10q10k10q10k.net

What changed in CODEXIS, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of CODEXIS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+440 added−429 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

Top changes in CODEXIS, INC.'s 2024 10-K

440 paragraphs added · 429 removed · 318 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

101 edited+37 added−33 removed28 unchanged
Biggest changeRecent examples of this strategy include monetizing CDX-7108 through the purchase agreement with Nestl é and the exclusive licensing agreement with Aldevron for our Codex® HiCap RNA Polymerase, both of which were announced in December 2023, as well as the exclusive licensing agreement with Roche in February 2024 for the newly engineered DNA ligase. 8 Strategic Collaborations Licensing Our CodeEvolver ® Directed Evolution Technology Platform GlaxoSmithKline We entered into our first CodeEvolver ® Platform Technology Transfer, Collaboration and License Agreement (“GSK CodeEvolver ® Agreement”) in July 2014 with GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GSK, pursuant to which we granted GSK a non-exclusive, worldwide license to use our CodeEvolver ® technology platform in the field of human healthcare for GSK's internal development purposes.
Biggest changeExamples of this strategy include monetizing CDX-7108 through the purchase agreement with Nestl é and the exclusive licensing agreement with Aldevron for our Codex HiCap RNA Polymerase, both of which were announced in December 2023, as well as the exclusive licensing agreement with Roche in February 2024 for the newly engineered DNA ligase, the non-exclusive license with Alphazyme in September 2024 for a portfolio of our life sciences enzymes, and the purchase agreement for transposase with seqWell executed in January 2025. • Advancement of our CodeEvolver platform to maintain leadership in enzyme engineering .
There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne, a private startup company, and a UK-based consortium led by the Centre for Process Innovation ( “ CPI ”) and consisting of multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne Biosciences, a private startup company, and a UK-based consortium led by the Centre for Process Innovation ( “ CPI ”) and consisting of multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
Our primary competitors in that market are companies marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services, or from full-service CDMOs offering conventional chemistry approaches to the production of APIs. We also face competition from existing in-house technologies (both biocatalysis and conventional chemistries) within our client and potential client companies.
Our primary competitors in that market are companies marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services, or from full-service CDMOs offering conventional chemistry and biocatalytic approaches to the production of APIs. We also face competition from existing in-house technologies (both biocatalysis and conventional chemistries) within our client and potential client companies.
In addition, academic institutions such as the California Institute of Technology, University of Manchester, and the Austrian Centre of Industrial Biotechnology are also working in this field. This field is highly competitive with companies and academic and research institutions actively seeking to develop technologies that could be competitive with our technologies.
In addition, academic institutions such as the California Institute of Technology, University of Washington, University of Manchester, and the Austrian Centre of Industrial Biotechnology are also working in this field. This field is highly competitive with companies and academic and research institutions actively seeking to develop technologies that could be competitive with our technologies.
We conduct enzyme evolution, enzyme production development, microbial bioprocess development, cellular engineering, microbial evolution and process engineering evaluations and design primarily at our headquarters in Redwood City, California. Manufacturing of our enzymes is conducted primarily in four locations: at our in-house facility in Redwood City, California and at third-party contract manufacturing organizations , Lactosan GmbH & Co.
We conduct enzyme evolution, enzyme production development, microbial bioprocess development, cellular engineering, microbial evolution and process engineering evaluations and design primarily at our headquarters in Redwood City, California. Manufacturing of our enzymes is conducted primarily in four locations: at our in-house facility in Redwood City, California and at third-party contract manufacturing organizations (“CMOs”) : Lactosan GmbH & Co.
This capability has allowed us to create a breadth of biocatalysts with improved performance characteristics including, for example, better activity, stability, and activity on a range of substrates, compared to traditional chemistry-based manufacturing processes and naturally occurring (and thus not optimized) biocatalysts.
This capability has allowed us to create a breadth of enzymes with improved performance characteristics including, for example, better activity, stability, and activity on a range of substrates, compared to traditional chemistry-based manufacturing processes and naturally occurring (and thus not optimized) biocatalysts.
In December 2023, we entered into an acquisition agreement with Nestlé (the “Acquisition Agreement”), pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé and terminate the Nestlé SCA.
In December 2023, we entered into an acquisition agreement with Nestlé (the “Acquisition Agreement”), pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé and terminate the Nestlé SCA and development agreement.
The principal methods of competition and competitive differentiation in this market are price, product quality and performance, including manufacturing yield, safety and environmental benefits and speed of product delivery.
The principal methods of competition and competitive differentiation in this market are price, product quality and biocatalyst performance, including manufacturing yield, safety and environmental benefits and speed of product delivery.
Further, our pharmaceutical manufacturing business establishes credibility for the ECO Synthesis™ manufacturing platform by demonstrating our proven history of engineering technically complex enzymes for large pharmaceutical companies and effectively scaling up to multiple metric tons of manufactured product using our existing platforms.
Further, our pharma biocatalysis business establishes credibility for the ECO Synthesis manufacturing platform by demonstrating our proven history of engineering technically complex enzymes for large pharmaceutical companies and effectively scaling up to multiple metric tons of manufactured product using our existing platforms.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s good laboratory practice regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the United States may begin; 13 • performance of adequate and well-controlled human clinical trials to establish the safety and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice (“GCP”) regulations; • preparation and submission to the FDA of a new drug application ("NDA") or biologics license application ("BLA") after completion of all pivotal clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations and to assure that the facilities, methods and controls are adequate to preserve the drug's continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCPs; and • FDA review and approval of the NDA or BLA prior to any commercial marketing, sale or distribution of the product.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice regulations; • submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before clinical trials in the United States may begin; • performance of adequate and well-controlled human clinical trials to establish the safety and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice (“GCP”) regulations; • preparation and submission to the FDA of a new drug application (“NDA”) or biologics license application (“BLA”) after completion of all pivotal clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations and to assure that the facilities, methods and controls are adequate to preserve the drug's continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCPs; and • FDA review and approval of the NDA or BLA prior to any commercial marketing, sale or distribution of the product.
These companies include many of our large innovator and generic pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers Squibb Company ("Bristol-Myers"), Kyorin, Urovant, and Teva Pharmaceutical Industries Limited ("Teva") , which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates for use in their drug product manufacturing.
These companies include many of our large innovator and generic pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers Squibb Company (“Bristol-Myers”), Kyorin, Urovant, and Teva Pharmaceutical Industries Limited (“Teva”) , which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates for use in their drug product manufacturing.
( “ Kyorin ” ) for the manufacture of vibregon, the active ingredient in Urovant’s GEMTESA™ and Kyorin’s BEOVA ® products for the treatment of overactive bladder, as well as supporting other products and customers for which public disclosures have not been made.
( “ Kyorin ” ) for the manufacture of vibegron, the active ingredient in Urovant’s GEMTESA and Kyorin’s BEOVA products for the treatment of overactive bladder, as well as supporting other products and customers for which public disclosures have not been made.
In the United States, the manufacture, distribution, marketing, and sale of drug products and the provision of certain services for development-stage pharmaceutical and biotechnology products are subject to extensive ongoing regulation by the United States Food and Drug Administration (“FDA”), the United States Department of Health and Human Services (“HHS”), state boards of pharmacy, state health departments, various accrediting bodies, and similar regulatory authorities in other countries, including laws and regulations governing bribery, fraud, kickbacks, and false claims.
In the United States, the manufacture, distribution, marketing, and sale of drug products and the provision of certain services for development-stage pharmaceutical and biotechnology products are subject to extensive ongoing regulation by the United States Food and Drug Administration (“FDA”), the United States Department of Health and Human Services (“HHS”), the Centers for Medicare and Medicaid Services (“CMS”), state boards of pharmacy, state health departments, various accrediting bodies, and similar regulatory authorities in other countries, including laws and regulations governing bribery, fraud, kickbacks, and false claims.
