Codexis, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Codexis engineers and commercializes enzymes using its CodeEvolver platform. At quarter-end it reported Performance Enzymes and Novel Biotherapeutics segments. In July 2023, it announced plans to discontinue investment in Novel Biotherapeutics and focus on Performance Enzymes, particularly pharmaceutical manufacturing and its ECO Synthesis platform.
Financial highlights
Amounts below are in millions, except per-share figures and percentages.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $21.3 | $38.4 | $34.3 | $73.7 |
| Operating loss | $(12.6) | $(2.6) | $(36.3) | $(11.0) |
| Net loss | $(11.5) | $(2.6) | $(34.1) | $(11.0) |
| Net loss per share | $(0.17) | $(0.04) | $(0.51) | $(0.17) |
| Operating cash flow | Not separately provided for the quarter | $(25.3) | $(13.4) |
- Revenue mix and change: Q2 product revenue was $11.0 million, down 68%, while R&D revenue was $10.3 million, up 173%. For the first half, product revenue fell 70% to $19.4 million and R&D revenue rose 77% to $14.9 million. The principal driver of lower product revenue was reduced CDX-616 sales to Pfizer versus unusually large 2022 sales.
- Margins and expenses: Product gross margin was 71% in Q2 versus 67% a year earlier; first-half product gross margin was 60% versus 70%. Q2 total operating expenses were $33.9 million, down 17%, but the operating loss widened as revenue declined. SG&A increased 25% in Q2 to $13.4 million; R&D expense decreased 9% to $17.3 million.
- Liquidity and capital: June 30 cash and cash equivalents were $92.1 million, plus $2.1 million restricted cash; working capital was $84.3 million. Cash and cash equivalents were $114.0 million at December 31, 2022. First-half investing cash use was $4.9 million, and financing provided $8.3 million, including $7.9 million net ATM offering proceeds. The company reported no outstanding borrowing under the credit facility, which it terminated in March 2023. Operating lease liabilities were $41.0 million.
- Other balance-sheet measures: Total assets were $206.8 million and stockholders’ equity was $124.1 million at June 30. Non-marketable equity securities totaled $21.4 million. Shares outstanding increased to 69.8 million from 65.8 million at year-end, principally reflecting ATM issuance and equity awards.
Changes, outlook and notable items
- The 2022 comparison included substantial CDX-616 product sales to Pfizer: $23.8 million in Q2 2022 and $45.1 million in the first half of 2022. No revenue under the Pfizer supply agreement was recognized in Q2 or the first half of 2023. In Q2 2023, $5.0 million of R&D revenue was recognized non-cash under a Pfizer license agreement using a portion of Pfizer’s previously paid credit.
- Codexis released $2.9 million of prior-period product revenue deferrals in Q2 2023 following early termination of enzyme supply obligations to a customer. This contributed to current-period revenue and product margin.
- Management said existing cash and expected revenue and expense management should fund operations, planned capital expenditures and working capital for at least the next 12 months, while cautioning that assumptions may change and additional capital could be needed. No specific revenue or earnings guidance was provided.
- Management expected to demonstrate gram-scale ECO Synthesis production by the end of 2023, begin pre-commercial customer testing in 2024, and target commercialization beginning in 2025. These are forward-looking targets, not assurances.
- On July 20, 2023, the company announced an approximately 25% workforce reduction, discontinuation of investment in biotherapeutics, and a move to consolidate operations in Redwood City. It expected approximately $2.9 million in restructuring charges, with actions substantially complete and paid by September 30, 2023. It was also seeking to sublease or assign its San Carlos facility; the remaining lease commitment and any potential impairment were not quantified clearly in the filing.
- Customer concentration remains significant: customers individually representing at least 10% accounted for 49% of first-half 2023 revenue. Revenue depends on customer purchasing schedules, collaborations, and third-party manufacturing capacity. The filing also cites ongoing losses, uncertain Pfizer demand, potential loss of collaboration value, and risks around commercialization and financing.
- The company reported no material pending litigation and stated disclosure controls were effective as of June 30, 2023. The July strategic changes occurred after the reporting date.
Most important facts for investors to verify
- Whether performance-enzyme sales and R&D collaborations can replace the exceptional Pfizer-related product revenue seen in 2022, and how customer concentration evolves.
- Cash burn, available liquidity and potential financing needs after the workforce reduction and strategic shift; assess the effect of further ATM issuance and dilution.
- Progress, customer testing and commercialization prospects for ECO Synthesis, including whether management’s stated milestones are achieved.
- Actual restructuring costs, savings, and the financial impact of the San Carlos lease, including any sublease and impairment outcomes.
- Whether Pfizer places further CDX-616 orders and whether collaboration programs—including Nestlé and Takeda arrangements—continue to generate revenue or other value.