Pharma's newest nemesis? Nestlé works at the intersection of food and drugs to attack illnesses

If Big Pharma didn't already have enough to worry about, with patent cliffs, drug price investigations and reluctant payers, it now will have to face the onslaught of a large, well-funded company trying to create hybrid pharma and food products company that would treat conditions from stomach disorders to Alzheimer's disease.

In fact, the four-year-old health-focused unit of Swiss food giant Nestlé is acting very much like a Big Pharma player these days. It is doing deals for pipeline projects, talking to the FDA about approvals on health-proven products and eyeing the same emerging markets that Big Pharma players have looked to improve their margins, Reuters points out. Last week Nestlé Health Science announced it would spend $70 million on a research hub in New Jersey.

Greg Behar, CEO of the operation, said the unit already has annual revenues of 2 billion Swiss francs ($2.1 billion) and believes $10.5 billion is a reasonable target.

The unit earlier this year teamed up with venture capital firm Flagship Ventures in hopes of spotlighting some early-stage startups at work in areas it sees with potential. Noubar Afeyan, CEO of the venture capital fund, said its tie-up with Nestlé is not about protein shakes but about working on "clinically validated, often regulatorily controlled products--things that have the same scientific rigor as we're used to in intravenous drugs."

Nestlé Health Sciences CEO Greg Behar

Behar says Nestlé is having some very constructive discussions with the FDA. "The FDA wants to bring innovation to the market," Behar told Reuters. "They see us as a partner that can help shape this area and this regulatory framework."

Nestlé is targeting some very high potential but high risk areas like Alzheimer's, a field that is littered with drug failures. Last month Nestlé partnered with Swiss biotech AC Immune in hopes of finding a way to detect Alzheimer's disease in its early stages. It also has invested $65 million into Seres Therapeutics ($MCRB) this year, backing the biotech's work in restoring the "microbiome," or healthy gut bacteria.

There are pharma players who have been working in this area. Abbott ($ABT) has its Ensure shakes targeted at baby boomers and Sanofi ($SNY) in 2011 bought about 40 nutraceutical products from a drugmaker in India. In fact the idea of eating foods for specific ailments is commonplace is some emerging markets, an area where Bahar says there are "amazing growth opportunities."

But with Americans' interest in so-called superfoods like blueberries, green tea and Acai, the market in the U.S. could be ripe with potential for a company with experience in food and marketing.

- read the Reuters story