Codexis(CDXS) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended June 30, 2024, highlighting key financial performance and position Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2024, reflects a slight decrease in total assets and an increase in total liabilities driven by new long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $18,595 | $65,116 | | Short-term investments | $54,604 | $0 | | Total current assets | $91,398 | $93,466 | | Total assets | $132,006 | $136,561 | | Liabilities & Equity | | | | Total current liabilities | $30,539 | $35,830 | | Long-term debt | $28,365 | $0 | | Total liabilities | $70,559 | $49,946 | | Total stockholders' equity | $61,447 | $86,615 | | Total liabilities and stockholders' equity | $132,006 | $136,561 | Condensed Consolidated Statements of Operations The statements of operations show a significant decrease in total revenues for both the three and six-month periods, resulting in continued net losses Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $7,979 | $21,323 | $25,052 | $34,305 | | Loss from operations | $(22,732) | $(12,626) | $(34,620) | $(36,291) | | Net loss | $(22,755) | $(11,523) | $(34,260) | $(34,140) | | Net loss per share | $(0.32) | $(0.17) | $(0.49) | $(0.51) | Condensed Consolidated Statements of Cash Flows Cash flow analysis for the first half of 2024 indicates improved operating cash usage, increased investing activities for short-term investments, and higher financing cash from new debt Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,957) | $(25,299) | | Net cash used in investing activities | $(55,650) | $(4,855) | | Net cash provided by financing activities | $29,084 | $8,275 | | Net decrease in cash | $(46,523) | $(21,879) | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, revenue recognition, debt agreements, and segment information, including recent business restructuring and financing changes - Effective October 1, 2023, the company consolidated its Performance Enzymes and Novel Biotherapeutics segments into a single reportable segment due to business restructuring[22][85][86] - On February 13, 2024, the company entered into a five-year term loan agreement with Innovatus for up to $40.0 million, with an initial tranche of $30.0 million funded[77] - In May 2024, the company entered into a new Controlled Equity Offering Sales Agreement with Cantor Fitzgerald to sell up to $75.0 million of common stock, after terminating a prior agreement with Piper Sandler[68][69] Significant Customer Revenue Concentration (Six Months Ended June 30) | Customer | 2024 (% of Total Revenue) | 2023 (% of Total Revenue) | | :--- | :--- | :--- | | Customer A | 16% | 11% | | Customer H | 24% | * | | Customer E | * | 17% | | Customer F | * | 11% | | Customer I | * | 10% | *Percentage was less than 10% Management's Discussion and Analysis of Financial Condition and Results of Operations This section details the company's strategic focus on pharmaceutical manufacturing and ECO Synthesis™ platform, analyzing financial performance, and assessing liquidity and capital resources Business Overview and Recent Developments Codexis's business overview highlights its strategic shift towards pharmaceutical manufacturing and the ECO Synthesis™ platform, including recent asset divestitures and a new Roche licensing agreement - The company's strategic focus is on its revenue-generating pharmaceutical manufacturing business and the development of its Enzyme-Catalyzed Oligonucleotide (ECO) Synthesis™ manufacturing platform[91][92] - In 2024, the company entered into asset purchase agreements to divest its investigational Fabry, Pompe, homocystinuria, and other biotherapeutics programs, retaining rights to potential future milestone and royalty payments[93][94] - In February 2024, Codexis entered an exclusive global license agreement with Roche for its newly engineered dsDNA ligase, recognizing $6.0 million in research and development revenue in Q1 2024[100] Results of Operations Results of operations for the first half of 2024 show a significant decrease in total revenues, driven by lower product and R&D revenue, partially offset by reduced operating expenses Revenue and Expense Changes (Six Months Ended June 30, 2024 vs 2023) | Item | Change ($M) | Change (%) | Reason | | :--- | :--- | :--- | :--- | | Total Revenues | $(9.3) | (27)% | Lower product and R&D revenue | | Product Revenue | $(3.6) | (19)% | Lower sales of branded pharmaceutical products | | R&D Revenue | $(5.7) | (38)% | Non-recurrence of Pfizer revenue, offset by new Roche revenue | | R&D Expenses | $(11.3) | (33)% | Lower headcount and outside service costs from restructuring | | SG&A Expenses | $(0.2) | (1)% | Lower headcount costs offset by higher stock compensation and legal fees | Liquidity and Capital Resources The company's liquidity position as of June 30, 2024, is strengthened by new debt and equity financing, with management confident in sufficient capital for the next 12 months Liquidity Position (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $18,595 | $65,116 | | Short-term investments | $54,604 | $0 | | Working capital | $60,859 | $57,636 | - In February 2024, the company borrowed $30.0 million under a new five-year term loan agreement with Innovatus[122][126] - Management believes that existing cash, combined with expected revenues and expense management, will provide adequate funds for at least the next 12 months[130] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from interest rates, foreign currency exchange rates, and non-marketable investments, with potential impacts on its financial performance - The company is exposed to interest rate risk on its $73.2 million of cash and investments and its $30.0 million floating-rate loan; an immediate 10% change in the prime interest rate would result in a $0.3 million impact on its results of operations over the next twelve months[138][139] - Foreign currency risk is not significant; a hypothetical 10% unfavorable change in exchange rates would result in a potential loss of approximately $41 thousand[140] - The company holds investments in non-marketable equity securities, which are inherently risky, difficult to value, and subject to impairment[141][192] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2024[144] - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2024[145] PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not currently a party to any material pending litigation or other material legal proceedings - The company is not currently a party to any material legal proceedings[148] Risk Factors This section outlines significant risks to the company's business and strategy, including a history of net losses, customer and manufacturer dependence, technology development challenges, and loan agreement covenants - The company has a history of net losses, including $34.3 million for the six months ended June 30, 2024, and may not achieve or maintain profitability[157] - Codexis is dependent on a limited number of customers, with 40% of total revenues in the first half of 2024 coming from customers that each contributed 10% or more[163] - The company relies on a limited number of contract manufacturers for large-scale production of its enzymes, creating risks related to capacity, performance, and supply interruptions[169] - The ECO Synthesis™ manufacturing platform is a novel, largely unproven technology facing an unknown regulatory path and competition from the established industry standard[179][180] - The Loan Agreement with Innovatus contains restrictive covenants that limit the company's ability to incur additional debt, sell assets, and make certain investments, and a default could lead to foreclosure on substantially all company assets[208][210] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None reported for the period[291] Other Information During the three months ended June 30, 2024, no directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement - During the three months ended June 30, 2024, no directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement[291] Exhibits This section lists the exhibits filed with the 10-Q report, including corporate governance documents, certifications by officers, and Inline XBRL data files - Lists filed exhibits, including corporate governance documents, officer certifications required under the Securities Exchange Act of 1934, and iXBRL data files[293]