It's working. All right. Okay, everybody, welcome back to the 2024 Stifel Healthcare Conference. We are on the life sciences track, and we're happy to have Codexis with us here as our next company. Kevin Norrett, Chief Operating Officer, agreed to spend some time with us today. Thanks for doing that. You bet. I think a good place to start would just be on a little bit of background for Codexis, just given that you have made some strategic changes over the last couple of years. You're set on a path right now that sounds like you feel confident on. And so maybe just as a good introduction to ECO, what you're doing there, what you think the market outlook should be. Sure. No, thanks for the time. Thanks for welcoming us to your conference, so a couple of things around Codexis. It's a company that's been around for about 20 years, focused around an enzyme engineering platform called CodeEvolver. We have a base business of which that has been around for the last 10 years in pharmaceutical manufacturing, engineering enzymes for small molecule manufacturing. We also, for what you alluded to, which is our emerging business, which is entering the siRNA manufacturing space, and that is our ECO Synthesis platform. We went through a pretty rigorous review of all the things that Codexis was prosecuting over the last couple of years that I joined the organization. We feel these are really the most compelling parts of our business that can both drive us to cash flow breakeven, but also provide a real growth opportunity for the company in the future with this emerging modality in siRNA. Helpful. Okay. And what is it about the siRNA market, the oligo market, that is so attractive? I mean, those of us that watch the drug development landscape can see that there's a class of drugs that is coming into its own a little bit. But maybe just expand on why you think that that is an opportunity worth pursuing. For sure. It's actually really interesting because when you look at the parallels to this market versus, say, monoclonal antibodies where they were 20 years ago, they're pretty uncanny, so right now in siRNA therapeutics, there are about six approved products, five of which are for rare disease, one of which is for a large indication, which is lowering cholesterol, and that's been recently launched by Novartis in 2021, and there's well over 400 products in the pipeline across preclinical and clinical development, some say as high as 700. Those numbers keep going up, and I think it's because of the benefits that this modality offers to patients, and that is dosing once or twice a year, subcutaneously, potentially future orally, and certainly from a patient convenience and from a long-term chronic indication standpoint for things like lowering cholesterol, there's a huge market opportunity. When you look at those products that are in the pipeline, not all of those are huge indications, but a good proportion, about 10% of them are targeted towards cardiovascular or CNS disease or other large indications. And those are products that are going to target hundreds of thousands to millions of patients. So while there are six approved products today, five of which for rare disease, and total kilograms produced of siRNA is probably well less than 1,000 kilograms across all those products, including those that are required in the pipeline from a clinical development standpoint. If you're talking about a product like inclisiran that's going to go from $200 million in sales to potentially $3 billion of sales, the production of siRNA is going to increase by 10 x too. So then you're talking about metric tons of siRNA required for that indication alone. And if you have 40 or so of those that are in the pipeline and you assume only about a third of those get to market, that's 15 or so products, each needing 1,000 to 2,000 kilograms of product that's going from 1,000 kilograms in terms of siRNA produced today to upwards around 30,000. So a huge market inflection point, just like when monoclonal antibodies were launching in the late 1990s, mid-1990s and going through into the mid-2000s. So we think that's a real parallel to where this modality is going. Do you have the numbers associated with the bar chart handy in your mind, just in terms of what percentage of the assets under development are in, say, phase I or preclinical? Yeah, a large proportion of, I'd say about 50% of them are in preclinical phase I. those 40 or so in the phase II and TIDES category is really what we're focused on in terms of immediate application of an enzymatic process. Because the other thing that's important to note is the chemical method of which these are produced today is not really feasible for reaching those 1,000 to 2,000 kilogram amounts without massive organic solvents, huge CapEx footprints, an example being Agilent built a facility a couple of years back. They announced this around $700 million plus for 2,000 kilograms of capacity. Not going to be able to build one of those for every single one of those assets that they come to the market, or you're talking about a $5 to 10 billion investment in capacity for manufacturing siRNAs. So something needs