Codexis, Inc. (NASDAQ: CDXS), a developer of world-leading enzymes and processes for the production of pharmaceuticals, biofuels and bio-based chemicals, today announced financial results for the third quarter ended September 30, 2012.

"As promised, Codexis went about the hard, but crucial work this quarter of strategically realigning the company for its forward growth strategy following the loss of Shell funding," said John Nicols, President and CEO of Codexis. "In parallel, we are encouraged by solid developments in our pharma business having recently finalized a new, more profitable business arrangement with our manufacturing partner, Arch Pharmalabs. We are also developing early prospects for commercialization partners for our CodeXyme? cellulase enzymes, which produce cellulosic sugars," Nicols added.

Third Quarter Financial Highlights:

Revenues for the third quarter of 2012 were $26.3 million, a 21% decrease from $33.3 million in the third quarter of 2011. Product revenue in the third quarter of 2012 was $7.1 million, a 41% decrease from $12.2 million in the prior year quarter and a 5% sequential increase from $6.8 million in the second quarter of 2012. Product gross margin in the third quarter was 10%, compared to 18% in the prior year quarter due to a higher percentage of generic products sales and lower on patent sales in the third quarter of 2012. Collaborative research and development revenue of $18.6 million decreased 3% from $19.2 million in the third quarter of 2011.

Research and development expenses in the third quarter of 2012 were $14.2 million, a decrease of 15% from $16.8 million for the third quarter of 2011. The decrease was primarily due to headcount reductions for the development of CodeXol? detergent alcohol.

Selling, general and administrative expenses in the third quarter of 2012 were $7.9 million, a decrease of 11% compared to $8.9 million in the same period of 2011. The decrease was primarily due to reductions in headcount and other discretionary expenses during the third quarter of 2012.

Net loss was $2.3 million, or a loss of $0.06 per share, based on 37.1 million weighted average common shares outstanding in the third quarter of 2012. This compares to a net loss of $2.7 million, or a loss of $0.08 per share during the third quarter of 2011.

On a non-GAAP basis, Adjusted EBITDA was income of $3.2 million in the third quarter of 2012 compared to income of $2.6 million for the third quarter of 2011. Adjusted EBITDA is calculated by adjusting net loss for net interest income, income taxes, depreciation, amortization, impairment of marketable securities and stock-based compensation. A reconciliation of net loss to Adjusted EBITDA is presented below.

Cash, cash equivalents, and marketable securities at September 30, 2012 were $53.9 million.

Outlook

Codexis' statements with regard to its outlook are based on current expectations. The following statements are forward looking, and actual results could differ materially depending on market conditions and the factors set forth under "Forward-Looking Statements" below.

For the full year 2012, Codexis expects a decline in total revenues relative to its full year 2011 total revenues of $124 million and adjusted EBITDA to be negative. The Company anticipates its year-end cash, cash equivalents, and marketable securities to be approximately $45 million.

Conference Call

Codexis will hold a conference call on Wednesday, November 7, 2012, at 4:30 p.m. Eastern Time. The conference call dial-in numbers are US: 866-788-0541 or International: 857-350-1679, access code 54501345. A live webcast of the call will also be available from the Investors section of www.codexis.com. A recording of the call will be available by calling US: 888-286-8010 or International: 617-801-6888, access code 65902545 beginning approximately two hours after the call, and will be available for up to seven days. A webcast replay will also be available from the Investors section of www.codexis.com approximately two hours after the call, and will be available for up to 30 days.

About Codexis, Inc.

Codexis, Inc. is a developer of world-leading enzymes and processes for the production of pharmaceuticals, biofuels and bio-based chemicals. Codexis' product lines include CodeXyme? cellulase enzymes and CodeXol? detergent alcohol. Partners and customers include global leaders such as Merck, Pfizer and Arch Pharmalabs. For more information, see www.codexis.com.

Forward-Looking Statements

This press release contains forward-looking statements relating to Codexis' forecast for 2012 revenue, Adjusted EBITDA, total cash burn and total pharmaceutical product sales; Codexis' ability to advance its position in pharmaceuticals and to deliver against opportunities in fuels and chemicals; Codexis' ability to monetize its technology; and Codexis' ability to develop its enzyme package for second generation ethanol. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond Codexis' control and that could materially affect actual results. Factors that could materially affect actual results include Codexis' need for substantial additional capital in the future in order to expand its business, Codexis' dependence on its collaborators, Codexis' dependence on a limited number of products and customers in its pharmaceutical business; Codexis' ability to secure third-party funding for its advanced biofuels program; the success of Codexis' recent cost saving measures, including its recent reduction in force; and various challenges to the feasibility of the production and commercialization of biofuels and bio-based chemicals derived from cellulose and Codexis' limited experience manufacturing and selling cellulase enzymes. Additional factors that could materially affect actual results can be found in Codexis' Quarterly Report on Form 10-Q for the period ended September 30, 2012 filed with the Securities and Exchange Commission on November 7, 2012, including under the caption "Risk Factors." Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law.

