CDXS - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Q4 2017 Codexis, Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference as being recorded. I would now like to turn the call over to Ms. Jody Cain. ahead. go Please

Jody Cain

A Cain of today’s Jody and Thank for on business you year today’s a This is company’s call to with website discuss in available progress. company’s the call results investors quarter deck Codexis’ participating to financial company section is the and LHA. slide the XXXX full codexis.com. fourth at

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

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

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

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

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

John Nicols

revenues heavy Fourth fueled for an nearly highly the on XXXX. year, of year lead history very million development bottom enzyme. quarter the you quarter partnership to Thanks, investor slide product quarter in I’m We’ve million as presentation recognized Health last increase accompany a nearly the report $X revenues recent Jody. for we sales with section by to profit, for reached exceeded a more exceptional biotherapeutic Nestlé on time year Gross on of and the Good of proud first afternoon, line, our posted everyone, in generated call. spending product finish double thank today’s Science. in the fourth sales and us. to $XX in XX% joining a first brief and for than the from our highest XX% despite the were margin well those website productive our our the on for biotherapeutics

in X, all achieved Codexis the non-recurring metrics fourth Turning million. revenues exceptional by guidance full reached from results considering for as fronts exceeded accomplishment with especially CodeEvolver by multiple consecutive or on parallel. and Slide our $XX.X XXXX This were this year licensing was the revenue that Merck. We we of XXXX in million year. impressive team, the GSK equally to delivered deals succeeding XXXX financial was $XX an

XXXX First, upgraded by upper XX% range. of XX% a was exceeded the our product grew guidance revenues, high throughout point guidance. on product end sales showing of margin the our XXXX Gross reaching strong which

customers growing of highlighting In across addition, accelerating were into protein spread markets. of increasingly those a list our revenues the catalysts target penetration our product

In four by more each This fact, in XXXX, just XXXX. is XX in from used catalysts. customers Codexis of than up XX protein products produced $XXX,XXX

generated from for than first were food of to also the beyond activities the off industry, Our the company pharmaceutical time paid industry. more XX% where revenues diversify

across a just clients timeframe, to protein in protein be customer are to of more arrangements be CodeEvolver and with securing and dedicated for a a the customers deepened partnering for reliable teams more more client, penetration protein addition efficiencies different time creating set a engineering year Codexis In These discovery going Codexis. growing engineering can given we our of applicability team, across targets at proteins those those dedicated four They stone secured of can In expansive of revenues widening given a endorsement Over forward. enable stream catalysts across up their for clear clients, while our the baseload service created protein predictable R&D XXXX portfolios. stepping in arrangements customers. Codexis relationships of from XXXX. a into one work

landed given our Codexis and similar collaborating & top offer in to as uncommercializable other making, to too fastest off food product new a XXXX. a these as limited to suite has on for and to process collaboration development. to low here commenced expectations Tate Since create exceeding to protein for develop sales catalysts start prospects established. beyond Lyle, revenue the we a a Other generators two date. very food performance our enhanced due excellent major timelines, can are and XXXX. targeted industries. process and deal to quest enable catalyst enzymes for major began growing the protein for and Tate highlights high commercialization a products Regarding larger novel of cost availability. success new executing Faster amongst industrial proudly a With commercialized well in protein got That we cost our partnering for ingredient peak become Lyle, arrangements progress an molecular effectively year its this the our for biology for attractiveness prospects in continued that applications schedule verticals diagnostic this & at In Codexis. catalysts CodeEvolver ago engineered breakout next target pace hold improved of for ahead With

with three a XX% less enzyme, than than Ligase. more DNA first plus minutes Here our for lower enzyme or demonstrates Ligase performance, we conversions competitive superior achieved conversions that XX% compared XX for requiring in minutes engineered our

