Earnings Call: Q2 2021

Aug 5, 2021

Greetings, and welcome to Codexis Q2 20 21 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. And now, I'll turn the call over to Stephanie Marks from Argo Partners. Please go ahead. Thank you, operator. With me today are John Nichols, Codexis' President and Chief Executive Officer and Ross Taylor, Codexis' Chief Financial Officer. During this call, management will be making a number of forward looking statements within the meaning of the Private They are forward looking statements reflecting beliefs and expectations of management as of the statement date August 5, 2021. You should not place undue reliance on the forward looking statements because they involve known and unknown risks, Uncertainties and other factors that are in some cases beyond the company's control and could materially affect actual results. In particular, there is significant uncertainty about the duration and impact of the COVID-nineteen pandemic. This means that results could change at any time and the currently For details about these risks, please see the quarterly news release that accompanies this call as well as the company's SEC filings, including Codexis' Annual Report on Form 10 ks filed with the SEC on March 1, 2021 and Codexis' quarterly report on Form 10 Q filed with the SEC on May 7, as well as Codexis' other periodic reports filed with the SEC. Codexis expressly disclaims any intent or obligation to update And now, I'll turn the call over to John. Thank you, Stephanie. Good afternoon, everyone. I am very pleased to report exceptionally strong Q2 2021 results for Codexis. Total revenue for the quarter grew by an impressive 70% year over year. Product revenue more than tripled over a year ago and product gross margin reached a new high of 71%. We are demonstrating our ability to capitalize on Codexis' rapidly accelerating business model, We are firing on all cylinders in our sustainable manufacturing business. In June, we received a significant new commercial scale quantity order from an unnamed global pharmaceutical company for one of Codexis' proprietary enzymes. This enzyme is designed for use process of a therapeutic drug that is in late stage clinical trials with an accelerated development and regulatory process. This business will deliver the largest annual sales for a product in the company's history. We raised our guidance in June upon receipt of the $13,900,000 order. Today, we are raising our revenue guidance again As we have solidified that order's delivery schedule to be executed within 2021 and have solid indications from the customer That they have significant additional 2021 product needs as well. Ross will provide more details later in the call. On top of that exceptional strength in pharma manufacturing, we recently executed a commercialization agreement in the food sector Working with our innovative partner Calsec to help them introduce new hop extracts to beverage applications. We also had very good sales to Tate and Lyle for their commercial stevia and allulose sweeteners and we have a solid outlook for revenues related to both of these In the life science tools market, our newly launched engineered enzymes continue to gain traction with market interest And our partnered programs continue to drive significant 2021 R and D revenue growth. And in our biotherapeutics business, our partner Takeda exercised its option to expand our collaboration to add a 4th program to the pipeline. In addition to all of our customer driven programs, we are applying our R and D resources to an increasing number of self funded programs across all lines of the business. We are advancing programs further into development as part of our strategy to capture even greater value in the future. Every year at the end of June, we provide an update to our pipeline of programs and products across the company, breaking them down in a number of ways to provide insight on how we're expanding Today, we published this annual pipeline snapshot as of June 30, 2021, which you can see here and find on our IR website. Let me highlight a few metrics that I think are particularly salient. First, our total number of commercial products and pipeline programs has grown by 20% since last year, Increasing to 78 from 65. We have dramatically increased our number of shots on goal. We now sell enzymes to sustainably manufacture 17 commercial products, up more than 50% from 11 just 2 years ago. The ultimate goal of our pipeline is to drive programs to commercial recurring revenue stage, So it's great to see momentum building for us here. Clearly, this is connected to the dramatic product revenue growth we are delivering in 2021 versus the past. Pharma manufacturing continues to be the largest application area in our pipeline, but we are also putting stakes in the ground more broadly. Note the 50% growth in performance enzyme programs outside pharma in the last year led by the life science tool sector, but also nice growth in the food and other industrial markets as well. Our biotherapeutics pipeline continues to expand as well, highlighted by our investments in 3 new self funded programs over the last And by Takeda's exercise of its option to license the 4th program from Codexis during the quarter. Our business model is consistently delivering acceleration