Q1 2024 Codexis Inc Earnings Call
Operator: Welcome to the Codexis First Quarter 2024 Earnings Conference Call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this event is being recorded. Now, I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead.
Welcome to the Codexis first quarter 'twenty 'twenty four earnings conference call.
Operator: Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: This event is being recorded.
Carrie McKim: And now I'll turn the call over to Kerry Mckim Director of Investor Relations. Please go ahead.
Carrie McKim: Thank you, Operator. With me today are Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, 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, anticipated milestones, including product launches, technical milestones, and public announcements related thereto, as well as our strategies and prospects for revenue growth and the successful execution of current and future programs and partnerships.
Carrie McKim: Thank you operator with me today are Doctor, Stephen Dilly, Codexis, President and Chief Executive Officer, Kevin <unk>, Chief operating Officer truly Alley, Chief Financial Officer, and Stefan Lutz SVP of research.
Carrie McKim: 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.
Carrie McKim: Our guidance for 'twenty 'twenty, four revenue product revenues and gross margin on product revenues anticipated milestones, including product launches technical milestones and public announcements related there too as well as our strategies and prospects for revenue growth and successful execution of current and future programs and partnerships.
Carrie McKim: 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, May 2, 2024. 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 materially affect actual results can be found in Codexis' filings with the Securities and Exchange Commission. Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law. And now, I'll turn the call over to Stephen.
Carrie McKim: The extensive 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. They may 2nd 2024.
Stephen: 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.
Stephen: Information about factors that could materially affect actual results can be found in codexis filings with securities and exchange question.
Stephen: Codexis expressly disclaims any intent or obligation to update these forward looking statements, except as required by law.
Stephen: And now I'll turn the call over to Steve.
Stephen George Dilly: Thanks Carrie, and thanks everyone for joining. We started 2024 really well. In addition to a strong financial start to the year, we're also making exciting technical progress with our eco-sensitive manufacturing platform. During our call in February, we projected at least 10% year-on-year growth in product revenue in 2024. Everything is shaping up nicely in line with our expectations. As in past years, we expect some of our projected revenue to be a bit lumpy across quarters, but we're confident in reiterating our full year 2024 guidance.
Stephen: Thanks, Kerry and thanks, everyone for joining.
Stephen George Dilly: We started 2020 full really well in addition to our strong financial start to the year. We're also making exciting technical progress with that ecosystem manufacturing platform.
Stephen George Dilly: Joining our call in February we projected at least 10% year on year growth in product revenue in 2024.
Stephen George Dilly: Everything is shaping up nicely in line with our expectations.
Stephen George Dilly: As in past years, we expect some of that projected revenue to be a bit lumpy across quarters, but we're confident in reiterating our full year 2020 full guidance.
Stephen George Dilly: No.
Stephen George Dilly: Just two years ago, customers came to us saying that if we could enzymatically synthesize full-length RNA oligos, they'd be interested. We're now very close to meeting that objective, or in the final stages of completing the enzymatic synthesis of a full-length oligonucleotide by the TIDES-USA meeting in a couple of weeks. We believe this will be a scientific first.
Stephen George Dilly: Just two years ago customers came to us, saying that if we could enzymatically synthesized full length RNA oligos they'd be interested.
Stephen George Dilly: We are now very close to meeting that objective or in the final stages of completing the enzymatic synthesis of a full length oligonucleotides by the tide USA meeting in a couple of weeks' time, we believe this will be a scientific first.
Stephen George Dilly: After we achieve this historic milestone, we can then go back to those customers and offer to make them enzymatically synthesized versions of their proprietary molecules at research grade, which they can, in turn, test and compare to conventionally synthesized materials. However, while developing our eco-synthesis technology and engaging with these potential customers, we've learned that optimal process conditions vary quite significantly depending on the construct being built. That's why we positioned ourselves with a versatile set of capabilities that can be adapted to best suit each molecule.
Stephen George Dilly: After we achieved this historic milestone. We can then go back to those customers and also to make them Enzymatically synthesize versions of their proprietary molecules a research grade, which they can in turn test and compare it to conventionally synthesize material.
Stephen George Dilly: Throughout developing our ecosystem technology and engaging with these potential customers. We've learned that optimal process conditions vary quite significantly depending on the construct being built.
Stephen George Dilly: That's why we positioned ourselves with a versatile set of capabilities that can be adapted to best suit each molecule.
Stephen George Dilly: Starting with our ligation program, we can use our double-stranded RNA ligase to stitch separate RNA fragments together into full-length constructs. We're confident that ligation is a crucial component of this market, and we've seen increasing interest from customers who want to explore this approach. In fact, in Q1, we secured a low-to-mid single-digit million-dollar order for an engineered double-stranded RNA ligase with a large pharma company, with potential for more orders in 2025. We're also looking forward to further commercial interest once we launch our double-stranded RNA ligase screening service at TidesUSA, which Stefan and Kevin will cover shortly.
Stephen George Dilly: Starting with allegation program, we can use that double stranded RNA like I used to stitch separate RNA fragments together the full length construct.
Stephen George Dilly: We're confident that litigation is a crucial component of this market and we've seen increasing interest from customers who want to explore this approach in fact in Q1, we secured a low to mid single digit million dollar order for an engineered double stranded RNA ligase with a large pharma company.
Stephen George Dilly: With potential for more orders in 2025.
Stephen George Dilly: We're also looking forward to further commercial interest once we launch had double stranded RNA like a screening service it ties USA, which stephane and Kevin will cover shortly.
Stephen George Dilly: In addition to setting us up for significant downstream revenues, our double-stranded RNA ligase program encourages customers to introduce an enzymatic step into their existing manufacturing process and positions us to engage with those who want to explore full sequential synthesis. From there, we have the option of how to generate the most value, including the potential to move in-house full-scale sRNA production when the time is right. Our plans for the EcoSensors Innovation Lab will play a vital role in this process for two reasons.
Stephen George Dilly: In addition to setting us up for significant downstream revenues double Street tended arent, a ligase program encourages customers to introduce an enzymatic step into their existing manufacturing process and positions us to engage with those who want to explore full sequential synthesis.
Stephen George Dilly: From there we have optionality how to generate the most value.
Stephen George Dilly: Are you, including the potential to move in house full scale S. RNA production when the time is right.
Stephen George Dilly: One, it provides a facility where we can perform ligation on behalf of customers, and two, it gives us a venue to define and optimize the manufacturing process for each customer before scale-up. That's critical, because ahead of transferring a process to a partner, we need to make sure it works seamlessly, is efficient, and is entirely scalable. The Innovation Lab will ensure that our technology gets baked into early-stage programs that have the potential to generate meaningful revenue dollars down the line.
Stephen George Dilly: Our plans for the ecosystem innovation lab will play a vital role in this process for two reasons.
Stephen George Dilly: One it provides a facility where we can pull in ligation on behalf of customers and two it gives us a venue to define and optimize the manufacturing process for each customer before scaleup.
Stephen George Dilly: That's critical because ahead of transferring the process to a partner we need to make sure. It works seamlessly is efficient and is entirely scalable.
Stephen George Dilly: The innovation lab will ensure that our technology gets baked into early stage programs that have potential to generate meaningful revenue dollars down the line.
Stephen George Dilly: Our timeline for that facility remains on track, and we expect to have it largely built out by the end of this year. We're also really pleased with progress towards the enzymatic synthesis of costly input materials like NQPs and the enzymatic placement of targeting monitoring. By addressing these additional elements of the manufacturing process, we can deliver an even more valuable product and significantly increase our own potential revenue capture in the process. Underpinning this progress is a CodeEvolver-directed evolution platform that marries rich datasets and iterative learning with experts who have decades of experience tackling increasingly complex engineering projects.
