Why Shares of Senomyx Inc. Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of flavor-ingredients-maker Senomyx (NASDAQ: SNMX  ) jumped as much as 15% this morning after announcing an extension of its deal with PepsiCo (NYSE: PEP  ) .

So what: A four-year agreement to develop flavor ingredients of nonalcoholic beverages has been extended an additional two years to August 2016. The deal gives PepsiCo exclusive rights to Senomyx sweet flavor ingredients and includes milestone payments as well as royalties.  

Now what: There clearly hasn't been a lot of financial benefit from the agreement so far with Senomyx reporting an $11.9 million loss on $29.3 million in revenue last year. Unless there's a major breakthrough that Pepsi puts in its products this will be a short-term pop. Maybe Pepsi has plans to up its use of Senomyx products, which is likely the speculation today, but it's the kind of speculative move I'm not going to be buying on right now.

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