of assets in our pipeline as you can see in the 4 year trends shown in Slide 5. More than doubling over the 4 years in almost all categories, an explosion of programs in our new high growth verticals of life science tools and Novel Biotherapeutics. We look forward to continuing to These trends going forward: adding to our shots on goal, advancing those towards commercial, Increasing the average program speed to market and peak revenue potential, all in tandem. Let's dive more deeply into our recent progress across our 3 businesses starting with sustainable manufacturing. Sustainable Manufacturing is where we built Codexis' enzyme engineering leadership over the past 2 decades and this market currently represents the large majority to dramatically reduce the cost and increase sustainability of manufacturing their end products. Compared to using traditional non enzymatic chemistry, which is capital intensive and inefficient, Our engineered enzymes decreased capital needs meaningfully, while also enabling higher yields, reduced energy usage And our CodeEvolver platform is constantly accelerating the speed of our ability to discover and design these value creating enzymes. Small molecule pharmaceutical processes have been and continue to be a core target for growing the sustainable manufacturing market for Codexis. We have partnered with 21 of the 25 largest The $13,900,000 order that we announced in June from an undisclosed global pharmaceutical company is a historic one for Codexis And it came to fruition with unprecedented speed. In a matter of months, we scaled up production of the enzyme to manufacture 100 of kilograms to fulfill this order during the second half of twenty twenty one. And as I mentioned earlier, we already have strong indications from this customer that they will need additional supply in 2021 on top of the June order and we've already established sufficient supply chain capacity to be able to fulfill The incremental demand. Another aspect of our sustainable manufacturing business is our ability to license our CodeEvolver protein engineering Platform Technology to partners. In the second quarter, we earned the largest back end licensing milestone payment from our partner GlaxoSmithKline. It was related to the advancement of the commercialization of an enzyme Designed by GSK using CodeEvolver that is engineered to improve a key step in the manufacturing process for an undisclosed Patented on the market drug. CodeEvolver backendlicensemilestone payments such as this one are 100% profit margin, highlighting another important and emerging facet of our business model. We also announced the completion of a CodeEvolver platform licensed This was our 3rd licensing collaboration to enable a customer to bring CodeEvolver technology in house, But the first one where we had to implement a considerable portion of the tech transfer virtually. I incredibly proud of our team's efforts to operate in lockstep with Novartis to ensure a smooth tech transfer. In addition to pharma manufacturing, in the past few years, we've been expanding to other industries, Designing enzymes for sustainably manufacturing a range of applications, including food and beverage ingredients, Recycling, consumer care and animal feed, etcetera. These products have shorter development timelines and lower regulatory hurdles, enabling our enzymes to reach the market more quickly. Recently, we announced the expansion of our research collaboration with Cal A leading producer of food and beverage industry products. Through the partnership, we have entered into an exclusive supply agreement for a novel enzyme to produce Calsec's newest natural hop extract. This enzyme was engineered using our CodeEvolver Technology to improve functionality, stability and efficiency, enabling CalSEK to deliver consistent characteristics and taste, while also furthering Codexis' mission to support the development of sustainable and clean label products. We're really excited about our growing opportunities in the food and nutrition vertical. In addition to the new development of CalSEK, We also had strong quarterly product sales from Tate and Lyle. They are growing the downstream adoption and sales of their newest sweeteners that use our enzymes for the manufacturing of TASTEVA Hemp Stevia and Dolcea Prima Allulose sweeteners. This is a very encouraging progress for these enzymes and we believe they could grow to be one of the largest enzyme products over time. With our deep Faster to market products to continue to accelerate Codexis' growth in sustainable manufacturing. Another area of expansion for Codexis is the life science tools market, which is a significant growth opportunity for the company. Codexis Engineered Enzymes can enable improvements in next generation sequencing and molecular diagnostics, biosensor applications, DNA and RNA synthesis and more. This market is very attractive given its high growth rapid commercialization cycles and above average margin prospects. The market also affords us the opportunity to develop products that can be marketed to multiple customers in addition to the highly engineered enzymes we customize for partners. In the past year, we've developed 3 new life science and Codex reverse transcriptase. Our RNA and DNA polymerases have led the way as we