Stephen George Dilly: Timeline for that facility remains on track and we expect to have it largely built out by the end of this year.
Stephen George Dilly: We're also really pleased with progress towards the enzymatic synthesis of costly input materials like <unk> on the enzymatic placement of targeting moiety baidu.
Stephen George Dilly: By addressing these additional elements of the manufacturing process, we can deliver an even more valuable product and significantly increase our own potential revenue capture in the process.
Stephen George Dilly: Underpinning this progress is that code evolve a directed evolution platform, which marriage rich datasets and iterative learning with experts who have decades of experience tackling increasingly complex engineering projects.
Stephen George Dilly: The Codexis Competitive Advantage is artificial intelligence combined with great data and human intelligence. With that, I'd like to pass the call over to Stefan Lutz, our Senior Vice President of Research, to describe some of our exciting technical progress. Stefan? Thank you, Steve.
Stephen George Dilly: But could <unk> competitive advantage is.
Stefan Lutz: Is artificial intelligence combined with great data and human intelligence.
Stephen George Dilly: With that I'd like to pass the call over to Stefan Lutz, Our senior Vice President Research described some very exciting technical progress Stephane.
Stefan Lutz: Thank you, Stephen. I'll begin by previewing our presentation at the upcoming TidesUSA meeting and then highlight some of our additional ambitious projects related to the Ecosynthesis Manufacturing Platform. Starting on slide three, we are very much looking forward to attending Tides USA later this month. As Stephen alluded to already, we are very close to achieving the sequential enzymatic synthesis of at least one full-length oligonucleotide with therapeutic relevance. We will also share an update on the continuous improvement of platform performance via the combination of enzyme and process engineering.
Stefan Lutz: Thank you Steven.
Stefan Lutz: I'll begin by previewing our presentation at the upcoming tides USA meeting and then highlight some of our additional ambitious projects related to the eco synthesis manufacturing platform.
Stefan Lutz: Starting on slide three we are very much looking forward to attending tied USA later this month.
Stefan Lutz: As Steven alluded to already.
Stefan Lutz: Very close to achieving the sequential enzymatic synthesis of at least one full length oligonucleotide therapeutic relevance.
Stefan Lutz: He will also share an update on the continuous improvements of platform performance were the combination of enzyme and process engineering.
Stefan Lutz: As reflected in the impurity profile of our oligonucleotides, these efforts have resulted in significant improvements in product quality. And in just two years, we are today delivering coupling efficiencies on par with phosphoramide chemistry, despite its 40-year head start.
Stefan Lutz: That's reflected in the impurity profile of our oligonucleotides. These efforts have resulted in significant improvements in product quality.
Stefan Lutz: And in just two years, we are today delivering coupling efficiencies on par with false Ramadan chemistry, Despite its 40 year head start.
Stefan Lutz: Finally, it is important to emphasize that our Ecosynthesis Manufacturing Platform incorporates the different nucleotide modifications most frequently found in approved siRNA therapeutics today, from starter oligonucleotides all the way to full-length products. We are thrilled with our progress and are on track to accomplishing this historic achievement, which is a direct result of an incredible enzyme engineering capability that we have cultivated through decades of experience. In addition to demonstrating the viability of our platform, this key milestone will enable us to show potential customers that we are well within the range of synthesizing the same sRNA therapeutics that they are actively developing.
Stefan Lutz: Finally, it is important to emphasize that our eco synthesis manufacturing platform incorporates the different nucleotide modifications. Most frequently found in approved ISR RNA therapeutics today from starter oligonucleotides, all the way to full length product.
Stefan Lutz: We are thrilled with our progress and are on track to accomplishing This historic achievement, which is a direct result of an incredible enzyme engineering capability.
Stefan Lutz: That we have cultivated through decades of experience. In addition to demonstrating the viability of our platform. This key milestone will enable us to show potential customers that we are well within the range of synthesizing the same sort of RNA therapeutics that they are actively developing.
Stefan Lutz: When achieved, the sequential synthesis of a full-length siRNA molecule would certainly represent an important threshold for Codexis, particularly given the breakneck pace of our technical progress to date. However, enzymatic synthesis of siRNA is just one facet of the valuable and exciting work that we're doing as we're advancing our ecosynthesis technology. There's a vast, wide space that we can continue to innovate, and our work is far from over. Moving to slide number four.
Stefan Lutz: When achieved sequential synthesis of a full length I'm, sorry, RNA molecule, which certainly represents an important threshold for codexis, particularly given the breakneck pace of our technical progress to date.
Stefan Lutz: However, enzymatic synthesis of ASR RNA is just one facet of the valuable and exciting work that we're doing as we are advancing our eco synthesis technology.
Stefan Lutz: There is a vast white space that we can continue to innovate.
Stefan Lutz: Our work is far from over.
Stefan Lutz: Moving to slide number four.
Stefan Lutz: We've previously spoken at length about our efforts to engineer the core suite of enzymes that make up our ecosynthesis technology of manufacturing platforms, including our engineered polymerase derived from a TDT enzyme. That core technology is the engine that powers our broader effort across RNA synthesis, and so far, it's where the lion's share of our effort has been focused. However, as Stephen mentioned, we're taking things to the next level by addressing challenges associated with the enzymatic synthesis of input materials like NQPs and strata-oligo, as well as working on ensuring the seamless incorporation of targeting moieties.
Stefan Lutz: Previously spoken at length about our efforts to engineer the core suite of enzymes that make up our eco synthesis technology or manufacturing platform.
Stefan Lutz: Including our engineered polymer raise derived from a TVT enzyme.
Stefan Lutz: <unk> core technology is the engine that powers, our broader effort across RNA synthesis, and so far its where the lion's share of our effort has been focused.
Stefan Lutz: However, as Stephen mentioned, we're taking things to the next level by addressing challenges associated with the enzymatic synthesis of input materials like anchor piece and stored all legal as well as working on ensuring the seamless incorporation of targeting <unk>.
Stefan Lutz: By establishing innovative new enzymatic solutions for inputs like NQPs, we could dramatically reduce associated COX and yield more product of higher quality for the same amount of starting material. In short, these efforts have the potential to lead to better, cheaper products.
Stefan Lutz: By establishing innovative new enzymatic solutions for inputs like <unk>, we could dramatically reduce.
Stefan Lutz: Associated Cogs and yield more product of higher quality for the same amount of starting material.
Stefan Lutz: In short these efforts have the potential to lead to better cheaper products.
Stefan Lutz: Similar to the focus on NQP, we're also aware of the important role played by targeting moieties in this class of therapeutics. By enabling the effective shuttling of oligonucleotides to specific locations and organs within the body, this innovation improves the potency and efficacy of sRNA assets. We have made real progress towards the enzymatic incorporation of targeting moieties in each position of interest to our customers, whether it is on the five prime end, the three prime end, or anywhere in between.
Stefan Lutz: Similar to the focus on <unk> were also aware of the important role played by targeting moiety in this class of therapeutics.
Stefan Lutz: By enabling the effective shuttling of oligonucleotides to specific locations and Oregon's within the body. This innovation.
Stefan Lutz: Improves the potency and efficacy of <unk> assets.
Stefan Lutz: We have made real progress towards the enzymatic incorporation of targeting moiety in each of the position of interest to our customers whether it is on the five prime and the three prime and or anywhere in between.
