Q2 2024 Codexis Inc Earnings Call

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Operator: call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this event is being recorded. And now, I'll turn the call over to Carrie McKim, Director of Investor Relations.

Speaker Change: Welcome to the Codexis second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this event is being recorded. And now I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead.

Carrie McKim: Operator. With me today are Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, and Sriram Ryali, Chief Financial Officer. Dr. Stefan Lutz, our SVP of Research, is also here and will be available for any questions during the Q&A. 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 gross 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.

Speaker Change: With me today are Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, and Sriram Ryali, Chief Financial Officer. Dr. Stefan Lutz, our SVP of Research, is also here and will be available for any questions during the Q&A.

Speaker Change: 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.

Speaker Change: including our guidance for 2024 revenue, product revenues, and gross margin on product revenues.

Speaker Change: anticipated milestones, including product launches, technical milestones, and public announcements related thereto, 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, August 8, 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 can 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.

Speaker Change: To the extent that statements contained in this call are not descriptions of historical facts regarding Codexas, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, August 8, 2024.

Speaker Change: 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 can materially affect actual results.

Stephen: Additional information about factors that can materially affect actual results can be found in Codex's filings with the Securities and Exchange Commission. Codex 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.

Stephen Dilly: Thank you, Carrie. And thanks, everyone, for joining us. Just a year ago, we announced our strategic period, focusing on two key areas. Firstly, growing our revenue-generating pharmaceutical manufacturing business, and secondly, enabling the manufacture of siRNA therapeutics through our ecosynthesis manufacturing platform. We're making great progress across both fronts.

Stephen: Thank you, Carrie, and thanks, everyone, for joining.

Stephen: Just a year ago, we announced our strategic period, focusing on two key areas. Firstly, growing our revenue-generating pharmaceutical manufacturing business, and secondly, enabling the manufacture of siRNA therapeutics through our ecosynthesis manufacturing platform.

Stephen Dilly: Part 3 will provide more details on our Q2 performance, but I want to highlight that we are exactly where we expected to be and are reiterating our full year 2024 guidance. We have clear visibility to delivering a strong second half of the year, including achieving double-digit product revenue growth for 2024. Our pharma manufacturing business has a deep pipeline of named product opportunities going into late-stage clinical trials and commercialization, which will drive our near-term product revenue.

Stephen: We're making great progress across both fronts.

Stephen: Sri will provide more of the details on our Q2 performance, but I want to highlight that we are exactly where we expected to be and are reiterating our full year 2024 guidance.

Sri: We have clear visibility to delivering a strong second half of the year, including achieving double-digit product revenue growth for 2024.

Sri: Our pharma manufacturing business has a deep pipeline of named product opportunities going into late-stage clinical trials and commercialization, which will drive our near-term product revenue.

Stephen Dilly: In parallel, we remain focused on adding new screening and evolution programs to the top of the funnel. We expect that this will drive sustained growth throughout the decade, a key part of reaching positive cash flow around the end of 2026. Zeroing in on these streamlined priorities has enabled our team to focus on returning the pharma manufacturing business to product revenue growth this year, driving our emerging double-stranded RNA ligase business, and advancing our vision of becoming a direct producer of siRNA with our EcoSynthesis manufacturing platform. Our plans and revenue targets are ambitious, but we've laid out a calculated, stepwise approach to how we get there. I'd like to take you through that.

Sri: In parallel, we remain focused on adding new screening and evolution programs to the top of the funnel. We expect that this will drive sustained growth throughout the decade, a key part of reaching positive cash flow around the end of 2026.

Sri: Zeroing in on these screen line priorities has enabled our team to focus on returning the pharma manufacturing business to product revenue growth this year.

Sri: driving our emerging double-stranded RNA ligase business and advancing our vision of becoming a direct producer of siRNA with our EcoSynthesis manufacturing platform.

Sri: Our plans and revenue targets are ambitious, but we've laid out a calculated, stepwise approach to how we get there. Take you through that, I'd like to pass the call over to Kevin.

Kevin Norrett: We are seeing continued momentum across each of our key strategic priorities, and I want to spend most of my time today outlining our commercial strategy. I'll start with a recap of the recent TiesUSA meeting.

Kevin: Thanks, Stephen.

Kevin: We are seeing continued momentum across each of our key strategic priorities, and I want to spend most of my time today outlining our commercial strategy.

Kevin Norrett: From there, I'll cover the roadmap to commercialization for our evolving siRNA manufacturing services offering, including more information on our anticipated revenue stream. Before I jump into those updates, however, I want to start on slide three by highlighting that we have further strengthened our commercial organization with the addition of a new Senior Vice President of Commercial Operations, Britton Jimenez. Britton has more than 20 years of experience in the CDMO space, and he brings valuable insights as we position Codexis for our next phase of growth.

Kevin: I'll start with a recap of the recent TiesUSA meeting. From there, I'll cover the roadmap to commercialization for our evolving siRNA manufacturing services offering, including more information on our anticipated revenue streams.

Speaker Change: Before I jump into those updates, however, I want to start on slide 3 by highlighting that we have further strengthened our commercial organization with the addition of a new Senior Vice President of Commercial Operations, Britton Jimenez.

Speaker Change: Britton has more than 20 years of experience in the CDMO space, and he brings valuable insights as we position Codexis for our next phase of growth.

Kevin Norrett: Part of that next phase of growth includes our pharma manufacturing business, which, as Stephen just mentioned, we expect to be strong for the second half of the year due to orders that already exist or are expected. Turning to the Ecosynthesis Platform, from a technical standpoint, we are ahead of where we thought we would be a year ago. This has accelerated our commercial momentum, and we are now engaged with the major players in this space.

Speaker Change: Part of that next phase of growth includes our pharma manufacturing business, which as Stephen just mentioned, we expect to be strong for the second half of the year due to orders that already exist or are expected.

Speaker Change: Turning to the Ecosynthesis Platform, from a technical standpoint, we are ahead of where we thought we would be a year ago. This has accelerated our commercial momentum, and we are now engaged with the major players in this space.

Kevin Norrett: When we began working on this technology, we envisioned a platform that could be put into customers' hands so they could manufacture their own siRNA. While this is still a primary part of our plan, over time, we see ourselves growing thoughtfully into a direct producer of significant quantities of GMP-grade sRNA to capture the most value. This is not a minor undertaking.

Speaker Change: When we began working on this technology, we envisioned a platform that could be put into customers' hands so they could manufacture their own siRNA.

Speaker Change: While this is still a primary part of our plan, over time we see ourselves growing thoughtfully into a direct producer of significant quantities of GMP-grade siRNA to capture the most value.

Kevin Norrett: As you'll hear today, we are already underway with our plans to produce GOP-grade material, and we envision a stepwise approach to moving up the rest of the value chain. To walk you through our strategy, let me first set the stage by taking you back to the recent TidesUSA meeting on slide four. Here, we announce two important updates on our progress. First, we demonstrated the sequential synthesis of a full-length oligonucleotide. Second, we rolled out our double-stranded RNA ligase screening and optimization services, which builds upon our years of experience in ligase enzyme engineering. Having firmly established our proof of technology, the players in this space have taken note.

Speaker Change: This is not a minor undertaking. As you'll hear today, we are already underway on our plans to produce GOP-grade material, and we envision a stepwise approach to moving up the rest of the value chain.

Speaker Change: To walk you through our strategy, let me first set the stage by taking you back to the recent TIDES USA meeting on slide four.

Speaker Change: There, we announce two important updates on our progress.

Speaker Change: First, we demonstrated the sequential synthesis of a full-length oligonucleotide.

Speaker Change: Second, we rolled out our double-stranded RNA ligase screening and optimization services, which builds upon our years of experience in ligase enzyme engineering.

Speaker Change: Having firmly established our proof of technology, the players in this space have taken note.

Kevin Norrett: Taking a closer look at our TISE presentations, on slide 5, we highlighted both the capabilities and flexibility of our Ecosynthesis platform, synthesizing all of the nucleotides from starting material through the attachment of a targeting moiety. What you may have missed from our presentation is that we synthesize one of the Lomaceron strands at full length. We also synthesize an extended fragment of a Gervaseron strand, which can be ligated to make the full-length therapeutic acid.

Speaker Change: Taking a closer look at our tides presentations on slide five, we highlighted both the capabilities and flexibility of our EcoSynthesis platform, synthesizing all of the nucleotides from starting material through the attachment of a targeting moiety.

Speaker Change: Well, you may have missed from our presentation, is that we synthesized one of the Lamasseron strands at full length. We also synthesized an extended fragment of a Javasron strand, which can be ligated to make the full length therapeutic acid.

Kevin Norrett: We believe that these real-world examples highlight the dynamic nature of our platform. As we shared at TIDES, in addition to incorporating all of the necessary nucleotide modifications, we consistently achieved coupling efficiency of greater than 98%, which is on par with phosphoramidite chemistry. We also executed the enzymatic attachment of a conjugation moiety and confirmed the lack of notable impurities typically observed when using chemical synthesis methods.

Speaker Change: We believe that these real-world examples highlight the dynamic nature of our platform.

Speaker Change: As we shared at TIDES, in addition to incorporating all of the necessary nucleotide modifications, we consistently achieved coupling efficiency of greater than 98%, which is on par with phosphoramidite chemistry.

Speaker Change: We also executed the enzymatic attachment of a conjugation moiety and confirmed the lack of notable impurities typically observed when using chemical synthesis methods.

