Q4 2022 Codexis Inc Earnings Call
Welcome to the Codexis fourth quarter and full year 2022 earnings conference call.
Time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this event is being recorded.
And now I'll turn the call over to Brendan strong from Argot partners. Please go ahead.
Thank you operator with me today are Dr. Stephen Dilly, Codexis, President and Chief Executive Officer, Kevin nor it Chief operating officer, and Sri Rally 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 1095, 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.
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.
23rd 2023.
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 <unk> control and could materially affect actual results additional information about factors that could materially affect actual results can be found at codexis as filings with securities and exchange can.
Mission.
Codexis expressly disclaims any intent or obligation to update these forward looking statements, except as required by law.
Now I'll turn the call over to Steven.
Thank you Brandon and thanks, everyone for joining.
As we laid out in the fourth quarter of last year, we continue to focus on prioritizing programs by Codexis has a clear competitive advantage and we're pleased with our recent momentum.
The financial results, we delivered in the fourth quarter, we're exactly on target. We ended 2022 with $114 million in cash providing us with runway through the end of 'twenty 'twenty, four and giving us plenty of time to demonstrate without new focused strategy is working.
Significant activity during the second half of 2022 in early 2023 has been adding to the strength of our leadership bench.
This has been happening across our executive leadership team and board and unless visible ways throughout the organization.
We've achieved this while reducing overall headcount since November .
To quickly recap the changes outlined in slide three.
Kevin <unk>, Chief operating officer, and make Fitzgerald, Chief Legal Officer, and General Counsel, both joined US last fall.
More recently, Sri Ryan Ali joined US as Chief Financial Officer in January Sri has a strong background in leading financial organizations within box biopharmaceutical company and as commercial expertise is further strength breath of our team's collective experience.
We've also added new capabilities in F. P N a commercial assessment and then now translational team.
Importantly, this is also happening on a board with the recent additions of Rahul thing be in Stewart Parker, both bringing demonstrated track records of success in leading pharmaceutical.
RFP companies.
Our core strength of engineering unique purpose built enzymes for use across a range of target markets remains central to our business. However in line with the strategy. We outlined during last quarter's call. We've been deliberate about selectively deploying a platform where we see the most.
For value creation.
To that end I want to take a moment to break down the structure of our business and highlight what we view as the most promising avenues outlined here on slide four.
In pharmaceutical manufacturing, we provide a single often bespoke enzyme engineered with specific characteristics for a specific customer.
Process is relatively inexpensive given the investments we've made in Cody vulva, but the potential annual revenue per deal is also limited averaging about three to 7 million the successful enzyme.
As you May imagine it takes an awful lot of these to get to a billion dollar revenue opportunity or even a few hundred million.
As we've said before we'll continue to invest modestly in this business ensuring that it grows steadily and remains profitable providing us with capital to invest in our high priority focus areas.
One of those high priority areas as life Sciences, which we view as a fruitful space to Codexis on.
On the genomics side, we optimize our enzymes are better performance with high sensitivity and specificity than the existing enzyme and with an eye on making our enzyme slot easily into existing customer workflows.
If we do our job well, we make it straightforward for potential customers to use Texas enzyme and key players in the industry are taking notice.
This process can be time consuming and labor intensive, but when we get it right. We believe the revenue opportunity is closer to $10 million to $30 million of enzyme because one enzyme can serve multiple customers. As you can see this is three or four times larger than a pharmaceutical manufacturing opportunities.
What the extra effort.
We're focused on driving our product revenues in this area next few years, Kevin will provide some specific examples in a few moments.
We're excited about genomics and the economics are much better than in pharmaceutical manufacturing, but let's face. It we're still basically selling enzymes for a mark up.
We believe there are even better opportunities for us to pursue that allow us to capture more true value of our offering.
That brings me to RNA and DNA synthesis, where we can engineer enzymes to support the development of nucleic acid based therapeutics.
Ill go, particularly in RNA is to put together suites of enzyme with unique capabilities. We're the same combination can have broad utility across many customers.
Cause the same group of enzymes can be used repeatedly across diverse applications. This strategy creates the potential return.