to be done to actually produce it in a more efficient, lower capital intensive way. And ideally, there's other benefits there in terms of what our platform offers in terms of scalability, improved yield, improved purity. So we think we have a pretty competitive offering to the current chemical methods. Okay. And in terms of where Codexis comes into the process, I should say, when do you target coming into the process? Because obviously an early stage asset allows them to not be set in their ways, but the later stage assets have been de-risked in a way that makes you feel better about your chances. So what is the right avenue for Codexis to go down when you're targeting, admittedly, what have to be limited numbers of opportunities, at least initially, at the risk of overextending yourself, right? So I mean. Yeah. Good question. I mean, I think you're asking two questions in there. One is really around what needs to happen for potential for products that are already in the pipeline with an embedded chemical process, so switching to an enzymatic method. I'll answer that one first, and that really comes down to what is our first foray and one of the things we're focused on in the next couple of years of expanding business is the use of a double-stranded RNA ligase for ligating short oligo segments that have been produced chemically together in a more effective, efficient way. That's a really easy regulatory hurdle to overcome. There are already products that use wild type versions of that enzyme. So it's the first sort of bridge into using enzymatic tools for introducing that into a chemical process. That's something that's not part of the final drug API and really drives increases in product quality and purity. They're more reducing manufacturing costs on an immediate basis. So that's one way that can lead to switching potentially of a large indication asset that's already in clinical development. With regards to the full enzymatic platform, that might take a little bit longer. That being said, and that's because you're talking about replacing the chemical process with a fully enzymatic approach. So there's a slightly different impurity profile, probably different analytical methods that need to be developed around quality control and whatnot. But we've been looking at that extremely closely and think that there's a bridge there because of the enhancements we see in terms of the product profile, particularly the improved product quality and purity and potentially improved yield, which we just recently demonstrated at the TIDES USA meeting with our synthesis of inclisiran. Right. That's a good way to segue into just what it is that you present. Maybe just taking a step backward. TIDES is a meeting that's important to oligo drug manufacturers. There's a TIDES US conference that took place earlier in the year, May, I believe. Then there's TIDES Europe that just took place recently, a couple of weeks ago. Can you talk a little bit about what you showed at TIDES US in May and then what you showed in TIDES Europe and how the progression from one data set or presentation to the other gives you confidence on just the process that you're on or the development track that you're on? Sure. And maybe I can take it one step further back into where we were at the end of 2023 in terms of customer conversations and what we had demonstrated. At the end of 2023, beginning of this year, we had completed what we call the gram-scale synthesis of a relatively short oligo. So siRNA molecules in full length are anywhere from 15 oligonucleotides up to 30. Most of the commercially approved assets are in the 20 range. So we had done the synthesis of a 7-mer at a gram scale to show that the process actually worked and could get to a scale that was sort of a proof point. By the time we got to mid-May of this year, we were able to synthesize two commercially approved assets, albeit not quite to completion of a single strand. Lumasiran and Givosiran were two commercially approved assets for rare diseases launched by Alnylam. We produced a 13-mer and maybe a 15-mer of those particular products. Demonstrating we could go longer in length and we could produce assets that had common chemical modifications in their backbone. But it was a single strand. What's important to know about this recent TIDES USA meeting was we did the complete synthesis of a full-length asset. We did a 21-mer with a sense strand and an antisense strand because that's what you needed for it to be therapeutically active, which is a double-stranded oligonucleotide. Y ou need to be able to attach through another enzymatic method, a tissue targeting moiety, like a chemical structure or something else that targets it towards a particular tissue within the body, in this case, the liver. So that capability really put us over the hump, I think, in proving the technology can work for synthesizing a complete asset with attachment of a tissue targeting moiety. The other really interesting fact of this last TIDES meeting that we feel is so pivotal was that we did this four different ways. We did this with chemically synthesized fragments of inclisiran that were linked