I the innovation a highly well presentations enzyme at engaged Meeting to presented in the attended audience. the post subject Medicine at Pathology of Molecular November, and for Association at to Last Conference International Tri-Conference last was Molecular World Precision Medicine the Our January. month,

funding on the potential Codexis. at also future $XXX low Equally up established welcomed to to digits successful a a credibility payments up capabilities over deal area for activities discovery executive on royalties this up products phenylketonuria her finally, total and former Science important to tiered past. an targeting candidate investments QIAGEN to we and orally an in set or penetration Clairmont recent It Codexis. million for Nestlé enzyme we’ve decade. extensive immediate the arena, Upfront arguably have to take is up continued gearing and investment Shawn deal the market role put the partnering the for continued attractive double can biotherapeutics administrable far on brings October, announced the CDX-XXXX patients PKU meet sales. in our stage huge establishes with having so additional plus place, into our and return partnering commercial Codexis rewards that been economic areas therapeutic in ramping We new this the the recently development best milestones very our in And Health developing it expertise disease, deal provides with of

lysosomal storage patients. in we deal, In needs addition to development Nestlé; and are discovery; two anchoring increasingly of drug as additional validating to effective the competences, directed engine, PKU an effective at both in Health amino one, orchestrated disease the now have programs internally drug parallel, newly Nestlé CodeEvolver two, enzyme as by funded applicable established well These partners. programs external acid metabolism potential through additional discovery therapy more widely have candidates as Science; five disorders interest we of

quantities our having have commenced driven successfully Furthermore, development clinical CDX-XXXX, recognition substance programs well company. well a is great preclinical as by to drug needs cGMP the Resources project all We in in Nestlé carry the a substantial for on by spec we brightest National it’s XXXX the ready capstoned in the XXXX, Codexis the for to into San produced enough have the honor plans management which human serve the Francisco their Science these in place as has next is due that that nation right trials, the drug business our and with set accomplishments roughly a in four only the to CEO. but Association and to all talent Health as companies three of whole work I both manage share themselves employees months. first an of great to area pride are Bay XXX to as best that for as to It one Codexis begin remarkable dedicate XXXX. to Recognized Business

over call more Gordon? to to financial on our Gordon Let provide turn me details now the results.

Gordon Sangster

with Thanks John. to move of results some now fourth I’ll starting the financial our on highlights quarter.

XXX% exclusive arrangement an the the with the sales argatroban quarter for and The injectable was quarter the Has sharing the as reflected the to included fourth compared from XXXX from of mentioned product to the CDX-XXXX an a increased for prior revenues of termination XXXX. XX% for to $X.X margin up of Exela. from for year, our in fourth contribution $XXX,XXX connection Revenue R&D quarter increased customer John from for which with the from the sharing prior in XXXX XX% quarter our increased fourth revenue year for with with other up in a demand X, increase enzymes a of fourth increase base. fourth $X.X revenue across significant of the due arrangement XX% the was $XX.X Turning XXXX mix. were million for the to with for Science quarter quarter quarter well license prior on development as the sales fourth total to million projects. Exela million of revenue product Slide related $X.X XXXX. from for Health revenues product Gross year to Nestlé $XX.X world the XXXX of million, improvement to drug for primarily to due by XXX% million

this expenses to quarter Turning quarter fourth were million expenses, expenses offset of or compared non-GAAP per fourth with of net of a fourth primarily improvement quarter by offset or up costs loss prior for $X.XX costs depreciation $X.X a increase and for million and year, income net income for SG&A the the fees basic We fourth versus XXXX fourth prior the On adjusted $X.X partially per outside an expenses was from loss partially $X.X $X.X increased for XXXX of or the of $X.XX to headcount, the expense. was higher million reported the quarter XXXX XXXX quarter by substantial share. net associated R&D due a $X legal fourth the higher in and diluted $X.XX $X to $X.X $X.XX to is of million, associated of with primarily CDX-XXXX, to million million, this services share. amortization basis higher per the was the higher for absence operating were lower adjusted to related per for increase of XXXX intangibles. due of XXXX $XXX,XXX, the from of share, for net quarter of or headcount, million, year, share,

adjusted million. loss million, $XX.X for milestone XXXX XXXX R&D full $XX.X which SG&A recognition included XXXX and up December loss GSK XXXX per R&D as and revenue. including deferred the million increase of Cash as million, for XXXX sales, net XX, million share. XXXX were revenues $XX.X million, product XXXX basis $XX.X per non-GAAP our per to million $X.X and XXXX. $X.XX versus $XX million, $XX.X year financial payment million with year. from is per a for million revenues income or Revenues share Total $XX was December with arrangement or of net We $XX.X and of $X.XX Gross on related Revenues loss were XX% technology $X.X from $XX equivalents for $X.XX over a Merck reported and net guidance. million for for for exceeding XX, XXXX. X% $X.XX this $XX.X million million, of or compares sharing prior $X.X to On of XXXX our in XXXX net non-recurring a in million was Turning of margin XXXX Exela. adjusted for results. were were transfer a cash share revenues for from $XX.X and revenue expenses in share R&D or product the