Stefan Lutz: Before I pass things over to Kevin, I'd like to briefly share my perspective on the importance of our double-stranded RNA ligase program. Our ability to offer customized, high-performance double-stranded RNA ligases fully leverages our prior enzyme engineering experience. Our collection of thousands of ligase variants and corresponding activity data allows for efficient library screening for lead enzymes, fine-tuning via enzyme and process engineering, and finally, scale-up production for customers. Because we're starting with a rich database and specialized know-how, we can streamline the process and maximize our ability to respond quickly.
Speaker Change: Before I pass things over to Kevin I'd like to briefly share my perspective on the importance of our double stranded RNA like Ace program.
Stefan Lutz: Our ability to offer customized high performance double stranded RNA like Acis fully leverages, our prior enzyme engineering experience.
Stefan Lutz: Our collection of thousands of ligand like Asbury ends and corresponding activity data allows for efficient library screening for lead enzymes.
Kevin: Fine tuning the <unk> enzyme and process engineering, and finally scale up production for customers.
Kevin: Because we are starting with a rich database and specialized knowhow, we can streamline the process and maximize our ability to respond quickly as Stephen mentioned that concept lies at the core of our competitive advantage.
Stefan Lutz: As Stephen mentioned, that concept lies at the core of our competitive advantage. Ultimately, we believe in our ability to deliver a modular approach that gives customers flexible design options to support the manufacturing of their siRNA therapeutic assets. Given the resources and capacity constraints of traditional chemical synthesis, we are confident that the versatility of our technology will provide fundamental value to players in the space. And thinking ahead, it's not lost on us that the valuable intermediates we're developing today could be applied to other processes and growing modalities in the RNA space. Now I'll hand the call over to Kevin to speak to the commercial side of the business.
Kevin: Ultimately, we believe in our ability to deliver a modular approach that gives customers flexible design options to support the manufacturing of their sorry, RNA therapeutic assets.
Kevin: And given the resources and capacity constraints of traditional chemical synthesis. We are confident that diversity of our technology will provide fundamental value to players in the space.
Kevin: And thinking ahead, it's not lost on us that the valuable intermediates, we are developing today could be applied to other processes and growing modalities, India RNA space.
Stefan Lutz: Now I'll hand, the call over to Kevin to speak to the commercial side of the business Kevin.
Kevin: Thanks Stefan.
Kevin Norrett: As Stephen previously highlighted, we have started the year with a strong set of Q1 results, and we have made tremendous technical progress since achieving gram scale last December. At the TISE-USA meeting in May, Stefan and his team plan to present a technical update on the Ecosynthesis Manufacturing Platform, and we are on track to demonstrate the enzymatic synthesis of a full-length siRNA molecule by them. When achieved, this milestone positioned us to offer a variety of ways to demonstrate our enzymatic solutions for RNA synthesis to customers. First, let me expand on our double-stranded RNA ligase program on 5-5.
Kevin: As Stephen previously highlighted we have started the year with a strong set of Q1 results and we have made tremendous technical progress since achieving grand scale since since last December at.
Kevin Norrett: At the ties USA meeting in May Stefan and his team plan to present, a technical update on the ecosystem since manufacturing platform and we are on track to demonstrate the enzymatic synthesis of a full length SMN RNA molecule by that.
Kevin Norrett: When achieved this milestone position us to offer a variety of ways to demonstrate our informatics solutions for RNA since since to customers.
Kevin Norrett: First let me expand on our double stranded RNA.
Kevin Norrett: RNA <unk> program on slide five.
Kevin Norrett: As I have mentioned in the past, the double-stranded RNA ligase program is our bridge for customers to incorporate enzymes into their RNAi therapeutics manufacturing, but it's more than just that. Our increase in inbound customer interest has made it clear that drug innovators are already exploring the possibility of ligating short strands of siRNA to immediately decrease manufacturing costs as they scale through clinical trials and overcome challenges in synthesizing longer and more complex RNAi constructs.
Kevin Norrett: As I have mentioned in the past the double stranded RNA <unk> program is a bridge for customers to incorporate enzymes into their RNA therapeutics manufacturing, but it's more than just that our increase in inbound customer interest has made it clear that drug innovators are already exploring the possibility of like getting short strands of SA RNA to immediately decrease manufacturing.
Kevin Norrett: Costs as they scale through clinical trials and to overcome challenges and synthesizing longer and more complex RNA constructs.
Kevin Norrett: The signing of our first large pharma customer order for their customized double-stranded RNA ligase in the low-to-mid single-digit millions is good evidence of this market expansion. In addition, we have a second customized program in development, which we hope to convert to a future product order either later this year or early next year.
Kevin Norrett: Signing of our first large pharma customer order for their customized.
Kevin Norrett: Double stranded RNA ligase in the low to mid single digit million is it is good evidence of this market expansion.
Kevin Norrett: In addition, we have a second customized program in development, which we hope to convert to a future product or either later this year or early next year.
Kevin Norrett: Finally, we have several other customers testing other double-stranded RNA ligase variants as part of our early access program launched earlier this year. Just like we saw in pharma manufacturing, we were not surprised to see early adopters of a ligation-based approach be large companies because they can afford to test and assess new technologies in parallel to traditional chemistry. We are excited to see this playing out with this opportunity and look forward to growing our programs over the next year. To capitalize on this momentum, we are launching our double-stranded RNA ligase screening service at TidesUSA. This service will simplify the screening process for our customers and potentially lead to additional customized programs.
Kevin Norrett: Finally, we have several other customers testing other double stranded RNA logging experience as part of our early access program launched earlier this year.
Kevin Norrett: Just like we saw in pharma manufacturing, we are not surprised to see early adopters of allegation based approach be large companies because they can afford to test and assess new technologies in parallel to traditional chemistry.
Kevin Norrett: We are excited to see this playing out with this opportunity and look forward to growing our programs over the next year.
Kevin Norrett: To capitalize on this momentum we are launching our double stranded RNA lagging screening service at ties USA. This service will simplify the screening process for our customers and potentially lead to additional customized programs. We anticipate that this program will also increase the odds of our technology being used in the scale up of many promising assets already in clinical development.
Kevin Norrett: We anticipate that this program will also increase the odds of our technology being used in the scale-up of many promising assets already in clinical development. Later this year, we plan to also launch our EcoRNA ligase kit of variants, which can be sent to customers for testing in their own hands. Finally, we plan to offer in-house RNA ligation capabilities through our Ecosynthesis Innovation Lab, where customers can send us their constructs, and we can do the ligation for them. This is super exciting as it is our first step towards becoming a full service provider of sRNA for testing and preclinical studies.
Kevin Norrett: Later this year, we plan to also launch our eco RNA <unk> variance, which can be sent to customers for testing in their own hands.
Kevin Norrett: Finally, we plan to offer in house RNA litigation capabilities through our eco synthesis innovation lab, where customers can incentives their contracts and we can do the litigation for them.
Kevin Norrett: This is super exciting as it is our first step towards becoming a full service provider of <unk> for testing in preclinical studies.
Kevin Norrett: While these offerings won't be significant revenue drivers in 2024, they allow us to secure potential customers for our enzymatic approach and are expected to translate into future product revenue. Shifting to our full EcoSynthesis manufacturing platform and our EcoInnovation Lab on slide six, let me reiterate a few key. We continue to garner significant inbound interest from key RNA synthesis players, and we are already in dialogue with those you'd expect. Many drug innovators and CDMOs have also made site visits where we can show and tell our capabilities.
Kevin Norrett: While these offerings won't be significant revenue drivers in 2024, they allow us to secure potential customers into our <unk> approach and are expected to translate into future product revenues.
Kevin Norrett: Shifting to our full ecosystem manufacturing platform and our eco innovation lab on slide six let me reiterate a few key points.
