Q4 2023 Codexis Inc Earnings Call

Operator: Welcome to the Codexis fourth quarter and full year 2023 earnings conference. If anyone should require an operator, press star zero on your telephone.

Welcome to the Codexis fourth quarter and full year 2023 earnings conference call.

Any once you require operator assistance during the conference. Please press Star zero on your telephone keypad. Please note that this call is being recorded.

Carrie McKim: Please note that this call, and now I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead. Thank you, operators. With me today are Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, Sriram Ryali, Chief Financial Officer, and Stefan Lutz, SVP of Research. 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 2024 revenue, product revenues, and growth margin on product revenues, as well as our strategies and prospects for revenue growth and the 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, February 28, 2024.

Now I'll turn the call over to Kerry Mckim director of Investor Relations. Please go ahead.

Thank you operator.

With me today are doctors, even daily, but that's as president and Chief Executive Officer, Kevin <unk>, Chief operating officer, She reality Chief Financial Officer.

I think in research.

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 frankly for revenue product revenue and gross margin on product revenue 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 but I said they are forward looking statements, reflecting the beliefs and expectations of management as of this payment date February 21.

Sure.

Carrie McKim: 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. Additional information about factors that can affect actual results securely can be found in Codexis' Filing with the Social Securities and Exchange Commission. And now, I'll turn the call over to Stephen. Thank you, Carrie, and thanks, everyone, for joining us.

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, you're on could access control.

Really affect actual results.

Additional information about factors that could materially affect actual results can be found in the filings with the securities and Exchange Commission.

<unk> expressly disclaims any intent or obligation to update these forward looking statements such as required by law.

Now I'll turn the call over to Steven.

Thank you Gary and thanks, everyone for joining.

Stephen George Dilly: Seven months ago, we took decisive action to reduce our cash burn by more than 50% and execute on a clear, prioritized strategy. We ended 2023 strongly, with clear indications that the strategic decisions we made last year are translating into real momentum. This was illustrated by the series of exciting and validating announcements we made in December, specifically the achievement of ground-scale synthesis with our EcoSynthesis manufacturing platform, the completion of an exclusive licensing agreement with Aldebaran for our Codex HICAP RNA polymerase, and our purchase agreement with Nestle for CDX7-108. We've continued that upward trajectory with a couple of positive updates already under our belt in 2020.

Seven months ago, we took decisive action to reduce our cash costs by more than 50% and execute on our clear prioritize strategy.

We ended 2023 strongly with clear indications that the strategic decisions, we made last year translating to real world.

This was illustrated by the series of exciting as validating announcements we made it.

Specifically the achievement of Grand scale synthesis without anything.

<unk> platform.

<unk> have an exclusive licensing agreement without that wrong frown Kodak's Arctic polymerize.

Oh interest agreement with Nestle, the CTX doesn't want to wait.

We've continued that upward trajectory with a couple of positive things already under our belt in 2024.

Stephen George Dilly: First, driven by the extremely encouraging technical progress we're making with the Ecosynthesis Manufacturing Platform, which Stefan Lutz will describe later in his call, we announced plans to initiate the construction schedule for our Ecosynthesis Innovation Lab. We expect that this facility will be a hugely valuable resource to support the technical and commercial advancement of our ecosystem manufacturing platform. Additionally, the Innovation Lab is intended to enable us to provide sufficient GLP-grade siRNA directly to innovators to support the preclinical development of their product candidates. As Kevin will describe, this gives us access to a critical part of the growing siRNA ecosystem.

Uh huh.

Driven by the extremely encouraging technical progress, we are making with the.

Manufacturing all of that stuff.

I will describe later it's cool.

We announced plans to initiate the construction schedule for our ecosystem.

Ah patient.

We expect this facility will be a hugely valuable resource to support technical commercial and thoughts about it.

Manufacturing platform.

Additionally.

<unk> lab is intended to enable us to provide sufficient G. L. P. Great sorry, RNA direct, particularly the major cause for preclinical development of that product candidates.

As Kevin will describe this keeps us access to a critical part of growing.

Ecosystem.

Stephen George Dilly: Furthermore, we anticipate that the learnings from the Ecosynthesis Lab will enable us to move to in-house full-scale GMP siRNA production when the time is right. Now, while the business case for acceleration of the Ecosynthesis Innovation Lab is compelling, we made sure to secure the financial resources first by executing on a very carefully designed strategic debt financing with Innovatis Capital Partners. Sri will describe the financial details in his comments, but the punchline is that the Innovator's Deal fully funds the construction and operation of our eco-synthesis innovation lab for several years and strengthens our balance sheet and increases our operational flexibility for our projected runway to cash flow positivity around the world. On the heels of that announcement, we were also delighted to welcome two additional members to our Strategic Advisory Board, further broadening this group's scope of relevant expertise to help guide our strategic direction.

So the more we anticipate that they'll do that.

So the lab.

<unk> will enable us to move to in house full scale GMP, sorry, RNA production when the Time's right.

No.

While the business case for acceleration of the innovation lab is compelling.

Made sure to secure an actual resources, but by executing on a very carefully designed strategic debt financing.

Boston Partners.

Sri will describe the financial details in his comments, but the punch line is that the Novartis deal we fund the construction and operation of our ego since its innovation last several years and strengthens our balance sheet and increase our operational flexibility throughout projected runway to cash flow positive RASM.

The 2026.

On the heels of that announcement, we were also delighted to welcome two additional members to our strategic Advisory Board.

Broad.

Scope with relevant expertise to help guide our strategic direction.

Stephen George Dilly: Finally, we added more strength to our balance sheet just over the last few days when we announced the completion of an exclusive out license for a non-core asset, this time with Roche for a newly engineered, double-stranded DNA-like protein. As you can see, we've done exactly what we said we were going to do, and even more, right on the timelines we laid out. As a result, we now have projected runway through positive cash flow inspected around the end of 2026. As a result, we now have projected runway through positive cash flow inspection around the end of 2026, an innovation engine with anticipated billion dollar plus market potential in our ecosystems manufacturing platform, and an adjacent growing core pharmaceutical manufacturing business that generates cash and boosts our relevance.

Finally, we added more strength to our balance sheet just over the last few days when we announced the completion of an exclusive license for a noncore asset this time with rush right Julie.

Double stranded DNA ligase.

As you can see we've done exactly what we said was going to do and even more right on the timeline.

As a result, we now have projected run rates with positive cash flow expected around the end of 2026.

Innovation engine with.

Billion dollar plus market potential in our ecosystem.

Paul.

Jason growing core pharmaceutical manufacturing business that generates cash.

Commercial reach.

Stephen George Dilly: Before I pass it off to Stefan and then Kevin to review our recent technical and commercial progress, let me share some thoughts of how we view Moving to slide three, our path to success starts with our long-standing pharmaceutical manufacturing. We've been working hard to return this core business to an upward trajectory, and today we're pleased to highlight anticipated 2024 product revenue growth of at least 10% from 2023. Underpinned by a CodeEvolver-directed evolution platform, the value of the technical expertise credit built in commercial relationships we develop through this business is critical.

Before I pass it off to Stephane.

To review Oh.

Commercial progress.

Let me share some thoughts on how we use the road.

Moving to slide three.

Uh huh.

Stops without long standing pharmaceutical manufacturing business, we'd be working hard to return this business to an upward trajectory and today. We're pleased to highlight anticipated 2020 full product revenue growth of at least 10% 2020 right.

Underpinned by our coated balls a directed evolution.

The value of the technical expertise credit special relationship developed through this business is critical.

Stephen George Dilly: Furthermore, the cash our pharmaceutical manufacturing business generates is an invaluable element of supporting our runway to breakeven and positive cash flow. That said, we believe our ecosystem manufacturing platform to enable the commercial scale manufacture of RNA therapeutics as true breakout potentials transform the value trajectory today. The great thing about Codexis is the synergy of the experience and commercial infrastructure of our pharmaceutical manufacturing business with the emerging opportunities of the Ecosyntex manufacturing platform. A beautiful example of that synergy is how we're approaching the commercialization of our double-stranded RNA ligase program, which is an important stepping stone on the way to fully enzymatic SIR. To recap, the RNA ligase is designed to allow innovators to build full-length siRNA from several short fragments. That's important because both the cost and impurity profile of phosphoramide chemistry-built molecules increase with the length of the construct.

Furthermore, the cache of pharmaceutical manufacturing business generates it's a valuable element of supporting a runaway to breakeven and positive cash flow.

That said, we believe our ecosystem manufacturing platform enabled commercial scale manufacturer of RNA therapeutics as true breakout potential transformed the valleys excess.

Thinking about the synergy of the experience, mostly prescribed draft policy actually business with these emerging opportunities.

Is that accurate.

A beautiful example of that synergy is how we're approaching commercialization about double stranded RNA ligase program, which is important stepping stones, all the way to fully asthmatic and sorry RNA synthesis.

Recap the RNA like AC designed to allow innovation to build on that.

Renee several short fragments.

That's important because both the cost of impurity profile.

Chemistry molecule increases within that construct.

