For joining us at the 2023 London Healthcare Conference. Very happy to have Codexis with us this year. Joining us from the company for this conversation, CEO Stephen Dilly. Stephen? Hello. Over the past year, you've pivoted the company significantly toward what you call the ECO platform. For those that may be less familiar, may not have followed all the changes over the past 12 months, what is ECO and why do we need it? Why does the market need it? So the ECO platform, or the ECO Synthesis platform, which stands for Enzyme-Catalyzed Oligosynthesis platform, is a way of making siRNA purely enzymatically. It consists of an engine, which is an exquisitely engineered TdT polymerase and a phosphatase, plus the building blocks, the nucleotide quadraphosphates, plus the starter oligo, all made enzymatically, which we believe is a transformational, disruptive technology that will be very important in the scale-up to meet the demand in the siRNA space. Is this a capability that Codexis has just kinda had in the background? Is it something that you and your team kind of identified over the past 12 months? Where has it kind of been in the myriad, I guess, of pipeline projects that Codexis has trialed, in the past few years? Right. So for those of you relatively new to the story, Codexis has been around for two decades with a core technology around enzyme engineering. And when you have a wonderful, broadly applicable technology, it's sometimes a challenge to work out what it's for and what the real sort of killer app is. And so Codexis has done some very interesting stuff over the years, from biofuels to food, feed, agriculture. And then we built our nucleus and our current base business around biocatalysis for small-molecule API production. And if you want one claim to fame, we were the people that made tons of a specific enzyme, which enabled Pfizer to make Paxlovid in sufficient quantities to address the pandemic. And we've taken that enzyme engineering capability and said, "Okay, so there's an interesting field in small molecule API manufacturing. Where can we go from here?" And what we spotted was the disconnect between the current capability in phosphoramidite chemistry to make siRNA at scale and the coming wave of demand, and said, "There has to be an enzymatic solution here," which was coincident with a bunch of people that were already working with us in biocatalysis, saying, "Hey, can you guys do RNA?" And so that's really started two years ago. We've been under the radar screen, working on this, 'cause it's really, really hard. We first sort of showed it to people at the TIDES meeting in San Diego in April, and they said, "Lovely idea. Come back when it works." And then TIDES Europe, which was in Amsterdam a couple of weeks ago, we actually showed them a functional early version of the ECO platform, which completely changed the nature of the conversations. Yeah, I was gonna ask you about the two TIDES conferences and including the most recent one, and how the nature of the conversations have changed. Who are some of the customers that you're interacting with? Are they CDMOs? Are they drug manufacturers themselves? And, yeah, I guess, how has that conversation, I guess, changed since you first introduced it last spring? Yeah, it's fascinating. So we have what we believe is a very disruptive technology, and so you'd think that the people currently big in siRNA would recognize that immediately and jump on it. It's not the case. Cognitive dissonance is a real thing. So people that are currently spending hundreds of millions of dollars building phosphoramidite chemistry plants don't want to know that there's a much more efficient enzymatic solution that can happen in water. The people that wanna know that are the CDMOs that aren't necessarily in that space yet, that want to get into that space in a more efficient way. So we've gone from thinking that we'd be talking to the big, established players and innovators to saying, "No, it's gonna be like all disruptive change. It's gonna come from the edge." And so we're talking to technology partners, people that are very keen on taking our core technology and turning it into a desktop machine that can make small quantities of siRNA, to scaling partners who want to talk to us about how you immobilize enzymes on very large columns to be able to make massive amounts of siRNA, to small company innovators that are coming up with interesting constructs with new substitutions, and they want to know if our enzyme can really do that, through to companies that are looking at us and saying, "Okay, well, we've got interesting signals that our boutique indication might turn into something large, and we're worried about scale. And so how can we talk to you?" And then, the other part of these conversations is an enzyme called double-stranded RNA ligase, which allows you to stick together in a very controlled way, short-mers to make a complete construct. And we're already in deep conversations and some contracts with companies that are making their siRNA by the