Kevin Norrett: We continue to garner significant inbound interest from key RNA synthesis players and we're already in dialogue with those you would expect many drug of innovators and <unk> have also made site visits where we can show and tell our capabilities.
Kevin Norrett: With the continued build-out of our Eco-Innovation Lab, we will be able to offer customers a path to the production of GLP-grade material. First, we will be able to offer ligation for their chemically-derived shortmers. In the future, we plan to offer a semi-enzymatic method, which will include the TDT polymerase and other core eco-synthesis enzymes.
Kevin Norrett: With the continued build out of our eco innovation lab, we will be able to offer customers a path to the production of GOP great material.
Kevin Norrett: First we will be able to offer litigation further chemically derive short Myers.
Kevin Norrett: In the future we plan to offer a semi in somatic method, which will include the TVT polymerase and other core.
Kevin Norrett: And finally, we plan to offer a completely enzymatic process with enzymatically synthesized raw material. The more development projects we get off the ground this year and next, the more we learn to be able to address the different process conditions required for each customer's RNA concentration. And by producing the material for preclinical testing, we plan to outline the tech transfer process for large-scale GMP manufacturing with the downstream CDMO part. The Ecosynthesis Innovation Lab also supports our plans to scale up for GMP, either through CDMO partners or our own manufacturing facility.
Kevin Norrett: Since this enzymes and finally, we plan to offer a completely in somatic process with Enzymatically synthesize raw materials.
Kevin Norrett: The more development projects and get off the ground. This year and next the more we learned to be able to address the different process conditions required for each customer's RNA construct.
Kevin Norrett: And by producing the materials for preclinical testing, we plan to outline the tech transfer process for large scale GMP manufacturing with the downstream CDMA partner.
Kevin Norrett: The ecosystem innovation lab also supports our plans to scale up our GNP either through CMO partners.
Kevin Norrett: For our own manufacturing facility.
Kevin Norrett: Finally, moving to slide seven, I am super excited that we delivered a great quarter with double-digit growth in product revenues. However, as I mentioned in our end of year results call, our product revenues remain concentrated in a handful of large pharma customers across four commercial entities. Therefore, we remain focused on expanding our customer base and filling our pipeline to sustain future annual double-digit product revenue growth throughout the decade. We have made significant progress with getting several new screening programs off the ground this year across mid-sized pharma and large biotechs, and we expect these programs to translate into R&D revenues later this year. With that, I'll turn the call over to Sree to discuss our financial results.
Kevin Norrett: Finally, moving to slide seven I am Super excited that we delivered a great quarter with double digit growth in product revenues. However, as I mentioned in our end of year results call. Our product revenues remain concentrated in a handful of large pharma customers across four commercial enzymes. Therefore, we remain focused on expanding our customer base and filling our pipeline.
Sree: Saint future annual double digit product revenue growth throughout the decades we.
Sree: We have made significant progress with getting several new screening programs off the ground. This year across mid sized pharma and large biotechs and we expect these programs to translate into R&D revenues later this year with that I'll turn the call over to Sri to discuss our financial results.
Sriram Ryali: Thanks, Kevin. Good afternoon, everyone.
Sree: Thanks, Kevin and good afternoon, everyone moving to slide eight we delivered strong first quarter 2024 results.
Sriram Ryali: Moving to slide eight, we delivered strong first quarter 2024 results. Our full financial results were issued in a press release earlier this afternoon, which is available on our investor relations website, but I'd like to call out a few highlights here. Total revenues were $17.1 million for the first quarter of 2024 compared to $13 million for the prior year, an increase of 32% year over year. Product revenues were up 14% to $9.6 million for the first quarter compared to $8.4 million in the prior year.
Sree: Our full financial results were issued in a press release earlier this afternoon, which is available on our Investor Relations website.
Sriram Ryali: I'd like to call out a few highlights here.
Sriram Ryali: Turning to R&D revenues, we reported $7.5 million in Q1, compared to $4.6 million last year. In Q1, we recognized $6 million, the full amount related to the license agreement with Roche for the double-stranded DNA ligase contributing to the strong corridor. Product gross margin improved to 49% this quarter, compared to 46% in the first quarter of 2023. Turning to expenses, R&D expenses for the first quarter of 2024 were $11.2 million, compared to $16.7 million last year. SG&A expenses were $12.9 million compared to $15.4 million in the first quarter of 2023.
Sriram Ryali: Total revenues were $17 1 million for the first quarter of 2024 compared to $13 million from the prior year, an increase of 32% year over year.
Sriram Ryali: Product revenues were up 14% to $9 6 million for the first quarter compared to $8 4 million in the prior year.
Sriram Ryali: Turning to R&D revenues, we reported $7 $5 million in Q1 compared to $4 $6 million last year.
Sriram Ryali: In Q1, we recognized $6 million the full amount related to the license agreement with Roche for the double stranded DNA ligase contributing to the strong quarter.
Sriram Ryali: Product gross margin improved to 49% this quarter compared to 46% in the first quarter of 2023.
Sriram Ryali: Turning to expenses R&D expenses for the first quarter of 2024 were $11 2 million compared to $16 $7 million last year.
Sriram Ryali: SG&A expenses were $12 9 million compared.
Sriram Ryali: Compared to $15 $4 million in the first quarter of 2023.
Sriram Ryali: You can see the continued benefit from the actions we announced last year on our expense base, with R&D and SG&A expenses down approximately 32% and 16%, respectively, compared to Q1 2023. Taking a look at expenses compared to Q4 2023, which was our first full quarter after the reduction in force and consolidation of facilities, you can see we have maintained a similar run rate across R&D and S, G and A.
Sriram Ryali: You can see the continued benefit from the actions that we announced last year on our expense base with R&D and SG&A expenses down approximately 32% and 16% respectively compared to Q1 2023.
Sriram Ryali: Taking a look at expenses compared to Q4, 2023, which was our first full quarter. After the reduction enforced and consolidation of facilities. You can see we have maintained a similar run rate across R&D and SG&A.
Sriram Ryali: The slight increase in Q1 2024 expenses was primarily driven by non-cash, stock-based compensation. It is also worth noting that we expect to see a slight uptick in R&D expenses as we ramp up operating costs related to the Ecosynthesis Innovation Lab later this year. Maintaining tight control over cash and continued expense discipline remains a key focus.
Sriram Ryali: A slight increase in Q1 2020 for expenses was primarily driven by noncash stock based compensation.
Sriram Ryali: It is also worth noting that we expect to see a slight uptick in R&D expenses as we ramp up operating costs related to the eco since innovation lab later this year.
Sriram Ryali: Maintaining tight control of our cash and continued expense discipline remains a key focus.
Sriram Ryali: Before shifting toward guidance, I want to share a closer look at our 2024 revenue dynamics. On slide 9, the graph on the left-hand side shows the distribution of our first quarter product revenue by major category for both Q1 2023 and Q1 2024. In Q1 2024, of the $9.6 million we reported in product revenue, roughly 37% came from the big three commercial pharma manufacturing products that we have previously highlighted. You can see that it's down significantly from roughly 72% in Q1 2023, reflecting the progress we have made toward diversifying our revenue base.
Sriram Ryali: Before shifting toward guidance I want to share a closer look at our 2024 revenue dynamics.
Sriram Ryali: On slide nine the graph on the left hand side shows the distribution of our first quarter product revenue by major category for both Q1 2023 in Q1 2024 and.
Sriram Ryali: In Q1 2024 of the $9 6 million, we reported in product revenue roughly 37% came from the big three commercial pharma manufacturing products that we have previously highlighted.
Sriram Ryali: You can see that is down significantly from roughly 72% in Q1 2023, reflecting the progress we've made toward diversifying our revenue base.
