CDXS - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 Codexis Incorporated 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 is being recorded. to host like Jody today’s now Cain. would introduce for your conference, I begin. you Ma’am, may

Jody Cain

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

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

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

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

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

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

John Nicols

you Thanks, thank Good Jody. afternoon everyone for us. joining and

of to year. of metrics Web consecutive all or mentioned, XXXX a wide I’m As along. during our today’s and executed posted strategic our to on site fifth for on Codexis’ financial encourage the follow objectives achieved of a of we section accompany you have and the we Jody brief slide array guidance exceptionally exceeded Investors presentation as performance call proud I

Slide Let X. to attention me turn your

manufacturing sales in making way, of exceeding here rapid increase similar This margins growth X% expand sales. progress core XX% that non-pharma revenues sales guidance expected, nearly Performance by of solid sectors XX% continued XXXX a revenues as in delivered solid product in sectors in in pharma gains. And revenues top pleased of up result the XX% we year. traditional took segment importantly, led In gross have revenues at huge XXXX. cementing But sectors product up an sector reached We’re just been over for Enzymes year-over-year. XX% Performance and Biotherapeutics off guidance, XXXX Novel our other XXXX. engineering the to Per the year’s manufacturing again R&D XX% grew XX% Codexis. to result million, year-over-year. $XX Enzymes, grew and into a the on prior grew topping growth result into pharmaceutical is core into our new by the revenue we under report

to true highlight So pleasure for XXXX. it’s a

fronts well. In addition to accomplishments those we many in delivered on XXXX, as strategic financial

highlights the of Enzymes. Performance some review segment, let’s So starting by with

two concerted partnership orders the kick then to of XXXX, By the enzymes Tasteva of R&D enzyme gear. from in CodeEvolver and concept and was was accomplishment M. accomplished enzymes in to recently proudest XXXX better the & M of a commercialization Tasteva Tate started from our the sweetener the commercialization tasting quarter Lyle’s partnering more than efforts. shifted registration deal most years. end that third launched concept calorie on we each was stevia less the XXXX, of Here enabled Lyle’s the zero for quarter this to market, proprietary R&D out Codexis the enabled high our on process own late in patentability in our in engineering our funded up scale proof XXXX. commercial Tate Then and of those enzymes sweetener, first struck XXXX into GRAS Commercialization And were effective. and of & magnitude on party’s

and that products that their to M We from are excited using commercially. been already & Lyle strong some learn customer niche has Tate are initial Tasteva interest

expect We Performance largest our portfolio. become will products enzyme of the M that sales in Tasteva Enzymes one for over time

enzymes food, verticals Beyond molecular markets XXXX. of for us launch penetrate in to the diagnostic way for led other non-pharma the

Our launched next-gen in of present by DNA we ligase was XXXX, those customers AMP target the one NGS in and claims in Antonio at dozens or workflows. superiority our of a San trialed which results had of first enzyme, conference trial their November, customers target in validated sequencing

to multiple R&D our As for nine NGS we technical first and gain preferred digit own. our sales at results generated late-stage with to showcased DNA to on additional worldwide. our largest to we and versus the the molecular them seeking parallel convince partner enzyme AMP, ligase leading our us EVO class find close wide XXXX, TX going DNA polymerase in market players growing in DNA market garnered diagnostic is polymerase In which fast we superior used interest. access market

manufacturing core strategic Eight this each the business Performance parallel in to we With pharma a continued million adoption widening beyond. material sales Enzymes, XXXX, hitting greater of we $X in market pharma enzyme last this contributed in are these versus market build two than to in mark XXXX and multiple successes companies XXXX, significant materially XXXX. ways pharma growth In in in in year. penetrate

was from of Solutions Porton a in the as eight two global never the of top one us pharma completed fourth One in Pharma XXXX, them to these in screening capabilities high transfer those, company, prior. purchased XX protein any also amounts we quarter. customers of had pharma throughput significant year catalyst

a start. With multiyear less contract pipeline enzyme of deal a partnership in of year Beova $X to a to of The top eight KYORIN the leading overactive to We of extensive month, agreement solid yet is have are proprietary an installations. in we enzymes fully from second partnered Japan, developed list the with in XXXX. was operations. ingredient KYORIN Beova approved for treatment launched Japan KYORIN to the of a half than to a clients, pharma commercially vibegron, in add catalyst off for and proud in revenues supply million bladder. finally manufacturer’s by our another of our commercialized Last opportunity we Codexis catalytic used now plus announced pharma the our manufacture go protein of into active and

