Okay, I think we're gonna get started. Welcome back to another session at TD Cowen's 46th Annual Health Care Conference. I'm Brendan Smith, and I am joined today by the president and CEO of Codexis, Alison Moore. Alison, it's great to see you.
Thank you very much. Really appreciate the opportunity, Brendan. Thank you.
Yeah. Just as a reminder to folks, we've obviously got plenty to unpack here, but if at any time you've got any questions, feel free to kinda just flag me, or you can send me an email at brendan.smith@tdsecurities.com and kinda relay them and work them into conversation. Okay, Alison, maybe let's kind of just level set the conversation a bit here. Looking ahead to the rest of 2026, how has Codexis now evolved into the company that it is today, and where do you realistically see the real opportunities for some of the biggest inflection points, for your growth in 2026, but also kind of moving forward?
Yep. Regarding evolution, so Codexis is a company that generates manufacturing solutions using its proprietary biocatalytic enzymes. That's what we've done for years. That's what we're continuing to do. We have real strength in demonstrating that we have developed unique biocatalytic products for our existing pharma companies' customers, and we have been supplying them very successfully over the years. Our evolution is that we are currently focused on RNA medicines, where there is a real need for innovative manufacturing technologies. We've been working hard on that for the last 3 years - 4 years. I'm sure we'll talk more about that.
Mm-hmm.
In terms of inflection points for 2026, we're going to see some of our existing customers move into more significant contracts around the ECO Synthesis manufacturing platform. We are working on the product that our ECO Synthesis manufacturing platform generates. We think that we have an opportunity with respect to the assets that we generate having potentially improved potency. We will be continuing to talk about that. We have talked about it a little bit last year at TIDES. We're gonna continue to talk about that this year. We think that that could be a very important inflection point for the company and the technology.
That's great. Maybe now let's kinda dig a little bit more into ECO Synthesis platform itself, right? Help us understand, and I think I probably speak for a few folks on the sell side when we, when we try to say this, like we're trying to understand what the TAM here is realistically, like right between where it is today and honestly, where it could evolve to as some of these therapeutics, you know, continue to kind of address increasingly large markets. Maybe just first, really, what is kind of the why for your key end market focus? Like realistically, what is it that what need are you guys directly addressing, and how can we kind of think of that in the evolution of the TAM size itself?
Thanks. There's some really powerful needs, we believe. First of all, the RNA medicines market is growing very strongly. siRNA medicines, so RNA interference medicines, are growing somewhere between 5% and 10% per year. Not only is there numerical growth, but there's also a huge appetite to move into large patient population indications, such as cardiometabolic indications and now also CNS indications. There's a big why there. There's an enormous driver, which is that current production technology, so solid-phase organic synthesis is the generally used technology to generate oligonucleotides, is significantly scale limited. Maximum batch sizes of traditional chemistry are maybe around 5 kilos to 10 kilos at most.
That can service a lot of early-stage production, but for a company that is very progressed in the clinic or has an appetite for one of these very large population indications, trying to make a metric ton of a GMP siRNA is going to be incredibly difficult and incredibly expensive. We see that there is an enormous opportunity for growth, even in the near term. By 2030, we think that the TAM is $2 billion.
Great. That's great. maybe help us in the context of expansion of the exposure for the ECO Synthesis platform, maybe just speak through kind of the strategic rationale for kinda deprioritizing some of the legacy small molecule biocatalysis business, really why the ROI there looks a little bit different than it did a few years back, and what it ultimately kinda means for, you know, the ability to kind of leverage some of those savings into the revenue growth of the ECO Synthesis.
Yeah. Thanks. over the 15 years that we have been supplying biocatalytic enzymes to the pharma manufacturing business, we have certainly seen increased competition, and in the periphery of enzymes that are more commonly used, we have seen commoditization of the production of those enzymes. There are still some very sophisticated, highly customized enzymes that we continue to make and will continue to engineer for our clients. In addition, though, we are planning to have low single-digit growth in that pharma biocatalysis business. The reason behind that is we have a good portfolio of assets that we are supporting that are in Phase III development. only in the last four months, two out of three of those assets have actually successfully passed their Phase III goals and are preparing for launch.
We have 11 more assets in our pipeline, that are supporting Phase III therapeutics, and those will read out over the next 1 years - 3 years. That's the basis for, we actually think that we have some, low growth over the next 5 years - 7 years in that part of our business.
