Executives
Gwen Rosenberg – VP, IR & Corporate Communications
Kent Snyder – CEO and Chairman
John Poyhonen – President and COO
Tony Rogers – VP and CFO
Sharon Wicker – SVP and Chief Commercial Development Officer
Analysts
Mark Monane – Needham
Pamela Bassett – Cantor Fitzgerald
Senomyx, Inc. (SNMX) Q3 2009 Earnings Call Transcript November 5, 2009 11:00 AM ET
Operator
Good morning, we would now begin the Senomyx third quarter 2009 conference call. At this time, I would like to inform you that this conference call is being recorded, and that all participants are in a listen-only mode. (Operator instructions)
I will now like to turn the call over to Gwen Rosenberg, Senomyx’s Vice President of Investor Relations and Corporate Communications.
Gwen Rosenberg
Good morning and welcome to the Senomyx third quarter 2009 earnings and corporate update conference call. Participating in this call from Senomyx will be Kent Snyder, Chief Executive Officer; John Poyhonen, President and Chief Operating Officer; Tony Rogers, Vice President and Chief Financial Officer; Don Karanewsky, Senior Vice President, Discovery; and Sharon Wicker, Senior Vice President, Chief Commercial Development Officer.
Before we begin, please note that during the course of this call, we may make projections or other forward-looking statements regarding future events or financial performance of the company that involves risks and uncertainties. The company’s actual results may differ materially from the projections described in the press release and this conference call.
Factors that might cause such a difference include, but are not limited to, those discussed in our quarterly and annual reports filed with the SEC. Copies of these documents are available upon request from Investor Relations at Senomyx or may be accessed via our website at www.senomyx.com.
I would now like to turn the discussion over to Kent Snyder, CEO of Senomyx.
Kent Snyder
Thank you, Gwen. Good morning to everyone and thank you for joining the Senomyx management team for our conference call and webcast. During this call, we will provide you with a general business and financial update for the third quarter of 2009. This will be followed by a question-and-answer session.
I am very pleased to begin by noting that the events of the past several weeks have been some of the most significant in Senomyx’s history. First, on October 23rd, we announced the receipt of Generally Recognized As Safe, or GRAS, regulatory designation for our S6973 sucrose enhancer.
Today we announced that based on their encouraging evaluation thus far, Firmenich, the world's largest privately owned fragrance and flavor company has agreed to complete their assessment of S6973 as a candidate for potential commercial development in February 2010. We also reported that Ajinomoto, a leading global manufacturer of food and culinary products, has begun the initial commercial introduction of products that contain a Senomyx flavor ingredient. We will discuss each of these events during the call.
The GRAS determination for S6973 is one of Senomyx’s most important achievements. Taste tests have demonstrated that S6973, which was discovered and developed by Senomyx, enables the reduction of up to 50% of the sucrose present in product prototypes while maintaining the sweet taste of natural sugar. The GRAS status allows S6973 to be incorporated into specified products in the U.S. and numerous other countries.
It was especially gratifying to have received the GRAS designation earlier than originally anticipated. As you recall, our goal is to obtain a GRAS determination for S6973 by the end of the first quarter of 2010. Due to the outstanding efforts of our scientific and regulatory team, we were able to submit an application for the use of S6973 in a large number of product categories and received the GRAS status almost two quarters ahead of the expected time frame. We believe it is a confirmation of Senomyx’s discovery, development, and regulatory capability that S6973 was granted GRAS status for all of the uses and use levels requested.
During our August earnings call, we had discussed our new agreement with Firmenich regarding the discovery, development and worldwide commercialization of Senomyx sweet enhancer, which includes S6973 and other novel flavor ingredients intended to enhance the taste of sucrose, fructose, and Rebaudioside, also known as 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 as well as license fees and royalties on sale of the Senomyx sweet enhancers, developed under the collaboration. Senomyx received an initial license fee payment of $10 million from Firmenich following execution of the agreement.
As announced previously, a second $10 million licensee fee is payable to Senomyx following Firmenich's decision to commercialize a Senomyx sweet enhancer that has received regulatory approval. Firmenich has been conducting an extensive evaluation of S6973 including product prototype development, sensory testing across a broad range of product categories and assessing various manufacturing processes. Given the amount of work involved and their commitment to these activities, we have agreed to grant Firmenich additional time to complete their evaluation of S6973.