We into engineering same the platform accomplishments, first Urovant the outside have Phase line in vibegron. results supplied the package technology are manufacturing the out in of they to you in vibegron we with multiyear XXXX. recently manufacture vibegron protein our from upgrade their Merck a pharma the know Rounding of enzyme which half technology this rest to the of announce year. pleased rights entered CodeEvolver holds Urovant have has as marketing strategic licensed Urovant top Sciences Japan. also world to for to expect indicated X

now start CodeEvolver consumption of teams upgrades substance Merck’s protein for XXXX, their multiyear list Valued continues percentage a largest low delighted manufacturing. have capitalize procurement plus is with single Merck its growing in product CodeEvolver this made installed license are project Codexis product decision their plus model. parallel Codexis million first of for dollars, the deploying years our backend our uses productivity catalyst protein digit throughout at We from their last business an and of the their Merck’s procuring on the material JANUVIA revenue flagship by licensing for this to standard enhancements with to over multiple the drug CodeEvolver technology. created pharma manufacturing dedicated operate with of in-house at set they platform. for we few having engineering commercial

or to the drug towards comparable from companies continue protein for We we work have pharma engineering companies most applicability Biotherapeutics other that believe benefitting the PKU Novel remarkable and of our therapy to largest the segment, Codexis orally bring continuously XXXX. our span Switching technology world’s to Merck performance the high was bar. most enzyme administrable advancing for our CDX-XXXX step-out phenylketonuria for success in candidate

the clinical trial, Xa drug’s dependent a volunteers Here we and which response. study in the plus safety Phase healthy a successfully pharmacodynamic resultant showcased first-ever ran tolerability dose company’s

IND new filed fourth dose we a $X addition, and earned the the million Nestlé assessment with in from completed opened formulation Health an solid Science In a quarter. USFDA investigational Codexis or that milestone drug

milestone we CDX-XXXX to highly here, total to To-date, has plus milestone up decision a gratified payment. up under this enzyme. which forward are earlier commercial. exercise pre-commercial assumed $XX triggered to option this Science clinical potential million payments From Health commercialization earn to Nestlé exclusively Nestlé’s of license now the all for and activities month million by additional a CDX-XXXX, development earned $XX the to goes we million of essentially have We $X the have CDX-XXXX $XXX collaboration. if million their

of digit percentages. We are ranging also mid-single percentages entitled on tiered low-double from to commercial royalties digit to sales CDX-XXXX

CodeEvolver Biotherapeutics partnering those a addition early pipeline discover to strategy partnership Novel pipeline for using candidates importantly, currently towards and and provides of lysosomal disorders, drug candidates of clinical inborn credibly storage five our into additional Novel clinical platform therapy PKU, have credibility target development. differentiated enzyme funded substantial acid Nestlé in the and amino success of target In and our Biotherapeutics a developing and fifth our metabolism the We to program Science. is Health to beyond disorders with errors CDX-XXXX

pipeline specialized which for of that discovery and we secured to for brought discovery pipeline, in from the XXXX, drug the During of funding advancement increased Nestlé significantly. all staffing talents increased us accelerate this has partnership, enabled

one proven profitability bolstered industry revenue with debt awareness. President programs Codexis sheet to Development San also strategies the area our business Codexis encouraged retained resources in and For Vice biotherapeutics second brings about Brightest joined have And demand, I’m in million ensure keep Heilmann that, Protein to continues. consecutive in new core the grown recently raise XX by over in successful announce of Business team Companies the track dedication as Senior welcome to Codexis and Throughout enzymes. our than clean equity we parallel. pleased brand to outstanding forward and years smartly industrial in engineering Biotherapeutics and experience XXXX. strengthen global the nation to veterans year, gratifying credibly diagnostics Laurie the industry are our us adding of Best business of Work momentum developed as up a human a in delighted team excited increased for I’m Laurie growth highly these of cash exceptionally whole. in the success. quarter. transformative and a R&D core talent added I’m has who our and great We $XX and to been areas Marketing. proud resulting Novel the of balance more molecular Business have growth, brought both to in with National accomplishments. Resources second Bay It’s We’ve has strengthened with we XXXX, Francisco as ended Financially, in their in modest record to named the of that Association research, and to free with our capacity

see every creatively super I team a Codexis outstanding decorated people of and diverse, group an with the who day, we hardworking, are. to award that company collaborate Our has been make Gordon that smart great