in for Let highlighted XXXX, X. Slide introduce guidance financial me now our is which

is revenue a the in QX Our adoption XX-Q XXX based available of will and reconciliation on in ASC our revenues be May. of guidance early

total XX% $XX increase be to XXXX. to $XX, revenues between million a XX% for over expect to the year We

of half We expect revenues reported the year. first XXXX be to in approximately and the in second XX% XXXX half of XX% of the

include does revenue major not another guidance Our transaction.

sales product million. $XX expect We range from $XX to to million

from we spread the expect expenses We gross Separately the year. margin which be relatively that XX%. expenses, with unchanged on million to sales XXXX like around turn expect to of at is the expenses throughout back to between to $XX combination product be and I’d evenly With operating SG&A R&D XX% call to John.

John Nicols

Gordon. Thanks

discover cemented achieving outlook confidence described continue on you revenue Clearly, meet will into our continue creating of and outlined it Slide protein long our of our the an ability at this our core a at machine. our year the and all platform we customer’s the highly in proteins going engineering to us giving relentless center another technological CodeEvolver for competencies As needs unique as objectives enable increasing CodeEvolver our computational technology. strategic name term XXXX Artificial growth biology that product will plus X, productive to of intelligence, growth Branded our our XX% successes be forward. drives our focus pace, XXXX. has focus ever that recent guidance. synthetic

Second, we into protein a continue our to will accelerate products. manufacturing with portfolio pharmaceutical penetration catalyst growing

momentum, staying had and enabled expected XX% in from will established in our widening deepening these of a On the importance of of operations start elite are to plus our growing a by teams strong processes, to their partners also ends industrial catalysts We layer revenues of margin led partnership continue green our expected grow total into license. verticals. stage the are leadership the A the engineering our XXX% protein outpace generated of CodeEvolver their who growth, set growth low via arrangements Codexis seven sales pipeline customers to technology seize growing pharmaceutical protein a of above low an our a the the CodeEvolver. industry our list impact list food XXXX. is R&D that partnerships, newly installed sales catalyst to CodeEvolver Lyle. CodeEvolver from we our across and installing inside our growth, that and platform drug in build dedicated customers team with in of more are continues platform for stack corporate cost generating ultimately industry, manufacturing and secure top XXXX their Elite protein poised penetrated second Sales of substances set within commercialized revenues increasing for half back & From Tate by revenues of to digit

a meaningful we Ligase DNA to the our announce player. revenues the development and establishing of position partnerships top markets, of the anticipate biotherapeutic’s us discovery addition, to by within $X and ourselves by the increasingly we In generated followed enzymes additional of industrial follow in finally, products will that be other On enzyme be billion and biology diagnostics enter step molecular to and profitable And XXXX these, new to sales molecular other niches marketplace. XXXX growing successes as significant out development introduced. plan led

the into driven be like trigger discovered least more set of the We earn a Nestlés million with Codexis candidates bull assets CDX-XXXX, exercise attractive would in toward pipeline that pre-clinical end new to biotherapeutics bringing and in will drive next will of midyear envision the each well partnerable advancement deal, pivotal that up or a the towards status our XXXX. of kind payment CDX-XXXX trials by our start creation to trials collaboration from before these in success of teams. we $X business approaching Nestlé Health continue target us early assets drug Also given two XXXX. and and value Nestlé we in and Science of through the human that early human effective proven by of drug build of obviously partnerable at expect year next in patented partner trials these We option beyond

these proteins. progress to Our here Codexis unlocking very as Codexis further more of across will times at continue driving these we to as the accelerate are dynamic strengthen company a fronts power come with exciting

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

Operator

Instructions] [Operator you. Thank

John Nicols

schedule you for to busy conferences. question, to upcoming waiting our we’re alert our of like first I’d While

the Conference Life Annual next H. Healthcare Cowen France. and Jefferies Wainwright X XX being presentation Boston. Healthcare in The Conference in We in of and www.codexis.com. Investor New XX the XX The Materials the being Monaco, Boston. will Webcast held on Basic investor Minneapolis through March our Healthcare and June presenting in Conference be sections Cowen May through at Conference Conference Conferences Jefferies Global week in York. posted Sciences X at X be XX Institutional XXth The XXth being will of Industrial XX held C. to May the April in being held Craig-Hallum through held KeyBanc

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

Operator

Certainly.

