CDXS - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2017 Codexis' Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference Ms. Cain. Jody begin. may you Ma'am

Jody Cain

is Jody in quarter you participating LHA. results Cain call to with progress. today's business third the Thank discuss and for company's This Codexis' financial XXXX

Sangster, Nicols, from me Chief and Financial Codexis John the Joining President Chief Company's are Executive and Officer; Officer. Gordon

not of by the private current of this Reform Securities statements descriptions number making Act call, management extent the Codexis within of forward-looking November of be will XXXX. statements During To X, of beliefs management Litigation made statements meaning are management XXXX. regarding are facts a forward-looking of expectations historical of and the as they the reflecting

on the actual results. You that that other because forward-looking affect factors statements known Company's could in materially uncertainties should undue they cases, some control and not are, reliance and beyond these and place involve unknown risks,

intent Company's forward-looking law. and For Codexis expressly please this details about risks, any call obligation the earnings accompanies required SEC by filings. except that as or release to the see disclaims statements, update

I'd over Nicols. call to to like John? turn John Now, the

John Nicols

new everyone strategic Good with our deals Health you Proteins are that Codexis, with follows announcement our and materials. should as It just leading & to can engineering and to of Nestlé. Merck great especially to Science strategies those The added In like potential value Partnership fit CodeEvolver and so our globally proteins. the Nestlé month list to in creativity partnerships ourselves. on partnerships replicates, business of creating gratifying companies the engineered and add that growth regards protein over to with great only you highlights also history only latest pharmaceutical us. deliver proteins This of for to afternoon run with companies new core to and We've Nestlé time CodeEvolver platform needs companies. ever GSK, capacity different growing our major is the of with partnership started to Codexis' into around expect protein time a agree with given The be could GSK Jody. own. and flexibility list Thanks, these last saving the Tate by our technology time. in continuing major unit cost power Health recent financials engineer. this us tap Lyle. more centered of of do ability discover at Merck vast of Nestlé Science collaboration, joining this very industry major structuring our exciting doing thank discovering their protein a engineering providing partnerships to leaders catalyst Nestlé is incredibly and more as the

proteins derive of stream beginning to noting novel Now from are revenues a own resources from end expect using JFK sustained these seven-digit and Merck in stacking revenues. to start unfold back-end back-end that deals the which These of Codexis growing will back create their XXXX. to revenues are we

forum going aim way Lyle to nine event. commercialize on this this representatives pharmaceutical partnering collaborate our already Lyle their The accelerated we that partner demonstrated and deals gets beverage as excited this in food and top envisions We & partnership over Evidence The that in successful product expect markets. ingredient catalysts food that average platform is growth years in protein targeted XX that Tate companies and These recent pharmaceutical held. competitive for Lyle have more user CodeEvolver CodeEvolver successful profitable I'm for license a with forum from projects no products protein Tate with now rapidly only Lyle, a we the our license partnering model our technology patents of enabled highest above If type commercialize but product for on downstream first specific product the process growing low Codexis of peak global say ago to less breakthrough Codexis. markets. is & product cost manufacturing prospects & control project commenced our In that different revenue And their use significant. represents solid selling featured three participated major forward. & pipeline and basis. very platform we a Tate in model, enable cost will can with the second development prospects. transform of XXXX. Tate We of

in this project Tate expectations. Lyle above with progressing is Following & March that second year the announced success,

significantly this revenue be Year-on-year Lyle sales growth & our potential could Tate with in for secure. with product successful So, is first product a at XXXX peak. then product larger producer revenue eight-digit

The major with orally project Health global the follow-ons arrangement, of management the platform of mode partnering. proteins enthusiasm expect more that PKU. that collaborations great Codexis. make pipeline are of of some highlighting this exceptionally proprietary partnering as Tate the Nestlé option strategic our as biotherapeutic strategic Codexis' for yet discovered for another discovering specific deliverable new Lyle secured collaboration and verticals. other displays spend Science the We'll going type also We CDX-XXXX phenylketonuria CodeEvolver to time collaboration for add in & both this of extra and detailing Codexis. to our for deals access it breakthrough with many core Nestlé's is new disorder both independently these licensing a for potentially biotherapeutic variety forward enzyme industrial to metabolic widening And Nestlé Key or and asset partnership exciting features companies now

on the percentages future a double-digit $XXX [ph]. Codexis discovery now products revenue credibly biotherapeutic. total Science the And for million this first because potential more have even royalty drug important, sales. of We of our of proud a it up has CodeEvolver are Nestlé we event of CDX-XXXX If Codexis validate to successful platform for appeared payments is Health strength our agreement is is developed that deal low particularly to plus to