Gotcha. Okay. Now maybe let's also talk about the supply agreement with Merck too.
Mm-hmm
... as it kind of pertains to the outlook for Codexis. Maybe give us just a little bit more color, if you can, on some of the logistics of, I think this is the $38 million supply agreement there. Should we think of this as something more of kind of a one-off, or is this kind of indicative of or suggestive of how a lot of these conversations could go moving forward?
Maybe I'll underscore a word here. The agreement that we communicated in 2025 with Merck was a supply assurance agreement. That was a unique kind of agreement because we do make enzymes that are very critical to Merck's supply chain. Merck wanted an additional supply assurance action. Merck paid us to create specific cell banks that support the enzymes that they need for their product portfolio. We moved those cell banks into an escrow geography so that upon some catastrophic situation, they have additional access to those. This really was a supply chain risk assessment action that Merck ultimately took with us. We do have a history of all kinds of licensing arrangements, and while that one was somewhat unique, we do expect that there will be ongoing licensing arrangements with our customers in the future.
Okay, that's kind of a perfect segue here into the next part of the conversation, which is really just kind of about, you know, you recently confirmed the evaluation agreement with Avecia, right? With the Nitto Avecia, which I believe is the second that you've confirmed with a third-party kind of CDMO. Help us kinda contextualize what those conversations are looking like, how they kind of progress, and really what that says about, you know, where you are in the context of the conversations with some of these external customers.
Our CDMO customers, we actually have three agreements in place with CDMOs right now. We think that the CDMOs are interested in having vibrant conversation with Codexis because if you think about it's the CDMOs that are feeling some of the pain of the production limitations at this time. These are not just conversations, these are contracts that are supporting work in our Innovation Lab in the first instance. Oftentimes, these arrangements involve an innovator asset as well, and we are demonstrating that the ECO Synthesis manufacturing platform can successfully generate these assets. We are executing tech transfer into the CDMO location. We are doing that for 1 of those CDMOs as we speak. Our technology is in the CDMO's hands.
They can test it in their own facility, determine what their appetite is for scale of the technology, and then ultimately, we would be looking to enter into a commercial licensing agreement with at least one of those CDMOs.
Okay. Got it. how important is the kind of CDMO market to the kind of expansion opportunity for Codexis now moving forward? Like, is this a primary focus kind of in your sales outreach? Or like, where does it kind of fit into the bigger puzzle for where you guys go from here?
We think it's an important one. We ourselves, which I think we may talk about in a second, have plans to build a small manufacturing facility. We always see ourselves working hand in hand with large production CDMO partners. In addition, some of our customers have already longstanding existing relationships with some of these CDMOs. We want them to continue to have the utmost confidence in their source supply of GMP material. It makes sense for us to have those multi-way agreements with both the innovators and their trusted CDMOs.
Okay. All right. Great. I know earlier you also, I think you mentioned TIDES, but I know this is typically an important meeting for you all. Maybe first help us understand, like, the most important points for folks who are maybe refamiliarizing themselves with the Codexis story for your most recent TIDES presentations and realistically what we can kind of expect now for upcoming meeting.
Yeah. Thanks so much. The TIDES conference, we've used it as a vehicle to communicate our progress recently. It's the peptides and nucleotides largest conference. What we've talked about at TIDES in 2025, we've talked about the scalability of the ECO Synthesis manufacturing platform. We've talked about the operational simplicity of that platform. Since we are using enzymes, we've demonstrated very high product quality from our ECO Synthesis manufacturing platform. Last year, we also started to talk about the possibility of stereoisomer-controlled products from our manufacturing platform. Something that the FDA has been particularly interested in, we also at TIDES talked about the opportunity of in-process control. That means as the product is being generated, one can assess real-time fidelity of nucleotide addition, and that's all relating to high process control and high product quality.
Got it. What can you kinda tell us about how some of these recent disclosures that you just ran through, how has this kind of materially changed the cadence or the quality of the conversations you're having, either with existing or potential customers?
It's very much affecting our customer base. It's bringing a lot of interest on board. When we first talked about the totality of our platform opportunity in the TIDES U.S. meeting in May, we had a huge influx of interest, and we have translated some of that into our ongoing service projects that we're running currently.