Our with first Couillard Brandon from of Jefferies. question comes line the

now is line open. Your

Brandon Couillard

have the been somewhat there’s afternoon. thought mean, up Thanks, that I a there? XXXX ramping in pipeline. product good the What quite like revenues as minuses a are sounds have there would look John, happening would that pluses certainly in moving that outlook What out roughly the pointing contributor are to lot you bigger flat. and in a and are XXXX. parts perhaps

John Nicols

yes. So,

focused specifically and on product correct, that is So revenue, Brandon. sales

Brandon Couillard

That’s right.

John Nicols

some puts takes. There’s and Yes.

products and some in them to the produced last of the we we pattern customers order pharmaceutical our of just repeat don’t XXXX industry. given repeat of that lumpy not year Some in will the expect

will if not be So you moderate in products by in offset products other size repeat XXXX. they’ll and growth

gross So basically generated that plus product very and we in at significant cementing XXXX margins. minus quite would similar and revenues

Brandon Couillard

Okay, to thanks. board. respect director then NGS business, new with Shawn And on nice coming Clairmont the the to see

of the high be three You direct plan, you in big you can and sort to about think about opportunity the you of help opportunity think commercial versus how two, years how you how go this think talk how market can really expect about and here, level a it distribution, sizing us to sort there?

John Nicols

Yes, sure.

with hands our performance validating testing have stages we these interest ligase customers, And of in lot getting and of clients. ligase. significant lot of now, kind are are we discussions multiple various a found the they’re our in ligase and right of of in-house for and the we potential DNA So confirming all that a

enter And to with and business established arrangements Codexis with technical enzymes presence those potentially us to of customers, amount the albeit independent enable fair gross of probably customers customers it think working As optionality and channel we have how to margins. offer these more list or expense would more access, credibility with gives direct there. we customers can that more more some and could relationships generate players us presence, kind to as these at into from an build that build others. We market, on establish sales penetrate the I the with of our have potentially arrangements like be some of will a continue could quickly who of to than marketer with partnership direct larger rapidly the

at options XXXX. itself. as in carefully be sees move going the and of So we’re these in of product through front this of to is term best we looking one the through the company opportunities that year beginning this Longer

applications, kinds beta speak get mode the quickly. to these validations lined be used sell we the of and whether it the With supply to testers, product able from various We’ve that market enzymes genomic polymerase it’s as out in sales be end are are to gen product for in very good we next or of million sequencing today in those the sales pretty chain pretty it markets. applications size or otherwise enzymes range target. market being estimate of remarkably, PCR consumed one We that reaction of chain us $XXXX for

Codexis year above be So frame. aspire to we like to three achieve eight for that’s time sales products for hope that in at able accomplish. put an can this would to average into to digit we And penetration what margins us clearly

Brandon Couillard

know Is come other embedded conservatism the in how simply like incremental your parties quite deals platform one, conversations third any last types less from and pharma of a like feels transactions any explain sort you of de-prioritizing developed And partners from sound of there’s or helpful. it those it that with you’ve that out [ph]? or CodeEvolver still you bit doesn’t interest Thanks, and contribution yet there.

John Nicols

Yes, great question.