Kevin Norrett: We are currently in conversations with many large pharma players who are interested in this groundbreaking capability, and later in this presentation, I'll share how that interest could translate into revenue. Moving to slide six, we continue to view our double-stranded RNA ligase program as the bridge into enzymatic solutions for customers who are currently using traditional chemistry. We know that large pharma and CDMOs already using phosphoramide chemistry are increasingly interested in using enzymes in siRNA manufacturing due to the potential for increased efficiency and improved margins.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: We are currently in conversations with many large pharma players who are interested in this groundbreaking capability, and later in this presentation, I'll share how that interest could translate into revenues.

Speaker Change: to

Speaker Change: Moving to slide six, we continue to view our double-stranded RNA ligase program as the bridge into enzymatic solutions for customers who are currently using traditional chemistry.

Speaker Change: We know that large pharma and CDMOs already using phosphoramide chemistry are increasingly interested in using enzymes in siRNA manufacturing due to the potential for increased efficiency and improved margins.

Kevin Norrett: This is particularly valuable in assets targeting large indications, where drugs tend to be priced lower, and higher margins become much more impactful as volume increases. We have continued to say ligation combined with traditional chemistry is the next natural step. This became abundantly clear during our interactions with customers at Tides USA, where they immediately recognized the benefits of our engineered lighting.

Speaker Change: This is particularly valuable in assets targeting large indications, where drugs tend to be priced lower and higher margins become much more impactful as volume increases.

Speaker Change: We have continued to say ligation combined with traditional chemistry is the next natural step. This became abundantly clear during our interactions with customers at Tides USA, where they immediately recognized the benefits of our engineered ligase.

Kevin Norrett: Here you can see a comparison between our engineered variant versus the wild type or natural enzyme. There are several reasons why customers are interested in using engineered legacy. First, they can drive higher volumetric productivity. This translates into fewer batches to make the same amount of API, offering immediate cost savings with reduced time and purification, as well as potentially higher product yield. Second, engineered ligases can offer superior performance across a broad range of modified RNA oligonucleotide substrates, which offers versatility in design strategies and mitigates the need to adjust the starting substrate to fit a single enzyme.

Speaker Change: Here you can see a comparison between our engineered variant versus the wild type or natural enzyme.

Speaker Change: There are several reasons behind why customers are interested in using engineered ligases.

Speaker Change: First, they can drive higher volumetric productivity.

Speaker Change: This translates into pure batches to make the same amount of API, offering immediate cost savings with reduced time and purification, as well as potentially higher product yields.

Speaker Change: Second, engineered ligases can offer superior performance across a broad range of modified RNA oligonucleotide substrates, which offers versatility in design strategies and mitigates the need to adjust the starting substrate to fit a single enzyme.

Kevin Norrett: These are just two of the potential benefits that should enable broader adoption of our ligation technology across a diverse set of sRNA assets. With the potential to significantly reduce COGs, our library of engineered ligases provides a clear financial incentive for companies to look at switching from wild-type, even for later stage assets. In fact, we saw this dynamic with our first large pharmacus.

Speaker Change: These are just two of the potential benefits that should enable broader adoption of our ligation technology across a diverse set of Pessirony assets.

Speaker Change: With the potential to significantly reduce COGS, our library of engineered ligases provides a clear financial incentive for companies to look at switching from wild type, even for later stage assets.

Kevin Norrett: They determined that the benefits of our engineered ligase were compelling enough to test in clinical scale-up for a Phase II asset moving into Phase III. This is an encouraging signal, and we are focused on generating additional orders. More importantly, we expect the double-stranded RNA ligase program to become a repeatable, sustainable business that translates into meaningful revenues and supports our path to positive cash flow around the end of 2020. On slide seven, you can see a case study comparing the revenue opportunity for a single asset using our legacies versus a typical single pharma manufacturing.

Speaker Change: In fact, we saw this dynamic with our first large pharmacistamer. They determined that the benefits of our engineered ligades were compelling enough to test in clinical scale up for a phase two asset moving into phase three.

Speaker Change: This is an encouraging signal, and we are focused on generating additional orders.

Operator: Conference Call. At this time, all participants are in a listen only mode. The question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. Please note this event is being recorded.

Speaker Change: More importantly, we expect the Double-Stranded RNA LIGASE program to become a repeatable, sustainable business that translates into meaningful revenues and supports our path to positive cash flow around the end of 2026.

Carrie McKim: And now, I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead. Thank you, operator. With me today, our Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, and Sriram Ryali, Chief Financial Officer. Dr. Stefan Lutz, our SPP of Research, is also here and will be available for any questions during the Q&A.

Speaker Change: On slide 7, you can see a case study comparing the revenue opportunity for a single asset using our ligase versus a typical single pharma manufacturing enzyme.

Kevin Norrett: Assuming a large indication, SIR&A Therapeutic, with a projected peak annual sales of just $1 billion, an estimated 10% cost of goods sold is about $100 million. This cost percent is in line with what we're hearing at the $1 million per kilogram for a commercial drug with 100,000 patients treated per year. Customer feedback indicates that ligation can impact roughly 20% of their cogs, equating to potential annual savings of approximately $20 million for the pharma customer at peak for the single asset.

Speaker Change: Assuming a large indication, SIR&A Therapeutic, with a projected peak annual sales of just $1 billion, an estimated 10% cost of goods sold is about $100 million.

Speaker Change: This COGS percent is in line with what we're hearing at the $1 million per kilogram for a commercial drug with 100,000 patients treated per year.

Carrie McKim: During this call, management will be making a number of forward-looking statements within the meaning of the Private Security's 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 there too, as well as our strategies and prospects for revenue growth and successful execution of current and future programs and partnerships. To the extent that statements contained in this call are not descriptions of historical facts regarding Codexis, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, August 8, 2024.

Speaker Change: Customer feedback indicates that ligation can impact roughly 20% of their COGS, equating to the potential annual savings of approximately $20 million for the pharma customer, at peak, for the single asset.

Kevin Norrett: If Codexis were to capture roughly $10 million of those savings, that's double what a top-performing pharma manufacturing enzyme can deliver in a single year. Just imagine if this case study were for a drug in a mass market indication like cholesterol control, which targets millions of patients, where an asset could reach $10 billion in sales at peak. They're using the same math.

Speaker Change: If Codexis were to capture roughly $10 million of those savings, that's double what a top-performing pharma manufacturing enzyme can deliver in a single year.

Speaker Change: Just imagine if this case study were for a drug in a mass market indication like cholesterol control, which targets millions of patients, where an asset could reach $10 billion in sales at peak.

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 can 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.

Kevin Norrett: The revenue opportunity for Codexis could potentially be 5 to 10 times higher on an annual basis. Given our current pharma manufacturing run rate of roughly $40 million, it doesn't take many ligase programs for that to become the biggest driver of our business. The economics get even more compelling if we move up the value chain, potentially providing kilograms of sRNA for use in clinical trials. On slide 8, you can see the siRNA therapeutic revenue opportunity for Codexis for a given asset by stage based on what our market research says customers are currently paying.

Speaker Change: They're using the same math, the revenue opportunity to Codexis could potentially be five to ten times higher on an annual basis.

Speaker Change: Given our current pharma manufacturing run rate of roughly $40 million, it doesn't take many LIGATES programs for that to become the biggest driver of our business.

Carrie McKim: Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law.

Speaker Change: The economics can even more compelling if we move up the value chain, potentially providing kilograms of Sriram A for use in clinical trials.

Stephen Dilly: And now, I'll turn the call over to Steven. Thank you, Carrie, and thanks everyone for joining.

Stephen Dilly: Just a year ago, we announced a strategic pit, focusing on two key areas. Firstly, growing our revenue-generating pharmaceutical manufacturing business, and secondly, enabling the manufacture of SIR and Atherapeutics through our ecosystem's manufacturing platform. We're making great progress across both fronts. Shree will provide more of the details on our Q2 performance, but I want to highlight that we are exactly where we expected to be and are reiterating our full year 2024 guidance.

Speaker Change: On flight 8, you can see the SIRN8 therapeutic revenue opportunity to connect this for a given asset by stage based on one of our market resources customers are currently paying.

Kevin Norrett: What we've heard from potential customers is that today's development stage assets entering the clinic are seeing bottlenecks due to lead time and raw materials required to establish new manufacturing protocols. As a result, early stage programs carry a much higher cost per kilogram and are at risk of timeline delay.

Speaker Change: What we've heard from potential customers is that today, development stage assets entering the clinic are seeing bottlenecks due to lead-time raw materials required to establish new manufacturing protocols.

Speaker Change: As a result, early stage programs carry a much higher cost per kilogram and are at risk of timeline delays.

Kevin Norrett: Based on this dynamic, we estimate that the revenue opportunity per preclinical asset using the Ecosynthesis platform is more than $1 million. The nice thing about these early stage assets is that they require a relatively small volume of material that can likely be handled within our Eco-Innovation Lab currently under development. As you move through clinical trials, the cost per kilogram comes down, but the quantities needed go up so dramatically that the revenue opportunity becomes incredibly large. Following the visual here, Phase 1-2 assets could generate somewhere between $4 to $8 million in top-line revenue for Codex, similar to what we see in our farm manufacturing business.

Speaker Change: Based on this dynamic, we estimate that the revenue opportunity for a preclinical asset using the Ecosynthesis platform is more than $1 million.

Stephen Dilly: We have clear visibility to delivering a strong second half of the year, including achieving double-digit product revenue growth for 2024. Our farmer manufacturing business has a deep pipeline of named product opportunities going into late-stage clinical trials and commercialization, which will drive our near-term product revenue. In parallel, we remain focused on adding new screening and evolution programs to the top of the funnel. We expect that this will drive sustained growth throughout the decade, a key part of reaching positive cash flow around the end of 2026.