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

Gordon Sangster

the to fourth This of Thanks, with guidance. million fourth included R&D including transfer. Performance This of termination XXXX Novel from the which the completing almost million million. technology with segment and Biotherapeutics quarter John. Gross the of included year million of compares introduce quarter Biotherapeutics QX up from revenue which Enzymes and for licensing includes XX% product the decrease the compares compares million XXXX I’ll Nestlé. XXXX Total million $X.X QX fourth million XX%, $X.X with from which margin was for and increase $XX.X demand segment. fourth the R&D in XXXX results from $X million full million the a agreement included financial $XX.X R&D review $X.X in of million $X from the for fourth from $X QX timing $X.X revenues of for of revenue-sharing from with the a of of for Porton $X.X Product for revenue fees in $X.X XXXX million the revenue million of for XXXX Novel XXXX, revenue due the the non-recurring revenues in mix. XXXX in Fourth with Nestlé. revenue million on in and with was and year quarter $XX.X XXXX revenue connection were quarter our Performance recognition then in ago, $XX.X QX due the quarter segment. from was R&D revenue enzymes. of revenues Enzymes quarter the the initial to product segment

due $X.X year lower $X.X from Turning million to a operating expenses. offset SG&A R&D million, quarter non-GAAP related the or or $X.XX CDX-XXXX, non-GAAP million, XXXX million quarter and share. million loss Novel share. from for income including in expenses fourth $X.X segment from basis, the for The XXXX was decrease income net and partially and and net per in fourth was million ago share, of to accounting was million of per million from $X.X stock-based $X.XX which a year share, were quarter per Biotherapeutics the of higher fourth for with consulting $X.X from compensation Enzymes million fees primarily $X.X consulting Performance adjusted $X.X $X.XX expenses. legal XXXX outside the due adjusted XXXX to the from the $X.X year the On primarily of services quarter $X.XX net million Novel were last expenses, $XXX,XXX, or higher Biotherapeutics a decrease which The per by for overhead. $X.X $XXX,XXX, Performance offset segment, quarter by The included ago lower was of to Enzymes or fees $X.X fees. segment income partially lower the million, versus the segment. compares headcount $X.X fourth net expenses and of fourth corporate

net XXXX our and million I’ll which to was the revenues to year R&D revenue financial Total of $XX from million million, million, for up review $XX.X for XXXX, XX% XX% note, in share was favorably XX%. XXXX XXXX non-GAAP up $XX.X full revenue and from of consisted segment net $XX.X per were Turning adjusted expenses revenue year expenses for of per to XXXX $XX X, a SG&A $XX Biotherapeutics total basis, expenses respectively, XXXX XXXX equivalents or million of our $XX from million adjusted loss or net million XX% product Slide $X.XX We versus just for and compared $X.XX which XX, net non-GAAP reported a from while million share. $X.XX $XX.X loss December Performance mix. per were Enzymes XXXX million On with and R&D for Cash margin million, XXXX $XX by the on Of $XX.X due versus million, prior as segment. increased XXXX for operating increase with product increased XX%, share XXXX for Novel as share. and respectively, $XX.X XX, December $X.X up million with were and sales the or X% $X.XX cash was of loss for for $XX from revenue compares the was million $XX.X $XX.X loss of $XX.X XXXX. per or for results. XXXX. Gross XXXX million the million,

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

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

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

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

rent $XX those million are expected sales product approximately be be back operating increase gross that, quarters. to total due to I’d to we and quarter headcount, to is evenly margin throughout be like per John. expenses. divided on and increased segment to higher Novel expect XX% to Biotherapeutics With expense expect primarily We four the turn XX% relatively call expenses This and between and

