Earnings Call: Q1 2021

May 5, 2021

Welcome to Codexis' First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this event is being recorded. And I would now like to turn the conference 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 Securities Litigation Reform Act of 1995. To the extent that statements made by management are not descriptions of Historical facts regarding Codexis, they are forward looking statements reflecting beliefs and expectations of management as of this statement date, May 6, 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 point in time and the currently contemplated impact of the virus on the company's operations, financial results And outlook is the best estimate based on available information. For details about these risks, please see the quarterly news release that accompanies this call as well as the company's SEC filings. Codexis expressly disclaims any intent or obligation to update forward looking statements, except as And now, I'll turn the call over to John. Thank you, Stephanie. Good afternoon, everyone. I'm very pleased to present strong Q1 2021 results for Codexis. With the company's growth drivers continuing to accelerate, We began the year with even stronger momentum than we anticipated. Total revenue grew by 23% compared to a year ago And with a growing list of commercializing enzymes, product revenue grew by 101% year over year. With our sales mix continuing to shift toward higher margin products, we also delivered impressive product gross margins of 59%, up from 50% a year ago. Our focus on high growth opportunities is bearing fruit. This quarter, we had 15 customers who contributed over $100,000 in revenue and we had 5 customers who contributed over 1,000,000 In our sustainable manufacturing segment, on top of a strong base of product sales to Merck For Januvia Manufacturing and to Allergan and Urovant for their commercial products, we have an exciting list of late stage Clinical Development Installations Driving Product Revenue Growth in 2021. In the life science tools market, We're off to a strong start with expanding adoption for our own broadly marketed RNA and DNA polymerases, coupled with a strong quarter for R and D revenues for customer partnered programs, including several that were initiated in the Q1. And finally, in our Biotherapeutics segment, we steadily advanced our pipeline assets in the quarter and Ross will provide more details on the Q1 results and guidance shortly, but first I'll provide detailed updates across each of the businesses. Starting with our Performance Enzyme Reporting segment, we are growing the business and focusing on 2 distinct markets. The first being sustainable manufacturing. This is where we've built Codexis' enzyme engineering leadership over the past 2 decades and this market represents the large majority of the company's revenues currently. Codexis' novel high performance enzymes enable our customers to dramatically reduce the cost and increase the which is capital intensive and inefficient. Our engineered enzymes decrease capital needs meaningfully, while also enabling higher yields, reduced energy usage and lower waste generation. 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 pharmaceutical companies in the world to help them adopt and One of the original projects that we tackled with Thermo was to improve the cost and efficiency of manufacturing the active ingredient sitagliptin in their blockbuster diabetes drug JANUVIA. The enzyme we engineered for the sustainable manufacturing of sitagliptin was one of Codexis' earliest commercialized products and continues to be a significant revenue generator for us today. As a result of our work with Merck on sitagliptin and other projects, Merck recognized the value and wide applicability of using enzymes in their processes and decided to license our CodeEvolver platform to accelerate their adoption by performing enzyme engineering on their own in house. More recently, another significant project we collaborated on with Merck was the design of novel enzymes to sustainably manufacture It's Lotrevir, their investigational drug for HIV. We helped them convert a 16 step traditional chemistry process to one that only requires 3 steps, dramatically improving their capital efficiency and yield. The proprietary process utilizes 9 enzymes, a groundbreaking enzyme cascade process installation only made possible by the In general, our newer sustainable manufacturing enzymes like these for eslotservir are being priced Our sustainable manufacturing pipeline also has an increasing number of pharma products in late stage clinical development with the potential for FDA marketing approval approaching. Recently and excitingly, we've been helping 2 different large pharmaceutical companies by developing novel enzymes for manufacturing their COVID-nineteen antiviral clinical stage candidates. With accelerated development pathways for COVID treatments, these candidates are moving through the clinic much more rapidly than other pharmaceutical products. 