All right, welcome everyone. My name's Matt Stanton. I'm on the Life Science Tools and Diagnostics team here at Jefferies, back with us at the conference this year. We have the team from Codexis and joining us from the company, CEO Stephen Dilly. Stephen, thanks for being here this morning.
Thanks for having us.
I guess just to set the stage, I don't want to spend too much time here given there's a lot of other exciting updates to cover, which we'll get to. But can you maybe just spend two or three minutes kind of level-setting folks on your ECO Synthesis platform, what it does, how it's evolved, and kind of what you're trying to solve for with the platform? And we'll have some more nuanced questions further on, but just kind of level-set folks on the ECO Synthesis platform and where we sit today.
Pleasure, Matt. I'll actually start at the end of that question and work backwards, which is the problem we're trying to address is the supply of RNA medicines, particularly at the moment siRNA medicines. We've been really impressed with the progress made in pipeline by people like Alnylam, Novo, Novartis, the big players there. It really does seem with 350 siRNA assets in development that this is an important coming wave of medicines.
The dosing regimens are compelling, once or twice a year to control difficult-to-manage diseases. The big problem that people haven't been talking about enough is supply because at the moment, RNA medicines are made with conventional phosphoramidite chemistry that's been around for about 40 years. It's harsh conditions, organic solvents. It's very, very deleterious environmentally and economically, but it's reliable.
And what we've come up with is an alternate solution to making siRNA medicines, which is aqueous-based and all the hard work is done by enzymes. And the reason Codexis is doing this is we've spent the last 20 years working on enzyme engineering, enzyme evolution around our technology platform, which is called CodeEvolver. And what we're just rolling out at the moment is a big milestone last week. For the first time ever, we've made a complete siRNA drug enzymatically. So we thought that was pretty cool.
Okay, great. And I guess maybe to pick up where you ended there, coming out of European TIDES late last week, a number of exciting developments for the company, several poster presentations, including one with one of the larger CDMOs in the space, Bachem. Maybe just kind of level-set us on key themes and takeaways coming out of EU TIDES last week?
Great. So the first big takeaway was that biocatalysis has arrived. So a year ago, we went to the same meeting and talking about the use of enzymes in producing drug product was a footnote. We were a bit of an oddball off at the side. This year, everyone was talking about it, including the big players. Something like 30%-40% of the presentations were on enzymatic technology. One of the very pleasing themes coming out of it was really being reassured that Codexis is in the leading position, both in terms of the fully enzymatic synthesis of oligonucleotide therapeutics, but also in how to use enzymes to help with particular steps in the synthesis and to improve yield. So we were very enthusiastic about the presentations we were making.
What's more important was the traffic we got afterwards from big players, including CDMOs, but also the innovator companies, as we call them. Those are the companies like Alnylam and Novo and Novartis that are actually making siRNA drugs and developing them. And the theme that I liked most was we thought this was five years off. You've just showed us it's here. It's arrived. So we had a good week.
Okay, that's good to hear. I guess on the customer demand, I mean, is there any difference in terms of the conversation or willingness to adopt the product, CDMOs versus some of the bigger innovators? And I think we all kind of know this is an industry that's maybe slow to adopt, but kind of just help us.
Is there any difference between the two? And then also maybe what might be a little more nuanced with your product where I think it can kind of, there's promise to move into the process that's already ongoing, right? It's not like you have to start preclinical and move along with the drug. So maybe kind of talk about the difference between the two customers and then also confirm that you can move in at different points along the clinical journey.
Right. So a year ago, I think there was a level of embarrassment among some people acknowledging that enzymatic solutions might be applicable in this field because imagine if you just spent $728 million on a facility in Colorado to do phosphoramidite chemistry and someone comes up from left field showing you a much more elegant solution. You probably don't want to know early on. However, where we've gone from there is to actually show that you can use enzymatic steps in a chemical synthesis and it will improve the yield.
It will improve volumetric efficiency. It will improve the purity. So suddenly what's changed is rather than being a threat, we're seen as an enabler. And so one of the presentations that we gave last week was in cahoots with one of the most important CDMOs, that's Bachem.
We were actually showing the use of what we call our ligation technology. That's vital because chemistry is very good for short sequences. The longer you go, the harder it gets, the more impurities you start to encounter. What ligation is, is the stitching together of short sequences to make the full molecule. Codexis has been working for a while evolving ligases.