together via our ligase. We did this with a combination of chemical and enzymatically synthesized fragments and ligated them together. And we did it with full-length sequential sequences, meaning going from 0 to 21. And then we did it also with enzymatically produced fragments like a 10-mer and 11-mer and synthesizing those two or ligating those two together. And what we saw was really no difference in terms of coupling time, purity profile, and overall sort of yield from the process. That was super exciting to us because it shows that we could work with a customer depending on where they are in the evolution of adoption of an enzymatic platform for their molecule. If they want to incorporate some portions of chemical and some portions of enzymatic, we can do that. If they want to use a fully enzymatic approach, we can do that. Okay, so that says something about the flexibility of the offering that you will go to customers with and that if they have a particular idea in mind, you will meet them at that idea. It's not sort of a monolithic approach to here's your oligo, see you next week. Yeah. And to be honest, it's really important. And one of the reasons we went down that route was customers are approaching us with different ways they want to do it. Some are, no, no, no, no, I want to do an enzymatic synthesis of fragments and then use a ligase to ligate them together. Some are like, nope, I want to stick with PAC-based oligo phosphoramidite chemistry generated oligos and use a ligation. We have to be able to meet them where they are and be able to do either in order to fill our ECO Innovation Lab with customers and drive adoption of the technology. Is there anything, I mean, doing it as sort of a proof of concept is one thing, but at scale would be another thing. Is there anything about one of those four methods or some of those four methods that is more onerous or more costly than the others such that there's a preference that you might have for the approach that a customer would take? Let me address a point you made there though in terms of scale. Because while we've demonstrated this across these four routes, what we also need to demonstrate to our customers, but we can do that through real revenue-generating contracts, is actually moving to scaling up the process for them. So getting to tens and hundreds of grams of material is one more onerous than the other. I would say ligation is the simplest way for customers to approach us today, meaning stick with your pack-based oligos. We'll design or deliver a double-stranded RNA ligase and a solution in terms of the process development analytical methods for you to be able to scale this up in your clinical studies, which is important back to the switching strategy you asked about, meaning be able to do that sooner. So we're focused on that capability. The sequential synthesis piece, we have a couple of other pieces that we want to lock down this year in particular to facilitate that process being smooth, and that is securing our supply of the raw materials needed, which is the nucleotide quadraphosphate, which is unique to our process. So I would say ligation is probably the easiest today and an immediate cost-effective one that people can incorporate. And maybe the ECO synthesis platform is going to take a little bit more into the back half of this year in terms of full sequential synthesis. But I would say long term, the vision is that there one's not more onerous than the other. It's more just dependent on the construct and what might be easiest and most cost-effective to manufacture. Yeah. Okay. So, just said another way, there's no sort of pitfall that you run into depending on some customer's preference for one thing or another that puts you at a disadvantage. No, not currently, not at all. In the future, there might be new modifications, meaning chemical modifications made to side groups on different oligonucleotide or different nucleotides within the construct that may facilitate one more easily than the other, but right now, nothing that we see. Okay, so what does a company like Alnylam look for next? I mean, you've been working with them for a while now. You demonstrated the gram- scale. You stepped that up with what you showed a couple of weeks ago, multiple different ways. Hey, we can do this backwards or frontwards depending on what you think. What now are they looking to see you perform or be going forward? I think it gets back to the scale comment. Okay, so it's really just about can you make more of it? Can you make more of it? Because what we've heard from our customers, them being one, is that we need to see this at like 10 to 100 gram scale to say that it's ready for going into a full GMP process, and so that's one of the key value propositions of our sort of ECO Innovation Lab, which is our pilot facility where we've been making these constructs, is demonstrating that, okay, proof of concept, we've demonstrated that we can actually do this complete synthesis. We can do the synthesis of the fragments you need, and the analytical or the purity of these reflect really well when compared to phosphoramidite chemistry. The next step