Codexis, Inc.

Welcome to the Codexys first quarter 2022 earnings conference call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this event is being recorded. And now I'll turn the call over to Brendan Strong from Argo Partners. Please go ahead.

Thank you, operator. With me today are John Nichols, Codexys' president and chief executive officer, and Ross Taylor, Codexys' chief financial officer. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our guidance for 2022 revenues, product revenues and gross margin on product revenues, prospects for our life sciences tools, food sector, and biotherapeutics product businesses, and our expectations regarding the sales of one of our proprietary enzymes to Pfizer for the manufacture of their COVID-19 antiviral therapeutic, Paxlovid. To the extent that statements contained in this press release are not descriptions of historical facts regarding Cadexus, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, May 5th, 2022. 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 Cadexus's control and that could materially affect actual results. Additional information about factors that could materially affect actual results can be found in Cadexus's annual report on Form 10-K, filed with the Securities and Exchange Commission on February 28, 2020-22, including, under the caption, risk factors, and in Cadexus's other periodic reports filed with the SEC. Cadexus expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law. And I'll now turn the call over to John.

Thank you, Brendan. Good afternoon, everyone. I'm pleased to report that Codexys has delivered another very strong quarter of top-line growth as we kick off 2022. Total revenue of $35.3 million for the first quarter of 2022 nearly doubled year over year. A tripling of product revenues versus last year led the way, and those were delivered at an expanded gross margin reaching 72%. Our sales continued to be spread across a wide range of customers in the quarter as well, with 16 who contributed over $100,000 in revenue, eight of whom contributed over $1 million. We'll provide an in-depth overview of each of our business segments shortly, but I am proud to highlight that we are building on the strength of last year's defining success in the sustainable manufacturing market by consistently showcasing our value to a broadening range of customers through the quick and efficient scaling of our product supply capacities. Notably, we continue to steadily execute against the large enzyme orders we received from Pfizer to support Paxlovid, its COVID-19 antiviral therapeutic. In parallel, we continue to build momentum in our other exciting target growth areas, including driving our successful step-out strategies in the life science tools market by collaborating with innovative early-stage companies, molecular assemblies, and Sequel. And we continue making great strides advancing programs across our biotherapeutics pipeline. Our first quarter results nicely highlight Codexys' ability to continue driving robust progress across all of our core end markets, while also pursuing opportunities to push the application boundaries of our enzymes. We are thrilled to reiterate our 2022 guidance to grow our annual total company revenue by nearly 50% for the second year in a row. Before I hand off to Ross to share details on the first quarter financial results, let me first provide updates across each of our businesses. Sustainable manufacturing is where we've established Codexys as a preeminent leader in enzyme engineering, and this market continues to represent a large majority of the company's revenues. Codexys' novel high-performance enzymes reliably enable our customers to dramatically reduce the cost and increase the sustainability of their manufacturing of their end products. And our Codevolver enzyme engineering platform is constantly accelerating the speed of our ability to discover and commercialize these value creating enzymes. Small molecule pharmaceutical processes have been and continue to be a core target for growing the sustainable manufacturing market for Codexys. Here we are doing business with 21 of the 25 largest pharmaceutical companies in the world, helping them adopt and install novel codexis enzymes for manufacturing their APIs. We continue to deepen our relationships with these great companies, as well as extend our technology reach into smaller biotech and generic companies. After decades pioneering the use of enzymes to improve pharmaceutical manufacturing, our technology is now becoming more mainstream. as this market witnesses the substantial inroads we are making into blockbuster drugs like Merck's Genuvia diabetes drug and Pfizer's Paxlovid COVID antiviral. Codexis is increasingly proving double-digit percent cost savings, enhanced sustainability at full commercial scale, and in the case of Paxlovid, in record time. At least one out of three small molecule drug manufacturing processes can benefit similarly, and we have only just begun to deliver against this long-term billion-dollar-plus addressable market