Speaker Change: The nice thing about these early stage assets is that they require a relatively small volume of material that can likely be handled within our eco-innovation lab currently under development.

Speaker Change: As you move through clinical trials, the cost per kilogram comes down, but the quantities needed go up so dramatically that the revenue opportunity becomes incredibly significant.

Speaker Change: Following the visual here, Phase 1-2 assets could generate somewhere between $4-8 million in top line revenue for Codexis, similar to what we see in our pharma manufacturing business.

Kevin Norrett: However, by Phase 3, we estimate a per-asset opportunity of roughly $100 million, followed by a potential annual revenue of $150 million for commercial drug volume. At that annual revenue figure for 10 years, a single product could become a $1.5 billion opportunity for cadets. With the potential for 50% or greater gross margins for this business, it's easy to see why we want to climb the value chain to become a direct producer of GMP grade SIR. On slide nine, let me walk you through how we get there.

Stephen Dilly: Zeroing in on the screen-line priorities has enabled our team to focus on returning the farmer manufacturing business to product revenue growth this year, driving our emerging double-stranded RNA ligase business, and advancing our vision of becoming a direct producer of SIR and A without eco-synthesis manufacturing platform.

Speaker Change: However, by Phase 3, we estimate a per-asset opportunity of roughly $100 million, followed by a potential annual revenue of $150 million for commercial drug volumes.

Speaker Change: At that annual revenue figure for 10 years, a single product could become a $1.5 billion opportunity for Codexis.

Stephen Dilly: Our plans and revenue targets are ambitious, but we've laid out a calculated stepwise approach to how we get there.

Speaker Change: With the potential for 50% of our greater gross margins for this business, it's easy to see why we want to climb the value chain to become a direct producer of GNP Grade Signernet.

Kevin Norrett: Take you through that, I'd like to pass the call over to Kevin. Thanks, Stephen. We are seeing continued momentum across each of our key strategic priorities, and I want to spend most of my time today outlining our commercial strategy.

Speaker Change: On slide 9, let me walk you through how we get there.

Kevin Norrett: First, as I mentioned earlier, we are already generating orders from our double-stranded RNA ligase program. Second, we are also in conversation with several large pharma and CDMOs to deliver specific constructs using ligation or sequential, which they can compare to their chemically derived ones, an important proof of concept. Third, the consolidation of our sRNA manufacturing capabilities in the Ecosynthesis Innovation Lab remains on track for completion around the end of the year. Centralizing our efforts in one dedicated space will drive efficiency for us and our customers.

Speaker Change: First, as I mentioned earlier, we are already generating orders from our double-stranded RNA ligase program.

Kevin Norrett: I'll start with the recap of the recent ties USA meeting. From there, I'll cover the roadmap to commercialization for our evolving SIR&A manufacturing services offering, including more information on our anticipated revenue streams. Before I jump into those updates, however, I want to start on slide three by highlighting that we have further strengthened our commercial organization with the addition of a new senior vice president of commercial operations, Britain Jimenez. Britain has more than 20 years of experience in the CDMO space, and he brings valuable insight as we position Codexis for our next phase of growth.

Speaker Change: Second, we are also in conversation with several large pharma and CDMOs to deliver specific constructs using ligation and or sequential synthesis.

Speaker Change: which they can compare to their chemically derived ones, an important proof of concept.

Speaker Change: Third, the consolidation of our siRNA manufacturing capabilities in the Ecosynthesis Innovation Lab remains on track for completion around the end of the year.

Speaker Change: Centralizing our efforts in one dedicated space will drive efficiency for us and our customers.

Kevin Norrett: Fourth, we expect to use a flexible combination of ligation and sequential synthesis to produce GLP-grade sRNA in 2025, representing our first step toward becoming a CDMO. Through our Eco-Innovation Lab, we expect to supply customers with tens to hundreds of grams of material, which will allow them to get through toxicology studies in preparation for an I&E. Finally, the next natural step in becoming an siRNA provider is to build our own GMP facility that can deliver approximately a few hundred kilograms of material annually to supply customers for clinical trials.

Speaker Change: Fourth, we expect to use a flexible combination of ligation and sequential senses to produce GLP grade SIRNA in 2025, representing our first step toward becoming a CDMO.

Kevin Norrett: Part of that next phase of growth includes our farmer manufacturing business, which as Stephen just mentioned, we expect to be strong for the second half of the year due to orders that already exist or are expected. Turning to the ecosystem's platform, from a technical standpoint, we are ahead of where we thought it would be a year ago. This has accelerated our commercial momentum, and we are now engaged with the major players in this space.

Speaker Change: Through our Eco-Innovation Lab, we expect to supply customers with tens to hundreds of grams of material, which will allow them to get through toxicology studies in preparation for an I&E.

Speaker Change: Finally, the next natural step in becoming an siRNA provider is to build our own GMP facility that can deliver approximately a few hundred kilograms of material annually to supply customers clinical trials.

Kevin Norrett: When we began working on this technology, we envisioned a platform that could be put into customers' hands so they could manufacture their own SIR&A. While this is still a primary part of our plan, over time, we see ourselves growing thoughtfully into a direct producer of significant quantities of GNP grade SIR&A to capture the most value. This is not a minor undertaking. As you'll hear today, we are already underway on our plans to produce GNP grade material, and we envision a stepwise approach to moving up the rest of the value chain.

Kevin Norrett: While we have already started scoping this facility, which would likely take up to three years to complete, we are also engaged in partnering conversations to provide customers with a nearer-term path to GMP manufacturing using our technology. We also know that we need to address the raw materials supply chain for both partners and our own GMP facilities.

Speaker Change: While we have already started scoping this facility, which would likely take up to three years to complete, we are also engaged in partnering conversations to provide customers with a nearer term path to GMP manufacturing using our technology.

Speaker Change: We also know that we need to address the raw material supply chain for both partnering and our own GMP facility.

Kevin Norrett: While we see building our GMP footprint as an important step to climbing the value chain, I want to be clear that we are not relying on revenue from that facility to get to positive cash flow expected around the end of 2026. That path is based upon growth from our existing pharma manufacturing pipeline plus a couple of double-stranded RNA ligase orders, and we will be very thoughtful about what we believe is the best way to fund this GMP investment without compromising that trajectory.

Speaker Change: While we see building our GMP footprint as important to climbing the value chain, I want to be clear that we are not relying on revenue from that facility to get to positive cash flow expected around the end of 2026.

Kevin Norrett: To walk you through our strategy, let me first set the stage by taking you back to the recent TIES USA meeting on slide four. There, we announced two important updates on our progress. First, we demonstrated the sequential synthesis of a full length oligoducleotide. Second, we rolled out our double-stranded RNA ligase screening and optimization services, which builds upon our years of experience in ligase enzyme engineering. Having firmly established our proof of technology, the players in this space have taken note.

Speaker Change: That path is based upon growth from our existing pharma manufacturing pipeline, plus a couple of double-stranded RNA ligase orders, and we will be very thoughtful on what we believe is the best way to fund this GMP investment without compromising that trajectory.

Kevin Norrett: On slide 10, I want to briefly summarize the various revenue streams that flow from the commercialization plan that I just laid out. First, we expect to drive near-term revenue through our customized double-stranded RNA ligase screening and optimization services. For assets that require customized engineering, this will likely be R&D revenue with the potential to translate into product revenue as customers scale their clinical trials. Alternatively, we could see near-term product revenue if we identify a suitable engineered ligase variant from our extensive library, and they can scale quickly.

Speaker Change: On flight 10, I want to briefly summarize the various revenue streams that flow from the commercialization plan that I just laid out.

Speaker Change: ah

Speaker Change: First, we expect to drive near-term revenue through our customized double-stranded RNA ligase screening and optimization services.

Kevin Norrett: Taking a closer look at our TIES presentations on slide five, we highlighted both the capabilities and flexibility of our eco-synthesis platform, synthesizing oligoducleotides from starting material through the attachment of a targeting moiety. What you may have missed from our presentation is that we synthesize one of the Lamassarons strands at full length. We also synthesize an extended fragment of a Javassarons strand, which can be ligated to make the full length therapeutic asset.

Speaker Change: For assets that require customized engineering, this will likely be R&D revenue with the potential to translate into product revenue as customer scale.

Speaker Change: their clinical trials.

Speaker Change: Alternatively, we could see near-term product revenue if we identify a suitable engineered ligase variant from our extensive library and they can scale quickly.

Kevin Norrett: Second, and critical to our longer-term value creation, we could also take on development projects through our EcoInnovation Lab, where we can do ligation and sequential synthesis to create customers' desired siRNA constructs. Third, as I mentioned, the small quantities of GLP-grade sRNA we expect to produce in the EcoInnovation Lab could provide modest service and product-related revenue over the next few years. Finally, beyond 2026, we expect to generate revenue by providing customers with GMP-grade siRNA, initially through CDMO partnerships and then with our own GMP footprint.

Speaker Change: Second, and critical to our longer-term value creation, we can also take on development projects through our Eco-Innovation Lab, where we can do ligation and sequential senses to create customers desired SIR and A-Construcks.

Kevin Norrett: We believe that these real-world examples highlight the dynamic nature of our platform. As we shared at TIES, in addition to incorporating all of the necessary nucleotide modifications, we consistently achieved coupling efficiency of greater than 98%, which is on par with phosphoramidic chemistry. We also executed the enzymatic attachment of a conjugation moiety and confirmed the lack of notable impurities typically observed when using chemical synthesis methods. We are currently in conversations with many large pharma players who are interested in this groundbreaking capability, and later in this presentation I'll share how that interest could translate into revenues.