Under the terms of the Acquisition Agreement, Nestlé will be solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, with Codexis retaining an economic interest in the program through an upfront payment, future potential milestone payments and net-sales based royalties.
Under the terms of the Acquisition Agreement, Nestlé is solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, with Codexis retaining an economic interest in the program through an upfront payment, future potential milestone payments and net-sales based royalties.
Under the terms of the deal, Aldevron received global manufacturing and commercialization rights to the Codex® HiCap RNA Polymerase in exchange for payments for near-term technical milestones, along with commercial milestones and sales-based royalties for research use only material as well as good manufacturing practices ( “ GMP ” ) material.
Under the terms of the deal, Aldevron received global manufacturing and commercialization rights to the Codex HiCap RNA Polymerase in exchange for payments for near-term technical milestones, along with commercial milestones and sales-based royalties for research use only material as well as GMP material.
In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC ( “ Alphazyme ” ) for the production and co-marketing of enzymes for life science applications.
In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC (“Alphazyme”) for the production and co-marketing of enzymes for life science applications.
However, there are more than 450 RNAi therapeutic assets in development, including over forty that are in Phase 2 and Phase 3 clinical trials, with more th an 40 of these targeting large disease indications such as Alzheimer’s, hyperlipidemia and hypertension.
However, there are more than 450 RNAi therapeutic assets in development, including over one hundred that are in Phase 2 and Phase 3 clinical trials, with more th an 40 of these targeting large disease indications such as Alzheimer’s, hyperlipidemia and hypertension.
As of December 31, 2023, we owned or controlled approximate ly 1,990 active issued patents and pending patent applications in the United States and in various foreign jurisdictions, many of which are directed to our enabling technologies and specific methods and products that support our business in the pharmaceutical and oligonucleotide synthesis markets.
As of December 31, 2024, we owned or controlled approximate ly 1,760 active issued patents and pending patent applications in the United States and in various foreign jurisdictions, many of which are directed to our enabling technologies and specific methods and products that support our business in the pharmaceutical and oligonucleotide synthesis markets.
The ECO Synthesis™ manufacturing platform is also being designed to manufacture tens to hundreds of kilograms of high-purity RNA per batch, with a closed-loop system intended to increase volumetric reagent efficiency.
The ECO Synthesis manufacturing platform is also being designed to manufacture tens to hundreds of kilograms of high-purity RNA per synthesis batch, with a closed-loop system intended to increase volumetric reagent efficiency which enables large batch synthesis.
The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented. There is competition from large industrial enzyme companies, as well as subsidiaries of larger contract research/contract manufacturing organizations, such as DSM Firmenich, Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd.
The market for supplying enzymes for use in pharma biocatalysis is fragmented. There is competition from large industrial enzyme companies, as well as subsidiaries of larger contract research/contract manufacturing organizations, such as DSM Firmenich, Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd.
We continue to file new patent applications in our business areas of interest, for which terms generally extend 20 years from the non-provisional filing date in the United States. 10 As of December 31, 2023, we owned approximately 100 trademark registrations in the United States and foreign jurisdictions, as well as various common law trademarks.
We continue to file new patent applications in our business areas of interest, for which terms generally extend 20 years from the non-provisional filing date in the United States. As of December 31, 2024 , we owned approximately 70 trademark registrations in the United States and foreign jurisdictions, as well as various common law trademarks.
Other Core Technology We are a leader in the field of enzyme engineering to create novel enzymes, and our work across Pharmaceutical Manufacturing and the Eco Synthesis TM manufacturing platform relies on our core technology. We are aware that other companies, organizations and persons have developed technologies that appear to have some similarities to our patented proprietary technologies.
Core Technology 11 We are a leader in the field of enzyme engineering to create novel enzymes, and our work across pharma biocatalysis and the ECO Synthesis manufacturing platform relies on our core technology. We are aware that other companies, organizations and persons have developed technologies that appear to have some similarities to our patented proprietary technologies.
This portfolio also includes patents and pending patent applications in the biotherapeutics, mo lecular diagnostics, and other markets. As of December 31, 2023, our patents and pending patent applications, if issued, have terms that expire between 2024 and approximately 2044.
This portfolio also includes patents and pending patent applications in the biotherapeutics, mo lecular diagnostics, and other markets. As of December 31, 2024, our patents and pending patent applications, if issued, have terms that expire between 2025 and approximately 2045.
The Novartis CodeEvolver ® Agreement allows Novartis to use our proprietary CodeEvolver ® platform technology in the field of human healthcare. 9 Under the terms of the Novartis CodeEvolver ® Agreement, we granted to Novartis a worldwide license to use certain patents, patent applications and know-how from our CodeEvolver ® technology platform to research, develop and manufacture novel enzymes for use by or on behalf of Novartis as biocatalysts in the chemical synthesis of small molecule and bioconjugate APIs.
Under the terms of the Novartis CodeEvolver Agreement, we granted Novartis a worldwide license to use certain patents, patent applications and know-how from our CodeEvolver technology platform to research, develop and manufacture novel enzymes for use by or on behalf of Novartis as biocatalysts in the chemical synthesis of small molecule and bioconjugate APIs.
Our biocatalyst-based manufacturing processes must compete effectively on cost and efficiency with these internally developed routes. We believe that our principal advantage is our ability to rapidly deliver customized biocatalysts for existing and new intermediates and APIs in the pharmaceutical manufacturing market.
Our biocatalyst-based manufacturing processes must compete effectively on cost and efficiency with these internally developed routes. We believe that our principal advantage is our ability to rapidly deliver customized enzymes for existing and new intermediates and APIs in the pharma biocatalysis market.
In December 2023, we announced that we have entered into an exclusive licensing agreement with Aldevron LLC ( “ Aldevron ” ), a global leader in the custom development and manufacture of plasmid DNA, RNA and proteins for the biotech industry, whereby Aldevron licensed our Codex® HiCap RNA Polymerase.
In December 2023, we entered into an exclusive licensing agreement with Aldevron LLC (“Aldevron”), a global leader in the custom development and manufacture of plasmid DNA, RNA and proteins for the biotech industry, whereby Aldevron licensed our Codex HiCap RNA Polymerase.
COMPETITION We face differing forms of competition in pharmaceutical manufacturing and RNAi therapeutics manufacturing, as set forth below. Performance Enzyme Pharmaceutical Manufacturing We market our biocatalyst products and services to manufacturers of small molecule pharmaceutical intermediates and APIs.
COMPETITION We face differing forms of competition in pharmaceutical biocatalysis and RNAi therapeutics manufacturing, as set forth below. 10 Pharma Biocatalysis We market our enzyme biocatalyst products and services to manufacturers of small molecule pharmaceutical intermediates and APIs.
In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell Agreement”), pursuant to which we are providing research and experimental screening and protein engineering activities in exchange for compensation in the form of additional shares of seqWell's common stock.
In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell Agreement”), pursuant to which we provided research and experimental screening and enzyme engineering activities in exchange for compensation in the form of additional shares of seqWell's common stock.
For example, in addition to Pfizer, we sell biocatalysts to Merck, Sharp & Dohme ( “Merck”) for their manufacture of sitagliptin, the active ingredient in JANUVIA ® , to Urovant Sciences GmbH ( “ Urovant ” ) and KYORIN Pharmaceutical Co., Ltd.
For example, we sell enzymes to Merck, Sharp & Dohme ( “Merck”) for their manufacture of sitagliptin, the active ingredient in JANUVIA, to Urovant Sciences GmbH ( “ Urovant ” ) and KYORIN Pharmaceutical Co., Ltd.
We also have licensed our CodeEvolver ® technology platform to pharmaceutical companies to help them develop custom-designed enzymes that are highly optimized for efficient manufacturing processes. To date, we have entered into platform technology licensing agreements with each of GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GlaxoSmithKline plc (“GSK”), Merck and Novartis Pharma AG (“Novartis”).