CodeEvolver wider and we are just highlighted forums the a of to us. more and and widely lot GSK to clearly we how shows in did CodeEvolver deepening technology, to more license that CodeEvolver manufacturing it players next of I increasingly promoted right – So led led as we with our pharma it just to and the platform detail widening being the come we our the educate much like and penetration to deal Merck universe larger adoption It’s how of hasn’t relationships front license works. pharmaceutical help

specific in not embed we So of deals intermediate revenue CodeEvolver deal in to we’re guidance million kind dedicated to our your $XX with layering these $XX project Nonetheless another and million. did teams. question

are customers stepping project and dedicated entering said are dedicated with really next an the remarks these really through these So potentially work in I installing increasing the great number extended license. of teams like prepared CodeEvolver for into Codexis stones

license we’re up having dedicated So but we’re of remarkable as we middle put place and teams not having the one also so kind place. they’re in single – having project de-prioritizing teams from range in project between project economics pretty generating these project those it, dedicated of economically and a in a CodeEvolver

and So it’s quite nicely we’re working really for us pleased.

Brandon Couillard

you. good. Thank Very

John Nicols

you. Thank

Operator

you. Thank Arce from H.C. our Wainwright. next question the line comes And with

line now Your open. is

Ed Arce

Thank you. Good afternoon, John.

John Nicols

Yes, Arce.

Ed Arce

It really on questions. And quarter. be at we to rate at going see that Couple nice of what level? shown what profitable operational forward net quick or at this on the point run is the would fourth the you’ve and in revenue expect least income basis, how see non-GAAP should

John Nicols

in if first Hi stand XXXX profitability Arce. flat and of QX possible. non-GAAP profitability to we take And split Sure. half. certainly. are into then revenue willing – the second the fairly was XX% we’re the an layer XX% OpEx towards you our basis on XXXX headed of looking if as well half in simple second a excellent Non-GAAP as

Ed Arce

you how total the about. to besides the do in seven your business period strategy on and explore long-term. little DNA take want run Ligase what a caller with with to this And How segment front. Okay. of year the want you previous Then say five and that piece what’s And want to interesting we’re That’s evolve? in talking discuss an company. be could this long because segment, how current the how it could you actually – NGS What fantastic. the to do is take this the run you I bit is business you

John Nicols

Yes, Arce.

questions. Brandon has the and question of a asked think list I similar

the the things expect. to with And getting validation which at we a Then focused one attention validation and major larger for we’re step industry et the so biopsy, incredibly of we could very targets is difference to in with cancer on diagnostics make evolve we awareness the challenging like a especially time liquid an cetera. in get significant next take use the players in technological going that that players obviously protein-engineering and a sequencing create molecular

so and customers force And what products and focused parallel penetrate commercialization generate and lends that we revenues. of described expense the of we’re a want maybe that’s, probably volume when we going And what maximize you lot at with margin that the think purchase could we’re right I retain more to so full a from said could little market we’re way or color to on to I that to really the play for figure optionality. that’s of there, it different Brandon, lends I player by grow can our in the ready deeper margin and itself And what segments. to is. supply out independence could slower little a some the faster maybe that know over with And think differ that giving that channel I a physician partner just and

lends itself applications. to diagnostic at in as [ph]compared to model independent. NGS, example applications, inclined to work may NG we a Also larger be that partnering probably equal molecular or are PCR more diffuse molecular As look we we which applications we partner of – research be biology choose may for more versus academic much to

growing that expect enzymes current about of the our And thinking and double-digit significant validated all large than increasingly a as and you’re sequencing it. market genomic believe a we timeframe, how by rates to very are better because over this part itself become that’s gets growth We a is already will enzymes. five-year gen consuming it’s accounts revenues enzymes So incumbent we company’s market tool. our right should next as seven-year rapidly

little So color to you really these hopefully a good more questions. that gave

Ed Arce

should segments B, the that form the you. the you I’ll presentation in you’ve the at is be acceleration already to utilize two where CodeEvolver Are statement done question or lot of call it on at Thank three protein whether your putting least business. in discoveries. it that could X and question overall want understand In other – first that’s within that these business you very the amongst to on three trying your manufacturer A. a pharma of use segment it’s of manufacturing, not slide different of do I [indiscernible] the mature it enzyme the in – a uniqueness Slide you’re these two now, a a statement it time, because on energy the pharmaceutical use segments, it as segment. I more the the of bit build from to the work quite Of is other And where is you’re segments trying manufacturing, a well. business biotherapeutic different you segments anything biotherapeutic obviously as kind but in

you understand should there us if – the those about we So how help think about we long-term can Codexis? think should

John Nicols

Yes.

