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Codexis Reports 2019 Fourth Quarter and Full Year Financial Results

2019 total revenues increased 13% to $68.5 million with product revenue up 15% and R&D revenue up 11%

 Ten customers contributed more than $1 million each to 2019 revenues

Introduces 2020 financial guidance

Conference call with slides begins at 4:30 pm Eastern time today

REDWOOD CITY, Calif., Feb. 27, 2020 (GLOBE NEWSWIRE) -- Codexis, Inc. (CDXS), a leading protein engineering company, announces financial results for the three and 12 months ended December 31, 2019, provides a business update and introduces 2020 financial guidance.

“Strong fourth quarter revenues of $18.7 million increased 16% over the prior-year quarter, and closed off a solid year in 2019 with total year-over-year revenue growth of 13%. The Performance Enzymes segment led the way in 2019 with a 24% increase in revenues. Importantly, revenues were derived from a diversified base of business with 10 customers contributing more than $1 million each during the year,” said Codexis President and CEO John Nicols. “Among 2019 highlights, we signed our third CodeEvolver® licensing agreement, adding Novartis to the list of global pharma leaders incorporating our technology into their in-house R&D. We entered into a license agreement with Roche for our first internally developed high-performance molecular diagnostic enzyme, further validating our entry into this high growth market. We also announced Nestlé Health Science's exercise of their option for CDX-6114 for the treatment of phenylketonuria, plus expanded our partnership to include development of CDX-7108, the lead candidate, currently in preclinical development, for the potential treatment of a GI disorder.

“Our outlook for 2020 is for another year of double-digit revenue growth, up 14% to 20% over 2019,” he added. “We believe revenue growth will be led this year by strength in our R&D business, with strong performance expected from the Novel Biotherapeutics segment. We're well positioned to continue to build momentum for penetrating a growing list of value-creating applications and partnerships across both our Novel Biotherapeutics and Performance Enzyme business segments in 2020 and beyond.”

Fourth Quarter Financial Highlights
Codexis is reporting two business segments: the Performance Enzymes segment, which consists of its protein catalyst and enzyme product and service offerings with a focus on pharmaceutical, food, molecular diagnostics and other industrial markets; and the Novel Biotherapeutics discovery and development segment.

Total revenues for the fourth quarter of 2019 were $18.7 million, up 16% from $16.1 million for the fourth quarter of 2018. Product revenue was $4.9 million, compared with $7.3 million for the fourth quarter of 2018, with the decrease due to timing in the demand for various enzymes. Research and development (R&D) revenue for the fourth quarter of 2019 was $13.8 million, up 57% from $8.8 million for the prior-year period, primarily due to revenues under the Novartis CodeEvolver® licensing agreement, partially offset by lower development fees from Nestlé Health Science and from prior-year revenue related to a licensing agreement with Porton Pharma Solutions. R&D revenue for the fourth quarter of 2019 included $12.2 million from the Performance Enzymes segment and $1.6 million from the Novel Biotherapeutics segment. R&D revenue for the fourth quarter of 2018 included $5.8 million from the Performance Enzymes segment and $3.0 million from the Novel Biotherapeutics segment.

Gross margin on product revenue for the fourth quarter of 2019 was 30%, compared with 67% for the fourth quarter of 2018, due to product mix.

R&D expenses were $8.9 million for the fourth quarter of 2019, compared with $7.5 million for the fourth quarter of 2018, with the increase primarily due to higher outside services fees, higher salaries and personnel costs associated with higher headcount, higher allocation of occupancy-related costs and increases in lab supplies, partially offset by lower stock-based compensation expenses and lower consultant fees. R&D expenses for the fourth quarter of 2019 included $4.5 million from the Performance Enzymes segment and $4.0 million from the Novel Biotherapeutics segment. R&D expenses for the fourth quarter of 2018 included $4.4 million from the Performance Enzymes segment and $2.9 million from the Novel Biotherapeutics segment.

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2019 were $7.3 million, compared with $6.8 million for the fourth quarter of 2018, with the increase primarily due to higher facilities costs and higher headcount, partially offset by reductions in allocable occupancy-related costs and outside services fees. SG&A expenses for the fourth quarter of 2019 included $2.0 million from the Performance Enzymes segment, $0.5 million from the Novel Biotherapeutics segment and the remaining portion is included in $4.9 million in corporate overhead, depreciation, amortization and other expenses, net. SG&A expenses for the fourth quarter of 2018 included $1.8 million from the Performance Enzymes segment, $0.2 million from Novel Biotherapeutics and the remaining portion is included in $4.9 million in corporate overhead, depreciation, amortization and other expenses, net.

