San Diego, CA, November 5, 2009 - Senomyx, Inc., a company focused on using proprietary taste receptor-based technologies to discover novel flavor ingredients for the food, beverage, and ingredient supply industries, today provided a corporate update and reported financial results for the third quarter ended September 30, 2009.
Revenues were $4.2 million for the third quarter of 2009, compared to $4.0 million for the third quarter of 2008, an increase of 3%. As of September 30, 2009, the Company had cash, cash equivalents, and short term investments of approximately $33 million. Subsequent to the quarter end Senomyx achieved a major goal with the receipt of a Generally Recognized As Safe (GRAS) regulatory designation for S6973, an enhancer of sucrose (table sugar) that has demonstrated the ability to reduce up to 50% of the sugar in diverse products while maintaining the taste of natural sugar. The GRAS status allows S6973 to be incorporated into specified products in the U.S. and in numerous other countries.
"The receipt of a GRAS designation for S6973 is a landmark event for Senomyx," stated Kent Snyder, Chief Executive Officer of the Company. "We believe it is a confirmation of Senomyx's discovery, development, and regulatory capabilities that S6973 was awarded GRAS status for all of the uses and use levels requested. We are especially pleased to have completed development activities with S6973 and to be granted the GRAS designation for a large number of products earlier than originally anticipated."
Senomyx had stated previously that its goal was to obtain a GRAS determination for S6973 by the end of the first quarter of 2010. As a result of extended efforts by the Company's scientific and regulatory team, Senomyx was able to submit an application for the use of S6973 in a large number of product categories and receive the GRAS status almost two quarters ahead of the expected timeframe. The GRAS designation allows usage of S6973 in baked goods, cereals, gum, condiments and relishes, confectioneries and frostings, frozen dairy offerings, fruit ices, gelatins and puddings, hard and soft candy, jams and jellies, milk products, and sauces.
In August 2009 Senomyx and Firmenich SA, the world's largest privately-owned fragrance and flavor company, announced that the two companies entered into a collaborative research, development, commercialization and license agreement related to Senomyx's Sweet Enhancers, which are novel flavor ingredients intended to enhance the taste of sucrose, fructose, and Rebaudioside (stevia). The agreement provides that during the collaborative period Firmenich will have exclusive rights to commercialize selected Senomyx Sweet Enhancers worldwide in virtually all food product categories not currently licensed to other companies. In return, Firmenich agreed to pay to Senomyx shared funding of ongoing research, license fees, and royalties on sales of Senomyx's Sweet Enhancers developed under the collaboration. Senomyx received an initial license fee payment of $10 million from Firmenich following execution of the agreement.
As previously announced, a second $10 million license fee is payable to Senomyx following Firmenich's decision to commercialize a Senomyx Sweet Enhancer that has received regulatory approval. The companies have agreed that Firmenich will conclude its evaluation and make a determination in February 2010 regarding whether it will select S6973 for commercial development. Based on its encouraging evaluation thus far, Firmenich will pay to Senomyx in November 2009 a non-refundable $2 million payment as part of the second license fee. The remaining $8 million portion of the second license fee will be due to Senomyx upon Firmenich's decision to proceed with commercial development of S6973. If Firmenich does not proceed with S6973, the remaining $8 million will be due at the time Firmenich decides to proceed with commercial development of any other Sweet Enhancer covered under the agreement that receives regulatory approval.
"The global sucrose market has in excess of $50 billion in annual purchases, with a large range of products that utilize sucrose," noted John Poyhonen, Senomyx's President and Chief Operating Officer. "We believe the numerous products for which S6973 has been granted GRAS status are a valuable segment of this market and represent a large commercial opportunity for our novel sucrose enhancer. S6973 is intended to allow food and beverage companies to offer appealing lower-calorie products that may have a nutritional benefit for their customers, and in some product categories it may also provide a cost of goods benefit.
"In order to address other types of products that use sugar, Senomyx is evaluating S6973 for potential future GRAS determination in additional categories," Poyhonen said. "As discussed previously, we are also continuing to assess several promising new sucrose enhancers with desirable physical properties that may be advantageous for an even wider variety of applications, including a range of beverages."
Senomyx is also pleased to report that Ajinomoto Co., Inc., a leading global manufacturer of food and culinary products, has begun the initial commercial introduction of products that contain a Senomyx flavor ingredient. The first product marketed is an ingredient mix being introduced in China. Senomyx anticipates that Ajinomoto's commercial activities will expand to additional offerings and countries over time.
Senomyx is also continuing to make progress with other aspects of the Company's flavor programs and to increase the number of granted patents in its intellectual property portfolio. As of September 30, 2009, Senomyx is the owner or exclusive licensee of 176 issued patents and 427 pending patent applications related to proprietary taste receptor technologies in the U.S., Europe, and elsewhere.