John Nicols

guidance. Gordon. Slide the objectives achieving or Thanks, our we also confidence our XXXX drive have financial outlines longer-term drive growth exceeding X and and near the in they to strategic

synthetic unique constantly money with Proprietary pace. begins customer artificial strategy parallel, making platform ability at CodeEvolver processes proteins synthetic the heart scientific practiced on revenue Our in accelerating platform with of dynamic The other our business cutting-edge novel creates intelligence accelerating generating proteins. this our improving Merged meet believe focus the high-performing those constantly CodeEvolver we that to that our are In rapidly is biology an needs growing of synthetic protein improving universe. our teams proteins. engineering Codexis, a relentless unparallel are capabilities CodeEvolver from biology ever at are discover technology. biology by competencies fast

leading the from have discovery has driving been and of This world’s planted growing commercialization innovative companies. these five past years. Gordon Many of a over heard most We do digit seeds again as to business our in been and growth sustained growing been with we’re building double XXXX. you’ve and steadily industries have in and guiding revenue a relentlessly so set protein list

headwind do commercial R&D Tasteva M. Tate the enzyme despite revenues XXXX. is is overcome stevia full by will seven-digit program in first next in the product We year year’s to the be this sales Lyle’s two & from offset milestone to deal last and CDX-XXXX shift items the from need The not expected to expected not from Nestlé XXXX

revenue overcome of to acceleration segments. strong than both with revenue However, guidance. you for unfold to flow more deal an we headwinds our these with our through across of This elsewhere XXXX make will expect powering growth announceable in

ones, creating least years. add few already preclinical at is enzymes this PKU commercialized pharma data You’ve Nestlé advancement in licensees. In projects KYORIN, first pipeline we clients, that revenue a growing deals to clients milestones deal expect will fully and deals announcements. sales, share patentable new our investments and markets assets. our the to validate already possibly as two of CodeEvolver for the firmly pre-commercial our will increases biotherapeutics that threaten of made validates two differentiated have like our from licensing possible medium-term deeper in In warranted from our market protein monetizing term, Modest CodeEvolver generation created traditional pipeline of prior see platform drug performance substances, dent new to From backend nothing showing on near but the return penetration status. this or or that deals new that programs our dedicated expect to cash that our profitability full project two balances Novel penetration our begun growing R&D or big the expansions and of with status team successful partnerable with of a generate much new details and that project beyond of spending in months molecular a those Deals we show XXXX. into year and utilize and last new well as breakthrough will with our for you have here we i.e. existing diagnostics, announcements ones over stream engineering deliver historical that smartly quite are Biotherapeutics, quest Merck we new and

breakout to company XXXX. With We’re so excited up for call like those show off another open to the for Operator? year I in comments, the would questions.

Operator

Thank you. [Operator Instructions].

John Nicols

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

and held Jefferies X will Healthcare Cowen, www.codexis.com. in New at Capital the California; We the Conference ROTH UBS X in Global XX through Craig-Hallum XX New conferences Market's through May be investor in XX XX Cowen the presentation June the held XX through Webcast XX the the Healthcare XX May on Jefferies Conference XX Boston; UBS March Laguna York; in Conference Minneapolis; will May our participating and held of on to being posted KeyBanc in Conference in being York. of the in Niguel, to Global the March Boston; Conference being sections Conference Healthcare be

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

Operator

question first Jefferies. Brandon comes Couillard Our from with

Your is open. line

Brandon Couillard

Thanks. guys. Good afternoon,

John Nicols

Hi, Brandon.

Brandon Couillard

in revenues? delta year with the revs you kind then as see help moving then, molecular and won’t you perhaps the a related headwinds thought guidance a your the from Merck the and you being the recur Tate and Gordon, as And headwind the far got product revenues, that as that – between you incremental get product and thoughts minuses revenue not falloff or could share got detail you GSK coming the quantify us just milestones then the diagnostic upgrade, ramping, royalties could little John, between of might backend Merck love we much bit R&D growth more given line. with PKU that for us two on pieces, from Tate’s product got more of the little as the I the if revenues that revenues, would a within to actually pluses

John Nicols

Okay.