question. capacities a so are and And half for priorities we place applied is diagnostic let you of the I can relative teams it’s the third molecular our with for mean industrial being do about R&D, insightful these I giving segments, three a feel of and still what Today catalyst and and pharmaceutical those R&D me our today. R&D biotherapeutic give opportunities. discovery protein-engineering enzymes start pharmaceutical catalysts our against enzymes and development. to manufacturing other like Probably that So the good feel first doing you that really are

pharmaceutical reputation continues protein-engineering much out operations is for and point our do so more there, to significant of manufacturing you opportunity amount engrained accordingly. As grow set our a we continue to

both just against The half all our our you’re capacity. R&D of that’s that’s however, to was grown areas, of essentially manufacturing. because pharmaceutical two R&D if so And gives ago, years applied – four roughly being the of capacity other rewind have

R&D So pharma, for gone XXX% utilization manufacturing to of from XX%-ish. we’ve

So shows for areas results, translating other the increasingly and two that faster now top line just into are bottom right. that’s growing Codexis and

revenues generating nothing industry biotherapeutics XX% Nestlé our deal food from from four now. is or over sales essentially in we’re ago, three Now through the years

also well. incrementally than I but pharma two could as manufacturing, expanding capacity see So other our growing faster segments we’re R&D the

As funded past the the that’s our that we project last in project direction diagnostic been not announced in account next We’ve of our in comment, in pipeline. larger A we’re biotherapeutic proteins to enzymes in course area. potential partnered Tate to then done growing to innovations envision. is, by that being been protein that of the novel biotherapeutics protein make And from our able in we majority and the for in increasingly final an of are biotherapeutics. exceeds we investing investing creating therapeutic food have The parallel indication somewhat that been March self value when we’ve for have as also ultimately proteins partners. year. innovation the with the can discover a investments in own I’d a & a this of comment protein also other investing And potential Lyle are the that create second protein own our any on be molecular anybody of in we’ve confidence R&D. innovation These our

deal. that the monetize greater innovation and the way in biotherapeutics, protein we Nestlé we like is So partnering prospect the

in little think I more the a our do that So in proteins to than leads categories. and for own biotherapeutics investing other us

Ed Arce

you very Thanks Thank much, John.

John Nicols

Arce. you, Thank

Operator

And our Matt Thank the with Craig-Hallum. from line comes of Hewitt you. next question

Your line is now open.

Matt Hewitt

all in on the congratulations and achievements gentlemen XXXX. afternoon Good

John Nicols

Thanks, Matt.

Matt Hewitt

me. questions from Few

understand I just a make point sure this. just clarification, First I of

So an your that working there deal, you towards correct? guidance is and into for that is CodeEvolver factoring but not are XXXX, you are for opportunity that believe

John Nicols

That’s exactly correct.

Matt Hewitt

either mean And use the upon secondly, it from is and/or how teams a wants in, depending customer client indifferent you or partner margin great. to versus internally particular? Okay, the standpoint matter wants dedicated perspective to, there a or team margin revenue I CodeEvolver bring deals to the difference standpoint? your does it are then in a or from

John Nicols

indifferent us indifferent. teams teams Yes is of project it of have may or multiple when kind CodeEvolver there’s but become three order deal, we a that takes there dedicated difference tradeoffs if lot would become that and we capacity in project Say are that more put of to we project place. may

we’re pace place, towards that, to team fundamentally move deals. a amount. only their have influence in part project digits we and but a if large to we’ll generate drive project trying we most each plus. the So generate And CodeEvolver these They for will we seven all certain can own team with for pharmaceuticals

you appreciate just to we deal from and kind – CodeEvolver license projects CodeEvolver chapter it will of transfer we in generate ultimately the will the a what revenues that, in technology So general. come is those to but zero R&D drive greater than of

a dedicated Codexis team dedicated could longer. on can created. they last of So the teams owns protein longer project backend Also the project the that’s sustain

the On the licensee end of CodeEvolver license back the owns platform created. protein that’s

dedicated so team And sets kind us that to a compared revenue a of backend different a up from project license. outlook margin for CodeEvolver

revenue a and that and So yes, approaches. both towards with growing good we they’re generating We that. instigating also in companies more in there were time meantime really growing are taking think But pharmaceutical on license good our trade and of average offs, drive set more the should CodeEvolver clients. large patient platform we’re

