Codexis, Inc. (CDXS) Earnings Call Transcript

Thank you. Greetings and welcome to the Codexys second quarter 2026 financial results conference At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Georgia Urbaz, Chief Financial Officer and Chief Business Officer. Thank you. You may begin.

Thank you, Operator. With me today are Allison Moore, President and Chief Executive Officer, Stefan Lutz, Chief Scientific Officer, and Britton Jimenez, Senior Vice President, Sales and Marketing. 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 2026 revenue, anticipated milestones and product launches, facility expansion, technical public announcements related thereto, as well as our strategies and prospects for revenue growth, path to profitability, and successful execution of current and future programs and partnerships. To the extent that statements contained in this call are not descriptions of historical facts regarding Codexys, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, August 11, 2026. 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 Codexys' control and could materially affect actual results. Additional information about factors that could materially affect actual results can be found in Codex's filings with the Securities and Exchange Commission. Codexas expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. And now I'll turn the call over to Allison. Thank you, Georgia, and thanks everyone for joining. Codexis generates manufacturing solutions using high performance engineered enzymes.

The investment of over 20 years of our expertise is playing out in our pharma biocatalysis pipeline, which supports 14 commercial products and a pipeline of 15 in phase 2 and 3 clinical development. This expertise has also enabled the creation of the Ecosynthesis Manufacturing Platform, a scalable, aqueous process for the production of oligonucleotides. I'm pleased to share our progress through the first half of 2026 and I'm excited for the rest of the year and beyond. Today, we reported solid financial results for the second quarter of 2026 with revenue of $14.9 million. recent successful financing, which closed two weeks ago, resulted in a capital raise of $25 million of net proceeds. This provides us with greater stability and flexibility as we pursue our strategic goals. Georgia will give us more details on our financial achievements later in the call. An important highlight of the quarter was the TIDES-US conference in May, where we shared important new data on our ecosynthesis technology. DEXIS presented data demonstrating full-length siRNA synthesis with precise control of phosphorothioate chemistry using our technology platform. Stereochemistry plays an important role in how oligonucleotides perform. Stefan Lutz, our Chief Scientific Officer, will provide additional details on the growing capabilities of our platform later in the call. I'm also pleased to report that the construction of our GMP manufacturing facility is proceeding according to plan. This facility is a core component of our strategy to enable the adoption of ecosynthesis into the pipelines and supply chains of our customers. This facility will deliver GMP material to support IND filings and supply clinical trials, and deepen Codex's production scale platform expertise. Our building permit application will be submitted momentarily, and our manufacturing equipment has been ordered. We will begin construction following approval of the permit. The cost of the construction for this project is approximately $25 million. This investment underscores our long-term commitment to supporting product development, scale-up, and manufacturing for our customers. Years ago, the pioneering science of codexes transformed the opportunities available to process chemists, enabling the manufacture of complex small molecule chemistries. This innovation has now become standard practice in the production of small molecule medicines. Today, we believe that the Ecosynthesis Platform will similarly revolutionize the ability to generate large-scale quantities of siRNA medicines. this advanced modality accessible to patients across all therapeutic areas. Ecosynthesis, which leverages enzymatic production solutions, offers a scalable alternative to the current solid-phase organic synthesis technology. The latter is not sufficiently scalable and requires enormous quantities of solvent, posing significant challenges, as demand for siRNA is expected to increase 30-fold by 2035. This manufacturing bottleneck is anticipated to emerge within the next three years, particularly as large phase III cardiovascular trials reach their conclusions. As communicated at TIDES, the industry recognizes the limitations of current production methods and acknowledges the need for radical new technologies. The impact of the Ecosynthesis platform is becoming increasingly clear as more organizations embrace enzymatic approaches. Codexis is in the leading position to industrialize this important new method. I will now turn the call over to Stefan for more details on our tides data.