Stephen George Dilly: It's a nice idea, but in order to turn it into a real commercial opportunity, you have to be able to build an enzyme optimized for the specific reaction being driven and rapidly scale the manufacturing and supply to fit in with the requirements and schedule of the customer. We believe Codexis is uniquely equipped to meet that challenge because we've been doing something extremely similar for a decade or more through our pharmaceutical manufacturing business. Look for some exciting news on our EcoRNA ligase program in the second half. Now I'd like to pass the call over to Stefan Lutz, Senior Vice President of Research, to describe some of our exciting progress on the EcoSim manufacturing platform. Stefan

Nice idea, but in order to turn it into a real commercial opportunity.

To be able to build an enzyme optimized specific reaction being scribbling them rapidly scale, the manufacturing and supply because they didn't work very well Evans and schedule of the customer.

We believe Codexis is uniquely equipped to meet that challenge because we'd be doing something extremely simple for a decade go all go out policies to manufacturing business.

Look for some exciting news flow eco RNA like Ace program in the second quarter.

And now I'd like to pass the call over to Steffen Senior Vice President research to describe some of our exciting progress on the 19th.

Manufacturing platform.

Yeah.

Stefan Lutz: Thank you, Stephen. I'd like to use my time today to briefly recap our recent progress on the Ecosynthesis Manufacturing Platform and outline what you should expect on the technical front in the coming months. Shifting to slide four, as we announced in December, we achieved grand scale synthesis with our ecosynthesis manufacturing platform. This was a critical technical milestone, providing proof of concept for the platform's capability of manufacturing at preparative scale oligonucleotides composed of modified nucleotide building blocks typically used in RNAi therapeutics under process-like conditions. Our enzyme engineering teams have made tremendous progress in transforming native enzymes into high-performance biocatalysts that, together, offer a scalable process solution for siRNA manufacturing. In addition, there are two more reasons why hitting this grand scale benchmark is important. Firstly, it has enabled our scientists to initiate an in-depth assessment of the impurity profile for oligonucleotides produced with the IncoSynthesis platform. Secondly, it has provided a first data set on process-related parameters, informing early models of the manufacturing process and laying the foundation for broader platform development and process optimization.

Thank you Steven.

I'd like to use my time today to briefly recap our recent progress on the eco synthesis manufacturing platform and outline what you should expect on the technical Roc in the coming months.

Shifting to slide four as we announced in December we achieved grand scale synthesis with our eco centers manufacturing platform.

This was a critical technical milestone providing proof of concept for the platform's capability of manufacturing <unk>.

Preference scale oligonucleotides Kosta modified I'm sure you're tired building blocks typically used in RNA therapeutics under process like conditions.

Our enzyme engineering teams have made tremendous progress in transforming need events items. Its high performance bio Cowboys that together offer a scalable process solution.

R&D manufacturing.

In addition, there are two more reasons why hitting this grand scale benchmark is important.

Firstly it has enabled our scientist to initiate an in depth assessment.

<unk> profile for Arlington nucleotide produced with the eco synthesis platform.

Secondly, it has provided first dataset are process related parameters for me early models of the manufacturing process and laying the foundation for the water platform development and process optimization efforts.

Stefan Lutz: The last two decades of experience have taught us that the solution to a difficult challenge sometimes lies in evolving the enzyme. Experimental testing and validation of the EcoSynthesis platform allows us to refine our models and also enables us to leverage complementary and sometimes synergistic effects of enzyme engineering and process engineering. It also sets the stage for the Ecosynthesis Innovation Lab, which takes these efforts to the next level by giving up the venue to further push scale and process development capabilities. Kevin will speak more to the value of this facility on the commercial side, but we expect that the data-driven insights we gain will give us critical information to drive robust conversations with potential early access customers. Since achieving grand scale synthesis, we've continued to push the ecosynthesis manufacturing platform, with a particular focus on synthesizing longer strands of siRNA.

The last two decades of experience has taught us that the solution to a difficult challenge, sometimes life, all BDSI and sometimes it tweaking the reaction conditions.

Experimental testing and validation of the eco synthesis platform allows us to refine our models and also enables us to leverage complementary and sometimes synergistic effects of enzyme engineering and process engineering.

It also sets the stage for the ecosystem innovation lab, which takes these efforts to the next level by giving us a venue to further scale and process development capabilities.

Kevin will speak more to the value of this facility, while the commercial side, but we expect that the data driven insights we gain.

We will give us critical information to drive robust conversations with potential early access customers.

Since achieving Grand scale census is we've continued to push to east coast centers as manufacturing platform with a particular focus on synthesizing Walmart strand RNA sequences.

Stefan Lutz: While we plan to share further technical updates at the TIDES U.S. meeting in May, we've been very pleased with the performance of the Ecosynthesis Manufacturing Platform, which has easily exceeded the sequence length previously achieved by competing enzymatic RNA synthesis technologies. Based on this progress, the May Tides Conference will offer an opportunity to talk about the linear synthesis of full-length, clinically relevant siRNA that incorporates the different nucleotide modifications most frequently found in approved therapeutic assets today.

While we plan to share further technical updates at the tides U S meeting in May.

We've been very pleased with the performance of the ecosystem is manufacturing platform, which has to be easily exceeding sequence length previously achieved by competing answered magic RNA synthesis technologies.

Based on this progress domain tides conference will offer an opportunity to talk about linear synthesis.

Let me give you a relevant <unk>.

That incorporates the different nucleotide vacations, most frequently found in approved therapeutic assets today.

Stefan Lutz: We plan to do this, having used our eco-synthesis manufacturing platform from the start of Oligo all the way through to the full-length product. When you take a step back, the progress we've made with the Ecosynthesis platform over the past year seems quite remarkable. Yet this overnight success, I've actually been 20 years in the making.

We plan to do this I mean used our eco synthesis manufacturing platform from the start up all it go all the way.

Like product.

When you take a step back the progress we've made with the eco synthesis platform over the past year seems quite remarkable.

This overnight success I've actually been 20 years in the banking.

Stefan Lutz: Such rapid technical advancement could not have been possible without our extensive history of engineering technically complex enzymes for a variety of pharmaceutical and life sciences applications. Today, we're writing the book on enzymatic RNA manufacturing as we go. And within less than a year since unveiling our technology at last year's IGEUS meeting, we are on the cusp of presenting an enzymatic synthesis of real siRNA therapeutic assets. Beyond the ability to manufacture RNA oligonucleotides, our EcoSynthesis product roadmap includes the introduction of innovative new approaches and solutions for the biocatalytic production of key reagents such as NQPs and starter oligos, as well as their underlying processes.

That's rapid technical advancement.

That would be possible without our extensive history of engineering technically complex enzymes for Aruba.

Our Iot and.

Life Sciences application.

Today, we're writing the book of somatic RNA manufacturing as we go.

With a less than a year since our IPO our technology last year is tied to US Speaking, we are on the cusp presenting an enzymatic synthesis of real sorry, RNA therapeutic assets.

You all have the ability to manufacture RNA oligonucleotide, our eco census is on our roadmap.

The introduction of innovative new approaches and solutions.

Kevin I think production of key reagents, such as <unk> and startup only dose as well as their underlying processes.

Stefan Lutz: As you can see on slide five, to help Codexis's strategy in developing the Ecosynthesis technology, we were pleased to recently announce the appointment of Professor Martha Dahmer and Dr. Jim Lalonde to the company's Strategic Advisory Board. Joining John Maraganore, the founder and former CEO of Al-Nailah Pharmaceutical, the board's expertise across oligonucleotide synthesis and manufacturing provides critical insights While further process optimization and refinement of our ecosynthesis manufacturing platform lie ahead, we are highly encouraged by our progress to date and look forward to sharing further updates throughout the year. Kevin, over to you.

As you can see on slide five to help Codexis is strategy in developing the consensus is technology. We were pleased to recently announced the appointment of Professor Matsuo Donna.

Dr. Jim Malone to the company's strategic Advisory Board, joining John Mark and Lorie.

Her and former CEO of Ironwood Pharmaceuticals.

The board's expertise across all of the nucleotide synthesis and manufacturing provides critical insights to inform the continued development of our RNA manufacturing platform.

Well further progress process optimization and refinement of our eco synthesis manufacturing platform lives that we have.

We're highly encouraged by our progress to date and look forward to sharing further updates throughout the year.

Year.

And over to you.

Kevin Norrett: Thanks, Stefan. Before I provide an overview of our pharmaceutical manufacturing business and our commercial progress with the EcoSynthesis manufacturing platform, let me recap some of the recent business development announcements Stephen made. Starting on slide six, during our restructuring last year, we told you that our plan was to focus on our foundational revenue-generating biocatalysis business for pharmaceutical manufacturing and to develop the potentially game-changing eco-synthesis manufacturing platform. We also committed to monetizing products in our portfolio by leveraging partners with broader, Since then, as Stephen noted, we have completed an exciting series of deals and announcements, and I view our consistent execution as confirmation that we are focusing Our Codex HiCAP RNA polymerase is a great example.

Thanks Dawn.

Before I provide an overview of our pharmaceutical manufacturing business and our commercial progress with the ecosystem manufacturing platform. Let me recap some of the recent business development announcements even mentioned.