Got it. Okay, great. Now maybe extrapolating a little bit to the overall ecosystem that Codexis has of the revenue-generating contracts that are currently in place. Sounds like if my numbers are correct, I think you've got double digits now at this point, which is a significant improvement from even just this time last year. Help us understand, first of all, what you're able to discuss when it comes to the economics of some of these agreements, and if you can kind of speak to the margins that are kind of in place off of some of these revenues and how we should think about that kind of impact in the growth for Codexis over the next, let's say, 18, 24 months.
The projects that we have ongoing are what I call feasibility projects. This is a fairly transformational manufacturing technology, and the customers that we're working with, first of all, want to see, can it work for my asset? These are service agreements in the first instance. This year we're working to then translate that work into more substantive licensing arrangements. They're not supply agreements at this moment, so we're not really talking about margins.
I guess from, through the lens of those exact kind of contracts there, I guess is the general strategy moving forward kind of a land and expand within some of these existing customers, or are you primarily kind of prioritizing, additional addition of new revenue-generating contracts? Like, how do you kind of walk that balance just based on where, you know, your staffing is at this point?
Yeah. We absolutely want to land and expand. That's a big focus for us in 2026. We're very excited about that opportunity. We have more than 50 active conversations in our sales funnel. We think that there is really a very large opportunity portfolio for us. We will definitely be prioritizing who, you know, first of all, existing clients, the work that's going very well with them, we want to expand that. That's our number one priority. We are also being approached by customers that are not only manufacturing siRNA, but have challenges in some other oligonucleotide therapeutics. We are interested in looking at that, and we have taken on some small feasibility assessments there.
Really, we need to keep our eye on these expansion opportunities and making sure that we deliver our objectives of a scalable manufacturing process, with, you know, high product quality that can be deployed in other companies' pipelines for their ongoing siRNA assets.
Right. And I know you kind of mentioned, you know, where some of the prioritization comes into play, right? Can you help us understand, like, you know, out of the prospective customers you have in the funnel ahead, even just like broad strokes, like what are some of the kind of profiles of some of these customers and how you think about, you know, prioritization within kind of the funnel moving forward?
Some of our customers are some of the biggest biopharmaceutical companies in the world, and we will definitely prioritize those customers. Some of our very important customers are startup companies that have big aspirations for transforming a cardiovascular opportunity for a large patient population. Those kinds of customers really can help us validate what we bring, what our technology can bring to this area of genomic medicine. Up until now, we've been able to, you know, support all of these interesting projects. As we go forward, we will be following through on our commitments with these customers that we're currently working on, and we'll be really judicious about how we proceed forward, assessing the opportunity of other folks that are interested in the technology.
Gotcha. Okay. I know we touched on this a little bit earlier, but it is related to this part of the conversation is really kind of the scalability of the enterprise today, right? I guess where is Codexis now in your ability to kind of scale the production of RNAi in let's, you know, March 2026? What's kind of the benchmark for where you all kind of hope to be, whether that's a year or two from now? Just help us understand kind of the curve to get to the ultimate goal of the near term.
Yeah. Current state in our ECO Innovation Lab, which is at our headquarters in Redwood City, we're operating at a 100-gram scale. We have multiple projects moving forward. Some of them are only need one gram of material, other projects need, you know, 50 grams, 100 grams of material. Those are moving forward as we speak. By the end of this year, we're aiming to progress the technology towards kilo scale. In fact, we have one potential customer that's very interested in that landmark because they're trying to sync up the opportunity of deployment of our technology in their pipeline. Their pipeline has a timeframe, our technology has a timeframe. Can we make that work? That needs to be approximately kilo scale. Another driver for us achieving kilo scale is our own manufacturing facility.
Our own manufacturing facility will be online at the end of 2027. We expect that to be operational at kilo scale. Once we get that manufacturing facility operational, we kinda have an output of, you know, tens, definitely tens of kilos. We can certainly invest further to hundreds of kilos if that's the direction that we see the business going.
Gotcha. I guess to get to kilo scale from here, is it kind of just a matter of CapEx investment and building out some of the physical infrastructure of what you've got, or is there any kind of refinements of the technology itself that need to coincide with that? Like what are some of the kinda steps A to B to get to DEF?
