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November 12, 2013

Codexis Reports Third Quarter 2013 Results and Business Update

— Company immediately begins wind down of CodeXyme® cellulase enzyme
program for production of cellulosic sugars for biofuels and bio-based
chemicals–

— Conference call today at 4:30 pm ET

REDWOOD CITY, Calif.–(BUSINESS WIRE)–Nov. 12, 2013–
Codexis, Inc. (NASDAQ: CDXS), a leading developer of biocatalysts for
the pharmaceutical and complex chemistry industries, today announced its
financial results for the third quarter ended September 30, 2013.

“We continue to be very encouraged by the progress we’ve been making
with our core biocatalysis business,” said John Nicols, President and
CEO of Codexis. “Our recent appointment of Merck veteran Dr. Greg Hughes as Vice President, Strategic Alliance & Product Development underscores
our commitment to accelerating this business’ penetration deeper into a
growing list of customers worldwide. Though our product revenues were
soft during the third quarter, we are forecasting a strong performance
from this business in the fourth quarter, and are pleased with our
parallel initiatives to increase productivity and reduce cost
consistently since late last year.”

Nicols continued, “Going forward, we will exclusively focus the company
onto this biocatalysis business enterprise in which we develop and
supply enzymes to reduce the costs and increase the efficiency of our
customers’ pharmaceutical and chemical manufacturing processes. Given
the market’s undervaluation of the prospects and continued slow build
out of cellulosic ethanol facilities, we have not been able to secure a
suitable partnership or transaction for our CodeXyme® cellulase enzyme
business. Accordingly, we have begun today to immediately wind down our
CodeXyme® franchise, after having already stopped further development of
our CodeXol® detergent alcohols franchise earlier in the year. To
mitigate future cash burn for the Company, we have also undertaken
actions to restructure and reduce the costs of our operations. We expect
that the majority of these cost reduction measures will be in place by
year end to give us an optimal financial start to 2014.”

“With these decisions now in place, we will put our entire focus on
expanding the growth of our core biocatalysis business and moving
Codexis as rapidly as possible towards positive cash flow and eventual
profitability. Codexis’ biocatalysis business is clearly the right
strategic focus for us to achieve these goals – it is underpenetrated in
large diverse markets, and the ability of our technology to quickly
reduce costs and create value for our customers is a strong platform for
future growth,” concluded Nicols.

Third Quarter Financial Highlights:

Revenues for the third quarter of 2013 were $3.9 million, a 44% decrease
from $7.0 million in the second quarter of 2013. Revenues for the nine
months ended September 30, 2013 were $22.4 million. Product revenue in
the third quarter of 2013 was $1.1 million, a 78% decrease from $5.0
million
in the second quarter of 2013. The decrease in product revenue
was caused by continued weakness in our atorvastatin enzyme business and
delayed ramp up of sales to Merck of enzymes for the manufacturing
process of Januvia® (sitagliptin). Product revenue for the nine months
ended September 30, 2013 was $15.2 million. Product gross margin in the
third quarter was 54%, compared to 27% in the second quarter of 2013.
Product gross margin for the nine months ended September 30, 2013 was
35%. Collaborative research and development revenue for the third
quarter of 2013 was $2.8 million, an increase of 40% from $2.0 million
in the second quarter of 2013.

Research and development expenses in the third quarter of 2013 were $6.8
million
, a decrease of 21% from $8.6 million for the second quarter of
2013. Selling, general and administrative expenses in the third quarter
of 2013 were $5.8 million, a decrease of 19% compared to $7.2 million in
the second quarter of 2013. The decrease in operating expenses was
primarily due to a decrease in employee-related expenses.

Net loss was $9.3 million, or a loss of $0.24 per share, based on 38.1
million weighted average common shares outstanding in the third quarter
of 2013. This compares to a net loss of $12.6 million, or a loss of
$0.33 per share, during the second quarter of 2013. Net loss for the
nine months ended September 30, 2013 was $31.5 million, or a loss of
$0.83 per share, based on 38.0 million weighted average common shares
outstanding during the period.

