Codexis Reports Third Quarter 2013 Results and Business Update

  Codexis Reports Third Quarter 2013 Results and Business Update

-- Company immediately begins wind down of CodeXyme® cellulase enzyme program
  for production of cellulosic sugars for biofuels and bio-based chemicals--

                  -- Conference call today at 4:30 pm ET --

Business Wire

REDWOOD CITY, Calif. -- November 12, 2013

Codexis, Inc. (NASDAQ: CDXS), a leading developer of biocatalysts for the
pharmaceutical and complex chemistry industries, today announced its financial
results for the third quarter ended September 30, 2013.

“We continue to be very encouraged by the progress we’ve been making with our
core biocatalysis business,” said John Nicols, President and CEO of Codexis.
“Our recent appointment of Merck veteran Dr. Greg Hughes as Vice President,
Strategic Alliance & Product Development underscores our commitment to
accelerating this business’ penetration deeper into a growing list of
customers worldwide. Though our product revenues were soft during the third
quarter, we are forecasting a strong performance from this business in the
fourth quarter, and are pleased with our parallel initiatives to increase
productivity and reduce cost consistently since late last year.”

Nicols continued, “Going forward, we will exclusively focus the company onto
this biocatalysis business enterprise in which we develop and supply enzymes
to reduce the costs and increase the efficiency of our customers’
pharmaceutical and chemical manufacturing processes. Given the market’s
undervaluation of the prospects and continued slow build out of cellulosic
ethanol facilities, we have not been able to secure a suitable partnership or
transaction for our CodeXyme® cellulase enzyme business. Accordingly, we have
begun today to immediately wind down our CodeXyme® franchise, after having
already stopped further development of our CodeXol® detergent alcohols
franchise earlier in the year. To mitigate future cash burn for the Company,
we have also undertaken actions to restructure and reduce the costs of our
operations. We expect that the majority of these cost reduction measures will
be in place by year end to give us an optimal financial start to 2014.”

“With these decisions now in place, we will put our entire focus on expanding
the growth of our core biocatalysis business and moving Codexis as rapidly as
possible towards positive cash flow and eventual profitability. Codexis’
biocatalysis business is clearly the right strategic focus for us to achieve
these goals – it is underpenetrated in large diverse markets, and the ability
of our technology to quickly reduce costs and create value for our customers
is a strong platform for future growth,” concluded Nicols.

Third Quarter Financial Highlights:

Revenues for the third quarter of 2013 were $3.9 million, a 44% decrease from
$7.0 million in the second quarter of 2013. Revenues for the nine months ended
September 30, 2013 were $22.4 million. Product revenue in the third quarter of
2013 was $1.1 million, a 78% decrease from $5.0 million in the second quarter
of 2013. The decrease in product revenue was caused by continued weakness in
our atorvastatin enzyme business and delayed ramp up of sales to Merck of
enzymes for the manufacturing process of Januvia® (sitagliptin). Product
revenue for the nine months ended September 30, 2013 was $15.2 million.
Product gross margin in the third quarter was 54%, compared to 27% in the
second quarter of 2013. Product gross margin for the nine months ended
September 30, 2013 was 35%. Collaborative research and development revenue for
the third quarter of 2013 was $2.8 million, an increase of 40% from $2.0
million in the second quarter of 2013.

Research and development expenses in the third quarter of 2013 were $6.8
million, a decrease of 21% from $8.6 million for the second quarter of 2013.
Selling, general and administrative expenses in the third quarter of 2013 were
$5.8 million, a decrease of 19% compared to $7.2 million in the second quarter
of 2013. The decrease in operating expenses was primarily due to a decrease in
employee-related expenses.

Net loss was $9.3 million, or a loss of $0.24 per share, based on 38.1 million
weighted average common shares outstanding in the third quarter of 2013. This
compares to a net loss of $12.6 million, or a loss of $0.33 per share, during
the second quarter of 2013. Net loss for the nine months ended September 30,
2013 was $31.5 million, or a loss of $0.83 per share, based on 38.0 million
weighted average common shares outstanding during the period.

Cash, cash equivalents, and marketable securities at September 30, 2013 were
$31.0 million compared to $38.9 million at June 30, 2013.