opportunity. Twenty-two additional drugs in Phase II or Phase III have a codexis proprietary enzyme installed in their processes, more than double from just a few years ago. which bodes well for continued medium and long-term product revenue growth in this core market segment for Cadexis. Extending these benefits outside pharma manufacturing, we've been growing in other industries and exciting new verticals like food and nutrition as well. These industries have shorter development timelines and lower regulatory hurdles than pharma manufacturing, enabling our enzymes to reach the market more quickly. Our historical food customers, Taten Lyle and CalSec, continue to grow the downstream customer adoption of their new food ingredients enabled by our proprietary enzymes. In the first quarter, we booked nearly $1 million in revenues in this category, continuing our solid growth momentum in the food sector. Encouragingly, as we've kicked off 2022, we are also building early product development successes across multiple other customers and industrial verticals as well. Shifting to the life science tools market, it was only a few short years ago that we identified this area as a target market for Cadexus. And since then, this market has taken off as a significant growth opportunity for the company. Codexys engineered enzymes can enable improvements in next generation sequencing and molecular diagnostics, DNA and RNA synthesis, and more. The market is very attractive given its high growth commercialization cycles and above average margin prospects. Furthermore, enzymes developed for life science tools applications can often be marketed to multiple customers. While much of our work in this space still centers around engineering highly specialized enzymes for specific partners, we are also focused on opportunities where we can open up multiple customer markets for broad penetration of unique Codexys engineered enzymes. In 2021, we launched three such products, Codex HiFi DNA polymerase for use in next-generation sequencing, codex high cap RNA polymerase for use in messenger RNA manufacturing, and codex high temp reverse transcriptase for use in qPCR viral diagnostics. Each of these enzymes is engineered to offer differentiated and highly beneficial performance attributes in their respective applications, such as enhanced diagnostic fidelity, thermal stability, robustness, cycle time, reduce waste generation, et cetera. We continue to make strides in our sales ramp for all three products, and we look forward to providing further updates on commercial progress here through the rest of 2022. In addition to our commercial presence in the life science tool space, we are making exciting advancements on the partnership front. aimed at leveraging the power of our Codevolver platform to deliver dramatic performance improvements in life sciences. In April, Codexis and Molecular Assemblies announced the successful completion of one of the most intensive enzyme engineering campaigns in Codexis's history. The resulting highly evolved version of TDT polymerase which had over 90 amino acid modifications affected by codevolver, delivers unparalleled coupling efficiency and speed at elevated temperatures. This enzyme both enables and significantly differentiates molecular assemblies, fully enzymatic synthesis technology from other emerging players, as well as versus today's industry standard non-enzymatic DNA synthesis methods. In parallel, Molecular Assemblies is working to scale their manufacturing platform and commercially offer custom long-length oligonucleotides and gene-length DNA to customers in 2023. They are kicking off a key customer program later this year, targeting select companies in gene editing, including CRISPR technologies, next-generation sequencing, synthetic biology, and other high-growth applications. Our enthusiasm over the recent progress with Molecular Assemblies is underscored by our position as their second largest shareholder, and we remain deeply motivated by the opportunity to realize value from both our enzyme revenues as well as to capture downstream value through our equity investment. Through this innovative partnership, Codexis is poised to access the billion-dollar-plus and fast-growing field of DNA synthesis. We also recently announced another strategic investment and partnership in the life science arena, this time with Sequel, a developer of transformative library preparation products for various genomics and NGS applications. Like with molecular assemblies, co-devolver enzyme engineering can enhance Sequel's technology and product offerings. Their differentiated approach to simplify next-gen sequencing workflows utilizing their PlexWell technology has been gaining early market adoption since its launch over the last few years. PlexWell's NGS workflow efficiency is enabled by a unique enzyme called a transposase. Effectively, this enzyme enables two traditional NGS workflow steps, to be collapsed into one. Both Codexus and SQL see benefits from Codevolver to engineer the transposes to liberate even