Greetings and welcome to the conference call being hosted today by Codexis Management. At this time, all participants are in listen-only mode. A question-and-answer session will be held after the formal presentation. If anyone wants to require operator assistance, please press star zero on your telephone keypad. Please note that this event is being recorded. And now, I'll turn the call over to Carrie McKim, Director of Investor Relations. Please go ahead.
Thank you, Operator. With me today are Dr. Stephen Dilly, Codexis President and Chief Executive Officer, Kevin Norrett, Chief Operating Officer, and Dr. Stefan Lutz, our Senior Vice President of Research. Georgia Erbez, our Chief Financial Officer, is also here and will be available for any questions during the Q&A. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including anticipated technical and commercial milestones, our understanding of customer needs, and our position in target markets, as well as our strategies and prospects for successful execution of current and future programs and partnerships. To the extent that statements contained in this call are not descriptions of historical facts regarding Codexis, they are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, November 14, 2024.
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 can materially affect actual results. Additional information about factors that can materially affect actual results can be found in Codexis' filings with the Securities and Exchange Commission. Codexis expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. And now, I'll turn the call over to Stephen.
Good afternoon. This is a big day for Codexis. I'm going to give a brief overview of what we just announced and why it matters, and then I'll hand the call over to Stefan and Kevin, who can go into more detail. The biggest news today is that Codexis has succeeded in making a complete siRNA drug using our ecosynthesis platform. We chose to make Inclisiran because it's currently the most commonly used siRNA therapeutic. This is a crucial step in moving our technology from a science project to a powerful commercial platform. Our partners have been waiting for this because now we can have specific conversations about how to optimally synthesize their assets with the eco platform. An important detail that you shouldn't miss is that we actually succeeded in making Inclisiran by four different methods to illustrate the flexibility and reliability of our platform.
Probably the most impressive scientific feat was the continuous end-to-end enzymatic synthesis of the whole molecule. This has never been done before and is an incredible achievement. We also showed that we could make Inclisiran in pieces that we then stitched together to build the whole drug. The cherry on top was when we made some pieces chemically and some enzymatically before we stitched them together into the full-length molecule. This means we can tailor our eco platform to meet the specific needs and preferences of our partners. A critical piece of our offering is the ligation step that we use to stitch together short fragments of RNA to make the complete strand. We shared some great data today showing that our scientists have succeeded in making ligases that are tailored to specific molecules, resulting in greatly improved performance.
Some of this work underpinned our collaboration with Bachem, which was featured in the first Tides presentation. Bachem is one of the most important manufacturers of siRNA drugs and a leading innovator in the space. We are very pleased to be working with them. There's more. We just completed a proof of concept technical collaboration with a major siRNA drug innovator where we synthesized their desired oligonucleotide fragments using our enzymatic process. They were very pleased with the outcome, and we're now finalizing a revenue-generating development contract with them. With that, I'm going to hand over the call to Stefan in Hamburg.
Thanks, Stephen, for the introductory remarks, and good evening from the Tides Europe meeting in Germany. Before passing over to Kevin to provide details on our observations and customer conversations on the conference floor, let me briefly highlight the key points of the three Codexis presentations over the last two days. Two of the presentations focused on results from side-by-side comparisons of our engineered double-stranded RNA ligases and wild-type enzymes when used to combine short oligonucleotide fragments on route to synthesizing full-length siRNA therapeutic assets. The first presentation was our joint poster with the team from Bachem, and the shared data provided compelling external validation of the superior performance of the Codexis ligases over existing enzymes in use today. Now, we measure enzyme performance through two key metrics. The first one is higher volumetric productivity, which really boils down to making more RNA drug substance with less enzyme.
Volumetric productivity is a critical important parameter to assess the benefits of enzymes and the associated process conditions in commercial manufacturing, and our ligases consistently showed faster and higher conversion of oligofragments into siRNA at increased concentrations of raw materials, setting the stage for meaningful improvements in scalability. The second key metric is greater substrate versatility, meaning our ligase can work well with a broad range of modified RNA building blocks used in siRNA today. This allows for more flexibility in a customer's design of oligonucleotide fragments, which can translate into a more robust, higher-yielding manufacturing process. The extra freedom in oligodesign also positions our ligases as a potential platform technology by enabling the assembly of multiple therapeutic assets using just one engineered enzyme from Codexis.