As the Company has previously disclosed, it will not be presenting
year-over-year comparisons for the first three quarters of 2013. Codexis does
not believe that these comparisons are an appropriate measure of the Company’s
financial performance due to the termination of the Collaborative Research
Agreement with Shell, effective August 31, 2012, and the resulting loss of
associated collaborative research and development revenue.

Financial Outlook

Codexis' statements with regard to its outlook are based on current
expectations. The following statements are forward looking, and actual results
could differ materially depending on market conditions and the factors set
forth under "Forward-Looking Statements" below.

Codexis is revising its prior outlook for the full year 2013. Codexis now
expects total revenues in the range of $30 million to $32 million. In
addition, the Company now expects product revenue to be approximately $19
million of that total. Codexis continues to expect product gross margin in the
range of 30% to 35% and total gross margin for all revenue of approximately
50%. The Company is also revising its cash burn projection for the full year.
Due primarily to not finding a funding partner or completing a transaction for
CodeXyme®, and consequently not removing the associated expenses earlier in
the year, Codexis now expects cash burn to be approximately $23 million for
the year.

David O’Toole, Chief Financial Officer of Codexis said, “With the financial
goals from the restructuring driving us, we are providing the following
financial outlook for 2014. Next year, we expect year-over-year revenue growth
of 5% to 10% with a higher gross margin percentage on average than in 2013,
which will result in year-over-year gross profit dollar growth in the range of
15% to 20%. As the result of the restructuring and cost-cutting effort that
the Company has initiated, we expect the cash burn for 2014 to be less than $8
million.”

Conference Call and Webcast

Codexis will hold a live conference call and audio webcast on Tuesday,
November 12, 2013, at 4:30 p.m. Eastern Time. The conference call dial-in
numbers are 866-510-0707 for domestic and 617-597-5376 for international.
Please use the pass code 48857315 and call approximately 10 minutes prior to
start time. A live webcast of the call will also be available from the
Investors section of www.codexis.com. A recording of the call will be
available by calling 888-286-8010 for domestic or 617-801-6888 for
international, beginning approximately two hours after the call, and will be
available for up to seven days. Please use the pass code 35955501 to access
the replay. A webcast replay will also be available from the Investors section
of www.codexis.com approximately two hours after the call, and will be
available for up to 30 days.

About Codexis, Inc.

Codexis, Inc. is a leading developer of biocatalysts for the pharmaceutical
and complex chemistry industries. Codexis’ proven technology enables scale-up
and implementation of biocatalytic solutions to meet customer needs for rapid,
cost-effective and sustainable process development – from research to
manufacturing. For more information, see www.codexis.com.

Forward-Looking Statements

This press release contains forward-looking statements relating to Codexis’
ability to grow its biocatalysis business and worldwide customer base;
Codexis’ ability to increase productivity and reduce costs of operations
through its restructuring efforts; projected fourth quarter 2013 performance;
the anticipated timing of Codexis’ restructuring activities and cost-cutting
efforts; Codexis’ ability to refocus Codexis onto its biocatalysis business
enterprise and achieve profitability; Codexis’ ability to develop and supply
enzymes to reduce the costs and increase efficiency of its customers’
pharmaceutical and chemical processes; Codexis’ forecast for 2013 total
pharmaceutical revenue, total product revenue, product gross margin, total
gross margin for pharmaceutical revenue and total cash burn; Codexis’ forecast
for 2014 revenue growth, gross margins, gross profit dollar growth and total
cash burn; and the ability of Codexis’ technology to enable scale-up and
implementation of biocatalytic solutions to meet customer needs for rapid,
cost-effective and sustainable process development. 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 Codexis’ need for additional
capital in the future to expand its business; Codexis’ dependence on a limited
number of products and customers in its pharmaceutical business; Codexis’
ability to develop and commercialize new products for the pharmaceutical
markets; Codexis’ ability to maintain internal control over financial
reporting; any impairments Codexis may be required to record in the future
with respect to its goodwill, intangible assets or other long-lived assets;
the success of cost saving measures Codexis undertook during the third and
fourth quarters of 2012 and November 2013, Codexis’ primary reliance on one
contract manufacturer for commercial scale production of substantially all of
its enzymes; Codexis’ relationships with, and dependence on, its collaborators
in its principal markets; Codexis’ ability to deploy its technology platform
in new adjacent market spaces; the success of Codexis’ customers'
pharmaceutical products in the market and the ability of such customers to
obtain regulatory approvals for products and processes; Codexis’
pharmaceutical product gross margins are variable and may decline from quarter
to quarter; and Arch Pharmalabs Ltd’s ability to effectively market and sell
certain pharmaceuticals products containing Codexis’ technology. Additional
factors that could materially affect actual results can be found in Codexis’
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 12, 2013, including under the caption “Risk Factors.”
Codexis expressly disclaims any intent or obligation to update these
forward-looking statements, except as required by law.