rapidly advance these enzymes 2021, we've already been demonstrating success. We engineered Codex high cap RNA polymerase to provide dramatically higher capping efficiency, enabling customers to significantly reduce the amount of capping reagent that is critical to Stabilizing the product for pharmaceutical use. In addition, our proprietary enzyme decreases the production of We made our first commercial sales of Codex HiCap RNA polymerase to several customers earlier this year And now this product is in various stages of customer trials with multiple other messenger RNA manufacturers. Although the adoption cycle is a bit longer than we had hoped, this is an excellent start and we are confident that we are well positioned for potential installations in a range of processes for development stage mRNA based vaccines and therapeutic candidates. We expect product sales to begin to grow more meaningfully in the coming quarters. We're also making solid progress with the launch of Codex HiPhi DNA Polymerase. Our analysis demonstrates that Codex HiPhi DNA Polymerase enables the highest fidelity next gen sequencing results of all the competitive DNA polymerases tested. The enzyme is being sampled by dozens of high profile customers for potential use in their current and future NGS kits and progress in their trials is encouraging. Codex reverse transcriptase has been developed to further improve performance versus incumbent enzymes in both diagnostic and sequencing applications. It is currently being tested by our early access users and we are preparing for broader launch later this year. In addition to these broadly marketed products, we are also developing customer partnered enzyme products for life science tools applications. In the Q2, we earned an option milestone on a new enzyme with an unnamed life science tools leader and have multiple revenue generating partnered programs advancing in parallel as well. As an update on our groundbreaking collaboration with Molecular Assemblies for the commercialization of enzymatic DNA synthesis, We continue to make strong technical progress on this project. This disruptive approach to synthesizing DNA has the potential to significantly impact a wide range of high value markets from drug discovery and manufacturing through synthetic biology and longer term to compete with silicon for data storage. Leveraging the power of CodeEvolver to deliver dramatic We are engineering enzymes that should make Molecular Assembly's process a commercially viable, cost effective and differentiated solution to manufacturing long chain DNA. We remain on track to complete the enzyme engineering work for this program in the second half of twenty twenty one. With an increasing number of differentiated products In wrapping up the business review, we remain highly enthusiastic about the value creating potential for Codexis in the discovery and development of Novel Biotherapeutics. Here, we are rapidly building and advancing a high value Just a few years ago, we had only 2 very early stage programs in our pipeline. Fast forward today and we have over a dozen programs in the pipeline, including 1 in clinical stage and another in IND enablement development. We have an impressive multi program partnership with Takeda Pharmaceuticals focused on improving gene therapy candidates for rare diseases. Here we are leveraging CodeEvolver to engineer transgenes with improved attributes such as enhanced expression, Takeda exercised its option to expand our strategic collaboration for the research and development of an additional gene therapy for a lysosomal storage Bringing the total number of programs under the agreement to 4. We are extremely proud of the success we have generated in gene therapies for the potential treatment of Fabry disease, Pompe disease and an undisclosed blood factor deficiency After just 1 year in collaboration with Takeda, especially given that we are just a year into the partnership, This expansion to 4 is a gratifying indication of Takeda's enthusiasm for our technology and its ability to discover differentiated gene therapies for patients with rare genetic diseases. Modifying transgene using CodeEvolver to enable a gene therapy's expression of a better performing enzyme is a novel and differentiated approach to design Improved next generation gene therapy candidates. Accordingly, in addition to the partnered programs with Takeda, We have embarked on self funded discovery programs targeting improved transgene for other rare disorders. Leveraging CodeEvolver to discover novel oral biologics that are more safe, stable and efficacious for gastrointestinal indications is another high value growth strategy for Codexis. We have 4 oral biologics in partnership with Nestle Health Science and 3 early stage self funded programs. 