SNMX -- Senomyx

[ClientNine]

If you've read the VIC write-up, what are your thoughts? Could it possibly be as good a story as the author suggests?

[Cunninghamew]

seemed more like speculation than investing to me... very well could be a bagger, but I wouldn't call it an investment

[fenris]

Don't have access to the VIC write-up. What's the valuation/approach?

I still own some but found it very difficult to assign a value to it and hence I lightened up (too early). Pepsi CEO made it clear enough on the calls that they expect to work with S617 - but the endgame here is pretty blurry to me. I think the stock has now priced in a good chunk of excitement and I'm worried it'll give up the gains in a weak market. Definitely not a value investment...

[yadayada]

you can read the write up now, v interesting. Upside looks huge, 10-40x. But one big issue is that they had gras approval for one product since 2009. And didnt have any commercial revenues yet. But apparantly they do have contracts with pepsi now. starting this year adn the next year.

 

Are there any people working in the food industry who could have more insight in this?

 

Its worth it reading the write up and the comments as well.

 

2 key bull arguments against no commercialization yet are

 

-alot of insiders put most of their salary and bonus into the stock over the years.

-SNMX struck a very favorable deal with firmenich that extended firmenich's contract by only a little bit.

[yadayada]

yeah but for the largest holder that was only a small%. if he starts selling alot more id get worried.

 

can you elaborate on hansen's natural?

[yadayada]

yeah lets just say that if only pepsi works out, and 30% of pepsi drinks have this stuff then that is 240 million in revenue. Which translates to about 100 million in net income. And if they sell the stuff directly this is higher. On a 350 million$ market cap now. Easily deserving a 15x multiple. So that is 500% upside in a base case scenario. iF they capture more market share or sell directly, or their other sweet enhancer for solid foods becomes a succes then a 10 or 20 bagger doesnt seem unlikely.

 

Plays a bit like an option with no time limit. You really have to think this has a large chance of failing to not at least make a +ev gamble with a small amount I think.

 

If you think there is only the base case scenario, and that happens only 25% of the time, then this has already decent upside on average.

 

But what  I am thinking is, why would that PHD guy who owns about 20 million$ of stock not sell alot of stock now. most of his networth is tied up in it? Why did that guy invest so much of his earnings in this stock if he didnt think it has at least a good chance of succeeding? He seems to have the best view on both valuation and likelihood of succes.

 

If he thought this only had like a 10% chance of succeeding, why would he put most of his networth in it?

 

Not sure if this line of thinking is right though. History does suggest that insider buying indicates significant outperformance for stocks within a year afterwards tho (not so much after that). And with all the stocks with insider selling, market performance of those stocks were neither under our outperforming afterwards..

[yadayada]

whats up with this?

http://www.fda.gov/Food/NewsEvents/ConstituentUpdates/ucm389065.htm

 

So the FDA doesnt approve? What is the deal here? They did get approval in europe right?

[ragu]

So the FDA doesnt approve?

 

No, it didn't. But another body, an expert panel from FEMA (Flavor and Extract Manufacturer Association of the United States), did.

 

There is a link to the updated company statement: http://www.senomyx.com/flavor_programs/regProcess.htm

 

The FEMA GRAS status allows the ingredient to be commercialized in the United States and several other countries and regions.

 

Senomyx seems well worth digging into, IMO.

 

Best,

Ragu

[yadayada]

some bad publicity for senomyx. Dr Oz discussed them on his show. How they basicly dont get FDA approval, and what GRAS approval is. And stories that those molecules are made out of human fetuses are circling around now. thoughts?

[yadayada]

it also seems that regardless of wether you think that sweetener will become a big hit, they still have their proprietary testing process they use to find new molecules that influence tastebuds. This way they can really quickly test for new compounds, and they are the only one out there. So if this isn't a hit, something else will be?

 

Allthough it seems really easy to sink this with a false marketing campaign. Just look at what a billion $ did to misinform everyone on the global warming debate.

[PatientCheetah]

Senvest obtains the right to acquire up to 19.9% of the shares. Senvest is a fund that only bets on companies with potential to double or more.

[yadayada]

what is their track record? Currently this is a 3.5% position for me.  There seems to be huge amounts of potential. And the large amount of shares all the insiders own compared to their salary (and probably networth?) is just too convincing. This % also propped up over the past few years, especially for a few employees.

 

And if you look at their process of finding taste molecules... They say they narrowed in on a natural sweetener in their latest Q call. I have no idea how that works tho. So im keeping this one small. 

 

What I also find telling is that they said in that same Quarterly call that their pepsi agreement was the most promising. So it seems that other thing with the rest of the sugar market doesnt have that much potential?

[roughlyright]

I saw this VIC post today, where the author argues that buying Senvest is better way to buy Senomyx.

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/117848

 

The reason is Senvest is selling at 25% discount to book value and holds a big chunk of the fund in Senomyx. I was thinking of getting into Senvest as well, because they seem to have very good track record. They went by 25 times in book value from 1997 till today.