The net loss for the fourth quarter of 2019 was $0.6 million, or $0.01 per share, compared with a net loss for the fourth quarter of 2018 of $0.5 million, or $0.01 per share. Non-GAAP net income for the fourth quarter of 2019 was $1.0 million, or $0.02 per diluted share, compared with non-GAAP net income for the fourth quarter of 2018 of $1.6 million, or $0.03 per diluted share. A reconciliation of GAAP to non-GAAP measures is provided below.

2019 Financial Highlights
Total revenues for 2019 were $68.5 million, up 13% from $60.6 million for 2018. Product revenue was $29.5 million, up 15% from $25.6 million for 2018, and R&D revenue was $39.0 million, up 11% from $35.0 million for 2018. R&D revenue for 2019 included $28.7 million from the Performance Enzymes segment and $10.3 million from the Novel Biotherapeutics segment. R&D revenue for 2018 included $21.5 million from the Performance Enzymes segment and $13.5 million from the Novel Biotherapeutics segment.

Gross margin on product revenue for 2019 was 47%, compared with 51% for 2018, with the decrease due to product mix.

R&D expenses for 2019 were $33.9 million, compared with $30.0 million for 2018, with the increase primarily due to higher personnel costs associated with higher headcount, higher allocation of occupancy-related costs and supplies and increases in lab supplies, partially offset by lower outside services and stock-based compensation expense. R&D expenses for 2019 included $19.4 million from the Performance Enzymes segment and $13.3 million from the Novel Biotherapeutics segment. R&D expenses for 2018 included $18.9 million from the Performance Enzymes segment and $10.2 million from the Novel Biotherapeutics segment.

SG&A expenses for 2019 were $31.5 million, compared with $29.3 million for 2018, with the increase primarily due to higher facilities expense and higher personnel costs associated with higher headcount, partially offset by lower allocation of occupancy-related expenses and outside services. SG&A expenses for 2019 included $8.5 million from the Performance Enzymes segment, $2.2 million from the Novel Biotherapeutics segment and the remaining portion is included in the $21.4 million in corporate overhead, depreciation, amortization and other expenses, net. SG&A expenses for 2018 included $7.5 million from Performance Enzymes, $0.8 million from the Novel Biotherapeutics segment and the remaining portion is included in the $21.5 million in corporate overhead, depreciation, amortization and other expenses, net.

The net loss for 2019 was $11.9 million, or $0.21 per share, compared with a net loss for 2018 of $10.9 million, or $0.21 per share. Non-GAAP net loss for 2019 was $3.4 million, or $0.06 per share, compared with a non-GAAP net loss for 2018 of $1.8 million, or $0.04 per share.

Cash and cash equivalents as of December 31, 2019 were $90.5 million, compared with $53.0 million as of December 31, 2018.

2020 Financial Outlook
Codexis is introducing financial guidance for 2020, as follows:

  • Total revenues are expected to be $78 million to $82 million
  • Product revenues are expected to be $25 million to $27 million
  • Gross margin on product revenue is expected to be 43% to 47%

Non-GAAP Financial Measures
Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. On a non-GAAP basis, financial measures exclude the non-cash items depreciation expense and stock-based compensation expense. Non-GAAP financial measures presented are non-GAAP net income or loss, non-GAAP net income or loss per share (basic and diluted), non-GAAP R&D expense and non-GAAP SG&A expense. Non-GAAP operating expenses exclude stock-based compensation expense and depreciation of fixed assets.

Codexis management uses these non-GAAP financial measures to monitor and evaluate the Company’s operating results and trends on an ongoing basis, and internally for operating, budgeting and financial planning purposes. Codexis management believes the non-GAAP information is useful for investors by offering them the ability to identify trends in what management considers to be Codexis’ core operating results and to better understand how management evaluates the business. These non-GAAP measures have limitations, however, because they do not include all expenses that affect Codexis. These non-GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP, and therefore these non-GAAP results should only be used for evaluation in conjunction with the corresponding GAAP measures. A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table entitled “Reconciliation of GAAP to Non-GAAP Financial Measures.”