Program Updates:
-- Savory Enhancer Program: The primary applications of the Company's
savory flavor ingredients are to reduce or replace monosodium glutamate
(MSG) and to enhance the savory taste of foods by combining Senomyx's
savory flavors with other ingredients to create unique new flavors.
Nestle is currently marketing several new bouillon and culinary aid food
products that contain Senomyx's savory flavor ingredients in the Pacific
Rim and Latin America. In addition, Nestle has been conducting product
development and consumer testing with both new and reformulated
established products in larger countries that are high-volume users of
MSG. Senomyx anticipates that Nestle will initiate commercialization of
established products containing the savory flavor ingredients in the
current and new geographic areas on an ongoing basis.
-- Sweet Enhancer Program: The primary goal for this program is to
identify flavor ingredients that allow a significant reduction of
sweeteners in food and beverage products while maintaining the desired
sweet taste. In addition to the recent receipt of a GRAS (Generally
Recognized As Safe) regulatory designation for the Company's S6973
sucrose enhancer, Senomyx is continuing evaluation of a number of
complementary sucrose enhancers with other attributes that may be
advantageous for a variety of products.
In November 2008, Senomyx was granted a GRAS designation for S2383, a novel enhancer of the high-intensity sweetener sucralose. S2383 enables up to a 75% reduction of sucralose in product prototypes without compromising the sweet intensity or producing off-tastes. In addition, use of S2383 may result in an improved taste compared to sucralose alone when incorporated into a flavor system. Also in November 2008, Senomyx and Firmenich entered into a collaboration under which Firmenich has exclusive rights to commercialize S2383 on a worldwide basis in virtually all product categories. Firmenich is conducting pre-commercialization activities for S2383, including responding to project proposals from key customers.
Activities are ongoing to identify enhancers of fructose, a key sugar component of high fructose corn syrup, which is used widely by the beverage industry. Senomyx has discovered potential fructose enhancers that demonstrated activity in the Company's proprietary sweet receptor screening assays. Company scientists are now continuing evaluation of the most promising potential enhancers and conducting confirmatory testing.
Senomyx has also commenced activities to discover enhancers of Rebaudioside-A (also known as Reb-A or rebiana), a natural sweetener derived from the stevia plant that is often associated with off-tastes and a lingering aftertaste. A Reb-A enhancer could potentially allow the usage of lower quantities of Reb-A, maintaining the desired sweetness while reducing unwanted tastes. Initial screening of the corporate sample library has identified potential enhancers of Reb-A that are active in the assays.
-- Bitter Blocker Program: The primary goals of this program are to reduce
or block bitter taste and to improve the overall taste characteristics
of foods, beverages, and ingredients. Senomyx has completed successful
initial safety studies and development activities with two bitter
blockers. The Company and one of its partners are currently evaluating
these and additional bitter blockers for potential further development.
Senomyx is also working with Solae on the discovery and development of bitter blockers that modulate and control bitterness in certain soy-based products. Senomyx bitter blockers have demonstrated a taste proof-of-concept with several representative soy samples from Solae, as well as soy-based product prototypes. Optimization of the bitter blockers and additional taste tests are ongoing.
-- Salt Enhancer Program: The goal of the Salt Enhancer Program is to
identify flavor ingredients that allow a significant reduction of sodium
in foods and beverages yet maintain the salty taste desirable to
consumers. Senomyx is continuing to evaluate enhancers of sodium
chloride (table salt) that have demonstrated activity in proprietary
screening assays based on SNMX-29, the protein Senomyx believes is a
receptor involved with human salt taste perception. In addition, the
Company is using various chemistry and biology approaches to explore the
role of SNMX-29 and other proteins that may participate in the
perception of salt taste, with the objective of identifying a taste
proof-of-concept.
-- Cool Flavor Program: The goal of the Cool Flavor Program is to identify
novel cooling flavors that do not have the limitations of currently
available agents. Senomyx has discovered cool flavor enhancers that
provided a taste proof-of-concept. Many promising cool flavor enhancers
have been identified and the Company is conducting further taste tests
to determine which of these will be selected for optimization.
Financial Review:
Revenues were $4.2 million for the third quarter of 2009, compared to $4.0 million for the third quarter of 2008. The increase in quarterly revenue was primarily due to the recognition of revenue related to the Company's July 2009 agreement with Firmenich, partially offset by a reduction in milestone revenue. Revenues were $10.6 million for the nine months ended September 30, 2009, compared to $13.7 million for the nine months ended September 30, 2008. The higher nine month revenue in 2008 was primarily due to an $8.0 million upfront payment associated with the expansion of Senomyx's collaboration with Ajinomoto in August 2007. The upfront payment was recognized as revenue ratably over the nine month period from August 2007 through April 2008, with $3.6 million recognized as revenue through the third quarter of 2008 and none recognized as revenue through the third quarter of 2009. This decrease from 2008 to 2009 was partially offset by higher revenue in 2009 related to the Company's July 2009 Sweet Enhancer collaboration with Firmenich.