We also have licensed our CodeEvolver technology platform to pharmaceutical companies to help them develop custom-designed enzymes that are highly optimized for efficient manufacturing processes. To date, we have entered into platform technology licensing agreements with each of GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GlaxoSmithKline plc (“GSK”), Merck & Co., Inc.
In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the Technology Transfer Period (the “Improvements Term”), Novartis will pay us annual payments over four years which amount to an additional $8.0 million in aggregate.
We have also received an aggregate of $5.0 million for the completion of the third technology transfer milestone in 2021. 8 In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the Technology Transfer Period (the “Improvements Term”), Novartis will pay us annual payments over four years which amount to an additional $8.0 million in aggregate.
Pharmaceutical manufacturing generally requires one-to-one custom enzyme engineering projects, which involve significant time and resource investment from Codexis. Our top five selling pharmaceutical manufacturing enzymes in 2023, excluding sales of CDX-616 related to PAXLOVID™, generated on average between $2.0 million to $9.0 million annually per enzyme between 2021 and 2023.
Pharma biocatalysis generally requires one-to-one custom enzyme engineering projects, which involve significant time and resource investment from Codexis. Our top five selling pharma biocatalysis enzymes in 2024, excluding sales of CDX-616 to Pfizer Inc. (“Pfizer”) related to PAXLOVID, generated on average between $2.0 million to $9.0 million annually per enzyme between 2021 and 2024.
In o ur revenue-generating pharmaceutical manufacturing business, we utilize our CodeEvolver ® technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to reduce their costs and improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics.
In our revenue-generating pharma biocatalysis business (formerly our pharmaceuticals manufacturing business), we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics.
Our contracts with outside suppliers and vendors require compliance with applicable laws and regulations. HUMAN CAPITAL RESOURCES As of December 31, 2023, we had 174 full-time employees and part-time employees worldwide. Of these employees, 61 were engaged in research and development, 41 were engaged in operations and quality control and 72 were engaged in selling, general and administrative activities.
Our contracts with outside suppliers and vendors require compliance with applicable laws and regulations. HUMAN CAPITAL RESOURCES As of December 31, 2024, we had 188 full-time employees and part-time employees worldwide. Of these employees, 47 were engaged in research and development, 47 were engaged in operations and quality control and 94 were engaged in selling, general and administrative activities.
Many of our pharmaceutical manufacturing customers are developing RNAi therapeutics, and we believe that their familiarity with our ability to engineer and scale complex enzymes is a significant commercial advantage for our ECO Synthesis™ manufacturing platform. However, there are also key differences that make this platform a compelling opportunity as compared to our existing pharmaceutical manufacturing business.
We believe their familiarity with our ability to engineer and scale complex enzymes is a significant commercial advantage for our ECO Synthesis manufacturing platform. However, there are also key differences that make this platform a compelling opportunity as compared to our existing pharma biocatalysis business.
Diversity, equity and inclusion We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports our global workforce and the communities we serve.
Diversity, equity and inclusion We are renewing our commitment to increase diversity and foster an inclusive work environment that supports our global workforce and the communities we serve.
The most advanced of our biotherapeutics programs was CDX-7108, a potent lipase intended for use as a potential treatment for exocrine pancreatic insufficiency (“EPI”), which was being developed under a Strategic Collaboration Agreement with Nestlé Health Science (“Nestlé”) (the “Nestlé SCA”). As part of the Nestlé SCA, we and Nestlé completed a Phase 1 clinical trial of CDX-7108.
The most advanced of our biotherapeutics programs was CDX-7108, a potent lipase intended for use as a potential treatment for exocrine pancreatic insufficiency (“EPI”), which was being developed under a Strategic Collaboration Agreement with Nestlé Health Science (“Nestlé”) (the “Nestlé SCA”).
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace. Our diversity, equity and inclusion principles are also reflected in our employee training and policies.
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to not only comply with all laws applicable to discrimination in the workplace, but to promote a safe and equitable environment for all employees. Our diversity, equity and inclusion principles are also reflected in our employee training and policies.
We believe that the ECO Synthesis™ manufacturing platform could enable CDMOs and drug developers to scale production of RNA therapeutics and as a result could potentially command significantly better economic terms than the current annual revenues for pharmaceutical manufacturing enzymes.
We believe that the ECO Synthesis manufacturing platform could enable CDMOs and drug developers to scale production of RNA therapeutics with significantly less capital expenditure for infrastructure capacity and as a result, could potentially command significantly better economic terms than the current annual revenues for pharma biocatalysis enzymes.
We commenced independent operations in March 2002, after licensing core enabling technology from Maxygen, Inc. Our principal corporate offices are located at 200 Penobscot Drive, Redwood City, California 94063 and our telephone number is (650) 421-8100. Our internet address is www.codexis.com.
CORPORATE & AVAILABLE INFORMATION We were incorporated in Delaware in January 2002 as a wholly-owned subsidiary of Maxygen, Inc. We commenced independent operations in March 2002, after licensing core enabling technology from Maxygen, Inc. Our principal corporate offices are located at 200 Penobscot Drive, Redwood City, California 94063 and our telephone number is (650) 421-8100. Our internet address is www.codexis.com.
Consistent with our strategy to focus on programs that we believe have the strongest probability of creating significant value in the near-term and beyond, we continue to look for opportunities to monetize non-core assets and to leverage channel partners with stronger commercial reach to drive penetration of other developed, non-core life sciences enzymes.
Consistent with our strategy to focus on programs that we believe have the strongest probability of creating significant value in the near-term and beyond, we have monetized non-core assets and are leveraging channel partners with stronger commercial reach to drive penetration of other developed, non-core enzymes.
In August 2022, we and MAI announced that we had entered into a Commercial License and Enzyme Supply Agreement with MAI (the “MAI Supply Agreement”) under which Codexis shall manufacture and sell the TdT enzyme to MAI for use in native DNA synthesis.
In August 2022, we and MAI announced that we had entered into a Commercial License and Enzyme Supply Agreement with MAI (the “MAI Supply Agreement”) under which Codexis shall manufacture and supply to MAI an enzyme engineered under the MAI Agreement for use in a specific field.
CUSTOMERS We rely on certain key customers for a significant portion of our total revenues and our accounts receivable balances. For the year ended December 31, 2023, two customers accounted for approximately 22% and 13% of our total revenues. As of December 31, 2023, four customers accounted for approximately 21%, 13%, 12% and 12% of our accounts receivable balances.
CUSTOMERS We rely on certain key customers for a significant portion of our total revenues and our accounts receivable balances. For the year ended December 31, 2024, four customers accounted for approximately 18%, 13%, 10%, and 10% of our total revenues.
In these collaborations, we typically receive consideration in the form of one or more of the following: upfront payments, milestone payments, payments for screening and engineering, with other exclusive supply of enzyme or licensing fees and royalties as the customer’s product commercializes.
In these collaborations, we typically receive consideration in the form of one or more of the following: upfront payments, milestone payments, payments for screening and engineering, followed by fees for manufacturing scale-up and supply of enzymes, licensing fees and/or royalties as the customer’s product commercializes.
We focus on leveraging our capacity to enhance the properties and performance of enzymes to drive pivotal improvements across two key focus areas: our foundational, revenue-generating biocatalysis pharmaceutical manufacturing business and our Enzyme-Catalyzed Oligonucleotide Synthesis™ (“ECO Synthesis™”) manufacturing platform, which is currently in development to enable the commercial scale manufacture of RNA interference ( “ RNAi ” ) therapeutics.
