Q3 2023 Codexis Inc Earnings Call
Participants
Carrie McKim; IR; Codexis, Inc.
Stephen Dilly; President & CEO; Codexis, Inc.
Kevin Norrett; CFO; Codexis, Inc.
Sri Ryali; CFO; Codexis, Inc.
Brandon Couillard; Analyst; Jefferies & Co.
Matthew Hewitt; Analyst; Craig-Hallum Capital Group
Chad Wiatrowski; Analyst; Cowen
Presentation
Operator
Welcome to Codexis third-quarter 2023 earnings conference call. (Operator Instructions) Please note, this event is being recorded. And now I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead.
Carrie McKim
Thank you, operator. With me today are Dr. Stephen Dilly, Codexis' President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, and Sri Ryali, 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 2023 revenue, product revenues, and gross margin on product revenues as well as our strategies and prospects for revenue growth and successful execution of current and future programs and partnerships, including our ECO Synthesis platform and pharmaceutical manufacturing business.
To the extent that statements contained in this 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 2, 2023. You should not place undue reliance on the forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are in some cases beyond predictive 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 Stephen.
Stephen Dilly
Thank you, Carrie, and thanks, everyone for joining. We approacedh the end of 2023 in a position of strength. We have a core pharmaceutical manufacturing business that generates cash, a potentially game changing technology and ECO Synthesis platform and importantly, the financial resources to execute on our plan. Since announcing our enhanced strategic focus in July, we've worked very hard to put ourselves in a position of financial security so that we now have a path to potential positive cash flow around the end of 2026 with current financial resources.
Let me briefly recap how we get that. It starts with a strong balance sheet. As you'll recall, over the last two years, we received a windfall of roughly $135 million in product revenue from the sale of CDX-616 to Pfizer for the manufacturing of PAXLOVID. This was the result of our quick and meticulous execution supply metric tons of product in support of the global pandemic.
CDX-616 still represents the largest single commercial success for today's date and the extraordinary revenues that generated send calls to the strong balance sheet we have today with approximately $75 million in cash as of September 30. On top of that strong foundation, we've taken steps to dramatically reduce our cash burn by over 50% year on year. We did this by focusing our efforts on programs that will generate the greatest value, streamlining our organization to the right size for our go-forward plan and consolidating operations to a single facility.
We've also been working hard to return our core pharmaceutical manufacturing business for a growth trajectory. And we're very pleased with progress and excited for the future growth potential. The cash generated by our pharma manufacturing business, combined with reduced cash burn and our strong balance sheet creates the opportunity to invest in our ECO Synthesis technology to bring it to commercialization within our existing resources.
The first element of the ECO Synthesis platform, the double-stranded RNA ligase should start to generate revenue next year, followed by anticipated early commercial licenses in 2025 and the rollout of the complete ECO Synthesis platform in 2026. Putting all these pieces together, cash balance, reduced burn, growth in pharmaceutical manufacturing, and the exciting commercial potential of the ECO Synthesis platform gives us a path to potential positive cash flow around the end of 2026, which is within reach of our existing cash runway.
We are rapidly advancing the ECO Synthesis technology and many of our team members just returned from presenting on our technical progress at the TIDES Europe meeting. Our confidence in the revenue potential of this opportunity is increasing as we continue our conversations with potential partners and experts. As an adjunct to those conversations, we're in the process of forming a strategic Advisory Board to make sure that we have the best possible understanding of the existing and future landscape so that the ECO Synthesis platform is tailored to meet the real needs of the market.
We are truly delighted and honored to welcome John Maraganore as our inaugural external SAB member. As Founder and chief Executive Officer of our Alnylam Pharmaceuticals, John pioneered the translation of RNAi from a laboratory tool into an entirely new class of medicines. Alongside his participation in our Strategic Advisory Board, we also look forward to hearing John's perspective on the RNAi therapeutics landscape during our upcoming ECO Synthesis focused virtual KOL event in December.
Before I hand it over to Kevin to outline that event, let me briefly recap the reasons for our enthusiasm about ECO Synthesis platform. Moving to slide 3, drug developers are continuing to advance our pipeline of innovative RNAi therapeutics for large disease indications like Alzheimer's and hypotension. And there is a projected way of coming demand.