Research and development expenses, including non-cash stock-based compensation expense, were $7.0 million for the third quarter of 2009, compared to $7.7 million for the third quarter of 2008, a decrease of 9%. This decrease was primarily due to lower patent legal expenses associated with timing of patent prosecution of the Company's intellectual property portfolio. Also contributing to this decrease were lower expenditures for research supplies, partially offset by increased personnel expenses. Research and development expenses, including non-cash stock-based compensation expense, were $22.4 million for the nine months ended September 30, 2009, compared to $23.9 million for the nine months ended September 30, 2008, a decrease of 6%. This decrease was primarily due to lower patent legal expenses associated with timing of patent prosecution of the Company's intellectual property portfolio. Also contributing to this decrease were lower non-cash stock-based compensation expenses and lower expenditures for research supplies, partially offset by higher expenses attributable to activities in support of product candidate regulatory filings.
General and administrative expenses, including non-cash stock-based compensation expense, were $3.5 million for the third quarter of 2009, compared to $3.1 million for the third quarter of 2008, an increase of 13%. The increase was primarily due to higher personnel expenses. General and administrative expenses, including non-cash stock-based compensation expense, were $10.0 million for the nine months ended September 30, 2009, compared to $9.8 million for the nine months ended September 30, 2008, an increase of 2%. The increase was primarily due to higher personnel expenses.
The net loss for the third quarter of 2009 was $0.20 per share, compared to a net loss of $0.21 per share for the third quarter of 2008. The net loss for the nine months ended September 30, 2009 was $0.70 per share, compared to $0.62 per share for the nine months ended September 30, 2008.
2009 Outlook:
"As a result of the $12 million in license fee payments from Firmenich associated with our Sweet Enhancer collaboration, we are on track to end the year with more cash than anticipated at the beginning of the year," said Tony Rogers, Vice President and Chief Financial Officer. "Also contributing to this favorable trend in cash utilization is our tracking toward lower than anticipated expenses. We are therefore revising our guidance for 2009. For the full year, we expect our cash used in operating activities to be less than $12 million, compared to our previous guidance of $14 million to $16 million, and we expect our expenses to range between $42 million and $43 million, compared to our previous guidance of $46 million to $49 million.
"With respect to our outlook for revenue, while we have received more cash from collaborators than anticipated, we are tracking toward $15 million to $16 million in recognized revenue and we are revising our guidance accordingly. Regarding the $12 million license fee payments from Firmenich, in accordance with our GAAP revenue recognition policy, approximately $2.3 million will be recognized as revenue in 2009. The remaining $9.7 million will be included on our year-end balance sheet as deferred revenue and recognized as revenue in future quarters."
"Finally, resulting from these revisions, we are narrowing our range for net loss to be between $26 million and $27 million or $0.84 to $0.87 per share."
For the full year 2009, Senomyx now expects:
-- Total revenues of $15 million to $16 million
-- Total expenses of $42 million to $43 million, of which we estimate
approximately $6.0 million to $6.5 million will be non-cash, stock-based
compensation expense
-- Net loss of $26 million to $27 million
-- Basic and diluted net loss of $0.84 to $0.87 per share
-- Net cash used in operating activities of less than $12 million
.
Selected Financial Information
Condensed Statements of Operations
(in thousands, except for per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
2009 2008 2009 2008
------- ------- -------- --------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $4,157 $4,035 $10,635 $13,670
Operating
expenses:
Research and
development
(including $514,
$516, $1,472 and
$1,740,
respectively, of
non-cash
stock-based
compensation) 6,967 7,656 22,397 23,942
General and
administrative
(including
$1,006, $942,
$3,067 and
$3,021,
respectively, of
non-cash
stock-based
compensation) 3,522 3,106 9,992 9,824
------- ------- -------- --------
Total operating
expenses 10,489 10,762 32,389 33,766
Loss from
operations (6,332) (6,727) (21,754) (20,096)
Other income 167 248 201 1,117
------- ------- -------- --------
Net loss $(6,165) $(6,479) $(21,553) $(18,979)
======= ======= ======== ========
Basic and diluted
net loss per
share $(0.20) $(0.21) $(0.70) $(0.62)
======= ======= ======== ========
Weighted average
shares used in
computing basic
and diluted net
loss per share 30,968 30,617 30,883 30,580
======= ======= ======== ========
Condensed Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
------------- ------------
(unaudited)
Cash, cash equivalents and investments
available-for-sale $33,007 $40,106
Other current assets 823 942
Property and equipment, net 11,289 13,418
------- -------
Total assets $45,119 $54,466
======= =======
Accounts payable, accrued expenses
and other current liabilities $5,128 $5,908
Deferred revenue 10,764 2,284
Leasehold incentive obligation 7,321 8,062
Deferred rent 1,373 1,272
Stockholders' equity 20,533 36,940
------- -------
Total liabilities and
stockholders' equity $45,119 $54,466
======= =======