Shares of Martek Biosciences Corp. jumped as much as 14 percent yesterday after the Columbia biotech company said it landed a deal for its nutritional supplements to be used by General Mills.
The cereal giant is expected to launch a food item using Martek's product next year, Martek said in a news release.
Martek manufactures DHA, an omega-3 fatty acid found in fish and some plants. Its product, which is derived from algae, is in more than two-thirds of the world's baby formula.
Martek announced a similar deal last year with Kellogg Co., the country's No. 1 cereal maker. That company is also expected to launch food products using DHA next year.
"The General Mills agreement is another step toward widespread use of Martek's vegetarian source of DHA in foods and beverages. I believe that people's health will be better for it, and I applaud General Mills for taking this action," said Martek chief executive Henry "Pete" Linsert Jr.
News of the General Mills deal sent Martek shares up $2.77, or 10.37 percent, to $29.48, after reaching as high as $30.56.
In addition to cereal, General Mills' brands include Haagen-Dazs, Betty Crocker, Pillsbury, Old El Paso and Yoplait.
David Webber, a managing director at First Albany Capital, said in a research report yesterday that General Mills likely would use DHA initially in yogurt, "due to the relatively higher health consciousness of yogurt consumers and the relatively easier technical challenges of DHA formulation for short shelf-life products."
General Mills has more than a third of the U.S. yogurt market, Webber said in his report.
The 15-year General Mills agreement does have any minimum purchase requirement, according to the Martek announcement. All General Mills products with DHA will have a Martek logo on the packaging and related marketing and promotion materials.