The current manufacturing standards of phosphoramidite chemistry is dependable, well established and will no doubt continue to play an important role in the landscape. However, at commercial scale, it also requires enormous capital investment extensively time and high volumes of toxic solvent like this is in nitrile For reference, a leading contract manufacturing organization recently invest $725 million to build a phosphoramidite chemistry plant with the capacity to manufacture about 1,000 kilos of RNAi annually.
Our market research indicates that demand is expected to grow to approximately 30,000 kilos annually by around the end of the decade. It would take billions of dollars and many more of these plants to meet that capacity. Most companies don't have the resources necessary to make that kind of manufacturing investment, particularly given the realities of today's broader capital markets.
That's where an elegant enzymatic solution like the ECO Synthesis platform comes in. Today, we're closing in on an aqueous space working process designed to complement phosphoramidite chemistry and vastly reduce level of capital investment required for large-scale production. As with any disruptive technology, it would be naive to think that Codexis will command the entire market with our platform. So we're thinking critically about where exactly our technology fits within the existing manufacturing landscape.
In many cases that might look like augmenting the chemical approach with our double-stranded RNA ligation, which can stitch together short strands of RNA that have been chemically synthesized. This enables much more efficient use of existing facilities, and we currently have collaborations with a few key RNAi players in this space. In other cases, the ECO Synthesis platform could be used to synthesize the complete saRNA and sometime the best approach will be a combination of the ECO Synthesis platform, ligation and even chemistry.
That strategic optionality and flexibility is one of the beauties of our platform and underscores why ECO Synthesis has such promising potential to play a critical role in meeting future demand for saRNA. Now, while continuing to refine and perfect the technical piece is important, we also need to pay full attention to real life barriers to adoption of our platform. Put bluntly, why will innovative track our technology to deliver their valuable saRNA assets when they have a seemingly reliable alternative phosphoramidite chemistry.
For those already developing our RNAi therapeutics, it's about demonstrating the levels of purity we can produce and the ease of adoption we can facilitate. For those who aren't we need to emphasize how the ECO Synthesis platform opens the door for smaller companies to develop RNAi therapeutics for large indications they couldn't otherwise pursue.
We are well aware that these questions will be top of mind for drug developers and manufacturers as key decision makers weigh their options. So it's incumbent on us to help our customers in the investment community understand the need for an enzymatic solution. We think our December virtual KOL event will play a critical role in the ongoing market education process. We'll cover additional detail on that and our recent business development efforts, I'll pass it over to Kevin, who has just returned from the TIDES Europe meeting. Kevin?
Kevin Norrett
Thanks, Stephen. As mentioned, I was just in Amsterdam at the TIDES Europe meeting where I was energized by the high levels of interest we were seeing from potential customers and collaborators. Continued engagement with key players and decision-makers has only reinforced my conviction that there is a very real need for our enzymatic solutions. And with that a significant revenue opportunity for Codexis.
Shifting to slide 4. We look forward to sharing more detail on our recent technical progress in the coming months and the December virtual KOL event Stephen mentioned will be a terrific opportunity to hear directly from those in the RNAi space who would benefit from this technology. In addition to welcoming John Maraganore to our SAB We look forward to his participation in this event where he will share his perspective on the growing importance of RNAi therapeutics as a class, today's manufacturing landscape and the need for innovation is RNAi demand grows.
The agenda will also feature discussions around the ECO Synthesis commercial opportunity and a status update on our anticipated milestones as well as a technical overview of the platform from Stefan Lutz, our Senior Vice President of Research. We believe this event will be a highly valuable resource for education around what we see as the major growth driver for Codexis, and we hope you'll plan to join us virtually in December.
On slide 5, I'd like to quickly recap our anticipated key milestones. As we approach the end of 2023, we are nearing the demonstration of ground scale synthesis with our ECO Synthesis of technology. We will take a deeper dive into the significance of this key technological milestone during our December event, but at a high level, it means we plan to demonstrate the preparative scale manufacture of an oligonucleotide composed of the modified nucleotide building blocks typically used in RNAi therapeutic. And we plan to do this all under process like conditions.
This proof point represents the first step from an R&D project to something with potential commercial applications, and it will enable us to enter pre-commercial testing with select customers next year, followed by early commercial licenses of the technology anticipated in 2025. During those phases, we will collect valuable feedback to inform any necessary tweaks or modifications before the planned full commercial launch in 2026.
