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Senomyx Inc. SNMX

Firm OverviewFirm DirectionPorter's Five ForcesSWOT AnalysisCompetitor AnalysisValuation MetricsBalance SheetAdditional InformationConclusion. Table of Contents. Incorporated in September 1998, Senomyx is focused on discovering and developing novel flavor ingredients for food and beverages.

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Senomyx Inc. SNMX

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    1. Senomyx Inc. (SNMX) Lukas Roots, Pramod Thammaiah, Tae Yoon Portfolio & Risk Management

    2. Firm Overview Firm Direction Porter’s Five Forces SWOT Analysis Competitor Analysis Valuation Metrics Balance Sheet Additional Information Conclusion Table of Contents

    3. Incorporated in September 1998, Senomyx is focused on discovering and developing novel flavor ingredients for food and beverages. Currently focused on developing savory, sweet, and salt flavor ingredients “intended to allow for the reduction of MSG, sugar and salt in food and beverage products.” – Official Website Partnerships with Ajinomoto Co., Inc., Cadbury Schweppes, Campbell Soup Company, The Coca-Cola Company, Kraft Foods Global, Inc. and Nestle SA. Firm Overview of Senomyx

    4. Salt enhancer will not be on the market until at least 2009. Does not have any guidance on when the company aims to become profitable. Expects a $23-26 million loss in 2008. Focused on continuing R&D, rather than short-term profitability Firm Direction

    5. Sector: Healthcare Industry: Biotechnology & Drugs Diverse companies associated with this industry specializing in very specific fields. High costs to enter the industry Senomyx is very specialized, so there is not much rivalry. Rivalry does exist in cases when large corporations like Coca-Cola research on their own without relying on companies like Senomyx that were created to do the work for them. Porter’s Five Forces Rivalry

    6. Small biotech companies tend to focus on novel fields of research, as with Senomyx. With this variety of companies present, the supplier power is relatively high. Patents provide protection for the products. Porter’s Five Forces Supplier Power

    7. Because the companies in the biotechnology industry are very focused on specific areas, each individual firm has a small pool of customers to target. Many do not sell their products directly to customers, but to firms, so it is difficult to determine the demand. The industry as a whole, however, should have a relatively high buyer power because health and diet are very important to today’s people than ever before, and this industry leads the frontiers for such concerns. Porter’s Five Forces Buyer Power

    8. Food is a necessity for humans, so there is almost no threat of substitution. Natural flavors are only substitutes to artificial flavors. Porter’s Five Forces Threat of Substitutes

    9. Because the field requires significant amounts of scientific research and specialized knowledge, there is a strong barrier to entry. The cost of starting up a company in this industry is relatively high because developing new chemical compounds requires significant investments of human and physical capital. Government regulations and patents also hinder the entrance of new firms. Porter’s Five Forces Barriers to Entry

    10. Total Current Assets are well above Total Current Liabilities, with a liquidity ratio of 5.2. Has $62 million in cash on hand (28% of market cap). Made over $18 million Has increased revenue by 20% per year. SWOT Analysis Strengths

    11. Has lost money every year since the company’s inception. Has a profit margin of -120%. Has relatively high risk (beta of 2). Book value peaked two years ago, along with cash on hand. The company evidently has been unable to raise enough money to pay for its costly research. SWOT Analysis Weaknesses

    12. Maybe able to capitalize on 5 new patents related to human sweet and umami taste receptors. Has 371 pending patent applications which it has yet to capitalize on, and ongoing partnerships with 7 of the world’s largest food and beverage corporations. Could reduce focus on research, and collect short-term profit from royalties. Current earnings potential from assets (assuming 6% return) and royalties of $28.8 million, or 12.8% of market cap. SWOT Analysis Opportunities

    13. Patents may become worthless if other companies develop better technology. Current partners may develop their own research departments. Senomyx may not have the money required to update its patents and technology, since it is losing money. SWOT Analysis Threats

    14. Higher market cap ($1.32 billion) Engaged in the manufacture and marketing of colors, flavors, and fragrances. Actually makes a profit P/E of 16.96 26% yoy growth (Q4 FY2007 to Q4 FY2006) in net income 10.2% ROE Although Sensient is an important company in relation to SNMX, it is not a direct competitor, since it does not engage in research, and thus does not compete with its patents. Competitor Analysis Sensient Technologies Corporation (STX)

    15. Much lower market cap ($18.01 million) Focused on the production, licensing, marketing, and distribution of its singular product: Z-trim, a natural food ingredient used to replace fat and calories without altering taste, texture, or appearance. Is not currently a direct competitor of SNMX, but operates in the same general field of research, with the same type of clients. Have also never seen a profitable quarter. Unlike SNMX, they do not have a constant source of revenue from patents. Cost of revenue greatly exceeds revenue, even before research and administration costs. Profit Margin of -2733.78%. Liquidity ratio of 4.82 Book value of $10.58 million Has $4.16 million (23% of market cap) in cash. Lost $16.43 million last year, or 91% of its current market cap. Competitor Analysis Z-trim Holdings Inc. (ZTM)

    16. Key Statistics Market Cap: 225.75M Profit Margin (ttm): -119.82% Operating Margin (ttm): -138.45% Return on Assets (ttm): -18.61% Return on Equity (ttm): -34.62% Revenue (ttm): 18.22M

    17. Valuation Metrics Price/Sales (ttm): 12.41 Price/Book (mrq): 3.99 Mkt Cap: 225.75M EPS (ttm):-0.72

    18. Balance Sheet Cash And Cash Equivalents: 21,225 Total Current Assets: 75,343 Property Plant and Equipment: 14,839 Total Assets: 90,182 Total Current Liabilities: 9,888 Long Term Debt: 8,854 Total Liabilities: 20,705

    19. Income Statement

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