Semonyx reports Q3 earnings

Semonyx reports Q3 earnings

Company received regulatory approvals for savory flavors and sweet flavor ingredients.

Semonyx Inc. (NASDAQ: SNMX), a company using proprietary taste science 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, 2012. The Company ended the third quarter 2012 with $44.7 million in cash and highly liquid investments. During the quarter Senomyx earned $1.3 million in development milestones.

“We are announcing today that a Senomyx partner has begun its initial market launch of a retail product that incorporates our S6821 Bitter Blocker. This is the first time a Senomyx Bitter Blocker has been used in a consumer product,” said Kent Snyder, CEO of the Company. “Marketing activities are underway in a country in Southeast Asia and we expect our partner to expand to other regions and products. With this launch, four flavor ingredients discovered and developed by Senomyx—our S336 Savory Flavor; S2383 and S6973 from our Sweet Taste Program, and our S6821 Bitter Blocker—are now being commercialized by our partners.”

“As announced in October, we are also very pleased to receive new regulatory approvals for Senomyx flavor ingredients in the U.S., Europe, and elsewhere,” Snyder stated. “These approvals are significant validations of the Company’s scientific and regulatory accomplishments, as well as the safety of our proprietary ingredients and importantly, they open new market opportunities.”

Recent regulatory achievements include receipt of Generally Recognized As Safe (GRAS) regulatory status under the provisions of the Federal Food, Drug and Cosmetic Act administered by the United States Food and Drug Administration (FDA) for Senomyx’s S9632 flavor ingredient. The GRAS status allows S9632 to be incorporated into specified products in the U.S. and in numerous other countries.

“Like S6973, our new S9632 flavor ingredient can be used to improve the taste of products in which the sucrose has been reduced. Both S6973 and S9632 are solutions for manufacturers that are trying to respond to the rising consumer focus on health and wellness by creating new lower-calorie offerings that retain the taste consumers enjoy,” Snyder noted.

Senomyx continues to be diligent in seeking protection for its intellectual property. As of September 30, 2012, the Company is the owner or exclusive licensee of 345 issued patents and several hundred pending patent applications related to proprietary taste science technologies in the U.S., Europe, and elsewhere.

Commercialization Updates

Savory Taste Program: Senomyx’s Savory Flavors are very versatile and can be combined with other ingredients to create unique new flavor blends, among other uses. Each of Senomyx’s Savory Flavors provides a distinct new savory taste sensation. Two Senomyx partners, both of which are global food companies, are currently marketing new and reformulated established products that contain one of Senomyx’s Savory Flavors.

The Savory Flavors can be used in a variety of food products including sauces, frozen foods, cooking aids, soups, and snack foods. Current commercialization activities include sales and market launches of products that incorporate a Senomyx Savory Flavor, S336, in approximately 25 countries within Africa, Asia, Latin America, the Middle East, and North America, with additional product launches expected over the coming year. The marketed products have been launched into the retail, industrial, and food service channels in selected countries. Senomyx’s partners for this program continue to explore additional opportunities to expand their customer bases and increase the number of product offerings. In addition, Senomyx is considering commercialization options for S9229 and S5456, new Savory Flavors with GRAS status that complement those being marketed by the Company’s partners. Senomyx partners are currently assessing commercialization plans for Europe.

Sweet Taste Program: Senomyx’s S6973 can be used to restore the desired taste profile of foods and selected beverages in which sucrose has been reduced. Products applicable for S6973 usage include virtually all food categories and selected beverages, including dairy beverages, and ready-to-drink coffee and tea. Commercialization activities with S6973 by Senomyx’s partner are ongoing in the Americas, Southeast Asia, Africa, and Australia. Recent market launches of retail products that incorporate S6973 have occurred in the U.S., Latin America, Asia, and South Africa. These products span a variety of categories including ready-to-drink and powdered beverages, dairy products, and baked goods. Initial products launched with S6973 are showing strong performance based on re-order patterns, and additional launches of products that utilize S6973 are expected during the year.

S2383 can be used to restore the desired taste profile of products in which sucralose, a commonly used high-intensity sweetener, has been reduced. S2383 is applicable for use in all food and beverage product categories. Products that contain S2383 are being marketed in North America and Latin America. Follow-on launches are being planned by manufacturers that currently use S2383 in their products, and additional product development work for potential usage of S2383 in a variety of products is underway. Plans for commercialization of S2383 in Europe are under consideration.

S9632, which can be used to restore the desired taste profile of products in which sucrose has been reduced, was recently granted GRAS regulatory status. The GRAS designation allows usage of S9632 in a broad range of non-alcoholic beverages including powdered and concentrated beverages, along with ready-to-drink and powdered forms of dairy, coffee and tea products. In addition, S9632 may be used with alcoholic beverages, as well as a variety of foods, including dairy products, confectioneries, snack foods, and sauces. A Senomyx partner has exclusive rights to commercialize S9632 for food applications and co-exclusive rights for powdered beverages; Senomyx retains all rights for its use in non-alcoholic beverages and co-exclusive rights for powdered beverages. The Company is developing strategies to maximize the commercial potential and expand the usage of S9632 in these product categories.