In parallel to that progress, we also plan to make our engineered double-stranded RNA ligase widely available for customers in the second half of 2024. In addition to providing a near term RNA synthesis market entry point for us, this product gets our foot in the door with many of the customers currently using phosphoramidite chemistry, but requiring ligation-based approaches for longer sequences. This is a meaningful first step in educating customers on the benefits of incorporating enzymatic solutions as a complement to their existing manufacturing process.
Before I turn the call over to Sri to discuss our financial results for the quarter, let me provide an update on our business development activities following our strategic pivot in July. We are in active discussions with Nestle to restructure our collaboration, whereby they continue to develop CDX-7108 and Codexis retains an economic interest in this program but is no longer sharing in the clinical development and commercialization costs.
We expect a potential deal would follow the traditional path for Phase 1 molecule with an upfront payment, clinical milestones and sales-based growth. We are also in active negotiations with other potential partners to monetize assets within the segments of our life sciences portfolio where really no longer be focused such as genomics and PCR-based diagnostics. This is consistent with our previously announced strategy to leverage partners with broader channel reach and accelerate value to Codexis. We anticipate that we will be able to execute one or more of these deals by the end of this year or early next year. And we look forward to keeping you updated on that progress. With that, I'll turn the call over to Sri.
Sri Ryali
Thanks, Kevin. Good afternoon, everyone. Moving to slide 6, we released our full third-quarter financial results in a press release earlier this afternoon is available on our Investor Relations website. Before I call out a few highlights from the quarter, let me first share some thoughts on our financial position. As Steven noted, our strong balance sheet today reflects the benefit of a roughly $135 million windfall related to our CDX-616 sales to Pfizer for tax loaded between 2021 and 2022. This injection of cash significantly bolstered our financial positions and is reflected in our current cash balance of $74.6 million as of September 30.
As part of the restructuring announced in July, we focused our money and our people on the priority programs with the highest potential to create value, and we took decisive action to reduce headcount and consolidate facilities. These decisions lowered our projected cash burn by more than half. We now expect annual burn of roughly $20 to $30 million over the next two years. This, along with the anticipated return to growth of our pharmaceutical manufacturing business in 2024, an expected commercial launch of the ECO Synthesis platform is projected to fund our planned operations to positive cash flow, which we expect around the end of 2026. This is a good position to be in.
Now let me provide some brief comments on our Q3 results. During our July 20 call, we guided that Q3 product revenue can be our lowest quarter given the inherent lumpiness of the pharmaceutical manufacturing business, just driven by timing of customer orders and it is exactly in line with what we saw this quarter. Total revenues, excluding enzyme sales related to PAXLOVID were $9.3 million for the third quarter of 2023 compared to $21.5 million from the prior year.
Product revenues, excluding sales related to PAXLOVID were $5.4 million from third quarter compared to $15.1 million for the prior year. The decline is largely due to timing of customer orders, including specific customer building, pre-launch inventory in the third quarter of 2022, ahead of the anticipated approval of a pharmaceutical product. However, we expect Q4 product revenues to be more in line with Q1 and Q2 of this year. We are confident in reiterating our full year 2023 product revenue guidance of $30 to $35 million.
With PAXLOVID windfall now behind us, 2023 has been a reset year for the pharmaceutical manufacturing business. As we approach the end of this year, we are increasingly confident that this business is on a path to return to sustained growth beginning in 2024, and we plan to provide additional detail during our full year 2023 financial results call.
Now turning to R&D revenues, who reported $3.9 million in Q3 compared to $6.4 million last year. This decrease was driven by the completion of work on the Takeda partnered programs and the winding down of our biotherapeutics programs following our decision to exit this space. As a reminder, our biotherapeutics R&D revenues reflect the reimbursement approximately 50% of our costs. So all the decisions exit biotherapeutics will result in lower R&D revenues and moving these costs actually improves their bottom line by reducing overall cash burn.
We continue to expect 2023 R&D revenues be in the range of $21 million to $24 million. Product gross margin, excluding enzyme sales related to PAXLOVID is 58% this quarter compared to 55% in the third quarter of 2022. We continue to expect 2023 project product gross margin to be in the range of 55%, 65%.