2 proprietary Codexis enzymes are key to the manufacturing processes of these 2 clinical stage products and hold exciting prospects as potential new sources of product revenues for Codexis. In addition to pharma, in the past few years, we've been expanding to other industries, designing enzymes for sustainably a range of applications, including food and beverage ingredients, recycling, consumer care and animal feed. These products have relatively short development timelines and lower regulatory hurdles, enabling our enzymes to reach the market more quickly. In the Q1, we announced the commercial installation of new Higher yielding enzymes for each of TASTEVA M Stevia and Dulcea Prima Allulose, 2 of Tate and Lyle's Most exciting new sweetener product launches. These cost reducing enzymes enable our partner to further accelerate There are already promising customer adoption outlooks. In addition, with a deep and growing pipeline of other late stage development Industrial enzyme candidates, we expect this shift towards higher margin and faster to market products will continue to accelerate Codexis' Another relatively new area of expansion for Codexis is the life science tools market, which is a significant growth opportunity for the company. Codexis Performance Enzymes can enable improvements in next This market is highly attractive given its high growth, rapid commercialization cycles and above average margin prospects. This market also affords us the opportunity to develop products that can be marketed to multiple customers in addition to the highly customized enzymes We've recently developed 3 new life science tools enzymes for broad based customer marketing: Codex HiCap RNA polymerase, Codex HiPhi DNA polymerase and Codex Reversed transcriptase. Our RNA and DNA polymerases have led the way as we rapidly advanced these enzymes toward commercialization last year and began marketing at the end of 2020. In the Q1, we're already demonstrating success. We engineered Codex HiCap RNA polymerase to provide dramatically higher capping efficiency, enabling Customers to significantly reduce the amount of CAP agent that is required in the manufacturing recipe alongside an RNA polymerase. The graph on the right side of this slide shows the improved capping efficiency from using Codex HyCap at various cap agent loading levels. In addition, our proprietary enzyme decreases the production of unwanted double strand RNA, which increases the product the customer's product yield and simplifies downstream purification needs. In the Q1, we recorded our first commercial sales of Codex HiCap RNA polymerase to several customers We tested and validated its yield and efficiency benefits. The product is also in various stages of customer trials with several other messenger RNA Manufacturers, this excellent start to customer adoption gives us confidence that we're well positioned for potential installation in a range of processes for development stage mRNA based vaccines and therapeutic candidates. We expect We're also making great progress with the launch of Codex HiFi DNA polymerase. It has been formulated in a master mix That is a standard formulation used for library amplification in next generation sequencing. Our analysis demonstrates that Codex HiFi DNA We showcased our findings at the AGBT conference this quarter, which drove increased customer interest. The enzyme is currently in trials with dozens of customers for potential use in their current and future NGS kits. In addition to these broadly marketed products, we are also growing customer partnered life science tools programs. Continuing the recent trend, in Q1, we added multiple new customer funded life science tools R and D programs with undisclosed partners to our pipeline. Several significant projects kicked off in the Q1, which helped drive R and D revenue from this type of work up over 45% year over year to well over $1,000,000 in Q1. With the surge in demand for R and D project For these new customer funded projects, we temporarily shifted some resources away from the finalization of the engineering of our reverse transcriptase enzyme slightly delaying its commercialization. We are now expecting that product to launch in the second half of the year. One extremely exciting customer partner project we're working on in the life science tools market is our groundbreaking collaboration with Molecular Assemblies for the commercialization of enzymatic DNA synthesis. 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, we are engineering enzymes with the dramatic performance improvements that should make molecular assemblies Process a commercially viable, cost effective and differentiated solution to manufacture a long chain DNA. We remain on track to complete the enzyme engineering work for this program in the second half of twenty twenty one, enabling molecular assemblies to begin early commercialization With an increasing number of differentiated products and strong partnerships in the life science tools market, Codexis continues to build momentum to capitalize on this high growth opportunity. In closing out the business to review, we see tremendous growth potential for Codexis in the discovery and development of Novel Biotherapeutics. Here, we are rapidly building and advancing a high value pipeline of oral biologics and gene therapy candidates discovered using our CodeEvolva