Good afternoon and welcome to Codexis’ Q1 2012 Earnings Conference Call. This call is being webcast live on the Investors section of Codexis’ website at www.codexis.com. This call is property of Codexis and any recording, reproduction or transmission of this call without the express written consent of Codexis is strictly prohibited. As a reminder, today’s call is being recorded. You may listen to a webcast replay of this call by going to the Investors section of Codexis’ website. At this time I would now like to turn the call over to Doug Sheehy, Codexis’ Senior Vice President and General Counsel. Sir, you may proceed.

Thank you and good afternoon. Today after the market closed we announced our F1Q 2012 financial results. The press release is available on the Investors page on our website at www.codexis.com. With me today are Peter Strumph, our Interim President and Chief Executive Officer; and Brian Dowd, our Interim Chief Financial Officer. During the course of today’s call management will make a number of forward-looking statements. These forward-looking statements include our projected full-year 2012 revenue, adjusted EBITDA and cash burn; the ability of our technology platform to meet our customers’ changing needs; the ability of our CodeXyme cellulase enzymes to enable cost-advantaged conversion of biomass to sugars; the initiation of pilot-scale production of CodeXol, and the delivery of kilogram-sized samples of CodeXol to customers this year; the timeline for the completion of a CodeXol demonstration facility and the ability of this facility to generate data that will enable the design, financing and construction of a commercial facility for CodeXol; the timeline for the construction of and the first commercial production from a commercial-scale CodeXol facility; expected growth in our pharmaceutical product sales and gross profits; the timeline for first commercial deployment of our first generation ethanol technology in Brazil; and our ability in 2012 to produce larger volumes of CodeXyme cellulase enzymes and to sample customers. These forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ significantly from those projected. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to our Form 10-Q filed with the Securities and Exchange Commission today, May 10, 2012, for some of the important risk factors that could cause actual results to differ materially from the forward-looking statements made on this call. Except as required by law, we disclaim any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after this call. During today’s call we will discuss certain non-GAAP financial measures for comparison purposes only. The non-GAAP amount of adjusted EBITDA is calculated by adding depreciation, amortization, net interest expense, income taxes, warrant-related costs, and stock compensation to our net loss. This non-GAAP measure is in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Please refer to our press release today for reconciliation of non-GAAP financial measures to GAAP. Now, I’ll introduce Peter to discuss the quarter.

Good afternoon and thank you for joining us. On today’s conference call we will review in detail our Q1 financial results, provide an overview of our business strategy and reaffirm our annual guidance. But first I’d like to discuss my view of Codexis’ business portfolio and our execution strategy. Shortly after I took the CEO position in February it became clear to me that 3 assets continue to be our core value drivers: our CodeXyme cellulase enzymes, our bios-based chemicals pipeline with CodeXol detergent alcohols being our first go-to-market opportunity, and our established and growing pharmaceutical business. As many of you know I joined Codexis 2 years ago to run the pharmaceutical business and I’ve had the privilege of leading that business through a period of robust growth. I’ve seen firsthand how Codexis’ ability to rapidly version products - that is, to tailor and improve product performance for specific customers and projects - creates a value in the pharmaceuticals market. I believe this capability is unique, best in class, and difficult to replicate. It is the basis of our competitive strength in pharmaceuticals and I believe it will be the basis of our competitive advantage in the bio-based fuels and chemicals markets. Codexis’ partnership-driven strategy for CodeXyme cellulase enzymes and CodeXol detergent alcohol allows us to leverage our unique strengths. Similar to the software industry today, the cellulase enzymes market will involve continuous improvement in enzyme performance over time. This puts us in a strong competitive position. Our CodeEvolver directed evolution technology enables us to meet our customers’ changing needs rapidly and effectively. Our goal is to market CodeXyme as the world’s most valuable cellulase enzyme package, enabling cost-advantaged conversion of biomass to sugars for the production of bio-based fuels and chemicals worldwide. We believe our partnerships in fuels and…