Firmenich will conclude their evaluation and make a determination in February regarding whether they will proceed with commercial development for S6973. In return for this additional time, Firmenich will pay us a non-refundable $2 million 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 payment will be due at the time Firmenich decides to proceed with commercial development of any other sweet enhancer covered under the agreement that received the regulatory approval. Should Firmenich decided to forgo rights to S6973, Senomyx will have the right to license S6973 to any third party in the product categories previously licensed to Firmenich without restrictions.
We believe that potential commercialization of S6973 represents a significant financial opportunity for the company, which John will talk about later during the call. He will also provide us an update on pre-commercialization activities with S2383, Senomyx's extremely effective sucralose enhancer, which received GRAS status in November of 2008.
I would also like to note that we are intending to evaluate new sucrose enhancers that have other beneficial attributes. These enhancers have distinct physical properties that may be advantageous for a variety of products including certain beverages that have specific requirement due to packaging and storage conditions utilized by the beverage industry. We look forward to completing development of the new promising sucrose enhancers that could address the special needs of these products.
All of our sucrose and sucralose enhancers were discovered using Senomyx’s proprietary sweet receptor-based screening assay. We are currently using this assay to identify enhancers of fructose, a key sugar component of high fructose corn syrup, which is widely used by the beverage industry. Senomyx has discovered potential fructose enhancers that demonstrated activity in our proprietary sweet receptor screening assay. Company scientists are now continuing evaluation of the most promising of these potential enhancers and conducting confirmatory testing.
In addition, Senomyx is using our sweet receptor assay to discover enhancers of Rebaudioside-A, which is also known as Reb-A or rebiana. Reb-A is a natural sweetener derived from the stevia plant, which is often associated with off-tastes and a lingering aftertaste. An enhancer could potentially allow the usage of lower quantities of Reb-A, maintaining the desired sweetness while reducing unwanted taste. Initial screening of the corporate sample library has identified potential enhancers to Reb-A that are active and are sweet receptor assays.
Moving on to our other discovery and development activities, Senomyx is continuing to make progress with our bitter blockers program. The primary goals of this program are to reduce or block bitter taste and to improve the overall taste characteristics of food, beverages and ingredients. We have completed successful initial safety studies and development activities with two of our bitter blockers. Senomyx and one of our partners are currently evaluating these and additional bitter blockers for potential further development.
We are 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.
Our salt enhancer program continues to be an important focus for the company. The goal of this 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 evaluating enhancers of sodium chloride that have demonstrated activity in our proprietary screening assays based on SNMX-29, a 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.
Turning to our cool flavor program, the goal of this 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. In addition, 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.
Lastly, regarding our research efforts, Senomyx is continuing to increase our intellectual property portfolio. As of September 30th, 2009, Senomyx is the owner or exclusive licensee of 176 issued patents and 427 pending patent applications related to the proprietary taste receptor technologies in the U.S., Europe, and elsewhere.
As I mentioned at the beginning of my remarks our recent events, particularly the GRAS status for S6973, are extremely important for Senomyx. We believe this is a turning point for the company as we look forward to increase emphasis on commercial and business activates.
It was with this in mind that during the past quarter, John Poyhonen was promoted to President and assumed a newly created position of Chief Operating Officer and Tony Rogers was promoted to Vice President and Chief Financial Officer. John has been instrumental in securing many of Senomyx's collaborations and in developing and implementing our financial and business strategies. He has knowledge of all aspects of the company and is well qualified to lead Senomyx’s operational efforts.
Tony has played a critical role in Senomyx’s finance, accounting, and administrative areas as the company has grown and evolved. His expertise and outstanding service to Senomyx makes him the ideal individual to assume the responsibilities of Chief Financial Officer. I believe that Senomyx will benefit from having John and Tony take on expanded leadership roles at this important time.
I’ll now turn the discussion over to John who will provide an update on commercialization and business activities. John?
John Poyhonen
Thank you, Kent. I’ll start by commenting on the news regarding S6973, our novel sucrose enhancer. As Kent mentioned, S6973 has demonstrated the ability to reduce up to 50% of the sugar in a wide variety of products without compromising the sweet taste.
The GRAS designation allows the usage of S6973 in baked goods, cereals, gum, condiments and relishes, confectionaries and frostings, frozen dairy offerings, fruit ices, gelatins and puddings, hard and soft candy, jams and jellies, milk products, and sauces. In addition, in order to address the other types of products that use sugar, Senomyx is evaluating S6973 for potential future GRAS determination in new categories.
