Product sales increase 71% over the prior
year
Codexis, Inc. (NASDAQ:CDXS), a leading protein engineering company,
announces financial results for the three and nine months ended
September 30, 2017, and provides a business update.
“We continue to deliver excellent results in 2017, highlighted
by the creation of our new partnership with Nestlé Health Science,
as well as a solid financial performance,” said Codexis President
and CEO John Nicols. “Our recently announced strategic
collaboration with Nestlé Health Science validates the use of our
CodeEvolver® protein engineering technology platform for
biotherapeutic drug discovery and demonstrates our ability to
partner with yet another of the world’s leading companies.
Regarding the third quarter financial results, once again we are
most proud of the growth in product sales, which increased 71% for
the third quarter and 73% year-to-date, with gross margin on
product sales again toward the high end of our guidance range.
“Collaboration efforts with Nestlé Health Science have already
begun and are expected to contribute significantly to our fourth
quarter revenues,” he added. “Together with continued strength in
product sales, our fourth quarter is set up to produce the highest
revenue quarter for the year and we are reaffirming our total
revenue guidance for 2017 of $50 million to $53 million.
Delivering on our 2017 revenue guidance will be an exceptional
accomplishment by the Codexis team, especially given that over $20
million of last year’s revenues were from non-recurring milestone
payments and deferred revenues related to the completion of our two
pharmaceutical partners’ platform license technology
transfers. The new 2017 revenue sources that offset those
headwinds continue to gain momentum as we end this year, setting us
up for double-digit revenue growth in 2018.”
Third Quarter Financial HighlightsTotal
revenues for the third quarter of 2017 were $10.0 million compared
with $14.9 million for the third quarter of 2016. The prior
year period included the recognition of an $8.0 million milestone
payment and $0.6 million in deferred revenue under the platform
licensing deal with Merck. Product sales for the third quarter of
2017 increased 71% to $6.9 million from $4.1 million for the
prior-year period, primarily due to higher demand for enzymes.
Research and development service revenues for the third quarter of
2017 were $2.9 million compared with $10.4 million for the third
quarter of 2016, which included $8.6 million of revenue from Merck
described above. Revenue from the revenue-sharing arrangement with
Exela PharmSci for sales of the argatroban injectable drug was $0.1
million for the third quarter of 2017 compared with $0.4 million
for third quarter of 2016.
Gross margin on product sales for the third quarter of 2017
increased to 43% from 32% for the third quarter of 2016, mainly due
to an increase in sales of higher-margin products.
Research and development (R&D) expenses were $8.1 million
for the third quarter of 2017 compared with $5.5 million for the
third quarter of 2016, with the increase due primarily to higher
outside services expense related to CDX-6114, our lead candidate
for the treatment of phenylketonuria (PKU), and increased costs
associated with higher headcount, partially offset by the absence
of amortization of intangibles. Selling, general and administrative
(SG&A) expenses for the third quarter of 2017 were $8.0 million
compared with $5.2 million for the third quarter of 2016, due
primarily to an increase in legal fees and increased costs
associated with higher headcount, partially offset by lower
depreciation expense.
Net loss for the third quarter of 2017 was $10.2 million, or
$0.21 per share, compared with net income for the third quarter of
2016 of $1.4 million, or $0.04 per basic share and $0.03 per
diluted share. Non-GAAP net loss for the third quarter of 2017 was
$8.2 million, or $0.17 per share, compared with non-GAAP net income
for the third quarter of 2016 of $4.0 million, or $0.10 per basic
share and $0.09 per diluted share. A reconciliation of GAAP to
non-GAAP measures is provided below.
Year-to-date Financial ResultsTotal revenues
for the nine months ended September 30, 2017 were $28.3 million
compared with $38.9 million for the first nine months of
2016. The prior year period included the recognition of $20.4
million in milestone payments and deferred revenue from platform
licensing deals with GSK and Merck. Total revenues for the first
nine months of 2017 included $19.1 million in product sales, $8.3
million in R&D revenue and $0.8 million from the
revenue-sharing arrangement with Exela.
Gross margin on product sales for the first nine months of 2017
was 44% compared with 33% for the first nine months of 2016, due to
an increase in sales of higher-margin products.