 
Codexis, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
(In Thousands)
 
  Three Months Ended     Nine Months Ended
September 30 September 30
  2012       2011     2012       2011  
Revenues:
Product 7,140 12,199 29,090 33,528
Collaborative research and development 18,569 19,201 49,049 54,073
Government awards   632     1,882     2,247     2,771  
 
Total revenues $ 26,341   $ 33,282   $ 80,386   $ 90,372  
 
Costs and operating expenses:
Cost of product revenues 6,397 9,958 24,868 28,713
Research and development 14,191 16,786 46,190 45,502
Selling, general and administrative   7,909     8,871     24,093     27,160  
.
Total costs and operating expenses $ 28,497   $ 35,615   $ 95,151   $ 101,375  
 
Loss from operations (2,156 ) (2,333 ) (14,765 ) (11,003 )
Interest income 61 76 210 195
Other expenses   (45 )   (411 )   (320 )   (378 )
 
Loss before provision for income taxes (2,140 ) (2,668 ) (14,875 ) (11,186 )
Provision for income taxes   169     74     443     68  
Net loss $ (2,309 ) $ (2,742 ) $ (15,318 ) $ (11,254 )
 

Net loss per share of common stock, basic and diluted

$ (0.06 ) $ (0.08 ) $ (0.42 ) $ (0.32 )
 
Weighted average common shares used in computing net loss per share of common stock, basic and diluted   37,116     35,919     36,494     35,576  
 
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)
 
 

September 30,

     December 31,
  2012     2011  
Assets
Current assets:
Cash and cash equivalents $ 25,573 $ 25,762
Marketable securities 24,780 27,720
Accounts receivable, net 16,527 18,917
Inventories 2,760 4,488
Prepaid expenses and other current assets   5,169     2,345  
Total current assets 74,809 79,232
 
Restricted cash 1,511 1,511
Non-current marketable securities 3,578 10,348
Property and equipment, net 19,892 24,176
Intangible assets, net 13,777 16,442
Goodwill 3,241 3,241
Other non-current assets   2,228     972  
Total assets $ 119,036   $ 135,922  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 6,287 $ 10,364
Accrued compensation 4,708 6,785
Other accrued liabilities 7,419 7,354
Deferred revenues   2,286     3,789  
Total current liabilities 20,700 28,292
 
Deferred revenues, net of current portion 1,346 1,485
Other long-term liabilities   3,994     3,455  
Total liabilities 26,040 33,232
 
Stockholders' equity:
Common stock 4 4
Additional paid-in capital 293,163 287,792
Accumulated other comprehensive loss (154 ) (407 )
Accumulated deficit   (200,017 )   (184,699 )
Total stockholders' equity   92,996     102,690  
Total liabilities and stockholders' equity $ 119,036   $ 135,922  

Reconciliation of GAAP to Non-GAAP Financial Information

In this press release, in addition to GAAP financial results, we present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA to evaluate the effectiveness of our business strategies.

A reconciliation of GAAP net loss to Adjusted EBITDA is included in the table below.

 
(Unaudited)
(In Thousands)
 
Three Months Ended   Nine Months Ended
September 30, September 30,

Calculation of Adjusted EBITDA

   2012       2011     2012       2011  
Net loss $ (2,309 ) $ (2,742 ) $ (15,318 ) $ (11,254 )
Adjustments:
Minus: Interest income (61 ) (76 ) (210 ) (195 )
Plus: Income taxes 169 74 443 68
Plus: Depreciation and amortization 3,137 2,846 9,487 8,465
Plus: Stock-based compensation 1,466 2,536 4,475 7,393

Plus: Impairment of marketable securities

753 753
       
Adjusted EBITDA $ 3,155   $ 2,638   $ (370 ) $ 4,477  

Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:

  • Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
  • Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.

Codexis, Inc.
200 Penobscot Drive
Redwood City, CA 94063
Tel: 650-421-8100
www.codexis.com

Codexis, Inc.
Investors: 212-362-1200
ir@codexis.com
Media:
Matthew Hargarten, 312-377-4136
media@codexis.com