Codexis, Inc. (CDXS) Earnings Call Transcript

Welcome to the Codexis Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. And now I'll turn the conference over to Georgia Erbez, Chief Financial Officer and Chief Business Officer with Codexis. Please go ahead.

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 make 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 expansions, technical milestones and public announcements related thereto, as well as our strategies and prospects for revenue growth and successful execution of current and future programs and partnerships. To the extent these statements contained in the call are not descriptions of historical facts regarding Codexis, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, November 12, 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 Codexis' control and that could materially affect actual results. Additional information about factors that could materially affect actual results can be found in Codexis' filings with the Securities and Exchange Commission. Codexis 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 the call. Codexis generates manufacturing solutions using highly engineered enzymes. The use of biocatalysis in the pharmaceutical industry has dramatically advanced the production of complex small molecule therapeutics, and we are now focused on delivering a significantly improved enzymatic production system to manufacture oligonucleotide medicine. As we enter the final quarter of 2026, I am very proud of our accomplishments so far. Today, we reported solid third quarter results with revenues of $19.3 million, our fourth consecutive quarterly on-target performance. Early in the quarter, we completed an equity offering in which we raised $25 million of net proceeds. In addition, this week we announced we entered into a $60 million term loan agreement, of which $42.5 million was used in an initial drawdown to replace an existing loan. This combination of strong operating performance, bolstering our cash balance, and deferring our debt repayment has strengthened our financial position as we complete the year. Georgia will give us more details on our financial achievements later in the call. 2026 has been a year of recognition for the developers of RNAi medicines, recognition of the huge therapeutic opportunity in large population indications, and also recognition that traditional manufacturing methods are insufficient to support the commercial aspirations of these important new medicines. Exploration of enzymatic approaches is building significantly, and Codexis' ECO Synthesis Platform is in the lead in defining alternative approaches. Industry dialogue has shifted from proof of concept towards implementation of novel technologies into development pipelines. In October, we signed a feasibility study with a pioneer in the field to test ECO Synthesis fragments with stereochemical control. In addition, we have signed an agreement with a large biopharmaceutical company to explore ligation of a clinical asset, and we are working on how to initiate a pilot-scale technology transfer of ECO Synthesis technology into their pilot plant in order for them to assess the production capabilities and accessibility in-house. An important aspect of adoption readiness is the progress we've made to industrialize our platform. This includes scaling ECO Synthesis, improving operating parameters such as cycle time, and ensuring that we can meet product quality expectations. In Q3, we have produced multiple batches of material using ECO Synthesis at 100-gram scale and with high quality. During our process optimization, we have also reduced our cycle times by 40%. We will continue to optimize both scale and process performance toward kilo-scale readiness. Some of this data was shared just last week at the Tides Europe Conference, where we also included a first glimpse at the optimized biological activity achieved by stereocontrol of the siRNA. I will now turn the call over to Stefan for more details on our most recent Tides data and the additional findings we are planning to provide in the future. Stefan?