Speaker Change: Third, as I mentioned, the small quantities of GLP grade SIRNA, we expect to produce in the Eco Innovation Lab, could provide modest service and product related revenue over the next few years.

Speaker Change: Finally, beyond 2026, we expected January revenue by providing customers with GMP grade SIRNA initially through CDMO partnerships and then with our own GMP footprint.

Kevin Norrett: Moving to our milestones on slide 11, as you have seen, the TIES meeting has become an important venue for us to showcase technical updates and to advance commercial discussions. At the upcoming TIDES Europe meeting in November, we expect to show continued validation of our EcoSynthesis platform with customers and partners publicly expressing their excitement about our technology. With that, let me turn the call over to Sree to discuss our financial results and outlook for the rest of the year.

Speaker Change: Moving to our milestones on slide 11, as you have seen the TISE meeting has become an important venue for us to showcase technical updates and into advanced commercial discussions.

Kevin Norrett: Moving to slide six, we continue to view our double-stranded RNA ligase program as the bridge into enzymatic solutions for customers who are currently using traditional chemistry. We know that large pharma and CDMOs already using phosphoraminated chemistry are increasingly interested in using enzymes and SIR and A manufacturing due to the potential for increased efficiency and improved margins. This is particularly valuable in assets targeting large indications, where drugs tend to be price lower and higher margins become much more impactful as volume increases.

Speaker Change: at the upcoming TIDES Europe meeting in November .

Speaker Change: We expect to show continued validation of our EcoSynthesis platform with customers and partners publicly expressing their excitement about our technology.

Speaker Change: With that, let me turn the call over to Sri to discuss our financial results and outlook for the rest of the year.

Sriram Ryali: Starting on slide 12, Q2 revenues were exactly in line with our expectations and the guidance we provided during our last call. Looking ahead, we continue to see a strong second half for this year, and we have a clear line of sight to delivering on our full year guidance of at least 10% year-over-year product revenue growth. I'll walk through key elements driving our second half revenue expectations shortly, but let me first review Q2.

Sri: Thank you, Kevin, and good afternoon, everyone. Starting on Flight 12, Q2 Revenue, where a exactly in line with our expectations, and the guys we provided during our last call.

Kevin Norrett: We have continued to say ligation combined with traditional chemistry is the next natural step. This became abundantly clear during our interactions with customers at TI-USA where they immediately recognize the benefits of our engineered ligase. Here, you can see a comparison between our engineered variant versus the wild type or natural enzyme. There are several reasons behind why customers are interested in using engineered ligases. First, they can drive higher volumetric productivity. This translates into fewer batches to make the same amount of API, offering immediate cost savings with reduced time and purification, as well as potentially higher product yields.

Sri: Looking ahead, we continue to see a strong second half of this year, and we have a clear line of sight to the delivering on our full-year guidance that we can present year over year product revenue growth.

Speaker Change: I'll walk through key elements driving our second half revenue expectation shortly, but let me first review Q2.

Sriram Ryali: Total revenues were $8 million for the second quarter of 2024, including product revenues of $6.3 million and R&D revenues of $1.7 million. As expected, this is down compared to Q2 of 2023. We were always projecting that Q2 2024 would be our lowest product revenue quarter of the year, which is the opposite of last year, where Q2 was our highest quarter. The decrease in R&D revenue primarily reflects having biotherapeutics revenue last year as well as a non-cash $5 million license fee we recognized in Q2 2023. The product gross margin was 45% this quarter.

Sri: Total revenues were $8 million for the second quarter of 2024, including product revenues of $6.3 million, and R&D revenues of $1.7 million.

Sri: As expected, this is down compared to Q2 of 2023.

Speaker Change: You're always projecting that Q22024 would be our lowest product revenue quarter of the year, which is the opposite of last year for Q2 with our highest quarter.

Kevin Norrett: Second, engineered ligases can offer superior performance across a broad range of modified RNA nucleotide substrates, which offers versatility in design strategies and mitigates the need to adjust the starting substrate to fit a single enzyme. These are just two of the potential benefits that should enable broader adoption of our ligation technology across a diverse set of SIR and A assets. With the potential that significantly reduced COGS, our library of engineered ligases provides a clear financial incentive for companies to look at switching from wild type even for later stage assets.

Speaker Change: The decrease in R&D revenue primarily reflects having biotherapeutics revenue last year, as well as a non-cash $5 million license fee we recognized in Q2 2023.

Speaker Change: Product gross margin was 45% this quarter. This was down compared to Q2 2023, largely driven by product mix.

Sriram Ryali: This was down compared to Q2 2023, largely driven by product mix. Turning to expenses, RMD expenses for the second quarter of 2024 were $11.4 million compared to $17.3 million last year. You can see the continued benefit of the expense actions we took last year reflected in the 34% year-over-year reduction in R&D expenses. I also want to note that Q2 R&D expenses were up a little compared to Q1 of this year, and we expect to see a slight ramp-up in the second half of the year for Ecosynthesis Innovation Lab investment.

Speaker Change: Turning to expenses, RMD expenses for the second quarter of 2024 were $11.4 million compared to $17.3 million last year.

Speaker Change: You can see the continued benefit of the expense actions we took last year, reflected in the 34% year over year reduction in R&D expenses.

Kevin Norrett: In fact, we saw this dynamic with our first large pharma customer. They determined that the benefits of our engineered ligase were compelling enough to test and clinical scale up for a phase two asset moving into phase three. This is an encouraging signal, and we are focused on generating additional orders. More importantly, we expect the double-stranded RNA ligase program to become a repeatable sustainable business that translates into meaningful revenues and supports our path to positive cash flow around the end of 2026.

Speaker Change: I also want to note that Q2 R&D expenses were up a little compared to Q1 of this year, and we expect to see a slight ramp up in the second half of the year for Ecosynthesis Innovation Lab investment.

Sriram Ryali: SG&A expenses were $15.7 million compared to $13.4 million in the second quarter of 2023. This was primarily driven by a one-time, non-cash, stock-based compensation modification expense of $2 million. Excluding this one-time charge, SG&A expenses were $13.7 million in the quarter and flat to last year.

Speaker Change: SG&A expenses were $15.7 million compared to $13.4 million in the second quarter of 2023.

Kevin Norrett: On flight seven, you can see a case study comparing the revenue opportunity for a single asset using our ligase versus a typical single pharma manufacturing enzyme. Assuming a large indication, SIR and A therapeutic with a projected peak annual sales of just $1 billion, an estimated 10% cost of goods sold is about $100 million. This COGS percent is in line with what we are hearing at the $1 million per kilogram for a commercial drug with 100,000 patients treated pre, customer feedback indicates that ligation can impact roughly 20% of their cogs equating to the potential annual savings of approximately $20 million for the pharma customer at peak for the single asset. If Codexis were to capture roughly $10 million of those savings, that's double what a top performing pharma manufacturing ends on can deliver in a single year.

Sriram Ryali: Now I want to take a closer look at our 2024 revenue dynamic. The graph on slide 13 shows a historical distribution of our product revenue, excluding tax, across the first and second halves of the year for 2020 through 2024. As you can see, and as we have discussed before, we typically see an uneven distribution of revenue throughout the year, primarily driven by the timing of customer orders.

Sriram Ryali: As we have previously communicated, roughly 40% of our product revenue is weighted towards the first half of this year, making 2024 look more like what we saw between 2020 and 2022. The takeaway here is that our product revenue tends to be lumpy, and instead of focusing on any single quarter, the overall annual trends are much better indicators of our progress. Taking a closer look at our product revenue trends, the graph on slide 14 shows a year-to-date comparison for the last three years.

Speaker Change: The takeaway here is that our product revenue tends to be lumpy and instead of focusing on any single quarter. The overall annual trends are much better indicators of our progress.

Kevin Norrett: Just imagine if this case study were for a drug in a mass market indication like cholesterol control, which targets millions of patients, where an asset could reach $10 million in sales at peak. They are using the same app the revenue opportunity to Codexis could potentially be 5 to 10 times higher on an annual basis. Given our current pharma manufacturing run rate of roughly $40 million, it doesn't take many ligates programs for that to become the biggest driver of our business.

Speaker Change: Taking a closer look at our product revenue trends the graph on slide 14 shows our year to date comparison for the last three years.

Sriram Ryali: As you can see, we have reduced revenue concentration in the big three commercial pharma manufacturing products as our pipeline programs continue to advance. Over time, we expect this diversification to smooth out some of the quarter-to-quarter lumpiness. Turning to guidance, we are confident in reiterating our 2024 product revenue and gross margin ranges. And here's how we get there. Our actual first half product revenues of $15.8 million are expected to make up roughly 40% of the year, with roughly 60% weighted to the second half. Importantly, most of the second half revenue comes from existing and expected orders. This includes orders where we already have binding commitments or very strong indications of likelihood.

Speaker Change: So as you can see we have reduced revenue concentration and the big three commercial pharma manufacturing products as our pipeline programs continue to advance.

Speaker Change: Over time, we expect this diversification to smooth out some of the quarter to quarter Lumpiness.

Speaker Change: Turning to guidance, we are confident in reiterating our 2020 for product revenue and gross margin ranges and here's how we get there.

Kevin Norrett: The economics can even more compelling if we move up the value chain, potentially providing kilograms of SIRNA for use in clinical trials. On slide 8, you can see the SIRNA therapeutic revenue opportunity to Codexis for a given asset by stage based on one of our market research as customers are currently paying. What we've heard from potential customers is that today, development stage assets entering the clinic are seeing bottlenecks due to lead time or raw materials required to establish new manufacturing protocols.