And what we're able to do is make an enzyme that is specific to the molecular construct you're working on right now, rather than what other people have been doing, which is using generic wild type ones. We're able to improve and we show facts and data on partners' projects with this to improve the yield, improve the reaction time, to improve the purity coming out.
So suddenly CDMOs who are all about how much scale, how much capacity can I get out of my footprint are seeing this as an enabler and a first sort of easy step into the adoption of an enzymatic process.
Okay. Maybe shifting gears a bit over to the, staying on ECO Synthesis, but the Ecolab, which you guys I think reiterated recently that you're on track to kind of open here by year end. Can you just talk about goals for opening that lab? And then as we think about kind of 2025 and beyond, what type of activity level will be there? And is it potentially revenue generating? Is it more kind of a sales and marketing tool to get people their hands on the technology? Kind of what should we be expecting once the doors open on the lab and we look out to the activity there in 2025 and beyond?
Great, so let me tell you what the Ecolab is. It's a part of our facility that has been dedicated to running the fully enzymatic process around siRNA synthesis, and essentially it's about pulling together pieces of technology that have been distributed through our facility into one place with a streamlined workflow. And it will be able to produce GLP-grade material at about the 100 gram level. 100 grams is quite important because that's the kind of capacity at which people will then extrapolate and say, "Okay, now you have a fully scalable process." We will be able to service several customers at once, but the capacity will not be infinite, and so our challenge actually in terms of looking at the functioning of the Ecolab next year has been about who do we work with and who do we have to sort of politely push off.
And in terms of the ideal partnerships, we're looking at big innovator companies that have deep pipelines of assets where we can learn to work with them and vice versa, and this will be applicable across a platform. And with the ongoing conversations we have right now, we expect to have filled the capacity of the Ecolab essentially by the end of this year. So this is something people want, they want a piece of.
And then we're thinking forward about how do we move from being a GLP manufacturer, which will allow people to do preclinical work, toxicology to becoming a GMP manufacturer, a provider of siRNA solutions. And that's why we're also talking about very soon closing what we call our GMP scaling partnership with a CDMO where we can put our technology onto their platform.
And one of the things to stress is when we show people our technology, they kind of say, "Is that it? Where is it?" Right? Because they're used to seeing huge tanks of acetonitrile and lots of sort of facilities for the chemistry. The enzymes do the work. This is a column and a pump and a storage container. It's really simple. And so it is very, very easy to put into other people's facilities if they have the sort of GMP infrastructure in place.
Okay. As we look out a bit more towards the commercialization of Eco, a bit of a way off, but can you kind of just talk about initial thoughts around commercial approach there? And then do you have the right team? Do you need to add more? You added some recent hires over the last few months, I guess, on those. How do they kind of help you prepare for that as we look out to kind of late 2025, 2026 and beyond on the commercial strategy?
Right. So things become very simple when we are a massive scale supplier of siRNA made enzymatically because at that stage, what we're doing is the economics around the supply of the drug. We have to get from here to there in an economically viable way that we can fund. Now, you asked a question a little earlier that I didn't answer, which was, are there economics associated with Ecolab?
And the answer is absolutely yes, that what we're looking at there is upfront payment for access to the technology, then a development partnership where the partner will be paying their way, and then milestones associated with the drug product itself and as the assets move forward in development, seeing associated economics there. Then there'll be the sort of the next stage when people say, "Yes, we love the process.
Build us a GMP route." Again, we're looking at upfronts, we're looking at milestones, and we're looking at being paid for the work that we do, and then forward from there, as we work with different players, we will have slightly different economic structures. One of the ones that really appeals to me in the long term is harvesting the many early phase compounds because one of the dirty secrets in oligonucleotide development at the moment is the big guys can get their drug supply, right? Because they have relationships with Agilent and Bachem and so on. It's the small guys trying to put things into development that are having to pay pretty egregious prices to get the attention of the CDMOs.
What we're looking at is a very rich sort of landscape there to partner with small companies with our technology to provide more than just the white powder. Because if you're in a small company having someone to build your analytical framework for you, help you with your regulatory path and so on is immensely valuable. It in many ways de-risks your development program. In that way, we'll be looking to be much more of a partner expecting back-end economics as well as the front-end and payment for the commodity.