R&D expenses for the first nine months of 2017 were $20.2
million compared with $16.3 million for the first nine months of
2016, with the increase primarily due to higher outside service
fees related to CDX-6114 and increased costs associated with higher
headcount. SG&A expenses for the first nine months of
2017 were $21.1 million compared with $18.5 million for the
prior-year period, primarily due to an increase in legal expenses
and increase in costs associated with higher headcount, partially
offset by lower depreciation expense.
Net loss for the first nine months of 2017 was $24.0 million, or
$0.53 per share, compared with a net loss for the first nine months
of 2016 of $3.3 million, or $0.08 per share. Non-GAAP net loss for
the first nine months of 2017 was $18.0 million, or $0.39 per
share, compared with non-GAAP net income for the first nine months
of 2016 of $4.5 million, or $0.11 per basic and diluted share.
Cash and cash equivalents as of September 30, 2017 were $23.8
million, compared with $19.2 million as of December 31,
2016.
Financial OutlookCodexis affirms financial
guidance for 2017, as follows:
- Total revenues of $50 million to $53 million, which includes
revenue from the Nestlé Health Science strategic collaboration
announced in October 2017.
- Product sales are expected to be between $25 million and $27
million, reflecting an increase of 63% to 76% over 2016.
- Gross margin on product sales is expected to be between 40% and
43%.
Codexis expects fourth quarter operating expenses, which is the
combined total of R&D and SG&A expenses, to be
approximately $16 million, which is higher than our previous
forecast due mainly to higher legal expenses. The guidance assumes
expenses associated with the company’s accelerated development
activities to initiate human trials for CDX-6114 in early 2018.
Non-GAAP Financial MeasuresConsolidated
financial information has been presented in accordance with GAAP as
well as on a non-GAAP basis. On a non-GAAP basis, financial
measures exclude non-cash items such as depreciation expense,
intangible asset amortization expense and stock-based compensation
expense. Non-GAAP financial measures presented are: non-GAAP net
income or loss, non-GAAP net income or loss per share (basic and
diluted), and non-GAAP operating expenses, including non-GAAP
research and development expense and non-GAAP selling, general and
administrative expense. Non-GAAP operating expenses exclude
stock-based compensation expense, amortization of intangible assets
and depreciation of fixed assets.
Codexis management uses these non-GAAP financial measures to
monitor and evaluate its operating results and trends on an ongoing
basis, and internally for operating, budgeting and financial
planning purposes. Codexis management believes the non-GAAP
information is useful for investors by offering them the ability to
identify trends in what management considers to be Codexis’ core
operating results and to better understand how management evaluates
the business. These non-GAAP measures have limitations, however,
because they do not include all items of expense that affect
Codexis. These non-GAAP financial measures are not prepared in
accordance with, and should not be considered in isolation of, or
as an alternative to, measurements required by GAAP, and therefore
these non-GAAP results should only be used for evaluation in
conjunction with the corresponding GAAP measures. A description of
the non-GAAP calculations and reconciliation to comparable GAAP
financial measures is provided in the accompanying table entitled
“Reconciliation of GAAP to Non-GAAP Financial Measures.”
Conference Call and WebcastCodexis will hold a
conference call and audio webcast today beginning at 4:30 p.m.
Eastern time. A slide presentation featuring an updated chart of
the company’s product pipeline to accompany the conference call
commentary is available on the Investors section of the company’s
website at www.codexis.com. The conference call dial-in
numbers are 855-890-8665 for domestic callers and 720-634-2938 for
international callers, and the passcode is 5797258. A live webcast
of the call will be available on the Investors section of
www.codexis.com.
A recording of the call will be available for 48 hours beginning
approximately two hours after the completion of the call by dialing
855-859-2056 for domestic callers or 404-537-3406 for international
callers. Please use the passcode 5797258 to access the recording. A
webcast replay will be available on the Investors section of
www.codexis.com for 30 days, beginning approximately two hours
after the completion of the call.
About Codexis, Inc.Codexis, Inc. is a leading
protein engineering company that applies its technology to the
development of biocatalysts for commercial manufacture of
pharmaceuticals and fine chemicals, as well as the development of
enzymes as biotherapeutics and for molecular diagnostics. Codexis’
proven technology enables implementation of biocatalytic solutions
to meet customer needs for rapid, cost-effective and sustainable
manufacturing. For more information, see www.codexis.com.