Thank you, Alison. At Tides US in May, we presented new data demonstrating on how our ecosynthesis manufacturing technology is not only advancing existing, but also unlocking new capabilities for production of sRNA therapeutics. Drug developers currently have limited control over phosphorothioate stereochemistry as existing chemical manufacturing methods produce complex mixtures that vary in therapeutic potency and require time and labor-intensive downstream processing. In contrast, the engineered enzymes that power ecosynthesis deliver products with defined stereochemical configurations all offering users unprecedented control within a scalable oligonucleotide manufacturing process. These stereopure molecules can confer overall improved product quality enhance therapeutic potency, and streamline manufacturing by reducing process complexity. We continue to explore the biological impact of stereo control and believe that this capability promises a significant advantage for customers seeking to optimize for performance, manufacturability, and differentiation of their sRNA assets. In addition, we introduce starterless ecosynthesis, a novel capability to launch RNA synthesis from a single nucleotide rather than a chemically synthesized starter oligonucleotide. Although still in the R&D stage, the startle loss approach is a technically simpler solution for initiating oligonucleotide synthesis and lowers cost for siRNA manufacturing. This innovation is particularly relevant as the industry increasingly explores fragment-based assembly strategies in which shorter oligonucleotides are ligated to produce full-length sRNA therapeutics. In this context, eliminating the need for starter oligonucleotides offers even greater economic and operational advantages. Feedback from business and CMC representatives at the conference has reinforced our view that stardust synthesis marks a material advancement in enzymatic sRNA manufacturing. We will provide updates on this technology as additional data become available. More broadly, our innovations presented at HITES US have generated significant interest across the industry and have resulted in additional engagement with prospective customers and strategic partners. But I will let Brittain speak to that in a minute. One message that came through clearly at this year's Tides Conference. As companies envision the future of RNA medicines, they recognize the need for manufacturing technologies that can overcome the limitations of traditional solid-fade synthesis. Enzymatic approaches, including ligation and sequential synthesis, are integral to these future strategies. Our focus remains on executing against our development objectives and demonstrating that ecosynthesis can be industrialized at the scale required to support broader adoption of sRNA therapeutics across larger patient populations. We believe our unique combination of product quality, stereochemical precision, and scalable enzymatic production represent a compelling competitive advantage in the emerging oligonucleotide manufacturing landscape. Our customers are an invaluable source for new ideas and we listen to what matters to them. I will now turn the call over to Britton for an update on our commercial activities.

Thanks, Stefan. The number of RNA medicines in development is expanding at an estimated rate of at least 10% per year with over 100 product candidates in clinical trials and more than 400 in preclinical development. It is broadly recognized that current production technologies will not be able to keep up with future demand. The rapidly changing landscape for siRNA is felt most keenly by CDMOs, who supply the vast majority of oligonucleotide medicines today using solid-phase organic chemistry. The ability to scale production is complicated by technical challenges associated with solid-phase synthesis and further burdened by the capital costs of building new facilities. It should be no surprise that some of our most motivated customers are CDMOs. For For each of the three CDMOs we have contracts with, we have completed small-scale technology transfers into their facilities so that they can assess ecosynthesis in-house. The most advanced of those assessments has been completed and we are in negotiations for a long-term commercial contract. We are very excited about this prospect as these relationships will be revenue generating and will create additional channels for adoption and scaling of the EcoSynthesis technology. Our engagement with biopharmaceutical companies continues to flourish. Our specific objectives are to promote adoption of our technology into therapeutic asset pipelines in which we supply preclinical and clinical material and support IND filings. In addition, our technology can be integrated into an innovator's company's production environment. last quarter we have been engaged with the pioneer si RNA companies in addition to other large biopharma companies to progress partnerships with these objectives Our small molecule biocatalysis business remains stable and profitable, and it benefits from some recent new product approvals that have higher margins than the old legacy products. we continue to support 14 commercially approved products that are dependent on our enzymes, including four products that received regulatory approval in 2026. Another product received a label expansion, significantly increasing the market potential of that drug. After years without a new product approval, this activity has resulted in a renewed growth trend. product pipeline also remains robust with 15 programs in phase 2 or 3 clinical development and data readouts expected on seven clinical trials in the next two years. We are excited for our prospects to demonstrate sustained, steady growth in this side of the business. With that, I will now turn the call over to Georgia for a discussion of our financial results for the second quarter.