Sriram Ryali: Approximately 5% of Q1 2024 product revenue was from enzymes supplying other commercially approved products, and 19% was for generics. Outside these three categories, 34% is for programs that we currently supply in clinical trials, which includes name programs, some of which are likely to convert to commercial products and drive future revenues as we transition to the big six or big seven in our pharmaceutical manufacturing business. Finally, roughly 5% of Q1 revenue is from life sciences and other programs.
Sriram Ryali: Approximately 5% of Q1 2020 for product revenue.
Sriram Ryali: From enzyme supplying other commercially approved products and 19% for generics.
Sriram Ryali: These three categories, 34% is for programs that we currently supply and clinical trials, which included the named programs some of which are likely to convert to commercial products and drive future revenues as we transitioned to the big six or seven.
Sriram Ryali: Pharmaceutical manufacturing business.
Sriram Ryali: Finally, roughly 5% of Q1 revenue was from life Sciences and other programs.
Sriram Ryali: Turning to guidance, we are confident in reiterating our 2024 revenue and gross margin guidance ranges. To help with modeling, we also wanted to provide additional detail on what we expect the rest of the year to look like in terms of revenue distribution.
Sriram Ryali: Turning to guidance, we are confident in reiterating our 2020 for revenue and gross margin guidance ranges.
Sriram Ryali: To help with modeling we also wanted to provide additional detail on what we expect the rest of the year to look like in terms of revenue distribution.
Sriram Ryali: Starting with product revenue, as highlighted during our results call in February, and in line with the lumpy nature of customer orders, we continue to expect that Q2 will be our lowest quarter of the year, and down as compared to Q2 2023. Based on the visibility we have today, we expect Q2 product revenue to be roughly 60% to 70% of the product revenue we reported in Q1, followed by a strong second half of the year.
Sriram Ryali: Starting with product revenue as highlighted during our results call in February and in line with the lumpy nature of customer orders.
Sriram Ryali: Continue to expect that Q2 will be our lowest quarter of the year and down as compared to Q2 2023.
Sriram Ryali: Just on the visibility we have today, we expect Q2 product revenue to be roughly 60% to 70% of the product revenue. We reported in Q1, followed by a strong second half of the year.
Sriram Ryali: It is also important to note that we expect to recognize the large, customized, double-stranded RNA ligase pharma order that Stephen and Kevin mentioned as product revenue by the end of the year. Now, looking at R&D revenue on slide 10, first, I'll note that Q1 2023 included approximately $3.5 million in revenues related to our biotherapeutics programs, which we previously announced that we discontinued. This quarter, due to the recognition of the $6 million related to the double-stranded DNA ligase agreement with Roche, we expect Q1 2024 to be our highest R&D revenue quarter of the year.
Sriram Ryali: It is also important to note beverage spectra recognize the large customized double stranded RNA <unk> pharma order.
Sriram Ryali: Stephen and Kevin mentioned as product revenue by the end of the year.
Sriram Ryali: Now looking at R&D revenue on Slide 10 first I'll note that Q1 2023 included approximately $3 5 million in revenues related to our biotherapeutics programs, which we previously announced that we discontinued.
Sriram Ryali: This quarter due to the recognition of the $6 million related to the double stranded DNA ligase agreement with Roche, We expect Q1 2024 to be our highest R&D revenue quarter of the year.
Sriram Ryali: Building off Kevin's commentary on our maturing pharmaceutical manufacturing pipeline, we anticipate R&D revenues will be weighted toward the back half of the year as new development programs get off the ground. With that in mind, we expect Q2 R&D revenue to be roughly in line with our Q1 2024 base business, which was $1.5 million. Broadly speaking, and excluding revenue accounting related to Pax Logood, we project that our full-year revenue will be weighted roughly 40% for the first half of the year and 60% for the second half of the year.
Sriram Ryali: And building off kevins commentary on our maturing pharmaceutical manufacturing pipeline.
Sriram Ryali: Despite the R&D revenues will be weighted toward the back half of the year as new development programs get off the ground.
Sriram Ryali: With that in mind, we expect Q2 R&D revenue to be roughly in line with our Q1 2020 for base business, which was $1 $5 million.
Sriram Ryali: Broadly speaking and excluding revenue accounting related to tax loaded we project that our full year revenue will be weighted roughly 40% for the first half of the year with 60% for the second half of the year.
Sriram Ryali: Moving to slide 11, we ended the quarter in a strong position with cash and cash equivalents and investments at $85 million, which we continue to expect will fund our planned operations through positive cash flow anticipated around the end of 2020. And now, we'll turn the call back to Stephen.
Sriram Ryali: Moving to slide 11, we ended the quarter in a strong position with cash and cash equivalents and investments of $85 million, which we continue to expect we will fund our planned operations through positive cash flow anticipated around the end of 2026.
Stephen: And now I will turn the call back to Steven.
Stephen George Dilly: Thanks, Sri. And thank you to Stefan and Kevin for the encouraging updates on the different facets of our business. As you've just heard, we delivered a strong first quarter, and we've made great technical progress on the eco-manufacturing platform. We're really looking forward to going into more detail at the Tides meeting in a couple of weeks in Boston. Now, we'd be happy to take your questions, Operator. Thank you. We will now be conducting a question and answer session.
Stephen: Thanks, Sri and thank you to Stephane and Kevin for the encouraging updates across the different facets of our business.
Stephen George Dilly: As you've just heard we delivered a strong first quarter and we've made great technical progress on the eco manufacturing platform.
Stephen George Dilly: We're really looking forward to going into more detail of the tides meeting in a couple of weeks in Boston.
Stephen George Dilly: Now we'd be happy to take your questions operator.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Operator: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Matt Staden with Jeffreys. Please proceed with your question.
Operator: One moment, please while we poll for questions.
Operator: Okay.
Evan Stampler: Thank you.
Evan Stampler: Our first question comes from the line of Matt.
Evan Stampler: Statin with Jefferies. Please proceed with your question.
Evan Stampler: Hey, thanks. Just maybe a quick one to start. Can you talk about any hurdles or the final pieces between now and TIDES, which is only a few weeks away, to fully synthesize or synthesize the full-length oligo? You noted it's very close, but I guess just what's left between now and TIDES in a few weeks?
Evan Stampler: Hey, Thanks, just maybe a quick one to start can you just talk about any hurdles or the final pieces between now and ties which is only a few weeks away to fully synthesize.
Evan Stampler: Or is this in slides in the full length.
Evan Stampler: The go you noted, it's very close but I guess, just what's left between now and and tie it to you in a few weeks.
Stefan Lutz: Happy to take that question. We'd like to share with the audience not just the successful completion of the synthesis but also some analytical details and purity profiles associated with this. To complete all these experiments just takes extra time.
Speaker Change: Yes happy to take that question wed like to share with the audience type.
Stefan Lutz: Information not just to the successful completion of the citizens, but also some analytical details impurity profiles associated with this too.
Stefan Lutz: To complete all of these experiments just takes extra time.
Stefan Lutz: Yeah.
Kevin Norrett: Okay, great. And then you talked about how you continue to see progress filling the pipeline on the product side for sustainable future growth. You talk a bit more about what type of programs you are filling the pipeline with, and then I think you also noted encouraging engagement with mid to large-size pharma that's new. So I guess just the nature of those conversations and types of engagements with those folks. Thanks.
Stefan Lutz: Okay, Great and then you talked about how you continue to see progress filling the pipeline on the on the product side for sustainable future growth can you just talk a bit more about what type of programs you are filling the pipeline with and then I think you also noted.
Kevin Norrett: Engagement with mid to large size.
