Senomyx Announces First Quarter 2006 Financial Results; Highlights Include New, Expanded, and Extended Collaborations and Increased Royalty Revenue Potential

Senomyx, Inc. (NASDAQ:SNMX), a leading company focusedon using proprietary taste receptor-based assays to discover novelflavor ingredients for the packaged food and beverage industry, todayreported financial results for the first quarter of 2006. Consistentwith management's expectations, for the three months ended March 31,2006, the Company recognized revenues of $2.4 million and incurredtotal expenses of $9.9 million, resulting in a net loss of $6.6million. As of March 31, 2006 the Company had cash, cash equivalentsand short term investments of approximately $79.3 million.

"The first quarter of 2006 was eventful for Senomyx," said KentSnyder, President and Chief Executive Officer of the Company. "Weinitiated a collaboration with a new major food industry partner,expanded one of our existing collaborations, and extended a secondexisting collaboration. Importantly, we have leveraged our currentdiscovery and development programs to broaden our food productcategories and increase our royalty revenue potential," Snyder noted.

In March, Senomyx entered into a new collaboration with AjinomotoCo., Inc., a market leader in food and culinary products withparticular expertise in Japan and other Asian markets. Although theagreement was signed in the first quarter, revenues from Ajinomotowill begin to be recognized in the second quarter. The Company willwork with Ajinomoto on the discovery and development of novel flavoringredients in the soup, sauce and culinary aids, noodle, and bouillonproduct categories within Japan, China, and additional Asiancountries. Ajinomoto is one of the world's top amino acids and foodproducts manufacturers and is renowned for its technology and thequality of its products.

"We were extremely pleased to establish the new partnership withAjinomoto," Snyder commented. "This collaboration creates new accessfor Senomyx to a number of large product categories. In addition, therelationship with Ajinomoto supports our strategy of establishing bothglobal agreements and regional partnerships with market leadingcompanies that provide expertise on taste characteristics preferred bylocal consumers.

"Also in March, we expanded our agreement with Nestle, the world'slargest food company, to include commercialization of novel flavorsand flavor enhancers in the pet food category, a large, new marketopportunity for the Company," Snyder said. "In addition, we amendedthe Nestle agreement to allow Senomyx to reacquire specified rights incertain areas, which enables us to enter into new collaborations forthose areas.

"In February, we announced the extension of the collaborativeresearch phase of our research and license agreement with CampbellSoup for an additional three years to March 2009," Snyder stated. "Weappreciate continuing our work with Campbell, one of our long-standingpartners and a leading global provider of soup, vegetable-basedbeverages, and other premium quality foods."

Senomyx now has eight product discovery and developmentcollaborations with six of the world's foremost packaged food andbeverage companies: Ajinomoto, Cadbury Schweppes, Campbell Soup,Coca-Cola, Kraft Foods, and Nestle. Senomyx expects to receiveresearch funding from one or more of these collaborations throughOctober 2009.

Senomyx had estimated that the combined 2004 worldwide sales ofits collaborators' products that fall within their exclusive orco-exclusive product fields were more than $45 billion. This figurehas increased about 15% to approximately $51.5 billion with theaddition of the new collaboration with Ajinomoto and the expanded andamended agreement with Nestle. The Company's collaboration agreementsprovide that it will receive royalties of up to 4% on itscollaborators' sales of products containing Senomyx's flavors, flavorenhancers, or taste modulators. Senomyx does not anticipate that itscollaborators will incorporate its flavor ingredients into all oftheir products within their exclusive product fields.

"We believe that our collaborations with these prominent companiesprovide validation of Senomyx's technology and business model, and areconsistent with our goal of maximizing Senomyx's royalty revenuepotential by continuing to leverage our unique capabilities. Movingforward, we will be looking for other opportunities to establishadditional collaborations with global or regional market leadersseeking to create a competitive advantage for their products," Snydersaid.

"In other recent company news, we were fortunate to announce twooutstanding additions to Senomyx's Board of Directors," stated Snyder."Christopher Twomey brings a wealth of finance, audit, and strategicbusiness expertise to the Board. He is currently Senior VicePresident, Finance and Chief Financial Officer at Biosite(R)Incorporated, and he oversees all financial aspects of Biosite, aswell as the Human Resources, Facilities, and Information Systemsdepartments. Dennis O'Brien has extensive food industry experience,most recently as the President and Chief Operating Officer of ConAgraFoods Retail Products Company, where he has been responsible forgeneral management of an $8.6 billion packaged foods business. Chris'financial and business acumen, and Dennis' knowledge of food industryoperations, marketing, and product development, will be of great valueto Senomyx as we continue to seek new collaborations and to advanceour discovery and development efforts."