platform. Just a few years ago, we had only 2 very early stage programs in our pipeline. Fast forward to today and we have a dozen programs in the pipeline, including 1 in clinical stage and another in IND enabling development. We have an impressive multi program partnership with Takeda Pharmaceuticals focused on improving gene therapy candidates for rare diseases. We are leveraging CodeEvolver to engineer transgenes with improved attributes such as enhanced expression, At the World Symposia in February, we presented some exciting new transgene optimization data we've developed For Pompe disease, one of our programs partnered with Takeda. We screened over 19,000 variants of alpha glucosidase and engineered a GAA variant with dramatically enhanced attributes that overcome the key limitations of existing Pompe disease therapies, improving stability and enzyme half life, increasing We're proud of the success we have generated in gene therapies after just 1 year in collaboration with Takeda. Modifying transgene using CodeEvolver to enable a gene Accordingly, we have embarked on self funded discovery programs targeting improved transgenes for other rare disorders. Leveraging CodeEvolver to discover novel oral biologics that are more safe, stable and efficacious For GI 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 And the most advanced of those, CDX-seven thousand one hundred and eight, is poised to begin its first clinical trials later this year. Most of our IND enabling activities for CDX-seven thousand one hundred and eight are complete, including preclinical toxicology studies and GMP Manufacturing campaign, setting the stage for IND submission in the Q3 of this year. Let me now 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 Q1 2021 results. Total revenues for the Q1 of 2021 were $18,000,000 up 23% compared to the prior year period. On a segment basis, dollars 14,200,000 in revenue was from our Performance Enzymes segment and $3,800,000 was from our Novel Biotherapeutics segment. This compares with $10,900,000 $3,800,000 for Performance Enzymes and Novel Biotherapeutics, respectively, for the prior year period. Product revenue for the Q1 of 2021 was $10,200,000 above the high end of our expected range for the quarter and up 100% compared to $5,100,000 for the prior year period. The major contributors were increased sales to Merck, Allergan and Urovant as well as strength in generics and contribution from a new product than another top ten Big Pharma Company has in late stage clinical development. R and D revenues were $7,800,000 in Q1, down from $9,600,000 last year. The decrease was largely driven by lower revenue contribution from Novartis as we wind down the tech transfer process for the Novartis CodeEvolver agreement. Gross margin on product revenue for the Q1 of 2021 also came in above the high end of our expected range as it was 59 Turning to operating expenses, our R and D expenses for the Q1 of 2021 were 11 point dollars in the prior year period. The R and D expense increases were primarily due to increased compensation resulting from higher headcount 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 Q1 of 2021 were $11,400,000 compared to $9,000,000 for the prior year period. The increase in SG and A expenses was primarily due to higher costs for compensation and $7,000,000 or $0.13 per share for the Q1 of 2020. Turning to the balance sheet. Cash and cash equivalents as of March 31, 2021 were $140,000,000 which puts us in a strong On a quarterly basis, our business remains a lumpy one. Even with the strong Q1 results, We continue to expect total revenues for the year to be between $82,000,000 85,000,000 We now anticipate that total revenues in Q2 It should be similar to the level of Q1. We expect product sales to trend toward the high end of guidance range of $36,000,000 to $39,000,000 in 2021, which represents growth of 20% to 30% over 2020. Also, we continue to expect the gross margin on product sales to be between 54% 58% for the year. While R and D and SG and A expenses on a combined basis were somewhat lower than we expected in Q1, Our outlook for these expenses for the full year of 2021 does not change materially from the description we provided on our earnings call back in February. We anticipate expenses for R and D and SG and A combined will be in a range of $25,000,000 to $26,000,000 in the Q2 of 2021. In addition, we anticipate R and D and SG and A expenses combined should increase by roughly 10% sequentially in Q3 from Q2 and increased by another 10% sequentially in Q4 from Q3. These investments in R and D and in our SG G and A infrastructure are important drivers of our future growth. In summary, we had a strong start to 2021 And we are well positioned for excellent growth in total revenues, strong growth in product revenues and expansion of product gross margin in 2020 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 this year. As both Ross and I have shared today, Codexis has started off 2021 with strength financially. We have also made excellent progress across the critical strategic objectives that will drive the continued step out growth for the company in the medium and longer term as well. From widening our