conventional phosphoramidite chemistry route, saying, "Actually, we can make it much more efficiently by using a ligation step," and we have a very, very interesting sort of way forward there. So getting people used to the ideas that enzymes can be involved in the synthesis of siRNA. You've talked about, I think a commercial timeline, for ECO— Yeah. Sometime in the 2025 timeframe. What's the next milestone that you expect to demonstrate on that pathway toward commercial stage? Right. So I'm gonna preface this by pointing out something super important about Codexis. We have a very long cash runway. We've been through a lot of streamlining and thoughtful restructuring of the company, so we can go as long as we want to. We believe that we are funded through cash flow, break even, and profitability on existing cash because we have this base business in pharma manufacturing that is profitable, right? So we can go along, so it can be relatively relaxed about how and when, and make sure we do it properly. The first thing that we're gonna be showing people, though, at the end of this year, so within the next month or so, is what we call gram scale synthesis. So this is our little engine making a reasonable amount, you know, hundreds of milligrams, if not, not a gram of a real siRNA sequence, including all the modifications that people use, at reasonable purity, with good conversion rates, and so on. So, so that is meant to get people that, you know, came to see us at TIDES when we made a really beautiful 6-mer, and they said, "Oh, that's nice," to saying, "Ah, this is real." Now, it's, it, it's the conversation where we put it in their hands, and they can alpha test it and beta test it as a platform next year. So really those first sort of friends and family, almost conversations around how we build this into the thing that people really want next year. First, sort of sales we'll talk about with the double-stranded RNA ligase in 2024, and then the initial commercialization of the ECO platform itself in 2025 and beyond. And really, what we're trying to build for is around the end of the decade, when we expect the world demand of siRNA to have moved from about 1 metric ton a year to about 30 metric tons a year. And that would be an awful lot of acetonitrile to make that amount of siRNA, and we can do it in water. As you think about, you know, the commercial launch in 2025, is it plausible that ECO, you know, could be specced in to programs, let's say, that are already in phase II, phase III, maybe already commercial? Or are we mostly talking about adoption in pre-commercial programs? How do we think about the spectrum, I guess, of early adopters and where you could fit in, theoretically? So the simplest path forward is to get in with innovators so that the preclinical work and the early clinical work is done with enzymatically synthesized siRNA. Very clear path because you can spec it in early stage and just improve over time. We're currently working on what the analytical bridge would look like from a chemically synthesized siRNA to an enzymatic one. And it's pretty interesting because the enzymatic one is gonna be significantly purer, with significantly less sort of impurities in its profile, because we don't have the harsh phosphoramidite chemistry side chain reactions. What you're gonna see with an enzymatically produced oligo is it's gonna be the plus one and the minus one. Now, because the way our system works is a tethered enzyme and a starter oligo plus a building block passed by the tethered enzyme, we can sample at every synthetic step, and so we can actually purify in midstream. So we expect to come out of that with a really pure oligo. The other part of it is, because it's enzymatic, we can control chirality. I know there are a lot of siRNAs that use thiophosphate groups, which have orientation to them. At the moment, chemically produced siRNAs are largely random mixes of all the different enantiomers. So we have a kind of me-too better, but therein is a real regulatory conundrum, because if you take something that is purer than the thing that has been developed, you need to do the bridge. So what we're working on at the moment is: Do we try and replicate what chemistry does, or do we actually make something better that should have a cleaner efficacy and tolerability profile? But, yeah, the history of new solutions like this, it is up to the innovative companies to come up with something reasonable and sell it to the FDA, rather than waiting for them to come up with the guidelines. We've talked to, you know, some experts, you know, may be familiar with the approach but have questioned some attributes like volumetric productivity and flexibility of an enzymatic, you know, approach. Yeah. What are some of the, I guess, pushbacks that you hear from some of your initial customer conversations, and how do you think ECO will ultimately stack up on some of those key attributes versus Phosphoramidite? Yeah. So, so we hear volumetric productivity, we hear waste products, we hear flexibility, cost, how