Briefly turning to expenses, R&D expenses for the third quarter of 2023 were $13.7 million compared to $21.8 million last year. SG&A expenses were $12.3 million compared to $13.5 million in the third quarter of 2022. Compared to both the prior year and last quarter, you can see reductions across R&D and SG&A expenditures resulting from our financial discipline. We can expect to see the continued benefit of the decisive actions we've taken in the fourth quarter with continued lower expenses.
You'll notice this quarter that our Q3 GAAP expenses included large one-time charges. These primarily relates to the restructuring we announced in July. We booked $3.1 million charge related to the reduction in force and $10 million noncash impairment charge, reflecting our decision to exit biotherapeutics and consolidate our facilities.
Finally, as you can see in the other income and expense line in the table on this slide, we recorded onetime noncash impairments related to certain investments we previously made in private life science companies. Shifting to slide 7, to recap, we are in a strong financial position. We are confident in reiterating our 2023 guidance, and we have laid the foundation for our pharmaceutical manufacturing business to return to sustained growth in 2024.
Looking ahead, we have positioned ourselves well with the path to potential positive cash flow expected around the end of 2026, and we look forward to providing further guidance during our full year 2023 financial results call. I'll now turn the call back to Stephen.
Stephen Dilly
Thank you, Sri. In closing, I'm incredibly optimistic with the difficult decisions we made a few months ago have positioned Codexis for long-term success. We've streamlined the company and zeroed in on the killer app of our CodeEvolver platform, and we have the resources we need to realize that massive value of our ECO Synthesis technology. Now, we're in execution mode and with a cascade of upcoming milestones, we look forward to keeping you up to date on our progress. With that, we'd be happy to take your questions. Operator?
Question and Answer Session
Operator
(Operator Instructions) Brandon Couillard, Jefferies.
Brandon Couillard
Hey, thanks for having us. Kevin or Stephen, could you elaborate a little bit more on the TIDES EU conference and some of the engagement you saw there? How does it go relative to expectations? And what were some of the reactions from potential customers and new engagement there?
Stephen Dilly
Yes. Thanks, Brian. I'm going to get to Kevin to answer that because it's literally just back of the airplane looking suitably jet like.
Kevin Norrett
Thanks Stephen. Hi Brandon. Yes, actually it was it was quite exciting for multiple reasons. One, if you remember in the May TIDES meaning, really, first time we had come above the radar in terms of rolling out what we were working on behind the scenes for the last year or so which was the ECO Synthesis platform. What we demonstrated at TIDES and really generated a lot of excitement was that we've made significant progress since then in terms of showing increased coupling efficiency, longer strands sRNA fragments as well as improvements in some of the other pieces that are important across an enzymatic platform, which is also an important piece of having a fully enzymatic solution. So I think customers and potential collaborators, that were not as interested in talking to us in May, are now really excited about talking to us and we were quite popular at the conference. Anything you want to add?
Stephen Dilly
Well, I think it's the nature of the customers.
Yeah. I think the nature of the customers really, I mean, TIDES is a manufacturing focused conference. So CDMOs and whatnot are really kind of the bulk of the clients there and their focus in terms of looking at a new alternative versus simply trying to improve phosphoramidite chemistry was completely shifted from that. I think that really summarizes why I came back super energized from this conference and look forward to sharing more information in May of next year.
Brandon Couillard
Steve, and some of the experts, we've talked to about enzymatic approaches your question, a few things like flexibility, volumetric productivity, how do you address those concerns? What are some the timeline to be able to do that? And how do you respond to some of those concerns about the approach in general.
Stephen Dilly
Well, first one would be the volumetric productivity, which is actually the central premise of the enzymatic approaches. It should have vastly improved and that comes from the tethering of the enzyme and the having the oligo in solution. And so we actually expect our volumetric productivity to be significantly superior to the of the traditional chemical approach but we need to show you the guys that we start to do that at the December event. But some of the TIDES slides started to hint that also will continually show more starting with TIDES Asia in March next year, and then it may be TIDES to US again.