pharmaceutical and drill installations in our sustainable manufacturing segment to excellent early customer adoption of our newly launched RNA and DNA polymerases and life science tools to advancing our second biotherapeutic product toward clinical trials. We plan to check all the boxes on this list in 2021. We are on track to continue delivering on the catalyst that will accelerate the company's growth ambitions. We're so excited by the nearly limitless possibilities for enzymes as a product class. We have only begun to scratch the surface of how Codexis enzymes can make a difference for the health of people and the planet. Now we'd be happy to take your questions. Operator? Thank you. At this time, we'll be conducting a question and answer session. While we're waiting for the first question, I want to let you all know that on May 26, I'll be Speaking on the plenary panel session kicking off the 2021 Syn Bio Beta Biopharma Conference. We invite you to listen into what will be a very dynamic discussion there. In addition, we will be presenting and attending multiple investor conference Our first question today comes from Brandon Couillard of Jefferies. Please proceed with your question. Hey, thanks. Good afternoon. John, appreciate all the detail around the progress on some of the life science programs. For the HiFi DNA polymerase, Talked about dozens of potential customers trialing for use in their NGS kits. Can you just talk about what that evaluation process looks like in terms of length and Remind us sort of how you see the magnitude of the potential opportunity for this DNA polymerase, let's say, over the next 2, 3 years? Yes. Thanks, Brandon. So first question, just the continued timeline for Sales development for our HiFi DNA polymerase. So trialing is critical, of course. So in small scale, the customers Our master mix with our DNA polymerase in their amplification step of their particular NextGen sequencing workflow. There are many different NextGen sequencing workflows that various customers use for various applications. So this is a critical step. I'd say typically, a customer trialing effort would take in the range of 3 to 6 months. Some of them have been underway for some period of time. So some of those customer prospects today are well in motion. But some of those just recently started it. So we should expect to see some results from these trials as we move through the summer. And if the customers validate the performance attributes and benefits that we've seen, then we'd start to move towards sales based discussion. So should layer in some first commercial sales as we move through the summer. We should start to see a ramp in that product as we move towards through the end of the year and should set us up extremely well for year on year growth in 2022 versus 2021. This is a really meaningful product in the world of molecular biology and diagnostics. Pretty much any company in the world that's running a next generation Sequencing machine will require the DNA polymerase to run their workflow. We see this as Probably one of, if not the largest category of enzymes used in the diagnostic The genomic diagnostic environment. And so if we're successful at penetrating this market like we expect and hope, This could be one of the largest products in our portfolio over the next 3 years or so. And today, our largest product $10,000,000 per year. So we could definitely see what success, continued success, a pathway to $10,000,000 plus sales in this product. Great. And then just a clarification, Ross. Did I hear you right in terms of your revenue outlook for the year? I think you suggested 2Q revenues similar to the Q1, is that true for both product and R and D revenues specifically? Yes, good question, Brandon. I think with products, I would think the mix of products versus R and D will be Pretty similar to what we saw in Q1. I'd expect very nice growth in product revenue In Q2, I think R and D revenue is likely to be down from Q2 last year. Keep in mind, we had Large lump of revenues come in from Takeda in Q2 last year, which certainly makes a tough comparison there. Okay. And then lastly, product gross margins continue to make good progress. Can you just talk about the longer Term runway there over the next few years, especially as the mix shifts towards some of these newer products, where do you think product gross margins over time could ultimately go to? Yes, I think we Given our guidance, we expect to see a nice step up in gross margins in 2021. I think that trend will likely continue over the next several years. I'm not sure it would necessarily continue with the I'm not sure it would necessarily continue with the pace of improvement that we're seeing in 2021 versus 2020, but I think you should see some improvement in our product gross margin over time. As we've discussed in the past, much of that is really driven by a shift in the product mix towards the higher margin products. In terms of trying to predict peak or where that eventually levels out, I'm not sure we really want to go there at this point, Brandon, but certainly we see the trend over the next few years as positive. Very good. Thank you. Thanks. The next question is from Doug