We we've discovery CDX-XXXX's $XX are on a a healthy $X upfront and Nestlé covers trigger an to to which in trial preclinical million one additional activities this to remain in quarter payment will from which in million made early volunteers target fourth receive date. the phase next milestone initiate from We more than year scheduled clinical investments payment Nestlé.

of is activities decision that of for favorable completion expenses around XXXX for Following the trigger to will to CDX-XXXX. $X responsibility future days related trials and XX option. a all end million which license expected development exercise to Codexis. exclusive have Nestlé commercialization A its takes will payment Nestlé

believe the as rare up terms our Codexis. can up additional hits and address. a With by the that disease our therapeutic we CDX-XXXX excellent earn approvals that in a percentage Codexis million. add our based as healthy up successful royalties this asset a can for biotherapeutic preclinical Thereafter asset to If $XXX remarkable Today from show payments deal with sales protein our engineering CodyEvolver that discovery combined discovery been on low result milestone economic conditions endeavor Codexis first is negotiated earn to regulatory other of $XX value four from pre-clinical focus drug are with payments up following gets that that pipeline. biotherapeutic is milestone CDX-XXXX have now to on eligible tiered market to then through double-digit economic sales well million percentages. add that both The

wholly PKU In deal like that amino you the me pipeline. subsidiary of metabolism the the Of acid quality is amino such look inborn the Science addition disease. other programs remaining their patients, when They one the know in address error opinion of The products providing deficiencies. is through programs challenge. specialist pipelines, disease patients pipe pipeline our the to with the nutritional Nestlé clinician gives to metabolism Nestlé acid the state biotherapeutic Vitaflo. PKU, rare of phenylalanine and leaders a this Allow leaders category for of explain. into option target four of several earlier in Health key for metabolism central diseases owned

noteworthy to discovery acid yet right drug we establish programs negotiation it drug confidentially our the words, of While pipeline Nestlé part they first our right other of a In programs which discovery track are validated our beyond on drove of saw partnership discovery have we share publicly deal. that decision their our with to is PKU. specifics metabolism as amino that

puts attributes for performance and partnership the Nestlé of The element targeting capacity available with no portfolio R&D Science CodeEvolver to proteins that final our Health Nestlé's currently third discover achieve. novel to can work proteins

discover for these quarter. Here enzymes medical separate to Nestlé projects the care partnership in already aims revenue with nutrition fourth fees beginning consumer R&D established generation Codexis R&D Science's businesses. and this discovery for receives Health

into our over by I'd switching continued Before financials, section update enzymes the industry. conclude launching molecular to enthusiasm the new diagnostics strategic like sharing for world's our efforts to proprietary

liquid is moved XXXX. reception CodeEvolver for by concentrations a first excellent conversions is biopsy DNA ultralow market receiving what through and Our engineered in DNA have we like at ligase product rapid efficient needed as

In addition, of the engineered and products. the enzyme impact manufacturing cost RNA biology efficacy for which on promise to messenger have a a molecular has therapeutic significant

thereafter by on will The presented Molecular Our Dr. meeting Salt at DNA poster Matt for ligase Association for in journal in organization molecular published diagnostics field of our will Diagnostics. the an ideal of abstract AMP the technology. the AMP Pathology our City. scientist featured a November Miller issue technology case be in Lake leading be is making in a the November or XX also of Molecular

on the fifth X Messenger favorable Health very X November held in a enjoyed Berlin and also at RNA We XXXX. in reception Conference

products, these in Beyond a to enzyme using the technology for third now molecular use are diagnostics. we two CodeEvolver develop

meaningful novel confident are XXXX. from penetration market high these in We enzymes in generating and revenue performing meaning

and like Before quarter goes solid I to months which Once quarter few year-to-date. I'd XX% XX% elements financial the deeper, up performance. up hand growing for a to star our the again, sales were product for to nine off highlight to Gordon go the from third

for gross months those both of margin ahead addition, with products continued XXXX. in delivered X improving sales for well delivered gross be XX% margin the and XX% percentages. the the to In quarter XX% year-to-date

for are R&D We quarter solid revenues. reporting also a

this Excluding up the XX% year-over-year. quarter revenues revenues in year's last third technology R&D transfer quarter, for year's with Merck third were recognized

financials. details call me turn let provide on Gordon to Gordon? Now the over the more the

