June 22, 2010 (FinancialWire) — Martek Biosciences Corp. (NASDAQ: MATK) said that it has extended its sole-source supply agreement with Mead Johnson & Co., LLC (NYSE: MJN), for DHA and ARA for infant formula products.

Under the terms of the amendment, Martek will remain Mead Johnson's global sole-source supplier of DHA and ARA for all of its infant formula products through December 31, 2015, an extension of four years beyond, the company said, the earliest possible termination date of the current agreement.

Martek has been supplying DHA and ARA to Mead Johnson for use in infant formula under a global 25-year license agreement executed in 1992. In May 2006, Martek and Mead Johnson entered into a supply agreement that established Martek as Mead Johnson's global sole-source supplier of DHA and ARA for use in its infant formula products.

Mead Johnson first launched infant formulas containing Martek's DHA and ARA in international markets in 2000. Mead Johnson launched Enfamil LIPIL, the first infant formula in the U.S. to feature DHA and ARA, in 2002.

Under the terms of the amendment, Martek will continue to be Mead Johnson's global sole-source supplier of DHA and ARA for all of its infant formula products through December 31, 2015, an incremental four years beyond the terms of the prior agreement.

In addition, Mead Johnson has the option to further extend the term of the agreement for an additional four years beyond 2015. The amendment also provides graduated price reductions to Mead Johnson over the term of the extension, beginning in 2010.

The financial terms of this amendment were factored into the company's recent financial guidance provided during its second quarter conference call on June 3, 2010.

Martek said its strategy is to offset a significant portion of price reductions that result from its infant formula contract extensions by implementing manufacturing cost savings and product innovation initiatives, and by growing its non-infant formula business.

Naturally present in human breast milk, DHA and ARA are fatty acids important to infant development and growth.

Maryland-based Martek Biosciences is engaged in the development of DHA and ARA and has developed patented technology for the production and use of these ingredients.

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