Starting on slide six during our restructuring last year. We told you that our plan was to focus on our foundational revenue generating bio catalysis business for pharmaceutical manufacturing and she developed a potentially game changing ecosystem is manufacturing platform.

We also committed to monetizing products in our portfolio by leveraging partners with broader commercial reach.

Since then as Stephen noted, we have completed an exciting series of Nielsen announcements and I view, our consistent execution is confirmation that we are focusing our efforts on the right assets.

Our codec hike have already one race is a great example.

Kevin Norrett: Offering improved capping efficiency and reduced double-stranded RNA contamination, this enzyme represents a meaningful step up from the wild-type variants available on the market today. For Aldebaran, this product is compelling from both a scientific and commercial perspective, and they can maximize its value given their existing footprint in mRNA manufacturing. From our standpoint, Aldebaran offered strong terms and a rapid path to manufacturing a GMP version of. Given Aldebaran's leadership in mRNA manufacturing and the evolving RNA manufacturing landscape, this is a valuable relationship for Cultivate. We look forward to building a long-term partnership with Aldebaran and the broader Danaher family. As seen on slide seven, we also announced the Nestle Health Sciences purchase of CDX7108, which followed our discontinuation of investment in biotherapeutics last July.

Offering improved capital efficiency and reduce double stranded RNA contamination. This enzyme represents a meaningful step up from the wild type variant available in the market today.

All of them are on this product is compelling from both the scientific and commercial perspective, and they can maximize its value given their existing footprint in the mrna manufacturing arena.

From our standpoint, all that Ron offered strong terms and a rapid path to manufacture GMP version of this enzyme <unk>.

Given all that Brian's leadership and mrna manufacturing any evolving R&D manufacturing landscape. This is a valuable relationship to Culp, Inc. We look forward to building a long term partnership without that run in the broader danaher family of companies.

As seen on slide seven we also announced the Nestle Health Science has purchased a CTX 7108, which followed our discontinuation of investment in Biotherapeutics last July.

Kevin Norrett: Putting CDX 7108 in the hands of Nestle allowed us to significantly reduce our cash burn going forward while providing an upfront payment of $5 million and the potential for additional payments upon reaching development milestones and eventual commercial roles. Finally, we announced an exclusive global outlicense agreement with Roche for our newly engineered double-stranded DNA ligand, and we will receive mid-single-digit million combined upfront and technical milestone payments. Importantly, returns on this deal are a healthy multiple over what it cost to develop. These examples demonstrate our ability to find partners who can extend our commercial reach and to monetize high-value assets that are not core to our. Before I shift to covering our ecosystems manufacturing platform and upcoming milestones, I'd like to take a moment to share more about our foundational pharmaceutical manufacturing business.

Putting CTX 7108 in the hands of NES fleet allowed us to significantly reduce our cash burn going forward, while providing an upfront payment of $5 million and the potential for additional payments upon reaching development milestones and eventual commercial royalties.

Finally, we announced an exclusive global license agreement with Roche for our newly engineered double stranded DNA ligase.

We will receive mid single digit million dollars combined upfront and technical milestone payments.

Currently returns on this deal or a healthy multiple over what it cost to develop this asset.

These examples demonstrate our ability to find partners, who can extend our commercial reach and to monetize high value assets that are noncore to our business.

Before I shift to covering our ecosystems manufacturing platform and upcoming milestones I'd like to take a moment to share more about our foundational pharmaceutical manufacturing business.

Kevin Norrett: Shifting to slide eight, when a customer approaches us about a potential enzyme project, the first step is to determine whether we have an off-the-shelf engineered enzyme that will fit their needs or whether a particular enzyme requires evolution to optimize it for the customer's API manufacturing process. Over the last 10 years, we have generated thousands of enzyme variants across commonly used enzyme classes, which gives us the ability to identify existing variants that can be quickly manufactured in kilogram quantities to support full clinical development.

Shifting to slide eight when a customer approaches us about a potential enzyme project.

First emphasis determined whether we have an off the shelf engineered enzyme that will fit their needs or whether a particular enzyme requires evolution to optimize it for the customers API manufacturing process.

Over the last 10 years, we have generated thousands of enzyme variance across commonly used inside classes, which gives us the ability to identify existing variance that can be quickly manufactured in kilogram quantities to support clinical development plans.

Kevin Norrett: When a customer requires some evolution of the selected enzyme, this fee-for-service business can usually be completed in less than six months and sometimes even in a few weeks. Once the enzyme meets the customer requirements, we generate gram-level quantities to support the customer's process and formulation work for use in clinical trials. As the product enters the clinic, we can quickly scale the enzyme to kilogram quantities.

When a customer requires some evolution of the selected enzyme this fee for service business can usually be completed in less than six months and sometimes even in a few weeks.

Once the enzyme meet the customer requirements, we generate gram level quantities to support the customer's process and formulation work for use in clinical trials.

As the product enters the clinic, we can quickly scale the enzyme to kilogram quantities.

Kevin Norrett: While enzyme evolution fee-for-service is recognized as R&D revenue, our ultimate goal is to provide a customized enzyme product or their future clinical trials and eventual, These are our product representatives. The process from enzyme variant selection to potential evolution and finally to kilogram quantity production can take several years as a customer's product moves through clinical trial phases. Therefore, to continue driving long-term product revenue growth, we must fill the funnel with new enzyme variant screening programs and clinical stage products where one of our enzymes or enzyme classes can be used to replace chemical steps and reduce overall costs. Over the years, we have also had experiences where an existing customer comes to us to develop an enzymatic route for a drug that is already commercially approved.

Enzyme evolution fee for services recognize R&D revenue our ultimate goal is to provide a customized enzyme product to support their future clinical trials and eventual commercial launch these are our product revenues.

The process from enzyme variant selections and potential evolution and finally to kilogram on any production can take several years as our customers product moves through clinical trial phases.

Therefore to continue driving long term product revenue growth, we must fill the funnel with unions on various screening programs in clinical stage products, where one of our enzymes brands I'm classes can be used to replace chemical steps and reduce overall cost.

Over the years, we have also had experiences where an existing customer comes to us to develop an enzymatic route for a drug that is already commercially approved in.

Kevin Norrett: In order to drive growth in all these areas, we have dedicated business development and key account teams. As a result, we've already seen an increase in new screening programs with new customers in mid-sized pharmacies. On slide 9, as I just mentioned, we remain focused on filling the pipeline to sustain annual product revenue growth throughout the decade. That said, much of our expected product revenue growth for the next three years is based upon enzymes that have already transitioned out of R&D and are moving to kilogram scale to support further clinical trials. Typically, we refer to these as named programs, meaning the customer has disclosed the drug candidate's name and target indication to PEDX. This usually occurs when the drug candidate reaches Phase 2 or early Phase 3 clinical trials.

In order to drive growth in all of these areas, we have dedicated business development and key account management personnel.

As a result, you've already seen an increase in new screening programs with new customers in the mid sized pharma segment.

On slide nine as I just mentioned, we remain focused on filling the pipeline to sustain annual product revenue growth throughout the decade.

That said much of our expected product revenue growth for the next three years is based upon a enzyme that have already transitioned to out of R&D and moving to kilogram scale further clinical trials.

Typically we refer to these as named programs, even the customer has disclosed the drug candidates aim and targeted indication of Codexis.

This usually occurs when the drug candidate reaches phase III early phase III clinical trials.

Once we understand the drug candidate indication, we can better forecast the future production needs for late stage clinical development and a potential commercial launch.

Kevin Norrett: Once we understand the drug candidate indication, we can better forecast the future enzyme production needs for late-stage clinical development and potential commercialization. As you can see on this slide, we are currently selling custom-engineered enzymes to pharmaceutical manufacturers for 12 of these named products. While this number of NAME programs fluctuates from year to year, as not all clinical programs are successful, our goal is to maintain a consistent number of pipeline programs to sustain future product revenue. We expect annual product revenue growth to be sustainable. All of these factors contribute to why quarter over quarter product revenue tends to be unpredictable.

As you can see on this slide we are currently selling custom engineered enzymes to pharmaceutical manufacturers for 12 of these new products.

While this well this number of named programs fluctuates from year to year is not all clinical programs are successful. Our goal is to maintain a consistent number of pipeline programs to sustain future product revenue growth.

While we expect annual product revenue growth to be sustainable.

All of these factors contribute to why quarter over quarter product revenue tends to be unpredictable.

Provide guidance at the start of each year, we typically have visibility into somewhere between 60% to 70% of our product revenues through a combination of binding and non binding customer forecasts as well as our understanding of lean programs.

Kevin Norrett: When we provide guidance at the start of each year, we typically have visibility into somewhere between 60% to 70% of our product revenues through a combination of binding and non-binding customers, as well as our understanding of the program. Maintaining this visibility is why we need to continue our efforts across business development and key accounts. Keep in mind that customers, who are primarily procurement and manufacturing leaders, will make changes to their forecast of enzyme needs when they see changes in product demand or when they stockpile to avoid drug shortages. When you look at historical quarterly product revenues, there is no consistent trend or clear seasonality to the ebbs and flows.

