Welcome to Codexis' Second Quarter of 2012 Earnings Conference Call. This call is being webcast live on the Investor section of Codexis' website at codexis.com. This call is property of Codexis and any recording, reproduction or transmission of this call without the expressed 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 Investor section of Codexis' website. I would now like to turn the call over to Mr. Doug Sheehy, Codexis' General Counsel. You have the floor, sir.

Thank you and good afternoon. Today after the market closed, we announced our fiscal second quarter 2012 financial results. The press release is available on the Investors' page on our website at codexis.com. With me today is John Nicols, our President and Chief Executive Officer; and Mark Ho, Interim Controller and Senior Director of Accounting at Codexis. During the course of today's call, management will make a number of forward-looking statements. These forward-looking statements include our 2012 forecast for revenue, adjusted EBITDA, total cash burn and total pharmaceutical product sales; our ability to advance our position in pharmaceuticals and to deliver against opportunities in fuels and chemicals; including development timelines for our CodeXol Detergent Alcohol project; our ability to monetize our technology; our ability to develop our enzyme package for second generation ethanol; our ability to obtain the right to market our enzymes in a biofield field to parties other than Shell; our expectation that Shell will notify us of a reduction in funding of FTEs under our collaboration with Shell, effective September 1, 2012; and discontinue FTE funding after October 31, 2012 and our expected cost reduction measures. 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, August 9, 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 is 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 an 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 a reconciliation of non-GAAP financial measures to GAAP. Now, I would like to introduce John Nicols.

Thank you for joining our second quarter 2012 results conference call and good afternoon. To begin, let me start by saying how excited I am to be here with you for my first quarterly earnings call as leader of this great company Codexis. As you all know, I recently joined after a 22-year career with Albemarle Corporation, one of the world's most successful specialty chemical companies with roughly $3 billion in annual revenue. At Albemarle, I held several leadership roles; each one driving significant sustained value creation and importantly those successes were delivered with business models as well as in markets that are highly applicable to building shareholder value here at Codexis. In my most recent role as the head of Albemarle's Catalysts division, a $1 billion plus business with the large majority of its sales serving existing and emerging global energy markets, the hallmarks of growth were successful market penetration of multiple new innovative catalysts, the establishment of new global manufacturing beachheads and partnerships and the near doubling of profit margins through value-based pricing and operational cost efficiencies. In my prior role as head of Albemarle's Fine Chemicals division, I led a strategic redirection of that portfolio that turned around prior profit declines. Key to that turnaround success was intensifying focus and building up capabilities to serve the highly competitive needs of pharmaceutical and other fine chemical industries clients. I think you can see that these are all highly relevant experiences to apply her at Codexis. When Codexis' Board of Directors approached me for the CEO position earlier this year, I was once again drawn to the opportunity to create value at a dramatic scale. My ensuing due diligence uncovered a number of near term challenges confronting the company, but it also uncovered a best-in-class platform in directed evolution…

Thanks, John. For the second quarter 2012, we reported total revenues of $22.9 million which compares unfavorably to the $26.1 million in total revenues for the same quarter last year. The $3.1 million decline from the prior year quarter is due to the following three items. First, our collaborative R&D revenue from Shell was down $1 million versus the prior year quarter due to Shell's 2011 funding reduction and our collaborative R&D agreement. As a reminder, in August 2011, Shell reduced its funding commitments from 128 full time employee equivalents or FTEs to a current level of 116 FTEs. Second, collaborative R&D revenue from non-Shell sources was down about 600,000 versus the second quarter of 2011. The decline was primarily due to the discontinuation of our carbon capture program with Alstom effective November 2011. This decline was partially offset by a one-time milestone payment we earned from one of our pharmaceutical customers related to FDA approval of the use of our enzymes and the manufacture of a leading pharmaceutical product. Third, our product revenue was down by $1.6 million or 19% versus second quarter of 2011. As you are aware, quarter-to-quarter variations in our product revenue are not unusual with our pharmaceuticals business. In the second quarter, our results were also affected by the expiration of the six-month generic exclusivity period for atorvastatin. Many of our customers who had stocked up in anticipation of this event paused manufacturing activity to gauge demand and managed inventory amidst the industry-wide atorvastatin launch. We do not anticipate a significant impact from atorvastatin inventory reductions in the second half of 2012. Turning to margins, product gross margin in the second quarter was 14% compared to 15% in the prior-year quarter. A 1% reduction in gross margin was due to a higher percentage of sales…