Orders of magnitude greater than our other offerings.
We believe our suite of enzymes like this can be worth hundreds of millions of dollars in revenue opportunity.
Finally, our biotherapeutics business is where our technology really has the promise to create tremendous value.
As shown on slide five today, we are advancing a pipeline of oral enzyme that gene therapies, many of which we're working on in collaboration with Nestle Health Science Takeda.
Most of our near term milestones related to these programs and as you'll hear today Theyre moving along quite nicely. If we're successful we have multiple shots on goal to address the billion dollar market opportunities.
The first is C. D X seven one in light of drug candidate for the treatment of lipase deficiency in patients with <unk> in pancreatic insufficiency, our API a debilitating condition of the Gi tract caused by conditions that impact pancreatic function.
Let's discuss the biology briefly.
Under normal conditions, pancreatic enzymes, which are important image gesture of fat protein and sugars are secreted directly into the duodenum through the pancreatic duct.
Exocrine pancreatic insufficiency occurs when either the pancreatic duct is blocked or the pancras itself is damaged and insufficient enzymes reached the small intestine.
This leads to a wide range of problems, including weight loss fatigue, and anemia, abdominal pain and so on.
The currently established treatment paradigm pancreatic enzyme replacement therapy or hurt is based on all administration of porcine derived pancreatic enzymes.
There are three main issues with this approach firstly, the practicalities of harvesting sufficient cosine enzymes to address the market is daunting.
Candidly the enzymes that given orally so they have to pass through the various citic environment in the stomach before reaching the small intestine Westpac has absorbed.
Finally, the dosing regimen tends to be onerous with patients requiring multiple doses per meal to achieve adequate like these levels with that approach.
Despite these challenges the two leading products on the market. They have combined annual sales of greater than $1 $5 billion.
Gtx seven one O eight has the potential to address all three of these limitations of current therapy as shown on slide six.
Firstly C D, except one O eight is a recombinant protein produced in E. Coli. So production is easily scalable.
Secondly, C. Do you accept one of late has been engineered stable evening various civic conditions. So it can transit through the stomach without losing activity.
Thirdly, <unk> seven one is sufficiently potent lipase essentially support treatment with a single capsule per meal.
We believe this tri factor of manufacture ability durability and potency can translate into a very exciting commercial potential.
Moving to slide seven that's why we were so excited to recently review of the first clinical data from 48 normal volunteers and five patients with epi treated with C. Do you accept one of late.
Importantly, the safety profile was quite reassuring with no significant adverse events attributed to treatment.
In the patients we measured at absorption following C. Do you accept one of eight or placebo in a crossover design using 13 C. O two label breast test in Greece patients either fatty meal labeled with a known nomad carbon 13 in the fast and then we measure the about the carbon 13 exhaled over the next four hours.
The results were exactly as we'd hoped showing increased pad absorption in CD, except one away, Tom and a very encouraging potency and duration of action.
Suffice to say, we and our colleagues at necessarily a very encouraged by what we've seen and decided to move forward expeditiously with a phase II trial that we expect to initiate in early 2024.
Similarly, as outlined on slide eight we are excited about our collaboration with Takeda without gene therapy programs continuing to track towards the goals, we outlined a few months ago.
Here, we're using co default engineered proteins may improve targeting and expression within the body when administered this trans genes and gene therapies potentially offering improved therapeutic benefit as compared with current treatment option across a range of rare genetic disorders.
As you may have seen yesterday, we highlighted preclinical data from our fabry disease Transgene program that Takeda will soon be presenting at the 19th annual World Symposium.
Abri disease is a rare lysosomal storage disorder in which the body cannot efficiently breakdown lipid into smaller components on the enzyme replacement therapies currently available treatment.
<unk> by that short in vivo half life on the development of Antidrug antibodies.
As part of our work with Takeda, we engineered protein Baron with enhanced stability and potentially reduced immunogenicity to try to overcome these limitations.
While this update is encouraging in isolation. Its strategic partnership has also allowed us to demonstrate the power of that coated Barbara enzyme engineering platform in the context of gene therapy more broadly.