long is it gonna take? All that kind of stuff. So let's start with volumetric productivity. Currently, if you want—a nd I'm gonna give some rough numbers, so don't shoot me. If you want to make 1 kg of siRNA by phosphoramidite chemistry, it's about 1,000 liters of acetonitrile. It's about 300 liters of toluene and other solvents. So that's about, you know, 1,300 liters of organic solvent. We see ourselves doing the same thing in 150 liters of water. Right? Now, we've heard, well, you can't just pour the water down the drain, but, you know, I'd ask you, would you rather try and dispose of a gallon of gasoline or a glass of dirty water, you know? It's actually easier our way. Plus, what we can do, we believe we're gonna be at 10-kilo batches in 1,500 liters standard fermenters. Okay? Standard fermenters. We're not talking about, you know, populating Colorado with acetonitrile tanks. We're talking about standard fermenters that run off water. That's the beauty of the enzymatic approach, and, you know, we're innovating all the way back to nature. This is how nature makes oligos, right? Now, the other thing we hear is flexibility, and the thing that I can claim no credit for this, this is the absolute genius power of some of the people within Codexis, is going from the standard paradigm of enzymes, which is you make them super selective for one molecule and one conversion, to this TdT is promiscuous. So it can grab any starter oligo, and it can add any NQP building block, including the modified ones. What we're doing at the moment is moving from, you know, to more and more sort of breadth in that promiscuity. That gives us the flexibility. Now, someone is always gonna come up with something that we can't do yet, which is why we see this being, you know, like the iPhone; there'll be version 1, version 2, version 3. The way the system is designed with columns means it can be multiplexed. We may, over time, evolve to more than one TdT enzyme to do specific subsets of reactions. It's just the sequence that you pass it through the columns and the next building block that you add. This sort of makes it into something that should be very attractive to CDMOs because with the same kit, they can service many, many customers, as opposed to the challenge we've had with biocatalysis for CDMOs, which is we have to evolve an enzyme for every new molecule they want to do. In terms of, you know, investors beginning to sketch out the longer-term sort of financial opportunity here, how should we model this out? I mean, Agilent is doing, you know, let's say $350+ million of revenue in their oligo business this year. Three or four years ago, they were doing $150 million. Over half of their commercial of that revenue base is from commercial therapies. They're also putting $750 million— Yeah. Of CapEx in the ground right now. I know it's early, but can you give us any, like, parameters or benchmarks to think about revenue opportunity from this, call it five years out? Yeah. So, so let's, let's look at it on the basis of, you know, is Codexis a good bet from here? Well, we're currently. We have a, you know, $75 million of cash. We have a core business in pharma manufacturing that, that throws off about $35 million in top line revenue with about a 60% margin. You know, we, we are currently valued on that part of the business. So the ECO Synthesis platform is a bit of a freebie. And we can do it within our current cash. We don't have to raise money. We can, we can. We've got time to get it right. We see the, the first sort of upswing being the double-stranded RNA ligase, as I say, starting with revenues next year. We see that as over time in the sort of, you know, high double-digit revenue potential as that spreads widely and becomes one of the cornerstones of phosphoramidite chemistry. And then we see actually $many hundreds of millions of revenue potential in the ECO platform itself through the different models. Now, there's the put the kit in the hand of the CDMO model, there's the put the kit in the hands of the innovator company so they can produce their own. Both of those are, you know, charge for the, charge for the enzymes and get a small royalty off the back end. This is such a big field, this is such a big TAM, that we can do extremely well, by taking that kind of approach. And then there's the scale-up and, you know, making siRNA ourselves, and because this is enzymatic, because it's aqueous, because it's on standard equipment, it doesn't cost us very much to scale up, to be able to make, you know, hundreds of grams and kilogram quantities of siRNA. And one of the things that's really important about our business model is, you know, small companies with great innovative medicines for big indications don't tend to become the commercializers of those indications. They tend to get taken out. So the fact that Codexis has been, you know, in relationships with most of the big 20 pharmaceutical companies making enzymes for biocatalysis means that when they're doing diligence on Company A that has a