Cash, cash equivalents, and marketable securities at September 30, 2013
were $31.0 million compared to $38.9 million at June 30, 2013.

As the Company has previously disclosed, it will not be presenting
year-over-year comparisons for the first three quarters of 2013. Codexis
does not believe that these comparisons are an appropriate measure of
the Company’s financial performance due to the termination of the
Collaborative Research Agreement with Shell, effective August 31, 2012,
and the resulting loss of associated collaborative research and
development revenue.

Financial Outlook

Codexis’ statements with regard to its outlook are based on current
expectations. The following statements are forward looking, and actual
results could differ materially depending on market conditions and the
factors set forth under “Forward-Looking Statements” below.

Codexis is revising its prior outlook for the full year 2013. Codexis
now expects total revenues in the range of $30 million to $32 million.
In addition, the Company now expects product revenue to be approximately
$19 million of that total. Codexis continues to expect product gross
margin in the range of 30% to 35% and total gross margin for all revenue
of approximately 50%. The Company is also revising its cash burn
projection for the full year. Due primarily to not finding a funding
partner or completing a transaction for CodeXyme®, and consequently not
removing the associated expenses earlier in the year, Codexis now
expects cash burn to be approximately $23 million for the year.

David O’Toole, Chief Financial Officer of Codexis said, “With the
financial goals from the restructuring driving us, we are providing the
following financial outlook for 2014. Next year, we expect
year-over-year revenue growth of 5% to 10% with a higher gross margin
percentage on average than in 2013, which will result in year-over-year
gross profit dollar growth in the range of 15% to 20%. As the result of
the restructuring and cost-cutting effort that the Company has
initiated, we expect the cash burn for 2014 to be less than $8 million.”

Conference Call and Webcast

Codexis will hold a live conference call and audio webcast on Tuesday,
November 12, 2013
, at 4:30 p.m. Eastern Time. The conference call
dial-in numbers are 866-510-0707 for domestic and 617-597-5376 for
international. Please use the pass code 48857315 and call approximately
10 minutes prior to start time. A live webcast of the call will also be
available from the Investors section of www.codexis.com.
A recording of the call will be available by calling 888-286-8010 for
domestic or 617-801-6888 for international, beginning approximately two
hours after the call, and will be available for up to seven days. Please
use the pass code 35955501 to access the replay. A webcast replay will
also be available from the Investors section of www.codexis.com
approximately two hours after the call, and will be available for up to
30 days.

About Codexis, Inc.

Codexis, Inc. is a leading developer of biocatalysts for the
pharmaceutical and complex chemistry industries. Codexis’ proven
technology enables scale-up and implementation of biocatalytic solutions
to meet customer needs for rapid, cost-effective and sustainable process
development – from research to manufacturing. For more information, see www.codexis.com.

Forward-Looking Statements

This press release contains forward-looking statements relating to
Codexis’ ability to grow its biocatalysis business and worldwide
customer base; Codexis’ ability to increase productivity and reduce
costs of operations through its restructuring efforts; projected fourth
quarter 2013 performance; the anticipated timing of Codexis’
restructuring activities and cost-cutting efforts; Codexis’ ability to
refocus Codexis onto its biocatalysis business enterprise and achieve
profitability; Codexis’ ability to develop and supply enzymes to reduce
the costs and increase efficiency of its customers’ pharmaceutical and
chemical processes; Codexis’ forecast for 2013 total pharmaceutical
revenue, total product revenue, product gross margin, total gross margin
for pharmaceutical revenue and total cash burn; Codexis’ forecast for
2014 revenue growth, gross margins, gross profit dollar growth and total
cash burn; and the ability of Codexis’ technology to enable scale-up and
implementation of biocatalytic solutions to meet customer needs for
rapid, cost-effective and sustainable process development. You should
not place undue reliance on these forward-looking statements because
they involve known and unknown risks, uncertainties and other factors
that are, in some cases, beyond Codexis’ control and that could
materially affect actual results. Factors that could materially affect
actual results include Codexis’ need for additional capital in the
future to expand its business; Codexis’ dependence on a limited number
of products and customers in its pharmaceutical business; Codexis’
ability to develop and commercialize new products for the pharmaceutical
markets; Codexis’ ability to maintain internal control over financial
reporting; any impairments Codexis may be required to record in the
future with respect to its goodwill, intangible assets or other
long-lived assets; the success of cost saving measures Codexis undertook
during the third and fourth quarters of 2012 and November 2013, Codexis’
primary reliance on one contract manufacturer for commercial scale
production of substantially all of its enzymes; Codexis’ relationships
with, and dependence on, its collaborators in its principal markets;
Codexis’ ability to deploy its technology platform in new adjacent
market spaces; the success of Codexis’ customers’ pharmaceutical
products in the market and the ability of such customers to obtain
regulatory approvals for products and processes; Codexis’ pharmaceutical
product gross margins are variable and may decline from quarter to
quarter; and Arch Pharmalabs Ltd’s ability to effectively market and
sell certain pharmaceuticals products containing Codexis’ technology.
Additional factors that could materially affect actual results can be
found in Codexis’ Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 12, 2013, including under
the caption “Risk Factors.” Codexis expressly disclaims any intent or
obligation to update these forward-looking statements, except as
required by law.