So it's just going to be -- we want to show you what we've actually done rather than what we're hoping to do. But yeah, progress is good and the volumetric part of it is really nailed down. The other thing that we think is super important. And actually, we have heard from even your calls was Brandon, was the need to address the building blocks as well. And so one of the things I think that really surprised people at TIDES is how far we got on the enzymatic synthesis of the [NQP] as well as just putting them together into the oligo.
And finally, when we announced that gram scale milestone towards the end of this year, what we're going to be showing in that is flexibility and the inclusion of modified blocks in there. So yes, this is why I keep saying we're listening to what the state-of-the-art is, what we need to do, how we need to be competitive. And also, the other thing that we have heard is the intrinsic ability of the enzymatic route to go along is a competitive advantage that the phosphoramidite chemistry approach will find very hard to compete with.
So yes, and again, that's one of the intrinsic advantages of our approach. But yes, they've been doing this for four years. We've been doing this for 1.5 year. But we're very much on the same playing field now. You can tell from our general body language we're super excited here.
Operator
Dan Arias, Stifel.
Hey, guys, it's actually Evan on for Dan. Thanks for the questions. The first one is actually just a simple modeling question. I mean you're giving a guidance in terms of CDX-616 product revenues, ex pax, low-bid. Can you remind me what your PAXLOVID, enzyme or product revenue is for this year and kind of which quarters those have or are going to fall into next year?
Sri Ryali
Sure. Yeah. I can answer that. This is Sri. We haven't booked any revenue related to sales of CDX-616 perpetual, but this year we are expecting to book $8 million in the fourth quarter and that is part of the accounting for the retainer fee that's already been collected. So it's non-cash revenue, You'll see $8 million in Q4. There's another $9 million that we'll book in Q4 of 2024, and then we'll be done accounting for all of the PAXLOVID retainer fees.
And that's R&D or that enzyme sales?
Sri Ryali
That will show up in product revenue.
Product revenue. Okay. And then is there an R&D piece there as well that's not PAXLOVID but Pfizer related?
Sri Ryali
Yes, so in the second quarter, we booked $5 million. This is where Pfizer applied a portion of their credit to a new enzyme not related to PAXLOVID. It's already been booked as R&D revenue and that was incurred in last quarter.
Got you. Okay. So $8 million for in 4Q and then another $9 million next year in 4Q and those are product revenues. Okay. Super helpful. Got that out of the way. Thanks. The next question is -- what I want to ask? I want to ask about -- rights. So you're write-down -- kind of a double question related. It took a write-down of some of your investments in the quarter. I think there's $3.7 million-something charge. So I guess which specific investments were those?
And then just kind of related, I know you guys have relationships with Alphazyme and Molecular Assemblies I know Molecular Assemblies, you have an investment and that's why it's related. What kind of status of those relationship?
Sri Ryali
So I can start with the write-down question first, we did book roughly $4 million in impairments on investments and private life science companies that we hold. We have investments disclosed in our queue in [MAI sequel] in Arzeda write downs related to sequel and Arzeda. And really it's just a function of the fact that these are companies that have been active on the financing front in anytime they do that. We have to reassess the value that they raised money at an appropriately reflect that on our financials.
Kevin Norrett
I'll cover the MAI and Alphazyme. It's very different situations, but strange enough, we've talked to both of them within the last couple of days. MAI, we have a fairly significant equity stake in, and you'll remember they're using our TdT enzyme version that does DNA, not RNA, to do DNA (technical difficulty) synthesis. They're making super good progress technically in terms of coming up with some very long, very pure DNA strands. We're super happy with that in that relationship. And really we're looking how we collaborate going forward.
So that's very positive. Also with Alphazyme, they've now become part of the broader Maravai umbrella. We're talking to them. They have existing contracts in place with us. And we're also talking about going forward how we can leverage that relationship. So that, obviously being a small company trying to cover a broad landscape, there's a lot of collaborations and our future.
Got you. Thanks for answering the questions.
Operator
Matthew Hewitt, Craig-Hallum.
Matthew Hewitt
Good afternoon and thank you for the progress update. Maybe two from me. The first one, what is the -- as you look at, what is the biggest challenge to achieving gram-scale synthesis for ECO? And then separately you're talking about getting maybe your some of your first orders later in the second half of next year. How should we be thinking about the size of those orders? Are they six figures, are they seven figures. Just help us calibrate how big those initial orders could be. Obviously, we would expect those to scale and ramp higher over time. but where do we start at?