Financial Review:

Revenues were $2.4 million for the first quarter 2006, compared to$3.0 million for the first quarter of 2005, a decrease of 19%. Thechange is primarily due to the receipt of a milestone payment and costreimbursement revenue in the first quarter of 2005, partially offsetby a net increase in research and development funding revenues.

Research and development expenses, including stock-basedcompensation expense, were $6.5 million for the quarter, compared to$5.2 million for the first quarter of 2005, an increase of 26%. Thisincrease is primarily due to increased patent-related expensesassociated with expanding the Company's intellectual propertyportfolio and foreign filing costs, increased outsourced researchsupport expenses, and increased scientific supplies expensesassociated with increased research and development activities.

General and administrative expenses were $3.4 million for thefirst quarter of 2006, compared to $2.6 million for the same quarterin 2005, an increase of 30%. The increase in general andadministrative expenses was due to increased salaries and personnelexpenses driven by increased headcount and consulting expenses, and toincreased non-cash, stock-based compensation expense due to theimplementation of SFAS 123(R) in the first quarter of 2006.

The net loss for the quarter was $6.6 million, or $0.22 per share,compared to a net loss in 2005 of $4.6 million, or $0.18 per share.

Financial Outlook for 2006:

"The first quarter financial results met the Company'sexpectations. We are expecting an increase in revenues and expenses in2006 and will continue to manage our operations closely as we advanceour discovery and development programs towards commercialization,"said John Poyhonen, Senior Vice President, Chief Financial andBusiness Officer. "Expense growth is expected to be driven bydiscovery and development activities, increased headcount, and theadoption of FAS 123(R), which is anticipated to increase our non-cash,stock-based compensation expense.

"We are expecting growth in our revenues during the second quarterand remaining quarters in 2006," noted Mr. Poyhonen. "Due to thetiming of the signing of the collaboration agreement with Ajinomoto,no revenues related to this collaboration were recognized in the firstquarter of 2006; however, we expect to recognize revenues related tothis collaboration starting in the second quarter of 2006. We are alsocontinuing our business development efforts, which are directedtowards the signing of additional corporate collaborations."
For the full year 2006, Senomyx continues to expect:

-- Total revenues of $14 million to $16 million

-- Total expenses of $39 million to $41 million, of which $7
million to $8 million is non-cash, stock-based compensation
expense

-- Net loss of $22 million to $24 million

-- Basic and diluted net loss of $0.74 to $0.80 per share

-- Net cash used in operating activities of $1 million per month
on average for the full year

Corporate Highlights:

-- Announced that Senomyx entered into a new research,
development, commercialization, and license agreement with
Ajinomoto Co., Inc., a market leader in food and culinary
products. During the three-year collaborative period, the
Company will work with Ajinomoto on the discovery and
development of novel flavor ingredients on an exclusive basis
in the soup, sauce and culinary aids, and noodle product
categories and on a co-exclusive basis in the bouillon product
category within Japan and other Asian markets, including China
and additional key countries. Ajinomoto has agreed to pay
Senomyx an upfront license fee, discovery and development
funding, and specified payments upon the achievement of
milestones during the collaborative period. Upon
commercialization, Senomyx will be entitled to royalty
payments based on sales of Ajinomoto products containing any
flavor ingredients developed under the agreement.

-- Announced the expansion and amendment of the Company's
agreement with Nestle SA, the world's largest food company.
The agreement, which covers the discovery and
commercialization of novel flavors and flavor enhancers in the
dehydrated and culinary food, frozen food, and wet soup
product categories, was expanded to include commercialization
of novel flavors and flavor enhancers in the pet food category
on a co-exclusive basis. Upon commercialization, Senomyx will
receive royalty payments based on sales of products containing
its flavors and flavor enhancers developed under the amended
agreement. The amendment also allows Senomyx to reacquire
specified rights from Nestle in certain areas.