Our ability to tailor enzymes with precise and desirable characteristics makes us an incredibly powerful collaboration on this program is indicative of how we can leverage our trans gene engineering capabilities to introduce new and potentially more efficacious therapeutic option for rare diseases, where the unmet need remains high.
We understand that the IND preparation work is in full swing, which logically leads to the entry into patients around the China. This year.
To sum it up.
With a strong team in place and a rich set of upcoming catalysts. The next 18 months will be a critical period for codexis.
Demonstrated by the updates I've shared our strategy is all about clear prioritization steady execution.
Focusing on programs that create the most potential value.
Now I'd like to hand, the call over to Kevin to dive further into our promotional strategy across each market.
Thank you Steven.
Moving to slide nine we have continued to modestly invest in our pharmaceutical manufacturing focus area to build a pipeline of phase two in earlier clinical programs, which should ensure continued growth into the latter part of the deck.
These opportunities are customized 101 projects with some thinking five plus years tomorrow.
When we look at our life Science book Life Sciences focus area, we have developed a pipeline of enzymes to address many challenges across multiple customers.
Outlined on slide 10, we have designer enzymes to be more sensitive more robust and more optimized to easily drop into existing workloads.
A good example is our newly engineered DNA ligase for next generation sequencing our Ngls.
Ligase enzymes are used to barcode pieces of DNA in a simple so they can be read on a sequencer.
Them critical to detecting a signal.
Natural <unk> have a like mission efficiency of approximately 40% to 50%, meaning that about 50% to 60% of any DNA sample costs and barcode and therefore is not sequenced or detect.
In comparison, our newly engineered DNA ligase achieved over 90% migration efficiency.
This is a significant improvement when you are searching for a needle in a haystack across small tissues.
Not only is this lagging its more sensitive and efficient.
But it was developed using common test kits and buffers. So it is an easy drop in solution across multiple customer workflows.
Earlier this month I had the opportunity to discuss our preliminary data from our DNA ligase whitepaper.
With many potential customers at the advances in genome biology, and technology conference or <unk>. There was a lot of interest in this enzyme from multiple large NTS players and we plan to deliver the research grade version to customers for testing in the second quarter.
We also will have commercial supply available later this year.
Finally, Roche, who previously licensed a different DNA ligase from us in 2019, just exercised their right of first negotiation on this newly engineered version.
As part of this we will begin negotiating potential terms with them over the next time.
If you're interested in learning more about our newly engineered DNA like a copy of the white paper is available under the resources tab on our corporate website.
In the RNA and DNA synthesis space, we can enable the development of nucleic acid based therapeutics for.
For example on slide 11, our high cap RNA polymerase is the first enzyme we engineered to support mrna synthesis.
This enzyme increases capping efficiency and significantly decreases the unwanted byproduct of double stranded RNA.
We launched this enzyme in late 2020, 'twenty, one and continue to gain customer traction with multiple RNA manufacturers.
This enzyme was our entry point into mrna and <unk> and we are now developing a suite of enzymes to support these customers.
Looking ahead, we expect to launch at least one other enzyme in this arena before the end of it.
Stephen previously mentioned that the same group of enzymes can be used repeatedly across diverse applications.
<unk> strategy to drive potential returns that are orders of magnitude greater than our other offerings.
On slide 12, an oligonucleotide synthesis, our engineered PDT preliminaries is a perfect example.
We have developed a sensor for our partner molecular assemblies to enable more efficient and customized DNA synthesis.
The TVT preliminaries at any one of four DNA based units onto the end of a growing chain regardless of the prior sequence of that chain and then stops before the next program step occurs in the next base unit is that this.
This enable DNA sequences built to order in a controlled fashion.
Moving to slide 13.
Now applying the same approach to RNA synthesis over.
Over the last year, we've been focused on developing a suite of enzymes to support short interference RNA or sorry, RNA manufacturing.
Over 300, RNA RNA therapies are currently in development and we want to be positioned to help any one of these companies manufacture commercial level supply out there RNA therapeutics.
Today biopharmaceutical companies use foster emanate chemistry to develop small quantities of ISI are in this process is expensive and creates a lot of chemicals.