Forward-Looking StatementsTo the extent that
statements contained in this press release are not descriptions of
historical facts regarding Codexis, they are forward-looking
statements reflecting the current beliefs and expectations of
management made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, including
Codexis’ expectations regarding fourth quarter 2017 and 2017 total
revenues, product sales, gross margin on product sales, and
operating expenses, 2018 revenue growth, and its anticipated
timeline to initiate human trials for CDX-6114 and associated
expenditures. You should not place undue reliance on these
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors that are, in some cases,
beyond Codexis’ control and that could materially affect actual
results. Factors that could materially affect actual results
include, among others: Codexis’ dependence on its licensees and
collaborators; Codexis’ dependence on a limited number of products
and customers in its biocatalysis business; potential adverse
effects to Codexis’ business if its customers’ pharmaceutical or
food products are not received well in the markets; risks,
uncertainties and costs associated with the successful development
of biotherapeutic candidates, including obtaining development
partners for its biotherapeutic programs and progressing such
programs to clinical trials and regulatory approvals; Codexis’
ability to develop and commercialize new products for the
biocatalysis markets; Codexis’ dependence on a limited number of
contract manufacturers for large-scale production of its enzymes;
Codexis’ ability to deploy its technology platform in new market
spaces, including the fine chemicals, therapeutics and in vitro
molecular diagnostics markets; Codexis’ ability to comply with the
terms of its credit facility and its associated debt service
obligations; Codexis’ need for additional capital in the future in
order to expand its business or to adjust for market conditions or
strategic considerations, which may involve Codexis entering into
equity offerings, debt financings, credit facilities and/or
strategic collaborations; Codexis’ dependence on key personnel;
risks associated with the patent litigation that Codexis initiated
in February 2016; Codexis’ ability to establish and maintain
adequate protection for intellectual property, trade secrets and
other proprietary rights covering its technologies; and any claims
by third parties that Codexis is infringing their intellectual
property rights or other proprietary rights. Additional information
about factors that could materially affect actual results can be
found in Codexis’ Annual Report on Form 10-K filed with the
Securities and Exchange Commission (“SEC”) on March 9, 2017 and
Form 10-Q filed August 9, 2017, including under the caption “Risk
Factors” and in Codexis’ other periodic reports filed with the SEC.
Codexis expressly disclaims any intent or obligation to update
these forward-looking statements, except as required by law.
Codexis Contacts:
InvestorsLHA Investor RelationsJody Cain,
310-691-7100 jcain@lhai.com
Financial Tables to Follow
|
Codexis, Inc.Condensed
Consolidated Statements of
Operations(Unaudited)(In
Thousands, Except Per Share Amounts) |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues: |
|
|
|
|
|
|
|
Product
sales |
$ |
6,948 |
|
|
$ |
4,052 |
|
|
$ |
19,134 |
|
|
$ |
11,072 |
|
Research
and development revenues |
2,929 |
|
|
10,373 |
|
|
8,320 |
|
|
25,971 |
|
Revenue
sharing arrangement |
107 |
|
|
445 |
|
|
847 |
|
|
1,825 |
|
Total revenues |
9,984 |
|
|
14,870 |
|
|
28,301 |
|
|
38,868 |
|
Costs and operating
expenses: |
|
|
|
|
|
|
|
Cost of
product sales |
3,976 |
|
|
2,756 |
|
|
10,768 |
|
|
7,466 |
|
Research
and development |
8,055 |
|
|
5,467 |
|
|
20,242 |
|
|
16,265 |
|