Applying the same key metrics, our second presentation was a talk on the exhibition floor where we reiterated the outstanding performance of the Codexis ligases based on real customer case studies from our ligase screening and optimization service launched six months ago. Through this program, we can accelerate the delivery of lead ligase variants to customers by leveraging our existing extensive libraries of engineered enzymes and our long-standing expertise in optimizing process conditions for a customer-specific asset. Finally, earlier today, Codexis' third presentation unveiled the first-ever enzymatic synthesis of an entire approved siRNA therapeutic asset. Two fully modified oligonucleotides, a sense and an anti-sense strand, including on the former the enzymatic incorporation of a tissue-targeting moiety, which gets the drug to the location of choice in the body.
In fact, we didn't just do it once but demonstrated the successful synthesis of this therapeutic asset using four different possible manufacturing routes. Besides fully enzymatic sequential synthesis, where one adds one nucleotide at a time to synthesize the two strands from beginning to end, we also prepared four short oligonucleotide fragments that could subsequently be assembled into the full-size therapeutic assets via ligation. For the latter routes, the data highlighted that the full-length oligos were of equal quality and yields and could be made using enzymes or traditional phosphoramidite chemistry. In other words, mixing and matching is allowed without compromising any of the key performance and quality metrics. The Codexis team chose Inclisiran, a commercially approved siRNA asset, as our example for this demonstration. We're super pleased with the results both qualitatively and quantitatively.
The analytical characterization of our oligonucleotides consistently showed higher quality as measured by the absence of hard-to-remove impurities regularly found in chemically synthesized oligos, a fact that we attribute to our mild aqueous reaction conditions. The coupling efficiency and overall yield of the oligo product also validated that the current enzymatic platform is performing on par with phosphoramidite chemistry. To give you a specific measure, in the last 12 months, we've achieved a more than 6% increase in coupling efficiency, raising the average for our eco core technology to above 98%. This is already in line with traditional chemistry, and we are not done optimizing our enzymes and processes for even better manufacturing solutions. It is also important to emphasize that these numbers are not asset-specific.
Codexis' ECO Synthesis platform has previously been equally successful in assembling oligonucleotide fragments of other approved siRNA assets, including Givosiran and Lumasiran, clearly speaking to the versatility of this technology. Ultimately, there are two important takeaways from this data. First, the four routes highlight the exquisite performance and broad applicability of enzymes in RNA synthesis, including the efficient incorporation of a tissue-targeting moiety. Second, and equally important, we have demonstrated our platform's seamless backward compatibility with oligos synthesized by traditional chemical methods. This enables us to meet customers where they're at by offering a stepwise approach to implementing enzymatic manufacturing solutions. With that, Kevin, I pass it over to you.
Thanks, Stefan, and good evening, everyone. I'll keep my comments brief, but this has been a really exciting meeting, and it is a pivotal moment for Codexis. In May of 2023, we announced the concept of our ECO Synthesis manufacturing platform, and now, only 18 months later, we have publicly demonstrated the platform's capabilities to manufacture a commercial asset using four different manufacturing routes. We have seen incredibly high foot traffic at our booth and have had a packed calendar of high-quality customer meetings. There is growing commercial interest in our platform and, more importantly, deeper appreciation of the full scope of our capabilities. You will be happy to hear that we are already engaged in discussions with several major siRNA players for process development work and multi-asset collaborations kicking off in the new year.
Coming out of this meeting, I'm confident that Codexis is a leading enzymatic player in the field of siRNA manufacturing, and these Tides meetings will continue to serve as fertile ground to demonstrate this and to drive deeper customer engagement. With that, we look forward to answering your questions. Operator?