Maintaining this visibility is why do we need to continue our efforts across business development and key counties.

Keep in mind that customers, which are primarily procurement and manufacturing leaders, we will make changes to the forecast. Therefore casted enzyme means when they see changes in product demand or when they stockpiled to avoid direct shortage.

When you look at historical quarterly product revenue, there is no consistent trend or clear seasonality to the ebbs and flows of this business.

As a result, our sensitive future demand comes down to active customer communication and overall market monitor.

As a reminder, we currently sell custom engineered enzymes or 16 commercial drugs across orange indications, including cancer diabetes and neurological disorders.

More than 50% of our product revenues come from three enzymes, which we're selling to for large pharma customers I E. The big three.

Kevin Norrett: As a result, our sense of future demand comes down to active customer communication and the overall market. As a reminder, we currently sell custom-engineered enzymes for 16 commercial drugs across large indications, including cancer, diabetes, and neurological... More than 50% of our product revenues come from three enzymes which we are selling to four large pharma customers, i.e. The Big Three If our pipeline of NAME programs continues to be successful in clinical development, we expect the Big Three to become the Big Six or Seven, driving the majority of product revenues. Turning to our Ecosynthesis Manufacturing platform on slide 10, as Stefan mentioned, we are looking forward to an important presentation at the TISE U.S. Meeting in Boston. Between the effective demonstration of a full-length enzymatically synthesized sRNA and the buildup of the EcoSynthesis Innovation Lab, we anticipate that our interactions with potential customers will rapidly shift from theoretical conversations to concrete demonstrations of our capabilities.

If our pipeline of new programs continues to be successful in clinical development. We expect the victory become the big six or seven driving the majority of the product revenues in the future.

Turning to our ecosystem manufacturing platform on slide 10, as Stefan mentioned, we are looking forward to an important presentation at the tides USB DMA.

Between the expected demonstration of our full then enzymatically since science S. Irony in the Buildout of <unk> innovation lab, we anticipate that our interactions with potential customers will rapidly shift from theoretical conversations to concrete demonstrations of our capabilities.

And we remain on track for our first really access customers in the second half of this year.

Ideally one of these customers will translate into an early commercial license in 2025.

Technical progress that Stefan and his team presented at <unk> in November has already allowed us to begin conversations about access to the platform with several large pharma in March CMO customers.

In addition, we anticipate the innovation that will enable us to provide sufficient GOP, great irony directly to innovators, which supports preclinical development of their product candidates.

Kevin Norrett: And we remain on track for our first early access customers in the second half. Ideally, one of these customers will translate into an early commercial license in 2020. Technical progress that Stefan and his team presented at TIGEU in November has already allowed us to begin conversations about access to the platform with several large pharma and large CDMO companies. In addition, we anticipate the innovation lab will enable us to provide sufficient GOP-grade sRNA directly to innovators, which supports preclinical development of their products. Having the ability to license the EcoSynthesis manufacturing platform to large pharma and large CMO customers, along with the ability to provide a complete solution for smaller pharma customers, enhances our ability to win market share from different sectors.

Having the ability to license the ecosystem manufacturing platform to large pharma and large CMO customers along with the ability to provide a complete solution for smaller pharma customers enhances our ability to win market share from different segments and I am really excited because the eco synthesis inhibition that provides us the blueprint for the potential future <unk>.

<unk> of GMP grade SRA.

Finally, I am thrilled that we anticipate offering a near term solution to our future potential ecosystem manufacturing platform customers with our double stranded eco RNA ligase, which we plan to make available for customers in the second half this year.

Only to provide customers with a demonstrated RNA language solution allows them to build OLED cyrenaic from several shorter fragments that we joined together.

Kevin Norrett: And I'm really excited because the Ecosynthesis Innovation Lab provides us with a blueprint for the potential future production of GMP-grade SIRNs. Finally, I'm thrilled that we anticipate offering a near-term solution to our future potential EcoCensus manufacturing platform customers with our double-stranded EcoRNA ligase, which we plan to make available for customers in the second half of this year. The ability to provide customers with a double-stranded RNA ligase solution allows them to build full-length sRNA from several shorter fragments, which directly reduces the cost and impurities from the phosphoramidate chemistry-built molecules of increasing length.

This directly reduces the cost and impurities from the bus for eminent chemistry built molecules are increasing lines.

Call that we already have multiple customized demonstrated R&D ligase programs ongoing with major players in this space.

The important takeaway from today is that we have many ways to engage customers and win with the progress we have made with our enzymatic approaches to R&D and manufacturing.

With that I'll turn the call over to Sri to discuss our financial results and 2020 for guidance.

Thank you Kevin Good afternoon, everyone before we dive into the fourth quarter and full year 2012 financials.

Sriram Ryali: Recall that we already have multiple customized double-stranded RNA ligase programs ongoing with major players in the space. The important takeaway from today is that we have many ways to engage customers and win with the progress we have made with our enzymatic approaches to R&AI manufacturing. With that, I'll turn the call over to Srini to discuss our financial results and 2024 guidance. Thank you, Kevin. Good afternoon, everyone.

To reiterate Steve's commentary on the recent loan agreement with Novartis on slide 11.

The rapid technical progress, we didn't give a synthesis manufacturing platform.

Increased commercial engagement.

Was the right time to accelerate our technology is value creation.

Importantly, the agreement with the Novartis achieved each of the key financial goals, we highlighted during.

During our conference call if you reach to go.

We estimate that the cost to build out and operate the ecosystem innovation lab for the next few years will be approximately $10 million.

Sriram Ryali: Before we dive into the fourth quarter and full year 2023 financials, I'd like to reiterate Stephen's commentary on the recent loan agreement with the Nevadas on slide 11, between the rapid technical progress we've made with the Ecosynthesis manufacturing platform and the increased commercial engagement. Use the right time to accelerate our technology's value creation. Importantly, the agreement within EMBODIS achieves each of the key financing goals we highlighted during our conference call a few weeks ago. We estimate that the cost to build out and operate the Ecosynthesis Innovation Lab for the next few years will be approximately $10 million.

This means that most of the proceeds from this financing will remain on our balance sheet.

This facility will put us in the best position possible to drive rapid uptake of our ecosystem manufacturing platform.

We used to have secured the capital to get it up and running for the next few years.

Moving to slide 12.

We released our fourth quarter and full year 2023 financial results press release earlier. This afternoon, which is available on our Investor Relations website.

Our results are in line with the pre announcement, we issued in January.

Like to call out a few highlights starting with the fourth quarter.

Total revenues split enzyme sales related to tax slowly were $18 4 million for the fourth quarter of 2023 compared to $13 million.

Prior year.

Product revenues, excluding enzyme sales related <unk> were $9 $9 million for the fourth quarter compared to $5 9 million.

Sriram Ryali: This means that most of the proceeds from this financing will remain on our balance sheet. This facility will put us in the best position possible to drive rapid uptake of our Ecosynthesis manufacturing platform, and we're pleased to have secured the capital to get it up and running for the next. We released our fourth quarter and full year 2023 financial results press release earlier this afternoon, which is available on our investor relations website. Our results are in line with the 8K pre-announcement we issued in January, and I'd like to call out a few highlights, starting with the fourth quarter. Total revenues, excluding enzyme sales related to PaxLoban, were $18.4 million for the fourth quarter of 2020, compared to $13 million for the prior year. Product revenues, excluding end-time sales related to taxable goods, were $9.9 million for the fourth quarter, compared to $5.9 million in the prior year.

During the year.

Turning to R&D revenues.

According to $8 $5 million in Q4 compared to $7 1 million last year.

Product gross margin enzyme sales related to pack slogan was 71% this quarter compared to 44% in the fourth quarter of 2022.

Briefly turning to expenses R&D expenses for the fourth quarter of 2023 were $11 2 million compared to $19 $7 million last year.

SG&A expenses were $2 million.

<unk> 3 billion in the fourth quarter of 2022.

This was our first quarter post reduction in force and impairment and restructuring charges. You can see that expenses are down year over year and operating losses improved significantly.

This was also our lowest quarter of cash burn consistent with our expectations. Following the decision to streamline our portfolio.

Solid facilities last year.

Now, let me review our key elements of our full year 2023 financial results.

Total revenues for fiscal year 2023.

Sriram Ryali: Turning to R&D revenues, we reported $8.5 million in Q4, compared to $7.1 million last year, product gross margin splitting enzyme sales related to patch sloven with 71% compared to 44% in the fourth quarter of 2020. Briefly turning to expenses... R&D expenses for the fourth quarter of 2023 were $11.2 million, compared to $19.7 million last year. SGA expenses were $12.2 million compared to $12.3 million in the fourth quarter of 2020. This was our first quarter post-reduction in force, and excluding impairment and restructuring charges, we can see that expenses are down year-over-year and operating loss. This was also our lowest order of cash burn, consistent with our expectations following the decision to streamline our portfolio. Consolidate Facilities West.

<unk> sales related to tax located were $62 million compared to $63 2 billion in 2022.