This appears to be a very opportune time for a sweet enhancer that enables a meaningful reduction in the sugar content of products without altering the sweet taste. There is a growing consumer, medical and government awareness of the benefits of decreasing sugar intake for many individuals.
Reducing the quantity of sucrose in products would be advantageous for consumers who want to limit the sugars in their diet due to obesity, diabetes, and other health issues, and for manufacturers who would like to offer products with improved nutritional profile without compromising on taste. The global sucrose market has in excess of $50 billion in annual purchases with a large range of products that utilize sucrose.
We believe that 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 to their customers, and in some product categories may also provide a cost savings from a cost savings from a cost of goods basis.
We are also looking forward to an upcoming commercial launch of 2383, Senomyx’s highly effective sucralose enhancer. As a reminder, S2383 enables up to a 75% reduction of the high-intensity sweetener sucralose in product prototypes, without compromising the sweet intensity or producing off-taste. In addition, use of S2383 may result in improved taste compared to sucralose alone when incorporated into a flavor system.
Firmenich has the exclusive rights to commercialize S2383 on a worldwide basis in virtually all product categories. They are currently conducting their pre-commercialization activities for S2383 including responding to project proposals from key customers. Our goal with Firmenich is to begin commercialization of S2383 during the fourth quarter of 2009 with Senomyx's first expected recognition of revenue from royalties in early 2010.
In the other commercialization news, Ajinomoto has begun the initial commercial introduction of products that contain a Senomyx flavor ingredient. The first product being marketed is an ingredient mix that Ajinomoto is introducing in China. Ajinomoto has informed us that they are ready to begin shipping goods and sales will occur upon receipt of orders from customers. Senomyx anticipates that Ajinomoto’s commercial activities will expand to additional offerings in countries over time.
As we’ve discussed on previous calls, Nestle is marketing several new bouillon and culinary aid food products that contain Senomyx's savory flavor ingredients. The primary applications of the company’s savory flavor ingredients are to reduce or replace monosodium glutamate or MSG and to enhance the savory taste of foods by combining Senomyx's savory flavors with other ingredients to create unique new flavors.
Nestlé’s current marketing activities are focused on the Pacific Rim and Latin America. In addition, they have begun conducting product development and consumer testing with both new and reformulated established products in larger countries that are high-volume users of MSG. Nestle has informed us that their current efforts include work on more than 50 products across those three geographic zones.
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. To date, all the products launched by Nestle are new products being marketed under the Maggi line.
Senomyx continues to await regulatory approval for our savory flavor ingredients in Europe. As we’ve discussed previously, the delay in Europe is due to changes in the regulation of flavors and it’s not specific to Senomyx. We are in the queue with many other companies that are seeking approval of their flavor ingredients. We will let you know when we have details regarding the status of our savory flavor ingredients in Europe.
Finally, I’d also like to note that our business development initiatives continue to be an important focus for Senomyx as we actively seek new collaborations with retail and ingredient supply partners. Although new collaborations are highly dependent on our continued progress on an R&D front, as well as potential collaborators’ ability and willingness to invest in an R&D program in the current economic environment. We believe our flavor programs offer valuable opportunities to prospective partners.
This concludes my update. I’ll now ask Tony Rogers, Senomyx’s CFO to provide a financial overview of the company.
Tony Rogers
Thank you, John. Revenues were $4.2 million for the third quarter of 2009 compared to $4 million for the third quarter of 2008. The increase in quarterly revenue is primarily due to recognition of revenue related to the company’s July 2009 agreement with Firmenich. This was 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 months revenue in 2008 is primarily due to the timing of revenue recognition related to an $8 million upfront payment associated with the expansion of Senomyx’s collaboration with Ajinomoto. This decrease from 2008 to 2009 is partially offset by higher revenue this year 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 million for the third quarter of 2009 compared to $7.7 million for the third quarter of 2008. This decrease was primarily due to the timing of patent filing legal expenses associated with the company’s intellectual property portfolio. Also contributing to this decrease were lower expenditures for research supplies, particular 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 same period in 2008. This decrease was primarily due to the timing of patent filing legal expenses associated with 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. This was partially offset by higher expenses for activities in support of our 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. The increase was primarily due to higher personnel expenses. General and administrative expenses including non-cash stock-based compensation expense were 10 million for the nine months ended September 30, 2009 compared to $9.8 million for the same period 2008. This 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 in the third quarter of 2008. The net loss for the nine months ended September 30, 2009 was $0.70 per shared compared to $0.62 per share for the same period 2008.