is, okay, can you scale that process to larger, and what pitfalls have you encountered as part of that natural part of just manufacturing scale- up? That's what we're focused on for 2025, is scaling up. Is there anything that prevents you from working on the other oligo-based products that a company like Alnylam or another one might have in the portfolio? I mean, at a high level, it seems like it's an applicable technology to kind of anything being developed in that space, but I don't know whether there's a more nuanced view that says some things about one particular drug are more amenable or not. Yeah, it's a really good question because there's a lot of nucleic acid-based therapies that you're alluding to, that there's siRNAs, there's ASOs, there's single guide RNAs. We're really staying focused on the siRNAs for now because we think successful sort of commercial adoption of the platform will be being an expert in that space, and of that upward of 700, the great proportion of those are siRNA molecules. Not all of them, some are ASOs or combinations of both, meaning the way they're designed, and they might require a slightly different modification, but we're staying focused on that because we think you can then immediately target assets that are in the clinic today and demonstrate an opportunity for people to either switch during their clinical process or switch after they become commercial as a patent extension strategy or some other way they want to engage with us. But we do look forward to applying the technology to these other modalities in the future. We just want to not get too distracted as a small company. Yeah, but in staying true to siRNA, I would imagine that to our point on you only get so many initial partnerships to form upfront, you're probably looking for companies where it's about more than just one asset. Absolutely. We're looking at the major siRNA players. And nicely, it lines up with who's most interested at this point, right? Because they're looking for an advantage to their manufacturing process because they're looking at their pipeline of products and saying, "Oh God, I got a drug in hypertension and I got a drug for targeted Alzheimer's." And I'm like, "How am I going to ever tackle the drug production needs for these without an enzymatic method or something alternative to chemistry?" So they're the ones that are sitting at the table going, "We really want to adopt your technology and apply it across the pipeline as a platform. Yep. Okay. I think one of the things that will be important for you going forward per your own commentary is just this development or completion of the innovation lab that you're working on. Can you talk a little bit about when that gets finished and then what the timeline is and the costs that's associated with building out a GMP facility? Sure. Sure. We get asked this question a lot. Well, first, I'll say that we're going to be very prudent with the capital we have today to ensure we can preserve our cash flow break even, which is targeted towards the end of 2026. That being said, the ECO Innovation Lab is actually well on its way. It should be done by the end of this year. Now, what does that mean? Well, we already have sort of the sort of makings of the ECO Innovation Lab itself in terms of the capabilities. It's about consolidating these into a single area in our current footprint and providing efficiency in terms of the teams that are working together. So it allows us to be able to be more efficient with customers and actually making them product. As far as the GMP portion of the business, there's two ways we're thinking about that, right? One is it takes a couple of years from the time you break ground to validate, to put a GMP manufacturing plant in place to be able to start filling it, at least two years. So we don't have that today. We won't have that a year from now, even if we broke ground tomorrow. So we need to look at ways that we can take our process and scale it up through large CDMOs that are focused and interested in adopting a new technology. And those are the likes of the Bachems of the world, the Agilents of the world, etc., that want to take this technology and be our GMP scale-up partner. So once we've completed the process development work and optimized and provided them GLP material for either toxicity or preclinical studies, they can take that process and put it into a GMP plan, scale it up. So that's one way so we can show a path to customers for the GMP. So look for more information on that in terms of a partnership in the 2025 timeframe. The second piece is building out a plan, as you described. And we're basically doing the design work right now to see what that would look like and at what scale. And there's multiple different ways to approach that. Georgia, our CFO, and Alison, our new CTO, are looking very closely at ways to maybe not necessarily have to break ground with a fresh new spot, which costs more, or maybe adopting or taking on an existing facility that's 60% of the way built out. There are a lot of those around actually in excess capacity. And then only having to purchase equipment and bring that up to