Biotech Values

[AlohaDan]

Here's the abstract:

News Feature
Nature Biotechnology  22, 1203 - 1205 (2004)
doi:10.1038/nbt1004-1203


A taste of the future
Cormac Sheridan

Dublin
Flavor-enhancing molecules provide a fast track to market and to an IPO, at least for Senomyx, the first 'flavor' biotech out of the block. Will others follow? Cormac Sheridan investigates.

Unfortunately I only get a hard copy. Here are some main aspects.

Competitors listed were Linguagen (mention on CC with bitter blockers)and Chemcom (private out of Brussels). The latter looks like it's at least two years behind with assay technology.

IFF has been forced into seeking a partnership with Chromocell of New Brunswick NJ to get automated screening. But they are not only behind, but SNMX has sewed up some serious patent space. Founder Charles Zucker UCSD is a scientific leader in this area. Check on PubMed and patent office. Co founders of the original company (Ambryx) were Roger Tsien also UCSD and Lubert Stryer of Stanford.

The CC listed food sales of $36 billion by SNMX partners. Lets say conservatively flavor enhancers are used in one fifth, or $7 billion.

Royalty rate was quoted as 1-4%. If you take 2% then you have, if I'm eyeballing this right, SNMX revenues of .02 X $7 billion or $140 million/22 million shares = ~$5 share revenue.

Looks like a possible realistic 2-3 bagger anyway on sales alone. BTW the Nature article was more optimistic giving a range of royalties of $310 million to $1.2 billion. Anyway seems good.

I'm waiting on my investor pack to dig deeper into overhead costs. Selling as a supplier to a few big firms should keep sales costs way down.

Downside?

I don't thing a complete disaster. HAG $3-5 bucks if first compounds fail GRAS. May also drop & linger in $7 region if there is a time stretchout. Nestle relationship was reported by Nature as pretty good, Coke as an initial struggle as the new management shakes out.

I'll be doing DD over the next few months. Anyone that comes up with something please post. A new CC is coming up January 12 IIRC.