Thank you, Alison. We had an exciting and busy schedule at Tides Europe in Amsterdam last week. In two presentations, the Codexis team delivered critical updates addressing three key customer questions: scale, platform capability, and stereochemistry. Let me elaborate briefly. As Alison already mentioned, our main-stage presentation formally announced the successful scale-up of the ECO Synthesis Manufacturing Platform to 100 grams. Equally important, we were able to share the excellent quality of oligonucleotide produced at that scale, exceeding industry expectations at this stage of development. In addition, the 100-gram synthesis demonstrated a strong predictive relationship between process and product performance across scale. We saw consistent product quality of oligonucleotides manufactured by ECO Synthesis at both the 100-milligram and 100-gram scales. This consistency validates our process understanding, which is foundational for faster and more predictable development. It also gives us confidence in our ability to anticipate and optimize performance as we advance to larger scale. Building this level of process understanding takes time, and there are no shortcuts. Over the past three years, beginning with our first 1-gram oligonucleotide synthesis in the fall of 2023, we have systematically built, scaled, and refined the ECO Synthesis manufacturing platform. Today, we believe we have established a robust foundation for large-scale manufacturing. Next, we presented an important expansion of the ECO Synthesis platform, the direct incorporation of tissue-targeting molecules at the end of therapeutic oligonucleotides. ECO Synthesis can now attach these targeting molecules efficiently, quantitatively, within the standard workflow. Given the importance of targeted delivery in today's siRNA therapeutics, this capability addresses a critical customer need and further strengthens the platform's value proposition. Already operational in our EcoInnovation lab, this capability moves us closer to a true end-to-end oligonucleotide synthesis solution, from the first nucleotide to the final tissue-targeting molecule. Finally, we shared an exciting update from our ongoing work to understand the potential biological value of phosphorothioate stereochemistry. Two fully stereocontrolled antisense strands using ECO Synthesis were converted into therapeutic siRNA duplexes and tested in primary human hepatocytes. Compared with the chemically synthesized stereorandom control, the stereodefined siRNAs show 3- to 4-fold greater potency while achieving comparable levels of maximum gene knockdown. Greater potency can translate into meaningful therapeutic and economic benefits, including the potential for lower doses, reduced manufacturing requirements and costs, less frequent administration, and potentially additional routes of administration. These early results provided encouraging evidence that stereochemical control could become an important source of therapeutic differentiation and value. Our innovations presented at Tides are generating significant industry interest, and they have led to additional engagement with prospective customers and strategic partners. Importantly, the dialogue is shifting from questions about technical feasibility to considerations around deployment, regulatory strategy, and process economics. We see this as an indicator of growing confidence in the ECO Synthesis technology and a more mature focus on its path towards pipeline adoption. With that, I will turn the call over to Britton for an update on our broader commercial activities.

Thanks, Stefan. As our engagement with leading innovators progresses, we are seeing interest in the value our ECO Synthesis platform can bring to customers. In October, we announced a feasibility study with a pioneer in the field where Codexis will use our ECO Synthesis technology to synthesize stereodefined fragments. This innovator uses a fragment synthesis and ligation strategy, but is seeking to increase the purity of fragments above what they can achieve using standard solid-phase chemistry techniques. They will be evaluating our platform as a way to achieve their manufacturing purity targets. Another example of innovator engagement is an evaluation agreement we signed this week with a leading biopharmaceutical company with a pipeline of siRNA assets. With this customer, we plan to assess ligation strategies for a late-stage asset and the performance of ECO Synthesis production at pilot scale. This will be Codexis' first technology transfer of ECO Synthesis into an innovator's pilot-scale manufacturing environment, an important milestone in demonstrating how the platform's small footprint and aqueous process can enable integration into an existing manufacturing infrastructure. Together, these engagements allow us to demonstrate the potential of ECO Synthesis in addressing the needs of our customers and the industry. Beyond these engagements, we have additional conversations moving forward with other large pharma and biotechnology innovators, which is translating into an exciting pipeline of opportunities. We are pursuing relationships with CDMOs who are currently the primary sources of oligonucleotide production for the industry. We have three ongoing evaluations following small-scale technology transfers, and we have recently engaged with two other CDMOs. One of these new parties is a major manufacturer who is seeking a capital-efficient way to re-enter the oligonucleotide manufacturing space. Our small-molecule biocatalysis business remains profitable and has seen a return to growth this year as it benefits from some recent new product approvals. Our product sales for the first nine months of 2026 increased 78.5% over the similar period last year, led by CDX049, a proprietary enzyme used in the production of two branded pharmaceuticals, with one of the products being granted label expansions by the European Commission earlier this year. Our product pipeline in biocatalysis remains robust with 12 programs in Phase 2 or Phase 3 clinical development and data readouts expected on seven clinical trials in the next two years. This year, three drugs have been approved that use our enzymes in their production, and two represent potential blockbuster products. All of these drugs are just launching and may become strong contributors to future revenue, offering significant diversification opportunities to our top line. We are excited for the prospects for steady growth and continued profitability in this side of the business. With that, I will now turn the call over to Georgia for a discussion of financial results for the third 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 $19.3 million for the third quarter of 2026 compared to $8.6 million in the third quarter of 2025. We are particularly pleased with the revenue performance in this year's third quarter as we experienced strong performance of our pharma biocatalysis business, which, as Britton mentioned, we see as evidence of a return to growth. Not only has this side of our business outperformed last year, but also is on pace to exceed revenues achieved in each of the last three years. Not only is our biocatalysis revenue growing, it is also increasingly profitable. Product gross margin was 74.5% for the third quarter of 2026, which has continued its improvement trend over the gross margin we achieved in the first half of 2026 and over the gross margin for the entire year for 2025. Due to this sustained gross margin improvement in the first nine months of 2026, we now anticipate achieving gross margins in the low 70s for the full year 2026. Research and development expenses for the third quarter of 2026 were $12.6 million compared to $13.9 million in the third 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 $10.1 million in the third quarter of 2026 compared to $11.2 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 allocable costs. Controlling expenses remains a key focus for Codexis. We want to use our capital efficiently and in areas that bring the largest positive impact to the success of our overall business. Net loss for the third quarter of 2026 was $8.1 million compared to a loss of $19.6 million for the third quarter of 2025. We are reiterating our top-line guidance for 2026 and expect revenue in the range of $72 million to $76 million. Codexis ended the third quarter of 2026 with $72.7 million in cash, cash equivalents, and short-term investments, which compares to $78.2 million at the end of 2025. During the third quarter, we successfully completed an equity financing that raised approximately $25 million net of expenses. Subsequent to the close of the third quarter, we successfully entered into a $60 million senior secured term loan agreement, of which $42.5 million was drawn down upon closing. The drawdown was used to pay off existing debt of $42 million. The loan provides for 48 months of interest-only payments, followed by a 12-month amortization period. We expect that our current cash will be sufficient to fund our planned operations and capital expenditures through 2028 in line with our previous cash runway guidance. With that, I will now turn the call back over to Alison.