3 of the partnered programs with Nestle are co owned between the parties, The most advanced of those being CDX-seven thousand one hundred and eight, which is targeting an undisclosed GI disorder. Our IND enabling activities for CDX-seven thousand one hundred and eight, including GMP manufacturing and preclinical toxicology have now been successfully completed. In addition, CDX-seven thousand one hundred and eight has been filed for approvals with the ex United States regulatory authorities for its first clinical trial, which we expect to initiate around the turn of the year. Now let me hand the call over to Ross to take you through our financial results in more detail. Thanks, John, and good afternoon, everyone. We delivered strong Q2 2021 results. Total revenues for the Q2 of 2021 were $25,500,000 up 70% compared to the prior year period. On a segment basis, $21,600,000 in revenue was from our Performance Enzymes segment and $3,900,000 in revenue from our Novel Biotherapeutics segment. This compares with $7,500,000 $7,500,000 for Q2 of 2021 was $14,700,000 above the high end of our expected range for the quarter and up 2 27 percent compared to $4,500,000 for the prior year period. The major contributors were increased sales in the Sustainable Manufacturing segment to partners including Allergan, Tate and Lyle, Contribution from generic manufacturers, KYORIN and significant product revenues from our undisclosed global pharmaceutical partner. R and D revenues were $10,700,000 in Q2, up slightly from $10,500,000 last year. Gross margin on product revenue for the Q2 of 2021 also came in above the high end of our expected range at 71% compared with 62% in the Q2 of 2020. The increase was due to a favorable shift in product mix Turning to operating expenses. Our R and D expenses for the Q2 of 2021 were $12,800,000 up from $10,900,000 in the prior year period. The R and D expense increases were primarily due to increased compensation resulting from higher headcount, Higher expense from outside services and higher costs for lab supplies and depreciation. These items were partially offset by lower Biotherapeutics preclinical development and regulatory expenses. SG and A expenses in Q2 of 2021 were 12.8 compared to $8,500,000 for the prior year period. The increase in SG and A expenses was primarily due to higher payroll expenses, Higher share based compensation and higher legal fees, partially offset by lower allocable expenses. Net loss for the Q2 of 2021 was $4,300,000 or $0.07 per share compared with a net loss of $6,300,000 or $0.11 per share for the Q2 of 2020. Turning to the balance sheet. Cash and cash equivalents as of June 30, 2021 for $129,000,000 which puts us in a strong position as we look to seize the company's growth opportunities. Also, I will note that to date, we have not drawn any funds from our $50,000,000 ATM equity facility that we put in place in early May of this year. As John described earlier, we are increasing our 2021 Financial guidance issued on June 17, 2021. The increase is primarily the result of our expectation for more business from the large unidentified global pharmaceutical customer that we referenced previously for an enzyme that is used to manufacture a therapeutic drug. However, I should also point out that sales of many other products in our portfolio are also trending very well. We now expect full year 2021 total revenues to be in a range of $98,000,000 to $103,000,000 up from prior guidance of $89,000,000 to $92,000,000 driven by an increase in our product sales forecast. We expect full year 2021 product revenues to be in a range of $59,000,000 to $63,000,000 up from our prior guidance of a range to be in a range of 65% to 68%, up from our prior guidance of a range of 60% to 64%. The increase is driven by a shift in the sales mix to higher margin products for the full year. However, we do expect the product gross margin to decline from Q2's levels during the second half of twenty twenty one as revenue from CityGlifton will increase as a percentage of the sales mix during the back half. For R and D revenue, we are updating our outlook for the remainder of 2021. We now forecast that 2021 R and D revenue will be lower than we anticipated at the beginning of the year. The change is partially due to the prioritization of the strategic build out of our self funded projects and is also due to some new partnering Also, I will note that our underlying R and D business is strong As we expect to deliver a similar level of total R and D revenue this year as last year, despite facing combined headwinds over $10,000,000 from the initial 3 Takeda projects and the Novartis Code Evolver tech transfer. Our outlook for R and D and SG and A expenses for the full year 2021 has not changed materially since our call last quarter. We expect R and D and SG and A expenses combined should be in a range of $27,000,000 to $28,000,000 in Q3 and in a range of $32,000,000 to $34,000,000 in Q4. As we have noted before, our investments in R and D and in our SG and The foundations we have established in each of our business segments, and we are well positioned for excellent growth in total revenues, strong growth in product revenues and expansion of product gross margin in 2021. With that, I'll turn the call back to John. Thanks, Ross. Let me close out our prepared remarks in the context of our goals for the year. As both Ross and I have highlighted, Codexis has made excellent progress throughout the Q2 of 2021. In particular, we have executed on standout opportunities within the sustainable manufacturing sector, resulting in significantly increased product revenues And a defining period of growth for this business line. Add to that, the continued progress within our proprietary life science tools Achieving the goals outlined on this