Sanitarium stands to reap windfall from liver drug

Food giant Sanitarium, the tax-exempt manufacturer of Weet-Bix and Marmite, is expected to reap significant financial returns from the sale of a United States-based drug developer's intellectual property to a Nasdaq-listed pharmaceutical firm.

Baltimore's Asklepion Pharmaceuticals - which counts the New Zealand breakfast cereal maker as an investor - secured an acquisition agreement with New York-based Retrophin in January.

Retrophin has acquired the worldwide rights to Asklepion's colic acid treatment for a deadly genetic liver defect, provided the drug receives US Food and Drug Administration approval.

The deal could net Asklepion - reportedly controlled by Sanitarium's shareholder, the Seventh-day Adventist Church - more than $100 million over the next few years, plus royalties.

The church would not disclose how much capital Sanitarium had invested into Asklepion.

But in 2012 it confirmed its "group one" entities in New Zealand, which include the food manufacturer, had invested roughly $13 million into Asklepion and two other US ventures.

Sanitarium has a controversial exemption from paying tax on its business income as a result of its ownership by the church, a registered charity.

The "advancement of religion" is considered a charitable purpose under the Charities Act, which some critics argue is no longer relevant in a 21st century democracy.

James Standish, communications director for the South Pacific Division of the church, said Sanitarium expected "a strong return to New Zealand operations" from the Retrophin deal.

He said Asklepion was still determining how much cash from the deal would be distributed to shareholders.

"The core rationale for Sanitarium investing in biotech companies - that are creating products that save lives - is to generate funds for further charitable work in New Zealand," Standish said. "This in turn allows growth in the extensive charitable programme we already operate."

The church's group one New Zealand businesses reported a 2.3 per cent increase in revenue to $191.6 million in the last financial year.

Its charitable activities in this country include the Adventist Development & Relief Agency, schools and aged care facilities.

Distributions in the past financial year included $5.7 million to the agency, $4 million in aged care expenses and $182.5 million for "nutrition, wellbeing and health food activities expenses", according to the accounts.