Welcome to the Codexis First Quarter 2022, Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. And now I'll turn the call over to Brendan Strong from Argot Partners. Please go ahead.

Thank you Operator. With me today are John Nicols, 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 Private Securities Litigation Reform Act of 1995, including our guidance for 2022 revenues, product revenues, and gross margin on product revenues, prospects for our life sciences tools, crude sector and biotherapeutics product businesses, and our expectations regarding the sales of one of our proprietary enzymes to Pfizer for the manufacturer of their COVID 19 antiviral therapeutic Paxlovid. To the extent that statements contained in this press release are not prescriptions of historical facts regarding Codexis. They are forward-looking statements reflecting the beliefs and expectations of management as of this statement date May 5, 2022. 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. Additional information about factors that could materially affect actual results can be found in Codexis annual report on Form 10-K, filed with the Securities and Exchange Commission on February 28, 2022. Including under the caption Risk Factors and in Codexis' other periodic reports filed with the SEC. Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law. And I'll now turn the call over to John.

Thank you, Brendan. Good afternoon, everyone. I'm pleased to report that Codexis has delivered another very strong quarter of top-line growth as we kick off 2022. Total revenue of $35.3 million for the first quarter of 2022, nearly doubled the year-over-year. A tripling of product revenues versus last year led the way, and those were delivered at an expanded gross margin reaching 72%. Our sales continued to be spread across a wide range of customers in the quarter as well, with 16 who contributed over $100,000 in revenue, 8 of whom contributed over $1 million. We'll provide an in-depth overview of each of our business segments shortly. But I am proud to highlight that we are building on the strength of last year's defining success in the sustainable manufacturing market, by consistently showcasing our value to a broadening range of customers through the quick and efficient scaling of our product supply capacities. Notably, we continue to steadily execute against the large enzyme orders we received from Pfizer, to support Paxlovid, its COVID 19 antiviral therapeutic. In parallel, we continue to build momentum in our other exciting target growth areas, including driving our successful step-out strategies in the life science tools market, by collaborating with innovative early-stage companies, Molecular Assemblies, and Sequel. And we continue making great strides, advancing programs across our Biotherapeutics pipeline. Our first quarter results nicely highlight Codexis, ability to continue driving robust progress across all of our core end markets, while also pursuing opportunities to push the application boundaries of our enzymes. We are thrilled to reiterate our 2022 guidance to grow our annual total company revenue by nearly 50% for the second year in a row. Before I hand off to Ross to share details on the first quarter financial results, let me first provide updates…

Thanks, John. And good afternoon, everyone. We delivered strong first quarter 2022, results. Total revenues for the first quarter of 2022, were $35.3 million, up 96% compared to the prior year period. On a segment basis, $33.1 million in revenue was from the Performance Enzymes segment, and $2.2 million was from Novel Biotherapeutics. This compares with $14.2 million and $3.8 million for Performance Enzymes and Novel Biotherapeutics respectively, for the prior year period. Product revenues for the first quarter of 2022, were $30.7 million compared to $10.2 million in the first quarter of 2021. The increase was due to additional sales of Enzyme to Pfizer for Paxlovid, which represented $21.3 million in product revenues in the first quarter of 2022, compared to $0.4 million in the first quarter of last year. R&D revenues were $4.7 million compared to $7.8 million last year. Decrease was driven by lower revenues in both the Performance Enzymes and Biotherapeutics segments. Product gross margins for the first quarter of 2022, was 72.2% compared to 58.8% in the first quarter of 2021. The increase was driven by increased sales of higher-margin products. Turning to operating expenses, our R&D expenses for the first quarter of 2022 were $19.5 million compared to $11.6 million in the first quarter of 2021. The increase was primarily driven by higher headcount and salaries as well as higher expenses for facilities in lab supplies. SG&A expenses for the first quarter of 2022 were $15.7 million compared to $11.4 million in the first quarter of 2021. The increase was primarily the result of increased expenses for legal fees, higher headcount and salaries, as well as higher stock compensation expense. The net loss for the first quarter of 2022 was $8.4 million or $0.13 per share compared to a loss of $9.1 million or…

Thanks, Ross. Let me close out our prepared remarks in the context of our 2022 corporate goals and catalysts. As we have described, Codexis has maintained strong momentum throughout early 2022. In particular, in our sustainable manufacturing market, we continue to pursue widened adoption and product commercialization in pharma manufacturing and accelerated uptake in food and industrial verticals, all while executing on our exceptionally high volume sales to Pfizer for the manufacturer of Paxlovid. In Life Science Tools, where we are growing the use of our three recently launched enzymes and driving innovative partnerships with Molecular Assemblies and seqWell, we are energized by unlocking the power of our engineered enzymes when applied to nucleic acid synthesis and next-generation sequencing. As we continue building momentum in this market, we look forward to capitalizing on additional opportunities to expand both our customer and application base going forward. We also continue to expand and advance our pipeline of high-value assets and partnerships in the Biotherapeutics segment. A key clinical milestone for CDX-7108, and the continued focus on advancing IND -enabling work for three additional assets, set this segment up for another step-out year of value creation. I am extremely proud of the Codexis team's tremendous accomplishments. We've had a defining start to the year. And heading into the rest of 2022, we have clear visibility into the multiple catalysts that will accelerate our growth ambitions. We remain focused on driving growth across all of Codexis' markets, and we look forward to providing further updates in the quarters to come. Now, we'd be happy to take your questions. Operator.

Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Steven Mah with Cowen. Please proceed with your question.

Great. Thanks, Operator. Congrats on the quarter. And thanks for taking the questions.

Thanks a lot, Steve.

Yes. So first one on Paxlovid. Can you give us a sense of the Paxlovid revenue cadence for the rest of 2022, given you're maintaining the Paxlovid revenue guide.?And if I'm doing my math right, the $21.3 million in Q1 suggests that potentially on a sequential quarterly-over-quarterly basis, the revenues should be going down? Am I thinking about that right?

Sorry, it's Ross, Steve. I think -- I don't want to get into too much detail about the cadence of each quarter. Honestly, I think Q2 could prove to be a little bit stronger than Q1 for Paxlovid, and then it probably evens out over the back half of the year in terms of Q3, Q4 being more equal, but I'd expect Q2 has a good chance being a little stronger than Q1 for Paxlovid.

Okay. And is there any element of front loading here, where Pfizer's maybe stockpiling the enzyme? Is that what's causing the -- for it to skew forward?

I don't think so. I think, the supply chain buildup that we're observing for Pfizer is exceptional. And so they've lined up enzyme. The enzyme obviously, is needed in advance of manufacturing the key intermediate for Paxlovid. And we're delivering our enzyme to multiple locations for Pfizer. So I don't think there's a stockpiling of our product that's happening. I think, Pfizer seems to be driven to expand the manufacturer of their Paxlovid as quickly as possible to be as responsive to the pandemic as is possible. So I don't see that happening at all.

Okay. Got it. And I don't know if you can give us any color on to 2023, with Paxlovid, but do you expect there to -- I don't know if you can give us any color on that?

Yes, it's super hard. We're obviously executing it substantially well against 2022 orders, and this has been a priority for our company as you can see from the financials. In previous, earlier in the year, we shared with the investor community that we had significant non - cancelable POs for 2023 as well, and that those purchase orders represented a majority of our 2022 guidance expectations, but really roughly a majority. So the outlook beyond this year is extremely difficult to predict. It's good that we have these non - cancelable POs to carry us in, but it's really opaque to make any real clear views of what to expect in 2023 for Paxlovid and our enzymes to support that.

Okay. That makes sense and thanks for that color. A last one for me. On the Life Science Tools enzyme, can you give us any color on the expected demand from Molecular Assemblies, and can you remind us on the margin profiles of this enzymatic DNA synthesis enzyme. Is that going to be in line with the other Life Science Tools enzyme margins that you guys have?

Yes. Good, great question. Thanks. As you heard on the prepared remarks, we're super excited about how well our partnership with Molecular Assemblies is working out. We have shifted from a very intensive enzyme engineering chapter which generates R&D revenues for Codexis, to starting to supply enzymes for Molecular Assemblies enzymatic DNA synthesis. In 2022, those product revenues will be very modest, not very large. But of course, with success, we expect that to ramp next year. Next year as the prepared remarks shared is when we expect Molecular Assemblies to commercialize their business, and that's when enzyme needs will ramp and start to grow. And on the margin question, yes, very much in line with the standard gross margins for our products that you're seeing across our portfolio.

Okay. Great. Thank you.

Thank you, Steve.

Our next question comes from the line of Brandon Couillard with Jefferies, please proceed with your question.

Hey, thanks. Good afternoon. Any chance you could break out the revenue contribution from life sciences in the first quarter and any color on which are the three products you're seeing the most traction the customer are interest in will be interesting? Thanks.

We didn't break out the revenues for life sciences. We certainly uphold our previous outlook for that sector to generate $12 plus million dollars of sales for the company. And that's a mix of both product revenues. But frankly, a majority of R&D revenues as we move through this year. And we're doing well through the first quarter on the three launched products. Of course, we only launched the HiTemp Reverse Transcriptase late last year. So we're encouraged by customer response to that, but it's too early to be generating product sales from the HiTemp Reverse Transcriptase. On the HiFi DNA polymerase for next-gene sequencing, and the HiFi RNA polymerase for messenger RNA. They're both doing well. We continue to get traction. Honestly, the messenger RNA enzyme is doing a little bit better, but they're both doing well for us. We continue to be quite encouraged by the early days of the launch on all three of these enzymes.

Okay. And then, just a question on the R&D revenue line coming under $5 million for the quarter. Both performance and Biotherapeutics were down. Can you just help us understand what's driving that, and your level of confidence in the implied $40 million guide for the year? Thanks.