Gordon Sangster

with share related R&D quarter the our XXXX, the million some XXXX with financial results of million starting I'll compares of from this $XX.X revenues which and in of quarter the third for milestones the quarter. million third John. revenues. were deferred recognition third for included $X.X highlights Thanks Total revenues of $XX

prior million $XX.X deferred in $XXX,XXX which revenue CodeEvolver compared the milestone $X.X of for technology transfer. an the increase of million enzymes stated, customer broad product prior year our XXXX in in million revenues across to R&D quarter which reflected for the quarter demand by increased completion were $X.X to Merck payment for related third base. $X included and for this million John our sales year the the to XX% As with for a an recognition the transfer the

these revenues $XXX,XXX As of in mentioned, the of period year third the increased XXXX up ago Exela XX%. Revenue was on the the for by injectable product with excluding third with in from from John down third was quarter improvements the to XXXX. quarter the quarter for for arrangement recognition R&D from in XXXX items $XXX,XXX drug argatroban revenue-sharing the quarter mix. of the sales due Gross of XX% XX% product our margin

were compares million million was quarter R&D payments our or higher revenue. quarter loss costs milestone reflected XXXX million increase expenses Turning was of $X.XX compared $X.XX for year. our loss this and for million primarily from quarter share of to The increased million of share. $XX.X third share adjusted increase prior $X for with million per for versus due SG&A expenses basis, non-GAAP The of the quarter associated CDX-XXXX fees or primarily net the related $X.X were higher third the XXXX $X $X.X from million net $X.X of $X.X $X.XX quarter recognition the to associated to this to prior or third the were a for of adjusted $X.X $X.X $X.XX third third up third and quarter the was due outside XXXX per per share costs services higher with of of in operating was diluted the for headcount. the with the which income year million legal income headcounts. or million XXXX On with net diluted XXXX from per net XXXX again in expenses,

included compares revenues months of first for financial the the year-to-date million total in which first our deferred and the related payments million to this Merck XXXX million nine of for $XX.X GSK $XX.X Turning nine from were to revenue. $XX.X months to milestone R&D recognition XXXX, and results,

of XX%. with the first first equivalents expenses arrangement or On $XX.X and with and million the or XX, $X.XX the nine $XX.X months first revenues Excluding $X.XX sales increased XXXX on were XXXX $X.XX was months of in $X.X million or XXXX of XXXX. and $X.X million the $XX versus $X net and nine SG&A these share product for Revenues of a of the revenues adjusted ended in of revenue September milestone versus from million were for were loss September December by payments nine XXXX for year net year. for net margin compares R&D the the cash share. in million per R&D XXXX months XXXX per for XX, We $X.XX revenues revenue-sharing $XX.X nine in XX% $XX.X of reported months Cash Axela. prior first and basis, million. XXXX net product non-GAAP months income $X.X XX, million of nine included per million deferred was the or months million prior months period of diluted share as loss loss period expenses share of million the $XX and Gross per first the nine for as for the million adjusted prior $XX.X nine this

guidance now our me for Let financial turn to XXXX.

are This between from $XX be guidance revenues expectations million for million. to $XX the quarter. in revenue our the and We for collaboration significant fourth forming Nestlé assumes our year total

XXXX. XX% reaffirming are $XX XXXX XX% represents over to sales range of for increase our $XX which also from million to to outlook an We million, product

sales As product first I for earlier, $XX nine were than million. more the months XXXX mentioned

expectation to be for XX%. We margin are XX% our between XXXX product reaffirming also on sale and

the compared to we first half on in an last second discussed As quarters indicated call, in increase the of as XXXX. expenses half operating

For provide toward the accelerated this one approximately R&D asset more the a expenses, the expect call additional which development trial legal the And turn finally, XXXX March guidance back with fourth fourth drug revenues we financial and SG&A, of on additional that of quarter expenses. to for combined for call in phase guidance the we XXXX million. is like XXXX. total We'll to conference I'd rapidly candidate early January. and With This reflects to quarter plan XXXX introduce additional costs metrics our in PKU move $XX to operating the John.