So in year-on-year asking so Brandon the part of revenues, first the about question was growth product thanks.

side So once that – have just least million sell. and products Actually each we takes. we a $X.X different puts at And have enzymes general again there as worth nine who of diverse there’s in usual customers procure of is XXXX. we

were those of several We of stage significant have clinical products batches materials. which

see customers. given don’t we those clinical for those programs So the repeating those of progression

clinical the we So XXXX. have from a list few falloffs in

programs Lyle’s million low that. huge. growth some stevia. expect the expect & areas, in in It sales clinical we It on single dollar conversations Tate for revenues expect product be with come & new new Tate in won’t We We offset very and digit product do some Lyle. will be based the to

They’re be will speak. breaking into ramping. their it clientele we So as

the they I mentioned, feedback and in big stevia. a commercial initial installations their by their this encouraged customer expect product don’t of But year for early As full customer volume and they’re first base. in breakout

realistic. being we’re So

I think there’s upside our outlook we’re realistic there, but there. in being

our guidance, think XX% exceed product year-on-year would end of sales on upper the we said growth. I we

that’s to it guidance the just and year-on-year. growth in maybe our XX% think JANUMET But modest of range, quite sales and be but I practice slightly a up manufacturer or of that’s would XX% our lot sales JANUVIA product enzymes pretty drug which a of range. sales lift is to Merck’s or stable give to in down a pretty substance stable, Underpinning is year-on-year; possible.

been – So is our which we year-on-year don’t JANUVIA see a both and sales has finally to are molecular sales licensing our product largest our as outlook branching sales then sales diagnostics, know. which lift And into oriented we in for XXXX. as in you build in sales product big

that product and in overall lift expectations molecular will molecular will from So diagnostics. sales sales. R&D our product revenue diagnostics in there growth is for sales between But come some nice spread

for for But the and you in product space, by all had in outlook hopefully revenues. the additional questions means. that the a gave So pluses good hopefully minuses product if feel revenue you

second two the the you from question had headwinds. Gordon, Brandon think I around So

Gordon Sangster

pharma looking for that of the Yes, a recurring. Nestlé in same referred for expect roughly don’t million top in the time, John companies We be At CDX-XXXX in that that revenues we headwinds, $X for had will the programs XX year. had from from we couple the this revenues I’m XXXX. we to not product two at XXXX

over repeat So to now. they’ve option taken since we don’t expect the obviously that

will some have headwinds. But the in that option from one the recognize license. revenue be is able We’ll We quarter. first to be to going that the of

The other to of the to to John to Tate numerous other & product is that the are revenues that year, where revenues to into we’re our there talked up that XX% last do Lyle’s R&D XX% in able earn referred about in guidance. But growth level stevia going we we get which we’re translate expect XXXX. ways not we can same

Brandon Couillard

selling Got on molecular I’ll and model getting commercial from of versus users and how the out and those you some you. making sort curious how business, with party guess then feedback be early the approach I diagnostics And most or on play thinking that is? beta expect between trial exclusive the the perhaps one about arrangement of enzymes you’re of you’re what sort an to optimal

John Nicols

out Yes, of been the The and that significant. product DNA about superiority has and first the of a ago the year I’m our quite ligase, this that very we launched year, validation attention confident. will play

garnered all we’ve of and to we’ve bulk the players XXXX. prepared parallel, exclusive controls on throughout remarks, arrangement. the and it mentioned space be for economics solid been make fashion degree whether bulk In in proceed base sales and enzyme have of deal entertained deal case we of through nature lining I right XXXX. in first on multiple leading our that market to the and the partnering an developing that have made own And up our market very significant users companies to interest all exploiting to users the bulk enzymes we’re the sales. we’ve bulk going consider being would depends we directly in been a NGS would sales Those and we by because channel from the now major As of to

ligase So those be very it’s and of a place of nature very to unfold XXXX. either paths specific could which we us the positively this first see as DNA story exciting the for That’s to and all product. with be move through you’ll

the has which conference is which the results. is world, more a potential two successful second myself out, a garnering even molecular of working first R&D diagnostic for only and interest along in probably on with best are positioning product the an hopefully conference team will with a go the to and market the leading tonight addressable of in also on monetize AMP I’m actually great Codexis this second but to year. not ligase, way DNA to ourselves late-stage The be the larger the product plane AGBT penetration conferences the on half based

excitement and forthcoming for to these comments and So our year, we’re that enthusiasm and really, really speak remarks success diagnostics our excited and encouraged and emboldened in this to I Brandon. think molecular prepared the in

Brandon Couillard

hop the you. back Thank I’ll queue. in Super.