Assuming these companies receive FDA approval for their therapies, they will need new solutions to efficiently scale up manufacturing to larger quantity.
We believe we are close to an enzymatic solution that can lower costs and same time and we plan to share more information on the technology platform at the tides meeting.
Wrapping up life Sciences, our goal is to develop differentiated and enzymes that solve complex problems for multiple customers first with plug and play solutions in genomics and Ngls second with a suite of enzymes and methods and RNA and DNA synthesis to support the development of nucleic acid based therapeutics.
Finally, I'd like to take a moment to revisit the enhanced commercial focus we discussed on our last call outlined on slide 14.
Last quarter for our Biotherapeutics pipeline. We told you that we were prioritizing assets that we have a clear understanding of the investment needed to support partnering or Codexis driven development of our most promising clinical candidates.
We are doing just that and our collaboration with Nestle is a great example of how we can effectively leveraged strong partners to derisk, our programs and rapidly penetrate markets.
For instance, <unk> seven one O eight as you just heard from Steven This program is targeting an existing $1 5 billion.
We've used the co develop our platform to engineer a differentiated life base with the potential to address limitations of the standard of care treatment options and exocrine pancreatic insufficiency.
While our partner Nestle brings existing market presence and robust commercial infrastructure in the states.
By combining the strengths of each respective organization, we are poised to deliver long term value creation.
With that I will now turn the call over to Sri to discuss our financial results for the quarter.
Thank you Kevin and good afternoon, everyone. Let me dive into the highlights of our full year 2022 financial results starting with slide 15.
Total revenues for fiscal year, 2022, or $138 6 million, an increase of 32% from $104 8 million the prior year.
Excluding enzyme sales related to pack slogan, which were $75 $4 million and $34 $5 million for 2022 and 2021, respectively.
Total revenues for fiscal year, 2022 were $63 $2 million a.
<unk> of 10% from $70 3 million in the prior year.
Product revenues for 2022 were $116 $7 million, an increase of 65% from $70 $7 million. The prior year, primarily driven by enzyme sales related to pack slogan.
Excluding these sales total product revenues for fiscal year, 2022 were $41 $3 million, an increase of 14% from $36 1 million in the prior year.
R&D revenues were $21 9 million for fiscal year, 2022, compared to $34 1 million the prior year.
The decrease was driven by lower license fees and decreased revenue from milestone payments as well as lower R&D fees from existing collaboration agreements.
Product gross margin for fiscal year, 2022 was 67% compared to 69% the prior year <unk>.
Decrease was primarily driven by changes in sales mix and higher shipping costs.
Turning to operating expenses R&D expenses for fiscal year, 2022 increased to $80 1 million compared.
Compared to $55 9 million the prior year.
Selling general and administrative expenses for fiscal year, 2022 were $52 2 million compared to $49 3 million the prior year.
We also recognized $3 2 million in restructuring charges related to the workforce reduction plan, we announced in the fourth quarter of last year.
The net loss for fiscal year, 2022 was $33 6 million.
Or <unk> 51 per share compared to $21 3 million or <unk> 33 per share for fiscal year 2021.
As of December 31, 2022, we had $114 million in cash and cash equivalents.
In addition, we have not drawn any funds from our $50 million ATM facility, we put in place may of 2021.
I'd like to spend a moment breaking down our financial results by segment as outlined here on slide 16.
Revenue in our performance enzymes business increased 40% to $126 $6 million in 2022.
Before the allocation of corporate overhead expense operating income for this segment was $46 $4 million in 2022.
Or an operating profit margin of 39%.
And our biotherapeutics business revenue was $12 million and we generated an operating loss of $41 2 million again before the allocation of corporate overhead expenses.
Our operating losses in this business increased year over year, as we grew and advanced CTX 71 O weight as well as our self funded programs.
Turning to guidance as outlined on slide 17, we expect total revenues in 2023 to be in the range of $63 million to $68 million.
This range excludes revenue from enzyme sales related to tax slogan and is in line with 2022 revenue.
As you May recall, when we announced the amendment of our supply agreement with Pfizer last July it included a $25 $9 million retainer fee that was paid to us in 2022.