Schenkel of Cowen. Please proceed with your question. Hi, good afternoon. This is Kyle on for Doug. Thanks for taking the questions. I just wanted to start with early last week, Kate and Lyle had responded to some media speculation that they were exploring the sale of its Food and Beverage Solutions and Primary Products businesses. If this plan were to come to fruition, would there be any impact on the relationship that Codexis has with Tate and Lyle? Hey, Kyle, thanks. I'll field that one. So there were some rumors that were put out there about some potential significant restructuring for one of our top customers, Tate Myles, as you've highlighted. What we saw was the potential for Tate and Lyle to spin out its primary products division. The primary products division are more the commodity bulk products like high fructose corn syrup as One of their big primary products, that that would be the division that would spin out. So that would leave with Tate and Lyle a focus on their food and beverage solutions division. Our business with Tate and Lyle is focused on the food and beverage The enzymes that we've developed for TASTEVA M and the enzymes we developed for Dulcea Prima Allulose are both new products in their food and beverage solutions division. These are all unqualified rumors at this Honestly, if the business that we have with Tate and Lyle spins out into a new co, we would be a very important supplier to that new The way we see it today is our products would stay as key products for Tate and Lyle And we would see it as net beneficial if Tate and Lyle were to spin out the primary products division. That would make Tate and Lyle more focused On kind of the higher value food and beverage products that remain as Tate and Lyle and we've become a very important and growing supplier Thank you. That's really helpful. And maybe just one more. Regarding your wholly owned pipeline biotherapeutics That's both oral biologics and gene therapies. Have all these gated into the preclinical stage from discovery? And how many preclinical stages are there? And what Sure. So Everything is in preclinical development at Codexis today, in Codexis' biotherapeutic Pipeline today with the exception of CDX-six thousand one hundred and fourteen, the enzyme replacement therapy that we developed for Phenylketonuria disease, that is now in the clinical stage. It is the only product that we've discovered with CodeEvolver In our history that is in the clinical stage, that clinical stage program is being run by Nestle today, Nestle Health Science. We have formally out licensed that product to Nestle Health Science. And just real quick, we didn't address In the prepared remarks, the CDX-six thousand one hundred and fourteen program is in really good shape, under Nestle Health Sciences' control. They are working on the solid dose formulation upgrades to stage for A critical multiple ascending dose study that they expect to run and readout in 2022. So it's not a big event. That product doesn't have a big event in 20 21, but it will be set up for a pretty critical clinical development program readout in 2022. Other than that, all of our programs, all 11 of our programs are in the preclinical stage and we've separated preclinical into 3 chapters just to give a little bit of color on that. First is the discovery stage. Here in the discovery stage, Codexis is using CodeEvolver to generate Usually tens of thousands of different enzyme variants or protein variants to assess against the target attributes for the particular disease. CodeEvolver is generating a lot of these variants. We're testing those variants. We're changing the molecular structure of those variants. The research stage that we call preclinical research, We're starting to hone in on the best variants from our discovery chapter from CodeEvolver and we're increasingly doing animal research. We're doing preclinical trials in relevant animal models to get much more translatable results From the candidates that we elevate from the discovery chapter. The end of the preclinical research chapter for us is where we've identified the lead candidate, the candidate that we're going to invest in all of the IND enabling work that sets Codexis up to do clinical trials thereafter. Today, we have one program in the IND enabling chapter. That's one of our co owned oral biologic programs with Nestle Health Science, CDX-seven thousand one hundred and eight. In the prepared remarks, we shared that we've done the preclinical toxicology work that's critical in this IND enabling stage. We And IND with the FDA in the Q3 and we should see our second program So hopefully that gave you a nice feel for How we define the various critical chapters of drug discovery and early development and I'm not sure I think I answered all your questions there, but if you had others, please, by all means. That's great. That's all. Thank you. Hey, thank you, Kyle. The next question is from Jacob Johnson of Stephens. Please proceed with your question. Hey, thanks. Good afternoon. Maybe just one for Ross, and I apologize if I missed this in the prepared Fair comments. But really strong start to the year in the Q1, I think better than the cadence you had expressed last