Full year 2023 product revenues.

Sales related to tax loaded with $34 8 million compared.

Care to $41 $3 billion from the prior year.

Before shifting to 2024 guidance I want to share a closer look at our 2023 revenues on.

On slide 13. This graph shows the distribution of our 2023 product revenue by major categories.

23.

$34 8 million.

<unk> revenue excluding tax logos at roughly 50% came from the big three commercial carbon manufactured products that Kevin referenced.

Outside of that approximately 3% came from sales of enzyme we supply for other commercially approved products.

5% programs that we currently supply and clinical trials.

5% risk for generics.

1% came from food feed and 6% was from life Sciences and other programs.

We've built a nice pharmaceutical manufacturing pipeline with enzymes currently supplying the 12 named programs that Kevin referenced.

Sriram Ryali: So let me review the key elements of our full year 2023 financial, Total revenues for fiscal year 2020. Exploiting enzyme sales related to tax slogans were $62 million compared to $63.2 million in 2020; full year 2023 product review, splitting enzyme cells related to Taxylobid with $34.8 million, compared to $41.3 million from the prior year. Before shifting to 2024 guidance, I want to share a closer look at our 2023 roadmap. On slide 13, this graph shows the distribution of our 2023 product revenue by major category. In 2023, of the $34.8 million in product revenue, excluding PECS' slow visit, roughly 50% came from the big three commercial pharma manufacturing products that Kevin referenced. Outside of that, approximately 3% came from sales of enzymes we supply for other commercially approved products. 25% of the programs that we currently supply in clinical trials, and 5% was for generics. 11% came from food and feed, and 6% was from life sciences and other programs.

As a result looking ahead, we expect reduced concentration in our 2044 product revenue base.

Now turning to guidance on slide 14.

<unk> revenue related to tax law.

We expect product revenues to be in the range of $38 million.

$42 billion, indicating.

Indicating our expectation I bet, we used approximately 10% year over year growth.

This range.

Excluding the benefit 2023 from accelerating deferred revenue milestone exiting the deep business, which was approximately $3 $9 billion.

Our model would actually indicate 2020 for product sales growth of more than 20% versus 23, three at the low end of guidance range.

To help with modeling based on our current visibility into the timing of customer orders, we expect our revenues to be weighted toward the second half of the year with Q2 anticipated to be our lowest quarter of the year. This is the opposite of what we saw in 2043, where our revenues were weighted towards the first half of the year.

We will provide additional detail on anticipated quarterly revenue distribution as we advance throughout the year.

Moving to slide 15, we expect R&D revenues, he's a range of $18 billion $22 billion, which includes roughly $7 billion from recent development deals with Roche and <unk>.

Sriram Ryali: We've built a nice pharmaceutical manufacturing pipeline with our enzymes currently supplying the 12 named programs that Kevin referenced. As a result, looking ahead, we expect reduced concentration in our 2024 product revenue. Now turn to guidance on slide 14, including revenue related to tax. We expect product revenues to be in the range of $38 billion to $42 billion, indicating our expectation of at least approximately 10% year-over-year growth at the low end of this range. Excluding the benefit in 2023 from accelerating deferred revenue and milestones due to exiting the food and feed business, which was approximately $3.9 million, our model would actually indicate 2024 product sales growth of more than 20% versus 2023 at the low end for guidance. To help with modeling, based on our current visibility into the timing of customer orders, we expect our revenues will be weighted toward the second half of the year, with Q2 anticipated to be our lowest quarter of the year.

While R&D revenues are down year over year.

Note that 2023, R&D revenues included $6 $1 billion for Biotherapeutics business 7 million noncash revenue related to Pfizer applying a portion of the retainer fee credits with your program.

Excluding these items, we are actually projected to increase R&D revenues of approximately 48% year over year at the low <unk> for our core business.

We are projecting roughly what about for business development transactions in R&D revenues reached 43 in 2024.

Shifting to slide 16, when you take our product and R&D revenue guidance together, our 2024 total revenue guidance range to a range of $56 million $64 million.

This range excludes revenue from <unk> sales related to tax law.

Gross margin on product revenue is expected to be in the range, 58% to 63%.

Including our anticipated build out of the ecosystem innovation lab, we continue to expect that our existing cash cash equivalents combined with our future expectations for product revenues R&D revenues.

Sriram Ryali: This is the opposite of what we saw in 2023, where our revenues were weighted toward the first half of the year. We will provide additional detail on anticipated quarterly revenue distribution as we advance throughout the year. Moving to slide 15, we expect R&D revenues to be in the range of $18 million to $22 million, which includes roughly $7 million from recent business development deals with Roche and Aldebaran. While R&D revenues are down year over year, it's important to note that 2023 R&D revenues included $6.1 million for biotherapeutics and $7 million in non-cash revenue related to Pfizer applying a portion of its retainer fee credit to a new program.

Management will be sufficient to fund our planned operations through cash flow breakeven around the end of 2026 now I will turn the call back to Steven.

Thank you Sri and thank you to Stephane and Kevin for those exciting updates.

Lots of companies out there are either all innovation all execution.

We've built a world organization Thats brought with.

With a greatly reduced burn rate a growing base business granted in solid customers.

We're up to the platform with enormous potential upside Codexis has all the components in place to become a breakout story.

Sriram Ryali: In excluding these items, we are actually projecting an increase in R&D revenues of approximately 28% year-over-year at the low end for our core business. We are projecting roughly the equivalent amount for business development transactions and R&D revenues for 2022. Shifting to slide 16, when you take our product and R&D revenue guidance together, our 2024 total revenue guidance comes to a range of $56 million to $64 million. This range excludes revenue from index sales related to tax motives.

Encourage you to stay tuned for an exciting year ahead.

Now we'd be happy to take your questions.

Great.

Thank you we will now be conducting a question and answer session.

He would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press Star two.

I would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your hand set before pressing the star keys.

One moment, please pull for questions.

Thank you. Our first question comes from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Hello. This is kayla <unk> on for Brandon. Thanks for taking the question I guess, just starting off with the Roche partnership for the new.

Now, let's turn to the DNA ligase any more color you can share on the economics of the deal structure and then how big could this be.

Sriram Ryali: Gross margin on product revenue is expected to be in the range of 58%. Including our anticipated build-outs of the Ecosynthesis Innovation Lab, we continue to expect that our existing CACHE and CACHE equivalents, In conclusion, I want to thank you for watching. We hope that this webinar, combined with our future expectations for product revenues, R&D revenues, and expense management, will be sufficient to fund our planned operations and cash flow grant events around the end of 2021. Now, I'll turn the call back.

Over time for Kodak flow from how similar or different to the Evo team for DNA ligase prior deal itself.

Yeah.

Sure. This is Kevin so to give you a little more color on this deal. This is this was really exciting deal for US we love. This deal because it really was about monetizing these noncore assets in terms of getting cash upfront.

There is no backend it royalty associated with this product we were focused on that aspect because we're exiting the genomics business and we really have a lack of control in terms of their product cycle and we learned that from the EBIT Q4 experience, we'd love we love. The fact that Roche came back to US again, there are blue chip partner the asset.

Stephen George Dilly: Thank you, Sri, and thank you to Stefan and Kevin for those exciting comments. There are lots of companies out there that are either all innovation or all. We've built a well-oiled organization. With a greatly reduced burn rate, a growing base business grounded in solid customers, and a disruptive platform with enormous potential upside, Codexis has all the components in place to become a breakout story. And I encourage you to stay tuned for an exciting year ahead. Now, I'd be happy to take your questions. Operator? We will now be conducting a question... I would like to ask you something... Please press star 1.

To come back and do it again the economics here were really favorable in terms of a total return on investment.

A couple of years of evolution to move on to a mid single digit million.

Product deal so.

We love it.

Yeah.

Great and then just.

Switching over to <unk>.

Go ahead cap or any preliminary it's like all that Brian.

Pretty recent but any update or feedback you can provide that you've heard kind of the deal was announced.

And.

And you can quantify at all the contribution expected and 24.

So I'll, let <unk> comment on some of the contribution in 'twenty four but the feedback we've received from external parties and.

Operator: For participants using speaker equipment, it may be necessary to pick up the, One moment, please. This is Kayla on behalf of Brandon. Thanks for taking the time. I guess just starting off with the Rose partnership for the new double-stranded DNA ligase. Any more color you can share on the economics or deal structure? And then how big could this be over time for Codexis and how similar or different to the Evo T4 DNA ligase prior deal as well? Sure. This is Kevin.

From the investment community is very positive in terms of the partnering aspect with I'll defer on their own either in the <unk> space and certainly Ken can extend our commercial each in this space that is growing.

With the high cap RNA preliminary but can you speak to that yes.

Yeah in terms of 2024 and R&D revenue our guidance includes.

Kevin Norrett: So, to give you a little more color on this deal, this was a really exciting deal for us. We love this deal because it really was about monetizing this non-core asset in terms of getting cash up front. So, there is no back-ended royalty associated with this product. We were focused on that aspect because we're exiting the genomics business. And, you know, we really have a lack of control in terms of their product cycle, and we learned that from the Evo T4 experience. But we love the fact that Roche came back to us again.