Okay. That's helpful. Maybe one just to kind of take a step back for maybe someone who's maybe a little less familiar with the Codexis story, right? I mean, I think Eco wasn't really on the radar maybe 18, 24 months ago. And so you're talking about some of these bigger players who have a lot of deep pockets and things like that. I mean, can you maybe just talk about IP and know-how around the product and process, right? That they can't just kind of look at it and then recreate it. And then also maybe the history of Codexis around this, right? And kind of the know-how and deep understanding that give you maybe a bit of a more of a competitive moat than it might seem where, "Hey, this wasn't around 18 months ago and now it's not that simple.
It's really not that simple. This is an overnight sort of success, 20 years in the making. And we've been working on enzyme engineering for that amount of time. We were doing AI machine learning before it was even called that. We've really built a very deep expertise in enzyme engineering itself, but even more important than that is how to get enzymes working together in cascades under process conditions.
And during our journey, we have actually licensed some of our platform technology to big players, to large pharmaceutical companies who do their own biocatalysis, often in the field of small molecule API manufacturing, but also some of them have been working on ligation technology as well. And the good news is because this is our lifeblood, because this is what we do all day, we tend to be better at it. And focus is really critical.
I think of this a lot more like a high-tech play than a classic biotech play. This is not like we're developing a drug and we have composition of matter. We have version one of Eco that we're rolling out right now that has great capabilities. We're working on version two. There are many adjacent markets we can go to. And adopting our technology that works is going to be so much more attractive than people trying to invent it for themselves.
Yep. Okay. Maybe to go back to something from before, I guess you talked about kind of the GLP scaling partner and the opportunity there, I guess. One, I think a lot of people when they hear drug manufacturing, drug processing, think GMP. So maybe just kind of clarify why GLP is important and then also kind of how the development of that partnership looks. Is it just moving it into a facility, like you said? Is it kind of trialing it on some products that that CDMO theoretically would be supporting today? How does that partnership look once hopefully it's successful here? And I think you said the nearest term.
So one of the things that my management team have got bored of me saying, but I haven't said it enough yet, is we have to move this from being a science project to a real commercial proposition and focus on that, right? So the first thing you do is you invent a new process and you say, "Wow, that's cool. Look, we've just made a molecule."
That's lovely. It's not going to make you any money, right? Then people have to be able to do something with it. So it's then all about the process controls. And what CMC stands for is Chemistry, Manufacturing, and Controls, right? And so we have to be able not just to do something really cool, we have to be able to do it reproducibly at scale over and over again with reliability so people can depend on us for that process.
The first level of control is really what's called good laboratory practice by the FDA. That means your molecule is well enough characterized, your process is reliable enough that you can do preclinical testing and get useful information out of it. As soon as you go near a human with your drug, you need to get to GMP. And a lot of that is about locking down the process. And all the things that scientists like to tweak and tinker with, you have to stop them. You have to lock it down because those are deviations, right? This is now processes controlled and it's all about reliability and scale. And so 2023 and 2024 were about doing the really cool science.
Much of this year and into next year is about locking down the process for specific molecules so that in 2026, we come on stream with real commercial relationships around specific assets that we can talk about, and those will be GMP.
Okay. Okay, so GLP first, then GMP later.
Yeah.
Okay. Perfect. Maybe to shift gears a bit over to the balance sheet. You've done, since you've taken over, a lot of focus on kind of the core business and the portfolio and what you guys should be focused on, profitability, the runway ahead of you guys around that. You recently raised another, I think, $30 million in 3Q.
So can you just kind of talk about where the balance sheet sits today? And then I think you talked about of that $30 million raised, some is going to go sit on the balance sheet, other is going to go to a few growth investments. Can you just kind of remind us where that's going? And is it five, five, five, or is there one of those three that's going to be maybe a bit more of that chunk?
That's correct. So the heritage business of Codexis has been what we call pharma manufacturing, which is where we provide bulk enzymes for manufacturing of small molecule APIs by partner companies. That business was somewhat sort of lacking a bit of care and feeding over the last few years. We've really focused back on that and turning that into a profitable growth engine.
The top line on that business is somewhere in the high 30s product revenue right now. This year will be back in double-digit CAGR growth, and we expect that to continue based on assets that are in development, using our enzymes right now that will scale over time. So that's really helpful. That plus the ligase business, which is commercial right now, people can partner with us, we will supply them with high-grade double-stranded RNA ligase.