quarter. Was there any pull forward in the quarter or just maybe can you just comment on what came in better than expected in this Q1? Right. I think really it was just the timing of some of the orders. Some came in earlier than we expected, maybe a few things that We're not necessarily expected as well, but it was really more of a timing issue. I wouldn't say it was a pull forward effort On our part, certainly, but I think the timing of orders was just different than what we originally expected. As you know, our business It was very lumpy on a quarterly basis. It can be difficult to predict for a number of reasons. But We're certainly pleased that you'll start the year off strong, but we don't see any need to change our guidance at this point. Got it. Thanks for that Ross. Then maybe for John, you talked some about the DNA polymerase, but something we've heard recently is just about the need And I think maybe just more supply of enzymes for mRNA manufacturing. I know you touched Some of the initial trialing, but can you just talk about, 1, the outlook for the RNA polymerase? And then are there other kind of enzyme type products you could launch for that end market? Thanks, Jacob. Yes, we're very encouraged by the beginning of penetration for Our high cap RNA polymerase, we shared some data in the deck that we provided today for the first time that shows The capping efficiency benefits that our RNA polymerase provides versus incumbent RNA polymerases, We see the RNA polymerase as the key enzyme for RNA manufacturing. Indeed, there are others. We would see them as less gravitas, less potential, but So we're very focused primarily on RNA polymerase as it relates to messenger RNA manufacturing. That's to speak just to messenger RNA manufacturing, which we think we're well positioned to really benefit from In the growing world of messenger RNAs. But broadly speaking, we're just seeing a tremendous amount of Opportunity to bring engineered enzymes into life science tools. In general, the DNA polymerase, The RNA polymerase, we've spoken to now in the Q and A as well as in the prepared remarks, Progress with Roche on the DNA ligase, our first enzyme into the space. We highlighted with more color today than in the past, A growing list of customer partnered enzyme developments, these are niche enzymes that have particular benefit For a given customer and their given application, less broad market based, but more specific to what a given company is trying to do with their portfolio. And we've had a tremendous growth in this type of project, customer partnered projects in life science tools. And it actually generated some very meaningful sales for us in the Q1. So we're just seeing a tremendous amount of opportunity, Not only for the enzymes that we've given you and our investors a fair amount of color on, but also others That we have earlier in the development cycle and or that we're partnering with customers these days. So continues to be a very, very dynamic exciting space for Connexus. The next question is from Matt Hewitt of Craig Hallum Capital Group. Please proceed with your question. Good afternoon. Thanks for taking the questions. Just a couple from me. First on the RNA polymerase orders that you received in the Q1, how should we think about the way that those will Is it they take an initial batch kind of get started and things should progress and accelerate from there Or much like maybe pre stocking for drug development where you take they maybe take a bigger upfront, get launched so there's maybe a lull and then things pick up a quarter or 2 later? Thanks for the good question. I'd say more of the former. Early orders are smaller. Most of that is Working to fit our RNA polymerase into their particular recipe for manufacturing There particular messenger RNA. As we move forward with these customers, then They will start to apply it in kind of clinical stage batches in other programs within their development pipeline. So the first approach for a given customer is to get it trialed and validated and installed in one particular messenger RNA, either vaccine or therapeutic agent and then it dominoes into or we hope where it's a domino into other Messenger RNA programs within their pipeline. These are all development stage programs at this point. As we've Shared in the past, we're not installed in the 2 big commercial stage messenger RNA programs for COVID-nineteen vaccines. So it's all development stage. Orders will come as the customer starts To make more materials for follow on clinical batches, and so we'll see some lumpiness, but we'll see generally Growth in the number of customers and then growth in the number of programs within each customers that are applying our RNA polymerase. And so we're very encouraged to see us get in, start to break through first commercial sales, Start to break into new customers as we've kicked off 2021. So we're very much on the track that I just outlined that we hope to be on As we move through the year. Got it. And then maybe one separate question. As you're looking at these products, Is there a difference or are there efficiencies that can be garnered when you're working on trial batches and then you move up to a commercial