Conference Call and Webcast
Codexis will hold a conference call and audio webcast today beginning at 4:30 p.m. Eastern time. A slide presentation to accompany the conference call will be available on the Investor section of company website. The conference call dial-in numbers are 855-890-8665 for domestic callers and 720-634-2938 for international callers, and the passcode is 8768898. A live webcast of the call will be available on the Investors section of www.codexis.com.

A recording of the call will be available for 48 hours beginning approximately two hours after the completion of the call by dialing 855-859-2056 for domestic callers or 404-537-3406 for international callers. Please use the passcode 8768898 to access the recording. A webcast replay will be available on the Investors section of www.codexis.com for 30 days, beginning approximately two hours after the completion of the call.

About Codexis, Inc.
Codexis is a leading protein engineering company that applies its proprietary CodeEvolver® technology to develop proteins for a variety of applications, including as biocatalysts for the commercial manufacture of pharmaceuticals, fine chemicals and industrial enzymes, and enzymes as biotherapeutics and for use in molecular diagnostics. Codexis’ proven technology enables improvements in protein performance, meeting customer needs for rapid, cost-effective and sustainable manufacturing in multiple commercial-scale implementations of biocatalytic processes. For more information, see www.codexis.com.

Forward-Looking Statements
To the extent that statements contained in this press release are not descriptions of historical facts regarding Codexis, they are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Codexis’ expectations regarding 2020 total revenues, including revenue distribution between businesses, product revenues and gross margin on product revenues, the performance of its Novel Biotherapeutics segment, and its future prospects for penetrating a growing list of value-creating applications and partnerships across both its Novel Biotherapeutics and Performance Enzyme business segments. 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, among others: Codexis’ dependence on its licensees and collaborators; Codexis’ dependence on a limited number of products and customers; potential adverse effects to Codexis’ business if its customers’ products are not received well in the markets; Codexis’ ability to deploy its technology platform in new market spaces; Codexis’ dependence on key personnel; Codexis’ ability to compete may decline if it loses some of its intellectual property rights; third party claims that Codexis infringes third-party intellectual property rights;  Codexis could face increased competition if third parties misappropriate Codexis biocatalysts; the uncertainties inherent in research and the clinical development process, including risks, uncertainties and costs associated with the successful development of biotherapeutic candidates, including obtaining development partners for Codexis’ unpartnered biotherapeutic programs and progressing such programs to clinical trials and regulatory approvals; Codexis’ dependence on its biotherapeutic licensees and collaborators, including Codexis’ dependence on Nestlé Health Science for the successful development and commercialization of CDX-6114; Codexis’ biotherapeutic programs are early stage, highly regulated and expensive; the regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and the results inherently unpredictable; results of preclinical studies and early clinical trials of product candidates may not be predictive of results of later studies or trials; unintended or undesirable side effects of our product candidates could hinder or prevent receipt of regulatory approval; even if regulatory approval is obtained for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements and expenses; our biotherapeutic products may face competition in the market; Codexis’ dependence on a limited number of products and customers in its biocatalysis business; potential adverse effects to Codexis’ business if its customers’ pharmaceutical or food products are not received well in the markets; risks, uncertainties and costs associated with the successful development of biotherapeutic candidates, including obtaining development partners for its biotherapeutic programs and progressing such programs to clinical trials and regulatory approvals; and risks associated with epidemic diseases or the perception of their effects. Additional information about factors that could materially affect actual results can be found in Codexis’ Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2019 and Form 10-Q filed with the SEC on  November 6, 2019, including under the caption “Risk Factors” and in Codexis’ other periodic reports filed with the SEC. Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law.

Investor Contact:
LHA Investor Relations
Jody Cain, 310-691-7100
jcain@lhai.com

Financial Tables to Follow

Codexis, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(In Thousands, Except Per Share Amounts)

  Three months ended December 31,   Twelve months ended December 31,
  2019   2018   2019   2018
Revenues:              
Product revenue $ 4,877        $ 7,299        $ 29,465        $ 25,590     
Research and development revenue 13,773        8,769        38,993        35,004     
Total revenues 18,650        16,068        68,458        60,594     
Costs and operating expenses:              
Cost of product revenue 3,402        2,393        15,632        12,620     
Research and development 8,872        7,513        33,873        29,978     
Selling, general and administrative 7,322        6,806        31,502        29,291     
Total costs and operating expenses 19,596        16,712        81,007        71,889     
Loss from operations (946 )     (644 )     (12,549 )     (11,295 )  
Interest income 356        227        1,287        671     
Other expenses, net (40 )     (69 )     (656 )     (291 )  
Loss before income taxes (630 )     (486 )     (11,918 )     (10,915 )  
Provision for (benefit from) income taxes       (25 )     17        (37 )  
Net loss $ (635 )     $ (461 )     $ (11,935 )     $ (10,878 )  
               
Net loss per share, basic and diluted $ (0.01 )     $ (0.01 )     $ (0.21 )     $ (0.21 )  
Weighted average common stock shares used in computing net loss per share, basic and diluted 58,620        53,973        56,525        52,205     

Codexis, Inc.