Total of $7 million of cross business development deals and Thats inclusive of Roche and that ran it as Kevin said Roche is mid single digit millions in terms of milestone payments that technical payment technical milestone payment and upfront.

We're maker is our debt, Brian, which we previously said was low single digit billion upfront.

Great. Thank you.

Thank you. Our next question comes from the line of Dan Arias with Stifel. Please proceed with your question.

Hey, guys. This is evan on for Dan.

My biggest question I mean, it's kind of along the same lines.

Trying to think about.

This business kind of over 24 and 25 because.

Probably not going to generate much revenue if at all from the question. This is from $25. So if I kind of just look at 'twenty four.

Kevin Norrett: They're a blue-chip partner. They asked us to come back and do it again. The economics here were really favorable in terms of a total return on investment with, you know, a couple of years of evolution to move on to a, you know, mid-single-digit million product or deal. We love it.

I have in my model and I think that's what you guys have talked about is $9 million from Pfizer.

That goes into.

Your product revenues now youre talking about $7 million this year from Roche announced that Ron.

Kevin Norrett: All right, and then I'm just pushing over to get it. PHYCAP RNA polymerase agreement with LDAP, pretty recent, but any update or feedback you can provide that you've heard since the deal was announced, and then you can quantify all the contribution expected and, So I'll let Shree comment on some of the contribution in 24, but the feedback we've received from external parties and from the investment community is very positive in terms of the partnering aspect with Aldebaran. They're a leader in the mRNA space and certainly can extend our commercial reach in this space that is growing with the high-cap RNA polymerase. Yeah, in terms of 2024, in terms of R&D revenue, our guidance includes a total of $7 million across business development deals. And that's inclusive of Roche and Aldebaran.

Are there any revenues this year I guess one question is are there any revenues this year from.

Nationally Health Sciences, and then as I think about kind of moving on to just 25 I know you don't have visibility on on everything but like do these are these numbers.

<unk> million dollars from Roche and deliver on it.

Yes.

Pfizer is going to go away.

Just think about like going onto twenty-five like what's kind of the baseline.

How should we be looking at from like 24, our revenues are going to go down again in 'twenty five just trying to get a baseline of how we should be thinking about the progression here.

So I think we need to think about revenues in terms of the components. So if you think about product sales and I'd take Pfizer out of the equation for that the $9 million that you mentioned Thats correct, we do have.

Sriram Ryali: And as Kevin said, Roche is mid-single-digit millions in terms of milestone payment and technical payment, technical milestone payment, and upfront. And the remainder is Aldebaran, which we previously said was a low single-digit million upfront. Thank you, and on behalf of Dan Arria. Hey guys, this is Evan on for Dan.

Expect to book.

9 billion dollar accounting for revenue in Q4 of 2024 as an artifact of a retainer fee and that should be the last of the accounting for that.

Non cash so the guidance we've given.

Evan Stampler: Um, my biggest question, I mean, it's kind of along the same line. So it's like, I'm, I'm trying to think about it. This business is kind of over 24 and 25 because you're probably not going to generate much revenue, if at all, from ecosynthesis at 25. So if I kind of just look at 24, I have in my model, and I think this is what you guys have talked about, $9 million from Pfizer. And that goes into your product revenues. Now you're talking about $7 million this year from Roche and Aldebaran.

But were expecting product sales to grow low double digit CAGR through the end of the decade. It goes to the comments Kevin made earlier about the progression of the pharma manufacturing pipeline.

Specced in less concentration in our revenue from the big three part of manufacturing customers.

More of the pipeline programs that could take us six or seven so we do see product growth.

Moving along year over year to be in a decade, and then grow even more once we launch the eco synthesis platform another key contributor to product growth.

Is the double stranded RNA why days or the <unk>, which we expect to be commercially available in the second half of this year that will also be a key contributor of product revenue over time.

Evan Stampler: I guess one question is, will there be any revenues this year from Nestle Health Science? And then as I think about kind of moving on to just 25, I know you don't have visibility on everything, but are these numbers, is this $7 million from Roche and Delveron? And yes, and Pfizer's gonna go away. As you kind of just think about going on to 25, what's the baseline?

R&D revenue if you looked at the issue that we had up you can see that year over year in terms of the core business when you backed out the deals.

Actually our projected close to 30% growth and that comes from finding new customers for new services and new programs that over time will translate into future product sales growth.

Sriram Ryali: How should we be looking at this from 24? Are revenues just gonna go down again in 25? Just trying to get a baseline of how we should be thinking about the progression. So I think we need to think about revenues in terms of the components. So if you think about product sales, and I take Pfizer out of the equation for that, the nine million that you mentioned, that's correct. We do expect to book a nine million dollar accounting for revenue in Q4 of 2024 as an artifact of a retainer fee. And that should be the last of the accounting for that, non-cash, so the guidance we've given excludes that, but we're expecting product sales to grow low double-digit kegger through the end of the decade.

I was wondering Richard.

Yes, I guess so.

That makes a lot of sense, particularly on the product revenue side on the R&D revenue side. So.

Last year or this year, you had $5 6 million have been asking I'll dive right in this year you're forecasting seven.

I guess.

One question I.

Asked earlier so is there any is there anything from.

Nationally in there and then also.

The $7 million that youre going to get this year do you have any visibility.

So what that looks like in 2025.

Because I guess, it's kind of or is that just is that just going to go away.

Core of my question.

So the current guidance does not contemplate additional milestones from now although that could be potentially play.

Sriram Ryali: It goes to the comments Kevin made earlier about the progression of the pharma manufacturing pipeline and expecting less concentration in our revenue from the big three pharma manufacturing customers to more of the pipeline programs that could take it to the big six or big seven. So we do see product growth moving along year over year until the end of the decade and then growing even more once we get to the end of the decade, the Ecosynthesis Platform. Another key contributor to product growth is the double-stranded RNA ligase, or the EcoRNA ligase, which we expect to be commercially available in the second half of this year.

In terms of your question almost $7 billion both of those were upfront payments related to deal. So those are one time payments.

We don't expect to continue because those deals don't have additional milestones beyond those now with our Dev Ron there are royalties that are tied to sales of high cap.

This should show up in our revenues overtime as well everyone watches that product.

Okay, Alright that makes a lot of sense. So the right way to think about it is that your guide for this year at the midpoint 20 million box I wanted to take the $7 million from the upfront payments to kind of get my baseline and then I can embed some sort of just growth plus the potential for <unk>.

Sriram Ryali: That'll also be a key contributor of product revenue over time. On R&D revenue, if you look at the picture that we had up, you can see that year over year in terms of the core business, when you back out the deals, we are actually projecting close to 30% growth. And that comes from finding new customers for new services and new programs that, over time, will translate into future product sales growth. If we can add to that, yeah, I guess so.

Our our Dev Ron.

Royalties, if that kind of the right way to think about it.

I think that's fair.

Okay cool.

I'll pass it on thank you.

Thank you. Our next question comes from the line of Steven Mah with TD Cowen. Please proceed with your question.

Great. Thanks for taking the questions.

Just a few follow ups here.

On the.

Two for logging is deal with Roche.

How much of the how much of the product product guide is is gross.

Evan Stampler: That makes a lot of sense, particularly on the product revenue side. On the R&D revenue side, so last year or this year, you had $5.6 million invested in Aldebaran, and this year you're forecasting $7 million. I guess... One question that I asked earlier. So, is there anything from Nestle in there? And also, the $7 million that you're going to get this year, do you have any visibility into what that looks like in 2025? Because, like, I guess it's kind of — or is that just going to go away?

Product sales from their <unk> kits.

B all upfront.

The deal strictly upfront as well as structured in in terms of an out license, it's really much more of an asset purchase. So the deal was more upfront and technical training our tech transfer milestone associate all recognized in 2024.

Oh, yes, sorry, I might have missed it I was had some connection difficulties, but so theres.

There is no royalty rate.

With the Roche sluggish deal.

Just so basically out licensing.

Thanks, just straight upfront and state yet.

Okay, no understood and appreciate that color.

And then last one on the product revenue guide can.

Evan Stampler: That's the core of my question. So the current guidance does not contemplate additional milestones from NFC, although that could be potentially in play. In terms of your question on the $7 million, both of those were upfront payments related to deals. So those are one-time payments; don't expect them to continue because those deals don't have additional milestones beyond those. Now, with Aldebaran, there are royalties that are tied to sales of HICAP, and those should show up in our revenues over time as Aldebaran launches that product. Okay, all right, that makes a lot of sense. So the right way to think about it is that your guide for this year is at the midpoint, 20 million bucks. I want to take the 7 million out of the upfront payments to kind of get my baseline. And then I can embed some sort of fair growth plus potential for Ness or El Devron royalties. Is that the right way to think about it?

Can you remind us.

You know if there is going to be a contribution from our <unk> in terms of royalties I know, there's a kind of.

An upfront component.

And also on the <unk> RNA my gaze, if theres going to be any.

Product revenue contribution in 2024, and then also can you remind us what the expected Tam of each of these new opportunities are thank you.