Selling,
general and administrative |
7,989 |
|
|
5,229 |
|
|
21,141 |
|
|
18,451 |
|
Total costs and
operating expenses |
20,020 |
|
|
13,452 |
|
|
52,151 |
|
|
42,182 |
|
Income (loss) from
operations |
(10,036 |
) |
|
1,418 |
|
|
(23,850 |
) |
|
(3,314 |
) |
Interest income |
28 |
|
|
12 |
|
|
96 |
|
|
40 |
|
Other income
(expenses) |
(68 |
) |
|
7 |
|
|
(80 |
) |
|
(39 |
) |
Income (loss) before
income taxes |
(10,076 |
) |
|
1,437 |
|
|
(23,834 |
) |
|
(3,313 |
) |
Provision for (benefit
from) income taxes |
150 |
|
|
— |
|
|
132 |
|
|
(15 |
) |
Net income (loss) |
$ |
(10,226 |
) |
|
$ |
1,437 |
|
|
$ |
(23,966 |
) |
|
$ |
(3,298 |
) |
|
|
|
|
|
|
|
|
Net income (loss) per
share, basic |
$ |
(0.21 |
) |
|
$ |
0.04 |
|
|
$ |
(0.53 |
) |
|
$ |
(0.08 |
) |
Net income (loss) per
share, diluted |
$ |
(0.21 |
) |
|
$ |
0.03 |
|
|
$ |
(0.53 |
) |
|
$ |
(0.08 |
) |
Weighted average common
stock shares used in computing net income (loss) per share,
basic |
48,147 |
|
|
40,940 |
|
|
45,568 |
|
|
40,504 |
|
Weighted average common
stock shares used in computing net income (loss) per share,
diluted |
48,147 |
|
|
42,134 |
|
|
45,568 |
|
|
40,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Codexis, Inc.Condensed
Consolidated Balance
Sheets(Unaudited)(In
Thousands) |
|
|
September 30, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
23,826 |
|
|
$ |
19,240 |
|
Accounts
receivable, net |
7,906 |
|
|
5,924 |
|
Inventories |
849 |
|
|
825 |
|
Prepaid
expenses and other current assets |
2,443 |
|
|
1,238 |
|
Total
current assets |
35,024 |
|
|
27,227 |
|
Restricted cash |
1,536 |
|
|
1,624 |
|
Marketable
securities |
1,163 |
|
|
1,142 |
|
Property and equipment,
net |
2,810 |
|
|
2,155 |
|
Goodwill |
3,241 |
|
|
3,241 |
|
Other non-current
assets |
327 |
|
|
259 |
|
Total
assets |
$ |
44,101 |
|
|
$ |
35,648 |
|
Liabilities and
Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
4,474 |
|
|
$ |
4,232 |
|
Accrued
compensation |
3,795 |
|
|
4,314 |
|
Other
accrued liabilities |
4,664 |
|
|
2,111 |
|
Deferred
revenue |
4,141 |
|
|
1,710 |
|
Total
current liabilities |
17,074 |
|
|
12,367 |
|
Deferred revenue, net
of current portion |
1,839 |
|
|
1,066 |
|
Financing obligation,
net of current portion |
360 |
|
|
— |
|
Other long-term
liabilities |
2,736 |
|
|
3,116 |
|
Total
liabilities |
22,009 |
|
|
16,549 |
|
|
|
|
|
Stockholders'
equity: |
|
|
|
Common
stock |
5 |
|
|
4 |
|
Additional paid-in capital |
338,110 |
|
|
311,164 |
|
Accumulated other comprehensive income |
13 |
|
|
— |
|
Accumulated deficit |
(316,036 |
) |
|
(292,069 |
) |
Total
stockholders' equity |
22,092 |
|
|
19,099 |
|
Total liabilities and
stockholders' equity |
$ |
44,101 |
|
|
$ |
35,648 |
|
|
|
|
|
|
Codexis, Inc.Reconciliation
of GAAP to Non-GAAP Financial
Measures(Unaudited)(In Thousands,
Except Per Share Amounts) |
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
(i) Research
and development expenses |
|
|
|
|
|
|
|
Research and
development expenses - GAAP |
$ |
8,055 |
|
|
$ |
5,467 |
|
|
$ |
20,242 |
|
|
$ |
16,265 |
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Depreciation expense(a) |
(173 |
) |
|
(213 |
) |
|
(530 |
) |
|
(689 |
) |
Intangible asset amortization(b) |
— |
|
|
(844 |
) |
|
— |
|
|
(2,531 |
) |
Stock-based compensation(c) |
(386 |
) |
|
(246 |
) |
|
(1,050 |
) |
|
(688 |
) |
Research and
development expenses - Non-GAAP |
$ |
7,496 |
|
|
$ |
4,164 |
|
|
$ |
18,662 |
|
|
$ |
12,357 |
|
|
|
|
|
|
|
|
|
(ii) Selling,
general and administrative expenses |
|
|
|
|
|
|
|
Selling, general and
administrative expenses - GAAP |
$ |
7,989 |
|
|
$ |
5,229 |
|
|
$ |
21,141 |
|
|
$ |
18,451 |
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Depreciation expense(a) |
(67 |
) |
|
(228 |
) |
|
(265 |
) |
|
(676 |
) |
Stock-based compensation(c) |