Kevin Norrett: Pharma, it's new so I guess, just nature of those conversations and types of engagements with those folks.
Kevin Norrett: Sure. So, you know, over the last year, we've been talking about focusing on not just the top 10 pharma companies but the next level down. And so we've been focused on expanding our educational efforts with the customers there in terms of getting screening programs off the realm with our existing variants. Those have led to probably four to five new programs with, you know, large biotechs, midsize pharma, that we expect to translate into scaled-up programs towards the end of this year.
Speaker Change: Sure so over the last year, we've been talking about our focus on not just the top 10 pharma, but the next level down and so we've been focused on expanding our educational efforts with customers. There in terms of getting screening programs off around with our existing variance those have led to probably four to five new products.
Kevin Norrett: Graham split.
Kevin Norrett: Large biotech midsized pharma that we expect to translate into scale up programs towards the end of this year, but as you know what the farmer manufacturing business, which is what I was referring to in that regard those take time to develop as a clinical asset has to go through the clinical development stages of phase one two and three so.
Kevin Norrett: But as you know, with the pharma manufacturing business, which is what I was referring to in that regard, those take time to develop as the clinical asset has to go through the clinical development stages of, you know, phase one, two, and three. So if we don't fill the pipeline now, though, we're not going to be able to sustain that double-digit annual growth past 26, where we already see the pipeline of name programs driving most of those revenues in the near term.
Kevin Norrett: If we don't fill the pipeline now, though we're not going to be able to sustain that double digit annual growth past 2006, where we already see the pipeline of named programs driving most of those revenues in the near term.
Kevin Norrett: Thanks. And maybe just one last one on the pharma order for the double-stranded RNA ligase.
Speaker Change: Thanks, and maybe just one last one on the pharma order for the double stranded RNA ligase.
Kevin Norrett: Can you talk a bit more about the process there from kind of early access, getting it in their hands, and then to inking the deal? Just curious how it played out in relative context as we think of some of the other early access customers that are looking at that today? Thank you.
Kevin Norrett: Talk a bit more about the process there from kind of early access getting it in their hands and then taking the deal just curious how it played out.
Kevin Norrett: Relative to the context as we think of some of the other early access customers that are.
Kevin Norrett: Looking at that today. Thank you.
Kevin Norrett: Sure, so that program in particular came from one of our, or that order came from one of our existing customized programs that has been in the works for the last several years, but that's not a good example of what we expect to happen going forward in terms of reaching that level of sale because now with the launch of our double-stranded ligase screening services, our EcoRNA ligase kit, we're looking at a push in terms of customers being able to scale up variants in a much faster range because ligation is a growing modality within the marketplace, and in fact, what we've learned from our customers in the last couple of months of getting these variants in early access customers' hands is that many of them are looking at programs that are in later stage development where their scale-up challenges existed with phosphoramidate chemistry and they need a ligation approach. That's something unique and why we think we'll be able to scale up much faster than taking a couple of years to get a customized program through the funnel to get to a large order.
Speaker Change: Sure. So that program in particular came from one of our that order came from one of our existing customized programs that has been in the works for the last several years, but that's not a good example of what we expect to happen going forward.
Kevin Norrett: Ms of reaching that level of sale because now with the launch of our demonstrated ligase screening services, our eco RNA ligase kit, we're looking at a push in terms of customers being able to scale up variance at a much faster range, because ligation isn't growing modality within the marketplace and in fact, what we've learned from our customers and the.
Kevin Norrett: Last couple of months of getting these variance in early access customers hands is that many of them are looking at programs that are in later stage development.
Kevin Norrett: Where their scale up challenge has existed with Phosphamidon chemistry, and they need a litigation approach. That's that's something unique and why we think we'll be able to scale up much faster than taking a couple of years to get a customized program through the funnel to get to a large order.
Stephen George Dilly: But Matt, I think it is worth sharing that this customer had been using another ligation enzyme and tried ours, found it significantly better, and so decided it was worth making the switch. So that is a reason to be very optimistic. Thanks.
Kevin Norrett: But I think it is worth sharing this customer had been using another litigation enzyme.
Stephen George Dilly: And tried out has found its significantly better and so we decided it was worth making the switch so that is a reason to be very optimistic.
Evan Stampler: Thanks, that's a really helpful call; I appreciate it.
Matt: Thanks, that's really helpful color I appreciate it.
Operator: Thank you. Our next question comes from the line of Dan Arias with Stiefel. Please proceed with your question.
Speaker Change: Thank you.
Evan Stampler: Our next question comes from the line of Dan Arias with Stifel.
Dan Arias: Please proceed with your question.
Evan Stampler: Hey guys, this is actually Evan on for Dan. Thanks for the questions. The first one is just really quick and kind of just... Getting my numbers right.
Operator: Hey, guys. This is actually Evan on for Dan Thanks for the questions.
Evan Stampler: The first one is just a really quick and tonnages.
Evan Stampler: Getting my numbers right I think the guide and talked about.
Evan Stampler: So I think the guide talked about $7 million coming from Roche and Aldebaran for the year. You booked six this quarter. Is that just $1 million more from Aldebaran this year, or is there any change there?
Evan Stampler: $7 million coming from <unk> out to everyone for the year.
Evan Stampler: You booked six this quarter is that just one more $1 billion more from now on this year or is there any change there.
Sriram Ryali: So this quarter also includes a part of the Aldebaran order, so the rest of the year milestone revenue is pretty small. We expect the R&D revenue for the rest of the year, for our guidance, to come from our energy services business.
Speaker Change: So this quarter also include a part of the al that Ron order. So the rest of year milestone revenue is pretty small we expect the R&D revenue for the rest of the year for our guidance to come from our R&D services business.
Evan Stampler: Okay, so no change here, though, on the $7 million?
Sriram Ryali: Okay. So no change there though.
Evan Stampler: $7 million.
Evan Stampler: Sorry, could you repeat that again?
Speaker Change: Sorry can you repeat that again.
Evan Stampler: So there's no change there on the $7 million forecast?
Speaker Change: So there is no change there on the $7 million forecast for the full year, that's still correct.
Sriram Ryali: Right, for the full year, that's still correct. Yeah.
Evan Stampler: Okay, and then I guess, you know, similarly, you know, like looking back, you know, when you gave the guide for the year last call, had you been contemplating this ligase order from your customer? In terms of, I think you talked about maybe another customer that's looking at the double-strand ligase with potential for an order later this year. I mean, how does the funnel look beyond that, and what's the potential for additional customers?
Sriram Ryali: And then I guess.
Evan Stampler: Similarly.
Evan Stampler: No.
Evan Stampler: Looking back when you gave.
Evan Stampler: The guide for the year last call.
Evan Stampler: Had you been contemplating.
Evan Stampler: This <unk> order.
Evan Stampler: I mean your customer.
Evan Stampler: And then in terms of I think you've talked about maybe another customer that's looking at.
Evan Stampler: But notwithstanding I guess.
Evan Stampler: With potential for an order later this year.
Evan Stampler: I mean are there how does the funnel look beyond that and what's the potential for additional customers.
Kevin Norrett: Yeah, sure. This is Kevin.
Evan Stampler: Yes sure. This is Kevin so the funnel for additional customers is really based upon getting the early access program off the ground in the first half of this year, which I said was somewhere in the range of four to five key customer additional customers on top of those programs that we already have in place.
Kevin Norrett: So the funnel for additional customers is really based upon getting the early access program off the ground in the first half of this year, which I said was somewhere in the range of four to five key additional customers on top of those programs that we already have in place. But we're looking to expand that funnel dramatically in the next six months, which, you know, if you think back to what we talked about last year, really, the second half of this year was our big push for the LIGASE program in terms of filling that with new screening programs. The other part of that question was, "Remember me?".