We focus on leveraging our technology and capacity to enhance the properties and performance of enzymes to drive pivotal improvements in manufacturing of complex therapeutics across two key focus areas: our foundational, revenue-generating pharma biocatalysis business and our Enzyme-Catalyzed Oligonucleotide Synthesis™ (“ECO Synthesis™”) manufacturing platform, which is comprised of enzymatic tools, and processes, designed to enable large-scale manufacture of RNA interference (“RNAi”) therapeutics.
We have limited internal manufacturing capacity at our headquarters in Redwood City. We expect to rely on third-party manufacturers for commercial production of our biocatalysts for the foreseeable future. Our in-house manufacturing is dedicated to producing both Codex ® biocatalyst panels and kits and enzymes for use by our customers in pilot scale and clinical production.
For o ur pharma biocatalysis business, we expect to rely on third-party manufacturers for commercial production of our biocatalysts for the foreseeable future. Our in-house manufacturing is dedicated to producing both Codex biocatalyst panels and kits and enzymes for use by our customers in pilot scale and clinical production.
ITEM 1. BUSINESS COMPANY OVERVIEW We are a leading enzyme engineering company leveraging our proprietary CodeEvolver ® directed evolution technology platform to discover, develop, enhance, and commercialize novel, high-performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life.
ITEM 1. BUSINESS COMPANY OVERVIEW We are a leading provider of enzymatic solutions for efficient and scalable therapeutics manufacturing, and we leverage o ur proprietary CodeEvolver ® directed evolution technology platform to discover, develop, enhance, and commercialize novel, high-performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life.
By contrast, the ECO Synthesis™ manufacturing platform could be applicable to many customers and has the potential to manufacture a range of siRNA. Further, the potential scalability of our solution is differentiated from phosphoramidite chemistry, which is limited in batch size and requires high volumes of toxic solvent.
By contrast, the ECO Synthesis manufacturing platform could be applicable to many pharmaceutical and CDMO customers and has the potential to manufacture multiple different RNAi therapeutic assets with the same of enzymes and processes. Further, the potential scalability of our solution is differentiated from phosphoramidite chemistry, which is limited in batch size and requires high volumes of toxic solvent.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, all of which lead to improved efficiency and reduced costs in small-molecule manufacturing.
(“seqWell”), a privately held life sciences company, pursuant to which we purchased 1,000,000 shares of seqWell's Series C preferred stock for $5.0 million .
In March 2022, we entered into a Stock Purchase Agreement with seqWell, Inc. (“seqWell”), a privately held life sciences company, pursuant to which we purchased 1,000,000 shares of seqWell’s Series C preferred stock for $5.0 million .
Pharmaceutical Manufacturing We believe the pharmaceutical industry represents a significant market opportunity for our performance enzymes as pharmaceutical companies are in constant search of new small molecule drugs and are under significant competitive pressure both to reduce costs and to increase the speed to market for their products.
Pharma Biocatalysis We believe the pharmaceutical industry represents a significant market opportunity for our enzymes as pharmaceutical companies constantly developing new small molecule drugs and are under significant competitive pressure both to improve manufacturing efficiencies and to increase the speed to market for their products.
ECO Synthesis™ Manufacturing Platform ECO Synthesis™ Manufacturing Platform Overview A key strategic priority for Codexis is the advancement and commercialization of our ECO Synthesis™ manufacturing platform, which is currently in development to enable the commercial scale manufacture of RNAi therapeutics.
(“Merck & Co”) and Novartis Pharma AG (“Novartis”). 5 ECO Synthesis Manufacturing Platform ECO Synthesis Overview A key strategic priority for Codexis is the advancement and commercialization of our ECO Synthesis manufacturing platform, which is designed to enable the commercial scale manufacture of RNAi therapeutics.
For example, we are aware that other companies, includin g Ginkgo Bioworks, BRAIN, Enzymaster, and Enzymicals AG have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.
For example, we are aware that other companies, includin g Ginkgo Bioworks, BRAIN, and Enzymicals AG, have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity. Some companies, including Biomatter Designs, Arzeda, and Enzymaster, leverage predictive computational algorithms to guide enzyme engineering efforts.
To address these pressures, pharmaceutical companies are driven to identify reliable, cost-effective, and sustainable manufacturing processes to produce both their new drug candidates and their existing products, while not impacting drug safety and efficacy.
To address these pressures, pharmaceutical companies are driven to identify reliable, cost-effective, and sustainable manufacturing processes to produce both their new drug candidates and their existing products, while not impacting drug safety and efficacy. Manufacturing economies of scale are increasingly important to our pharmaceutical customers as they get closer to their commercial drug launch.
We also use the CodeEvolver ® platform technology to develop enzymes for the synthesis of nucleic acids such as DNA/RNA, including enzymes utilized in our ECO Synthesis™ manufacturing platform, where our enzymes are poised to deliver many of the same benefits we offer in pharmaceutical manufacturing across purity, yield, and improved efficiency.
We also use the CodeEvolver platform technology to develop enzymes for the synthesis of RNAi therapeutics through our ECO Synthesis manufacturing platform, where our enzymes are poised to deliver many of the same benefits we offer in pharma biocatalysis across purity, yield, and improved manufacturing efficiency.
We completed the second technology milestone transfer under the agreement and received a milestone payment of $4.0 million in 2020. We have also received an aggregate of $5.0 million for the completion of the third technology transfer milestone in 2021.
We completed the second technology milestone transfer under the agreement and received a milestone payment of $4.0 million in 2020.
In addition to these larger volumes of biocatalysts that are sold for our customers’ ongoing commercial requirements, we also sell lesser quantities of engineered enzymes for use in a customer’s developmental, qualification or regulatory approval operations.
In addition to these larger volumes of enzymes that are sold for our customers’ ongoing commercial requirements, we also sell smaller quantities of engineered enzymes for use in a customer’s clinical-stage manufacturing.
These research and development activities are typically governed by collaboration agreements, which often contain research fee payments and intellectual property provisions, under which we screen and/or engineer biocatalysts for customers in connection with their process development efforts.
In addition to the sale of enzymes, we also offer contracted research and development partnerships to our customers. These research and development activities are typically governed by collaboration agreements, which often contain research and development fees and intellectual property provisions, under which we screen and/or engineer enzymes for customers in connection with their process development efforts.
As of December 31, 2023, there are six approved small interfering ribonucleic acid (“siRNA”) therapeutics on the market in the United Sates, primarily targeting rare orphan disease indications.
As of December 31, 2024, there are six approved siRNA therapeutics on the market in the United States, primarily targeting rare orphan disease indications.
As of December 31, 2023, Codexis is selling biocatalysts to pharmaceutical manufacturers for 12 drug candidates currently in Phase 2 and Phase 3 clinical trials, or to customers working to convert to an enzymatic manufacturing process for drugs that have been commercially approved. This pipeline reinforces our confidence in our ability to continue to grow this business over time.
As of December 31, 2024, Codexis is selling enzymes to pharmaceutical manufacturers f or 14 dr ug candidates currently in Phase 2 and Phase 3 clinical trials, or to customers working to convert to an enzymatic manufacturing process for drugs that have been commercially approved.
The intellectual property rights and other related assets that we acquired from Maxygen continue to be subject to existing exclusive and non-exclusive license rights granted by Maxygen to third parties.
(“Maxygen”) in October 2010, which are associated with directed evolution technology, known as the MolecularBreeding technology platform developed by Maxygen. The intellectual property rights and other related assets that we acquired from Maxygen continue to be subject to existing exclusive and non-exclusive license rights granted by Maxygen to third parties.
Compensation, benefits and development Our goal is to attract, motivate and retain talent with a focus on encouraging performance, promoting accountability and adhering to our company values.
Our scientists, bioinformatics experts and other professionals work collaboratively as interdisciplinary teams to unlock and advance technological innovation. 13 Compensation, benefits and development Our goal is to attract, motivate and retain talent with a focus on encouraging performance, promoting accountability and adhering to our company values.