Sure so from from a revenue standpoint from all that run in 2024, they are already selling in the marketplace in terms of an <unk> version of the enzymes, which we have today. So we're expecting a simple we said before is the high.

A double digit royalty associated with that Amit and we're just starting to see that come through in 2024 with regards to.

2025, and beyond we're expecting them to move into a G&P version, where it's also very healthy royalty associated with that from a product revenue standpoint.

Evan Stampler: I think that's fair. Okay, cool, I'll pass it on. Thank you. Our next question comes from the line of Stephen Mah with TD Cowan. Please proceed with your... Great. Thanks for taking the questions.

Then the second part.

Now, let's turn it around like illustrated RNA <unk>, we actually are getting very close to having some early customer orders associated with that lag as we've been out there testing in the marketplace. If you recall, we were talking about first half of this year with early access customer in testing some of that has gone well and but we are looking to make that more widely available in the second half of the.

Stephen George Dilly: Just a few follow-ups here. You know, on the P4 ligase deal with Roche. How much of the product guide is Roche product sales from their NGS kits, or is it just going to be all up there? The deal, strictly up front, is well-structured in terms of an out license. It's really much more of an asset. So the deal was more upfront and had technical or tech transfer milestones, so she'd all recognize, Oh, yeah, sorry, I might have missed it. I had some connection difficulties.

This year. So we expect some contribution this year and some into the double stranded RNA leggings sticking on point with the second half of this year.

And in 'twenty, five 'twenty, six certainly growth beyond that.

Kevin Norrett: But so there's no royalty rate with the Roche legacy deal. It's just basically out licensing. It's just straight up front, Steve, yeah. Okay, no, understood. Appreciate that color.

Okay, Great and then can you remind us what the unexpected Tam.

Hi, Catherine.

<unk>. Thank you.

Kevin Norrett: And then last one, on the product revenue guide, can you remind us if there's going to be a contribution from Aldebaran in terms of royalties? I know there's a kind of an upfront component. And also on the double-strand RNA ligase, if there's going to be any product revenue contribution in 2024. And then also, can you remind us what the expected TAMs are for each of these new opportunities? Sure.

Tam for the high cap RNA polymerase.

In terms of.

It's probably somewhere in that $200 million to $300 million range in our conversations.

With folks the.

The large players there have a good handle on that and that's sort of how we modeled the deal specifics as regards to the camera on the R&D line.

It's tied to where we are from a path for M&A chemistry standpoint, and SRA named Buildout remember this has a significant impact in terms of cost reduction you guys phosphate eminent chemistry guests very inefficient in the longer strands of SA RNA over time, so being able to stitch things together.

Kevin Norrett: So from a revenue standpoint from Aldebaran in 2024, they're already selling in the marketplace in terms of an RUO version of the enzymes, which we have today. So we're expecting a, I think what we said before is, you know, the high double-digit royalty associated with that. And we're just starting to see that come through in 2024.

When you are talking about 567 years.

To be able to get 221 number is.

Very effective so I don't have a number to provide you around the total addressable market there yet other than to say, it's growing with ESR or any market and expanding precipitously.

Kevin Norrett: With regard to 2025 and beyond, we're expecting them to move into a GMP version where there is also a very healthy royalty associated with that from a product revenue standpoint. And then, double-stranded RNA ligase, we are actually getting very close to having some early customer orders associated with that ligase. We've been out there testing in the marketplace. If you recall, we were talking about the first half of this year with early access customer testing.

Okay got it do you have any sense right now for the first parameter chemistry market right now for arena.

Well, we're projecting that there is back to our projections 400 products in clinical development growing from somewhere around 1000 kilograms. Today at 30000 kilograms by the end of decade. So that's what we use in terms of our thinking around the R&D leg, it's fitting into that potential total addressable market.

Kevin Norrett: Some of that has gone well, but we are looking to make that more widely available in the second half of this year. So we expect some contribution this year in terms of the double-stranded RNA ligase sticking on point with the second half of this year. [inaudible] Okay, great.

Assuming all of those move through clinical trials and will continue to come into the pipeline.

Okay, Great I appreciate the color. Thank you.

Thank you.

Our next question comes from the line of Jacob Johnson with Stephens. Please proceed with your question.

Hey, Thanks, good evening and congrats on the quarterly outlook, maybe just sticking with the modeling question Sherry.

If we kind of <unk> expense trends as a jumping off point anything to call out as we think about opex trends.

Kevin Norrett: And can you remind us what the expected TAMs of high TAP and double-strand RNA ligase R are? Thank you, Tim, for the high-cap RNA polymerase in terms of, probably somewhere in the $200 to $300 million range in our conversation. With folks, the, you know, the large players there have a good handle on that, and that's sort of how we model the needle specifics. As regards the TAM around the RNA ligase, you know, it's tied to where we are from a phosphoramidide chemistry standpoint and sRNA buildup. Remember, this has a significant impact in terms of cost reduction because phosphoramidide chemistry gets very inefficient in the longer strands of sRNA over time. So being able to stitch these together when you're talking about 5, 6, 7 mers, to be able to get to a 21 mer is very effective.

2020 for I guess, specifically, maybe around that the eco synthesis investments youre, making.

Yes, Jacob I do think that the Q4 Opex is a good barometer for how the run rate will look like in 2024.

Expect that based actually come down a bit but that would be offset by some incremental investments in eco including in the eco lab. Later this year. So I think that's a fair barometer.

Okay. Thanks for that and then maybe for Kevin you've partnered off the DNA ligase nationally staff, the RNA polymerase anything else kind of major on the partnering front.

That kind of heavy lift and maybe just along the same lines is there anything else contemplated in guidance this year from any additional partnering activities.

Kevin Norrett: So I don't have a number to provide you with about the total addressable market there yet, other than to say it's growing with the sRNA market and expanding precipitously. Do you have any sense right now for the phosphoramidite chemistry market right now for RNA? Well, we're projecting that there are, you know, back to our projections, 400 products in clinical development growing from somewhere around 1,000 kilograms today to 30,000 kilograms by the end of the decade. So that's what we use in terms of our thinking around the RNA ligands fitting into that potential, you know, total addressable market, assuming all those move through clinical trials and will continue to come into the pipeline. Okay, great. I appreciate the color.

So I'll, let <unk> speak to the guidance aspect of the things that we've been talking about are the remainders of the genomics portfolio portfolio, which really encompasses our three other launch Dan science as well as those that we had in development and we're in various conversations with folks around US again blue chip players that come to the table as they've been looking for engineered.

In sum this and sort of highlights the value that we're able to create out of this.

Remainder of the portfolio that can help extend our cash runway.

Yes, our guidance really reflects the deals that we've already announced.

Additional programs that Kevin mentioned would likely be smaller in terms of upfront payments from what you've already completed yet.

Jacob K. Johnson: The next question comes from the line of Jacob Johnson; please proceed with. Hey, thanks. Good evening, congrats on the quarter in the outlook. Maybe just sticking with the modeling question, Sri, just if we kind of use 4Q expense trends as a jumping off point, anything to call out as we think about OPEX trends in 2024, I guess, specifically, maybe around the ecosynthesis investments you're making. Yeah, Jacob, I do think that the Q4 OPEX is a good barometer for how the run rate will look in 2024. We expect that base to actually come down a bit but then be offset by some incremental investments in EECO, including in the EECOLAB later this year. So I think that's a fair barometer.

Got it thanks for taking questions guys.

Okay.

Thank you. Our next question comes from the line of Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.

Good afternoon, and thanks for taking the questions maybe the first one following your.

Success with the Grand scale and you obviously got the presentation at <unk>, but as we look to the back half of the year announced after you started to get this into the hands of some potential customers.

What are your thoughts as far as the.

Sriram Ryali: Thanks for that. And then maybe for Kevin, you know, you've partnered off the DNA ligase, the Nestle stuff, the RNA polymerase, anything else kind of major on the partnering front? Or was that kind of a heavy lift?

The model.

Will you kind of stick with us standard.

Front milestone sales based model will it depend upon the potential customers are you hoping to standardize those contracts across the number of customers that you ultimately sign up just how should we be thinking about the eco synthesis sales model.

Kevin Norrett: And maybe just along the same lines, is there anything else contemplated in guidance this year from any additional partnering activities? So I'll let Sri speak to the guidance aspect, but the things that we've been talking about are the remainders of the genomics portfolio, which really encompasses our three other launched enzymes, as well as a host that we have in development, and we're in various conversations with multiple folks around those. Again, blue chip players have come to the table as they've been looking for engineered variants of this, and it sort of highlights the value that we're able to create out of this remainder of the portfolio that could help extend our cash runway. But do you want to speak to the guidance as well?

Thanks, Great question Matt.

Chile does segment with the category of customer.

One of them is the.

While we've been talking about for a while which is the CMO, where we're enabling them to supply multiple customers. Kevin can talk about that the other one is looking at the innovative pharma, where they're looking at a single product that they're trying to scale. The other one that's become apparent recently is enabled by the new eco synthesis.