Thank you, Peter. I will start by going over Q1 results and then I will provide our outlook for the full fiscal year of 2012. Revenue for Q1 was $31.1 million, in line with Q1 2011. Sales of pharmaceutical products were $15.2 million for the quarter, up 17% over the prior-year quarter. Growth in the quarter was primarily driven by increased demand for Atorvastatin-related products. Pharmaceutical product gross margins were 17% in the quarter, up 7 points from the prior-year quarter due to a shift in innovator sales toward higher-margin products. Revenue from collaborative R&D was $14.6 million in Q1, down $2.9 million or 16% from the prior year quarter. The year-over-year reduction in collaborative R&D revenue was driven primarily by the termination of our carbon capture program with Alstom in Q4 2011, and by the mid-2011 reduction of FTE funding under our current collaborative agreement with Shell. Turning to operating expenses, our total expense for the quarter was $25.7 million, up $3 million versus the prior year quarter. R&D expense was $16.3 million, a 19% increase over the prior year quarter, primarily due to our continued development of CodeXol detergent alcohol. SG&A expense was $9.4 million, a 4% increase compared to the prior-year quarter. For adjusted EBITDA, our Q1 loss was $3.1 million compared to a gain of $1.8 million in the prior year quarter. The change is primarily due to reduced collaborative R&D revenue and increased R&D spending related to CodeXol. We ended the quarter with cash, cash equivalents and marketable securities of $62.2 million compared to $63.8 million on December 31, 2011. Capital expenditures were $2.1 million driven primarily by improvements in our R&D facilities and purchases of lab equipment. Now, let me turn to our outlook for 2012. Recall that our guidance policy is to give annual guidance which we will update each quarter. For the full year 2012 we are reaffirming our prior guidance. We continue to expect revenue in line with or exceeding our 2011 results, positive adjusted EBITDA and cash burn levels similar to 2011. With that, I will turn the call back to Peter.

Thank you, Brian. I would like now to provide an update on our business development efforts and key strategic initiatives for 2012. As you are aware, Shell and Iogen recently announced a significant reduction in staff at Iogen Energy and cancellation of the planned Manitoba cellulosic ethanol facility. We are working with Shell to determine the effect that this announcement will have on our ongoing collaborative efforts. Shell has reaffirmed its commitment to advanced biofuels, providing a foundation for our continued collaborative development of cellulosic ethanol. We are in ongoing discussions with Shell regarding our potential collaboration after October 31. Elements of our discussion include the level of FTE funding for our continued collaboration in cellulase enzyme development and our ability to market CodeXyme cellulase enzymes to biofuels customers beyond Shell and its affiliates. In addition, we have initiated discussions with Raizen, our largest shareholder and the world’s largest producer of ethanol from sugarcane, on the potential use of our CodeXyme cellulase enzymes and yeast for the production of second generation ethanol from sugarcane [indiscernible] tops and leaves in Brazil. Meanwhile, our work with CodeXyme cellulase product development continues to show significant progress. We have initiated activities with contract manufacturing organizations to secure access to larger-scale CodeXyme manufacturing capacity. This capacity will enable us to supply demonstration scale and early commercial quantities of CodeXyme cellulase to our bio-based chemicals customers. We are planning for larger-scale CodeXyme production in the second half of 2012 with these CMOs. We continue to make significant strides in our CodeXol detergent alcohol program. We believe we now have the tailored mix of C12 and C14 molecules to meet drop-in product requirements. We expect to provide kilogram-scale samples from our 650 liter fermenter in Redwood City to several potential customers this year. We are also in…

[Operator Instructions] Our first question comes from the line of Patrick Jobin with Credit Suisse.

So Peter, on the R&D investment plans, could you maybe walk us through the current outlook for maybe by headcount on CodeXyme, CodeXol and pharma?

Sure. So for pharma, we have probably 30 FTEs engaged in R&D and then a number of FTEs engaged in operational and delivery and manufacturing activities. In CodeXyme we have approximately 100 people on the enzyme development, and if you add yeast development in there it gets up to approximately 120. And then that’s the funded portion by Shell, which is at present 116. We have additional resources allocated to enzyme development that we’re specifically working towards bio-based chemicals, and that’s probably 30. And then we have approximately 40 people engaged in CodeXol R&D.