Thanks Mark. Overall financial results for the first half of 2012, find us below our expectations. Furthermore, given the recently announced exclusive negotiation agreement we entered into with Shell, we are expecting and are planning for Shell to deliver notice of a reduction in funding under our collaborative agreement by 48 FTEs, effective September 1. In addition, although we have not received any formal notice from Shell, we do not currently expect continued Shell FTE funding after October 31. In pharmaceutical products, we are revising our forecast to account for a shift in timing of orders for certain on-patent products. As a result, we now forecast total product sales in line with last year's results of $49 million. In light of these factors, we now forecast a decline in overall 2012 revenue versus our prior outlook of meeting or exceeding our 2011 revenues of $124 million. Given the new lower revenue expectations, we are finalizing our plans to reduce our operating expenses. We will provide further information on these cost reduction measures, when they become necessary to implement. These forward realities and our necessary responses form the basis for my opening remarks referring to 2012, as a year of important transition for Codexis. At this point, I am confident to put forward the following remarks about the company on the other side of this transition. First, the raw innovative capacity of this company will surely remain intact, despite expected smaller headcount. Shrinking will liberate efficiencies and those resulting productivity enhancements, are an integral part of the cost reduction planning process we are undertaking. Second, the financial impact of the revenue and cost reduction changes will be aligned, to ensure that the resulting cash burn, post transition will remain in the single digit millions per year. Finally, we expect significant onetime…

(Operator Instructions) Your first question comes from the line of Edward Westlake with Credit Suisse. Please proceed. Edward Westlake – Credit Suisse: Hey John, welcome aboard.

Thank you. Edward Westlake – Credit Suisse: Just I guess a quick question. I mean, the fall in the revenue, you say it's lumpy, but so far it has been – it has kind of been relatively steady and the margins have changed with the mix. You talk about an exciting pipeline going forward, but maybe just give us some comfort around what happened in the quarter, and why that might not happen again?

Ed, thanks. Pharma, overall we are looking at pharma revenues this year to be flat with that of last year, and prior outlook would have had us having growth in the pharma revenues for 2012. So really, the two explanations for the flatness this year are explained in the second quarter results partially by the six month exclusivity expiration in atorvastatin, creating a little bit of a downdraft in the second quarter for our generics business. Secondarily, in the outlook going forward into the second half, we now see some of the on-patent revenue slipping into 2013. So those are the two primary explanations for short term. Again, as I kind of elaborated some extent on the opening remarks, we are feeling good about the outlook beyond the second half of 2012. Our pipeline, the number of companies that we are working with, to apply our enzymes technology is growing. We have a larger list of customers that we are currently working with, than we have had any time in the recent past. So that's a sign of encouragement. More and more companies in the pharmaceutical space are seeing opportunities to apply the enzyme technology. Further, some of the key products that have been more recently launched, for example, the key products in sitagliptin are set out for some good year-on-year growth in revenues next year versus 2012. Hopefully, that gave you some deeper color on the pharmaceutical revenue situation. Edward Westlake – Credit Suisse: Thanks that's helpful. Then coming to managing the adjustments that obviously have to come. Is it possible to give us a range of R&D spend, say just in pharmaceuticals or maybe for CodeXol, just so that we can get some idea of how deep the R&D budget could temporarily be curtailed, while other revenue sources are building up.