As a result of the $12 million in license fee payments for 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. Also contributing to the favorable trend in cash utilization is our tracking toward lower and anticipated expenses. We are, therefore, revising our guidance for 2009.
For the full-year, we expect our cash used in operating activity to be less than $12 million compared to our previous guidance of $14 million to $16 million. And we expect our expenditures 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 received more cash from collaborative than anticipated this year, 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 and in accordance with our GAAP revenue recognition policy, approximately $2.3 million of this 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.
So, in summary, for the full-year, Senomyx now expect total revenues of $15 million to $16 million, total expenses of $42 million to $43 million. Of this amount, we expect – we estimate approximately $6 million to $6.5 million will be non-cash stock-based compensation expense.
We expect the net loss of $26 million to $27 million or basic and diluted net loss per share of $0.84 to $0.87. Net cash used in operating activities to be less than $12 million is our projection for the year.
In closing, we are pleased with the $12 million in payments from Firmenich and the positive impact on our balance sheet. We’ve recognized that a strong balance sheet is important to investors and for the company’s normal course of business. Going forward, we will continue to monitor our cash requirements and our expenses very closely and we will keep you updated on our progress.
I will now turn the call back over to the operator to open it up to questions.
Question-and-Answer Session
Operator
Thank you. (Operator instructions) Mr. Snyder, our first question comes from Mark Monane at Needham. Please proceed.
Mark Monane – Needham
Thank you. Good morning and congratulations on your progress.
Kent Snyder
Thank you, Mark.
Mark Monane – Needham
I have a concrete question and a more abstract question. Regarding the Ajinomoto agreement, is that just a savory program, and then how are you evaluating success in terms of your penetration there? Are there cultural issues we should think about in terms of what is savory and what is not savory as you look at the different countries?
Kent Snyder
Mark, let me (inaudible) at that and I’ll ask John or Sharon to jump in as well. You are correct; the Ajinomoto launch has to do with a new savory flavor product containing a Senomyx savory flavor ingredient. Certainly, there are cultural differences from country to country in how savory flavor ingredients are used, but we do not anticipate that that’s going to be necessarily an issue since we know that Ajinomoto has done of a lot of factory work in their pre-commercialization activity. So we think that they’ve taken all those types of things into consideration.
John Poyhonen
I would just add, Kent, with the China market, which will be the first country that Ajinomoto will be conducting their launch, and right now, it’s estimate is that about half of the world’s monosodium glutamate or MSG are consumed in that marketplace. So certainly, there won’t be issues from a labeling perspective that we see in other markets in the United States and Europe for example. However, we think that this new flavor ingredient mix that’s being launched by Ajinomoto will create a very unique and interesting new flavor to provide choice for their customers. So I think, it’s a bit early to comment more than that, Mark, but that gives a little more perspective
Mark Monane – Needham
That’s helpful and we look forward to that result and coming revenue from there. And a more general question. When you think about partnership, I guess it can vary a lot depending on who the individual potential partner is and how the company thinks about it. Let me ask you how the company is thinking about partnerships going forward. Do you prefer a scenario in which you would license out a product for individual product like soup and give exclusivity there or are you looking more towards licensing out a product in a variety of sweet indications like Firmenich has regardless of the individual food category? Can you talk by the two different philosophies and how the company is evolving for us?
Kent Snyder
John, would you like to correct that?
John Poyhonen
Sure. It’s a very important strategic issue that we have, as a company, as you would expect, Mark, and I think what we try to do is evaluate each of our programs independently and look at the method to create the greatest value for the program and for the compounds within the program. So, as you mentioned, there are a number of collaborative agreements that we have that do work with more retail companies and we are very proud of our relationships with Nestle and Coca-Cola and Campbell Soup. Those would be examples of those types.
We think there are certainly benefits to those types of programs, especially when they have very large market shares and the categories, which they’re upright. Obviously, there’s benefits and that you will collect royalties on a higher selling price than you would from an ingredient supply perspective. So I think those are key benefits that we looked at, as well as the brand name recognition that comes with that.