Codexis, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
           
 
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Revenues:
Product $ 1,076 $ 4,948 $ 7,140 $ 15,161 $ 29,090
Collaborative research and development 2,867 2,026 18,569 7,236 49,049
Government awards           632         2,247  
 
Total revenues   3,943     6,974     26,341     22,397     80,386  
 
Costs and operating expenses:
Cost of product revenues 494 3,631 6,397 9,790 24,868
Research and development 6,831 8,624 14,191 22,776 46,190
Selling, general and administrative   5,832     7,169     7,909     21,126     24,093  
 
Total costs and operating expenses   13,157     19,424     28,497     53,692     95,151  
 
Loss from operations (9,214 ) (12,450 ) (2,156 ) (31,295 ) (14,765 )
 
Interest income 9 16 61 53 210
Other expenses   (22 )   (183 )   (45 )   (288 )   (320 )
 
Loss before (benefit) provision for income taxes (9,227 ) (12,617 ) (2,140 ) (31,530 ) (14,875 )
 
(Benefit) provision for income taxes   35     (12 )   169     (41 )   443  
 
Net loss $ (9,262 ) $ (12,605 ) $ (2,309 ) $ (31,489 ) $ (15,318 )
 
Net loss per share, basic and diluted $ (0.24 ) $ (0.33 ) $ (0.06 ) $ (0.83 ) $ (0.42 )
 
Weighted average common shares used in computing net loss per share,
basic and diluted
38,102 38,060 37,116 38,002 36,494
       
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)
 
September 30, December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 26,911 $ 32,003
Marketable securities 3,009 13,524
Accounts receivable, net 2,688 7,545
Inventories 2,101 1,302
Prepaid expenses and other current assets   1,935     5,395  
Total current assets 36,644 59,769
 
Restricted cash 911 1,511
Non-current marketable securities 1,067 3,623
Property and equipment, net 13,809 16,650
Intangible assets, net 10,403 12,934
Goodwill 3,241 3,241
Other non-current assets   361     2,237  
Total assets $ 66,436   $ 99,965  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 1,490 $ 3,654
Accrued compensation 3,340 3,495
Other accrued liabilities 2,140 6,948
Deferred revenues   2,248     2,186  
Total current liabilities 9,218 16,283
 
Deferred revenues, net of current portion 1,161 1,299
Other long-term liabilities   5,183     3,943  
 
Stockholders’ equity:
Common stock 4 4
Additional paid-in capital 297,776 294,128
Accumulated other comprehensive loss 139 (136 )
Accumulated deficit   (247,045 )   (215,556 )
Total stockholders’ equity   50,874     78,440  
Total liabilities and stockholders’ equity $ 66,436   $ 99,965  

Source: Codexis, Inc.

Codexis, Inc.
Investors
Paul Cox, 212-362-1200
ir@codexis.com
or
Media
Jemma
Connor, +44 161 359 3255
jemma.connor@notchcommunications.co.uk

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