Primary competitors in this space include CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their RNA manufacturing capabilities using phosphoramidite chemistry. In addition, CDMOs and large pharmaceutical companies are seeking to make incremental improvements to phosphoramidite chemistry, including the development of ligation-based approaches, liquid-phase synthesis, and solvent recycling.
In addition, CDMOs and large pharmaceutical companies are seeking to make incremental improvements to phosphoramidite chemistry, including the development of ligation-based approaches, liquid-phase synthesis, and solvent recycling technologies.
The licenses to Novartis are granted under patents, patent applications and know-how that Codexis owns or controls as of the effective date of the Novartis CodeEvolver ® Agreement and that cover the CodeEvolver ® technology platform.
These product-related usage payments, if any, will be paid by Novartis to Codexis for each quarter that Novartis manufactures API using a CodeEvolver-developed enzyme. The licenses to Novartis are granted under patents, patent applications and know-how that Codexis owns or controls as of the effective date of the Novartis CodeEvolver Agreement and that cover the CodeEvolver technology platform.
Our United States (“U.S.”) patents and pending patent applications directed to the CodeEvolver ® technology platform developed internally by us have terms that expire between 2029 and approximately 2034.
Our United States (“U.S.”) patents and pending patent applications directed to the CodeEvolver technology platform developed internally by us have terms that expire between 2029 and approximately 2034. It is possible that some U.S. patents and patent applications (if issued) may be entitled to patent term extensions and/or patent term adjustments, which would extend the protection beyond these expiration dates.
The CodeEvolver ® technology platform has the power to transform the performance of an enzyme, tailoring it for a specific application and/or process.
Since 2002, we have made substantial investments in the development of our proprietary CodeEvolver technology platform, the primary source of our competitive advantage for our business. The CodeEvolver technology platform has the power to transform the performance of an enzyme, tailoring it for a specific application and/or process.
We expect worldwide demand for RNAi therapeutics to grow significantly as RNAi therapeutics progress through clinical development and are commercially approved. The current industry standard for manufacturing RNAi therapeutics is a well-established, chemical-based method called phosphoramidite chemistry. This approach has existed for more than forty years and works effectively for small-scale manufacturing required during the discovery stage of clinical development.
We expect worldwide demand for RNAi therapeutics to grow significantly as RNAi therapeutic assets progress through clinical development and are commercially approved. The current industry standard for manufacturing RNAi therapeutics is a well-established, chemical-based method commonly called solid-phase oligonucleotide synthesis (“SPOS”) utilizing phosphoramidite chemistry.
GOVERNMENT REGULATION Our enzymes are used by pharmaceutical and biopharmaceutical companies in the manufacture of their drug or biologic product candidates and finished products.
Generally, we perform smaller scale manufacturing in-house and outsource larger scale manufacturing, representing a large percentage of our production of novel enzymes, to CMOs. 12 GOVERNMENT REGULATION Our enzymes are used by pharmaceutical and biopharmaceutical companies in the manufacture of their drug or biologic product candidates and finished products.
Many of our competitors have substantially greater manufacturing, financial, research and development, personnel and marketing resources than we do. As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could.
As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors.
First, this technology is being developed to integrate within existing manufacturing facilities, potentially eliminating much of the infrastructure investment required for commercial scale manufacturing of RNAi therapeutics with phosphoramidite chemistry.
We believe that the ECO Synthesis manufacturing platform presents several advantages to potentially address the limitations of SPOS and phosphoramidite chemistry. First, the platform is being developed to integrate within existing manufacturing facilities and utilizes equipment currently available in the industry, potentially eliminating much of the infrastructure investment required for commercial scale manufacturing of RNAi therapeutics with phosphoramidite chemistry.
We also rely heavily on confidentiality and non-disclosure and other contractual agreements for further protection of our proprietary technology, products and services.
INTELLECTUAL PROPERTY Our success depends in large part on our ability to protect our proprietary technology, products and services under patent, copyright, trademark and trade secret laws. We also rely heavily on confidentiality and non-disclosure and other contractual agreements for further protection of our proprietary technology, products and services.
Since then, this collaboration has enabled the commercialization of Codex ® HiFi DNA Polymerase, Codex ® HiFi Hot Start DNA Polymerase, Codex ® HiFi Hot Start 2X NGS Mix, Codex ® HiCap RNA Polymerase, Codex ® HiFi UL DNA Polymerase, and Codex ® HiTemp Reverse Transcriptase. 7 In June 2020, we entered into a Master Collaboration and Research Agreement with Molecular Assemblies, Inc.
This collaboration enabled the commercialization of Codex HiFi DNA Polymerase, Codex HiFi Hot Start DNA Polymerase, Codex HiFi Hot Start 2X NGS Mix, Codex HiCap RNA Polymerase, Codex HiFi UL DNA Polymerase, and Codex HiTemp Reverse Transcriptase.
Content-rich libraries screened under real-world conditions can yield dense and valuable datasets, when data-mined effectively, and multiple parameters can be optimized in parallel. The resulting evolved variants often have a combination of enhanced properties, such as increased activity, specificity, and stability under desired conditions, or improved expression in the production host.
The resulting evolved variants often have a combination of enhanced properties, such as increased activity, specificity, and stability under desired conditions, or improved manufacturability in the production host.
As additional RNAi therapeutic candidates are approved for large disease indications, we believe using traditional chemical synthesis for commercial scale production will become prohibitively expensive, time-intensive, and challenging for many drug developers and contract development and manufacturing organizations (“CDMOs”). We believe that the ECO Synthesis™ manufacturing platform presents several advantages to potentially address these limitations.
As additional RNAi therapeutic candidates are approved for large disease indications, we believe using traditional SPOS and phosphoramidite chemical synthesis for commercial scale production will become prohibitively expensive, time-intensive, and challenging for many drug developers seeking to produce enough drug substance to address patient indications that require dosing more than 1 million patients annually.
For more information, see Note 15, “Segment, Geographical and Other Revenue Information” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K. 12 OPERATIONS Our corporate headquarters are located in Redwood City, California and provide general administrative support to our business and are the center of our research, development and business operations.
As of December 31, 2024, four customers accounted for approximately 18%, 16%, 12%, and 10% of our accounts receivable balances. For more information, see Note 15, “Segment, Geographical and Other Revenue Information” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.
In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment and that we are actively exploring options to drive value by potentially monetizing non-core life science assets, including in genomics and next generation sequencing (“NGS”).
In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment. As part of this strategic prioritization, during 2024 we completed the divestiture and monetization of certain biotherapeutics assets as well as certain non-core life science assets, including in genomics and next generation sequencing applications.
These enhanced properties provide differentiated technical performance in the target application and can provide our customers increased value in the commercial deployment of their products.
These enhanced properties provide differentiated technical performance in the target application and can provide our customers increased value in the commercial deployment of their products. 4 Key Strategic Focus Areas We provide enzyme-based solutions to our clients that address complex therapeutic manufacturing challenges in the areas of pharma biocatalysis and RNAi manufacturing.
None of our employees are represented by a labor union. Supported by our annual employee survey, we believe our relationship with our employees to be generally good. Our scientists, bioinformatics experts and other professionals work collaboratively as interdisciplinary teams to unlock and advance technological innovation.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. Supported by our annual employee survey, we believe our relationship with our employees to be generally good.
Merck In August 2015, we entered into a CodeEvolver ® Platform Technology Transfer and License Agreement (the “Merck CodeEvolver ® Agreement”) with Merck. The Merck CodeEvolver ® Agreement allows Merck to use our proprietary CodeEvolver ® technology platform in the field of human and animal healthcare.
The Novartis CodeEvolver Agreement allows Novartis to use our proprietary CodeEvolver platform technology in the field of human healthcare.
We intend to increase the number of pharmaceutical customers and processes that utilize and benefit from our novel, cost-saving enzyme biocatalyst solutions. • Developing and commercializing high-performance enzymes for use in nucleic acid synthesis, including our dsRNA Ligase and our proprietary ECO Synthesis™ manufacturing platform .