really cool siRNA, they're looking at their CMC, and they say, "Who does it? It's Codexis?." They're gonna nod and grunt and move on to the next bit of diligence, right? So we see that as a real selling point for our platform, is our history of making really high-quality enzymes reliably, repetitively over many years. You're hosting a KOL event on ECO in a couple of weeks. The former founder and CEO of Alnylam is part of your advisory board, he's gonna be part of this KOL event. What should we look forward there in terms of content and any announcements? Yeah, so this is our ECO Day, and this is part of our sort of coming out party. And, you know, John Maraganore is gonna be there, really talking about the coming wave of demand and the problems of addressing it. You know, and we're super excited to have him there, just— I mean, Mr. siRNA, he really grandfathered the field. That's great in itself. We're also gonna have David Butler, who's the Chief Technology Officer of Hongene there as well. So, you know, John can talk from the science and the medicine and the coming wave of therapeutics angle, and then David's gonna be talking about, you know, the difficulty of scaling the current technologies. And so we think that'll be really cool, and essentially, they're gonna lay out a set of problems and say: "You know, if we're gonna get excited about ECO, it's gotta do this, this, and this." And then Stefan Lutz, our head of research, is gonna show how we're gonna get there. So we think that's quite an important event. We'll keep it relatively brief. It's horribly early in the morning for those of us live on the West Coast, but, you know, I think it'll be worth it. You've as part of this restructuring decided to exit biotherapeutics for the most part. Will you talk about, I guess, that unwind process over the next quarter or two? Yeah. As you kind of move some of these programs off your worksheet, and any, I guess, cash that process could bring in? Yeah, so, you know, I'm a biotherapeutics guy by extraction. I've been in drug development for an embarrassing number of years. I looked at that platform, which was based on the concept of making, you know, enzymes into drugs themselves, said, "Lovely idea. We can't afford it." It's just like, you know, a profit share is a lost share for a decade, and there we were sitting in profit-sharing relationships with big companies. So what we've been doing is reframing that, and so specifically with Nestlé, with 7108, our enzyme replacement therapy for pancreatic insufficiency, we've been reframing that relationship so it'll be like an out-licensing of a phase I drug. It'll be a modest upfront, it'll be milestones, it'll be royalties, and we should be able to talk about that within the next couple of months. I'm seeing that. Then, there are other things in our portfolio. We've made some beautiful transgenes that we were in collaboration with Takeda. Takeda decided to exit gene therapy. They may see the light of day again as enzyme replacement therapies. Again, you know, don't expect huge amounts of incoming, but what we've done is we've stopped the bleeding. We're not spending the money on development and digging ourselves into a bigger hole because we see, you know, we've built a path to profitability. Preserving that path is front and center of our minds. We would rather take back-ended financing than put that in jeopardy. And so, yeah, look for some modest news over the next few months and years. Lastly, on the core main pharma manufacturing business, which you're committed to and is cash flow positive, you know, you've talked about returning to growth in 2024. Could you just talk about the source of confidence in that outcome next year? The returning to growth next year is based around existing orders and relationships that we have in place. What we've set ourselves and set outside is a target of modest growth and improving margins over time. So, as I say, currently, sort of mid-30s in terms of the top-line revenue generation. We expect that to go into the 40s next year and then grow sort of high single-digit, low double-digit CAGR. Currently, we have 3 enzymes to 4 customers that are 70% of the business, right? That makes it incredibly lumpy. If someone goes soft on their orders 'cause they stop their channel or whatever, we'll look to see that moving to be the big 6 rather than the big 3 over the next few years. That will smooth things out. That will also provide us with an uplift in margins because, at the moment, you know, we are looking at some relatively old enzymes where they're not as profitable as the newer ones, and the newer ones are more profitable because we can charge more 'cause they do harder things. So what we see is steady revenue growth, improving margins, throwing off cash, which buys us the oxygen to get to the next iteration, which is the ECO platform. So it all fits. Super. Unfortunately, we're out of time, so we'll have to leave it there. Stephen, thanks for being here. Everybody— Thank you. Thanks for having me. Have a great day.