Condensed Consolidated Balance Sheets
(unaudited)
(In Thousands)

  December 31,
  2019   2018
Assets      
Current assets:      
Cash and cash equivalents $ 90,498        $ 53,039     
Restricted cash, current 661        —     
Accounts receivable, net 9,029        11,551     
Unbilled receivables, current 10,099        1,916     
Inventories 371        589     
Prepaid expenses and other current assets 2,520        1,068     
Contract assets 1,027        35     
  Total current assets 114,205        68,198     
Restricted cash 1,062        1,446     
Equity securities —        588     
Right-of-use assets - Operating leases, net 23,837        —     
Right-of-use assets - Finance leases, net 268        —     
Property and equipment, net 6,282        4,759     
Goodwill 3,241        3,241     
Other non-current assets 178        1,051     
 Total assets $ 149,073        $ 79,283     
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 2,621        $ 3,050     
Accrued compensation 5,003        5,272     
Other accrued liabilities 6,540        4,855     
Current portion of lease obligations - Operating leases 1,107        —     
Current portion of lease obligations - Finance leases 60        —     
Deferred revenue 57        4,936     
  Total current liabilities 15,388        18,113     
Deferred revenue, net of current portion 1,987        3,352     
Long-term lease obligations, Operating leases 24,951        —     
Long-term lease obligations, Finance leases —        61     
Lease incentive obligation, net of current portion —        35     
Other long-term liabilities 1,230        1,416     
Total liabilities 43,556        22,977     
Stockholders’ equity:      
Common stock          
Additional paid-in capital 447,920        386,775     
Accumulated deficit (342,409 )     (330,474 )  
Total stockholders’ equity 105,517        56,306     
Total liabilities and stockholders’ equity $ 149,073        $ 79,283     

Codexis, Inc.

Segmented Information

(unaudited)

(In Thousands)

    Three months ended December 31, 2019   Three months ended December 31, 2018
    Performance Enzymes   Novel Biotherapeutics   Total   Performance Enzymes   Novel Biotherapeutics   Total
Revenues:                        
Product revenue   $ 4,877      $ —        $ 4,877        $ 7,299      $ —        $ 7,299     
Research and development revenue   12,179      1,594        13,773        5,755      3,014        8,769     
Total revenues   17,056      1,594        18,650        13,054      3,014        16,068     
Costs and operating expenses:                        
Cost of product revenue   3,402      —        3,402        2,392      —        2,392     
Research and development(1)   4,491      4,026        8,517        4,376      2,891        7,267     
Selling, general and administrative(1)   1,963      454        2,417        1,843      156        1,999     
Total segment costs and operating expenses   9,856      4,480        14,336        8,611      3,047        11,658     
Income (loss) from operations   $ 7,200      $ (2,886 )     4,314        $ 4,443      $ (33 )     4,410     
Corporate costs (2)           (4,439 )             (4,561 )  
Depreciation and amortization           (505 )             (335 )  
Loss before income taxes           $ (630 )             $ (486 )  

(1) Research and development expenses and Selling, general and administrative expenses exclude depreciation and amortization of finance leases.
(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.

Codexis, Inc.