We intend to pursue opportunities in the pharmaceutical market to use our enzymes to improve the manufacturing efficiencies for the production of small-molecule drugs. We intend to increase the number of pharmaceutical customers and products that utilize and benefit from our novel, enabling engineered enzymes. • Developing and commercializing our ECO Synthesis manufacturing platform for use in RNAi manufacturing .

… 91 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

123 edited+44 added−35 removed221 unchanged
Biggest changeWe may not complete needed improvements to our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock and your investment. • We may need additional capital in the future in order to expand our business. 16 • We may not be able to comply with the terms of our five-year loan and security agreement (our “ Loan Agreement ” ) with Innovatus Life Sciences Lending Fund, I, LP, an affiliate of Innovatus Capital Partners (“Innovatus”). • Our ongoing efforts to deploy our technology in the life science tools market may fail. • Even if our customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense. • If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected. • Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful. • Our ability to compete may decline if we do not adequately prosecute, maintain, protect and/or defend our proprietary technology, products or services or our intellectual property rights. • Third parties may claim that we are infringing, violating or misappropriating their intellectual property rights, which may subject us to costly and time-consuming litigation and prevent us from developing or commercializing our technology, products or services. • We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful. • We may not be able to enforce our intellectual property rights throughout the world. • If our biocatalysts are stolen, misappropriated or reverse engineered, others could use these biocatalysts to produce competing products. • We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company. • Market and economic conditions may negatively impact our business, financial condition, and share price. • Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales. • Evolving expectations around environmental, social and governance matters may expose us to reputational and other risks.
Biggest changeThe ability of our customers, future customers or collaborators, including any company developing RNAi and other RNA-based therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain. • We believe that our products are exempt from Food, Drug, and Cosmetic Act (“FDCA”) requirements, but FDA or other regulators may disagree and find that our products are subject to such requirements. • We are dependent on a limited number of customers. • Some of our product supply agreements with customers have finite duration and may not be extended or renewed. • The demand for our product depends in part on our customers' research and development and the clinical and market success of their products. • If we are unable to develop and commercialize new products for our target markets, our business and prospects will be harmed. • A reduction or delay in government funding of research and development for our customers may adversely affect our business. • With respect to customers purchasing our products for the manufacture of API for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations. • The services and offerings we provide are highly complex, and if we encounter problems providing the services or support required, our business could suffer. • Any productivity issues or higher-than-expected costs at our facilities could result in material and adverse impacts on our financial condition and results of operations. • We are dependent on a limited number of third-party contract manufacturers for large scale production of substantially all of our enzymes. • We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products. • We have invested significant resources to enable enzymatic nucleic acid synthesis, which is based on novel ideas and technologies that are largely unproven. • As a result of our strategic shift and our refined focus on the revenue-generating pharma biocatalysis business and the ECO Synthesis platform, we may fail to capitalize on other opportunities that may be more profitable or for which there is a greater likelihood of success. • Given our change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements. 15 • The timing of customer orders and related product revenue recognition is unpredictable and may cause our operating results to vary significantly from quarter to quarter, which could adversely affect our stock price. • We use hazardous materials in our business, and we must comply with environmental laws and regulations. • We may need additional capital in the future in order to expand our business. • We may not be able to comply with the terms of our five-year term loan and security agreement (our “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of Innovatus Capital Partners, LLC . • Even if our customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense. • If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected. • Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful. • Third parties may claim that we are infringing, violating or misappropriating their intellectual property rights, which may subject us to costly and time-consuming litigation and prevent us from developing or commercializing our technology, products or services. • We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful. • If our biocatalysts are stolen, misappropriated or reverse engineered, others could use these biocatalysts to produce competing products. • We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company. • Market and economic conditions may negatively impact our business, financial condition, and share price. • Business interruptions resulting from political events, disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales.
We are subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal controls over financial reporting. As part of these evaluations, material weaknesses in our internal controls over financial reporting may be identified.
We are subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal controls over financial reporting. As part of these evaluations, material weaknesses in our internal controls over financial reporting may be identified.
These efforts are subject to numerous risks, including the following: • customers in these markets may be reluctant to adopt new manufacturing processes that use our enzymes; • we may be unable to successfully develop the enzymes or manufacturing processes for our products in a timely and cost-effective manner, if at all; • we may face difficulties in transferring the developed technologies to our customers and the contract manufacturers that we may use for commercial scale production of intermediates and enzymes in these markets; • the biotherapeutics products that use our tools may not receive regulatory approval or be commercially viable; • the contract manufacturers that we may use may be unable to scale their manufacturing operations to meet the demand for these products and we may be unable to secure additional manufacturing capacity; • customers may not be willing to purchase these products for these markets from us on favorable terms, if at all; • we may face product liability litigation, unexpected safety or efficacy concerns and product recalls or withdrawals; • our customers’ products may experience adverse events or face competition from new products, which would reduce demand for our products; 21 • we may face pressure from existing or new competitive products; and • we may face pricing pressures from existing or new competitors, some of which may benefit from government subsidies or other incentives.
These efforts are subject to numerous risks, including the following: • customers in these markets may be reluctant to adopt new manufacturing processes that use our enzymes; • we may be unable to successfully develop the enzymes or manufacturing processes for our products in a timely and cost-effective manner, if at all; • we may face difficulties in transferring the developed technologies to our customers and the contract manufacturers that we may use for commercial scale production of intermediates and enzymes in these markets; • the biotherapeutics products that use our tools may not receive regulatory approval or be commercially viable; • the contract manufacturers that we may use may be unable to scale their manufacturing operations to meet the demand for these products and we may be unable to secure additional manufacturing capacity; • customers may not be willing to purchase these products for these markets from us on favorable terms, if at all; • we may face product liability litigation, unexpected safety or efficacy concerns and product recalls or withdrawals; • our customers’ products may experience adverse events or face competition from new products, which would reduce demand for our products; • we may face pressure from existing or new competitive products; and • we may face pricing pressures from existing or new competitors, some of which may benefit from government subsidies or other incentives.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, using, selling or importing our technologies, products and services that use the subject intellectual property; • pay monetary damages to the third party asserting claims against us; • grant or transfer rights to third parties relating to our patents or other intellectual property rights; • obtain from the third party asserting its intellectual property rights a license to make, sell, offer for sale, import or use the relevant technology, product or service, which license may not be available on reasonable terms, or at all; or 33 • redesign those technologies, products, services or processes that use any allegedly infringing, misappropriated or violated intellectual property rights, or relocate the operations relating to the allegedly infringing, misappropriated or violated intellectual property rights to another jurisdiction, which may result in significant cost or delay to us, could be technically infeasible or could prevent us from making, selling, offering for sale, using or importing some of our technologies, products or services in the United States or other jurisdictions.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, using, selling, offering for sale or importing our technologies, products and services that use the subject intellectual property; • pay monetary damages to the third party asserting claims against us; • grant or transfer rights to third parties relating to our patents or other intellectual property rights; • obtain from the third party asserting its intellectual property rights a license to make, sell, offer for sale, import or use the relevant technology, product or service, which license may not be available on reasonable terms, or at all; or • redesign those technologies, products, services or processes that use any allegedly infringing, misappropriated or violated intellectual property rights, or relocate the operations relating to the allegedly infringing, misappropriated or violated intellectual property rights to another jurisdiction, which may result in significant cost or delay to us, could be technically infeasible or could prevent us from making, selling, offering for sale, using or importing some of our technologies, products or services in the United States or other jurisdictions.
Among other things, our amended and restated certificate of incorporation and bylaws provide for a board of directors which is divided into three classes, with staggered three-year terms and provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our board of directors, the chairman of the board of directors, our chief executive officer or president may call a special meeting of the stockholders.