Great, and then it sounds like you’re making great progress with CodeXol, with the 650 liter pilot being completed today and samples on track for this year. I guess are there any milestones that need to be met to kind of start construction of that 1500 liter facility you mentioned or anything that we should be looking out for?

Well what we are doing prior to getting into that 1500 liter facility is we are continuing to work on the biology. So as I described in my prepared remarks, we have the C12-14 chain length at sort of drop-in levels, and so where the microorganism is producing the product we desire to have it produce, and a product that meets drop-in requirements of our customers. So we are on that never-ending development effort that is to improve the production performance metrics associated with that microorganism. As we move into next year’s demonstration facility we hope to have a microorganism that pencils out with commercial-enabling production performance characteristics. But really we have next year to get there as we’re working in the demonstration facility, and as I mention the demonstration facility I think it’s an opportunity for me to specifically define what we mean by “demonstration facility.” I know that a lot of companies in the industry throw around different terms and they have different meanings. So for us, what it means is a couple very clear things. One is that it’s a fully integrated facility, so we’re not just talking about dropping a fermenter somewhere and bringing in sugar from someplace else, and doing the DSP someplace else. This is fully integrated, from feedstock, pulling it off the fields, the biomass off the fields; processing it, turning it into sugar, putting it into the fermenter, doing the downstream processing and ending up with a product that could be sold to customers all from co-located unit operations. The other element of what we mean when we say “demonstration facility” is we intend that data from this facility will be the dataset that enables design, construction and financing for our commercial facility. So that’s the effort that we’re embarking on in terms of preparations for this year. Later in the year we anticipate starting construction and we anticipate having that demonstration facility online next year.

Our next question comes from the line of Weston Twigg with Pacific Crest Securities.

This one is probably a harder one to answer but I’m wondering if there’s a way you can help us feel more comfortable with the potential opportunity for CodeXyme given the uncertainty around Shell moving forward? Or maybe you can make us feel more comfortable with what the Shell outcome might look like in 2013 and beyond?

Let me just provide the information I know and you can figure out whether it makes you feel more comfortable. So the opportunity with Shell and the continuation of funding has some uncertainty associated with it. I believe it’s the same uncertainty now as has existed over the last several weeks and months. I would very much like to have those discussions behind us but we don’t. The fact of the matter is that, I think with the recent Iogen announcement it actually potentially creates an opportunity for us and this is what I mean by that. Our view at Codexis is that the players in the new sugar economy won’t be the players that were defined by legacy partnerships - they will be the entities that provide the very best technology in their respective areas. And where we provide our technology is in the very specific area of enzymes, and we think we make the world’s best enzymes. And to now be able to have our enzyme package evaluated by our partner Shell and not have to be linked to what I would call an esoteric feedstock, wheat straw - it’s not going to be the dominant feedstock in the new sugar economy - and tied to specifically the Iogen pretreatment which is a fine pretreatment. But in the years that we’ve been collaborating with Shell there are other pretreatment technologies that have developed. So to have Shell be able to make the assessment independent of those other integrated elements of just our enzyme technology, I think sets us up better for our ongoing discussions with Shell. Also in terms of those discussions with Shell, there is some uncertainty there. So while we are engaging with Shell, and I’m comforted by the good level of engagement that we do have with Shell at all levels of the organization to get to the answer that we all want to get to; while we’re doing that we in Codexis are also preparing contingency plans - preparing plans for various outcomes of those discussions, so that at the time that those discussions reach conclusion and we announce them to the world we will also have plans in place and not be caught flatfooted. And the objectives of that planning process is really twofold: one is to prioritize our research programs so that we can focus our resources on the projects that create the most value for shareholders; and the second very important objective is to create plans that are balance sheet sparing so that we don’t erode our balance sheet. So that’s what we’re doing while we are engaged in those discussions with Shell.

Okay, good, that’s helpful. And just on a related note you mentioned, I think in the earlier part of the discussion that you are in fact working on gen 2 technology with Raizen? Does that mean then you have approval from Shell now to move forward with potentially a cellulosic solution with Raizen?