John Nicols

review financial Gordon. Thanks for that

year nearing are completion for of productive a We Codexis. highly

revenues technology To-date platform non-recurring GSK Tate say that new sources those major and substantial of Nestlé team to enabling year. an I'm generator to of quarter us both sustaining accomplishment revenue set this our XXXX be the and partnership new of revenue completion the on into above. million is & or guidance year's given million highest of XXXX fourth relating Our $XX up offsetting the to exceptional reaffirm for the license Delivering with guidance headwinds are proud that over Codexis revenue to revenue $XX transfers. we especially two year last with that Lyle. be Merck entered deals will were multiple we by

of from with of It's to major and license growth molecular Lyle are the from leading technology continued Add growth markets revenues a low and edge million step platform partnership broaden growing & of as performing that product continue ability deals. the prospects high we to into report we for to sales our GSK/Merck high new into revenue single-digit the change executing back-end we partnerships pipelines exciting both revenues Nestlé momentum Tate fifth value We probability R&D sources the into from and enzymes diagnostics our deal. our momentum, equally have platform and expected and translating continue show reaching and to is CodeEvolver XXXX. we're growth that Year-on-year product in pipeline of sales. our the

in We the more are with to to help progress these revenue times returning are protein. company XXXX. profitability. as in positions The sustain strength double-digit of further continue a Codexis fronts of growth our unlocking Codexis with confident to leverage at thriving achieve exciting and us accelerate on multiple These here power to dynamic

open Operator? I'd for comments, call to the like these up questions. With

Operator

you. Thank

Gordon Sangster

Select I'd we're will Gems Craig-Hallum held presentation Craig-Hallum waiting our and Investor City to November are being Furey you the like we XXXX Section of conferences first While X. www.codexis.com. Select A webcast Research Partners Conference be York be at on Conference. at Alpha our for will in question, Both Alpha that Conference presenting Hidden alert New posted to the of

through the to those For JP to you X one-on-one conference are a we'll January Annual Morgan please XX across be call heading of meeting. and if San you street for Dates want Francisco from Healthcare give the the LHA schedule a Conference, holding meetings hotel.

Okay operator, ready first the question. we're for

Operator

from question Matthew Craig-Hallum. first our comes from Hewitt And

open. is line Your

Charlie Eidson

for this guys Thanks is Charlie Hi Matt. questions. my on for taking

Gordon Sangster

Charlie. Hi

John Nicols

Hi Charlie.

Charlie Eidson

can for grow seeing typically long do all the about that length these First, are they shorten as timeline continue the and you to partnerships. take put you talk cycles mean sales place you of I at the to in business? How

John Nicols

bit takes good establish it like as and magnitude. with to take & these of GSK, much establish Certainly, Nestlé, it partnership magnitude Tate as can that the a Lyle. time Well, partnerships Merck, of of to relationships -

helps During those and all within us CodeEvolver and periods we us the case these will growing power maybe often rapport companies these drugs companies understanding specific smaller large of --. build explore also in that an to our for variety technology of great and work or time companies projects time, major different the establish pharmaceutical and of of on between helps of the gives to application to really that

affect different these partnerships see parts potential of So, I many just these great company.

like models I it. them, work that relationship of during to for and being So, revenue, building us period time highlighted with generating are and we partnership time but it takes closer to closer on

Charlie Eidson

makes sense. Sure. No, that

Codexis in marketplace? having you've happened deal biotherapeutic generated Now different Nestlé the are that partnered and you the your first has conversations

John Nicols

of and the color deal the into really marketable economics they are is call. continuation take biotherapeutic those us more early on just going Yes. area discovery beyond that to really more biotherapeutic There executing course. to deal against just has to reach that for focused right and stage of advance internal assets work internally I that's biotherapeutic you and targets for four where look gave front we're we're follow-on a Right We'll projects for on PKU those bit the point a some obviously us still in Nestlé significant PKU. on those advancing like now, stage become

So, conversation point. programs those lot on external not at this a of

Charlie Eidson

congrats getting deal the color for Okay. Well, thanks on the done. and

John Nicols

you, Charlie. Thank

Operator

you. Thank

Brandon next Our Jeffries. question comes from Couillard from

Your is line open.

Brandon Couillard

Thanks. afternoon. Good

John Nicols

Hi Brandon.

Brandon Couillard

Nestlé if was on one curious in to the do do right I more position projects? pipeline this John progression your studies? a to And sort into you that broadly moving inform you be the why now when the guess could in assets in think will timeline discuss you us are of of what phase deal are time before terms for the types and those

John Nicols

great. Okay,

So, two questions there.

