The companies will also increase their R&D collaboration to look for new applications for the ingredient, such as in animal feed.
ARA is a long-chain fatty acid which, in combination with docosahexaenoic acid (DHA), supports infant brain development. Martek produces DHA at its own facilities by fermenting microalgae. But it needs to co-operate with the Netherlands-based DSM on production of ARA, sharing intellectual property on the manufacturing process, to offer both fatty acids to its key clients.
The recent launches of infant formula containing a combination of the two fatty acids by all of the leading formula makers has triggered a major surge in demand.
US market share for infant formula containing Martek's oils grew from less than 10 per cent in 2002 to greater than 40 per cent by the end of last year. Almost 90 per cent of Martek's fourth quarter revenues was generated by sales of DHA and ARA to Mead Johnson, Wyeth, Abbott Laboratories and Nestle, with supplemented term formulas now marketed by these four companies in over 30 countries around the world, according to Martek.
Supply problems were further impacted by a national power cut in Italy last year, affecting production at DSM's plant in Capua. This raised costs for the US firm and also resulted in DHA inventories piling up as they could not be blended with ARA. A new DSM plant, scheduled to open in the US this year, is expected to reduce the impact of factors that could affect the production at any one plant.
Under the new agreement, Martek also gains access to certain of DSM's patents and intellectual property and will have certain ARA production rights. DSM, as Martek's supplier of ARA, will have access to Martek's technology related to the manufacture of ARA, and is granted rights to use Martek's technology in non-human fields, including animal feeds.
"This agreement should add significant long-term ARA production capacity, improve production efficiency and allow the companies to explore new ARA uses," said Henry Linsert, Martek's chairman and CEO.
DSM has been Martek's supplier of ARA since 1997.