Bitter Blockers Program: Senomyx’s Bitter Blockers are intended to reduce or block bitter taste and to improve the overall taste characteristics of foods, beverages, and ingredients. A Senomyx partner recently initiated its first market launch of a retail product incorporating S6821 in a country in Southeast Asia, and is evaluating the use of S6821 in additional products and geographies. S6821 has demonstrated activity against bitter-tasting ingredients such as soy and whey proteins, menthol, caffeine, cocoa, and Rebaudioside A (stevia), which are used in foods and beverages. Senomyx has also received a GRAS determination for S7958, a related Bitter Blocker with similar functionality. In addition, the Company continues to evaluate potential new Bitter Blockers.

Discovery & Development Program Updates

Sweet Taste Program: During the third quarter of 2012 Senomyx initiated preliminary development activities intended to support regulatory filings for S617, a unique new flavor ingredient intended to be used to restore the desired taste profile of products in which either high fructose corn syrup (HFCS) or sucrose has been reduced. Initial safety studies have been completed successfully and further activities are ongoing. Taste tests have demonstrated that S617 allows a very meaningful reduction of HFCS and sucrose in product prototypes while maintaining the desired sweet taste. Evaluations of S617 in a variety of products of interest are underway.

Additional Sweet Taste Program activities include a key effort to discover and develop natural high-potency sweeteners and sweet taste modifiers. The Company continues to expand its targeted natural-source library and use its proprietary technologies to discover potential new natural sweeteners and sweet flavor ingredients. The identification of a natural compound that provided a sweet taste is an important taste-proof-of-concept and validation of the approach underway for this effort.

Salt Taste Program: This program is an important research focus for Senomyx’s longer-term pipeline, with a goal 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 has assembled a proprietary, comprehensive database of proteins found in taste buds, and progress is being made exploring the role of a number of these proteins that may be involved in salt taste perception. Analytical systems that assess the effects of salt are being used to identify specific proteins that could be viable candidates for the receptors or co-factors responsible for salt taste. Senomyx has identified a novel blocker of salt taste and efforts are underway to evaluate this blocker as a tool to help discover the receptor involved with salt taste perception.

Cooling Taste Program: The goal of the Cooling Taste Program is to identify novel cooling agents that do not have the limitations of currently available agents. A number of cooling agents are being evaluated in order to identify one or more candidates that demonstrate advantageous properties compared to commonly used cooling agents, such as greater potency, longer cooling duration, or lack of aroma.

Financial Review

The Company ended the third quarter 2012 with $44.7 million in cash, cash equivalents and investments available for sale.

Revenues were $7.9 million for the three months ended September 30, 2012, compared to $7.1 million for the three months ended September 30, 2011. The increase in total revenues was primarily due to $1.3 million of development milestones earned in the third quarter. This increase was partially offset by lower upfront license fee revenue in 2012 compared to 2011, which was due to a Senomyx partner electing to extend its collaboration agreement in the second quarter of 2012 by one year, resulting in a one-year extension of the service period over which the upfront license fee is recognized. There was no impact on cash flow in either period as the related upfront payments were received prior to 2011.

Revenues were $22.9 million for the nine months ended September 30, 2012, compared to $22.8 million for the nine months ended September 30, 2011. The net increase in revenues primarily results from increased development milestone revenues earned in 2012, offset by lower upfront license fee revenues recognized in 2012 compared to 2011.

Research and development expenses, including non-cash stock-based expense, were $7.2 million for the three months ended September 30, 2012, compared to $7.0 million for the three months ended September 30, 2011. General and administrative expenses, including non-cash stock-based expense, were $2.7 million for the three months ended September 30, 2012, compared to $2.8 million for the three months ended September 30, 2011.

Research and development expenses, including non-cash stock-based expense, were $21.5 million for the nine months ended September 30, 2012, compared to $21.6 million for the nine months ended September 30, 2011. General and administrative expenses, including non-cash stock-based expense, were $8.5 million for the nine months ended September 30, 2012, compared to $8.3 million for the nine months ended September 30, 2011.

The net loss for the three months ended September 30, 2012 was $0.05 per share, compared to $0.07 per share for the three months ended September 30, 2011. The net loss for the nine months ended September 30, 2012 was $0.17 per share, compared to $0.18 for the nine months ended September 30, 2011.

Financial Outlook

“Overall financial results through September 30th were in-line with management expectations and we are on track to achieve our financial guidance for 2012. During the third quarter we earned $1.3 million associated with the achievement of development milestones and we expect to receive the related cash during the fourth quarter,” stated Tony Rogers, Senior Vice President and Chief Financial Officer.

In addition to the $44.7 million in cash and highly liquid investments at September 30, 2012, the Company has earned milestone payments, committed funding, and potential future sources of cash including the following:

  • $1.3 million in milestone payments earned in the third quarter of 2012
  • Ongoing royalty payments from collaborators
  • $16.0 million in research and development funding commitments from current collaborators
  • $23.7 million in potential milestone payments under current collaborations
  • $21.7 million related to extension options under current collaborations

For the full year 2012, Senomyx continues to expect:

  • Total revenues of $30 million to $33 million
  • Total expenses of $39 million to $42 million, of which approximately $5 million is non-cash, stock-based compensation expense
  • Net loss of $8 million to $10 million
  • Basic and diluted net loss of $0.20 to $0.25 per share
  • Year-end cash, cash equivalents and investments available for sale balance greater than $40 million

 

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