speed in a more capital-efficient manner. So we're looking at that in terms of over the next couple of years to figure out what's the most efficient way to do that. Yep. Yep. That seems like at least a strategy worth pursuing anyways, looking into. But your point on a CDMO partner makes me think about just what it is that CDMOs need to see because obviously there's a CapEx, to your point, there's a CapEx discussion there. There's a tech transfer discussion. There's an expertise discussion. So where are you in demonstrating these things for CDMO partners? And how might that differ from what you've shown to Alnylam, who's probably gotten up the curve on a lot of these things faster, not probably, definitely than a CDMO maybe thinking about the platform? I think the CDMO interest comes from the fact that they are sort of parroting our value proposition back to us, which is they're looking at this pipeline of assets and they can't build the capacity needed in time for a purely chemical process. So they're looking at ligation as an initial step in terms of, and they've seen the proof points there. And so several CDMOs came to me at the TIDES EU meeting, for example, were like, "Okay, we clearly understand we need a ligation solution. How can we start working together?" Then there's those that were already working together, like the Bachem, where we presented a joint collaboration poster. I think the other thing that they needed to see that we presented in a couple of different venues is that the CapEx and the materials needed is not really that much different than what they have already from a chemistry standpoint. Stirred tanks, water, it's an aqueous-based solution, management of that versus management of toxic organic solvents, these types of things. They all seem very solvable. When we sit in front of them and show them kind of design specs and how we're doing, they're like, "Oh, okay, that really works. I see how that's not going to be as expensive and it fits into my existing footprint." So when you think about the GMP partnership, there's probably two ways. One is on the ligation front in terms of just providing a ligase to arm them with the technology to be able to provide a more effective manufacturing solution. But there's also the idea that the CapEx required and the investment they need to make to adopt the technology is not that significant as compared to building out more capacity on the chemistry side. So there's no on the checklist of things that a CDMO would need to see in order to say, "Yes, Codexis is going to be our partner in the future." There are no items on there that are dramatically different or that represent some different conversation that you haven't yet had. I think about COGS and just, and I'll ask a question about savings on a drug and whether that's math that a CDMO cares more about than maybe a company that I keep using Alnylam, but siRNA company X. Great point. And I might have missed that when you said that earlier, but I think one of the things that they all need to see is they need to see a path to a secure supply of raw materials and the cost of those raw materials being in a fashion that ties into a COGS assumption that they know they can manufacture this in an effective way. Otherwise, why would they want the technology there to stick with their current methods? So those are two key points you kind of hit on there that they've got to see. And so what we're trying to demonstrate to them in the course of the next six to 12 months as well is tackling both of those, making sure we have our secure supply of raw materials, either chemical NQPs or enzymatic NQPs. We're working on both, right? We use chemical NQPs today, and we have an enzymatic process that is moving forward and should be completed this year. And then what is the cost associated with that? Yeah. Yeah, that's a good point. The way that you have framed the cost savings that your platform can generate is to say there can be $20 million or so in savings if you're talking about a $1 billion dollar drug. Is that generally true across any siRNA drug that would reach $1 billion? And do you feel comfortable? And I think you've put out 50% of that $20 million could come to you. Is that a number that could kind of feel good to most people thinking about what you might end up getting out of the equation, so to speak? Sure. Let me give a little more background to that in terms of illustrating how we kind of come up with that thinking because it is illustrative today. We haven't signed that deal for that billion-dollar product with that particular cost savings. But when you think about the way siRNA drugs are manufactured, there's roughly a 10% or so COGS associated. So on a billion-dollar product, that's about $100 million of COGS for producing the actual siRNA itself. Within that, the way that cost breakdown is you have the kind of manufacturing costs, the packaging costs, etc., all that. But you also have a significant part within the manufacturing costs. This is around downstream purification. And if you're able to synthesize fragments via a chemical method, shorter fragments, you inherently have a more pure