Segmented Information

(unaudited)

(In Thousands)

    Year Ended December 31, 2019   Year Ended December 31, 2018
    Performance Enzymes   Novel Biotherapeutics   Total   Performance Enzymes   Novel Biotherapeutics   Total
Revenues:                        
Product revenue   $ 29,465      $ —        $ 29,465        $ 25,590      $ —      $ 25,590     
Research and development revenue   28,691      10,302        38,993        21,483      13,521      35,004     
Total revenues   58,156      10,302        68,458        47,073      13,521      60,594     
Costs and operating expenses:                        
Cost of product revenue   15,632      —        15,632        12,620      —      12,620     
Research and development(1)   19,380      13,278        32,658        18,924      10,185      29,109     
Selling, general and administrative(1)   8,462      2,222        10,684        7,538      771      8,309     
Total segment costs and operating expenses   43,474      15,500        58,974        39,082      10,956      50,038     
Income (loss) from operations   $ 14,682      $ (5,198 )     9,484        $ 7,991      $ 2,565      10,556     
Corporate costs (2)           (19,624 )             (20,324 )  
Depreciation and amortization           (1,778 )             (1,147 )  
Loss before income taxes           $ (11,918 )             $ (10,915 )  

(1) Research and development expenses and Selling, general and administrative expenses exclude depreciation and amortization of finance leases.
(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.

Codexis, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited)

(In Thousands)

  Three months ended December 31,   Twelve months ended December 31,
  2019   2018   2019   2018
               
(i) Research and development expenses              
Research and development expenses - GAAP $ 8,872        $ 7,513        $ 33,873        $ 29,978     
Non-GAAP adjustments:              
Depreciation expense (a) (331 )     (246 )     (1,124 )     (870 )  
Stock-based compensation (b) (157 )     (500 )     (1,406 )     (2,055 )  
Research and development expenses - Non-GAAP $ 8,384        $ 6,767        $ 31,343        $ 27,053     
               
 (ii) Selling, general and administrative expenses              
Selling, general and administrative expenses - GAAP $ 7,322        $ 6,806        $ 31,502        $ 29,291     
Non-GAAP adjustments:              
Depreciation expense (a) (121 )     (89 )     (446 )     (277 )  
Stock-based compensation (b) (1,003 )     (1,182 )     (5,537 )     (5,834 )  
Selling, general and administrative expenses - Non-GAAP $ 6,198        $ 5,535        $ 25,519        $ 23,180     
               
(iii) Net income (loss)              
Net income (loss) - GAAP $ (635 )     $ (461 )     $ (11,935 )     $ (10,878 )  
Non-GAAP adjustments:              
Depreciation expense (a) 452        335        1,570        1,147     
Employee stock-based compensation (b) 1,160        1,682        6,943        7,889     
Net income (loss) - Non-GAAP $ 977        $ 1,556        $ (3,422 )     $ (1,842 )  
               
               

Codexis, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited)

(Shares in Thousands)

  Three months ended December 31,   Twelve months ended December 31,
  2019   2018   2019   2018
(iv) Net income (loss) per share              
Net income (loss) per share - GAAP, basic $ (0.01 )     $ (0.01 )     $ (0.21 )     $ (0.21 )  
Non-GAAP adjustments:              
 Depreciation expense (a) $ 0.01        $ 0.01        $ 0.03        $ 0.02     
Stock-based compensation (b) $ 0.02        $ 0.03        $ 0.12        $ 0.15     
Net income (loss) per share - Non-GAAP, basic $ 0.02        $ 0.03        $ (0.06 )     $ (0.04 )  
               
Net income (loss) per share - GAAP, diluted $ (0.01 )     $ (0.01 )     $ (0.21 )     $ (0.21 )  
Non-GAAP adjustments:              
Depreciation expense (a) $ 0.01        $ 0.01        $ 0.03        $ 0.02     
Stock-based compensation (b) $ 0.02        $ 0.03        $ 0.12        $ 0.15     
Net income (loss) per share - Non-GAAP, diluted $ 0.02        $ 0.03        $ (0.06 )     $ (0.04 )  
               
Weighted average common shares used in computing GAAP and Non-GAAP net loss per share, basic 58,620        53,973        56,525        52,205     
Effect of dilutive shares 2,796        4,469        —        —     
Weighted average common shares used in computing non-GAAP net income (loss) per share, diluted 61,416        58,442        56,525        52,205     

These non-GAAP financial measures exclude the following items:

(a) Depreciation expense: we provide non-GAAP information which excludes depreciation expense related to the depreciation of property and equipment. We believe that eliminating this expense from our non-GAAP measures is useful to investors, because the acquisition of property and equipment, and the corresponding depreciation expense, can be inconsistent in amount and can vary from period to period.

(b) Stock-based compensation: we provide non-GAAP information which excludes expenses for stock-based compensation. We believe the exclusion of this item allows for financial results that are more indicative of our operations. We also believe that the exclusion of stock-based compensation expense provides for a better comparison of Codexis' operating results to prior periods as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types.