Codexis, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with the three months ended March 31, 2023. Codexis engineers and commercializes enzymes and proteins using its CodeEvolver platform. Following its 2023 restructuring, it reports as one segment, focused on pharmaceutical manufacturing and development of its ECO Synthesis platform.
Financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $17.1 million | $13.0 million | +32% |
| Product revenue | $9.6 million | $8.4 million | +14% |
| Research and development revenue | $7.5 million | $4.6 million | +63% |
| Product gross margin | 49% | 46% | +3 percentage points |
| Operating expenses | $29.0 million | $36.6 million | −21% |
| Operating loss | $(11.9) million | $(23.7) million | Loss narrowed |
| Net loss | $(11.5) million | $(22.6) million | Loss narrowed 49% |
| Basic and diluted loss per share | $(0.16) | $(0.34) | — |
| Cash used in operating activities | $7.8 million | $9.2 million | Use decreased |
Revenue growth reflected higher branded pharmaceutical product sales and higher licensing and collaboration revenue, including approximately $6.0 million more from the Roche agreement. The increase was partly offset by lower revenue from Nestlé Health Science and Takeda. Product gross margin improved mainly because of product mix.
At March 31, 2024, cash and cash equivalents were $58.0 million, short-term investments were $27.5 million, and working capital was $78.9 million. Cash, cash equivalents and restricted cash totaled $59.6 million. Long-term debt had a $30.0 million face amount and a $28.1 million carrying amount. Total assets were $149.6 million and total liabilities were $70.3 million.
Investing activities used $28.6 million, primarily reflecting purchases of short-term investments. Financing activities provided $29.3 million, chiefly from the Innovatus loan. Cash, cash equivalents and restricted cash decreased $7.1 million during the quarter.
Material changes and developments
- Revenue rose 32%, while lower R&D and selling, general and administrative expenses—reflecting reduced headcount and other post-restructuring costs—helped narrow the quarterly loss.
- In February 2024, Codexis borrowed $30.0 million under a five-year Innovatus facility, with another $10.0 million available subject to milestones, including revenue thresholds. The loan carries a floating interest rate, has interest-only payments through February 2027, and is secured by a first-priority lien on company assets.
- Codexis licensed its engineered double-stranded DNA ligase and EvoT4 DNA ligase to Roche under an exclusive global agreement. The filing reports upfront and technical milestone payments; management attributes about $6.0 million of year-over-year R&D revenue growth to the Roche agreement.
- Codexis received a $5.0 million upfront payment from Nestlé Health Science in January 2024 under the CDX-7108 acquisition agreement. Nestlé is responsible for further development and commercialization; Codexis may receive future milestones and royalties.
- After quarter-end, Codexis terminated its Piper Sandler equity distribution agreement and entered into a new agreement with Cantor on May 2, 2024, allowing discretionary at-the-market sales of up to $75.0 million of common stock, subject to registration effectiveness. Such sales could dilute shareholders.
Outlook, commentary and risks
Management stated that existing cash, cash equivalents, expected revenue and expense management should fund operations, planned capital expenditures and working capital for at least the next 12 months. This assessment depends on assumptions that may prove incorrect; the company says it may need additional capital. No specific quarterly or full-year financial guidance is provided in the filing.
Codexis expects pre-commercial customer testing of ECO Synthesis in 2024, early commercial licenses in 2025 and a full commercial launch in 2026. The platform remains in development, and enzymatic nucleic-acid synthesis is novel and not yet commercialized. These milestones are expectations, not assurances.
Key risks include ongoing losses and execution risk in achieving profitability; customer concentration (customers contributing at least 10% each represented 60% of revenue, with one customer at 35%); reliance on a limited number of contract manufacturers; variable customer orders and product demand; and the uncertain commercial adoption, scale-up and regulatory path of ECO Synthesis. The Innovatus facility adds floating-rate expense, covenants and secured-debt obligations. Management said it was in compliance with the loan terms at March 31, 2024. The company reported no material pending litigation and no restructuring charges in Q1 2024. Management concluded disclosure controls were effective as of March 31, 2024.
Important facts for investors to verify
- Whether revenue growth and improved product margin persist, particularly given customer concentration and variable order timing.
- Roche agreement payment composition, timing of any future milestones, and the extent to which licensing revenue is repeatable.
- ECO Synthesis customer testing, technical and manufacturing scale-up, commercial adoption, and progress against the 2025 and 2026 milestones.
- Cash burn and financing needs against management’s at-least-12-month liquidity estimate; conditions for accessing the additional $10.0 million Innovatus tranche.
- Loan interest-rate exposure, covenant compliance and repayment obligations, as well as any share issuance under the $75.0 million Cantor ATM facility.