Codexis, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
                                                                  
                                                                         
                   Three Months Ended                      Nine Months Ended
                   September    June 30,      September    September     September
                   30,                        30,          30,           30,
                   2013         2013          2012         2013          2012
  Revenues:
  Product          $ 1,076      $ 4,948       $ 7,140      $ 15,161      $ 29,090
  Collaborative
  research and       2,867        2,026         18,569       7,236         49,049
  development
  Government        -          -           632        -           2,247   
  awards
                                                                         
  Total revenues    3,943      6,974       26,341     22,397      80,386  
                                                                         
  Costs and
  operating
  expenses:
  Cost of
  product            494          3,631         6,397        9,790         24,868
  revenues
  Research and       6,831        8,624         14,191       22,776        46,190
  development
  Selling,
  general and       5,832      7,169       7,909      21,126      24,093  
  administrative
                                                                         
  Total costs
  and operating     13,157     19,424      28,497     53,692      95,151  
  expenses
                                                                         
  Loss from          (9,214 )     (12,450 )     (2,156 )     (31,295 )     (14,765 )
  operations
                                                                         
  Interest           9            16            61           53            210
  income
  Other expenses    (22    )    (183    )    (45    )    (288    )    (320    )
                                                                         
  Loss before
  (benefit)          (9,227 )     (12,617 )     (2,140 )     (31,530 )     (14,875 )
  provision for
  income taxes
                                                                         
  (Benefit)
  provision for     35         (12     )    169        (41     )    443     
  income taxes
                                                                         
  Net loss         $ (9,262 )   $ (12,605 )   $ (2,309 )   $ (31,489 )   $ (15,318 )
                                                                         
  Net loss per
  share, basic     $ (0.24  )   $ (0.33   )   $ (0.06  )   $ (0.83   )   $ (0.42   )
  and diluted
                                                                         
  Weighted
  average common
  shares used in
  computing net      38,102       38,060        37,116       38,002        36,494
  loss per
  share, basic
  and diluted

                                                            
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)
                                                                 
                                               September 30,     December 31,
                                               2013              2012
  Assets
  Current assets:
  Cash and cash equivalents                    $  26,911         $ 32,003
  Marketable securities                           3,009            13,524
  Accounts receivable, net                        2,688            7,545
  Inventories                                     2,101            1,302
  Prepaid expenses and other current assets      1,935          5,395    
  Total current assets                            36,644           59,769
                                                                 
  Restricted cash                                 911              1,511
  Non-current marketable securities               1,067            3,623
  Property and equipment, net                     13,809           16,650
  Intangible assets, net                          10,403           12,934
  Goodwill                                        3,241            3,241
  Other non-current assets                       361            2,237    
  Total assets                                 $  66,436        $ 99,965   
                                                                 
  Liabilities and stockholders' equity
  Current liabilities:
  Accounts payable                             $  1,490          $ 3,654
  Accrued compensation                            3,340            3,495
  Other accrued liabilities                       2,140            6,948
  Deferred revenues                              2,248          2,186    
  Total current liabilities                       9,218            16,283
                                                                 
  Deferred revenues, net of current portion       1,161            1,299
  Other long-term liabilities                    5,183          3,943    
                                                                 
  Stockholders' equity:
  Common stock                                    4                4
  Additional paid-in capital                      297,776          294,128
  Accumulated other comprehensive loss            139              (136     )
  Accumulated deficit                            (247,045 )      (215,556 )
  Total stockholders' equity                     50,874         78,440   
  Total liabilities and stockholders' equity   $  66,436        $ 99,965   

Contact:

Codexis, Inc.
Investors
Paul Cox, 212-362-1200
ir@codexis.com
or
Media
Jemma Connor, +44 161 359 3255
jemma.connor@notchcommunications.co.uk
 
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