Yes. So we have initiated discussions with Raizen about how our technology could be used to help them meet frankly one of their strategic objectives. And so the formation of Raizen was a 2011 event. It was a very large joint venture, a $12 billion joint venture as you know, and they worked through essentially in 2011 the integration of Cosan and Shell assets to create Raizen. Recently in 2012, Raizen identified as one of their strategic objectives how they regard technology, and it was stated quite clearly to me that they regard technology as an opportunity to get more productivity out of their fixed assets. And they regard their fixed assets as both their landholdings that produce the biomass as well as their fixed asset plants - their ethanol facilities. And our first gen and second gen technology play perfectly and are lined up with that strategic objective for Raizen. So we have initiated discussions with Raizen on second gen. We’re well underway with first gen and Shell is aware of all of these discussions that are ongoing.

Okay, and just to bring it full circle then, is one possible outcome that Shell would lean on Raizen to take over the cellulosic ethanol development program, and then Shell sort of uses Raizen as their ethanol program source, I guess?

I suppose that is possible. It’s clearly one of the scenarios that we’re thinking through, is as this collaboration moves forward who’s writing the checks to us, Shell or Raizen, I suppose we’re indifferent to. It makes a lot of sense to have a second generation ethanol program that is taking advantage of the Brazilian geography versus the Canadian geography.

Our next question comes from the line of Michael Klein with Sidoti & Company. I think he may have disconnected, sir. Our next question comes from the line of Pavel Molchanov.

I just wanted to clarify the sequencing on 2 things, and both of these are going back to the Analyst Day in December. The gen one deployment with Raizen, I think it was at the Bonseem [ph] mill. Does that happened at a pilot level in 2012 or in the second half of the year?

Hi Pavel, it’s Peter. If you have 2 questions do you want to just get them out so then I can fire off my answers?

Okay, that was the first one and the second one is the trajectory for commercializing CodeXol, is it still demo in 2013 and first commercial sales in 2014?

So yes, I’ll take those in order - thank you, Pavel. So with regards to gen one with Raizen, we are in discussions with them right now to finalize commercial terms for what will be a 2-year project. We have been reviewing project plans. We had several projects that we were considering and we’ve identified one high priority project that makes sense with regards to our technology against their requirements. And I would expect to commence that project this year, and pilot next year and then commercial deployment in 2014. When we do pilot I’m not sure that we actually will pilot in the [Bonseem] mill. As we’ve been developing and refining our plans, the actual development plans for this project, we have realized that there might not be a requirement to pilot in the [Bonseem] mill. There are various options, from going into pilot scale to going right into some unutilized commercial scale fermenters, so the exact piloting sequence is still TBD. And as I said that’s a 2-year project so commercialization in ’14.

Alright, I appreciate it, guys.

But with regards to your CodeXol question, the sequence is that we are working in biology this year and later in the year anticipate beginning construction on the pilot facility with Chemtex. That pilot facility that we’re building is not as I described a fully integrated facility. The portion that we’re building is the portion downstream of the sugar that Chemtex is supplying. So Chemtex has access to the biomass and they’re doing the processing and the pretreatment, and the esterification to create the sugar stream. We’re of course working with them on that creation of the sugar stream with our enzymes, but then once we get the sugar stream what we are building on their facility is fermentation and downstream processing. And so that build we anticipate will happen this year and construction to be completed next year for operation of that integrated demonstration facility in 2013. As I said, we expect and we’re working towards creating a dataset from that integrated demonstration facility that will enable design, construction, financing of a commercial facility. And if we start building that in 2014 with a year and a half, 2-year construction build we think that we could be commercial as soon as 2015.

[Operator Instructions] Our next question comes from the line of Mike Ritzenthaler with Piper Jaffray.

I’m wondering if you can reflect a little bit more on the Shell Iogen development. It sort of leaves Codexis, like you had said in your prepared comments and I think in response to a previous question, it leaves you free to work with other process technologies. How easy is that to layer into the existing agreements you have with Shell and maybe that you’re working on with Raizen? Can you work with Chemtex there as you wish or I guess how many stamps of approval are needed before another pretreatment process can be selected for the biofuels piece?