Speaker Change: Our actual first half product revenues of $15 8 million are expected to make up roughly 40% of the year with roughly 60% weighted to the second half.

Speaker Change: Importantly, most of the second half revenue comes from existing unexpected orders.

Speaker Change: This includes orders, where we already have binding commitments are very strong indication of likelihood.

Sriram Ryali: As an example, we are contracted to deliver a two and a half million dollar double-stranded RNA ligase order from a large pharma customer in Q4. We also expect the product mix in the second half of the year to include higher-margin products as compared to the first half of the year. To help with modeling, expect Q3 product revenue to be in line with Q1 of this year, followed by a strong Q4 and an overall return to at least 10% product revenue growth versus 2023.

Speaker Change: As an example, we are contracted to deliver the $2 5 million double stranded RNA why does order from a large pharma customer in Q4.

Kevin Norrett: As a result, early stage programs carry a much higher cost per kilogram and are at risk of timeline delays. Based on this dynamic, we estimate that the revenue opportunity per preclinical asset using the Ecosynthesis platform is more than $1 million. The nice thing about these early stage assets is that they require a relatively small volume of material that can likely be handled within our eco-innovation app currently under development. As you move through clinical trials, the cost per kilogram comes down, but the quantities needed go up so dramatically that the revenue opportunity becomes incredibly significant.

Speaker Change: We also expect the product mix in the second half of the year to include higher margin products as compared to the first half of the year.

Speaker Change: To help with modeling, we expect Q3 product revenue to be in line with Q1 of this year, followed by a strong Q4 and an overall return to at least 10% product revenue growth versus 2023.

Speaker Change: Shifting to slide 15, as we previewed in May our Q2, R&D revenue was roughly in line and actually better than this year's Q1 R&D base business.

Sriram Ryali: Moving to slide 15, as we previewed in May, our Q2 R&D revenue was roughly in line and actually better than this year's Q1 R&D-based business. And when we talk about our base business, we are excluding revenue from non-recurring items and discontinued programs like biotherapeutics.

Kevin Norrett: Following the visual here, phase 1, 2 assets could generate somewhere between $4 to $8 million in top-line revenue for Codexis, similar to what we see in our farmer manufacturing business. However, by phase 3, we estimated per asset opportunity of roughly $100 million, followed by a potential annual revenue of $150 million for commercial drug volumes. At that annual revenue figure for 10 years, a single product could be of a $1.5 billion opportunity for Codexis. With the potential for 50% are greater growth margins for this business, it's easy to see why we want to climb the value chain to become a direct producer of GNP-grade SIRNA.

Speaker Change: And when we talked about our base business, we are excluding revenue from nonrecurring items and discontinued programs like bio therapeutics.

Speaker Change: Looking at our full year R&D guidance range of $18 million to $22 million, Let me take you through how we get there.

Sriram Ryali: Looking at our full year R&D guidance range of $18 to $22 million, let me take you through how we get there. Our R&D-based business run rate is approximately six to seven million dollars. In Q1, we also recorded $6 million related to the double-stranded DNA ligase agreement with Roche. Looking ahead, the rest of our 2024 R&D revenue will come from new projects and other one-off license fees anticipated in the back half of this year.

Speaker Change: Our R&D base business run rate is approximately $6 million to $7 million.

Speaker Change: In Q1, we also recorded $6 million related to the double stranded DNA ligase agreement with Roche.

Speaker Change: Looking ahead, the rest of our 2024 R&D revenue will come from new projects and other one off license fees and anticipated in the back half of this year.

Sriram Ryali: To drive that, we have continued to make significant progress in getting several new screening programs off the ground across mid-sized pharma and large biotech. We expect these programs to translate into R&D revenues later this year. In terms of modeling, Q3 R&D revenue is expected to be roughly in line with Q1 and Q2, followed by a strong Q4 based on the factors I just outlined. Moving to slide 16, we ended the quarter in a strong cash position with $73.2 million in cash, cash equivalents, and investments, which we continue to expect will fund our planned operations through positive cash flow anticipated around the end of 2026.

Speaker Change: To drive that we have continued to make significant progress getting several new screening programs off the ground.

Speaker Change: Some midsized pharma and large biotech.

Kevin Norrett: On slide 9, let me walk you through how we get there. First, as I mentioned earlier, we are already generating orders from our double-stranded RNA ligase program. Second, we are also in conversation with several large farmer and CDMOs to deliver specific constructs using ligation and or sequential synthesis, which they can compare to their chemically derived ones, an important proof of concept.

Speaker Change: These programs translate into R&D revenues later this year.

Speaker Change: In terms of modeling Q3, R&D revenue is expected to be roughly in line with Q1 and Q2, followed by a strong Q4 based on the factors I just outlined.

Speaker Change: Moving to slide 16, we ended the quarter in a strong cash position was $73 $2 million cash cash equivalents and investments, which we continue to expect will fund our planned operations through positive cash flow anticipated around the end of 2026.

Kevin Norrett: Third, the consolidation of our SIRNA manufacturing capabilities. [inaudible] Centralizing our efforts in one dedicated space will drive efficiency for us and our customers. Fourth, we expect to use a flexible combination of ligation and sequential census to produce GLP grade SIRNA in 2025, representing our first step toward becoming a CDMO. Through our eco-innovation lab, we expect to supply customers with tens to hundreds of grams of material, which will allow them to get through toxicology studies in preparation for an IND.

Sriram Ryali: That path to positive cash flow means a roughly doubling of product revenue by 2026. As you heard today, we have a clear path to get there, primarily based on growth that's already baked in via our existing pharma manufacturing pipeline, plus a couple of double-stranded RNA ligase orders. From there, we see an even higher trajectory for Codexis as we climb the value chain and become a full-fledged siRNA service provider. Now, we'll turn the call back to Stephen.

Speaker Change: That path to positive cash flow will say roughly doubling of product revenue by 2026.

Speaker Change: As you heard today, we have a clear path to get there primarily based on growth that's already baked in VR existing pharma manufacturing pipeline plus a couple of double stranded RNA why disorders.

Speaker Change: From there, we see an even higher trajectory for codexis as we climb the value chain and become a full fledged SA RNA service provider.

Speaker Change: And now I will turn the call back to Steven.

Steven: Thank you Sri.

Stephen Dilly: As you can hear from today's commentary, we have a strong conviction in our path to becoming a major player in siRNA synthesis. In addition, we're focused on maintaining our path to positive cash flow around the end of 2026. There are just a few things that you have to believe for us to get there.

Steven: As you can hear from today's commentary, we have a strong conviction in our path to becoming a major player in SA RNA synthesis.

Kevin Norrett: Finally, the next natural step in becoming an SIRNA provider is to build our own GMP facility that can deliver our approximately a few hundred kilograms of material annually to supply customers clinical trials. While we have already started scoping this facility, which would likely take up to three years to complete, we are also engaged in partnering conversations to provide customers with a newer term path to GMP manufacturing using our technology. We also know that we need to address the raw material supply chain for both partnering and our own GMP facility.

Speaker Change: In addition, with focused on maintaining our path to positive cash flow around the end of 2026.

Speaker Change: There are just a few things that you have to believe for us to get there.

Stephen Dilly: First, a strong second half of this year in product revenues driven by existing and expected orders, including our first double-stranded RNA ligase order from a large pharma customer. After that, we expect that today's pharma manufacturing pipeline, plus only a few additional ligand orders, will drive product revenue growth in 2025 and 2026. Finally, we remain focused on adding new screening and evolution programs to drive near-term R&D revenue in pharma manufacturing and product revenue growth beyond 2021. On top of that, our Eco-Innovation Lab and the potential Codexis GMP-grade facility can provide significant upsides for Codexis' future. Now, we'd be happy to take your questions. Operator?

Speaker Change: First a strong second half of this year and product revenues driven by existing and expected orders, including our first double stranded RNA <unk> order from a large pharma casto.

Speaker Change: After that we expect that today's polymer manufacturing pipeline plus only a few additional like as orders will drive product revenue growth in 2020 six.

Kevin Norrett: While we see building our GMP footprint as important to climbing the value chain, I want to be clear that we are not relying on revenue from that facility to get to positive cash flow expected around the end of 2026. That path is based upon growth from our existing farmer manufacturing pipeline, plus a couple of double stranded RNA ligase orders, and we will be very thoughtful on what we believe is the best way to fund this GMP investment without compromising that trajectory.

Speaker Change: Finally, we remain focused on adding a new screening and evolution programs to drive near term R&D revenue in pharma manufacturing product revenue growth beyond 2026.

Speaker Change: On top of that Eco innovation lab on the potential Codexis GMP grade facility can provide significant upside for the future.

Speaker Change: Now we'd be happy to take your questions operator.

Kevin Norrett: On flight 10, I want to briefly summarize the various revenue streams that flow from the commercialization plan that I just laid out. First, we expect to drive near term revenue through our customized double stranded RNA ligase screening and optimization services. For assets that require customized engineering, this will likely be R&D revenue with the potential to translate into product revenue as customer scale their clinical trials. Alternatively, we could see near term product revenue if we identify suitable engineered ligase variant from our extensive library and they can scale quickly.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

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 list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for your questions. Our first questions come from the line of Kristin Kleska with Cantor Fitzgerald. Please proceed with your question.

Kevin Norrett: Second, and critical to our longer term value creation, we could also take on development projects through our eco-innovation lab where we can do ligation and sequential synthesis to create customers desired SIRNA constructs. Third, as I mentioned, the small quantities of GLP grade SIRNA we expect to produce in the eco-innovation lab could provide modest service and product related revenue over the next few years. Finally, beyond 2026, we expect to generate revenue by providing customers with GMP grade SIRNA initially through CDMO partnerships and then with our own GMP footprint.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

McHugh: Press Star two if you would like to remove your question from Mchugh.