-- Announced an agreement for a three-year extension of the
collaborative research phase under the Company's initial
collaborative research and license agreement with Campbell
Soup Company, a global manufacturer and marketer of high
quality soup and simple meals. During the collaborative
research period, Senomyx will continue to work with Campbell
on the discovery and commercialization of new ingredients that
improve the taste of wet soups and savory beverages. Under the
agreement, Campbell will provide research funding over the
three-year period as the Company meets specified research
goals, and, upon successful outcome of the research,
additional payments for milestones and for royalties based on
net sales of products using the new ingredients.

Scientific Update:

-- Savory Program: The primary goals of the Company's savory
flavor ingredients are to reduce or eliminate monosodium
glutamate (MSG) and other additives such as sodium inosinate
(IMP), and to enhance the savory taste of foods. Senomyx's
collaborator who is evaluating the savory ingredients for
commercialization is conducting recipe development and taste
tests at multiple sites. These activities are being performed
to assess the taste of a variety of product lines
incorporating one or more of the savory ingredients. During
the first quarter, Senomyx developed a set of formulations
containing its savory ingredients in an effort to facilitate
this and future product development work.

-- Sweet Program: The near-term goal of the sweet program is to
identify compounds that function at a concentration of one to
two parts per million in a wide variety of products and
achieve at least a 33% reduction of the carbohydrate
sweetener. As described previously, the addition of
approximately 1.5 to two parts per million of S951 to 6%
fructose-sweetened soft drink and powdered drink prototypes
resulted in sweetness equivalent to 10% fructose. This is
equivalent to a 40% reduction of the added carbohydrate
sweetener. S951 also enabled a significant reduction of the
carbohydrate sweetener and maintained sweet taste at a
concentration of approximately 6 parts per million in more
complex product prototypes such as ice cream and cereal.
Senomyx is continuing to optimize the potency and physical
properties of several classes of compounds. Toward this
goal, the Company identified S8613, which is approximately
as potent as S951 in taste tests, but is more water
soluble than S951. Recently, several compounds were
identified that are 150 to 200 times more soluble than
S951 in a sweetened solution. Such improvements in
physical properties are expected to translate to better
functionality in products. Senomyx is continuing to taste
these improved compounds in various product prototypes and
to provide samples of certain prototypes to our
collaboration partners for evaluation.

-- Salt Program: Senomyx is continuing to identify enhancers of
the ion channel, ENaC, which is present in human taste cells.
Two forms of ENaC, Alpha and Delta, may each play a role in
salt taste. Senomyx has identified several new classes of
enhancers of Alpha ENaC, the most potent of which are S4613
and S7100. In addition, characterization was completed for
Delta ENaC, which has different properties from Alpha ENaC.
Activities are ongoing with both Alpha and Delta ENaC, and
discovery of Delta ENaC enhancers was initiated using
Senomyx's proprietary screening assays. Sets of Alpha and
Delta ENaC enhancers that are active in these assays have been
identified.

-- Bitter Program: The goal of the bitter taste modulation
program is to block bitter taste and improve the overall taste
characteristics of packaged foods, beverages, and
pharmaceutical products. The initial steps of this program
involve the identification of taste receptors that respond to
bitter ingredients known to be present in a variety of foods,
beverages, and pharmaceuticals, followed by the use of these
receptors to discover bitter taste blockers. Progress is
continuing with several lines of research. Senomyx had
previously demonstrated a functional response to 16 of the 25
known human bitter receptors. The Company recently
demonstrated the response of two previously uncharacterized
bitter receptors to certain bitter-tasting compounds,
increasing the total number of receptors for which Senomyx has
demonstrated a functional response to 18. Senomyx's
researchers are continuing to evaluate the function of the
remaining seven receptors. In addition to this work, the
development of high-throughput screening assays for several
bitter receptors has been initiated. Screening for bitter
blockers using these assays is anticipated by year-end.

Conference Call:

Senomyx will host a conference call at 11:00 a.m. Eastern Time(8:00 a.m. Pacific Time) today to discuss these financial results andprovide an update on the Company. To access the call in the U.S. dial866-700-7101 or from outside the U.S. dial 617-213-8837. Theparticipant passcode for this conference call is 23496090.Additionally, the call will be webcast under the Investor Relationssection of Senomyx's website at www.Senomyx.com and will be archivedthere for 30 days following the conclusion of the conference call.

