Codexis Drops After Saying Shell Won't Continue to Fund

Codexis Inc., the California-based maker of enzymes for biofuels and biochemicals, fell to its lowest price after announcing it won’t receive further funding from Royal Dutch Shell Plc for research into converting biomass to fuel.

Codexis, based in Redwood City, declined 21 percent to $2.44 at the close in New York, the lowest since it began trading on April 22, 2010. The shares have dropped 54 percent this year.

“We are expecting and are planning for Shell to deliver notice of a reduction in funding under our collaborative agreement,” Chief Executive Officer John Nicols said in a statement released after the close of regular U.S. trading yesterday. The company doesn’t expect any funding after Oct. 31, he said.

The funding supports 116 research and development employees representing about one-third of Codexis total staff, Wes Bolsen, the company’s vice president and chief marketing officer, said today by telephone.

Codexis will need to reduce headcount further to save costs and meet a goal of “single-digit million cash burn rate,” Nicols said yesterday on a conference call.

Raizen Energia

The company is working with Raizen Energia SA, a venture of Shell and Brazil’s Cosan SA Industria & Comercio, on improved yeast strains to boost the output of mills that turn sugar cane into ethanol. The company is in talks with The Hague-based Shell for the rights to sell its CodeXyme technology to other companies, according to the statement.

“We’re absolutely feeling confident that we’re going to get the global rights to market these enzymes,” Bolsen said. Shell previously gave rights to Codexis’ technology in Brazil to Raizen, so if Codexis receives other offers in Brazil, “it just means we need to negotiate with Raizen,” he said.

Revenue from selling enzymes to companies other than Raizen isn’t likely to come before 2015 since most projects nearing construction already have suppliers, Nicols said. “It’s probably a low probability expectation that we could displace who they’re already working with,” he said on the call.

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