Thanks, Britton. Good afternoon, everyone. Today, I will provide a brief overview of our financial results here on the call and invite you to review our 10-Q filed today for a more detailed discussion. Total revenues were 14.9 million for the second quarter of 2026 compared to 15.3 million in the second quarter of 2025. We are particularly pleased with the revenue performance in this year's second quarter as we experience significant improvement in our biocatalytic enzyme business, which we see as a result of the increase in the number of new biocatalysts. see as a return to growth. Product gross margin was 73% for the second quarter of 2026, which was an improvement over the gross margin in the first quarter of 2026 and over the gross margin for the entire year for 2025. The strong result for the second quarter was primarily driven by higher sales of more profitable products. Due to this sustained improvement in the first half, we now expect gross margins to improve into the high 60s for the first half. full year 2026. Research and development expenses for the second quarter of 2026 were $11.7 million compared to $13.8 million in the second quarter of 2025. The decline was largely driven by lower employee-related costs and reduced spending on outside services and lab supplies. Selling general and administrative expenses were 10.9 million for the second quarter of 2026 compared to 12.3 million in the prior year period. The decline was primarily due to lower employee-related costs associated with reduced headcount, lower stock-based compensation expenses, and lower aliquot costs. Controlling expenses remains a focus of ours to ensure we are using our capital efficiently and in functions that bring the largest positive impact to the success of our business. Net loss for the second quarter of 2026 was 12 million compared to a loss of 13.3 million for the second quarter of 2025. We continue to expect 2026 revenue in the range of $72 million to $76 million. Similar to the quarterly trends we saw last year, we expect 2026 revenue to be more heavily weighted towards the second half of 2026 versus the first half. Codexys ended the second quarter of 2026 with $54.9 million in cash, cash equivalents, and short-term investments, which compares to $78.2 million at the end of 2025. Subsequent to the closing of the second quarter, we successfully completed an equity financing that raised a total of approximately $25 million net of expenses. resulting in a pro forma cash balance of approximately $79.8 million. We expect that our current cash will be sufficient to fund our planned operations and capital expenditures through 2028, extending our previous cash runway guidance. As a reminder, our financial guidance and cash runway projection includes the expenses associated with the build-up of our GMP facility. With that, I will now turn the call back over to Allison. Thank you, Georgia, Stefan, and Britton.

Codexys' Ecosynthesis technology is already demonstrating its potential to alter the landscape of oligonucleotide manufacturing and enable siRNA therapeutics to reach indications with large patient populations. Our next steps are to advance the industrialization that will support deployment of our technologies into customers' pipelines. For investors, we want to show proof of success. We are working hard to sign higher value contracts as well as innovative licensing deals. We will also be focused on financial performance by striving to meet our revenue targets while being mindful of our expenses. We will continue to use our know-how and years of experience in engineered enzymes to sustain and drive innovation in the field of RNA medicine. We are committed to achieving our goals and milestones for 2026. This includes beginning construction on our GMP production facility, progressing toward 500 gram pilot scale production of siRNA in the EcoInnovation Lab. expanding a CDMO scale-up partnership for egosynthesis, securing the ecosynthesis raw materials supply chain, and maintaining the pharma biocatalysis business at healthy growth margins. I believe 2026 will be the year that Ecosynthesis achieves the scale and performance metrics that prove it to be the technology of choice for our customers' siRNA medicine. We are excited by our prospects and proud of the dedication and achievements of the entire Codexis team who have been instrumental in making the Ecosynthesis technology a reality. Now we'd be happy to take your questions. Operator? Thank you.

And ladies and gentlemen, at this time, we will conduct the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. And your first question comes from Allison Bratzel with Piper Sandler. Please state your question.

Hey, guys, good afternoon, and thank you for taking the question. Just, you know, following up on the stereochemistry data and the single nucleotide initiation capabilities you guys showed at Tides USA, could you just talk more to, you know, what has customer reaction actually looked like since then? Has that translated into new engagements? And then separately, can you talk about? could you talk to what kind of updates you'd expect to be able to show at Tides Europe later this year and just what kind of customer conversations that could foster? Thank you.