John Nicols

Thank you.

Operator

Thank you.

Matt Our Capital. with next question comes Hewitt Craig-Hallum from

Your line open. is now

Matthew Hewitt

Good progress the afternoon for and update. you thank

John Nicols

Matt. Thanks,

Matthew Hewitt

detail. when completed, been you on. have internal Is just what you’re provided have the programs, partnered? when regarding been more question little bit that more A working the they’ve granularity Is or trials it point provide you’ll I’m bit a candidates wondering there? at exact that a begun little

John Nicols

Yes, we have optionality here.

we disclosures progressing and at in performance preclinical certainly patentability of model non-human this But we’ve animals. like point. show data programs make we’ve got the that would So our until many data won’t in this the any with got announceable we’re

more a we widely until generate could interest. market could little to broadcast partner, wait we So we if

made seeing it prepared the clear So remarks, I be data. really you’ll in

that’s accelerate our advancement We’re excited that in about Nestlé five the one team encouraged part progress some have area to year. and we’ve made including programs, significant the to the in very of up partnership XXXX. going material with the successes announceable this We’ve we’re a of built we’re this other in

Matthew Hewitt

the teams year teams we there? sit today of where number to relative ago? color regarding or then maybe number a the of And Great. maybe Could get some

John Nicols

the been headcount. productivity in every And probably say I’d of our to R&D headcount, probably year-over-year you’ve get We factor terms have added But XX% got we’ve we year. that Yes, modestly we to to enhancements. adding – headcount. added then

protein engineer able faster are to We and novel quicker. a

the engineering out be unless had XX%. So expansion probably protein this We XX% wouldn’t more headcount adding of overall we like capacity is or for demand it. the

engineering So begun we’re about either capacity. the middle in or warranted that of expansion opportunities are start juggling of that protein has significant to very a pipeline or engineering protein work, of which had R&D

Matthew Hewitt

Okay, one great. and one I’ll from hop Maybe back last me in.

first that Urovant, Regarding here some contribution thinking like about the maybe to sounds to data if going approval? from it able in they half. fact we’re are in the later How FDA get we be garner should

John Nicols

Japanese we successful see combined is it’s – commercialized. the with assuming KYORIN the the fully enzyme this same enzyme, sales, they’re and Yes,

So not doing R&D any work. work scale-up we’re or

We’re to as material already need evidenced is KYORIN. contract with soon as by a multiyear as ready they signing additional go

this a penetrate So but the as as margins fully sale, sales enzyme we not to develops, they as low-single dollar a nice it in big to JANUVIA enzyme million as market it’s size see average for the KYORIN at digit Urovant It’s target. as be mid being sale and above going expect.

received super happy commercially. has approval has We’re already purchase their already and that KYORIN begun to

believe feel after But and when this that we that patient talk we’ll wait year. their markets. penetrate this that the about gives that hopeful a Urovant and for that peak achieve will news follows you revenue hope that We’re happens. customers for We’ll ultimately our that

Matthew Hewitt

Great. Thanks very much.

John Nicols

you. Thank You’re welcome.

Operator

from Doug next Cowen. comes question with Schenkel Our

open. is line Your

Doug Schenkel

starting my just on I to questions. to with and questions. thank through earlier just there, want here on for quick clarifications a up Good up clean some a of couple Hi. do really you maybe just guidance and things, go few afternoon, taking Brandon’s following guys,

milestone And apparently no recognition Merck with clarification second to associated new assumptions correct? of agreement Nestlé. than the a guidance that’s to guidance. that just amount upfront year for just in is less $X I’m in from that when was whatever revenue payment but First, Presumably the payments I if correct, are is full and in-sourced million new the is, was presumably originally included the then If was those additional CodeEvolver. – on wondering milestone the want CodeEvolver Merck make upfront recognition an sure agreement. factors full the there agreed that