more NGS workflow efficiencies. We are thrilled to have led SQL's Series C financing with a $5 million investment. This establishes Codexus as the only strategic investor in SQL and again allows us to enjoy the downstream value creation as an equity holder in this innovative revenue stage private company. Rounding out the life science tool sector, we continue to experience strong demand for a range of partnered enzyme engineering program for life science applications in which a bespoke engineered enzyme product can unlock value. These programs add low risk sources of potential future commercialization opportunities and we will continue providing timely updates as these engagements mature. We remain steadfast in our belief that enzymes are core to unlocking exceptional value and opportunity across life science tools. Due to Codevolver's unique performance attributes and ability to design highly customized products, Codexys is poised to be a critical partner in value creation for a range of customers. between penetration potential for our recently launched products, new product launches with broad customer applicability, and new high-synergy partnerships, we anticipate this sector will continue to be a leading source of future top-line growth. Discovering and developing novel biotherapeutic drug candidates is another exciting growth strategy at Codexys. Just a few years ago, we had only two very early stage programs. Today, we have over a dozen programs in the pipeline, including two assets in clinical stages. At this point, it is clear that our Codivaba platform is a differentiated drug discovery engine capable of uniquely addressing a widening range of human health challenges. Guided by machine learning and our unparalleled enzymology expertise, the Codexys biotherapeutic teams wield the Codevolver platform to efficiently elevate unique, increasingly on-target large molecule candidates. Translational teams validate those in relevant preclinical models, then development teams tap into our decades experience in bioprocessing to scale and manufacture these candidates to meet the FDA's rigorous GMP quality standards to enable clinical trial initiations. No other synthetic biology company has built such an extensive biotherapeutic discovery and development capability. We are highly confident in the pipeline's accelerating value creation. And so are our lead biotherapeutics partners Nestle Health Science, and Takeda, who continue to tap into Codexys Biotherapeutics programs, helping us de-risk, learn, cover costs, and generate revenues. Like our performance enzymes business unit, 2022 is shaping up to be an excellent year for Codexys Biotherapeutics. Later this year, we expect to be able to share data from our phase one trial of CDX7108, our oral enzyme therapy co-owned with Nestle for the treatment of exocrine pancreatic insufficiency, or EPI. CDX7108 is an orally administered GI-active lipase that was precisely engineered to be highly stable to the acidic conditions in the stomach, which is a key challenge for today's industry standard billion-dollar-plus pancreatic enzyme replacement therapies. or PERTs. A 10-day course of CDX7108 in an EPI mini-PIG model showed equivalent coefficient of fat absorption recovery at a tenfold lower dose than the current standard of care PERT. Additionally, we are on track to advance three development candidates into IND enabling stage in 2022. One of those three programs, co-owned with Nestle Health Science, should initiate preclinical development stage activity later in 2022. CDX6512, wholly owned by Codexis, is already moving towards the clinic. It has been granted orphan drug designation and rare pediatric disease designation by the FDA for the treatment of homocystinuria, a rare inborn error of amino acid metabolism disorder estimated to affect 1 in 150,000 people worldwide. And finally, CDX6210, our wholly owned candidate for the treatment of maple syrup urine disease, or MSUD, is expected to begin IND-enabling work later this year. Rounding out our positive biotherapeutic pipeline updates is our newer, equally exciting work to leverage Codevolver to enable safe, more effective, next-generation gene therapy candidates. Here, we are pleased to report solid progress across each of the four programs in partnership with Takeda. At this point, we have handed off our lead Codevolver-engineered transgene candidates for three of the four programs to Takeda, and they are advancing each of those through their gene therapy preclinical evaluations. We look forward to upcoming presentations in May at the American Society of Gene and Cell Therapy 25th Annual Meeting, where two of Cadexus's impressive scientists will present posters highlighting differentiated performance data for all three of these engineered transgene programs. Building upon all of these accelerating and widening validations, we anticipate new biotherapeutic partnering activity to be announced before the end of the year as well. Let me now hand the call over to Ross to take you through our financial results in more detail.