When you look at the ingredient supply, we think that’s also a very viable opportunity. A lot of times that has to do with marketplaces that tend to be a bit more fragment. And so for example, if there’s not a dominant market leader within different product categories, you don’t want to provide exclusive rights to any one single company. I think that if we look at out partnership with Firmenich, we’ve been extraordinarily impressed with their ability to conduct manufacturing to do major work and product developments and formulation and incorporate it into the flavor systems. They have outstanding relationships with customers.
So we think all those things are really going to benefit us from a perspective of speeding the time to market. So I don’t mean to be evasive, Mark, but we think there is certainly room to have both types of agreements within the company and we’ll continue to pursue both on a parallel path to create the most value for our programs.
Mark Monane – Needham
That’s fair enough. We look forward to future events including the 2383 commercialization. Congratulations on your progress.
Kent Snyder
Thank you.
John Poyhonen
Thank you.
Operator
Our next question comes from Pamela Bassett with Cantor Fitzgerald. Please proceed.
Pamela Bassett - Cantor Fitzgerald
Hi, thanks for taking my question and congratulations on the progress. A clarification on the $2 million, was that received in the fourth quarter already from Firmenich?
John Poyhonen
That payment will be upcoming, so it has not been received yet, but is expected in Q4.
Pamela Bassett - Cantor Fitzgerald
It’s Q4. Okay. And then the $8 million, should Firmenich proceed or select 6973, will that $8 million payment occur in Q1 or in Q2?
Kent Snyder
I’ll take that one, Pamela. On that particular one, we previously disclosed with the agreement that from the time of their selection and moving forward with the commercial development for a compound that has regulatory approval like S6973 that the payment will take place 30 days after that decision was made. So we would expect that to be a first quarter event.
Pamela Bassett - Cantor Fitzgerald
Okay. Thank you. And then one more Firmenich-related question. The $9.7 million remaining on the license fee that will be recognized, I assume in 2010, is that split evenly throughout the year?
Tony Rogers
Pamela, it’s Tony. That would be over a service period and we will describe this in a little more detail in the 10-Q we file today. But some of that will be recognized as revenue in 2011 as well, but most of it in 2010.
Pamela Bassett - Cantor Fitzgerald
Okay. Thank you. And then, can you talk about the sucralose launch and what we might expect in 2010 for that product?
Kent Snyder
I'll let Sharon Wicker to comment on that.
Sharon Wicker
Sure. What we have discussed earlier today that John covered is that it remains Firmenich's goal to be able to have their first sale or first orders yet this year, and then actually would receive revenue going into – world revenue, excuse me, going into the first part of next year. We are very pleased with the work that Firmenich has been doing on S2383. They have been working with key customers on some significant project opportunities, and at this point we're feeling really positive about the work and what the potential is there, Pamela.
Pamela Bassett - Cantor Fitzgerald
Can you give us some idea about maybe the number of customers or the size of the opportunity that you think Firmenich might be able to deliver on this quarter and then going into next year with respect to sucralose?
Sharon Wicker
I can comment in a general sense that virtually we're really not in a position to be real specific about the exact customers and the type of dollar sales that might be represented. But again, one of the things John mentioned that is really positive about working with Firmenich is that they have relationship that all of the large food and beverage company throughout the world. So, you can imagine who is on their target hit list and I will say that some of these significant projects that I mentioned are with these top customers.
Kent Snyder
Pamela, I just think it's probably too early for us to speculate on the update or the penetration that S2383 will have in these very early stages. But hopefully as we move into the early part of next year we’ll have – or we will be able to provide additional detail in terms of what the rollout might be looking like at that time.
Pamela Bassett - Cantor Fitzgerald
You know what I’m telling, how should we think about the ramp up in royalty revenue next year with Nestlé’s expansion of their products with the Ajinomoto launch, and then of course with what Firmenich is doing with sucralose it might do with sweet inhibitors.
Kent Snyder
Sure. We understand the question very well, Pamela.
Pamela Bassett - Cantor Fitzgerald
I know what you can tell us about that, but…
Kent Snyder
It’s probably too early to speculate. It would be our goal to provide some additional detail in terms of the rollout and possibly even rollout the expectations that we get into Q1 and Q2 of next year. And that’s probably the best we can do at this point.
Pamela Bassett - Cantor Fitzgerald
And do you think you would be able to give us guidance for the year or it will be more quarter-to-quarter?