We will be recognizing this amount is noncash revenue over the course of 2023 and 2024.
So we do not know the actual timing or amount that we may record in 2023.
Excluded it from our revenue guidance.
You choose to include that in your model I would encourage you to do so in the fourth quarter.
We expect product revenues to be in the range of $35 million $40 million as.
As you heard from Stephen and Kevin We expect growth from our life science business in 2023 to offset the year over year variability in the pharma manufacturing business.
We expect R&D revenues to be in the range of $25 million $30 million.
Gross margin on product revenue is expected to be in the range of 68% 73%.
As Stephen noted, we expect that our existing cash and cash equivalents combined with our future expectations for product revenues R&D revenues and expense management will be sufficient to fund our planned operations through the end of 2024.
I will now turn the call back to Steven.
Thank you Sri.
In closing we delivered exactly what we promised last quarter in terms of Q4 revenues cash position and cash runway.
Difficult strategic decisions towards the last few months of 2022 are paid off and opening up many potential avenues for revenue generation going forward I continue to be excited about the development of the team as we equip ourselves for the next leg of a journey.
Now we'd be happy to take your questions operator.
Thank you at this time, we'll be conducting a question and answer session if.
If you'd like to ask a question today. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
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One moment. Please we poll for questions. Thank you.
Our first question is from the line of Steven Mah with Cowen and company. Please proceed with your questions.
Okay, great. Thanks, a lot hey, congrats on the therapeutics progress and a welcome Shri.
Can you guys hear me thank you.
Okay. Thank you.
Okay no problem.
So a question on seven one O eight can.
Can you provide some color on the.
On the initiation of the Phase II study in early 2024 is there a reason why I can't start earlier.
The timeline, principally driven by CMC considerations, we want to get the final formulation in place by the time, we go into the very definitive phase II program and we're actively working on that right now and we're confident that we can have everything in place.
For early 2020, full we will obviously try and beat that if we can.
Okay, No understood and then I saw in the separate press release, you said the phase III studies.
Expected to take about 12 months.
Is there a sense for the number of patients that are going to be in that phase II trial, and what I'm getting at is you know given you know.
Given that it's a fairly rare disease.
Trial be able to enroll that quickly to achieve that timing.
So yes, there's a number let me unpack that a little bit.
In terms of trial size in the phase II study in the next one that we'll be initiating we see that somewhere in the range of 40 or 50 patients.
The phase one b, which was relatively slow to enroll was using essentially a single site.
We're going to be going to multiple sites in multiple countries for the phase two.
We're sharpening the pencil on exactly how many right now, but given the sort of the nature of the protocol we'd expect.
15 to 20 centers to do that sort of 40% to 50 patients.
Which should therefore go a lot quicker.
Okay understood thanks for that.
Additional color.
Maybe just pivoting over to life science tools enzymes.
Specifically on the second generation DNA ligase for Indias Library prep on.
On the Roche <unk>.
Right of first negotiation you mentioned they had 90 days.
Okay.
Does that mean that they have 90 days to come up with a deal with you guys and then it's freely available to transact with other counterparties.
Sure Hi, Steven This is Kevin essentially we have 90 days of good faith negotiations.
If we want to continue past that we can certainly open that discussion with them longer but we can obviously open the discussion with other players at that time.
Okay, all right perfect and then.
On the first generation ligase that they already have a license.
Is there a status you can share with us on the status of that kit.
Sure.
First thing just to clarify this is a newly engineered DNA ligase as opposed to second generation. So it was engineered off but on a different backbone.
Just to clarify that point and then secondly, we've been communicating with Roche over the launch of the.
EBIT for DNA ligase that they license from us in 2019 and are expecting our first commercial sales this year, but don't have clarity exactly what quarter at this point.
Okay understood and then if I can sneak one last question and this is for you Kevin as well you said you know you'd be tweaking the sales model and modestly increasing the sales footprint to two.
Target mid sized drug manufacturers.
Could you give us an update on the is that completed or give us some timing on completion of that.
Sure.