Thank you, Georgia, Stefan, and Britton. Our ECO Synthesis technology has the potential to disrupt the landscape of oligonucleotide manufacturing and enable siRNA therapeutics to reach indications with large patient populations. We remain committed to industrializing our technology to allow deployment into our customers' pipelines. While we are keenly focused on improving scale, process performance, and product quality, we are also listening to our customers and adding features to our platform that are vital to the success of our customers' products. This year, we have made advances, including discovering a method to achieve enzymatic synthesis without the use of a starter oligo, advancements in our stereochemistry approach, and methods to incorporate tissue-targeting capabilities into our technology. A high-priority goal for us is to close out the year with momentum. We've signed two important evaluation agreements in the last two months and have more in the funnel. This gives us excellent opportunities to sign higher-value contracts as well as innovative licensing deals in 2027. We have a number of commercial initiatives that are nearing the final stages of negotiations, and we look forward to keeping you informed of our progress. We will also be focused on financial performance by striving to meet our revenue targets while controlling our expenses. For investors, achieving these goals will show proof of success. We will use our know-how and our over 20 years of experience in engineered enzymes to sustain and drive innovation in the field of RNA medicine. In coming months, we will be moving toward 500-gram production scale, advancing the ECO Synthesis raw materials supply chain, and we will begin construction on our GMP production facility. We are really excited by our prospects and proud of the dedication and achievements of the entire Codexis team who have been instrumental in making the ECO Synthesis technology a reality. We'd be happy to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Allison Bratzel with Piper Sandler. Please proceed with your question.

Hey, team. Good afternoon, and thank you for taking the question. Just one from me on Tides Europe. Just coming off that meeting, could you maybe talk more to how new customer conversations are coming out of that and just where they're focused—on that stereo control or scale or something else? And then just secondly, I think you're going to have a meeting with the FDA's Emerging Technologies Team later this year. Just what's the status on that, and just what specific feedback are you looking to get from that FDA interaction? Thank you.

Hi, Ali. Thank you very much for the question. This is Alison, and I'll have Britton answer your first question, but I'll take the question on the FDA interaction. We did have a very successful interaction with them in late September. The topics that we covered were to discuss our expectations and specifications related to the enzymes of the ECO Synthesis Platform and also the specifications related to siRNA generated by the ECO Synthesis Platform, and we wanted to make sure that we weren't missing anything and that we were meeting the agency's expectations. That was a very useful conversation, and we feel very aligned with the agency. And then another important conversation that we had with the FDA was related to comparability and starting to get their thoughts on how one would construct a comparability argument, including stereochemical control compared to a stereorandom solid-phase chemistry originator, and we had a very constructive conversation about that. Once again, the FDA was extremely engaged. They pay a lot of attention to this platform. I think they're very compelled by the opportunity of product purity, and we're looking forward to the next one. And now I'll ask Britton to comment on your first question.

