Senomyx Announces Second Quarter 2006 Financial Results

"During the second quarter of 2006, Senomyx continued to makeprogress with each of our four discovery and development programs andto work closely with our collaborators," said Kent Snyder, Presidentand Chief Executive Officer of the Company. "Senomyx's primary focushas been on advancing our flavor discovery and development programswhile expanding our partnerships, which now total eight collaborativeagreements with six of the world's leading packaged food and beveragecompanies. In addition to these efforts, our activities areincreasingly focused on the commercialization of our savory flavoringredients. We are therefore especially pleased to have established aCommercialization Team under the leadership of Sharon Wicker, who wasrecently appointed to the newly created position of Senior VicePresident, Commercial Development and Chief Strategy Officer. Sharon'sexpertise as a food industry innovator, with product launch experienceand successful execution of commercial strategies, makes her the idealindividual to work closely with our collaborators to help ensuretimely and successful commercial launches of products containing ourflavor ingredients."

Senomyx also increased its intellectual property portfolio duringthe past quarter with the issuance of three new U.S. patents. Inaddition to other claims, the issued patents cover cell-based assaymethods for identifying new flavor ingredients that modulate theactivity of specific taste receptors. "Senomyx is the owner orexclusive licensee of 76 issued patents and 292 pending patentapplications in the U.S. and elsewhere," Snyder noted. "We are activein continuing to pursue patent protection for our proprietarytechnologies, inventions, and flavor ingredients that are commerciallyimportant to the development of our business."

Financial Review:

Revenues were $3.2 million for the second quarter 2006, comparedto $2.0 million for the second quarter of 2005, an increase of 59%.Revenues were $5.6 million for the six months ended June 30, 2006,compared to $5.0 million for the same period in 2005, an increase of13%. These increases are due primarily to the commencement of revenuerecognition for the Company's collaboration with Ajinomoto Co., Inc.,and increased research funding from another of the Company'scollaborators.

Research and development expenses, including stock-basedcompensation expense, for the second quarter and year to date were$6.3 million and $12.8 million, respectively, for 2006, compared to$5.0 million and $10.1 million, respectively, for 2005. The increasefor the year to date is due primarily to increased patent-relatedexpenses associated with expanding the Company's intellectual propertyportfolio, including the filing of foreign patent applications, aswell as increased expenses for scientific supplies and outsourcedactivities associated with the Company's discovery and developmentprograms.

General and administrative expenses, including stock-basedcompensation expense, for the second quarter and year to date were$4.0 million and $7.4 million, respectively, for 2006, compared to$2.5 million and $5.1 million, respectively, for 2005. The increase ingeneral and administrative expenses was due to increased non-cash,stock-based compensation expense resulting from the implementation ofSFAS 123(R) in the first quarter of 2006 and to increased personnelexpenses driven by increased headcount and one-time consultingexpenses.

The net loss for the second quarter and year to date were $6.2million and $12.8 million, or $0.21 per share and $0.43 per share,respectively, for 2006, compared to $5.2 million and $9.8 million, or$0.20 per share and $0.39 per share, respectively, for 2005.

"The second quarter financial results met the Company'sexpectations," said John Poyhonen, Senior Vice President, ChiefFinancial and Business Officer. "During the first half of the year ournet cash used in operating activities was $3.7 million, which wasconsistent with our cash utilization plans. We will continue to manageour operations closely as we advance our discovery and developmentprograms towards commercialization."

On the balance sheet, deferred revenue increased approximately$4.4 million from December 31, 2005 to June 30, 2006, primarily due tothe receipt of a $5.7 million payment made by a collaborator inadvance of associated revenues being recognized.

Property and equipment, net, increased approximately $2.0 millionfrom December 31, 2005 to June 30, 2006. Other non-current liabilitiesincreased approximately $1.0 million from December 31, 2005 to June30, 2006. The increase in both areas is due to the new facility thatthe Company will occupy, which the Company expects to be completed inthe fourth quarter of 2006. For a more detailed explanation ofaccounting for the Company's leasehold liability, please see theCompany's second quarter 2006 Quarterly Report on Form 10-Q, which theCompany expects to file on or around August 9, 2006.