 

 

[ItsAValueTrap]

I saw this VIC post today, where the author argues that buying Senvest is better way to buy Senomyx.

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/117848

 

The reason is Senvest is selling at 25% discount to book value and holds a big chunk of the fund in Senomyx. I was thinking of getting into Senvest as well, because they seem to have very good track record. They went by 25 times in book value from 1997 till today.

 

You need to adjust their book value.  In the past, securities were not marked to market.

 

Their track record is still good.  http://wp.me/1mOGr

[no_free_lunch]

Just doing a quick glance through Senvest's historical book value, haven't they always traded at a substantial discount?  It looks like 30-40% is common.

 

Don't get me wrong, their track record is impressive but I am not sure that a 25% discount to book is significant unless there is reason to believe that it will at some point close.  It actually looks like this is a smaller than normal discount, so in a strange sense you could say it's expensive.

[writser]

I saw this VIC post today, where the author argues that buying Senvest is better way to buy Senomyx.

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/117848

 

The reason is Senvest is selling at 25% discount to book value and holds a big chunk of the fund in Senomyx. I was thinking of getting into Senvest as well, because they seem to have very good track record. They went by 25 times in book value from 1997 till today.

 

Senomyx is hardly 5% of their portfolio, I don't think it's a very good way to 'play' Senomyx. Senvest looks interesting nonetheless.

[DTEJD1997]

Hey all:

 

I am skeptical that this will work out like it is thought.

 

I notice that Cott is putting artificial sweeteners in their sodas as HFC (high fructose corn syrup) is too expensive?

 

I accidentally bought some of this stuff and it is TERRIBLE.  You can tell from the first sip that something is "off".

 

Half the sugar, 10X the chemicals and NONE of the taste.  I don't see how they can sell this stuff.  I won't knowingly buy/drink it.  I doubt I am the only one...

 

I can imagine that this Senomyx stuff will be a similar thing.

[cmattporter]

I thought this was a value investor forum?

[PatientCheetah]

a small position with large optionality can be a value bet too

[Myth465]

I bought Senvest, there is a vic write up as well.

[roughlyright]

Hey all:

 

I am skeptical that this will work out like it is thought.

 

I notice that Cott is putting artificial sweeteners in their sodas as HFC (high fructose corn syrup) is too expensive?

 

I accidentally bought some of this stuff and it is TERRIBLE.  You can tell from the first sip that something is "off".

 

Half the sugar, 10X the chemicals and NONE of the taste.  I don't see how they can sell this stuff.  I won't knowingly buy/drink it.  I doubt I am the only one...

 

I can imagine that this Senomyx stuff will be a similar thing.

 

DTEJD,

 

  There is one major difference between senomyx and other sweetners. it does not alter the taste of the substance is any way. Zero change in taste. The molecules that are introduced into the liquid are only 10 parts per million.  This is quantity is so tiny that it does not even need to even show on the label according the VIC write up. I highly recommend this VIC post.

[yadayada]

The main thing really does it here are insiders owning and buying huge stakes. These insiders are v smart and have close to perfect information.

 

I read some study that you would have done 14% a year or something over a pretty long period, buying stocks that insiders just bought meaningfull stakes in.

 

If insiders are not v smart, then it probably says a lot less. But if they are smart, and they own a lot compared to their salary and possibly networth, then that is something you should give a lot weight. Especially if their product has shown to be good by independent sources.

[merkhet]

So... has anyone here actually tried the flavor enhancer in person? Or is everyone okay with relying on someone whose VIC writeup reads like a late night infomercial?

 

I mean, for all we know, that person eats ghost peppers for a living and has burned off the taste receptors on his or her tongue.

[yadayada]

senomyx had taste tests for analysists apparantly, so he is not the only one. If you make a lot of effort and are in the neighbourhood, you could probably arrange a taste test. So the VIC guy is not the only one confirming this.

[merkhet]

My larger point is that it's likely that the VIC author is compromised in terms of his objectivity. In essence, I am worried that this is like the Tichborne case (http://ftalphaville.ft.com/files/2013/12/JamesMontierDec.pdf) -- the author and the other analysts really want to believe -- and therefore they do.

 

More importantly, I sent this over to a chemical engineering friend of mine who used to work at Nestle -- and her response was that "replacing sugar is a very difficult thing to do -- because you can fry it, boil it, freeze it, bake it, etc. without losing its sweetness or altering the properties of the other ingredients to which it is added..." Most other replacements fail this test. Therefore, it's difficult to say that it could just take over the sugar market willy-nilly as the VIC author has pontificated.

 

Additionally, she views the fact that Firmenich couldn't sell more than $100 million worth over the last few years as a huge red flag -- as the dissenting commentators did -- in her opinion, as someone who has worked in the industry, the testing period before putting out new products is nowhere near as long as the five years that Firmenich has had the other flavor enhancer.