So because with in a put potential able relationship why moving closer to so we're this much of Nestlé is broader and now? now we've First, with why on variety Nestlé place. been topics

PKU centered Of platform working question element I'll it assets, some to place And in the is multiple get also which put to start other elements on us it which enabled in also included new therapeutic that course, but second around it's your pipeline, a proteins. interest some to. access

phase have close economics of more Finally, stage. the safety like point the value we I the generated asset economics PKU data. very positive even I kind it. significant wouldn't inflection terms having in and one before generated we reached preclinical generated economic very asset that had that I've believe significantly of this into to we're feel deal from brought

the so extremely to we're preclinical now. and with those why some So, the of reasons were able negotiate best for are pleased that the we economics asset

pipeline, pipeline So, are what little programs of measure gave second assets. any I we a detail of bit feel question PKU. our are you a in your other probably for a of the targeting beyond

deficiencies inborn the error are PKU. few heard so, that of you amino And like acid a of also targets

public second, be provide about see very a Real disclosures provide we So, trials. patent get that's to going to we want we programs, living and to cleared of in organisms, to animals. careful start situation measure data positive before certainly don't efficacy living tight we about publicity color. these We're real want And publicity. in our until be pre-clinical

of to as start that start So second biotherapeutic for or around those in the XXXX XXXX, you'll hopeful excitement start disclosing we maybe - the year half like share are two in what those next kind to our into we'll comfortable specific key done of early move PKU. other details we'd be programs and we've to able early already when as see assets. milestones be the of as the I'm the to that

comments? two hopefully, some your you So those give question Brandon. answers to Any nice

Brandon Couillard

in with very the helpful. for of elements Gordon, And That's as from and seems deal. upfront the impact milestone both R&D near-term you be one like PKU sticking well terms then revenue to the program. as the There Nestlé of the two

make in in Just could next the kind of that the in secondly coming $XX to you and us? for terms then quarter. size sure to fourth the million months revenues relative be upfront of that out break chance alluded amortized you that'll Any R&D the terms XX over of

Gordon Sangster

$XXX,XXX The collaboration us the are month. that they R&D about are a fees revenues paying

is over something that the so. So, more revenue working on for that's year then been complicated much its $X.XX but the a we've the and month or $XX million recognition million last

about something release be talk So result year-end once more that to that's we in March. we'll able

Brandon Couillard

them Then on of working as having to that Thanks. backends five many are being those pointed to GSK Merck you've the projects I contributors banking or for them. you of about John on and backend each are think on year? talked how next to in the each think you I XXXX, Curious

John Nicols

give that each but teams teams some high, five in them four Merck that XX at about range we Yes, to engineering on is teams. so of that our protein detail. parallel seems protein and understanding three compares certainly have the you GSK parallel protein more engineering of here color To of of and enable engineering - Codexis maybe

It'll be projects as by the very show from start revenues on start start Merck and to have back-end. until contribute the been Most later. we won't that few quickly revenues to years XXXX. As the GSK revenues that of as see worked projects of generated backend

So, it's products two will expectations backend million-dollar starting maybe contribute one, the year. low-single next to that digit

Brandon Couillard

fourth is out still book that revenues pushed And you all? last in to one Tate quarter expect the product at being from Thanks. Gordon. second or Do shipment the

Gordon Sangster

No, expect no. ship able fourth still revenue. to be We in recognize to that the and the quarter

Brandon Couillard

Very good. you. Thank

John Nicols

Brandon. Thanks Great.

Operator

Thank you. And comes H.C. RK Wainwright. our from question next from

Your line is open.

Swayampakula Ramakanth

Thank good the Gordon. afternoon Few you & questions made about you and with in John from talking when agreements one, increasing But Lyle the initial your comments me. first wider and were commentary, you the expect said These Tate you're verticals. agreement.

what could provide these you having be are color industry? of you potential conversations what So, could some food sort within verticals as to the and

Gordon Sangster

Sure.

yes, continue industries two would different and in clients. other to potentially other to ago food with either They of have potential think pharmaceutical So great progress come we to about besides types. quarters other to arenas I starting alluded really good talk several and I into penetrate market

whole creating First you for is for and that key Lyle. catalyst, low our been can of of how business based has protein catalysts manufacturing. the very we're generating Tate the part as been for That's know cost and company core & pharmaceuticals competent value history a CodeEvolver enable