Scientific Update:

-- Savory Program: The primary applications 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. One of the Company's collaborators continues its preparations for initial commercialization with activities that include conducting consumer acceptance tests in multiple countries, developing marketing plans, and finalizing arrangements with a manufacturer to produce our flavor ingredients. These efforts are geared toward identifying products and markets that would be involved in the first phase of commercialization. Additionally, Senomyx continues to pursue additional regulatory approvals while conducting product development and application work to support the collaborator's further commercialization activities.

-- Sweet Program: The goal for this program is to identify flavor ingredients that allow a significant reduction of carbohydrate sweeteners in food and beverage products while maintaining the desired sweet taste. The Company's current focus is to improve the potency, water solubility, and other physical properties of these compounds and to conduct taste tests with product prototypes. The optimization efforts are intended to result in flavor ingredients that are easier to work with and have applications in a wide variety of foods and beverages. During the past quarter, Senomyx scientists discovered potential flavor ingredients having up to 1,000-fold greater water solubility than previously identified compounds. Initial taste tests with several of these more water soluble compounds have demonstrated their ability to achieve the desired reduction of the carbohydrate sweetener in product prototypes. Taste tests are planned to evaluate a variety of additional taste parameters in product prototypes to enable our collaborators to assess the commercial viability of products containing these new compounds.

-- Salt Program: The goal of the salt program is to identify flavor ingredients that provide for a significant reduction of sodium in foods and beverages yet maintain the salty taste desirable to consumers. Senomyx is continuing to identify enhancers of the sodium ion channel, ENaC, which is present in human taste cells in two forms - Alpha ENaC and Delta ENaC. During the past quarter, Alpha ENaC enhancers were identified from a new chemical series. In addition, the Company has initiated optimization of several compounds from different chemical series found to be active in the Delta ENaC in vitro assay. Taste tests are underway for these new Alpha ENaC and Delta ENaC enhancers to determine whether they provide a taste effect, which is the ability to maintain the desired salt taste in a reduced-salt product. Timing for commercialization will be driven by achievement of a taste effect by one or more of these enhancers.

-- 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. Scientific advances continue to be made on the functional characterization of bitter taste receptors. As reported last quarter, Senomyx had previously demonstrated a functional response to 18 of the 25 known human bitter receptors. Company scientists 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 20. Senomyx's researchers are continuing to characterize the receptors that interact with bitter ingredients in foods and pharmaceuticals to evaluate the function of the remaining five receptors, and to develop high-throughput receptor-based screening assays.

-- Exploratory Research Efforts: Experiments have been initiated by Company scientists to identify and characterize other receptors and ion channels that may be involved in taste. The Company's approach is to identify receptors and ion channels present in taste cells using a variety of molecular biology and cellular approaches. Preliminary studies have identified a number of interesting receptors and ion channels for further characterization.

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. dial866-356-3093, or from outside the U.S. dial 617-597-5381. Theparticipant passcode for this conference call is 50064768.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 Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenues $3,215 $2,022 $5,626 $4,988

Operating expenses:
Research and development
(including $811, $1,139,
$1,547 and $1,970,
respectively, of
non-cash stock-based
compensation) 6,339 4,980 12,835 10,139
General and
administrative
(including $1,418, $776,
$2,457 and $1,737,
respectively, of
non-cash stock-based
compensation) 3,982 2,477 7,399 5,101
----------- ----------- ----------- -----------
Total operating expenses 10,321 7,457 20,234 15,240

Loss from operations (7,106) (5,435) (14,608) (10,252)

Interest income 947 250 1,821 475
----------- ----------- ----------- -----------

Net loss $(6,159) $(5,185) $(12,787) $(9,777)
=========== =========== =========== ===========

Basic and diluted net
loss per share $(0.21) $(0.20) $(0.43) $(0.39)
=========== =========== =========== ===========

Weighted average shares
used in computing basic
and diluted net loss
per share 29,724 25,314 29,665 25,250
=========== =========== =========== ===========


Condensed Balance Sheets
(in thousands)

June 30, Dec. 31,
2006 2005
--------- ---------
(unaudited)

Cash, cash equivalents and
investments available-for-sale $78,770 $83,813
Other current assets 2,885 2,300
Property and equipment, net 4,453 2,418
--------- ---------
Total assets $86,108 $88,531
========= =========

Accounts payable, accrued expenses
and other current liabilities $4,141 $4,207
Deferred revenue 6,138 1,728
Other non-current liabilities 1,180 151
Stockholders' equity 74,649 82,445
--------- ---------
Total liabilities and stockholders' equity $86,108 $88,531
========= =========