McHugh: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

McHugh: Please while we poll for your questions.

Speaker Change: Yeah.

Kristen <unk>: Our first questions come from the line of Kristen <unk> with Cantor Fitzgerald. Please proceed with your questions.

Speaker Change: Yes.

ion: Hi, this is Ion in line for questions. Thanks for taking our questions.

Kristen: I am on line for question. Thank you for taking my question. One question, we get a lot of Uh huh.

ion: One question we get a lot is how the ecosynthesis platform could be leveraged for drugs that are currently in clinical testing. What work would a company need to do to potentially consider switching the process? And if you could just elaborate more on whether you've been approached by companies or are currently in discussion with them. Thank you.

Speaker Change:

Speaker Change: Platform could be leveraged.

Speaker Change: <unk>.

Speaker Change: Awesome well work with the company.

Speaker Change: So from a processor.

Speaker Change: If you could just elaborate more on.

Speaker Change: Well they have been of course by company.

Speaker Change: Thank you.

Stephen Dilly: Thanks very much for the question. The way that I'd, I think, rephrase it is to talk about how applicable our platform is to drugs already in development or even on the market. And Kevin is in the midst of these conversations, so I'm going to throw it over to him in a second. But yes, we are being approached by companies that are already on the market and in clinical trials looking at how our platform can synthesize their drugs. So Kevin. Sure, absolutely. They're super interested in and

Speaker Change: Thanks very much for the question.

Speaker Change: The way the died.

Speaker Change: Rephrase. It is to talk about how applicable is a platform to drugs already in development or even on the market.

Speaker Change: And.

Kevin Norrett: Moving to our milestones on slide 11, as you have seen, the TIE's meeting has become an important venue for us to showcase technical updates and in two advanced commercial discussions.

Kevin: Kevin is in the midst of these conversations on good day.

Speaker Change: Wrote over to him in a second but yes, we are being approached by the companies that are already on the market and in clinical trials looking at how our platform can synthesize their drugs so Kevin.

Kevin Norrett: At the upcoming TIE's Europe meeting in November, we expect to show continued validation of our eco-synthesis platform with customers and partners publicly expressing their excitement about our technology. Technology.

Kevin Norrett: Sure, absolutely. They're super interested in, based upon the margin improvement that you can see, and we outlined in the slides today. First and foremost, with the double-stranded RNA ligase, they see an immediate impact because they can synthesize short-mers through PHC, phosphoramide chemistry, derive short-mers, and then ligate them together. That offers an immediate cost savings and is really applicable for products that are in clinical trials today and looking at that large-scale commercial growth in later years. Also, with the full eco-synthesis platform, the same technology can be applied to doing sequential synthesis of short-mers and then ligating them together, and that's where we've had some really exciting conversations with customers today.

Kevin: Sure absolutely there are super interested in based upon the margin improvement that you can see we outlined in the slides today first and foremost with a double stranded RNA lag as they see an immediate impact because they can synthesize short mers through PSC Phosphamidon chemistry.

Sriram Ryali: With that, let me turn the call over to Shree to discuss our financial results and outlook for the rest of the year. Thank you, Kevin, and good afternoon, everyone. Starting on slide 12, Q2 revenues were exactly in line with our expectations and the guidance we provided during our last call. Looking ahead, we continue to see a strong second half of this year when we have a clear line of sight to delivering on our full-year guidance of at least 10% year-over-year product revenue growth.

Speaker Change: Derive short mirrors and in line gave them together that offers an immediate cost savings and is really applicable for for products that are in clinical trials today and looking at that large scale commercial.

Kevin: Growth in the later years also with the full eco synthesis platform. The same technology can be applied with doing sequential census of short mers and unlike aiding them together and that's where we've had some really exciting conversations with customers today.

Sriram Ryali: I'll walk through key elements driving our second half revenue expectation shortly, but let me first review Q2. Total revenues were $8 million for the second quarter of 2024, including product revenues of $6.3 million, and R&D revenues of $1.7 million. As expected, this is down compared to Q2 of 2023. We are always projecting that Q2 2024 would be our lowest product revenue quarter of the year, which is the opposite of last year where Q2 was our highest quarter.

Kevin: Thank you our next questions come from the line of Tycho Peterson with Jefferies. Please proceed with your questions.

Operator: Thank you. Our next questions come from the line of Tito Peterson with Jeffries. Please proceed with your question.

Matt: Hey, Thanks. This is Matt on for Tycho. Thanks for taking the questions. Maybe first one you outlined in the press release at the <unk>.

Matt: Hey, thanks. This is Matt on FER for Tyco.

Matt: Thanks for taking the questions. Perhaps the first one: you outlined in the press release that the technological process is a bit faster than expected. Can you just remind us what's left in terms of technical milestones between here and, you know, pilot and commercial launch? And then, around your comments on the first technical collaboration for EECO by year-end, can you just talk about your level of visibility into that and then what exactly that looks like in terms of a collaboration? Is there some type of upfront payment? Is it a partnership-type collaboration? Just any more color on that would be appreciated. Thank you.

Speaker Change: Technological process.

Matt: Faster than expected can you just remind us what's left in terms of tactical milestones between here and pilot and commercial launch and then.

Sriram Ryali: The decrease in R&D revenue primarily reflects having biotherapeutic revenue last year, as well as a non-cash $5 million license fee we recognize in Q2 2023. Productress margin was 45% this quarter. This was down compared to Q2 2023, largely driven by product mix. Turning to expenses, R&D expenses for the second quarter of 2024 were $11.4 million compared to $17.3 million last year. You can see the continued benefit of the expense actions we took last year reflected in the 34% year-over-year reduction in R&D expenses.

Speaker Change: Around your comments on the first technical collaboration for <unk> by year end can you just talk about your level of visibility into that and then what exactly that looks like in terms of the collaborations or some type of upfront payment is it a partnership type.

Speaker Change: Collaboration just any more color on that would be appreciate it. Thank you.

Matt: Thanks, Matt.

Stephen Dilly: Thanks, Matt. And I'm going to ask Stefan to pitch in and talk about what we're working on next in terms of the platform. But we're super pleased both in terms of the progress and also the flexibility of the platform to get to different constructs with the different methods that Kevin described, both the short-mer and ligation, but also sequential synthesis. And then, Kevin, you should talk about where we are in terms of the thought process and the conversations around the technical partner. So, Stefan.

Speaker Change: I'll step on to page eight and talk about what we're working on next in terms of the platform, but we're super pleased both in terms of the progress and also the <unk>.

Kevin: Flexibility of the platform to get the different construct with the different methods that Kevin described both the short learn ligation, but also sequential synthesis and then Kevin you should talk about where we are in terms of the.

Sriram Ryali: I also want to note that Q2 R&D expenses were up a little compared to Q1 of this year, and we expect to see a slight ramp up in the second half of the year for eco-synthesis innovation lab investment. SGNA expenses were $15.7 million compared to $13.4 million in the second quarter of 2023. This was primarily driven by a one-time non-cash stock-based compensation modification expense of $2 million. Excluding this one-time charge, SGNA expenses were $13.7 million in the third quarter and flat to last year.

Kevin: The thought process and the conversations around the.

Matt: The technical partner so Stefan.

Stefan Lutz: Thanks, Stephen. Yeah, so 2024 for us is still very much an enzyme engineering and process development year. Two of the key priorities we're focusing on that will get us to commercial relevance are the cycle time for each iterative addition. The other aspect is the supply of critical reagents, for which we are developing an enzymatic route that we see highly advantageous both from an economic and from a technical perspective.

Kevin: Thanks, Steven Yes, so.

Speaker Change: 'twenty 'twenty four for us is still very much a.

Kevin: Enzyme engineering process development a year.

Kevin: Two of the key priorities, we are focusing on.

Speaker Change: It will get us to two commercial relevance is the cycle time for each at a rate of addition.

Kevin: The other aspect is the.

Matt: The supply of critical reagents.

Sriram Ryali: Now I want to take a closer look at our 2024 revenue dynamics. The graph on slide 13 shows a historical distribution of our product revenue, excluding Pax-Lovid, across the first and second halves of the year for 2020 through 2024. As you can see, and as we have discussed before, we typically see an uneven distribution of revenue throughout the year, primarily driven by timing of customer orders. As we have previously communicated, roughly 40 percent of our product revenue is weighted in the first half of this year.

Speaker Change: For which we are developing an enzymatic route that we see highly advantageous both from an economic and from a technical perspective.

Speaker Change: Yes, and this is Kevin I can add from a technical collaborations standpoint, what customers are asking us to do is do proof of concept with delivering their contracts. So they can compare them to their phosphate <unk> chemistry counterparts.

Kevin Norrett: Yeah, and it's Kevin. I can add from a technical collaboration standpoint what customers are asking us to do is to do proof of concept with delivering their constructs so they can compare them to their phosphoramide chemistry counterparts. So that has been accelerated by the technical progress you just heard Stefan outline, and I'd like to point out that what you guys have seen from our TIDES USA presentation, we're probably, you know, six months ahead of that in terms of where we've gotten to versus what you saw then.

Speaker Change: So that has been accelerated by the technical progress you've just heard stephane outlined and I'd like to point out that what you guys have seen from our ties USA presentation. We're probably six months ahead of that in terms of where we've gotten two versus what you saw then I would say from our lineup that collaboration still on the technical front.