So, manufacturing. all catalysis is chemical fundamental to

flavored another or could industries. industry chemical fragrances could industry And another So, come that verticals. of other or great varieties chemicals from come specialty from chemical

other into So that would of verticals. type extension industry be technology one our -- of into

are dominated create DuPont the very are example significant to industry whole in for type, and are are Novozymes sectors benefits [ph] a in we These industrial large industries. by industries. is we a enzymes provide in feeds, enzyme within, and different for are and that multibillion other paper pulp dollar there they animal enzymes products of range used those can they and impart used CodeEvolver operate they in used they competitors with variety in industries performance detergents, industry and of wide The like enzymes needed used are a

industrial So basically in Codexis to those see of trying talking has kind leading of enzyme that performance needs different are engineering customers of second this enzyme protein category world two industrial variety our markets we what been enzyme and sectors new those those are to capability customers types enzymes and approaches. a for improve looking of an be bring where into There one could with verticals.

of are them. We on working both

of We in them. are having some both successes

So, I'm like showing companies with hopeful in those. material you deals that future, too the we're not distant great

Swayampakula Ramakanth

Fantastic. doing deal talking life well have few the Actually, and also We're in the enzymes especially to have which Nestlé. about all verticals come which we and biotech, been proprietary food, various quarters. a now pharma, did with these with recent recently which just enzymes

term? So, to good the then one this figure and that on CodeEvolver out and you whole sit are the focus success so issues and to you any going want down thing you and where long a can facing do this take resource you also maintain sustained side growth board in on have and with all on side this other the does success mean

John Nicols

question we these issues really that's a and great course constantly. RK work Yes, of

new and time. are in arena, protein comforting R&D we earlier, that first XX engineering working have teams the is So given in parallel proteins said around any point XX I at different like on

area another another versus the area, protein in of are in one teams So, those R&D team for incredibly another to work teams one fungible.

is And so, arena to focus result. R&D mitigated as need the a in

So the ability I build companies really, and our it highlighted commercial to partnerships with. main huge comes And down the great access constraint relationships like to have we complex companies with choices. major the here is

projects But on need investments. of definitely essentially the to in focus are the and return headcount teams. to enable development and mitigated work work R&D on exclusion there on the project limitations we in of in business yes, so reading because our more at both other And one each smartly some is also generate

and team usually getting the to R&D R&D So, covered partnership. another at idea create another we're a we had fees protein by good

our we not it where then protect that Codexis and hole often works position. digging itself backend an So is have we're generating investment if patent

So, picking really at as applicability one to looking expanding opposed we're another. the over

So, that hopefully your gives you feel question. on some

Swayampakula Ramakanth

that's no No, good.

the to team. you of it a go the studies at your phase there the really question least how agreement shepherd a much kinds sure maintain do additional preclinical the before one And of But I last from that or it's effort encouraging and I generating the of in at I'm to to out with what off Nestlé require? these studies And somebody an to too do those to constant success you give stream molecules point. pipeline else pipeline zone a this development in of really relate is understand of know, very of do comfort that me. such is you can you it products? need Just much this is Obviously, for

John Nicols

Yes, good question so really again.

So, our them errors four couple inborn referenced acid are pipeline, about I projects, metabolism. commentary biotechnology in of these of

So, limited data. patents That I teams. develop we our our of until we gave three today four protein requires some engineering efficacy color maybe roughly know, very and

several referenced teams. I've times have about XX we So,

R&D is roughly, minority So or or XX% our XX% pipeline. health to of capacity dedicated that

Nestlé of now projects those of new is of One where collaboration element this nutrition. care for and consumer we enzymes part create medical

of generating. by one So, R&D them fees is that we're the Nestlé covered

ability things requires minority efficacy a testing, R&D of is to improving challenge does on protein has catalyst that us focused a in as efficacy generating a So, straightforward it's do catalyst laboratory. pipeline a this the It catalyst capacity still yield efforts. and that and of fairly our the because or

humans in a have in that animals. and alternate, we For therapeutic for

successfully understanding. So that that living yes, that through we that the something is in protein will we're with I investing and has highlight But is very PKU push -- building program. proving technology things

of we've challenges. these confidence kinds been technical building So, on

Swayampakula Ramakanth

And Thank I'll you. you soon. folks congratulations. to talk and you, Thank

John Nicols

Thank you, RK.

Operator

Thank you.

Steve from from next First Our Analysis. comes question Schwartz

Your open. line is

Steve Schwartz

Good afternoon, Gordon. John,

disclosed you've First how much question, invested into have you CDX-XXXX?

