Regarding Senomyx’s Sweet Taste program, in late October the Company expanded its collaboration with Firmenich SA for S6973, a novel sucrose enhancer. In addition to its previous rights related to commercial development of S6973 for virtually all food product categories and select powdered beverages, Firmenich has been granted an exclusive worldwide license to commercialize S6973 for use in instant and ready-to-drink milk, tea, and coffee beverages. Under the amended agreement, Senomyx will receive an additional license fee, incremental milestone payments and minimum annual royalties, as well as royalties on sales of S6973 for use in the additional product categories.“Firmenich has made notable progress in their pre-commercialization activities with S6973 for food categories,” Snyder stated. “Extending our partnership to include the new beverage categories increases the potential value of S6973. We believe that Firmenich’s expertise with S6973 provides the best opportunity to accelerate commercialization and maximize commercial revenue for this unique sucrose enhancer. “Senomyx established a new collaboration with PepsiCo for our Sweet Taste Program in August,” Snyder noted. “We are looking forward to working with PepsiCo, an innovative company committed to reducing added sugar in key global beverage brands.” Senomyx’s collaboration with PepsiCo is focused on the discovery, development, and commercialization of sweet enhancers and natural high-potency sweeteners for use in non-alcoholic beverage categories. Under the agreement, the Company received an upfront payment of $30 million from PepsiCo and is entitled to $32 million in committed research and development payments over the four-year research period. In addition to other activities, Senomyx is diligent in seeking protection for its intellectual property. As of September 30, 2010, the Company is the owner or exclusive licensee of 216 issued patents and several hundred pending patent applications related to proprietary taste receptor technologies in the U.S., Europe, and elsewhere. Technologies covered in the Company’s patents include taste receptor sequences and functions, screening assays, new flavor ingredients, and product applications.
Subsequent to the end of the third quarter, Mary Ann Gray, Ph.D., joined Senomyx’s Board of Directors. Dr. Gray, who is President of Gray Strategic Advisors, LLC, has extensive experience as an equity research analyst, strategic advisor, scientist, and member of Boards of Directors of public companies. She holds a Ph.D. degree in pharmacology from the University of Vermont.Commercialization Updates: Nestlé SA, the world’s largest food and beverage company, has been conducting marketing activities with Senomyx’s Savory Flavor Ingredients, which are intended to reduce or replace added monosodium glutamate (MSG) in foods and beverages. Nestlé’s commercialization efforts have been expanded to reformulated established products that contain our ingredients. Ongoing activities include launches of new products that incorporate Senomyx’s Savory Flavor Ingredients in the Pacific Rim, Latin America, and Africa. As announced last quarter, the European Food Safety Authority (EFSA) has provided a “favorable opinion” for Senomyx’s S336 and S807 Savory Flavor Ingredients, which means that no further evaluation is required. Final regulatory approval and commercialization in the European Union is contingent upon the ingredients being included in the EFSA Union List, which EFSA has targeted for publication by the end of 2010. Approval to use these ingredients in Europe could create a new market opportunity for Nestlé. Ajinomoto, Co., Inc., a leading global manufacturer of food and culinary products, has been introducing products that contain a Senomyx flavor ingredient in Asia and another key region. Ajinomoto has increased the number of products launched during the year. Firmenich SA, a global leader in providing ingredients and flavor systems to major consumer companies, has begun commercializing flavor solutions that include S2383, Senomyx’s extremely effective enhancer of the high-intensity sweetener sucralose. Firmenich has exclusive worldwide rights to market the sucralose enhancer as either a stand-alone ingredient or as part of a flavor system in all food and beverage product categories. They are currently pursuing marketing opportunities for the use of S2383 in beverages, cereal, dairy products, baked goods, and confectionary products. Firmenich also has exclusive worldwide rights to commercialize the Company’s S6973 sucrose enhancer for virtually all food and specified beverage categories. S6973 enables up to 50% reduction of sugar in certain foods and beverages while maintaining the sweet taste of natural sugar. Firmenich has initiated pre-commercialization activities with major clients in anticipation of conducting its first product launches with the sucrose enhancer during 2011.