Those two things together get us to cash flow positivity and profitability at the end of 2026 and getting better into 2027. And so what this is all about is launching the big Eco platform from a profitable growing company, whereas we see that as really promising and to give us the oxygen to invest, to really capture as much value from the platform as we possibly can. Before Q3, yeah, we had a trajectory to profitability and all the rest of it. It was a bit tight.
And so when we had a couple of inbounds saying, "Would you take some money in off the ATM?" I said, "Yeah, let's do it." Some of that was to pad the balance sheet and to make my conversations with the auditors in the out years less interesting. The other part was to invest in the company itself.
Some of that is about security and flexibility of supply. In pharma manufacturing, we've learned that if we can make bulk chemicals to a slightly higher scale internally before we have to partner out, we can actually capture more assets. We're going to do that. That's $1 million-$2 million to gussy up existing facilities. We've learned that the RNA ligase business is super promising. Just why I like it? With bulk enzymes that we provide for small molecule API manufacturing, that's about $3,000 a kilo.
When you move into double-stranded ligase, it's about that per gram. We're a thousand times higher price point, but we need to do more purification. This is about investing in downstream processing of our ligase platform to really be able to capture value, keep it under control, keep it in-house.
And then we're starting to look at. Remember we're talking GLP and GMP. Now looking at a kilo-scale GMP siRNA manufacturing plant. So we can partner with small companies through conceptualization, through GLP, getting into preclinical, and then doing phase one GMP so they can get in the clinic before we have to partner with the big scaling partner. Now, by 2028 or 2029, we should be at bigger GMP scale ourselves, but we need to bridge between here and there.
Okay. And so that facility is taking up the biggest chunk of it because you're kind of building more or greater capacity and kind of.
The more capacity, the more controls, the more expensive it is. But one of the features of Eco is relative to trying to do the same thing chemically. It is orders of magnitude less capital investment because it is very simple tanks and columns, and you can put that in just about any facility that has the right drainage, the right water supply, the right sort of controls, entry and exit controls, and all that you need for GMP.
Okay. Maybe one, as we think about kind of 2025 and the slate of catalysts there, I mean, you guys did a really good job. I think of laying out a number for 2024 and have hit those or exceeded those. If we roll the calendar to next year, what are the handful of catalysts, I guess, more so on the Eco side that you would call out for people to kind of watch, whether it be more proof points on the earlier side, commercially, revenue-generating items? What are some of the catalysts to watch in 2025?
So watch out in 2025 for real partnerships across multiple assets with big innovator players in the field. You'll be able to see why I'm saying the Ecolab is full and why we're building the GMP facility. Also look for our scaling partnership so that we can be on stream with tens of kilos of GMP material as soon as possible. It's all that. And then continued execution and delivery on the goals that we've laid out around the heritage business, continuing to grow and continuing to be increasingly profitable.
Okay. You touched on it a bit in the beginning. I think we talk about it often, but I think it's a very evolving landscape. Just kind of updates on the competitive landscape. You touched on, I think, your first answer. You guys are clearly getting more eyeballs. There's certainly some of the bigger players there that have put a lot of capacity into the ground.
I think there's some thoughts and beliefs that other more established CDMOs might move more into this area, right, as the pipeline evolves. So kind of just help level set us on commercial landscape today, whether that be, I think, mostly CDMOs, but also at pharma, right, and their willingness to invest in this area and build out capacity. I think that'd be helpful.
Right. So in terms of what we do, which is the enzymatic platform, we've had a number of conversations with big players who said, "We've talked to everyone. We've surveyed the landscape. We've looked at others. We chose you because you're best." And that's what happened with our first big pharma partner around the ligase platform. They confirmed what we already knew, which was our ligase function better than other people's.
Same thing with our multi-asset innovator partnerships where they said, "We've looked at the other players in enzymatic synthesis. You're clearly ahead. This is real. We're going with you." In terms of the CDMO landscape, there are the ones that are dyed in the wool chemistry players, but even they are looking at ligation steps. So we don't see anyone not talking to us. No one's sort of pushing us away.
But there's always this sort of thing in terms of disruptive technology where the real adopters are often on the edge of the field and they want to get more of it. And so one of the reasons that we really like Bachem is that they have had a history of innovation around trying to address the problems coming down the pike, but they're not the only ones we're talking to.
Yep. Okay. All right. With that, I think we're out of time. I have to leave it there. Stephen, thanks again. Appreciate the time.
Thank you so much, Matt. Thank you.