San Diego’s Senomyx (NASDAQ: [[ticker:SNMX]]) has a clearer road ahead in its development of flavor-enhancing ingredients, after the company said yesterday it will pocket a $10-million upfront payment as part of an expanded collaboration with Switzerland’s Firmenich. Senomyx, which is reporting its second-quarter earnings this morning, says its deal with the world’s largest private company in the flavor and fragrance business eventually could be worth as much as $34.5 million.
The two companies first began collaborating in January 2008, when Firmenich got access to novel ingredients Senomyx is developing to boost or block the taste of key flavors. By November, Firmenich agreed to a second deal to get commercial rights to a Senomyx sweetener that’s supposed to reduce the need for sucralose in beverages.
Yesterday’s deal gives Firmenich the right to co-develop and commercialize ingredients to enchance the taste of table sugar and two other sweeteners. The deal will provide $10 million to Senomyx within the first 20 days, and another $10 million after the first flavor ingredients wins regulatory approval, according to an SEC filing.
Investors liked the news enough yesterday to lift the value of Senomyx’ stock by 40 cents, or more than 14 percent, to close at $3.20 a share.
Senomyx spokeswoman Gwen Rosenberg tells me another significant aspect of the collaboration lies in the scope of its deal with Firmenich. Senomyx has disclosed, for example, that it has a partnership with Coca-Cola that covers Coca-Cola’s use of Senomyx sweetness enhancers in non-alcoholic beverages.
The Firmenich deal is more comprehensive. With a handful of exceptions, the deal provides Firmenich worldwide exclusive rights on the development and commercialization of Senomyx flavor enhancers for sucrose (table sugar), fructose, and various forms of rebaudioside (a natural sweetening ingredient) for all forms of foods and beverages. (The exceptions are non-alcoholic beverages, gum, sugar confections, and chocolate confections.)
As I explained in June, there’s a sweet receptor on the tongue that binds with sucrose. But additional nearby sites bind with other molecules to intensify the sweet flavor, enabling food companies to use less sugar without sacrificing flavor. As a result, the sweetness enhancers under development at Senomyx could become more crucial as overweight Americans focus on how much sugar they are consuming their diet.
Rosenberg says that Senomyx is optimistic about the second installment coming from Firmenich. That milestone, worth another $10 million, is due when Senomyx’ lead sweetness enhancer, a compound known as S6973, is ready for commercialization—which could come as early as the first quarter of 2010, she says.
While the deal is focused initially on synthetic flavor ingredients, a provision of the Firmenich deal enables the Swiss company to evaluate natural flavor ingredients for a limited period. According to Rosenberg, rebaudioside is a natural sweetener (derived from the stevia plant), but it is not widely used because it triggers some lingering off tastes. But by using its technology, she says Senomyx may be able to identify molecules that enhance the sweet flavor of stevia and minimize the side-effects.
CEO Kent Snyder will likely discuss details of the deal, along with the company’s second-quarter financial results,with analysts and institutional during a conference call set for 8 am Pacific today.