Stephen Dilly
Thank you. I'll cover the gram-scale synthesis question. And Kevin, you can talk about those double-stranded ligase next here. So with the gram-scale synthesis, it sounds like a very simple statement until you pull it apart and say, what does it actually mean? And what we're talking about here is making an appropriate quantity of a suitable length oligo that has the appropriate modifications in it under process conditions with reasonable purity and so on. And you know, we've been making very strong progress on that. We reiterate our confidence in hitting that.
I think the most interesting question will be, how long we actually go with the oligo by the end of this year? We're already up. What we showed at TIDES was a very nice six [mode] that we made, which is sort of comparable to what some other companies were showing with phosphoramidite chemistry in terms of its purity and then specifications all the rest of it. But no one's ever run a TdT RNA oligo out15, 16, 17 yet. And we're hoping to do that relatively soon, so we can really understand the physical chemistry better.
So that's the thing that I'm most excited about. But I've been super happy with things like the conversion efficiency of the enzyme and have to stay, the productivity, the reliability, the ability to include the modifications. So we're feeling like we're very much on track. And intrigued by how performance have given.
Kevin Norrett
Yes. And then you layer on top of that, it's important to note that Stephen mention the double-stranded RNA ligase. Already ligation approaches are becoming more and more common with in the phosphoramidite chemistry chemistry world because pc tends to fall down in the longer oligo range in terms of requirement of more input materials that becomes a little less than efficient. You get a higher impurity profile, the longer strands.
So a lot of companies have approached us around testing RNA ligation in the first half of next year so that they can look at making shorter oligo strands with phosphoramidite chemistry works really well and stitching together 10 meters or fibers and be able to get to sRNA strands in the 20 to 30 range and maybe even a little longer with the ligation. So when it comes to orders itself, though we're talking about testing with customers in the first half of '24 and looking at actual customer orders in the second half of '24, based upon that experience.
And the other thing I should mention, we also have two other customized double-stranded RNA ligase programs that are wrapping up from an evolution standpoint where we could see some additional orders for those customized programs, but we haven't put those supply agreements in place.
Stephen Dilly
And order magnitude in terms of the size of those orders that you'd be happy with.
Kevin Norrett
Well, I think from an individual enzyme standpoint, double-stranded RNA ligase is one piece. It's still in the range of a total peak opportunity at least today without huge growth towards the end of the decade. If we're successful with ECO Synthesis somewhere in the range of $15 to $25 million enzyme opportunities. So by the end of this year with early launch, maybe you could see some single-digit millions in terms of ordering. But we'll put out more information around that as we get to our financial guidance for 2024.
I think the other thing here really is -- I'm just going to say one more thing that -- sorry, just to highlight how important it is that we have the cash runway you have now to be able to set the market correctly with not only the double-stranded RNA ligase but also the ECO Synthesis platform and getting that in the hands of customers for testing, it's coming year or so.
Matthew Hewitt
That's really helpful. Thank you.
Operator
Chad Wiatrowski, Cowen.
Chad Wiatrowski
Hey, this is Chad on for Stephen Mah. Just to follow up on Brandon's question on the ECO Synthesis flexibility. Did you guys present any data that the enzyme-based approach allows utilization of all the various modified nucleoside and analogues which can be used by chemical synthesis messages? And what about future modified bases? How easy would they be in the integrated using the existing enzyme or with new enzymes that we engineered.
Stephen Dilly
So thanks for the question, Chad. Yes, I mean this is part of the sort of central driver of how we're evolving the TdT. And what we showed at TIDES was some very sort of relevant examples, current modifications with furthering that in terms of our gram-scale synthesis. The aim is the version 1.0 of ECO Synthesis covers the modifications currently in use.
Now we've always said that this is going to be to your analogy like the iPhone or whatever else as newer, more strange, unnatural modifications come through, we may well have additional enzymes that we need to evolve to include that or further evolve the current TdT to add that to it's own material. There's probably you have a law of diminishing returns with any single enzyme such that we will get it effect around what currently exists with TdT 1.0 and then move on to some of the more innovative one.