Among other things, our amended and restated certificate of incorporation and bylaws provide for a board of directors which is divided into three classes, with staggered three-year terms and provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our Board of Directors (our “Board”), the chairman of our Board, our chief executive officer or president may call a special meeting of the stockholders.
Some fermentation pathway design companies, like Ginkgo Bioworks (who recently acquired Zymergen), whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into designing organisms that express enzymes. There is also competition in the enzyme customization and optimization area from several smaller companies, such as BRAIN AG, Arzeda, c-LEcta GmbH and Evocatal GmbH.
Some fermentation pathway design companies, like Ginkgo Bioworks (who recently acquired Zymergen), whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into designing organisms that express enzymes. There is also competition in the enzyme customization and optimization area from several smaller companies, such as BRAIN AG, Arzeda Corp., c-LEcta GmbH and Evocatal GmbH.
If that happens, we may need to license these technologies, products or services, and we may not be able to obtain licenses on reasonable terms, if at all, which could cause harm to our business. 32 Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted.
If that happens, we may need to license these technologies, products or services, and we may not be able to obtain licenses on reasonable terms, if at all, which could cause harm to our business. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted.
Our failure to repay our obligations under the Loan Agreement would result in Innovatus foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations. If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.
Our failure to repay our obligations under the Loan Agreement could result in Innovatus foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations. If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.
Even if identified, we may be unable to adequately and timely investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove or obfuscate forensic evidence. 40 We and certain of our external vendors are from time to time subject to cyberattacks and security incidents.
Even if identified, we may be unable to adequately and timely investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove or obfuscate forensic evidence. We and certain of our external vendors are from time to time subject to cyberattacks and security incidents.
There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne, a private startup company, and a UK-based consortium led by CPI and consisting of multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne Biosciences, a private startup company, and a UK-based consortium led by CPI and consisting of multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.
Changes in the healthcare industry’s pricing, selling, inventory, distribution, or supply policies or practices, or in public or government sentiment for the industry as a whole, could also significantly reduce our revenue and results of operations. Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.
Changes in the healthcare industry’s pricing, selling, inventory, distribution, or supply policies or practices, or in public or government sentiment for the industry as a whole, could also significantly reduce our revenue and results of operations. 30 Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.
Furthermore, because of the substantial amount of discovery required in connection with U.S. intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. We may not be able to enforce our intellectual property rights throughout the world.
Furthermore, because of the substantial amount of discovery required in connection with U.S. intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. 34 We may not be able to enforce our intellectual property rights throughout the world.
Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report: • our ability to achieve or maintain profitability; • our dependence on a limited number of customers; • our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products; • with respect to customers purchasing our products for the manufacture of active pharmaceutical ingredients for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations; • our dependence on a limited number of products in our performance enzymes business; • our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products; • our relationships with, and dependence on, collaborators in our principal markets; • our ability to successfully and timely develop and commercialize new products, including our ECO Synthesis ™ manufacturing platform, for the markets we serve; • the potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us; • the success of our customers’ products in the market and the ability of such customers to obtain regulatory approvals for products and processes; • our ability to deploy our technology platform in life science tools markets; 36 • our dependence on our collaborators or customers’ product candidates which could unexpectedly fail at any stage of preclinical or clinical development; • our dependence on our collaborators or customers’ product candidates which may lack the ability to work as intended or cause undesirable side effects; • our ability to successfully prosecute and protect our intellectual property; • our ability to compete if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights; • our ability to avoid infringing the intellectual property rights of third parties; • our involvement in lawsuits to protect or enforce our patents or other intellectual property rights; • our ability to enforce our intellectual property rights throughout the world; • our dependence on, and the need to attract and retain, key management and other personnel; • our ability to prevent the theft or misappropriation of our biocatalysts, the genes that code for our biocatalysts, know-how or technologies; • our ability to protect our trade secrets and other proprietary information from disclosure by employees and others; • our ability to obtain substantial additional capital that may be necessary to expand our business; • our ability to comply with the terms of our Loan Agreement; • our ability to timely pay debt service obligations; • our customers’ ability to pay amounts owed to us in a timely manner; • our ability to avoid charges to earnings as a result of any impairment of goodwill, intangible assets or other long-lived assets; • changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations; • our ability to maintain effective internal control over financial reporting; • our dependency on information technology systems, infrastructure and data; • our ability to control and to improve product gross margins; • our ability to protect against risks associated with the international aspects of our business; • the cost of compliance with EU chemical regulations; • potential advantages that our competitors and potential competitors may have in securing funding or developing products; • our ability to accurately report our financial results in a timely manner; • results of regulatory tax examinations; • market and economic conditions may negatively impact our business, financial condition, and share price; • business interruptions due to natural disasters, disease outbreaks or other events beyond our control; • public concerns about the ethical, legal and social ramifications of genetically engineered products and processes; • our ability to integrate our current business with any businesses that we may acquire in the future; • our ability to properly handle and dispose of hazardous materials in our business; • potential product liability claims; 37 • changes to tax law and related regulations could materially affect our tax obligations and effective tax rate; and • our ability to use our NOLs to offset future taxable income.
Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report: • our ability to achieve or maintain profitability; • our dependence on a limited number of customers; 36 • some of our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products; • the timing of customer orders and our related revenue recognition may vary significantly from quarter to quarter; • with respect to customers purchasing our products for the manufacture of active pharmaceutical ingredients for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations; • our dependence on a limited number of products in our performance enzymes business; • our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products; • our relationships with, and dependence on, collaborators in our principal markets; • our ability to successfully and timely develop and commercialize new products, including our ECO Synthesis manufacturing platform, for the markets we serve; • the potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us; • the success of our customers’ products in the market and the ability of such customers to obtain regulatory approvals for products and processes; • our ability to deploy our technology platform in life science tools markets; • our dependence on our collaborators or customers’ product candidates which could unexpectedly fail at any stage of preclinical or clinical development; • our dependence on our collaborators or customers’ product candidates which may lack the ability to work as intended or cause undesirable side effects; • our ability to successfully prosecute and protect our intellectual property; • our ability to compete if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights; • our ability to avoid infringing the intellectual property rights of third parties; • our involvement in lawsuits to protect or enforce our patents or other intellectual property rights; • our ability to enforce our intellectual property rights throughout the world; • our dependence on, and the need to attract and retain, key management and other personnel; • our ability to prevent the theft or misappropriation of our biocatalysts, the genes that code for our biocatalysts, know-how or technologies; • our ability to protect our trade secrets and other proprietary information from disclosure by employees and others; • our ability to obtain substantial additional capital that may be necessary to expand our business; • our ability to comply with the terms of our Loan Agreement; • our ability to timely pay debt service obligations; • our customers’ ability to pay amounts owed to us in a timely manner; • our ability to avoid charges to earnings as a result of any impairment of goodwill, intangible assets or other long-lived assets; • changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations; 37 • our ability to maintain effective internal control over financial reporting; • our dependency on information technology systems, infrastructure and data; • our ability to control and to improve product gross margins; • our ability to protect against risks associated with the international aspects of our business; • the cost of compliance with EU chemical regulations; • potential advantages that our competitors and potential competitors may have in securing funding or developing products; • our ability to accurately report our financial results in a timely manner; • results of regulatory tax examinations; • market and economic conditions may negatively impact our business, financial condition, and share price; • business interruptions due to natural disasters, disease outbreaks or other events beyond our control; • public concerns about the ethical, legal and social ramifications of genetically engineered products and processes; • our ability to integrate our current business with any businesses that we may acquire in the future; • our ability to properly handle and dispose of hazardous materials in our business; • potential product liability claims; • changes to tax law and related regulations could materially affect our tax obligations and effective tax rate; and • our ability to use our NOLs to offset future taxable income.
