New Wellness JV Nexida Aims to Tackle Aging—And They're Backed by a Third of the World's Collagen Supply

Darling Ingredients DAR and Tessenderlo Group disrupted the enormously profitable health, wellness and nutrition industry this week, announcing an agreement to merge the collagen and gelatin units of their waste recovery operations into the newly formed Nextiva. Darling already produces 30% of the world's collagen supply, while the joint venture could generate up to $1.5 billion in revenue in its first year of operation.

Nextiva will sit in collagen's sweet spot, with industry growth forecast to rise 9.5% annually, reaching over $14 billion in 2033. This biological gold is extracted from animal skin, tendon, cartilage and bone that waste recovery companies used to throw away as useless byproduct. Its popularity in cosmetics, joint health, supplements, biomaterials and pharmaceuticals has exploded in the last decade, with anti-aging and skin health benefits touted by Jennifer Aniston, Kate Hudson, Kourtney Kardashian and other celebrities.

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Texas-based Darling has struggled in the last two years, with annual revenue dropping from $6.79 billion in fiscal 2023 to $5.22 billion in fiscal 2024. This marked the first revenue downturn for the S&P Mid Cap 400 component since 2019. The hookup is a strategic move to respond to Wall Street about declining performance and regrow earnings by leveraging its leadership in the profitable animal byproducts segment.

Top tier investment firms including Piper Sandler, TD Cowen, and UBS cover Darling stock but have yet to issue research reports on this week's news. Clearly, their endorsements will help the deal proceed without roadblocks. In late April, Jason Gabelman at TD Cowen lowered his Darling price target from $37 to $34, pointing to an inconsistent track record on guidance. His ‘take' on the new venture will be watched closely by Wall Street.

Chairman and CEO Randall C. Stuewe touted the venture, saying, “Collagen has represented the fastest-growing area of Darling Ingredients‘ food segment business over the past several years.” He added that the joint venture will provide a "platform for accelerated product development and growth" and create an opportunity to "unlock significant shareholder value." Darling will own 85% of Nextiva, according to the release, while its Brussels partner holds the balance. Together they intend to operate 23 facilities on four continents, producing about 200,000 tons of collagen and gelatin in the first year.

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The hookup is not expected to close until 2026. The initial press release describes the venture as a noncash transaction that combines assets and capabilities, but negotiations are continuing, and no definitive documentation has been sign by principals. However, the ownership ratio between the much larger Darling and its smaller partner appears locked-in and there are no obvious red flags to the startup currently.

Nextiva will also require regulatory approval in the U.S. and European Union, which might face unexpected hurdles, given current political tensions. Meanwhile, collagen use remains unregulated and somewhat controversial, with critics noting the refined product used in supplements breaks down when ingested, rather than rebuilding our naturally produced substance. They also point to the corruptive influence of marketing hype, driven by celebrities owning companies benefiting from collagen use.

Regardless, both critics and advocates consider collagen use to be safe and our beauty-obsessed culture has a long history of chasing the latest ‘Fountain of Youth', regardless of cost. This bodes well for Darling and Tessenderlo's profit growth in coming years. And, given their giant industry footprint, they could strongly influence worldwide supply and pricing in coming decades.

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