June 12, 2018 / 11:37 AM / 6 months ago

Senomyx shareholder pushes for change at flavor maker

(Reuters) - A shareholder who says he owns about 4 percent of Senomyx Inc SNMX.O called on Tuesday for the flavoring company to remove its chairman and give fresh oversight for a new sale process, saying in a publicly released letter that Senomyx’s performance has been “nothing short of disaster.”

Matthew Turk, who said he owns more than 1.9 million shares of Senomyx’s common stock, said in the letter that he is skeptical of the San Diego-based company’s announced plans to explore a strategic review.

Turk said in the letter that Senomyx shares have lost 78 percent of their value since the company went public in 2004, under the direction of Chairman Kent Snyder and Chief Executive Officer John Poyhonen.

“There must not be a slow liquidation of Senomyx, but rather a complete sale either in whole or in parts as quickly as possible to preserve remaining shareholder value,” Turk said.

“The underlying assets are worth well more than what the stock is trading at,” Turk told Reuters on Tuesday.

Senomyx shares on Tuesday closed at $1.19, down 8.1 percent.

Senomyx, which had a market capitalization of $62.8 million at the close of trading on Monday, did not respond to requests for comment.

Turk, who said he began buying Senomyx shares in April 2012, also called on the company to name a shareholder representative to its board. Turk said he first asked for a board seat in April and after that was denied asked to be an unpaid board observer, which was also denied.

The flavors and ingredients space has been undergoing consolidation and growth as food multinationals, facing slowing growth for legacy food and drinks brands, adjust their offerings to appeal to new and healthier tastes. Last month, International Flavors & Fragrances Inc (IFF.N) agreed to buy Israeli flavors and ingredients maker Frutarom Industries Ltd FRUT.TA for $7.1 billion in cash and stock.

“The company is only trading at a $65 million market cap with approximately $15 million in net cash and no debt, so it’s a very small company, except it has burned over $500 million in both partner funding and equity commitments since inception,” Turk said.

The company’s stock has declined since PepsiCo Inc PEP.N stopped a trial partnership involving the use of Senomyx ingredients in drinks such as Mug Root Beer ahead of what was widely expected to be a U.S. nationwide rollout in late 2016.

Senomyx still has a non-exclusive agreement with Pepsi that runs until 2019, under which Pepsi has access to natural flavor ingredients and sweeteners that were developed during the partnership, according to a news release. Pepsi could not be reached for comment.

Since changing the terms of its deal with Pepsi, Senomyx’s management team has not set up any new commercial partnerships despite claiming to have interest from at least 25 companies, Turk said.

According to filings from the company’s last annual shareholder meeting, Snyder received more withhold votes than for votes on his reelection, despite running unopposed as chairman.

Reporting by Harry Brumpton in New York; Additional reporting by Liana B. Baker in New York; Editing by Lisa Shumaker and Leslie Adler

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