slide. We are deeply energized by the endless possibilities that lie before Codexis And we are proud of our role in harnessing the power of enzymes and synthetic biology to improve the health of people and the planet. Now we'd be happy to take your questions. Operator? Thank you. At this time, we will be conducting a question and answer The first question today is from Brandon Couillard of Jefferies. Please proceed with your question. Hey, thanks. Good afternoon. John, in terms of the pipeline update, clearly, Great progress across a number of fronts. Can you just talk about your how you feel about your the capacity of your R and D teams right now and kind of expansion plans as we look out for the next 12 months? Hey, Brandon, thanks. Yes, we've been Stepping up the research capacity in the company consistently at actually at a higher rate since the middle of last year once we Got the company reestablished after the Q2 COVID shutdown last year. We could sense Significant growth in demand for our research, our engineered enzymes, both for customer partnered projects as well as for a growing list of self funded projects. So from that point forward, we've been growing the capacity of research at a much Sure, Cliff. And in any time since I joined the company, and that's progressing really well. We've been adding in the range of 5 people into research every month now for the last 6 or 7 months, and that's enabling us To do more enzyme engineering projects in parallel, it's enabling us to take on more of the self funded and customer funded projects. So Really, really great progress, great execution. It's actually a very dynamic market to hire these kinds of talent. So been a big effort and a big Success story so far and more to come as we continue to ramp up the research and development capacity of the company through the rest of this year and likely into the beginning of next year. Okay. And then related to the large $14,000,000 Undisclosed pharma order. You kind of alluded to having some visibility at this point around the customer needs in 'twenty two. Can just touch on kind of what you expect there? Should we sort of model this in order to be recurring, maybe it steps up even next year? Any case you could share with us right now? Yes, Brandon, it's Ron. Go ahead, Ron. At year end. Okay. Yes, I'll try to take a stab at that brand. And I think in terms of thinking about 2022, our practice really is to update guidance early in each calendar year after we report our Q4 results as you know. But stepping back though, our base business right now, it is firing on all cylinders. At the same time, we are working very hard and we're committing a lot of resources to fulfill this large new piece of business that we first described back in June. But until this product gets through the FDA process, it's out into the market, we're really basing our guidance and our outlook on our enthusiasm and their indications of demand. And this suggests to us that 2022 and beyond could be similar to what we're seeing now. And certainly our customers' confidence in the fact that we are talking about your supply chain in 2022 and beyond certainly would suggest confidence Good demand going forward. But at the same time, I think we have to keep in mind that this is a drug that has to work through the FDA process and much is It's going to be dependent on that, obviously. Great. Last one for you, Ross. Could you quantify the size of the GSK milestone payment that you booked in the Q2 and then any color you can share with us in terms of the phasing for the back half between 3Q In 4Q? Sure. In terms of the GSK milestone, we're really not permitted to What it is specifically, I will note that the last GSK milestone we got back in the Q3 of 2019 and we did disclose then that was about $2,000,000 and this one's probably somewhere in that neighborhood, but we can't be more specific than that. I think your second question related to cadence of revenues in the back half. And I think it's going to be about evenly split between Q3 and Q4. I think as far as products go, it might be a little bit more weighted to Q3 versus Q4 and Q4 and probably the opposite for R and D. So maybe just slightly more products in Q3 versus Q4 and A little bit less R and D in Q3, a little bit more R and D revenue in Q4, but overall total revenue is probably split about equally between the two quarters. Thanks. The next question is from Doug Schenkel of Cowen and Company. Please proceed with your question. Hi, good afternoon. This is Kyle on for Doug. Thanks for taking the questions. Just one today. Going back to your prepared remarks and the collaboration agreement with Calsec that you spoke about. I just wanted to kind of get for a feel for how would you characterize the revenue opportunity that that presents. Yes. Hey, Kyle. Thanks for the good question. Yes, we're really excited about the new food ingredient Success story for the company, this time with a new partner Calsec, who's a really cool company, a very innovative company, And they're working in the area amongst others, but the area that we've been working with them in is in improving and bringing forward improved hop derivatives NextTrax. And we've been working on the research chapter of that program for a while. It's one of our one of the programs