Chr. Hansen to acquire HMO leader Jennewein for €310 million

A new study helps to explain how nerve cells sense the microbes in the gut and how they coordinate their function with other tissues in the digestive tract.

Chr. Hansen signed a €310 million deal to acquire leading Human Milk Oligosaccharide (HMO) player Jennewein Biotechnologie this week – the Danish microbiome specialist’s third purchase in six months.

The acquisition is in line with Chr. Hansen’s ‘2025 strategy’ to make bolt-on acquisitions which strengthen its microbial and fermentation platforms, the company said in a statement, marking HMO a ‘high-growth business area’.

Chr. Hansen’s chief executive, Mauricio Graber, said the new deal also signals a long-term investment and commitment to HMOs, “which I am convinced will bring long-term value creation to our shareholders”.

HMOs are essential milk sugars found in human breast milk which bolster infants’ microbiome, for instance via bacteria which have a probiotic effect. Germany’s Jennewein launched the first infant formula containing HMOs in the U.S. in 2016, and in Europe in 2017. It now has six commercialised HMOs, beside other products in the pipeline.

The addressable market for HMOs is predicted to reach more than €400 million by 2025, and more than €1 billion in the long-term, according to Chr. Hansen’s press statement. Many experts also see the potential for HMOs as a high-growth area for other life stages, especially in healthy ageing and immunity.

In particular, both companies hailed the potential of HMOs with probiotics, specifically Chr. Hansen’s probiotic bacteria such as LGG and BB-12.

“Functional ingredients, especially HMOs and probiotics, are driving the premiumization trend in infant formula and there is a significant potential to increase the penetration of these two ingredients, and also to create synergistic blends in the future,” said Chr. Hansen.

The acquisition is planned for a total consideration of €310 million, and is expected to close this month.

Jennewein is expected to generate sales of around €50 million in 2021, but still make a net earnings before interest and tax (EBIT) loss, Chr. Hansen noted, adding its overall financial outlook for 2019/20 and long-term financial ambition remain unchanged.

Deal spree

The deal comes amid a six-month shopping spree for Chr. Hansen.

In June, it bought probiotics specialist UAS for $530 million, and in April it struck a deal for oral women’s health probiotics company HSO Health Care.

The deals are part of the company’s 2025 strategy, launched in August, with the ambition to create a “differentiated bioscience leader to improve food and health for a sustainable future”.

Chr. Hansen also formed a €90 million joint venture last year, split 50/50 with Lonza. The new entity, BacThera, is focused on contract manufacturing of live biotherapeutics.

On Tuesday, Jennewein’s co-founder, Dr Stefan Jennewein, added that the latest deal marks a new chapter in the pre- and symbiotic market.

“Whereas initially we were very much intrigued by the anti-infective effects of HMOs, in particular against human pathogenic viruses, today it is clear that even more beneficial effects can be expected from the combination of HMOs with probiotics,” he said.

Manufacturing investment

HMOs are produced via industrial fermentation – one of Chr. Hansen’s existing core capabilities.

Beside its acquisition strategy, Chr. Hansen plans to invest more than €200 million in production assets until 2025, including investments in a ‘brown-field’ factory, expanding HMO capacity to meet the anticipated demands.

A ‘meaningful part’ of this manufacturing capacity has already been secured through long-term contracts, the company said on Tuesday.

Jennewein has around 100 employees headquartered in Bonn, Germany, with other production capabilities outsourced to contract manufacturers.

Its co-founder Dr Jennewein will become chief science and technology officer for the newly acquired entity, which will become part of Chr. Hansen’s health & nutrition division and operate as a ‘separate, full value chain’.