Swedish probiotic player BioGaia has broadened and strengthened its ties with food manufacturing giant Nestlé by agreeing a deal for clinical research and new product development (NPD), according to the firm.
The move comes approximately two years after BioGaia sold the rights for the use of Lactobacillus reuteri Protectis in infant formula to Nestle for the remainder of the patent lifetime.
However, the two companies have now entered in to a new 'supplementary agreement' which will involve the provision and development of pre-clinical and clinical studies in addition to new product development for Nestlé.
“We are of course very satisfied with this agreement, which gives us additional financial resources, improved profits and a great opportunity for us to develop a number of interesting products for Nestlé," said BioGaia president Peter Rothschild.
If the development is successful, these products will be produced by BioGaia and sold to Nestlé, BioGaia added.
As part of the original deal, signed in February 2012, BioGaia received €40 million up-front and a commitment to a further €10.8 million during the period 2014 to 2017 - upon achievement of certain milestones.
BioGaia confirmed that the first milestone payment of €3.6 million was received in February this year.
The new agreement will provide BioGaia with further royalties of around SEK 92 million (approximately €10.4 million) over a three-year period, starting during the second quarter of 2014. As part of the deal BioGaia will carry out specific clinical studies in the paediatric area, the firm said.
Furthermore, the agreement means that BioGaia will immediately receive the remaining milestone payments totalling €7.2 million from the 2012 agreement.
These payments as well as the milestone payment already received will be entered as income for the current quarter, said BioGaia - adding that the new agreement will have a positive effect on profits during the whole three-year period.
Beyond the short term profit boost, there will also be an eventual income from sales of future products, the firm added.