Kevin Norrett: I would say from an outline of that collaboration, still on the technical front, I think, as Stefan outlined, we have to solidify a path to having raw materials done via an enzymatic synthesis method, as well as a few other process development specifications before we can put it in the hands of customers. And that's where I'm super excited because the Eco Innovation Lab will allow us to do that going into 25. And we're already doing that for a few customers.

Sriram Ryali: They come 2024 look more like what we saw between 2020 and 2022. The takeaway here is that our product revenue tends to be lengthy, and instead of focusing on any single quarter, the overall annual trends are much better indicators of our progress. Taking a closer look at our product revenue trends, the graph on slide 14 shows a year-to-date comparison for the last three years. As you can see, we have reduced revenue concentration and the big three commercial farming manufacturing products as our pipeline programs continue to advance. Over time, we expect this diversification to smooth out some of the quarter to quarter lumpiness.

Speaker Change: I think as Stephane outlined we have two.

Speaker Change: To solidify a path to having raw materials done BN enzymatic synthesis method as well as a few other process development specifications before we can put it in the hands of customers.

Speaker Change: And that's where I'm super excited because the eco innovation lab will allow us to do that.

Speaker Change: Going into 'twenty, five and we're already doing that for a few customers now.

Kevin Norrett: Great. And then maybe one on the optimization service you launched coming out of Tides. You know, we're looking to work to optimize leggings for customers. I think you offered two options, both order the kit and send it, and then, you know, you guys doing it in-house, which I think was a bit faster just given the kind of deep libraries you guys have. But just talk a bit about kind of a demand funnel now. It's been a few months out of Tides, and any mix between more for the kits or, you know, sending it to you guys to work on as far as the optimization service. Thanks.

Speaker Change: Great and then maybe one on the optimization service you launched coming out of tides, we look to work to optimize ligase for customers I think youre offered two options both order kit.

Sriram Ryali: Turning to guidance, we are confident in reiterating our 2024 product revenue in gross margin ranges, and here's how we get there. Our actual first half product revenues of $15.8 million are expected to make up roughly 40% of the year with roughly 60% weighted to the second half. Importantly, most of the second half revenue comes from existing and expected orders. This includes orders where we already have binding commitments or very strong indication of likelihood.

Speaker Change: You guys doing it in house, which I think was a bit faster just given kind of the the deep libraries, you guys have but can you talk a bit about kind of demand funnel now it's been a few months out of tides and any mix between more for the kits or sending it to you guys to work on as far as the optimization service. Thanks.

Kevin Norrett: Sure, so we were super excited about launching that service because up until then, we really were just sending out samples to customers, and what we don't want to happen there is not having them testing them on parameters and other elements we might be able to counsel them on. By then sending them their substrates to us through our ligase screening and optimization services, really done as part of our eco-innovation lab, we think the speed is critical to identifying the variant and the conditions they want to be able to use it in, and there's been more receptivity from customers doing that in the last couple of months since they've seen us roll out that service.

Speaker Change: Sure. So we're super excited about launching that service because up until then we really were sent just sending out samples to customers.

Sriram Ryali: As an example, we are contracted to deliver the $2.5 million double-stranded RNA ligase order from a large pharma customer in Q4. We also expect the product mix in the second half of the year to include higher margin products as compared to the first half of the year. To help with modeling, we expect Q3 product revenue to be in line with Q1 of this year, followed by a strong Q4 in an overall return to at least 10% product revenue growth versus 2023.

Speaker Change: Don't want to happen there is not having them testing them on parameters and other elements, we might be able to counsel them on by the end of sending them theres substrates to us to the Uh huh through our ligase screening and optimization services really done as part of our Eco innovation lab. We think the speed is critical to identifying the variant and the conditions they want to be able to use.

Speaker Change: It in.

Speaker Change: And theres been more receptivity from customers doing that in the last couple of months since they've CNS rollout that service. So we offer both past and we're obviously excited about.

Sriram Ryali: Shifting to slide 15, as we previewed in May, our Q2 R&D revenue was roughly in line and actually better than this year's Q1 R&D base business. Now, when we talk about our base business, we are excluding revenue from non-recurring items and discontinued programs like biotherapeutics. Looking at our full year R&D guidance range of $18 to $22 million, let me take you through how we get there. Our R&D base business run rate is approximately $6 to $7 million.

Kevin Norrett: So we offer both paths and we're obviously excited about having customers send us their substrates to be able to do it more rapidly and scale up and as a result, we've also developed a bigger pipeline of other potential candidates which gives us the confidence in, you know, not only getting a couple more ligase orders from our existing customers, but also bringing new ones on board which could, you know, maybe even outpace that growth in the next couple of years.

Speaker Change: Having customers send us their substrates to be able to do it more rapidly and scale up and as a result, we have also developed a bigger pipeline of other potential candidates, which gives us the confidence in.

Speaker Change: Not only getting a couple of more ligase orders from our existing customers, but also bringing new ones on board, which could maybe even outpaced that growth in the next couple of years.

Speaker Change: Okay. Thanks, and maybe just one more if I could squeeze it in here can you talk about the rationale to bring Britain onboard to head up commercial operations and then some of the key areas of focus in the coming months.

Kevin Norrett: Thanks. And maybe just one more, if I could squeeze it in here.

Kevin Norrett: Could you talk about the rationale for bringing Britain on board to head up commercial operations and then some of the key areas of focus in the coming months now that they're on board? Thank you.

Sriram Ryali: In Q1, we also recorded $6 million related to the double-stranded DNA ligase agreement with Roche. Looking ahead, the rest of our 2024 R&D revenue will come from new projects and other one-off license fees anticipated in the back half of this year. To drive that, we have continued to make significant progress in getting several new screening programs off the ground across mid-sized pharma and large biotechs. We expect these programs to translate into R&D revenues later this year. In terms of modeling, Q3 R&D revenue is expected to be roughly in line with Q1 and Q2, followed by a strong Q4 based on the factors I just outlined.

Speaker Change: Now that they're on board. Thank you.

Speaker Change: Yes.

Kevin Norrett: Sure. So, bringing Britain on board is an important part of the next stage of evolution for Codexis as a whole, where we as a team have been looking around the table to see where we have relevant skills needs and other gaps in the organization. Britain brings 20 years of experience in the CDMO space, which is something that, you know, Codexis doesn't necessarily have in droves, so we thought it prudent to bring on somebody with that type of experience as we go into the next phase of Codexis' build out and growth for the future.

Britain: Sure So bringing Britain on board is an important part of the next stage of evolution for Codexis as a whole where we as a team have been looking around the table to see where we have relevant skills needs in other gaps in the organization Britain brings 20 years of experience in the <unk> space, which is something that codexis.

Speaker Change: It doesn't necessarily have in drove so we thought it prudent to bring on somebody with that type of experience as we go into the next phase of of Codexis is build out and growth for the future.

Sriram Ryali: Moving to slide 16, we ended the quarter of a strong cash position with $73.2 million in cash, cash, equivalent to end investments, which we continue to expect will fund our planned operations through positive cash flow anticipated around the end of 2026. That path to positive cash flow means a roughly doubling of product revenue by 2026. As you heard today, we have a clear path to get there primarily based on growth. It's already baked in VR and existing pharma manufacturing pipeline, plus a couple of double-stranded R&D ligase orders.

Operator: Super. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star.

Speaker Change: Super Thank you.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Matt Hewitt with Craig Hallam. Please proceed with your question.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Our next questions come from the line of Matt Hewitt with Craig Hallum. Please proceed with your questions.

Jack: Hey, guys. This is Jack on for Matt just considering the macro environment, we've heard from others in the pharma and biotech industry that the funding environment is improving throughout Q2 could you just provide some insight on what you guys are hearing or seeing from your customers. Thanks.

Speaker Change: Okay.

Speaker Change: Kevin you want to take that yeah.

Kevin Norrett: You want to take that? Yeah, you know, we've heard relatively positive feedback, especially as it relates to innovation budgets. We haven't experienced a lot in terms of pushback on, you know, budgetary considerations and whatnot, so I think really it's been, you know, sped up as a result of pharmaceutical companies looking for ways to leapfrog technology and progress here in a period of time when people might not be as focused or, you know, I think, you know, really, I just, I think the simple answer is we just haven Right. And one thing I'd add, Kevin. I think

Speaker Change: Yeah.

Kevin: We've heard.

Stephen Dilly: From there, we see an even higher trajectory for Codexas as we climb the value chain and become a full-fledged SIRNA service provider, and now we'll turn the call back to Stephen. Thank you, Sri. As you can hear from today's commentary, we have a strong conviction in our path to becoming a major player in SI RNA synthesis.

Kevin: Relatively positive feedback, especially as it relates to innovation budgets.

Speaker Change: Haven't experienced a lot in terms of pushback on.

Speaker Change: Budgetary considerations are and whatnot. So I think really it's been set up as a result of.

Speaker Change: Pharma companies are looking for ways to leapfrog technology and progress here in a period of time, where people might not be as focused or.

Stephen Dilly: In addition, we're focused on maintaining our path to positive cash flow around the end of 2026. There are just a few things that you have to believe for us to get there. First, a strong second half of this year in product revenues driven by existing and expected orders, including our first double-stranded RNA ligase order from a large pharma customer. After that, we expect that today's pharma manufacturing pipeline, plus only a few additional ligase orders, will drive product revenue growth in 20 saliva than 26.

Speaker Change: I think.

Speaker Change: Really simple answer is we just haven't seen any pushback on that at all like really.

Speaker Change: Exciting progress and willingness to fund projects in this space.