Thank you very much, Ali, for the question. I'm going to have Stefan say a little bit more about the technology and what to expect next, and then we'll have Britton speak to...

what's happening commercially as a result. Yes, hi, Ellie. On Tice EU, I think we really see an opportunity to continue the story from Tice US, talking about the capabilities of the ecosynthesis platform, but also maybe address some of the data on the biological impact or stereo control. Yes.

TO BUILD ON STEPHON'S COMMENTS THERE, FROM A CUSTOMER INTERACTION, ACTUALLY QUITE A BIT OF EXCITEMENT CAME FROM TIDE.GUS AROUND BOTH THE STEREOCHEMISTRY CONTROL AND THE STARTERLESS INITIATOR. with several customers that believe both in the value of stereochemistry control from a better therapeutic perspective, but also from a quality, that better product quality perspective. So those conversations just have advanced. We're in several conversations with customers around that and how they want to deploy this type of technology within to their pipelines. So those conversations have been really, really positive. From a starter list perspective, because this was a brand new technology and enhancement to our platform, A lot of those, the conversations we are having have just started, but they're all significantly positive. We've actually had several... Past customers that were interested in our technology have now really changed their position where they want to advance and test our technology because of this new starterless capability. that we have. So overall extremely positive and it's really allowed us to advance our conversations further with these customers.

Thank you. Thank you. And your next question comes from Kristin Kelska with Kantor Fitzgerald. Please state your question. Kristen Kelska, your line is open. Please state your question. Unmute yourself.

Hi, sorry, this is Jenny on Kristin's line. Thank you so much for taking my question. So my first question is sort of how might the advances in stereochemistry allow partners to lower dosage, maybe save money,.

and potentially improve upon safety measures. Thank you for the question, Jenny. I think maybe Stephan could at least at a high level describe some of our own work that we're doing there. and then maybe just recap what the field understands about the potential. Yes.

So when it comes to stereochemistry, these drugs operate within the cell. The cellular environment is chiral, has stereocontrol, and so these drugs certainly have the potential to also play to that nature. It's also a good indication that in the small molecule dual API field, and the stereochemistry has shown to be an important factor in the therapeutic efficacy of assets. As far as playing to other strengths of offering stereo control, I think it is important to highlight the manufacturing advantages that such a capability brings, the reduction in process complexity as the the products resulting from the synthesis are much more narrowly defined and therefore simplify the downstream processing which today involves a very elaborate purification chromatography process Those aspects certainly factor into advantages that we see of controlling stereochemistry as well.

And then we have also ongoing work here at Codexis where we're evaluating ourselves in biological assays. that's related specifically to activity or the potential of activity improvement.

Great. Thank you so much. And I was wondering if you could maybe talk a little bit about how much do you believe the desire to use precise control with stereochemistry is going to lead you to find potential partners? What are the key data or analysis that truly suggests its added benefits? And then why will this matter as SRC? RNA therapeutic development becomes more competitive in the upcoming years.

I think that what we know with our current customers is that some of them feel quite strongly about the opportunity of stereo control. And some of them are less concerned about stereo control. And we have created an environment. engagement with both kinds of customers and We are happy to deploy the EcoSynthesis technologies whether they're interested in stereochemistry or not. That's not – it's not that we can only take one route there. However, we have one particular customer that is – very interested in eking out any potential potency opportunity that we might have for their asset as a result of stereochemical control. And Stefan and his team generated some very beautiful material and beautiful analytical data that we did share at TIDES that Stefan spoke to. And you asked, you know, what happens next. So we... are making material with particular stereo configuration, We are advancing studies to understand the activity opportunities of different configurations. other companies that we are currently in negotiations with. who are interested in doing the same. All right. Thank you very much.

Your next question comes from Matt Hewitt with Craig Hallam. Please state your question.

Good afternoon. Thanks for taking the questions. Maybe first up, Georgia, regarding the guidance, the $72 to $76 million in revenues this year, obviously back half weighted, but that still implies a pretty significant step up here in the second half. How should we be thinking about cadence and how much of that... up here in the second half of the year is from contracts that you already have in hand, whether it's for individual enzymes or some of the work that you're doing with the eco synthesis and the newer products.