Gordon Sangster

Doug. Hi,

in the able correct. for a XXXX. XXXX. option, able million year, actual First we’re milestone Merck, expect still to in but much we And half all, recognize from with were to Nestlé the for likely of expect second this That’s you’re We Merck more be don’t during the secondly, X that recognize of working be in transfer terms then but to the tech improvements. the of we first to

expect would in the quarter. likely I second the that conservatively in first half, So

John Nicols

-- and Yes,

Doug Schenkel

Okay, included go sorry, ahead. but is –

John Nicols

the we I low-single half that technology The remarks million as of stream the years, dollar upgrade for then upfront. value it out those But and digit the deal the is and years. over haven’t other and will ballpark, so the low-single roughly magnitude multiyear deal half for total which upfront we half it’s in of that that over prepared an guided that digit disclosed exact stated, was of roughly

Doug Schenkel

Okay. And the for that’s in year. your guidance

John Nicols

secured already We’ve deal. Yes. that

I to think technology do know exactly how we the transfer.

the for gave Gordon So risk we a timing feel that zero you or no in see almost that of revenue. and

Doug Schenkel

to that great revenue or bit million do is than opportunity be & Tate their And commentary customers? early Lyle. ultimate think positive for you have little Tasteva around in the maybe hear & signal $XX better any annual you response a Tate still from Do given revenue that then the Lyle that on could Okay. on it the

John Nicols

Yes, it could be bigger.

positive very and collaboration very Lyle. We Tate deep with & have a

need, it’s if early predict. And myself just expect, our what great for Tasteva a performance M, so would market chute. slope others $XX suggested sales Codexis. sweeteners million reached the shoes attributes get new of real trying to were and in is on of higher enzyme feel this to you than less were them much had a But curve they penetrations call. which for would they the than arguably from is out As There say this

based if on disappointed the us Lyle that peaks for great see than the all really it faces. work, ballpark. & it that’s I sales not the But would it example, be So we a for the million could competition limited out Codexis, out goes be $XX relatively million. $X bad I for opportunity remarkably think there, well, better Tate if at

And out they’re so of – and ahead competition. their

very going hard hopeful see. better. The to is could be we’re to that significantly So ramp be it

indication for Lyle ramp. for great lot the and to ramp & this learn the give for And next Tate to go over about year We’re us this will us. the a product a months really XX going where going is

manage did Tasteva – gave comments conservative R&D a But forecasting XXXX last So and we’re there. R&D for we’re we’ll in medium for of smart. side lot revenues, because my that and a just I longer-term we the in way revenues and be feel probably this chapter but really through our about product an on little generate poised to from a to Brandon the going success we’re upside hopefully year. to there’s this

Doug Schenkel

the NGS, that’s MDx kind direct few given value guess specific verticals you’ve than I’m about like CodeEvolver, opportunity next have moving just partnership in, should the I’m And give I out And more wondering into new with about you to your about ask with enzymes? would vertical could or an One other and specific just know optimally this ones you set. move broader are you XXXX great. then I could a thinking you’re few one last opportunity to the market ability over we additional That’s hints if what very to to go on maybe we might talked XXXX address the one curious over you if in So into associated next on years? just infrastructure of be any the and expect initial question. us how years, built really if that XXXX, capture

John Nicols

great Yes, really it’s question. a

to So these the least company. timeframe, other for be sure, going one one in one. has In in almost answer question to to asked one at nobody verticals, three-year a partnership certainly great a I’ll two it’s before, it’s with good it. year

to It’s was then partner’s with we’ve with going character it’s CodeEvolver to and rapidly. for designing then the be what protein getting diagnostics. & the enzymes molecular Lyle. with unique succeeded as really protein close did quickly leveraging create channel to I the Codexis a to directly opportunity to great of here with there it think get it Tate MDx company to that in for and a launch new using out pretty money then sit and set, Codexis and we user vertical, the of a be I But new opportunity a like market attributes going imagining end and with into

are that two Business Vice more is Development? for year Senior deals a Tate new vertical feel as venture ask see my like deals you you’ll Gordon question we & or and in So President sure. the for Lyle the of to into great next chuckling. I new verticals Which

number a be grade Any partnering have clients, there. the concepts and different of new several We out competing one of could verticals winner. partners

