1123979--3/10/2006--SENOMYX

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Risks Related To Our Business We are dependent on our product discovery and development collaborators for all of our revenue and we are dependent on our current and any future product discovery and development collaborators to develop and commercialize any flavors, flavor enhancers or taste modulators we may discover. We may not be able to negotiate additional collaboration agreements having terms satisfactory to us or at all. We may not be successful in developing flavors, flavor enhancers or taste modulators useful for formulation into products. If we or our collaborators are unable to obtain and maintain the GRAS determination or regulatory approval required before any flavors, flavor enhancers or taste modulators can be incorporated into products that are sold, we would be unable to commercialize our flavors, flavor enhancers and taste modulators and our business would be adversely affected. Even if we or our collaborators receive a GRAS determination or regulatory approval and incorporate our flavors, flavor enhancers or taste modulators into products, those products may never be commercially successful. We have a history of operating losses and we may not achieve or maintain profitability. We expect that our results of operations will fluctuate from period to period, and this fluctuation could cause our stock price to decline, causing investor losses. Changes in financial accounting standards related to stock option expenses are expected to have a significant effect on our reported results. Compliance with regulation of corporate governance and public disclosure may result in additional expenses. We may need to obtain additional capital to fund our operations. If we lose our key personnel or are unable to attract and retain qualified personnel, it could adversely affect our business. We may encounter difficulties managing our growth, which could adversely affect our business. We will rely on third parties to manufacture our flavors, flavor enhancers and taste modulators on a commercial scale. If we acquire products, technologies or other businesses, we will incur a variety of costs, may have integration difficulties and may experience numerous other risks that could adversely affect our business. Risks Related To Our Industry Our ability to compete in the flavor and flavor enhancer market may decline if we do not adequately protect our proprietary technologies. Many of the patent applications we and our licensors have filed have not yet been substantively examined and may not result in patents being issued. Disputes concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and extremely costly and could delay our research and development efforts. If we are unable to protect our trade secrets and other proprietary information, we could lose any competitive advantage we may have, which could adversely affect our business. Many potential competitors, including those who have greater resources and experience than we do, may develop products or technologies that make ours obsolete or noncompetitive. We may be sued for product liability, which could adversely affect our business. We use hazardous materials. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. Risks Related To Our Common Stock The price of our common stock is volatile. Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us more complicated and the removal and replacement of our directors and management more difficult. Our shareholder rights plan may hinder or prevent change of control transactions. If our officers, directors and largest stockholders choose to act together, they may be able to control our management and operations, acting in their best interests and not necessarily the interests of other stockholders. We have never paid cash dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.

Full 10-K form ▸

1123979--3/10/2006--SENOMYX_INC