product. If you're able to effectively ligate those products together very effectively, that's where the cost savings is driven from. So why do we think that could be 20%? It could be a little higher than 20%. Kind of depends on the size of the fragment and the design of it itself and how effectively we design a ligase for them. But it seems like a very rational conversation to have with them say, "Look, within your 60% of manufacturing costs coming out of that COGS number, we're saving you 20%-30% of that, that we could garner a significant amount of dollars associated for that off a $1 billion product." That's how we come up with that 50% number. I think that the proof will be in the pudding in terms of getting up to clinical scale where you start to see or come to phase three clinical scale and commercial as that being an ongoing revenue stream. But the important thing to note there too is that $10 million or so, we say, of the $100 million of COGS savings, 20% of that is $20 million. We could garner maybe $10 million of that. That's more than double what our best pharmaceutical manufacturing enzyme is. So it's a significantly bigger opportunity because the impact is larger. Bigger opportunity and the math doesn't strike anyone as unreasonable for a partner looking at their own cost equation. No, actually, we've had some of those conversations already, and where the partner, it's really interesting to bring it up, where the partner immediately starts to put two and two together is they realize that the way we've engineered the enzyme is so much more effective from a loading standpoint, not getting too technical, but you need to use so little of the enzyme to get the desired effect, so from a volumetric efficiency and a yield standpoint, they understand that this can drive significant cost savings, and so it's been an epiphany as we've gone through these customer conversations, and they basically have parroted it back to us and say, "Okay, now I understand why you're talking about these types of economics." And it really comes down to what we've demonstrated that we can do from an engineering standpoint. Okay, so what does that mean the revenue generation path for this platform looks like in the next couple of years? Next couple of years, just to reiterate, we're really focused on our base business, the pharmaceutical manufacturing business, growing the top line there. Double-digit growth is our assumption. In addition, we have the emerging double-stranded ligase business, which we call pharma manufacturing 2.0 because it's still designing an enzyme, in this case, a double-stranded ligase, RNA ligase, and scaling it up as products scale through the clinical pipeline into commercialization. So that's the economics we were just describing, and then we have the full ECO platform, of which initially starts in the ECO Innovation Lab, and the revenue streams around that will be coming on a little bit later, more in the 2026 timeframe as we provide this path to GMP. Our two focus areas for the next couple of years are pharma manufacturing and that double-stranded ligase scale-up to show that we can execute and repeat this business. Okay. So I take that comment to mean that by 2027, perhaps you could be generating revenues from companies using your platform and you deriving the benefits that we kind of walked through there, or the economics that you kind of walked through there. That's exactly right. Okay. Yep. Okay. Last one for you. Cash burn was $90 million, cash position was $90 million as of the end of the quarter. I think when we tallied things up, you were burning $13 million or so per quarter, thereabouts. Sounds about right. How does that situate you as a rate going forward? Obviously, there seemingly is a need to spend money as this platform evolves, but I know you guys are also cautious about that or conscious of that. We're very conscious of that. We continue to reiterate that, and we recently did a raise of about $30 million to extend that cash runway potentially to 2027. But we're trying to achieve that cash flow break even off the existing business of pharma manufacturing, the double-stranded ligase, and the initial push for ECO Synthesis with the scaling up happening on that part of the business probably in the later 2026- 2027 timeframe. So we're very conscious of the burn and the investment needed, which is why, back to your question around GMP build, we want to make sure we do that in the most prudent fashion possible so we don't exhaust those resources. We are pretty well situated, I would say right now, with the ECO Innovation Lab being a relatively small investment because it's in our four walls with some equipment and some people to be able to demonstrate that we can get to scale with some of these key siRNA major players. But if there's an opportunity to expand the ECO Innovation Lab and look at that on additional revenues, I don't think anyone would expect us not to maybe increase the burn and look at ways to raise capital, which would be a natural part of the growing business. Okay. I'm going to leave it there, Kevin. All right. Appreciate it. All right. Happy Thanksgiving to you.