CORRECTED-Senomyx says sweetener enhancer determined safe; shares jump (March 11)

Wed Mar 12, 2014 1:15pm EDT

(Corrects headline and paragraphs 1 and 2 in March 11 story to say the company, not the FDA, determined the product to be safe. Also corrects paragraph 7 to remove reference to GRAS compliance being dependent on FDA testing)

March 11 (Reuters) - Senomyx Inc said its Sweetmyx food flavoring was determined to be safe, paving the way for customers such as PepsiCo Inc to add it in drinks to reduce the use of sugar or sugar substitutes.

Senomyx shares jumped as much as 24 percent to their highest in nearly seven years after the company designated Sweetmyx Generally Recognized As Safe (GRAS) under the Federal Food, Drug and Cosmetic Act.

"The new Sweetmyx flavor ingredient will enable the creation of lower-calorie beverages and foods that have reduced sweeteners without sacrificing taste," Chief Executive Officer John Poyhonen said on Tuesday.

Sweetmyx works by enhancing the characteristics of other flavors such as sucrose or fructose, allowing for reduced use of sweeteners in drinks.

Sugar-sweetened drinks are a significant source of extra calories in the average American's diet and are closely linked with weight gain, which often leads to illnesses such as diabetes and heart disease.

PepsiCo has exclusive rights to use Sweetmyx worldwide in all non-alcoholic beverages. Geneva, Switzerland-based Firmenich has lifetime rights to commercialize the flavor for food product categories and alcoholic beverages.

In the United States, food flavors are considered either a food additive or GRAS-compliant.

Companies can declare their ingredients GRAS-compliant based on their own research or that of hired consultants. But the U.S. Food and Drug Administration has the option to challenge such declarations.

Senomyx shares were up 15 percent at $10.81 in morning trading on the Nasdaq. They have risen more than 240 percent in the past year. PepsiCo shares were up 1 percent. (Reporting by Aditi Shrivastava and Natalie Grover in Bangalore; Editing by Saumyadeb Chakrabarty)