And this is where Kevin and his team are really doing a lot of hard work to link-up with innovator companies. They're often small companies that are looking at very new constructs and you're learning about those and trying to stay current. And one of the big concepts about the alpha testing, we've been talking about early next year is to put our enzyme kit in their hands to see how it works under their conditions with their modification and getting the feedback right?
And you can imagine the one, the flexibility of the system because the enzyme is tethered and the oligo moves is that you can pass it through more than one column for want of a better word. So you could have several TdT enzymes specified for the specific oligo that you're trying to make. And so we're very aware that one of the performance characteristics that we need to deliver beyond volumetric efficiency is flexibility and speed.
Kevin Norrett
I might add just one thing, there is that our assessment of the current products in development for sRNA, certainly groups 400 products in development. So bear in mind, there may be some variation this. But we see greater in the 80% of them, including the two or three most common modifications, which are the two prima metal and the two prime --
Stephen Dilly
Floros.
Kevin Norrett
As well as the phosphorylase on so. At the end of the day, that's why we wanted to demonstrate our ability to do that at TIDES, and that was the first step.0 And we'll continue to build upon that as new modification come out.
Stephen Dilly
We put the slide deck from TIDES up on our website. I think the presentation is going to be up within the next day or so, which is -- we've looked if you've got time.
Chad Wiatrowski
Awesome, we are looking forward to that and to the KOL event on December. Ahead of that event, are there any details you can share on John Maraganore opinion on the need for the ECO Synthesis. Was he involved in that strategy update or added to your Advisory Board recently?
Stephen Dilly
We've been talking to him for a little while. He's always told me that -- yeah, he was saying we need an enzymatic solution even before he left being CEO of Alnylam a couple of years ago. And he is very much on Board with what we're trying to do. But yes, what we also need is rather than just cheerleaders, we need people to keep it honest, in terms of -- what it would really take for someone to adopt this this methodology because I was super serious about what I said in my prepared comments that, yes, there are going to be people sitting there, weighing the decision about do I go the old safe, tried route of phosphoramidite chemistry and eat up the cost or do I tried this new thing?
And we've got to show reliability and dependability. And we've got a couple of hooks. Purity is going to be one of them. And the reduced capital investment is going to be another one, but they'll all has to be based on rigor and meeting the specification and doing it dependably and doing it repetitively. So all of that is front of mind and having people that have really sat in that seat advising us is super useful.
Chad Wiatrowski
Thanks again for the questions.
Operator
Brandon Couillard, Jefferies.
Brandon Couillard
I just want to ask about your source of competence in the pharma manufacturing business returning to growth in '24 and whether that will be a function of business with existing customers or new?
Sri Ryali
Hey, Brandon, as we look at the forecast that we are developing internally, specifically on 2024, we see growth coming from the pipeline, which we think is an important driver. We also see a normalization of ordering patterns from some of our big customers as well. So they both are contributing. As we progress throughout this decade, you'll see a bigger contribution of growth coming in from the pipeline. I think we said this year has been sort of a reset year with PAXLOVID going away with one of our big products went through a recent product launch, which cause central order prebuild inventory and then not orders this year. Those patterns start to normalize, and we're confident of growth both for marketed products as well as on the pipeline.
Kevin Norrett
Maybe one other thing to add there to bring inventory and I've been working a lot on is getting better at predicting that element as well. We've added a couple of resources in the past six months here to be able to do better account management, follow-up, et cetera, so that we have a better perspective on going forward forecast.
Sri Ryali
Just to add, I think you saw that with our expectations on Q3 that we said in July that this would be a low quarter, and that's exactly what it turned out to be. And we're expecting Q4 to come in line to meet our full year guidance. So I think as Kevin said, we feel much better about understanding the dynamics of this business than we did say a year ago.
Brandon Couillard
Okay. Thanks.
Operator
Thank you. There are no further questions at this time. I would like to turn the call back over to Stephen Dilly for closing remarks.
Stephen Dilly
Well, thanks again for joining us today. And as you can tell, Sri and Kevin and I looking forward to a very busy fall. We'll be meeting many of you in person during our slate of -- I think it's five upcoming investor conferences over the next month or so. And of course, we also hope you'll be able to join us for the ECO Synthesis focused virtual KOL event on December 8, and think it's going to be a fantastic conversation. So that's all from us and thank you very much for joining today.
Operator
This concludes today's call. You may now disconnect.