To get to kilo scale, over the last two years, we've been working on the integrity of the ECO Synthesis manufacturing platform, understanding the normal operating ranges, understanding what robustness means of that manufacturing platform. Getting to kilo scale is just like you asked your question. In part, it's experimentation and understanding the robustness and capability of the production process, so that's part of what scalability means to us. On equipment, capital investment side, we created some expense efficiencies in 2025 with a 25% expense reduction. We have channeled that opportunity into our plans for our manufacturing facility. We have leased a preexisting GMP manufacturing facility that we will be doing a rather minimal construction project on.
Part of our investment in that facility is the capital equipment to support kilo scale production. That is part of our plan that we are enacting in 2026.
Gotcha. Okay. All right, great. I again, kind of through the lens of the GMP facility, right? Help us maybe just understand, and then you spoke to kind of the scale that the facility should be able to unlock, but, just kind of the actual expense burn over the next kind of like 18-24 months to realistically get you to where you need to be?
Yeah. We'll invest between $20 million and $25 million in capital, the capital improvement of this facility. Some of that will be construction, and some of that will be equipment. In our financial plans, we have cash through the end of 2027, and that includes operationalizing this facility.
Got it. Okay. Again, I know we started to touch on this a little bit earlier, but I wanna maybe kinda zoom out from some of the operational part of this and help us contextualize realistically, like again, the need for this kinda technology against the backdrop of the evolving therapeutic landscape, right? When we think about, you know, you've mentioned cardiovascular indications in some respects and neurological indications. I guess when you look across the industry, and without even necessarily needing to point to this drug versus that drug, like is it kind of a matter of just critical mass of moving some of these RNAi therapies into, you know, markets 50,000, 100,000 type patients?
Or are there actual updates throughout development of RNAi drugs across the space that we can kind of watch for even before maybe some large-scale commercial launches? Like, what are you all paying attention to as the evolution of some of these therapies kind of moves forward, whether from customers or potential customers?
That's a very interesting question. Yes, what we're looking for are, there are, at least we think 450 siRNA assets in development. As we talked about earlier, there definitely seems to be an appetite to take on some larger patient population opportunities. In addition to your question, what we're watching for are some of the assets that have been used in orphan indications initially that are then approved for larger indications. There are even assets, for example, one of Alnylam's assets that has been used for a systemic indication where with additional tissue targeting technology, that asset can potentially be used for a CNS indication.
I think that part of the progression of the technology landscape and the utility of siRNA is that with different targeting technologies and with further evidence of safety improvements in dosing, really this can go from strength to strength. We're watching that closely because we think that we have a very powerful toolbox to innovate across that landscape, so we wanna keep up with those innovations. Just to come back again to the opportunity of the potential for stereoisomer control, if there are indeed more potent specific isoforms, this could be very important for an innovator company's target product profile. If, for example, they're interested in having a once or twice yearly dose, maybe in a self-administered auto-injector, this is an opportunity that we have that can really bring that kind of target product profile to bear.
We're paying really close attention to how these oligonucleotide medicines in general. That I really feel like they're really bringing some of the opportunity of genomic medicines to medicine where, you know, some other modalities have really struggled also because of manufacturing technologies. This is a tremendous area for Codexis to be involved in.
Okay. Maybe just in the last minute here to kind of hit it home, you know, we've talked a lot about operational expansion of the company, evolution of the platform, kinda go to market strategy moving forward now. Maybe just as a last point, you know, help us understand what really is kind of in summary the strategy, excuse me, for Codexis to compete with some of these larger as well as potentially emerging players. Like You know, what is the pitch to existing or potential customers to say, "You really need to work with Codexis if you want to make this work in some of these bigger markets"?
It is gonna be a competitive market if you're asking about competitors, because there's a big problem in this market, and the problem is that this material cannot be readily made at scale. The companies who feel that and know that are already talking to us. We expect competition. In terms of enzymatic route of synthesis, we believe that we are far in the lead, and we believe that with the experience that we have paying attention to the competition, paying attention to what's happening in the minds of innovators, we can stay in the lead with our proprietary technology. For customers, I think, as you know, we're saying, "Hey, come let us, let us show you.
Okay. I think with that, we are just at time. Always a pleasure to see you, Alison. Thank you all for listening in. There's a lot more to come in the last half of the day. Thanks, guys.
Thanks so much, Brendan.