About Senomyx, Inc. (www.senomyx.com)

Senomyx is a leading company focused on using proprietary tastereceptor-based assays, screening technologies and optimizationchemistry to discover and develop novel flavors, flavor enhancers andtaste modulators for the packaged food and beverage industry.Senomyx's current programs focus on the development of flavors, flavorenhancers and taste modulators in the savory, sweet, salt and bittertaste areas. Senomyx has entered into product discovery anddevelopment collaborations with six of the world's leading packagedfood and beverage companies: Ajinomoto Co., Inc., Cadbury Schweppes,Campbell Soup Company, The Coca-Cola Company, Kraft Foods Global, Inc.and Nestle SA.

Forward-Looking Statements

Statements contained in this press release regarding matters thatare not historical facts are "forward-looking statements" within themeaning of the Private Securities Litigation Reform Act of 1995.Because such statements are subject to risks and uncertainties, actualresults may differ materially from those expressed or implied by suchforward-looking statements. Such statements include, but are notlimited to, statements regarding: Senomyx's projected financialresults for 2006; Senomyx's ability to enter into global or regionalcollaborations; the size of any market for Senomyx's products; theprogress and capabilities of Senomyx's discovery and developmentprograms; the benefits to be derived from relationships with Senomyx'sproduct discovery and development collaborators, technologycollaborators and licensors and Senomyx's ability to enter into andmaintain these relationships; Senomyx's ability, or Senomyx'scollaborators' ability, to successfully satisfy all pertinentregulatory requirements and commercialize products incorporatingSenomyx's flavor enhancers and taste modulators in packaged foods andbeverages; the continued funding of Senomyx discovery and developmentprograms by its collaborators; Senomyx's ability to strengthendiscovery and development capabilities; and whether any publishedscientific discoveries of the Company contribute to commercialproducts or the Company's ability to generate revenues. Risks thatcontribute to the uncertain nature of the forward-looking statementsinclude: Senomyx is dependent on its product discovery and developmentcollaborators for all of Senomyx's revenue; Senomyx is dependent onits current and any future product discovery and developmentcollaborators to develop and commercialize any flavors, flavorenhancers or taste modulators Senomyx may discover; Senomyx may beunable to develop flavors, flavor enhancers or taste modulators usefulfor formulation into products; Senomyx or its collaborators may beunable to obtain and maintain the GRAS determination or regulatoryapproval required for flavors, flavor enhancers or taste modulators tobe incorporated into products that are sold; even if Senomyx or itscollaborators receive a GRAS determination or regulatory approval andincorporate Senomyx flavors, flavor enhancers or taste modulators intoproducts, those products may never be commercially successful; andSenomyx's ability to compete in the flavor and flavor enhancer marketmay decline if Senomyx does not adequately protect its proprietarytechnologies. These and other risks and uncertainties are describedmore fully in Senomyx's most recently filed SEC documents, includingits Annual Report on Form 10-K, under the headings "Risks Related toOur Business" and "Risks Related to Our Industry." All forward-lookingstatements contained in this press release speak only as of the dateon which they were made. Senomyx undertakes no obligation to updatesuch statements to reflect events that occur or circumstances thatexist after the date on which they were made.
Selected Financial Information
Condensed Statements of Operations
(in thousands, except for per share amounts)


Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
(unaudited) (unaudited)
Revenues $2,411 $2,966

Operating expenses:
Research and development (including $736 and
$831 of non-cash stock-based compensation) 6,496 5,159
General and administrative (including $1,039
and $961 of non-cash stock-based
compensation) 3,417 2,624
----------- -----------
Total operating expenses 9,913 7,783

Loss from operations (7,502) (4,817)

Interest income 874 225
----------- -----------

Net loss $(6,628) $(4,592)
=========== ===========

Basic and diluted net loss per share $(0.22) $(0.18)
=========== ===========

Weighted average shares used in computing
basic and diluted net loss per share 29,605 25,185
=========== ===========


Condensed Balance Sheets
(in thousands)


March December
31, 31,
2006 2005
----------- --------
(unaudited)

Cash, cash equivalents and investments
available-for-sale $79,251 $83,813
Other current assets 1,938 2,300
Property and equipment, net 2,724 2,418
----------- --------
Total assets $83,913 $88,531
=========== ========

Accounts payable and accrued expenses $4,312 $4,207
Deferred revenue 1,386 1,728
Deferred rent 2 151
Stockholders' equity 78,213 82,445
----------- --------
Total liabilities and stockholders' equity $83,913 $88,531
=========== ========