So just a little bit more color on that too Ben the last four or five months has been diagnosing sort of the approach from a commercial standpoint, and what's been surprising to me is as we've been trying to grow this segment.
Little we've focused in terms of.
Front end facing sales people in terms of pull through of enzyme sales now we only have three products on the market, but now we looked at not only that resourcing, there and looking to modestly increase it we're still in progress of actually doing that so it's not complete yet I expect that to be done probably by the end of this quarter.
And that's where I think we'll start to see some increased lift in terms of our existing products and product sales increased.
Okay, great. Thank you.
Thank you. Our next question is coming from the line of Brandon <unk> with Jefferies. Please proceed with your question.
Hey, Thanks, guys good afternoon.
David It shouldn't you be willing to kind of share the revenue base for life science enzymes in 'twenty, two and maybe some some goalposts parameters in terms of what youre expecting for growth in that portfolio in 'twenty three.
So we haven't disclosed a lot of information around life Sciences is it still relatively in its infancy as I mentioned, Steven we're still sort of building that sales plan one of the things that I just.
In my assessment has been we've been very focused on sort of customized and by an engineering agreements over the last couple of years and a little less focused on actual customer engagement and and pull through and account planning and Thats where were focused now so we expect to bring more than information towards the end of the year, but as we're getting the plant in <unk>.
Place, we haven't put any board at this point, but we definitely want to provide more color on that.
I would add to that.
In terms of our revenue guidance.
The growth that we're expecting in life Sciences, we're expecting that to offset some of the year over year variability variability in pharma manufacturing is when you look at our revenue guidance. The low end of that is in line with 2022 and as Kevin indicated the growth that we would expect it to be primarily on the life Sciences side, and we'll have more details on that throughout this year.
Sure.
Okay, and then yesterday <unk> announced the acquisition of Alpha Zions, who used partnered with on at least three lifesciences enzymes are there any implications of that deal as far as Codexis is concerned any changes in the commercial relationship and do you want all the IP for those three enzymes that you've commercialized.
With them.
So first this is Kevin first answer is yes, we own all the IP with with regards to those enzymes and I. Just recently got back from the ETP Conference, where I met with those folks was aware of some of the challenges some of the.
News coming out there and our business relationship with them is really solid they've been good partners for us in terms of.
Being able to execute and deliver enzymes downstream. We obviously are going to look at as we have been for some time and second sources of supply, but that being said the business relationship is in good shape.
Great and then last one for three any color you're willing to share as far as revenue pacing for the year I know your prior.
<unk>.
Prior CFO .
Had this 40 60 kind of framework, but any color as far as just phasing.
I'm talking about just in terms of the quarterly phasing.
Yes, first half second half you've got that.
To be aware of.
Yes, so we haven't provided quarterly revenue guidance I think one of the things that.
I've observed in the month on the job here is that the pharma manufacturing revenues are inherently lumpy and it's hard to predict those quarter to quarter, let alone year to year. So we haven't gone as far to provide quarter over quarter guidance, yet on revenue, but we're very comfortable with our full year range of 63 to 68 million for total revenue.
Very good thank you.
Our next question is from the line of do Kim Piper Sandler. Please proceed with your questions.
Yeah.
Hi, This is Scott on for Joe Thanks for taking my question.
For the partnership with <unk>, an update on how the launch is going for the DNA synthesis platform and how near term is the plan to commercialize that in 2023 and can you comment on any expectations you have for that thanks.
So really we look at the partnership as a validation of the TVT enzyme and the technical capability of that enzyme.
As Kevin said in his comments a lot of it is around.
The ability to then tweak that to be the RNA platform.
We think that MAA, I am making really great technical slides strides in terms of producing longer oligos.
But we're waiting to see just like you are in terms of do they get commercial traction when they launch so really yeah.
We're not planning on much right now Kevin.
No. We're we're.
Being cautiously optimistic is associated with commercial uptake, we would like to see a little bit more in terms of.
Our front end facing and their pull through downstream again, we think they've achieved a really nice technical set of success here.
So we're waiting and seeing and as you are.
Got it thanks.
Yeah.
Our next question coming from the line of Matt Hewitt with Craig Hallum. Please proceed with your questions.