Great question. While we were working with Iogen and Shell for our historical collaboration, the agreement was always between Codexis and Shell; and we take direction from Shell on what pretreatments, what feedstock, what geographies they would like to deploy our research efforts against. So there’s nothing in the agreement as it’s currently structured that causes any interference towards working with different feedstock, pretreatments or geographies. So the work we’ve done to date is very fungible toward different feedstock and pretreatment combinations. So as we are working with Shell to define the exact targets for our continued collaboration we are discovering and being able to utilize the technology that we’ve developed against different targets. And in fact, we started working with Chemtex with their pretreatment about a year ago and the objective of that collaboration was specifically for enzymes and converting biomass into a sugar stream to be used with bio-based chemicals. But that work also gives us confidence that the work we’ve been doing on the Iogen platform is so very fungible on these other pretreatment modalities.

Okay, so just kind of summarize that, I guess you’re sort of free to work with whomever you think has the best pretreatment technology, and obviously right now you think that’s Chemtex. And so on the biofuels side, that collaboration could be extended without too much added red tape I guess.

Yes, I would agree with that assessment.

Okay. And then just a couple questions on the pharma side - that seems to be just a key piece of the business over the next couple years as some of the other catalysts align in the biofuels and chemicals part. So Boceprevir with Merck, is this something that will take a couple of years to get the FDA approval of that process similar to the Sitagliptin process, and I guess secondly, can you help us understand the market opportunities for the drugs within Codexis; i.e., if all the Boceprevir is made with Codexis’ process, just kind of give us a sense of what the revenue pools could look like.

So just to be clear, so we have been working with the Hepatitis C franchise now for several years, and it’s the Sitagliptin which is the new piece of commercial activity for us by their recent approval. So it just so happens that Sitagliptin was a process that required specific FDA approval because it was using our enzymes in the penultimate manufacturing steps, so within the GMP envelope. Our other processes to date have not had that requirement so we have been free to introduce-- our sponsors have been free to introduce our technology without seeking prior FDA approval. So the Sitagliptin was the first instance where that was a milestone, and so there hasn’t been a similar restriction for our other products. So we’ve been off and running with our other products now without having to wait for FDA approval. With regards to giving you some color on the various individual drugs that we have participated in with sponsors, I actually think the way I like to represent the pharma business is as more of a portfolio business where we have built the business from $21 million to $35 million to $54 million over the last several years and we are doing that with a portfolio of current commercial projects as well as a growing portfolio of development and pipeline activities within that pharma practice. So I don’t want to speak to sort of the prospects of any one product but rather direct you to how the portfolio concept is working, and hopefully over time the way that will manifest itself is in continued growth in our pharma business and maybe a smoothing of the lumpiness as we move forward and the portfolio starts to take effect.

Okay, that all makes sense. And then finally on the mix of generic to innovator, you had provided some color on the mix of innovator had gone up during the quarter - that helped gross margins. Can you provide what the mix was this quarter, and if not maybe you can just kind of compare it to previous quarters on a relative basis.

We’re not providing that comparison. So within the innovator side we did have a nice mix of some of our more profitable innovator products in the last quarter. On the generic side we also saw continued growth of our generic franchise which is essentially, I’ll step away from the portfolio perspective here because the generics business is mostly to supply statins or intermediates for statins, and mostly to provide intermediates for Atorvastatin. So as you know, Atorvastatin recently went generic in the US and we have seen an increase in demand for that intermediate, but it’s one of our lower gross margin intermediates. So it adds nicely to revenues but it creates a mathematical challenge to increase the overall gross margin when that piece of the business is increasing.

Our next question comes from the line of Christopher Kovacs with Robert Baird.

Before you guys went down the CodeXol path you gave us some preliminary estimates of the economics around the plants. As you get closer to… Now I know you’re still in development work with Raizen, but on the gen one ethanol do you have any color at this point as to what the potential economics might be or how that compares to gen 2 for you guys?