Matt Hewitt

then Thank there’s next Great. that the us Phase Maybe could between there me. something walking arrangements your the remind Nestlé trial are if different Thank of Number you or then from steps impact to one ASC last more kind what ability to two X from impact one, of quantify is that on revenue on the scenarios. that through starting for you is for Gordon. the sum there cash for XXXX you. and lump maybe guidance? any XXX Was fiscal recognize –

John Nicols

first let question the Nestlé me the Okay on on take for runway program Matt PKU. the

X patients. running trial, healthy Phase So will Codexis be in the it is first

we in that they And and Phase right And I middle bear that and year. set the said development and plus start remarks should out said again the around When of with around Codexis and from forward I take to milestone of would from wouldn’t that would of payment the by the run this a that commercialize be payments the We’ll through further expect that Science costs of there to if exercised ultimately then but volunteer this all the market CDX-XXXX exercise as that. to million. royalty. trigger over Codexis payments we three stream course months that any and for As needed take $X essentially Nestlé happen costs just associated option the would or option that PKU option then that in Nestlé. four milestone in XXXX. for successful somewhere if that us ultimately on we’ll will tiered the XXXX that roughly Health would start milestone satisfy option of the Codexis deliverables X year And early point is to too development our million trial early XXXX, the prepared trigger $X in unilateral trial, healthy they call that exercise payment continued

Gordon Sangster

Okay.

on XXX jump me Matt. in Let

under assessed reconciliation XXQ I So contracts be we’ll XXX QX have you will we’ve tell XXX. our so we’ll versus revenues have disclosure can a between that that in far.

many but we guidance is XXX any with our safe auditors lost XX we’re have still there XX some comfortable consultants. from are of our that We analyzing contracts revenue, for effects are that and to and still

wait you’ll until a you’ll build can if QX you okay. reconciliation, So XXQ full see

Matt Hewitt

you Thank Great. much. very

John Nicols

Matt. Thanks

Operator

have [Operator line the Instructions] question Couillard I’m follow-up showing with we Brandon from And a Jefferies. of

Your line now is open.

Brandon Couillard

Thanks.

compound that? any period? going that Just rights to I asset to PKU I right milestone assuming the did for right the or in you’re the the took over payments With that Gordon. am that there related million a then is otherwise readably hear just a respect – to XX-month to And and follow-up secondly, payments you amortize $XX second Nestlé

Gordon Sangster

Okay.

revenue we’re not the over So on so $X it’s expect and milestone that million methods in first the recognition half recognizing XX this that for a of the the proportional performance revenue million months. the straight year, lined $XX we

the in-line costs So we will that with we incur. revenues recognize

costs XA and have through trial for look end okay. we So the forecast to of to Phase costs, revenue at we the then them those cover allocating are QX then and

John Nicols

question. Not second correct. exactly And

in gave our our course deficiencies option a partnership in new first Nestlé it with Nestlé on other for right, a that team also let and third clear. deal me was it the it’s to PKU to a in motion negotiation Nestlé why for create make the of built CDX-XXXX acid to put with gave pipeline. That’s we sure we’re right So metabolism amino working compound –

other we See potential that partners other we have to negotiated partners right Nestlé share first metabolism partnerable a certain Codexis we open those those explicit to No with if drug deal right negotiation. candidates just asset. economic at share terms – make with they’ll as acid of have point before of can them that packages a to data amino up look we a so could before that with first. And develops package that those

hopefully So that for clarifies that you.

Brandon Couillard

you. thank Does,

John Nicols

Good.

Gordon Sangster

Brandon. Thanks

Operator

Thank questions you. And I’m at showing further no this time.

I’d So remarks. back for John closing to like over Mr. call turn with that Nichols the to CEO,

John Nicols

business, your in Okay. everyone productive core XXXX Thank very up all good for stacking be you growth continued industries and into new high value year is a our to with questions. success to XXXX. of a as forward presentations for Codexis much. these upcoming earnings our throughout quarter well at sharing each calls very in you Thank biotherapeutics. stream We conferences, forward look as entering

Operator

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

Codexis (CDXS) 8 Mar 182017 Q4 Earnings call transcript