John Nicols

$XX more and I investment covers the discovery million the payment did the say Nestlé in but specifically, Not upfront from to-date preclinical efforts. the that than today

Steve Schwartz

John like going they're to people make you exactly, bunch that ask a know numbers. finance you of a when and comment to for

So, you're you necessarily anyway rate to simple the term understand near But one want I quarter? at okay. that new is if where Axela don't did I comment. that to A with this respect catch disclose revenue run figure. the this

Gordon Sangster

yes. so, think I

John Nicols

level maybe Most even likely has this to is likely. at is close stay small shrinking an why quarter over time. and in most number faced which The get this zero competition increasing to it'll pretty generic third the numbers product

important obviously less become company's the revenue. a of it's So, piece much

Steve Schwartz

your Certainly, and biopharma? of me. deals entities. Okay. larger are and at is from length at CodeEvolver coming of talked these with What business excuse of pharma large small And part then, about you've penetration medium your most

John Nicols

a The It's significant can than API's companies, of talking platform companies about the business for we companies be reason with with license much of you is have big can categorically But so do they because a smaller that better so pharmaceutical CodeEvolver many more GSK are pharma spend more more create by know catalyst significant time and deals. are a many amount amount large targets, good do we question. which smaller and really larger generic we because prospects affected business it's so entities, big Merck.

cost catalyst clearly smaller smaller because third in pharma from the one material more quarter character with of companies. bio drug pharma our the smaller of the it small one of One relationship the and these can pharmaceutical a revenues that's does. Typically, much reductions companies company. But many project work is

Steve Schwartz

And doesn't particular still world in a so now And related necessarily is is a that or that you stand out particular buzz world to is one that the the you? wave around big opportunity biosimilars. your opportunity for can right all of biopharma ride

Gordon Sangster

is trend its is a - just changes the world change CodeEvolver But in is new It protein it creating proteins. of as something in technology, very our a amino highlighted. acids big pharma novel in new. you've Biosimilars important our

So, new our proteins. creates technology

just same is biosimilar, the for creates generic so, new biosimilar to volume chapter manufacturers. And CodeEvolver proteins. the protein when larger opportunities great think leads you in manufacturing which about protein

protein is biosimilars trials that's not in of novel CDX-XXXX a the why the so we're much has clinical a alternative middle better CodeEvolver. So, And through for That's the wave. go make et to that cetera. new Does sense?

Steve Schwartz

at this have it. moved on information various into very approval that there if many and reduce drug stages acquired my next to time CodeEvolver understanding. to Sure, in that in development you have to pharma. say do actually, don't a with know And out which good the this how using molecules At of confidence or handle Got in you've improve by CodeEvolver, that sales lead at preclinical you terms in data involved it wondering just clinical how molecules totally is question I'm John, been I by is x% many or if a point I can development. is And someone good enough exactly where with certain point probability simple yet? you pitch can you stages a development you've

John Nicols

or to historically the for drug. Not the catalyst create the to in enough by process makes for make engineer cheaper protein involved timeline to make client. of a catalyst pharmaceuticals where the And bike delivering them really that that process and us and the us pharmaceuticals to to cheaper helping a quickly the key the been vast intermediate key the majority has of pharmaceutical is and development our so our projects drug fit we're in a

will drive not we've So, regulatory process quickly of those as our gotten part timeline because to [indiscernible] because for the to clinical timeline, so timeline the drive change is drive installed is phase three one, sales But faster and become but critical our get through the if don't clinical the us path we which can not the timeline. the sure only of doesn't that answering prove that that question and able the drives they results catalyst a make catalyst process we're sort issues going to your better And enough. timing within the two, that CodeEvolver clearly pitch. customer's is I'm the been do timing timeline.

Steve Schwartz

the not you the million answer. talked a No $XXX was might and when you John, John, question fact, that been no, a have talked good Nestlé answer with. about so perfectly. you question And But me to good my when a about deal, but of to point got then a again? talk noted Can of of goes which uncapped million was that through percentage commercial teens $XXX at as be percentage, to max, it. and it certain you high a that royalty element talked the if you think seemed I that a realize max in made about you it begin molecule also you did you

John Nicols

Sure.

right. drug, from of the $XXX the there through of are approval potential so Once You're drug. absolutely payments the million okay today

So that's upfront. million million, in $XX the $XXX

of drug of generating sources Okay, possibility that two so Codexis revenue then different once gets the additive. -- are approved

Those [indiscernible] drug tiered the parallel, in our add can milestones. $XXX and to both end royalties the is on sales in sources sales generating product up the milestones million. parallel. addition, of news Once of be first rate. in generates But tier the we royalty the upper of The will low double-digit

Steve Schwartz

it. Got

Okay. an you Gordon, R&D and one the SG&A what through about being the is you it us this And going rate be release for where trials run addressed what in quarter press just expenses for and then of clinical idea my higher talk getting but you afternoon legal Gordon. in might give last the fourth can ready XXXX?