that Showed up without a lot of detail in our pipeline snapshot now for the last year or 2. And if this program continues to commercialize As they and we expect, it should be a nice sized product. I would say in the low to mid single $1,000,000 of Enzyme sales per year as it penetrates the market could be more if their new hop extract is More successful than they expect in their markets in the next few years, but that's probably a good feel. Nice sized product, a little larger than a typical pharmaceutical API project, so low to mid single The next question is from Stephen Ma of Piper Sandler. Please proceed with your question. Great. Thanks and congrats on the quarter guys. Hey, thanks Steve. Yes. Maybe let's just step back a little bit, just more of a kind of a high level question So given recent events in the space and given your broad pipeline and Lots of shops on goals. How do you de risk developing products that are going to meet your customer Can you just give us a sense on how you guys manage that risk? Yes. It really comes down to, I'd say, Steve, early definition of what the market needs the Enzymes performance And the more we get that right, the more we point CodeEvolver's enzyme engineering at the right targets to improve upon, how much thermal stability, Reactivity, how important is it? Are there other critical features? So the more we get that early design of the enzymes performance better up Right upfront, the more we derisk. And we can take We can bring the enzyme 75% away along, get it out in the market and we can Together with our partner, if it's a self funded, broadly marketed enzyme like we're doing in the life science tools area, We can go out and we can bring a largely finished enzyme into the marketplace and calibrate from real world customer feedback and finish the R and D. We can very quickly these days improve enzyme performance given how So that's kind of the way we go about it. We do our best to design Upfront, we bring the enzyme engineering along a very substantial amount of the way. Sometimes that's sufficient and the market rapidly Sometimes we need to learn from the customer trialing and the downstream performance that the customers are having to come back and just make some modifications to get it just right. And that's the way we go about derisking the Discovery and development in part for new enzymes that we're bringing forward. Okay, got it. Yes, that's helpful color. Okay, so yes, With regards to kind of these trial studies or pilot studies, do you do those typically For all your partnered programs or is it just for a portion of them? You know, partnered programs, we can do a lot quicker, right? It's just one to 1, where we Sure. Right. It's just one to 1, where we just have one customer like we just spoke about Calsec. I mean, there we've been Making improvements to the enzyme, we've been shooting samples across the CalSEC in very real time fashion and they can do Their assessment of taste and profile from the hops that use the enzyme. So we can do that very real time, very quickly. We almost do it round by round with a custom partnership. As we bring forward our own enzymes into wider markets, Enzymes like our life science tools, enzymes where there are many different potential customers, it can take a little more effort And we're experiencing that to some extent with the DNA polymerase for next gen sequencing, for example. But that iterative process really helps to refine the product for more broader uptake and that's how it works. Okay, got it. Yes, that's helpful. Yes, so, yes, okay. So it looks like it's an iterative process with partners ample time to course correct the program. Okay. Yes. And not too time consuming and not too costly to make improvements Based on market feedback. It doesn't take a lot of time and cost and effort. Okay, got it. And then maybe moving on to the large ATI Enzyme order, we've been talking about. How do you de risk the manufacturing? I know you guys are for this one, you're Outsourcing to partners, can you just give us a sense on the ability to scale up to, I think you mentioned it was Tens of tons of product? Yes. This enzyme is actually an established enzyme that we've manufactured commercially in our historical past. So we already have experience manufacturing So when the opportunity with this customer came along, we were able to rapidly move to line up the capacity to produce this enzyme very, very rapidly at the scale that this new customer requires for their rapid development and efforts. So that helped. That history helped in this case. But more broadly, in other enzyme opportunities, We have a very, very seamless relationship with our growing list of CMO partners. We have a very substantial in house Process development team that has essentially scaled up every enzyme in the company's history and we're rapidly approaching 100 enzymes that we have Fully scaled and transitioned over to CMO Partners. So this is a core capability of our company to be able to develop robust commercial scale Processes up to a significant scale in house and then seamlessly move it out to our CMO partners. So this is truly a refined commercial capability of the company that we continue to make more efficient. We continue to leverage in to tomorrow's new products. So it's really a key