Well gen one, I guess a couple things to say. First of all, the gen one opportunity is not as big as the gen 2 opportunity, so it is not one of our main core 3 assets that I indicated. However, it’s a great place where our technology can create some value relatively quickly. I would expect that the economics are not going to be substantial; we’re not providing guidance on it right now. And then the third point to remember with regards to our gen one work with Raizen is it has a great deal of strategic value for us because it gets us working with Raizen and it also shows Raizen how our technology can help them achieve their goal of increasing productivity through their fixed assets.

Okay. Do you guys have any update on the CFO and CEO searches there?

I do not have an update. I guess what is updated is that a little bit of time has passed but when you step back really not that much time. It’s been less than 3 months since I’ve taken over the position of the Interim CEO, and I think any thoughtful process to review candidates and identify the very best person to create shareholder value in the CEO chair will take a while. So the Board is engaged; they have a process that they’re working on. I know that they’re making progress but this is exactly the type of thing that I would not want to make predictions on specific timing, other than to tell you it’s being worked on by a very engaged Board which is all very good. Following that there will be no decision or movement on the CFO position until the CEO position is filled.

[Operator Instructions] Our next question comes from the line of Michael Klein with Sidoti & Company.

Hey guys, sorry about that before. I apologize if some of these have been asked already. Have you always been able to communicate with Raizen on gen 2 opportunities or had you previously only been in talks with Shell?

That’s a bit of a nuanced question. So I mean we have a Raizen member on our Board and we have discussions with Raizen, face-to-face, over the phone. We’ve been talking to Raizen for some time. We haven’t had a bright line around the ability to talk about how our technology works in second generation. What I think has recently changed is that those discussions where we become aware of their strategic interests, we become aware of the problems where our technology could help solve and they become aware of our technology, all those have been going on for as long as Raizen has been in existence. What has changed is that now we’re talking about specific projects, specific ways in which our technology could be deployed and these discussions are now more formal - “Let’s move towards defining a project” rather than “Let’s understand each other’s capabilities and problems.”

Sure, understood. And in regards to the change with Iogen, and if Shell was to go with a different pretreatment technology would that delay at all the timeline of commercialization or would your technology be able to synch up relatively quickly?

We believe our technology will synch up in good concordance with how the market will be developing. So the market right now for second generation is one that I think is in a very transformative period of time. If you look back several years, no one was building demonstration facilities because when you penciled out the economics, the economics didn’t work. Just recently that penciling out exercise has resulted in an answer that says the economics work and so demonstration facilities are being built to demonstrate that that is in fact the case. Subsequent to that experiment being run, and if those experiments are successful and those are expensive experiments, but if they are successful commercial scale facilities will start getting built. So when you sort of lay that out on a timeline I don’t see commercial scale second gen ethanol facilities being built much before 2015 as these half dozen demonstration plants yield successful results and that turns into the design and construction of commercial facilities. So Shell at this point, transitioning away from or reducing their commitment to one pretreatment technology to considering other pretreatment technologies to get to cellulosic ethanol I don’t think introduces any delays in the development timeline.

Okay, great. And lastly, are you still comfortable with the balance sheet? Obviously you are for 2012, but as we look out further towards the 2014, 2015 timeline are you still comfortable with the balance sheet strength now?

Well, more is better so I could always be made more comfortable. But working with what we have, the way in which we’re getting comfort around our balance sheet is knowing that we have plans to respond to various scenarios that would not waste that precious balance sheet resource, so we can respond quickly. However these discussions end up we’ll have a plan in place to execute with the idea of balance sheet preservation being one of the main objectives. So I’m comforted by the idea that we’re aware of the number we have and we have plans to preserve it as much as possible, and we’re being very thoughtful about how we deploy our resources.

And we have no further questions at this time. I would now like to turn the presentation back over to Peter Strumph for any closing remarks.

Our closing remarks are simply thanking everyone for their participation on the call and I look forward to updating you again soon.

Ladies and gentlemen, that concludes today’s conference. Thank you so much for your participation. You may now disconnect. Have a great day.