Kevin Norrett: But we're looking to expand that final dramatically in the next six months, which if you think back to what we had talked about last year really second half of this year was a big push for the <unk> program in terms of filling that with new screening programs and hence why were making such a big splash around this at at tides and this may.
Kevin Norrett: The other part of that question was remind me.
Evan Stampler: I was, it was kind of a similar question to my first one was, was this, um, you know, big order.
Kevin Norrett: It was kind of a similar question my first one was was this.
Evan Stampler: Big order.
Evan Stampler: Low single digits to mid single digit revenue.
Speaker Change: That contemplated in your initial guidance or is that incremental yeah. So erinn.
Evan Stampler: Yeah, so our initial line is 38 to 42.
Evan Stampler: Domestic too that we're reiterating that include a range of different scenarios.
Evan Stampler: There are a number of orders and puts and takes in there. So it's hard to call. One particular went out but we're confident in reiterating our range of $38 million to $42 million for the year.
Kevin Norrett: Okay, thanks. And then just one more, just kind of going back to this, the RNA ligase. I think you sort of answered in a previous question, but for this order, is the customer using it, is it, what's the stage of the asset? Because it does seem like a fairly large order, so like what stage are they at with the asset, and I think you were saying that your goal is to actually use and look at later stage assets so you can scale as quickly. Can you just sort of talk about that, and also how that applies, or how Yeah, that's a really good question.
Speaker Change: Okay. Thanks, and then maybe just one more.
Kevin Norrett: Hum.
Kevin Norrett: Going back to this.
Kevin Norrett: The RNA ligase.
Kevin Norrett: I think you sort of answered a previous.
Kevin Norrett: Question.
Kevin Norrett: This order is.
Kevin Norrett: As the customer are using it.
Kevin Norrett: Just like what's the stage of the asset because it does seem like a fairly large order.
Kevin Norrett: So what's the answer to that with the asset.
Kevin Norrett: And I think you were saying that your goal is to actually use look at later stage assets. So you can scale. It is quickly can you just sort of talk about that.
Kevin Norrett: And also how that applies or how the rest of your funnel looks with respect to that yes. That's a really good question and there's some really important insights here. So.
Stephen George Dilly: Yeah, that's a really good question, and there are some really important insights here, so I'll state this carefully. What we have learned over the last few months of engagement with customers is quite often they make the step from pure phosphoramide type chemistry to a hybrid approach using ligation as they scale, and typically they do that between phase two and phase three. This is amazingly good news for us because it enables us to get on board with assets that are close to the market, right?
Stephen George Dilly: State this carefully what we have learned over the last few months of engagement with customers is quite often they make the step from pure phosphoric chemistry to a hybrid approach using litigation as well.
Stephen George Dilly: The scale and typically they do that between phase II and phase III.
Stephen George Dilly: This is amazing.
Stephen George Dilly: Amazingly good news for us because it enables us to get onboard with assets that are close to the market right and that's exactly what's happening in this case, it's the scaling from phase II to phase III, hence the size of the order, hence the looking forward to saying well, they're going to need to prep for launch and all the rest of it that will be the flow of orders in 2000.
Stephen George Dilly: And that's exactly what's happening in this case. It's the scaling from phase two to phase three, hence the size of the order, hence the looking forward to saying, well, they're going to need to prepare for launch and all the rest of it. That'll be the flow of orders in twenty-five and beyond. So it really does give us a much more rapid path to getting a piece of value out of assets that are close to commercialization or even being commercialized.
Stephen George Dilly: Five and beyond so it really does give us a much more rapid path to getting a piece of value out of assets that are close to commercialization or even being commercialized.
Evan Stampler: Gotcha. That's super helpful. I'll pass it on. Thanks.
Speaker Change: Got you that's super helpful. I'll pass it on thanks.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Matt Hewitt with Craig Callum. Please proceed with your question.
Evan Stampler: Our next question comes from the line of Matt Hewitt with Craig Hallum. Please proceed with your question.
Matthew Gregory Hewitt: Good afternoon and congratulations on the progress. Maybe first up regarding the new LIGASE screening service, I have a couple of questions. First, is it going to require you to add some more people to run those services, or can you do it with the people already on board? And then, as you look at that, obviously, launching it later this year, maybe a minimal contribution to the top line, but how should we be thinking about that service ramping up maybe over the midterm, I don't know, two to four years?
Matthew Gregory Hewitt: Good afternoon, and congratulations on the progress maybe first off regarding the new luggage screening service.
Matthew Gregory Hewitt: I guess a couple of questions first is it going to require you to add some more people.
Matthew Gregory Hewitt: To run those services or can you do with the people already onboard and then as you look at that obviously launching it later this year, maybe minimal contribution to the topline, but how should we be thinking about that service are ramping maybe over the midterm.
Matthew Gregory Hewitt: Midterm I don't know if two to four years.
Stephen George Dilly: Okay, so I'll answer the one about the ramp, and then Kevin can talk about how we provide the manpower. So, the screening service is purely a way of hooking customers, and the idea is we can provide them out of the gate with enzymes that are way better than the wild-type enzymes they can get elsewhere. And then, if those are good enough, they then get included in their process, and we start, you know, charging for this when they start ordering quantities of ligation enzyme, right?
Speaker Change: Okay. So I'll answer the one about the ramp and then Kevin can talk about how we.
Kevin Norrett: We provide the manpack. So the screening service is purely a way of hooking customers and the idea is we can provide them out of the gate with enzymes that are way better than the wild type enzyme as they can get elsewhere.
Stephen George Dilly: And then if those are good enough. They didn't get included into that process and we start charging for this when they start ordering quantities of ends of ligation enzyme.
Stephen George Dilly: There's also a world in which they're trying to do a particularly difficult ligation, or they want to work at a very large scale, where they actually want us to go through some steps of optimization. That's where the many thousands of different variants that we've got come into play, and we may be able to pull one off the shelf, or we may want to do a bit of rapid evolution for them, exactly as we have done in the past in pharma manufacturing.
Kevin Norrett: There is also a world in which they are trying to do a particularly difficult ligation all they want to work at very big scale, where they actually want us to go through some steps of optimization.
Stephen George Dilly: That's where the many thousands of different variance of we've got come into play, which we may be able to pull one off the shelf, but we may want to do a bit of rapid evolution for them exactly as we've done in past in pharma manufacturing and the idea is that this is the way to making it very easy for them to include our enzyme in that process.
Stephen George Dilly: And the idea is that this is a way of making it very easy for them to include our enzyme in their process as they start to scale their production. And we expect the timeline from first interaction to commercial-level production and supply from us to be much shorter in the siRNA space because they're adopting it later in the development process. And, Kevin, it's a pretty efficient play for us.
Stephen George Dilly: As they start to scale that product production and we expect the timeline from first interaction to commercial level production and supply from us to be much shorter than the SA RNA space because they're adopting later in the development process.
Stephen George Dilly: Kevin It's a pretty efficient play for us.
Kevin Norrett: It's what we've been doing for the past, you know, five, six years with various other life science enzymes, as well as our pharma manufacturing business. So, really, no new addition in terms of headcount because we already have these capabilities. The only thing is we're starting to centralize more of these capabilities in our eco-innovation lab, but that's all under the existing footprint.
Kevin Norrett: We've been doing for the past.
Kevin Norrett: Five six years with various other life science enzymes as well as our pharma manufacturing business. So really no. New addition in terms of head count because we already have these capabilities. The only thing is we're starting to centralize more of these capabilities and our eco innovation lab, but that's all under the existing footprint.