part of our commercialization success and capabilities. Okay, great. Yes, that's fantastic. Maybe moving on to molecular assemblies, You mentioned that the enzyme engineering will be mostly done by the back half of twenty twenty one. Do you have any sense of timing of the potential launch of an enzymatic synthesis product? Molecular assemblies, DNA synthesis. Yes. Yes. I mean, it's a great question to ask them directly. And as our investors know, I serve on the Board of Molecular Assembly since we made the investment in equity in that company. So I mean we're very intimate with molecular assemblies. We've made to design the enzymes that enable a low cost competitive manufacturing process using our enzymes. We have a little more work to do because it's a pretty competitive market. So that's why we continue to project it will take us into the second half of the year to get the enzyme to be designed just right for enabling this breakthrough enzymatic DNA synthesis. Our ability to scale that enzyme to the volumes that molecular assemblies market will need is being done in parallel. So we're quite confident and that will be pretty The real activity is to build out bimolecular assemblies of a competitive manufacturing platform to manufacture long chain DNA to be able to stitch together elegant nucleotides and nucleotides to design to the specification of downstream customers. And they're making great progress. I probably can't speak too much as to how they're doing it and how well they're doing it, but we're very impressed. They have made significant investments in building out their manufacturing platform They've done some tremendous hiring to really accelerate their ability to bring forward a Competitive manufacturing platform to make DNA using our enzymes. So I feel it's coming together extremely well. And we'll see milestone events like molecular assemblies, manufacturing platform being in place, likely being announced sometime towards the end of 2022 or thereabouts. Okay, great. That's a lot of color. Yes, I appreciate Appreciate that sensitive topic. But yes, just thought I'd give it a shot and ask you anyway. All right. Well, thank you. I'll get to some modeling questions On the call back later tonight. Okay, Steve. Thanks very much. The next question is from Matt Hewitt of Craig Hallum Capital Group. Please proceed with your question. I'll echo everyone else. Congratulations on the strong quarter. Just a couple of questions for me. First, just a point of clarification, the $13,900,000 order you increased guidance for in the second well, June, mid June, you're taking guidance up again the date, but it seemed it sounded like there's a very likely potential For that order to grow, did you include incremental revenues from that contract in the updated guidance? Yes, we did, Matt. We've had significant discussions with this customer. Part of taking up the guidance was when we put the guidance out, the updated guidance out on June 17. At that point, we weren't 100% sure of Timing of that $13,900,000 order, so we thought maybe some of that could have spread into 2022. We now know that all of that is in 2021. And so that's a piece of our upgrade today. Also, confidence that additional Demand is going to come to Codexis for this particular customer for their needs and So executable in 2021. So we shared in the prepared remarks that we've already assured ourselves of the capacity to Serve the additional demand. So those are the two pieces that lead us to the increased guidance today versus the Already increased guidance from June. Okay. That's really helpful. Thank you. And it kind of leads into my second question, which is, Given the strength that you're seeing, particularly on the pharma side, what kind of visibility do you have Into some of these programs. I mean, obviously, you know when there's a Phase 2 or a Phase 3 trial being conducted. But are your customers coming to you saying, The Phase 3 trial ends on this date or around this date, a PDUFA date is expected here and we think we're going to need This amount of product in fiscal 'twenty two or fiscal 'twenty three or what kind of visibility do you have with those customers? Yes. We actually get quite good visibility as late clinical trials move towards their completion And the customer, assuming they're confident of being able to file and launch, starts to work with us to do what is known as registration batches. So they need to go through a process to Convince the FDA in parallel to the good trial results, they need to be able to convince the FDA that they can produce to a tight Quality specification range and they do that by doing what they call a series of actually a parallel set of qualification registration batches. And these require Codexis enzymes to be able to make those registration batches. So the planning is often quite clear. These kinds of discussions are always guarded by an uncertain trial result and obviously an uncertain FDA response to the trial data. But the need to line up supply chain pre launch for these registration batches and then to be able to have material ready for launch is well planned and we get good significant visibility when our programs when our customers' programs reach this kind of stage. Okay. That's helpful as well. Thank you. And then maybe one last