Let me give you an answer, I am not sure it's going to directly answer, but I think it will give you a feel for how we are thinking about cost reductions. At first it starts with what we have now made very clear, our expectations for revenues forward from Shell, and as we've made explicitly clear, we do not expect production FTEs for the month of September and October, including months of the contract that we have (inaudible) with Shell and our current belief and expectation is that starting November 1, revenues directly from Shell will [cease]. Today we have 116 FTEs in R&D directly against the Shell program. Admittedly, we make some margin off of those FTEs. So we are going to have to make reductions in costs in account reductions beyond that 116, if we are going to live up to the work that we could very clearly forward to you guys, that (inaudible) and operate once we are down with this transition at (inaudible) ultimately. Those set the mileposts for how we are going to structure the P&L and it makes it very clear what we need to do, in terms of how much costs needs to be reduced, given those revenue realities, starting in November, and given the goal of a modest cash burn as we have outlined. So there is going to be a substantial R&D remaining, of course it's substantially less than what we currently have on our P&L today. The trick there is to make that R&D as productive as possible, the remaining R&D, and to make sure we can continue the acceleration in the pharmaceutical business that we have enjoyed over the last few years, and that we expect for next year, so we are going to basically put the R&D in place to ensure that we continue to grow the top line and gross profit generation of the (inaudible), and we will have additional lines remaining to continue (inaudible) chemicals and we believe we can continue to drive the R&D program (inaudible). So hopefully that gave you some sense, and maybe exactly answered the question that you asked. Edward Westlake – Credit Suisse: I guess at this point, although you are going to give us a little bit more detail, the pharma pipeline plus your initial thoughts on the reduction R&D helps you get down to that single digit burn and some confidence [after] that?

Obviously in that analysis, we are calculating what we believe the contribution from the pharma business will be. We are going to be looking extremely hard, not only at R&D headcount, but also the G&A side of our cost spend of operations. All things equal, we are going to be growing the long term value of this company, primarily leveraging R&D and microorganism technology platform. So we are going to preferentially look to keep as much money in R&D as we can, coming out of this transition, to enable the best long term value creation growth coming out of 2012 and '13. Edward Westlake – Credit Suisse: Thank you.

Our next question comes from the line of Ben Kallo with Robert W. Baird. Please proceed. Ben Kallo – Robert W. Baird: Thanks. Welcome aboard John.

Thank you. Ben Kallo – Robert W. Baird: Can you talk a little bit about the relationship with the JV down Brazil, how it's progressing, if there has been a standstill since there has been some changes, and obviously you joining conversations with them, and then also on the chemical side to have things been pushed out because of the changes at Codexis? I will stop there.

Good. Raizen is Codexis' largest shareholder. They have one of their top executives sitting on the board. He and I have worked very closely together, even before I joined the company. Actually, the conversations and the energies and efforts between Codexis and Raizen have accelerated, up to my arrival and through the first two months of my being on the job. So I am encouraged by how the conversations are advancing. Too early to forecast or to put a specific milestone expectation in place with you, but it's the primary goal of Codexis to deliver an excellent ongoing partnership with Raizen, as a primary commercialization of pathway for CodeXyme cellulase enzymes. So it has actually been very encouraging partnership over the last several months with Raizen in Brazil. On chemicals, I will speak directly to CodeXol. There has been no shift since. There have been changes in the management. The CodeXol project continues to encourage us, as I outlined at a high level in my opening remarks. The pilot plant progress, is approved by the board and has been constructed now, the partnership efforts with Chemtex are very solid, and the real key for us is going to be to – to link up a commercialization partner. Somebody who is willing to license this technology, and to invest in a real operating plan, to produce detergent alcohols based on our technology, and that's obviously a high priority activity for Codexis. Ben Kallo – Robert W. Baird: Could you talk a bit about, I think it's something that we struggle with, the visibility on the pharma side of the business. Can you talk about your internal visibility, now that you have been sitting in the chair for a little bit?

Yeah, internal visibility is definitely a place you'd rather be. We are going to provide more visibility for you guys, at least, provide you with traditional metrics of how many projects we have got in the pipeline, where they sit in terms of stage of development with pharmaceuticals. How that has tracked over time? That's the kind of metric that – when I used to run a pharmaceutical services business at another company, that's the kind of metrics we were told to provide, and we have all that data here. Actually, I am very encouraged by the way Codexis runs the pharmaceutical products and services business. It is frankly every bit as sophisticated, in terms of the deployment of R&D, the access to customers, as I was used at the great company of Albemarle. So, I am real happy with it. So I think we are going to really be very proud to put forward our views in some more details and give you guys a better handle on the pharmaceutical prospects here at Codexis. I am just begging for a little bit of time, and we will have that for you, certainly for our next call and beyond. Ben Kallo – Robert W. Baird: Great. Then finally, could you just give us an update on the CFO search, and I will hop back in queue? Thanks.

