Perfect Sugar Substitute: Health Sciences Has It

July 30, 2005
Volume VI, Issue 68
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Health Sciences Group (OTC BB: HESG); Two Bockbuster Products

Obesity is an epidemic in the United States today. The US Government considers anyone with a BMI (body mass index) of 30 or more to be obese. That includes 61.3 million Americans.

The weight control industry has evolved into a behemoth; $40 billion is spent annually in the US alone on weight control products and programs.

Public Enemy #1 in the fight against fat is one of our favorite foods: SUGAR. Sugar is used to enhance the flavor of more things than you can imagine. Aside from the obvious like pastries, candy, and soft drinks, vast amounts of refined sugar are found in products like ketchup and bread.

Refined Sugar, the ultimate "Bad Carb", has a number of nasty side effects. It is poison to diabetics. It causes your metabolism to spike briefly (a glycemic effect) and then crash. Kids run around the house destroying everything in their paths. You feel energized, then tired. You want more to feel energized again. Net result: Excess pounds.

Here's an overview of current substitutes:

  • Aspertame (Sweet n Low, Equal) was the most widely accepted sugar substitute. Aspertame is 100% chemical, has an unpleasant after taste, and has lost ground to Sucralose (Splenda) in recent years.
  • Sucralose (Splenda), was approved for use as a sugar substitute by the FDA in 1998. It tastes like sugar but is 600 times as sweet. It has no calories. It is derived from the sugar molecule and combined with Chlorine. It doesn't blend well with other substances, and cannot be used by itself in baking. It has been associated with numerous negative side effects including swelling of the liver and kidneys and shrinkage of the thymus: a gland that is the very foundation of our immune system.
  • Stevia: Zero calories and all natural, but has rough taste. It does not have a GRAS (Generally Recognized as Safe) rating from the FDA.

Health Sciences Group has the answer. Shugr. Shugr is the ultimate sugar substitute. Zero calories, zero carbs, tastes exactly like sugar, bakes and mixes exactly like sugar, and is made from 99.5% natural ingredients.

Shugr is derived from a blend of erythritol and tagatose which occurs naturally in many fruits and vegetables. Shugr has a patent pending and its ingredients have a GRAS (Generally Recognized as Safe) designation for food safety as determined by the U.S. FDA.

The product is currently being sold through several national chains including the Vitamin Shoppe and GNC. At present, it is only available in 1.3 lb jars, but packaging is expanding as you see here. The larger quantities will come in bags for baking just like regular sugar, and packets will be offered as well for individual servings.

The health stores represent a vibrant market for the product, but much higher volume potential exists as an additive to an end product. Recently, HESG signed a distribution arrangement with DNP International, one of the largest suppliers of ingredients to food manufacturers. DNP sold 8 million lbs of vitamin C in 2004.

DNP will be moving Shugr into a far larger market- as an ingredient for baked goods and beverages. This market is huge, and the sales cycle is long. Food producers do extensive testing with new ingredients before substituting in existing formulas.


HESG has another blockbuster product roll out scheduled for later this year. They have obtained the world wide rights to market Sequestrol. Sequestrol is a nutritional supplement that has been clinically proven to lower cholesterol. It was developed in Korea, and is extracted from seaweed.

In a study conducted on 57 subjects, Sequestrol reduced serum cholesterol levels by 22.7% after 30 days of oral administration with no change in diet.

In an similar animal trial, Sequestrol was found to reduce LDLs (the bad cholesterol) by 59% and 75%, while increasing levels of HDL (the good cholesterol).

Sequestrol is a white powder that is odorless and tasteless. It has a huge advantage over the avastatin drugs (Lipitor, et. al.) in that it is 100% natural, and can be combined with food products. It is also about 1/4th the price of the statin drugs.

Sequestrol can be combined with foods, and HESG anticipates manufacturers will be able to claim their product lowers cholesterol.

More immediately, HESG is slated to go into production on an infomercial to directly market the product. Sequestrol will be sold by informercial in a nationwide roll out later this fall.


HESG management is focusing nearly all of it's sales efforts over the next 6 months on Shugr and Sequestrol. These are two clinically proven products that have enormous market potential. A natural sugar substitute that tastes and bakes exactly like sugar. Just follow the recipe, and substitute Shugr. Combine the sugar substitute with a natural cholesterol reducer that can be added to foods and beverages - two very high profile products. Once these are successfully launched, there are others in the pipeline.

Here a six reasons to own HESG today:

  • Technically, the stock looks outstanding. After making a new all time high back in February, the stock pulled back to a low of just under $.70 last June, and has been making a series of higher lows and higher highs since then. HESG has been slowly working its way up through this trading range since mid May, and appears ready to break out. The consolidation pattern is circled in blue.
  • The stock is trading 40% below the high set last February.
  • August is the best time of the year to accumulate positions for a three to six month investment. Last year, the OTC Journal had several doubles and triples between mid August and year's end.
  • The company is launching two new products with blockbuster potential, and sales should ramp up as these products become more widely known.
  • There is a big pipeline of new products coming as soon as the initial two are launched.
  • The market capitalization is only in the $20 million range, leaving lots of upside potential. As sales ramp up, I could easily see this stock trading in the $50 million market cap range.
Peter Lynch, considered by many to be the greatest mutual fund manager of all time, believed in investing in companies with products and services that he used and understood.

For Sequestrol it's pretty easy to see the benefits of a clinically proven cholesterol reducing powder that can be blended with anything. Pfizer's Liptor is the highest selling drug on planet earth.

I have two 1.3lb jars of Shugr sitting on my counter, and have it every morning on my cereal. It is an outstanding product. No sugar substitute comes close. But, don't take my word for it. Do what Peter Lynch would do. Try it yourself.

I convinced the management at HESG to offer a free sample to OTC Journal members. All you have to do is go to a web page, help HESG out by clicking a few buttons in a survey, and give them your address. They will send you a free sample.

Simply Click Here, or copy and paste the following URL into your browser: While you are there, check out the company's web site.

I like this stock to go back to it's previous high of $1.50 before year's end, which would result in a 67% return on invested capital. Much, much higher levels could be attained down the road if Shugr and Sequestrol find their way into the recipes of household name foods and beverages.

Splenda did it, and hands down Shugr is simply a better product.

More details on sales projections and margins in future editions. I will have a BLOG posting up on Monday morning on HESG, so you can post any questions you have there.


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