Kevin Norrett: Got it. And then, shifting gears a little bit, as far as the second double-stranded opportunity in the pipeline there that's in development, is it your expectation that that will be similar in size from a revenue contribution to the one announced here this quarter?
Speaker Change: Got it and then shifting gears, a little bit as far as the second.
Kevin Norrett: Double stranded.
Kevin Norrett: Opportunity in the pipeline there that's in development.
Kevin Norrett: Is it your expectation that that will be similar in size from a revenue contribution to the one announced here with this quarter.
Kevin Norrett: I'm hesitating. It depends. And why I say that is what's interesting about that program is that, as Stephen was saying, is a little bit different in terms of the scaling from Phase II to Phase III for the ligation type of programs, people are building this as a platform to apply to other assets. So the exciting part here is that, you know, the second program that we have here is really being evaluated not just for a particular asset but for a platform. So, in theory, it could be much bigger in terms of size, but it will vary as we get through some of the technical comparisons with this variant they have right now this year.
Speaker Change: The reason I'm hesitating, it depends and like I say that is what's interesting about that program is the other thing that as Stephen was saying is a little bit different in terms of the scaling from phase II to phase III for the litigation type of programs is people are building. This as a platform to apply to other assets. So the exciting part here is.
Kevin Norrett: The second program that we have here is really being evaluated not just for a particular asset but for a platform. So in theory it could be much bigger in terms of size.
Kevin Norrett: But it will vary as we get through some of the technical comparisons with this variant they have right now this year.
Kevin Norrett: That's super exciting. And then maybe one last one. I apologize if I miss this, but the sale of the maple syrup, urine disease, and homocysteine area opportunity, size-wise, is that a couple million dollars, or how much does that add to the balance sheet? Thank you.
Speaker Change: That's super exciting and then maybe one last one I apologize if I missed this but.
Kevin Norrett: The sale of the.
Kevin Norrett: The maple syrup urine disease.
Kevin Norrett: Hamas the styrene.
Kevin Norrett: Cystinuria opportunity.
Kevin Norrett: Size wise does.
Kevin Norrett: Is that a couple of million dollars or how much does that add to the balance sheet. Thank you.
Matthew Gregory Hewitt: It's all a back-ended deal, Matt, so all the economics on that come from future milestones and royalties. It's a very early stage asset.
Speaker Change: Gotcha. That's all back ended deal match all of the economics on that come from future milestones and royalties.
Matthew Gregory Hewitt: Very early stage asset.
Stephen George Dilly: Understand? All right. Thank you.
Speaker Change: Understood Alright, thank you.
Operator: Thank you. Our next question comes from the line of Jacqueline Kiesa with TD Cowan. Please proceed with your question.
Stephen George Dilly: Thank you. Our next question comes from the line of Jacqueline Chiesa with TD Cowen. Please proceed with your question.
Jacqueline Kiesa: Hi, this is Jacqueline Kiesa on call for Stephen Mah. Thanks so much for taking the questions. A lot of ground has been covered already, but I just wanted to ask if you could provide any updates on any other opportunities for your other life science enzymes you may be working on in addition to the dsDNA and dsRNA ligases.
Jacqueline Kiesa: Hi, This is Jacqueline can you southern copper Steven MA. Thanks, so much for taking the questions. A lot of ground has been covered already but I just wanted to ask if you could provide any updates on any other opportunities for your other life science enzymes you may be working on in addition to the DS DNA in DSR and a lag basis.
Kevin Norrett: As we've mentioned in the past, we're still looking at some potential out-licensing opportunities with the reigning sort of life science enzymes we have in the portfolio. We're pretty far along with those conversations, but we wouldn't be carrying those on a go-forward basis for us from an enzyme supply agreement, and we should have that wrapped up this quarter.
Jacqueline Kiesa: As we've mentioned in the past, we're still looking at some potential out licensing opportunities with the remaining sort of life science enzymes, we have in the portfolio, we're pretty far along with those conversations, but we wouldn't be carrying those on a go forward base.
Kevin Norrett: <unk> for us from an enzyme supply agreement and we should have that wrapped up this quarter.
Kevin Norrett: And then just, I'm sorry if I missed this earlier, but could you provide a bit more color on the progress of your pharma manufacturing customers? I believe you mentioned earlier you were aiming to reach around six to seven customers at some point, and you already had three customers. You know, how is that progressing, and how should we look forward to that moving through 2024?
Speaker Change: Excellent and then just I'm sorry, if I missed this earlier, but did you provide a bit more color on the progress of your pharma manufacturing customers. I believe you mentioned earlier youre aiming to reach around six to seven customers at some point and you already had three customers how is that progressing and how should we look forward to that.
Kevin Norrett: Moving through 2024.
Kevin Norrett: In our February call, we talked about the pharmaceutical manufacturing funnel, so to speak, and we are currently supplying enzymes for about 12 main programs that are in Phase 2 and Phase 3, and we supply enzymes for about 16 commercial drugs, and that includes those big three programs that we talked about. So the progress that we're seeing this year, as reflected in Q1, is that the concentration of our pharma manufacturing product sales has come down.
Kevin Norrett: On our February call, we talked about the pharma manufacturing funnel so to speak and we are currently supplying enzymes for about 12 named programs that are in phase II and phase III and resupply enzymes for about 16 commercial drugs and that includes those big three programs that we talked about so the progress.
Kevin Norrett: We're seeing this year as reflected in Q1 as the concentration of our pharma manufacturing product sales has come down last year was about 7% and 2% for those big three programs. This year, it's roughly 37% and as the name programs continue to move forward into clinical trials and we add additional R&D programs, we expect the <unk> III to progressive.
Kevin Norrett: Last year it was about 72 percent for those big three programs. This year it's roughly 37 percent, and as the main programs continue to move forward into clinical trials and we add additional R&D programs, we expect the big three to progress with big six or seven by the end of the decade and then sustain the double-digit kegger that we've talked about in the past as well. Great. Thank you so much.
Kevin Norrett: Big six or seven by the end of the decade and sustained.
Kevin Norrett: A double digit CAGR that we've talked about in the past as well.
Jacqueline Kiesa: Great. Thank you so much. I appreciate it.
Speaker Change: Great. Thank you so much I appreciate it.
Speaker Change: Thank you.
Stephen George Dilly: I'm showing that there are no further questions. I'd like to turn the call back over to Stephen Dilly for closing remarks.
Jacqueline Kiesa: I'm showing that there are no further questions I'd like to turn the call back over to Stephen Daly for closing remarks.
Stephen George Dilly: Thanks so much. Thanks again for joining us today. We're looking forward to sharing more details on the technical progress at the Tides USA meeting in Boston in a few weeks, followed by our participation in a series of investor conferences over the coming months. We'll see many of you at those events, and we hope you'll stay tuned through the exciting year ahead.
Stephen George Dilly: Thanks, so much thanks again for joining us today, we're looking forward to obviously sharing more details on the technical progress at the tides USA meeting in Boston in a few weeks and followed by our participation in a series of Investor conferences over the coming months, we will see many of you those events and we hope Youll stay.
Stephen George Dilly: Tuned for the exciting year ahead. Thank you.
Operator: This concludes today's call. You may now disconnect.
Speaker Change: This concludes today's call you may now disconnect.
Operator: ?? ?? ?? ?? ?? ?? ?? ?? ??
Operator: Yes.
Operator: Hmm.
Operator: [music].
Operator: Hum.
Operator: Mhm.
Operator: [music].
Operator: Okay.
Operator: [music].
Operator:
Operator: Hum.
Operator:
Operator: [music].
Operator:
Operator: Okay.
Operator: [music].