Good. CFO search is progressing well. We hired months ago, a leading recruiting company to help us in that. They have provided us with many good candidates. We have shortlisted the set of candidates down to a very few, who are in second and third round interviews. I am quite hopeful and actually planning for having a CFO on our next call for the third quarter. Hopefully, significantly sooner.

Our next question comes from the line of Weston Twigg with Pacific Crest Securities. Weston Twigg – Pacific Crest Securities: Hi, thanks for taking my questions. Actually, just a couple of quick questions. The first one is, I think you mentioned you expect to get rights to sell the CodeXyme outside of Shell. Just wondering if you can give us an idea of how quickly you expect that you would be able to generate revenue with that product and at what scale?

Well, first we really can't engage in serious discussions with anybody, until we earn these rights from Shell, and as we made clear both in prior release, and in this call, we are in these exclusive, good faith negotiations with Shell, that should expire this month. So on the basis of our expectation, we earn those rights by Shell by the end of August or September 1. We are going to be immediately able to step into real negotiations with multiple other parties, who would have clearly an interest in our CodeXyme technology, and we would be seeking to advance those conversations to real deal making conversations that we would hope we could disclose end of this year, over next year if things go well. From there, it's a matter of getting installed and probably, getting installed in later stage facility buildouts, than the host of buildouts that have already been announced in the industry for second generation ethanol. It may be possibly against an announcement that says we get installed in some of these already announced capacities, but that seems pretty optimistic. So I think you know, we will ask the timeline for the buildout of the existing announced second generation ethanol plants. So I would say that realistically a build-out for revenue for us outside of Shell and outside of Hays and it's a 2015 kind of timeframe, maybe 2016. Weston Twigg – Pacific Crest Securities: Okay. And is there any possibility to displace enzyme companies that are already engaged in the existing build-out infrastructure?

Sure. There is a prospect. Maybe I wasn't clear in my answer, there is some opportunity. We would certainly target that, but reality says they've had to the line-up their enzyme partners as part of their confidence to announce. And so we will target those and we will work towards those, but I think it's probably a low probability expectation that we could displace who they're already working with. Weston Twigg – Pacific Crest Securities: Okay, good. And then just to clarify, if Shell funding, FTE funding drops off as of November, is there any milestone payments in tech access fee also goes away, it seems like it would?

Yes, that's correct, West. Weston Twigg – Pacific Crest Securities: Okay. And so you would be left with really no collaborative R&D except on the pharma side and then the pharma product revenue?

Yes. Today, that's what we have. So without Shell unless we find some additional collaborative R&D revenue opportunities which frankly we are working on, then you will be correct. Weston Twigg – Pacific Crest Securities: Okay. And any grant recognition left or has that all been recognized I think you're seeing Singapore, just trying to remember (inaudible), but is there anything left on the grant side?

There is. We are expecting a modest payment from the Singapore EDB grant some time in Q3. Weston Twigg – Pacific Crest Securities: Okay.

Thanks.

Our next question comes from the line of Pavel Molchanov with Raymond James. Please proceed.

Thanks for taking my question, guys. In retrospect, do you think that Shell's decision earlier in the year or two what drive the collaboration with Iogen was precursor were warning signal of sorts in terms of ending the FTEs with you?

I can't speak for Shell. When Shell obviously had been working with Iogen on how they were going to proceed beyond their historical relationship and you know the result. During that period of time we were – we still were managing multiple options with Shell about our path forwards with Shell over the last several months, especially certainly since the last call Shell's intention to become clearer and clearer to Codexis.

Okay, understood. And then following the conclusion of (inaudible) of the FTEs, would you be open to a loser collaboration with Shell that would not contain in the exclusivity but perhaps would offer some benefits to you guys?

We should – certainly we would, but our primary energy has been focused on partnership with Shell's joint venture in Brazil, Hays, and I see the prospects there being of greater prospect, greater probability and have taken the majority of our attentions as we work with Shell and its affiliates.

Okay. Appreciate guys.

Sure.