(1,447 |
) |
|
(984 |
) |
|
(4,162 |
) |
|
(3,173 |
) |
Selling, general and
administrative expenses - Non-GAAP |
$ |
6,475 |
|
|
$ |
4,017 |
|
|
$ |
16,714 |
|
|
$ |
14,602 |
|
|
|
|
|
|
|
|
|
(iii) Net
Income (loss) |
|
|
|
|
|
|
|
Net Income (loss) -
GAAP |
$ |
(10,226 |
) |
|
$ |
1,437 |
|
|
$ |
(23,966 |
) |
|
$ |
(3,298 |
) |
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Depreciation expense(a) |
240 |
|
|
441 |
|
|
795 |
|
|
1,365 |
|
Intangible asset amortization(b) |
— |
|
|
844 |
|
|
— |
|
|
2,531 |
|
Stock-based compensation(c) |
1,833 |
|
|
1,230 |
|
|
5,212 |
|
|
3,861 |
|
Net Income (loss) -
Non-GAAP |
$ |
(8,153 |
) |
|
$ |
3,952 |
|
|
$ |
(17,959 |
) |
|
$ |
4,459 |
|
|
|
|
|
|
|
|
|
(iv) Net Income
(loss) per share |
|
|
|
|
|
|
|
Net Income (loss) per
share - GAAP, basic |
$ |
(0.21 |
) |
|
$ |
0.04 |
|
|
$ |
(0.53 |
) |
|
$ |
(0.08 |
) |
Adjustments to GAAP net
income (loss) per share (as detailed above) |
0.04 |
|
|
0.06 |
|
|
0.14 |
|
|
0.19 |
|
Net income (loss) per
share - Non-GAAP, basic |
$ |
(0.17 |
) |
|
$ |
0.10 |
|
|
$ |
(0.39 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - GAAP, diluted |
$ |
(0.21 |
) |
|
$ |
0.03 |
|
|
$ |
(0.53 |
) |
|
$ |
(0.08 |
) |
Adjustments to GAAP net
income (loss) per share (as detailed above) |
0.04 |
|
|
0.06 |
|
|
0.14 |
|
|
0.19 |
|
Net income (loss) per
share - Non-GAAP, diluted |
$ |
(0.17 |
) |
|
$ |
0.09 |
|
|
$ |
(0.39 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
Weighted average common
shares used in computing GAAP and non-GAAP net income (loss) per
share, basic |
48,147 |
|
|
40,940 |
|
|
45,568 |
|
|
40,504 |
|
Weighted average common
shares used in computing GAAP net income (loss) per share,
diluted |
48,147 |
|
|
42,134 |
|
|
45,568 |
|
|
40,504 |
|
Effect of dilutive
shares |
— |
|
|
— |
|
|
— |
|
|
1,292 |
|
Weighted average common
shares used in computing non-GAAP net income (loss) per share,
diluted |
48,147 |
|
|
42,134 |
|
|
45,568 |
|
|
41,796 |
|
|
These non-GAAP financial measures exclude the following
items:
(a) Depreciation expense: we provide non-GAAP
information which excludes depreciation expense related to the
depreciation of property and equipment. We believe that eliminating
this expense from our non-GAAP measures is useful to investors,
because the acquisition of property and equipment, and the
corresponding depreciation expense, can be inconsistent in amount
and can vary from period to period.
(b) Intangible asset amortization: we provide
non-GAAP information which excludes expenses for the amortization
of intangible assets which primarily relate to purchased intangible
assets associated with our acquisitions. We believe that
eliminating this expense from our non-GAAP measures is useful to
investors, because this expense is non-cash. This financial measure
may be different from non-GAAP methods of accounting and reporting
used by the Company’s competitors to the extent their non-GAAP
measures include or exclude other items. The presentation of this
additional information should not be considered a substitute for
net income or net income per diluted share or other measures
prepared in accordance with GAAP.
(c) Stock-based compensation: we provide
non-GAAP information which excludes expenses for stock-based
compensation. We believe the exclusion of this item allows for
financial results that are more indicative of our operations. We
also believe that the exclusion of stock-based compensation expense
provides for a better comparison of Codexis' operating results to
prior periods as the calculations of stock-based compensation vary
from period to period and company to company due to different
valuation methodologies, subjective assumptions and the variety of
award types.
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