Discovery & Development Program Updates:Sweet Taste 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. Senomyx has had success in this program with the discovery and development of its S2383 sucralose enhancer and S6973 sucrose enhancer. In addition, the Company has identified a new family of sucrose enhancers with distinct physical properties that may be advantageous for a broader range of beverages and other product applications. Several new sucrose enhancers that enable up to 50% reduction of sugar in preliminary taste tests are in late stages of evaluation. Senomyx is assessing their physical properties and other characteristics in various product prototypes that would address the needs of our partners. Senomyx has also identified flavor ingredients that demonstrate a statistically significant amplification of the sweet taste of fructose, a key component of high fructose corn syrup. High fructose corn syrup is the primary sweetener used in carbonated and certain other beverages, especially in North America. The Company is pursuing several strategies to evaluate a number of samples that showed activity in screening assays designed to identify fructose enhancers. The most promising samples are being optimized, followed by evaluation in taste tests. 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 received GRAS (Generally Recognized As Safe) regulatory status for its S6821 and S7958 bitter blockers. The GRAS determination allows usage for specified products in the U.S. and numerous other countries. Senomyx has also been working with S0812, another bitter blocker. Senomyx has decided not to proceed with further development of S0812 because it has not met all of the Company’s development and commercialization criteria. Salt Taste Program: The goal of the Salt Taste 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. The Company is exploring the role of a number of proteins that may be integral to the sensation of salty taste. This high-priority, longer-term effort involves chemistry and biology approaches, including assessing components of Senomyx’s proprietary database of proteins found in taste buds. Senomyx believes that discovery of the protein or proteins that function as the salt taste receptor could lead to identifying a salt taste enhancer. Cooling Flavor Program: The goal of the Cooling Flavor Program is to identify novel cooling flavors that do not have the limitations of currently available agents. Senomyx has discovered new cooling flavors that demonstrate a taste proof-of-concept and display cooling properties that exceed those of commonly used agents. Senomyx and its partner for this program, Firmenich, have prioritized sample classes that are the focus of further optimization. Taste tests with promising new cooling flavors are being conducted by both Senomyx and Firmenich. Financial Review: Revenues were $5.8 million for the third quarter of 2010, compared to $4.2 million for the third quarter of 2009, an increase of 40%. Revenues were $19.2 million for the nine months ended September 30, 2010, compared to $10.6 million for the nine months ended September 30, 2009, an increase of 80%. The increases in revenues for the third quarter and the year-to-date were primarily due to the recognition of license fee and R&D funding revenue related to the Company’s August 2009 Sweet Program collaboration with Firmenich and August 2010 collaboration with PepsiCo. License fees and R&D funding related to these collaborations contributed $4.6 million and $10.8 million for the three and nine month periods ending September 30, 2010, respectively. Also contributing to the year-to-date increase was a total of $3.3 million in non-recurring milestone payments and cost reimbursements from collaborators.
Research and development expenses, including stock-based compensation expense, were $6.5 million for the third quarter of 2010, compared to $7.0 million for the third quarter of 2009, a decrease of 7%. The decrease was primarily due to reduced personnel-related expenses and reduced expenditures for compound acquisition and related high-throughput screening activities, partially offset by increased costs for contracted development activities related to regulatory submissions. Research and development expenses, including stock-based compensation expense, were $20.0 million for the nine months ended September 30, 2010, compared to $22.4 million for the nine months ended September 30, 2009, a decrease of 11%. The decrease was primarily due to reduced personnel-related expenses and reduced expenditures for compound acquisition and related high-throughput screening activities.General and administrative expenses, including stock-based compensation expense, were $3.1 million for the third quarter of 2010, compared to $3.5 million for the third quarter of 2009, a decrease of 13%. General and administrative expenses, including stock-based compensation expense, were $9.5 million for the nine months ended September 30, 2010, compared to $10.0 million for the nine months ended September 30, 2009, a decrease of 5%. These decreases were primarily due to lower stock-based compensation expense. The net loss for the third quarter of 2010 was $0.10 per share, compared to a net loss of $0.20 per share for the third quarter of 2009. The net loss for the nine months ended September 30, 2010 was $0.27 per share, compared to $0.70 per share for the nine months ended September 30, 2009. 2010 Outlook : “On August 18th we updated our guidance, which included an increase to our revenue projections and a significantly improved outlook on our cash position. At this time, we are reiterating this guidance and we look forward to providing additional guidance in the first quarter of 2011,” stated Tony Rogers, Vice President and Chief Financial Officer.
For the full year 2010, Senomyx continues to expect:
- Total revenues of $27 million to $29 million
- Total expenses of $42 million to $43 million, of which approximately $5 million is non-cash, stock-based compensation expense
- Net loss of $14 million to $15 million
- Basic and diluted net loss of $0.37 to $0.40 per share
- Net cash provided by operating activities between $16 million and $18 million
- Year-end cash, cash equivalents and investments available for sale balance of $65 million to $67 million
(Financial Information to Follow)
|Selected Financial Information|
|Condensed Statements of Operations|
|(in thousands, except for per share amounts)|
|Three Months||Nine Months|
|Ended September 30,||Ended September 30,|
|Research and development (including $388, $514, $1,370 and $1,472, respectively, of non-cash stock-based compensation)||6,505||6,967||19,999||22,397|
|General and administrative (including $752, $1,006, $2,369 and $3,067, respectively, of non-cash stock-based compensation)||3,077||3,522||9,488||9,992|
|Total operating expenses||9,582||10,489||29,487||32,389|
|Loss from operations||(3,773||)||(6,332||)||(10,291||)||(21,754||)|
|Basic and diluted net loss per share||$||(0.10||)||$||(0.20||)||$||(0.27||)||$||(0.70||)|
|Weighted average shares used in computing basic and diluted net loss per share||38,702||30,968||37,310||30,883|
|Condensed Balance Sheets|
|September 30,||December 31,|
|Cash, cash equivalents and investments available-for-sale||$||75,463||$||31,074|
|Other current assets||1,374||866|
|Property and equipment, net||9,355||10,514|
|Accounts payable, accrued expenses and other current liabilities||$||5,680||$||5,279|
|Leasehold incentive obligation||6,334||7,075|
|Total liabilities and stockholders’ equity||$||86,192||$||42,454|