We’re wasn’t XXXX. we begged by excited project new we verticals material moved It a and the year really the decent the officially, And have R&D to a did have in did we we how executed opportunities of in as into actually vertical. new up project that disclose us of a for we’re confidentiality. just stacking details enough last customer for But vertical. and in

we’ll of updated You’ll pipeline update of the XXXX. middle see see in in already chart. again pipeline middle that that on our you we XXXX the did Actually in that that chart our

change the So deals to but that about announceable, we’re excited and happens. to-date we when The that expect we’re is not of that traction. getting materiality

Doug Schenkel

couple you Thanks days, color of That’s and next see the I’ll for John. the great. all over

John Nicols

Doug. Thanks,

Operator

[Operator you. Thank Instructions].

Our H.C. Wainwright. with next from Lee question comes Sean

open. Your is line

Sean Lee

and Most beyond One ones. Novel have for projects the quick questions great Hi, my of guys, on XXXX. congratulations have been year. two just a answered. I Biotherapeutics

for the – them you execute look similar from further to along? independently be XXXX So looking to develop would what as are the or would you you deals looking

John Nicols

a the That with base for have is the with optionality, partnering result. but we’ve success approach a We us. the that Nestlé created case such great had

assets explore built would to to way develop do all did CodeEvolver. but Nestlé, we’ve might assets with longer than X over preclinical all that of the we’ve discovered the we the think I development and capability probably time a over time of we internal validating we Phase with – optionality into study, course holding of that

true been that remarkable as now that’s and our witnessed. you’ve financial model. So The from results tried have success

the So likely case. that’s most

Sean Lee

that. bit guidance? the any Thanks up from those – little partnership potential a Okay. is unclear of XXXX for included a that on I’m products your follow in revenues

John Nicols

Novel deals that segments. the assets Partnering make partnering revenues across from we be the have revenues the Biotherapeutics the in of we it year, revenue but could generation the end be would on Yes, modest. from toward early

talking have haven’t of that to partnering we’re that multiple our pharmaceutical zero clients as also done any assets about own opportunities We well. we self the from in investment

numbers XXXX as those So could well. show in up our

amount room our lot a in we’ve a built-in we’ve for got revenue of that upside left respect. modest So but of into guidance,

Sean Lee

is to the to exceed gross XXXX I continue margins significantly guide you’ve see. that I My that to XX%, last two on for for last XX% the question managed but Thanks gross you for margin. quarters. see product that the of clarification. for

and wondering can what’s conservatism upside? some we there, are some So pulls what I’m and just on kind of number where of pushes that see the the maybe

Gordon Sangster

year. that type shipments, selling and year second Yes, tended it last the the half the we’re product down of to really were timing the of in comes of the be to product

think margin year. blended I the guidance appropriately for So we’re overall being of the conservative in for terms the

think to have – XX% have last of to mean That similar for of such doesn’t we not of appropriate year, guidance all as we’re say going this the 'XX. we’re it’s product if give to for something second XX% So that to the that for to going I quarters XX% good we mix you’ll did half some year. see

John Nicols

lot Yes, if to but for a possibility want company. would happen in a that the we it And our be great will a that of Merck to drag also for be thing they enzyme. build do, on the needs more margins

end last margins did our why year end little a most above being that’s the on I lower the helps. on we of we guidance low revenue the XX% product of bit and Merck of on of also part that our room So mix in with leave think if other mix the

Sean Lee

that. have. on color That’s additional the for I Thanks see. all I

John Nicols

Sean. Thanks,

Operator

Thank like to you. time. showing back any John would I over call any And this not now Nicols closing I’m turn at the for questions remarks. further to

John Nicols

questions. your for everyone Thanks Okay.

exactly on the to born of birthday We’re deliver set in in the were Codexis. day to to this look highly Codexis XXXX. today ongoing up at and providing By productive another you. XXXX forward We progress year way, is we updates

Codexis. So Thanks everybody have a great happy and birthday day.

Operator

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

Codexis (CDXS) 26 Feb 192018 Q4 Earnings call transcript