Kevin Norrett: And one thing I'd add, Kevin, and I think you would agree with me, is that more money for innovation and particularly earlier phase stuff really raises the game for us in terms of not just having to think about making the product, making the sRNA, but also providing the regulatory backing, the analytical framework, all that good stuff. So we truly are a full service provider of the solution to take the sRNA forward. So, in the long term, it's all good news, but there's a lot of work to do.

Speaker Change: But one thing I would add Kevin I think you would agree with.

Kevin: With more money for innovation, and particularly earlier phase stuff that really raises the gain for us in terms of not just having to think about making the product, making the ESR RNA. It's also providing the regulatory backing the analytical framework all that good stuff. So we truly are a full service.

Stephen Dilly: Finally, we remain focused on adding a new screening and evolution programs to drive near-term R&D revenue in pharma manufacturing and product revenue growth beyond 2026. On top of that, our eco-innovation lab and the potential cadets's GMB grade facility can provide significant upside cadets in the future.

Kevin: Divider, all the solution to take our DSI RNA forward. So it's in the long term, it's all good news, but theres a lot of work to do.

Speaker Change: Yes, that's great to hear that's it for me thanks.

Stephen Dilly: Now, we'd be happy to say your questions.

Operator: Operator? Thank you.

Stephen Dilly: Thank you. I'm showing that there are no further questions. I'll turn the call back over to Stephen Dilly for closing remarks.

Stephen <unk>: Thank you I'm showing there are no further questions I will turn the call back over to Stephen <unk> for closing remarks.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tonal indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker, equipment, and maybe necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for your questions.

Stephen Dilly: Well, thanks again for joining us today. And as you hear, we're underway with a very busy second half of the year. So please stay tuned as we share the updates on our progress over the next few months. Obviously, the events around Tides Europe will be a highlight for us. And we'll also see many of you at our slate of fall investor conferences and look forward to connecting with you.

Stephen <unk>: Well, thanks again for joining us today and as you hear we're underway on a very busy second half of the year. So so please stay tuned as we share the updates on our progress over the next few months, obviously the events around tied to Europe will be a highlight for us.

Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Stephen <unk>: We'll also see many of you throw a slate of fall investor conferences, and look forward to connecting them.

Kristen Gluska: Our first questions come from the line of Kristen Gluska with Cantor Fitzgerald.

Stephen <unk>: Thanks again.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Stephen Dilly: Please introduce. Hi, this is Ion and mine for questions. Thanks for taking our questions. One question will get a lot is on how the eco-innovation platform could be leveraged for drugs that are currently in clinical testing. What work would a company need to do to potentially competitive teaching the process? If you could just elaborate more on what they've been approached by companies or currently in discussion with them.

Operator: BF-WATCH TV 2021 BF-WATCH TV 2021... [music]

Stephen <unk>: Okay.

Stephen <unk>: [music].

Kevin Norrett: Thank you. Thanks very much for the question. The way that I I think rephrase it is to talk about how applicable is our platform to drugs already in development or even on the market. Kevin is in the midst of these conversations, so I'm going to throw it over to him in a second, but yes, we are being approached by the companies that are already on the market and in clinical trials, looking at how our platform can synthesize their drugs.

Kevin Norrett: Kevin. Sure, absolutely. They're super interested in based upon the margin improvement that you can see we outlined in the slides today. First and foremost, with a double-stranded RNA ligase, they see an immediate impact because they can synthesize shortmers through PAC, phosphoraminated chemistry, derived shortmers, and then ligate them together. That offers an immediate cost savings and is really applicable for products that are in clinical trials today and looking at that large-scale commercial growth in the later years. Also, with the full eco-synthesis platform, the same technology can be applied with doing sequential synthesis of shortmers and unligating them together, and that's where we've had some really exciting conversations with customers today.

Kevin Norrett: Thank you.

Stephen <unk>: Okay.

Stephen <unk>: Okay.

Stephen <unk>: Yes.

Stephen <unk>: Okay.

Stephen <unk>: [music].

Stephen <unk>: Yes.

Stephen <unk>: Yes.

Stephen <unk>: Mhm.

Taito Peterson: Our next questions come from a lot of Taito Peterson with Jeffries. Please here in pilot and commercial launch and then around your comments on the first technical collaboration for eco by year and you talk about your level of visibility into that and then what exactly that looks like in terms of a collaboration is there some type of upfront payment? Is it a partnership type collaboration just any more color and that would be appreciated?

Stephen Dilly: Thank you. Thanks, Matt. And I'm going to ask that found to pitch in and talk about what we're working on on next in terms of the platform, but we're super pleased both in terms of the progress and also the flexibility of the platform to get to different constructs with the different methods that Kevin described both the shortmer and ligation but also sequential synthesis. And then Kevin, you should talk about where we are in terms of the thought process and the conversations around the technical partner.

Stephen Dilly: So Stefan. Thanks, Stephen. Yeah, so to 2024 for us is still very much a enzyme engineering process development year. The two of the key priorities we're focusing on that will get us to commercial relevance is the cycle time for each iterative addition. The other aspect is the supply of critical reagents for which we are developing an enzymatic route that we see highly advantageous both from an economic and from a technical perspective.

Stephen Dilly: Yeah, and this Kevin, I can add from a technical collaboration standpoint, what customers are asking us to do is do proof of concept with delivering their constructs so they can compare them to their phosphoramid eye chemistry counterparts. So that has been accelerated by the technical progress. You just heard Stefan outline and I'd like to point out that what you guys have seen from our Tides USA presentation. We're probably six months ahead of that in terms of where we've gotten to versus what you saw then.

Stephen Dilly: I would say from an outline of that collaboration still on the technical front. I think as Stefan outlined, we have to solidify a path to having raw materials done via an enzymatic census method as well as a few other process development specifications before we can put it in the hands of customers. And that's where I'm super excited because the eco-innovation lab will allow us to do that going into 25 and we're already doing that for a few customers now. Great.

Kevin Norrett: And then maybe one on the optimization service you launched coming out of Tides. You know, we look to work to optimize laggays for customers. I think you're offered two options both order kit and send it and then you guys doing it in house, which I think was a bit faster just given kind of the deep libraries you guys have. But if you talk a bit about kind of demand funnel, now it's been a few months out of Tides and any mix between more for the kits or sending it to you guys to work on as far as that optimization service.

Kevin Norrett: Sure, so we were super excited about launching that service because up until then we really were sent just sending out samples of customers and what we don't want to happen there is not having them testing them on parameters and other elements we might be able to counsel them on. By then sending them, there's substrates to us through our ligase screening and optimization services, really done as part of our eco-innovation lab. We think the speed is critical to identifying the variant and the conditions they want to be able to use it in and there's been more receptivity from customers doing that in the last couple of months since they've seen us roll out that service.

Kevin Norrett: So we offer both paths and we're obviously excited about having customers send us their substrates to be able to do it more rapidly and scale up and as a result we've also developed a bigger pipeline of other potential candidates which gives us the confidence in, you know, not only getting a couple more ligase orders from our existing customers but also bringing new ones on board which could, you know, maybe even outpace that growth in the next couple of years.

Kevin Norrett: Okay, thanks.

Stephen Dilly: Maybe just one more if I could squeeze it in here. If you talk about the rationale to bring Britain on board to head up commercial operations and then some of the key areas of focus in the coming months now that are on board, thank you.

Stephen Dilly: Sure, so bringing Britain on board is an important part of the next stage of evolution for Cadexas as a whole where we as a team have been looking around the table to see where we have relevant skills needs and other gaps in the organization, Britain brings 20 years of experience in the CDMO space which is something that, you know, Cadexas doesn't necessarily have in droves so we thought it prudent to bring on somebody with that type of experience as we go to the next phase of Cadexas's build-out and growth for the future. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad.

Matt Hewitt: Our next question has come from the line of Matt Hewitt with Craig Hallam.

Kevin Norrett: Please proceed with your questions. Hey guys, this is Jack. I'm from Matt. Just considering the macro environment, we've heard from others in the farm owned biotech industry that the funnier environment is improving throughout Q2, could you just provide some insight on what you guys are hearing or seeing from your customers? Thanks. Kevin, do you want to take that? Yeah. You know, we've heard, you know, relatively positive feedback, especially as it relates to innovation budgets.

Kevin Norrett: We haven't experienced a lot in terms of pushback on, you know, budgetary considerations or whatnot. So, I think, really, it's been, you know, set up as a result of former companies looking for ways to leapfrog technology and progress here in a period of time where people might not be as focused or, you know, I think, you know, really, I just, I think simple answers, we just haven't seen any pushback on that at all, like, really, you know, exciting progress and willingness to fund projects in this space.

Kevin Norrett: Right. And one thing I'd add, Kevin, I think you'd agree with is, with more money for innovation and particularly, you know, earlier phase stuff, that really raises the game for us in terms of not just having to think about making the product, making the S-R-N-A, it's also providing the regulatory backing, the analytical framework, all that good stuff. So, we truly are a full service provider of the solution to take the S-R-N-A forward. So, it's, you know, in the long term, it's all good news, but there's a lot of work to do. Yeah, that's great to hear.

Stephen Dilly: That's it for me. Thanks. Thank you.

Operator: I'm showing there are no further questions.

Stephen Dilly: I'll turn the call back over to Stephen Dilly for closing remarks. Well, thanks again for joining us today. And as you hear, we're underway on a very busy second half of the year. So please stay tuned as we share the updates on our progress over the next few months. Obviously, the events around tied Europe will be a highlight for us. And we'll also see many of you throw our slate of full investor conferences and look forward to connecting them. Thanks again. Thank you.

Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day. Thank you.