one, then I'll hop back in the queue. Regarding, I guess, kind of following on that, Your pipeline update, thank you for providing that. You've got 22 customer partnered products that are in Phase 2 or Phase 3. Are there incremental programs that are through Phase 3 and are awaiting PDUFA dates? And if so, are those Later this year, are those next year? Any color as to maybe the number that we should be anticipating over the next year acknowledging You don't know what's going to happen with those actual meetings, but if you follow normal Analytics, you should be getting X number of small molecule and X number of large molecule approvals. Just any color on the PDUFA date pipeline that would be helpful. Thank you. Yes. Hey, Matt, that's a hard one for us to answer. And we typically haven't given that kind of sharpness across these late stage clinical programs. I will just highlight that we've had a really nice momentum of Historical late stage clinical programs moving to fully commercially approved drugs and leading to announceable multi year supply contracts from Codexis. And I can reference Allergan and Kyorin and Urovant as some of the more recent Programs that moved from late clinical into fully commercial and obviously we're right on that edge with this Large unnamed pharmaceutical customer as well. So you should just expect to see more of these events unfold and the timing of those are always very hard for us to be able to have strong visibility into. But from a trend Perspective and momentum, this is we're really starting to build a head of steam from the now many years of Building late stage clinical installations and having them probabilistically increasingly move towards commercial. And really it's great to see all of that translate into such a step up in our product revenues in 2021 versus the recent past. So hopefully that helped give you some feel. Yes. No, that does. Thank you very much. Thanks, Matt. Our next question is from Sean Lee of H. C. Wainwright. Please proceed with your question. Good afternoon, guys, And thanks for taking my questions. So my first question is on the life sciences tool sector, which you mentioned should be a high growth area for the company. So in the prepared remarks, you mentioned there is an increase in the customer partnered R and D programs. Could you provide a little more color on what these programs entail? And How do you see these translate into longer term sustained revenue? Yes, great. Thanks for noting this. I mean, this has been a really great growth area for The company over, I'd say, the last 12, 18 months where in addition to actually alongside Codexis bringing forward our own Enzymes into sequencing markets and to nucleic acid synthesis, RNA synthesis, now DNA synthesis. We've had a growing list of clients come to us with very specialized needs for engineered enzymes. These are more 1 to 1 opportunities, we engineer an enzyme that's very specific to a client's unique application, not widely Like a polymerase is for next gen sequencing. And this has been great. I mean, our success stories and our growing visibility has brought a growing stream of partners to us. And that's dominoed into a really nice The $1,000,000 plus a quarter kind of R and D revenue generation that we've had in the recent few quarters with a set of different partners. And these programs are very unique. They're all different from each other. But like we've suggested and the area of life science tools generally has a little bit larger peak revenue enzyme opportunity if we're successful and we can go commercial with those. So I mean just compared to our traditional API manufacturing enzyme, so I'd say on average These could be mid single digit $1,000,000 enzyme opportunities at peak, some of them higher, some of them lower, but that's a really nice number for us to be targeting, especially when we get the partner to fund the R and D early in these programs. So hopefully that gives you a nice feel, Really attractive set of partnered R and D programs and life science tools and growing. Yes. Thanks for that. My second question is on the biotherapeutics. So you mentioned the 7,108 is expected to enter Phase 1 probably towards the end of the year. In addition to that, can we expect any release of clinical or preclinical results in your other programs before then? Yes, we plan to share more data. We have 12 programs and growing in the pipeline. We just added a 4th partnered program with Takeda. And so as a group, these are all really nicely advancing and it's going to be great to get 7,108 into the clinic as we finish this year around the turn of this year. So that will be our second Clinical drug that was discovered by Codexis and CodeEvolver. Other areas, they're advancing. I'm not going to foreshadow where, But hang on, we'll be providing some insight into the kind of differentiated performance that we are generating preclinically for at least a few of these programs in the not too distant future. Great. We'll be looking forward to it then. That's all I have. Thank you, Sean. I'm showing there are no further questions. I'll turn the call back to John Nichols for closing remarks. Okay. Thank you again for joining us today. We look forward to continue to update you on Codexis' progress in the future. Thank you very much.