Our next question comes from the line of Michael Klein with Sidoti & Company. Please proceed. Michael Klein - Sidoti & Company: Good afternoon. So with the demo plant being built with Chemtex in Italy, how quickly can this come online and how long do you think it will take before you have samples in potential partners' hands?

Good. We are in the early stages of construction. We expect start-up in the first half. We would in parallel continue to develop our strain to get it as advance as it can be by the time we start up the (inaudible) 1,500 liter plant. So we would start up. We would operate for some period of time. We would line it out somewhere in the middle of the year and we would be putting product in people's hands, the data on productivity and commercial partners' hands at that point. So we are looking at maybe year. It's a matter of how long it takes us to line up the facility and to demonstrate and how much time and effort we put in to not only hit spec but also hit productivity targets that all commercialization partners are going to be interested as well. Michael Klein - Sidoti & Company: Sure, understood. And with the type of partners that you are talking to right now, is it likely to be one partner or several partners kind of just to get the ball rolling for the first commercial plant?

I think for the first commercial plant we will likely to have one company, but our prospects cut across multiple companies. So it could be that we roll out with a more diverse set of potential operators. If we have a great commercialization plan with one, we may focus on that one for some period of time. So it's really kind of early to say. So I think both options are available and could transpire for us. Michael Klein - Sidoti & Company: Sure, okay. And can you just talk about the conversation with Iogen over Gen 1 ethanol?

Yes. Gen 1 ethanol has been a problem area for the company in the recent past. I took a look at where the Group was with this advancement. I got directly engaged with the executive leadership at Hays and the Gen 1 program really as we consider focus and limited resource didn't stack up in terms of prospect for Codexis and/or Hays and versus it's really focusing on Gen 2. So we are king of parking our efforts in Gen 1 for the time being and really focusing the discussions on Generation 2 ethanol technology. Michael Klein - Sidoti & Company: Okay. And last question under the collaborative R&D you get some pharma, can you just quantify how much that is roughly?

Just to be clear, is this for Q2, are you talking about the projection for the rest of the year? Michael Klein - Sidoti & Company: Yes, I mean on an annual basis, just trying to look at what the revenue, what's going to be the revenue mix going forward assuming Shell FTE funding is out?

It is going to be in the single digit namely on an annual basis. Michael Klein - Sidoti & Company: Okay, that's all I have. Thank you.

Thanks, Michael.

(Operator Instructions) Up next we have Mike Ritzenthaler with Piper Jaffray. Please proceed.

Good afternoon, guys.

Hi, Mike.

Just a quick couple of questions here. If Shell does (inaudible) October as you sort of have been planning for instruction for, were there still be milestone payments due for work done prior to the termination?

Yes, there will and we are finalizing that kind of important detail as we have this call.

Okay. And then, let's see it is the pilot plant that you constructing with your partner Chemtex, is that going to be permitted for sales and have all the proper permits and things like in place to do sales or is it just for sampling to your customers?

Well, it's really for development and for demonstrating the technology and refining the technology so and it's very small in terms of its scale. So I don't think it will be economic to run the plant for some product if the part of the OpEx would exceed the revenue you could generate. So I think we are just going to utilize that facility to continue to refine our technology offering and our licensed package to commercialization partners.

Okay. And then this is something that hasn't come up too often. I guess I had quite a few more questions prepared on the pharma side, but it sounds like you kind of wants to hold off on that, but on the water side is there [DRE] continuing R&D efforts on those type of funds or is that kind of all taking a backburner until you get the other things straight?

Yes. No direct comments on water Mike. Kind of go back to the way answer that question, we are rightsizing R&D. We are focusing on pharma for sure. The remainder of R&D capacity is going to be directed efficiently at the best portfolio from there. There could be some prospect that the water opportunities would stack up, but we are still as you heard encouraged and (inaudible). So I would say it's unlikely that it would take much of R&D capacity in the near term.

Okay, thanks guys.

Okay, thank you.

At this time, I would like to turn the presentation back over to Mr. John Nicols for closing remarks.

Okay, folks, well thank you very much. I really appreciate the energy and questions. And I look forward to follow-ons with you and for future conference calls. I appreciate it very much. Thank you.

Ladies and gentlemen, this does conclude today's presentation. Thank you once again for your participation. You may now disconnect.