Gordon Sangster

but you expenses. of from point view peak [Indiscernible] [ph] of legal also

John Nicols

Yes, and account. be offset will by

and put adding to are that's constrains encouraging business we R&D projects seeing new we and So, so it about and asked us to were headcount teams think RK was so our I add ranks to to work the development. for incrementally

off right it average I to and offset PKU by an be somewhat you the but $XX for come pretty you quarter. overall we for to million I of the will fourth that sharp next an on is go down headcount down give were will the year spend think expected increased says, So Gordon like that think are

Steve Schwartz

Thank it. question. Got Okay. the taking you for all

John Nicols

Thanks.

Operator

you. Thank

[ph] comes Stanley. Zenith Gregg Morgan question next Our from from

open. Your line is

Unidentified Analyst

John. Hi, Gordon. Hi,

flavor food of correct? company Tate would company considered So, house, in Lyle the and & ingredient a type is what food that or be or a

Gordon Sangster

They and healthy. call functional ingredients them or make wouldn't world's additives in food to more sweeteners of one leaders flavor products and a and like more things appealing food house. are I fillers the

Unidentified Analyst

market so next you years every be for it be with will not would yet? - ingredients industry takes or quicker that company you think a Do pharmaceutical do you think Codexis. other you this And to and two-year those deal. you are the do one revenue signing to would it that a products you then company deal about maybe are When have food to which something longer quicker for just timeframe, be with or the bring in market two you think of talked

John Nicols

shadowing major it partners we're be next the of all We're say Since I'll that these yes. three making clear kinds the for or one as different which prospects you will we put just of deals across that, between for of categories. not have

Unidentified Analyst

revenue upfront Yes. get trying the for the except are development I'm lead just the money that pharmaceuticals time and for it getting faster payment? company research versus is the in long get to you

John Nicols

and happening Gregg. Yes, it's

projects and and are those accelerating being First, those our and snapshot to our you R&D feel kind in you those two which of commercialization get commercialization requiring many we've been product for now. sometimes that's a revenue pipeline year on history growth is showing are working over that leading can projects of of XX plus all our their in our and for commercializing years

doesn't it do. pharmaceuticals that every ultimately every to then commercialize new time ingredients term So we Because you're place. other quicker effort get that's revenue or these theoretically these industry to long-term very food and the sustaining then require and be new on create happening and should add area that partnerships all and top, nicely generally to us all new partnerships for short and right with industry, opportunities revenue other the regulatory

sustainable. our we're business accelerating industries growing by in to So, other that timeline

Unidentified Analyst

that an companies ingredient within providing of they something lot you as CPG, a but replacing they product doing it? test With a Tate already have food don't of with brand-new being Lyle do before to that or goods of want Lyle an one - used is to going ingredient to replacing ingredient they that's is & testing take whether Tate package that's an may Are are ingredient & change time and consumer usually their lot testing product.

John Nicols

be new our partnership used of with Lyle CPG that helping Through create types ingredients in can we're products. Tate Yes. food existing to &

Unidentified Analyst

the I'm So, year feel there's next what just you like be? the two do of or as they've over wondering the there existing size what volume markets to a out got they're rolling going these far things the in is or as the slow if these chance. define

John Nicols

even testament is consumer products commercialize so or a the had. to this than You also second And are the kind industries resistance hopeful on first that three bigger it But could as years already Tate has like quickly. And companies. prepared just big been Lyle a alluded that change now, right. ago already, remarks is in to of that commercialize we've fact There bio. & relatively success able that project, process working And our something in we started timeframe. in we're to my be can that I the we've the more

Unidentified Analyst

you Thank much. Okay. very

John Nicols

you. Thank

Operator

I management to showing am Thank for turn to you. And like back now questions no lines. any closing would phone remarks. conference from over our the I further

John Nicols

platform progress capturing protein Okay. Relentless the success more recipe Thank at our questions. Getting technology. to ongoing Codexis. value core engineering your CodeEvolver great focus In our for and forward to updates -- of have the on that you. providing meantime, look We you using for That's here customer. and customers technology more thanks day. a

Operator

conference. conclude Ladies and have in does Everyone may participating all day. gentlemen, you thank a program you the today's disconnect. This for wonderful and,

Codexis (CDXS) 9 Nov 172017 Q3 Earnings call transcript