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, while we pull for questions. And our first question comes from the line of Kristen Kluska with Cantor. Please proceed.
Hi, everyone. Congratulations on these updates. You know, I can just hear in your voice how excited you are about the data with good reason here. So a few questions for me. Being able to achieve this via the Inclisiran presentation via four different synthesis routes kind of sounds like a good problem to have. As you think about this drug, building other drugs with partners in the future, how do you then determine which synthesis route might be the best earlier on? It seems like the results here were all pretty consistent with each other. Is there a reason to think that one of them, there's a better chance for purity, cost savings, or is it really going to depend on a case-by-case basis? And the purpose of this is to say, "Hey, no matter kind of the route you're going, we can do it.
Thanks, Kristen. Yeah, you detected rightly the excitement in our voices. And I think you called it right at the end there with saying this enables us to sort of look across the table at our partner and offer them the optimized route for their specific molecule. And I'm going to ask Stefan to talk a little bit about that and also then Kevin to talk about the kind of conversations we're having with those partners right now. So, Stefan.
Happy to. Yeah, thanks, Stephen. Happy to jump in. Really, the advantages of ligation have become very obvious at this meeting. Kind of looking back, even 12 months ago, the enzymatic approaches for oligonucleotide manufacturers were more of an oddity at the Tides meeting, for example. This time, Kevin and I actually compared notes. We came up with about a quarter of the presentations, including all the major pharma players, were actually talking about ligation. So we definitely see an advantage there over just a strict full-length sequential synthesis because one can really leverage the quality improvement that one achieves with shorter fragments and then uses the ligation step kind of as an assembly and concomitant purification step. But I think you hit it right on the head there at the end that really it comes down to individual customer expectations.
It comes to the very specific nature of the asset, the chemical composition of the asset that ultimately will determine the most advantageous route to take. Today's demonstration clearly shows, as you pointed out, that we can meet the customer whichever way they want to go.
Yeah, if I can add to that, to add some more color here with the kind of customer conversations. I mean, as Stefan said, the ligation is really a core focus. We launched that sort of service about six months ago. So immediately, people are like wanting to get into the fold with doing screens with us to find their selected variant to incorporate it either into their armamentarium to offer to their customers if they're a CDMO or to incorporate it if they're a major siRNA drug sponsor into their development protocol for scaling up this asset because the value proposition is very clear. I think on top of that, you have a couple of key players that are really interested in finding ways to work with us in a broader sense around expanding and accelerating the development of the ECO Synthesis full platform.
So it really does allow us to be able to have both conversations and will likely lead to some accelerating types of development agreements with some key players to ensure that we're ready for future scale-up of these large indication assets through a GMP process in 2026 and beyond.
Okay, thanks for that. And then maybe just to kind of help us all put this into perspective at the end of the day, I just looked. I think analysts have peak sales of Inclisiran at over $3 billion by the end of this decade, which obviously is going to be a pretty substantial ramp-up relative to what that drug is selling today. So help us understand with current chemistry, essentially what demand and what in place would need to happen to seriously achieve those numbers versus now that you've essentially established the first-ever enzymatic synthesis of this drug, what you essentially envision this process is going to look like at scale that would save all of the time, costs, advantages, etc.
The benchmark that people are working off at the moment, Kristen, is somewhere in the 8%-10% COGS for big drugs like Inclisiran, looking at costs of production of siRNA on a good day of around $1 million a kilo. If you run that through, the math is a very, very big opportunity. If it's a $3 billion drug, then $300 million of that would be the production cost of the Inclisiran. What Stefan has pointed to, what Kevin's pointed to, is volumetric productivity with the eco platform, which is being able to make more of a big drug in a smaller facility, but also the emerging promise of simplified purification steps by improving the purity profile of the drug at the synthesis step so you don't have to do so much downstream processing, which is a significant burden on the cost.
So we are already competitive with the chemical process in terms of all the critical parameters. Where we go from here is continually improving because I'd like to point out they had like 40 years start on us. So being competitive after 18 months is pretty impressive. So we think we can take a significant chunk out of the cost of goods and the cost of production of a big drug like Inclisiran.