Yeah, thanks Brandon. We're off to a good start. Effectively, all of the revenues ex - Pfizer are in a good place. We delivered against the first quarter largely as expected. Of course, the highlight for the P&L for this quarter is all the sales to Pfizer. But we're in a good place on the rest of the ex - Pfizer revenue, we continue to see growth throughout the year from the start for 1Q in R&D revenues, and just that's pretty typical for us to have a growing cadence of R&D revenues through the year. And we see that happening in 2022 as well, which obviously implies strength in the back half of the year. We've seen nice growth in the food area, we highlighted that some early R&D work in the other industrial verticals is starting to unfold for us, and there's early R&D revenue-generation there, and we hope to see that continue to grow, and we also shared that we expect to unfold a new Biotherapeutics partnering deal before the end of this year, so that clearly would add to our expectations for being able to deliver the expected R&D revenues for the company over the full year.

Pretty good. Thanks.

Thank you.

Our next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group. Please proceed with your question.

Good afternoon. Thank you for taking the questions. I'm going to maybe tackle the cadence a little bit differently. I'm just wondering, Ross, if you could maybe parse out first half versus second half revenues on the product side or if you want to talk about maybe total revenues? Again, just first half versus second half.

Maybe just talk about total revenues I think, Matt. My expectation is your Q2 revenues probably will grow in a range of 10% to 20% sequentially from where we were in Q1. And then obviously, the balance will be back in the second half of this year. I think, best estimates now, will be probably equally weighted between Q3 and Q4.

That's really helpful. Thank you. And then, one of the topics you haven't discussed, is on the food and nutritional side. Maybe if there's any type of an update on the Tate and Lyle. On the progress that they're seeing with the sweeteners?

Yeah. Thanks, Matt. We highlighted that we generated roughly a $1 million in the quarter in the food sector, spread between our two lead customers, Tate & Lyle and Kalsec. And both of them actually, are showing downstream success for their new products that they've launched, which have been enabled by our enzyme. So just nice momentum, and steady momentum, as we move through last year and got off to a start in 2022. But for the Tate & Lyle sweeteners, which they continue to encourage us, that they are marketing of the new products, the better-tasting Stevia. They call it TASTEVA M, and their bulkier, but similarly low caloric DOLCIA PRIMA Allulose sweetener.Both of them are doing well in new formulation work and promotion to their downstream food and ingredients customer, so feels really good, really solid.

That's great. Thank you.

Thanks, Matt.

[Operator Instructions] Our next question comes from the line of Delcam with Piper Sandler, please proceed with your question.

Good evening, gentlemen. This is E.K. on for Do, congrats on another solid quarter. Start with a quick question about your, my pleasure. I have a question about your pipeline. If you can, comp provides more of your part of thoughts around timelines in terms of development. So you talked about some those assets are pretty IND development. How are you thinking about prioritization of some of these programs? And lastly, some of the flexion points that you're thinking about in terms of when to partner them out? Thank you.

Yeah, really, really good. Thank you. So we're super excited about the continued progress in our Biotherapeutics pipeline. As you know, we have two programs that are in clinical stage. The PKU program has been out-licensed to Nestle now for years, and they are lining up for multiple ascending dose study. And we shared in February that we don't expect that to be completed until next year at this point, so we're most excited in the clinical stage with the impending readout from the Phase I trials for CDX-7108, the lipase that I highlighted on the call for exocrine pancreatic insufficiency. So this is really a critical priority for Codexis and we're quite excited to ultimately show the data that continues -- that reinforces the continued development of CDX-7108. As a reminder, CDX-7108 is co-owned between Codexis and Nestle Health Science. Behind that we've got three programs that are advancing towards IND -enabling stage. One of them is CDX-6512 for homocystinuria, this is the one where we have the orphan drug designation and we have the rare pediatric disease designation as well. And that one is already moving towards -- through the IND -enabling step, we've lined up for GMP manufacturing of CDX-6512, so we're on track to bring that one towards the clinic. As we move to the end of next year, we should be starting to line up our first clinical trials for 6512. The other two programs aren't quite yet at the IND-enabling stage, they're being lined up for that. One of those is another self wholly-owned asset CDX-6210 for Maple Syrup Urine Disease. So stay tuned and we'll let you know when we start the IND-enabling work for CDX-6210 for MSUD. And the third nearly IND-enabling asset is a partnered program with Nestlé. So this would…

Makes sense. Thanks for all the color.

Thank you.

I'm showing there are no further questions. I would like to turn the call back over to John Nicols for closing remarks.

Okay. Thank you everybody again for joining us. As a reminder, we will be presenting two posters at the American Society of Gene & Cell Therapy,s 25th Annual Meeting on May 16. Additionally, we will be attending several investor conferences in May and June this year, and we hope to see you there as well in person for many of those events. We look forward to continuing to update you on Codexis' progress, and to all the mothers out there, have a great Happy Mother's Day, and for all those guys out there, don't forget to say thanks to your mothers and your partners who are mothers. Everyone have a great rest of your afternoon.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.