Will that have an impact on gross margins as you move up to those larger batches? Thank you. Yes. Typically, when we start working with a customer in the clinical stage, we generally have above average gross Margins for those sales, they're smaller revenue, they're higher gross margins. And as we move through towards commercialization for the customer, for the customer. The margins will come down some from these high bases, but Generally, we see RNA polymerase, our high cap RNA polymerase being accretive to our gross margins. So we would expect that Versus our historical product margins, this will be lifting up at least incrementally from what we've been able to deliver for the company even after the application matures and some of the pricing comes down a little bit. Okay, great. Thank you. Thank you. The next question is from Swayampakula Ramakanth of H. C. Wainwright. Mr. Ramakanth, your line is open. Hi, sorry. Good afternoon, John. Really quick two questions. The first one is on the RNA polymerase. It's nice to see that business Picking up steam, when would you think the RNA polymerase revenue Line becomes meaningful. And I know you answered this. I think you answered this question to a certain extent, but probably I didn't catch the Full bit. When folks are trialing your DNA polymerase, Is there a how long of a period of time do they trial it for? Does it depend on the project? Sure. And your second question was again related to RNA polymerase or DNA Sorry, DNA polymerase, yes. The first one RNA polymerase and then DNA polymerase. Okay, sure. So yes, good questions both. For RNA polymerase, I was detailing a little bit for Matt Hewitt That the first is to penetrate a customer, get a commercial sale installation into One of their clinical stage programs and then expand the number of their assets in their pipeline that use our RNA polymerase And in parallel to work new customers similarly. So we've already broken into a couple of customers with first commercial sales, which is great. The reality is these are fairly small orders in the clinical stage in general. And so they'll ramp and the number of customers should grow from what we've been able to deliver in the beginning of this year. So meaningful revenues are probably, Especially as we continue to grow, like Ross said, towards the high end of our $36,000,000 to $39,000,000 product Revenues this year, meaningful revenues for this product are that move that dial aren't going to happen until 2022 and thereafter. But really it's all about penetration now. It's all about widening the customer base. It's all about widening the installations within each customer, which really just set us up for hitting the potential for this product Over time. But really the direct question, meaningful revenues for RNA polymerase 2022 plus, But a lot of milestones of progress in 2021. The sales progression for DNA polymerase, As you heard today, we've got our high phi DNA polymerase is in dozens of customer trialing right now. And typically, it's 3 to 6 months to go through a fully qualified trial and to engage into a sales based negotiation, assuming the trial results validate the kind of performance benefits that we see, if the customer sees that, then Towards the end of that 3 to 6 months, they'll start to talk to us about supply conditions and pricing and timing and stuff like that. So that's generally How we see the sales progression for actually for all of the life science tool enzymes, it's that kind of a timeframe. Okay. Thanks for that. And then, just trying to see if you have any commentary On your ongoing relationship with Proton Pharma and any update you can provide us? Yes, sure. Yes, we haven't spoken a lot about Port in a while, but really they've turned into a terrific partner for Codexis. They have become very proficient at working with the pharmaceutical manufacturing chemists at Codexis To understand how to apply all of the different enzyme catalysts that we've developed over 2 decades, They have the ability to rapidly screen in China without the assistance of Codexis, The enzymes that we've developed and we've seen them work many different Projects with their much larger, frankly, customer base in the pharmaceutical manufacturing world, given the size that they are as a CMO. They work with both large pharma customers and a growing list of small pharma customers, which Helps us to expand our reach into the sustainable manufacturing of pharmaceutical ingredients. And like us, it takes Multiple years for an early progress with the customer process to translate into meaningful product sales, but they're very nicely on that track. They're adding to our ability to penetrate this wide market. They're great partners. They've learned a lot. We've really picked a great partner with Port. And so Hang on and we'll start to over time showcase installations that have meaningful product sales that flow through Porton over time. I'm showing there are no further questions. I'll turn the call back to John Nichols for closing remarks. Okay. Well, thank you everybody for joining us today. We look forward to continuing to update you on all of the progress This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.