Yes. Hi, Ali. Britton here. The information and data that we presented further validated what we had been saying over the past year, that this is a technology that is growing and expanding. We're heavily focused on scaling the technology and having high quality with the technology, and that's something that we were able to demonstrate and show the actual data here at Tides EU. So showing the actual 100 grams at a crude purity of greater than 90% is an incredible milestone for us because when you look at the industry and a lot of their standards and their expectations, you have to be greater than 90% with crude material, and we're showing we can do that. So, there was a lot of excitement around that. There are also a lot of conversations around our scaling factors; now that we've taken it to hundreds of grams, can we get to the kilos, 10 kilos, hundreds of kilos? And all the data and everything we have shows that we can meet all those objectives. So, the conversations were great, a lot of excitement around it because this is something that's never been done before within our industry using an enzymatic process.

[Operator Instructions] Your next question comes from Kristen Kluska with Cantor Fitzgerald. Please proceed with your question.

Hi everyone, thanks so much for taking the question and congrats on these recent presentations. Just to kind of circle off that last question, I wanted to ask how phosphoramidite chemistry tends to be compromised or potentially the quality differentiating as the production increases in terms of the number of grams. And then also as you guys think about the next step to potentially demonstrate successful production of 500 grams, how are you guys going to characterize what would be a win for you in that scenario? Thank you.

Hi Kristen, this is Alison. I'll start and ask Stefan to comment. So I think your first question is about product quality with the existing chemistry and how that relates to scale, if I'm understanding your question correctly. So I think that there are 40 years of investment in solid-phase organic synthesis, and the folks that are making high-quality GMP material these days put a huge amount of effort into making and releasing very high-quality material. This takes very, very significant effort. The amount of purification required is fairly onerous. I don't think that that's debatable. I think that as the chemistry scales, there are some physical limitations—not necessarily quality limitations, those are physical limitations of the current technology and the ability for the solid-phase component of that synthesis only to scale to between 7 and 10 kilos per batch, which certainly sounds like a decent amount of material, but not if you have to supply a market that demands metric tons annually. So just to recap, the ECO Synthesis Manufacturing Platform will not have those kinds of scale barriers. And then secondly, what we're working hard to show and we've started to show at Tides Europe is that our material, even crude without purification, is demonstrating high purity. And we will continue to demonstrate that the chromatography and purification requirements of material made via ECO Synthesis will be much more efficient compared to solid-phase chemistry. Stefan, anything else you'd like to add?

Just to add about what causes the impurities in the chemical synthesis, the process itself, the chemical synthesis, is under really harsh conditions. So as the oligonucleotide is being manufactured, this repeated exposure to these harsh conditions does actually damage a small fraction of the product. In contrast, ECO Synthesis operates in an aqueous environment, in a buffered environment; it's much, much milder. And we believe that is a significant contributor to the higher quality that we're observing.

And then I think the second part of the question was, what are we excited about with respect to 500 grams? So actually, how we're thinking about 500 grams and beyond—so now that we're more routinely making hundreds of grams of fragments—we also love the approach of using the ligation of multiple fragments. So the math is relatively straightforward: if we can already make hundreds of grams in fragments, then we can stitch those together using the ligase enzyme into hundreds of grams of material, and that's how we're going to approach 500 grams. And we will progress from there quickly to kilo-scale. What's important there was what Stefan mentioned in our pre-recorded comments, which is we've also been working hard to determine the predictive performance over these scales, and we will constantly be assessing that because that enables us to move more rapidly as we increase scale. So we feel that we are very on track with our scale objectives, and we're very delighted to show everybody the performance of the 100-gram material and the product quality of that material. We feel that that's a milestone, and we can proceed quickly from here.

[Operator Instructions] Your next question comes from the line of Matt Hewitt with Craig Hallam Capital Group. Please proceed with your question.