Great. Congratulations again.
Thanks.
The next question comes from the line of Allison Bratzel with Piper Sandler. Please proceed.
Hey, this is Sam Lahl for Allison. Congrats on the progress. One question for us. So with the innovation lab that you're supposed to launch at the end of the year, what steps are left before that is ready to go? Thank you.
Everything is on track for the end of the year, and we're in mid-November right now. We are right in the throes of the installation right now, and things are exactly tracking as we'd hoped. This is really important because Kevin needs to turn the spigot on really at the turn of the year for the number of customers that we've got coming through the door. Not to speak too far out of school, but frankly, our problem is not going to be filling the ECO lab. It's going to be selecting who we can work with, with the capacity that it can provide. I think that's a high-quality problem. Kevin, do you want to pitch in?
I think that's right. The ECO Innovation Lab is critical for not only getting some of these ligation customers into taking what now they can see is not just selecting a variant, but us being able to provide the process development needed for scale-up of their asset, even if they're using pack-based oligos with ligation. That immediately goes into the ECO Innovation Lab and providing that for them as a service. And then in addition, sequential synthesis projects that more and more we're looking at customers that are wanting to do sequential synthesis of fragments because of the purification and applying ligation as well. So that's another key element of why we think this is such a pivotal point for us right now.
This multiple routes of synthesis is something that we can uniquely do, and customers are looking at this in a way to scale faster, and Stephen hit the nail on the head with the potential and promise of improved purification, which is one of the major cost drivers in overall oligonucleotide synthesis.
And just to be clear on the specifics of your question around what needs to happen, all the pieces that will run in the ECO Innovation Lab are up and running. But this is about having a physical place where all of them can be put together. So we're not trying to make something work. This is about making it look good so that we can show people and bring customers in and do the show and tell. So we're sort of very confident about the timeline and the rollout.
Thanks. Congrats on the progress.
Thanks.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. And our next question comes from the line of Dan Arias with Stifel . Please proceed.
Yeah, hi guys. Congrats on the progress here. Stephen, is your expectation that the conversations around what you've done here will have your customers sort of willing to take the Inclisiran experience and extrapolate across the portfolio in terms of applicability, or do you think you still have some one-by-one type progressions ahead of you when it comes to just incorporating the approach?
So the Inclisiran experience clearly helps because we've taken the biggest drug out there, a real one. We've made it and shown the flexibility of the platform. What tends to be happening at the moment is that our partners are giving us sort of interesting constructs to make and say, "If you can make that, we'll believe you." And that's been the sort of process we make it, we show them they're pleased with the outcome, and then we go on to the next step. So it's a real sort of stake we put in the ground that we're now at the position of making real drugs. It's easy to sort of focus on making the 21-mers and the 23-mers strand.
Just as important is the tacking on the targeting moiety for tissue delivery because that's one of the critical steps in turning an oligonucleotide into a drug and showing we can do that and showing when people really get under the hood, we can stick those targeting moieties on either end or in the middle as they need to be is super impressive to partners. So this was a real sort of step forward for us. And I think that is reflected in the flavor of the conversations that Kevin's having with partners right now.
Yep, fair enough. Okay. And then just maybe anything that you're seeing that looks similar in terms of an approach or evidence of success at the meeting? I mean, I don't necessarily need company names, but in lieu of being there and walking the floor, I'm just curious about the extent that the field is evolving or whether you're really just kind of pushing ahead of everyone at a pretty good clip. Thanks.
So we believe we are clearly in the lead around the enzymatic synthesis of siRNA. And the flavor of the relevance of that has really changed over recent months. And that's been the most sort of significant feedback from Tides is enzymatic synthesis was seen as a nice concept many years off a year or so ago. It's now increasingly understood that we are on the verge of making this real. And so there's now a sense of urgency from our partners to get engaged with us. And that's reflected with how busy Kevin is and is going to be over the next few months.