Kent Snyder
I think at this point we could probably speculate that what we expect on an annual basis, but again it’s hard to predict about the penetration rates and the uptake of these products are going to be. So we may be face with a situation that the best information will come out quarter-by-quarter.
Pamela Bassett - Cantor Fitzgerald
I think from my standpoint I think it's fair to say that there is an unmet need and certainly a demand for these products, particularly going forward with the introduction of the sucralose enhance, so is it – is there any – are there any bottlenecks in Firmenich’s ability to deliver? Let’s say, they get 20 customers wanting a significant delivery of product. Will they be able to produce that?
Kent Snyder
It’s our understanding at this point in time that they are confident that they will be to deliver what customers require and order. So, to this point in time, that’s the knowledge that we have.
Pamela Bassett - Cantor Fitzgerald
So let’s say, if they’re met with some significant order intake, there are no issues with regard to formulation, production, any scale-up issues?
Kent Snyder
We’re not aware of any at this time.
Pamela Bassett - Cantor Fitzgerald
That’s great. Okay. Thanks very much.
Kent Snyder
We’ve a lot of experience in launching new ingredients, Pamela. So I think we have a lot of comfort that they know based on the feedback that they're getting from key customers and their forecasting ability and the ability to develop safety stock and all that, that they should be in good shape.
Pamela Bassett - Cantor Fitzgerald
Okay. Great. And just staying with sweet for a minute, what is it - does it look like you’re headed towards selecting a fructose enhancer in the next couple of quarters?
Kent Snyder
Pamela, I think it’s a bit early to make that or set that expectation. I think we’ve found some very interesting fructose enhancer that has demonstrated activity in the assay. We’ve continued to scale those most interesting enhancers up so we have sufficient quantities to conduct taste testing. I think it’s probably again a bit too early to speculate on when an actual compound will be selected for development. But, hopefully, as we move quarter-to-quarter, we can report progress in that program but, at this point, I think it’s a bit too early.
Pamela Bassett - Cantor Fitzgerald
Okay. So does it look like you probably have more sucrose enhancers and then increase that portfolio as the next product?
Kent Snyder
That would be our expectation that we clearly have other sucrose enhancers that demonstrate significant activity in our taste tests. They have a variety of different properties compared to S6973, and so it will be our expectation that another sucrose enhancer could be selected for development before a fructose enhancer. But again, we’ll make some progress on both fronts, and so we will provide additional information as we move along.
Pamela Bassett - Cantor Fitzgerald
Okay. Great. Thanks very much.
Kent Snyder
Thank you.
Operator
At this time, there are no further questions. So I’ll turn the call back to Mr. Snyder to conclude.
Kent Snyder
I’d like to thank all of you for participating in Senomyx’s call today. This is an exciting time for Senomyx as we are evolving from a company with a primarily discovery and development focus to a company with near-term scientific and commercialization prospects.
Receiving GRAS status for one of our new flavor ingredients is a culmination of a lot of work. This includes discovery of the receptor involved in the perception of a particular taste sensation, development of screening assays, identification and optimization of potential ingredients, sensory studies, and formulation of product prototypes, and numerous activities in support of regulatory filings. It was very rewarding for the Senomyx team that two of our flavor programs have now yield six ingredients of GRAS status – our sucrose and sucralose enhancers and our four savory flavor ingredients.
Establishing research and commercialization partnerships in building companies also required an extensive amount of effort. Senomyx currently has product discovery and development collaborations with seven of world’s foremost food, beverage and ingredient supply companies. In addition to Nestlé’s use of our savory flavor ingredients, we are anticipating the near-term launch of products containing Senomyx flavor ingredients by both Ajinomoto and Firmenich.
We’re also optimistic about potential value drivers that may occur within the next six to 12 months. These includes completing key development activities for the new sucrose enhancers and selected bitter blockers, and the achievement of a taste proof of concept for a salt enhancer and a fructose enhancer. In addition, continued progress in optimizing our cool flavor ingredients could lead to more extensive development activities for this program.
We’re looking forward to updating you with - further at the end of the next quarter. If you have any additional questions, please feel free to contact us directly or through our website. Thanks to everyone for participating today, and we will talk to you at the end of next quarter.
Operator
Ladies and gentlemen, this concludes our conference call for today. All parties may now disconnect.
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