Sriram Ryali: Yeah, the guidance really reflects the deals that we've already announced, and the additional programs that Kevin mentioned would likely be smaller in terms of our front payments from the ones we've already announced. Got it. Thanks for your questions, guys. Our next question comes from the line of Matt Hewitt. Please proceed with, Good afternoon, and thanks for taking the questions.

Lab, which is our ability to directly supply X gene.

G L P.

Right.

Multiple gram scale them that enables them to go through that early development steps and then we talked about how do we scale and so what we need as a template for the fifth each of those.

Matthew Gregory Hewitt: Maybe the first one, following your success with the Gramscale, and you're obviously got the presentation at TIDES, but as we look to the back half of the year, and after you start to get this into the hands of some potential customers, what are your thoughts as far as the model? Will you kind of stick with a standard, you know, upfront milestone sales-based model? Will it depend upon potential customers? Are you hoping to standardize those contracts across, you know, the number of customers that you ultimately sign up? Just how should we be thinking about the Ecosynthesis sales model?

Some of it is going to be upfront about licensing for the technology, but it's also going to be sharing assets, Kevin do with vehicle. The only thing I would add is and then of course there is part of that there will be sales of the reagents material support those licensees on an ongoing basis. So.

I think Stephen hit the nail on the head one of the things that the Eagle innovation that really offer US now is the ability to hit the small and medium sized pharma segment that was going to be difficult because they wanted a path from preclinical all the way through to GMP.

Stephen George Dilly: Great question, Matt. And it actually does segment with a category of customer. One of them is, you know, the one we've been talking about for a while, which is the CDMO, where we're enabling them to supply multiple customers. Kevin can talk about that. The other one that's become apparent recently is enabled by the new Ecosynthesis Lab, which is our ability to directly supply SIRA, GLP grade, at sort of a multiple gram scale.

So I think the.

The ability to do that now and to be able to sell actually.

Full fledged product got it that not just reagents and materials field support that really opened up this whole other customer segment.

Got it got it that's helpful. Thanks, and then maybe just a balance sheet item.

Cash balance today, if I'm running the math right you see exited the year with 65 million $29 million from innovate us $5 million from Nestle.

Stephen George Dilly: And that enables them to go through their early development steps, and then we talk about how we scale. And so what we need is a template that fits each of those. And, you know, some of it's going to be up front, some of it's going to be about licensing for the technology, but some of it's also going to be a share in the assets. Kevin, do you want to say more about that? Do you know what that is?

I know a million $2 million from Roche. So you basically have a $100 million minus whatever you burn so far this quarter do I have the math right there.

Yes, that's a pretty good one thing I would just clarify that we're expecting in <unk>.

Single digit millions in terms of providing a prototypical, but your math still checks.

Stephen George Dilly: And then, of course, as part of that, there'll be the sales of the reagents and materials to support those licensees on an ongoing basis. So I think Stephen hit the nail on the head. One of the things that the Eco Innovation Lab really offers now is the ability to hit this small and medium-sized pharma segment that was going to be difficult because they wanted a path from preclinical all the way through to TMP.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Dan Arias with Stifel. Please proceed with your question.

Hey, guys sorry, thanks for the follow up I just wanted to make sure I had a couple of things right and this is particularly.

It's related to the our Dev run and the Roche deals. So for everyone. I just wanted to make sure I understand so you had roughly $5 million of.

Kevin Norrett: So I think the, you know, ability to do that now and to be able to sell actually, you know, full fledged products out of that, not just reagents and materials to be able to support that really opens up this whole other customer. Got it, got it. That's helpful. Thanks. And then maybe just a balance sheet item. Cash balance today, if I'm running the math right, so you exited the year with $65 million, $29 million from Innovatus, $5 million from Nestle, I don't know, $1 million, and $2 million from Roche. So you basically have $100 million minus whatever you've burned so far this quarter. Do I have the math right?

<unk> payments I think you said mid single digits.

And did you say that there is a high double digit royalty on sales and whatever the number is is are those royalty payments.

Are those are sales based payments are those is there any of that baked into the guidance and then on the double stranded ligase.

Yeah.

Just to make sure I understand exactly how this still works.

You are it does sound like you're monetizing the assets.

Matthew Gregory Hewitt: Yeah, that's pretty good. One thing I wish I would just clarify that we're expecting it to be a single-digit millions in terms of combined up prototechnicals, but your math doesn't check. Okay, great. Thank you. Our next question... (inaudible) please proceed with their questions. Hey, guys, sorry.

Our Austin will also be generating.

Product based revenues on it going forward could you just explain how that's going to work just so I have a straight math.

So remember that the double stranded DNA ligase double stranded RNA ligate. The DNA ligase is exactly what you said, it's an asset sale. So.

Evan Stampler: Thanks for the follow up. I just wanted to make sure I had a couple of things right. And this is particularly related to the Aldebaran and the Roche deals. So for Aldebaran, I just want to make sure I understand. So you had roughly $5 million of the upfront payment. I think you submitted single digits.

Cash is an out licensing deal, but rough quarter promise right. So it's typically.

Money on the barrel head and then we have no further.

<unk>.

Interest in it with our Dev wrong. It was a low single digit upfront, but then a healthy double digit royalty on what we're saying we'll remain high double digit.

Stephen George Dilly: And did you say that there's a high double-digit royalty on sales, and whatever the number is, are those royalty payments, are those, are sales-based payments, are those, is there any of that baked into the guidance? And then on the double-stranded ligase, Just to make sure I understand exactly how this deal works, it does sound like you're monetizing the assets, but you will also be generating product-based Can you just explain how that's going to work, just so I have it straight in my head? So remember, there's a double-stranded DNA ligase, and there's a double-stranded RNA ligase. The DNA ligase is exactly what you said it was.

We don't need 99, but we don't mean right.

Got it.

Is that somewhat.

The double stranded RNA like that is a really exciting product because thats. The same product. We can make the program. We can sell to multiple customers, where we were getting upfront enzyme payments and potentially royalties and significant supply agreements down there. So we see.

Thanks.

<unk> earlier around the Tam, we see that in the real high double digits potential for that enzyme plus over the next coming years.

Stephen George Dilly: It's an asset sale, so it's marketed as an out-licensing deal, but Russia's bought it from us, right? So it's simply, you know, money on the barrel head, and then we have no further sort of interest in it. For Aldebaran, it was a low single-digit upfront, but then a healthy double-digit royalty. And what we're saying when we mean a high double-digit is not 10, right?

For Us I would say just add to that one of the things as we've gone through our customer conversations. This really has become much more leaner.

<unk> business segment for us.

In terms of.

Stephen George Dilly: We don't mean 99, but we don't mean 10, right? So we've got to be in there somewhere, and with a double-stranded RNA light. That is a really exciting product because that's the same product we can, the program, we can sell to multiple customers where we will be getting, you know, upfront enzyme payments and potentially royalties and, you know, significant supply rings down there. So we see, you know, back to the question earlier around the TAMP, we see that in the real high double digits potential for that enzyme class over the next coming years. That's big for us. Yeah, I would say just add to that.

In terms of potential opportunity because this is their first step is to foster hematite cancer.

So it's an immediate cost reducer and an immediate impact.

Whereas ecosystem since as we know we're going to be talking about that are launching in 2006, when we need to bring people into the full full enzymatic way.

Way of synthesizing this area. So it's a much easier left in terms of getting customers over the hump in terms of buying into the proposition.

One thing to add is that any royalties from the Altair broad deal would likely show up in our R&D revenue line and non product revenue.

Okay Super and did you say how much is embedded in the guide for each of those things are not yet.

Kevin Norrett: One of the things we've gone through in our customer conversation is that this really has become much more of a meaningful business segment for us in terms of potential opportunity because this is their first step. So, it's an immediate cost, an immediate impact, whereas ecosynthesis, as we know, we're gonna be talking about that launching in 26, and we need to bring people into the fold of a full enzymatic way of synthesizing sRNA. So it's a much easier sell in terms of getting customers over the hump in terms of buying into the problem.

Yeah Amit.

On the upfront, we said that the low single digit million is embedded in the R&D you, we haven't broken out the royalties.

Okay, great. Thanks, so much.

Thank you.

There are no further questions at this time I will turn the call back over to Stephen Dewey for closing remarks.

Great well, thank you again for joining us today.

Sri cabin Cary and I looking forward to meeting many of you in person at the upcoming Cowen Conference in Boston next week.

Kevin Norrett: One thing to add is that any royalties from the Aldebaran deal would likely show up in our R&D revenue line and not product revenue. Okay, great. And did you say how much is embedded in the guide for each of those things, or not yet?

But thanks for participation today.

Yes.

Thank you. This concludes today's call you may now disconnect Goodbye.

Evan Stampler: On the up front, we said that the low single-digit million is embedded in the RER. We haven't broken out the royalties. Okay, great. Thanks so much. There are no further questions at this time. I'll turn the call back. Okay. Well, thank you again for joining us today. Sri, Kevin, Carrie, and I are looking forward to meeting many of you in person at the upcoming Cowen Conference in Boston next week.

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Stephen George Dilly: But thanks for your participation today. Thank you. This concludes today's call. Goodbye.

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