Yeah. Maybe I can just add something here. I mean, just along the lines of that excitement, I mean, the number of folks that were coming up to us both in customer one-on-ones, but after the presentation to highlight how impressed they were with the results and speed at which we've achieved this was unprecedented. And Stefan, you want to add anything to that?
Yeah, no, certainly, as Stephen pointed out, this was often seen as a kind of future technology, but the future was pretty far off, many years off. That perception has certainly been fundamentally shifted by today's presentation.
Okay, very good. Congrats, guys.
Thanks.
Thank you.
And the next question comes from the line of Jacob Johnson with Stephens. Please proceed.
Hey, thanks. I wanted to follow up on some of those last comments. Stefan mentioned earlier more presentations this year on ligation than in the years past, and it seems like maybe some other people discussed their efforts around enzymatic routes. I guess on one hand, it's good to have others preaching from the same hymnals as you. I guess on the other, maybe there's some other competition emerging for this offering. I'm just kind of curious what you saw from that dynamic. Stephen, I heard you mentioned you're in the lead here, but I'm just curious if you saw anything competitively that was interesting.
So let's just lay the breadcrumbs for how this conversation has changed, Jacob. From ligation, what's that, to now everyone saying, "Oh, ligation is a great idea." And the way that we're ahead of the game is by being able to evolve and scale and produce optimized enzymes for specific ligation steps. And that's really where we're differentiated. And Stefan, do you want to talk a little bit about Matt's presentation of real live examples of differential performance of our ligase over competitors?
Yeah, happy to jump in. So yeah, it's hard to put kind of a generic general statement about how much better we are because the performance of our enzymes, every enzyme very much depends on the specific composition of the asset. But what we have seen in our own assessment as part of this Ligase Screening and Optimization Service, as well as Bachem has seen that in their hands. And with numbers, with enzyme loads and all that that people are now reporting in the presentations as they talk about ligation, we see that we are consistently ahead. Sometimes we're twofold better. Sometimes we're tenfold better. But our enzymes consistently have outperformed in these studies, which is highly encouraging to us.
Got it. That's helpful. And then looking through the Inclisiran presentation, lots of numbers here. Clearly, it's not geared for people like me. But I'm just curious, as you look at kind of the four routes versus the traditional chemistry, anything surprise you in the data? And then I think I maybe heard Stefan say there's still continued improvement of ECO Synthesis, the platform becoming more efficient. So is this something where if we were to see these numbers a year later, do you think the four ECO numbers would look even better?
So let's answer the last question first. And the answer to that is we absolutely hope so. And we've been talking about coupling efficiency for a long time. And we've been talking about yield for a long time. And the thing that emerges as we do more and more process engineering and protein engineering is this purity and the ability to vastly simplify the downstream processing, which is actually just as important because this has the promise of eventually getting away from the need to use organic solvents at all, which would be a huge step forward to eliminate from the entire synthetic and purification process. And then it comes down to what are you trying to achieve? If you're trying to achieve something that is incredibly cool scientifically, you go end-to-end enzymatically. And yeah, that's a major achievement in itself.
If you're looking for, with this real live molecule, with the tools that are available to me today, what's the best way of doing it? Right now, our sort of basic assumption is it's going to be a ligation strategy because even for a given conversion coupling efficiency, even for a given yield, you will do better making 10-mers and 11-mers and stitching them together than you would by going all the way to 21, right, given the very high performance of the ligation step. But that will evolve over time, and there will be situations where we'll want to use different elements of the toolbox. But yeah, look for those numbers to continue to improve. Obviously, when you're at 98-plus, you can only go about 1.5% more. So the numbers will get smaller, but they're super important.
Got it. Thanks for that, Stephen, and congrats on the progress, guys.
Thank you. There are no further questions at this time. I'd like to turn the call back to Stephen Dilly for further remarks.
Well, thanks. And thanks everyone for joining us today. And as you can detect, we're underway on a very busy fall. And we actually have a series of investor conferences in New York, London, and Nashville next week. So we're looking forward to connecting with many of you live at those to discuss these exciting updates. So thanks again for tuning in.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.