Good afternoon, and thank you for taking the questions maybe first up some clarification on the on the <unk> contribution so if I heard you correctly.
There is still likely $12 $5 million. This year next year put it in in Q4, if we're going to include it I appreciate all of that.
Will it still be will you still be recording that as revenues in the fourth quarter, if and when it hits.
Yes, we would record that as revenue, but it would be noncash revenue.
Okay got it and then.
Backing that off so your guidance doesn't include it if you look at the the core.
Product revenues in fiscal 'twenty, two compared to your guidance. It does appear as though you know your revenues are going to decline a little bit maybe a little bit of color on what's happening with the rest of the portfolio there.
Sure. So the low end of our revenue range of $63 million is flat to what we achieved in 2022, excluding tax low bid.
I think what we've discussed that this is sort of a refocus here we've talked about the variability in pharma manufacturing, how that ebbs and flows year to year and we are expecting growth in life sciences to make up for that that's how we came to our $63 million to $68 million range. So definitely a year, where we are focusing for growth for life Sciences.
Set us up down down the road.
Got it and then maybe I think you've got two different.
Groups that you're working with on commercial agreements at the moment, how should we be thinking about the structure of those contracts is it going to be.
Simply hit your product sales line are these potential milestone and royalty opportunities just trying to think about how they could end up impacting.
The financials. Thank you.
So with regards to the two different product lines. My assumption is you are talking about pharma manufacturing versus life Sciences.
To clarify.
Correct context, yes, Okay go ahead.
No I would just say correct.
Or are they going to are those deals going to be structured where you'd be.
We're recognizing.
Enzyme sales product sales or how will those two agreements be structured or what are your hopes there.
Yes, I mean, I think it goes back to some of the Stephen's comments earlier with regards to foreign manufacturing and in some of the challenges there in terms of selling enzyme supply and the lumpiness lumpiness associated with that when you're you're an intermediary associated with a bio catalysis process, we're definitely adding value there, but it's a little bit harder.
To negotiate downstream royalties, particularly with some of these larger pharmaceutical manufacturers when you move over to life Sciences, where we can provide a really complex and differentiated enzyme which really enhances the workflow.
Hence gets back to the larger range of revenue you can see from this type of opportunity because some of that is straight up product sales, but some of that also could be licensing and licensing fees as well as milestones and downstream royalties and that's how we're looking at structuring those contracts going forward.
That's really helpful. Thank you.
Thank you.
You May press star one to ask a question.
Our next question is from the line of Jacob Johnson with Stephens. Please proceed with your questions.
Good afternoon. This is Matt on for Jacob just a couple of quick ones maybe for Sri.
Can you talk about your priorities as it relates to balancing investment in managing cash burn and how should we think about the outlook for R&D investments into this year.
Sure in terms of the philosophy I think you are in the fourth quarter, when we announced the restructuring plan. What we initiated was a more disciplined approach to the portfolio broadly where we were focused on high potential development programs that had high value commercial opportunities and that's very much in line with how we've approached.
Speaking about our 2023 and beyond investments on.
Cash burn is important to us certainly we're starting the year in a strong cash position with $114 million that provides us two years of runway in front of the programs that we talked about on the call today, including moving 71 O eight forward gene therapy programs as well as RNA and DNA synthesis.
My approach will be very much in line with that.
Ensuring that we are looking at the overall value that the programs are contributing to the company as opposed to just any one line item on the P&L.
And then in terms of your question specifically on R&D expenses, we haven't.
Provided.
Expense level guidance, we provided the cash burn guidance, but what I will say again going back to that.
The previous direction on refocusing the portfolio, we expect that the savings generated as a result of that effort will be redeployed to these.
New investments in high potential development program, so hopefully that helps a little bit.
Thank you for the color.
Thank you at this time, we've reached the end of our question and answer session now I'll turn the floor back to Steven Lilly Chief Executive Officer for closing remarks.
Well, thanks, everyone for tuning in today.
You can tell we were very pleased with the results that we delivered in 'twenty, two and Super excited for 2023 and continuing to make progress on these focus areas. So thanks again and have a great afternoon.
This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.