The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States. The UK Government has published its own form of the EU SCCs, known as the International Data Transfer Agreement and an International Data Transfer Addendum to the new EU SCCs.
The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States. The UK Government has published its own form of the EU SCCs, known as the International Data Transfer Agreement and an International Data Transfer Addendum to the EU SCCs.
While we believe fully enzymatic nucleic acid synthesis will offer certain improvements over phosphoramidite chemistry, including with respect to required infrastructure investments, batch size limitations and waste disposal challenges, the enzymatic route is novel and has not yet been commercialized.
While we believe enzymatic nucleic acid synthesis will offer certain improvements over phosphoramidite chemistry, including with respect to required infrastructure investments, batch size limitations and waste disposal challenges, the enzymatic route is novel and has not yet been commercialized.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant.
Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions or the loss of or damage to intellectual property through security breach.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions or the loss of or damage to intellectual property or data through security breach.
In addition, our amended and restated certificate of incorporation allows our board of directors, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.
In addition, our amended and restated certificate of incorporation allows our Board, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.
Any substantial revision of applicable healthcare legislation could have a material adverse effect on the demand for our customers’ products, which in turn could have a negative impact on our results of operations, financial condition, or business.
Any substantial revision of applicable healthcare legislation or regulation could have a material adverse effect on the demand for our customers’ products, which in turn could have a negative impact on our results of operations, financial condition, or business.
These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team.
These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board, who are responsible for appointing the members of our management team.
In addition, customer spending may be affected by, among other things, general market and economic conditions beyond our control. Our customers are engaged in research, development, production, and marketing of pharmaceutical products and intermediates.
In addition, customer spending may be affected by, among other things, general market and economic conditions beyond our control. 18 Our customers are engaged in research, development, production, and marketing of pharmaceutical products and intermediates.
If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any enzyme products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies. 26 In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding the ongoing commercialization of our ECO Synthesis ™ manufacturing platform , even if we believe we have sufficient funds for our current or future operating plans.
If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any enzyme products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies. 26 In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding the ongoing commercialization of our ECO Synthesis manufacturing platform and a GMP manufacturing facility , even if we believe we have sufficient funds for our current or future operating plans.
Our need for additional capital will depend on many factors, including the financial success of our performance enzyme business, our spending to develop and commercialize new and existing enzyme products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including the ongoing commercialization of our ECO Synthesis ™ manufacturing platform , and the filing, prosecution, enforcement and defense of patent claims.
Our need for additional capital will depend on many factors, including the financial success of our performance enzyme business, our spending to develop and commercialize new and existing enzyme products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including the ongoing commercialization of our ECO Synthesis manufacturing platform , scaling the ECO Synthesis manufacturing platform to GMP capability, and the filing, prosecution, enforcement and defense of patent claims.
In addition, under our Loan Agreement, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to additional covenants to the extent we seek other debt financing in the future. Strategic collaborations may also place restrictions on our business.
In addition, under our Loan Agreement with Innovatus, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to additional covenants to the extent we seek other debt financing in the future. Strategic collaborations may also place restrictions on our business.
Any such expiration, termination or reduction could materially adversely affect our revenues, financial condition and results of operations. For the year ended December 31, 2023, we derived a majority of our product revenue from these product supply agreements.
Any such expiration, termination or reduction could materially adversely affect our revenues, financial condition and results of operations. For the year ended December 31, 2024, we derived a majority of our product revenue from these product supply agreements.
Entities relying on EU SCCs for transfers to the United States are also able to rely on the analysis in the Adequacy Decision as support for their TIA regarding the equivalence of U.S. national security safeguards and redress.
Entities relying on EU SCCs for transfers to the United States are also able to rely on the analysis in the Adequacy Decisions as support for their TIA regarding the equivalence of U.S. national security safeguards and redress.
Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S. data bridge (i.e., a UK equivalent of the Adequacy Decision) and adopted UK regulations to implement the UK-U.S. data bridge (“UK Adequacy Regulations”).
Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S. data bridge (i.e., a UK equivalent of the Adequacy Decision) and adopted UK regulations to implement the UK-U.S. data.
If we are unable to continue to successfully develop and commercialize products in our pharmaceutical manufacturing business, increase sales of existing products and services, develop and commercialize our ECO Synthesis ™ manufacturing platform, and or develop new products or services, or otherwise expand our business, whether through new or expanded collaborations or other products and services, our net losses may increase and we may never achieve profitability.
If we are unable to continue to successfully develop and commercialize products in our pharma biocatalysis business, increase sales of existing products and services, develop and commercialize our ECO Synthesis manufacturing platform, and or develop new products or services, or otherwise expand our business, whether through new or expanded collaborations or other products and services, our net losses may increase and we may never achieve profitability.
We may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, and could cause delays in our ability to deliver products to our customers, increase our costs and decrease our profit margins. We currently have supply agreements in place with Lactosan, ACSD and Alphazyme.
We may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, and could cause delays in our ability to deliver products to our customers, increase our costs and decrease our profit margins. 20 We currently have supply agreements in place with Lactosan, ACSD and Sekisui.
Recently, the closures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”) and their placement into receivership with the Federal Deposit Insurance Corporation, and the government-brokered sale of the deposits and majority of assets of First Republic Bank to JPMorgan Chase, created bank-specific and broader financial institution liquidity risk and concerns.
During 2023, the closures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”) and their placement into receivership with the Federal Deposit Insurance Corporation, and the government-brokered sale of the deposits and majority of assets of First Republic Bank to JPMorgan Chase, created bank-specific and broader financial institution liquidity risk and concerns.
Finally, our charter documents establish advanced notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.
Finally, our charter documents establish advanced notice requirements for nominations for election to our Board and for proposing matters that can be acted upon at stockholder meetings.
Our biocatalytic based manufacturing processes must compete with these internally developed routes. Additionally, we also face competition from companies developing and marketing conventional catalysts such as Solvias Inc., BASF and Takasago International Corporation. 22 The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented.
Our biocatalytic based manufacturing processes must compete with these internally developed routes. Additionally, we also face competition from companies developing and marketing conventional catalysts such as Solvias Inc., BASF and Takasago International Corporation. 22 The market for supplying enzymes for use in pharma biocatalysis is fragmented.
We are dependent on a limited number of customers. Although we continue to expand our customer base, our current revenues are derived from a limited number of key customers. For the years ended December 31, 2023 and 2022, customers that each individually contributed 10% or more of our total revenue accounted for 35% and 56% of our total revenues, respectively.
We are dependent on a limited number of customers. Although we continue to expand our customer base, our current revenues are derived from a limited number of key customers. For the years ended December 31, 2024 and 2023, customers that each individually contributed 10% or more of our total revenue accounted for 51% and 35% of our total revenues, respectively.
The ability of our customers, future customers or collaborators, including any company developing RNAi therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain.
The ability of our customers, future customers or collaborators, including any company developing RNAi and other RNA-based therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain.
Risks Related to Our Business and Strategy We have a history of net losses and we may not achieve or maintain profitability. We have incurred net losses since our inception, including losses of $76.2 million, $33.6 million, and $21.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Risks Related to Our Business and Strategy We have a history of net losses and we may not achieve or maintain profitability. We have incurred net losses since our inception, including losses of $65.3 million, $76.2 million, and $33.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.
In addition, some of our agreements, including the agreements with GSK, Merck, Novartis, Nestlé Health Science, Aldevro n and Roche provide for milestone payments, usage payments, and/or future royalty or other payments, which we will only receive if we and/or our collaborators develop and commercialize products or achieve technical milestones.
In addition, some of our agreements, including the agreements with GSK, Merck, Novartis, Nestlé, Aldevro n, Roche, Crosswalk and Alphazyme provide for milestone payments, usage payments, and/or future royalty or other payments, which we will only receive if we and/or our collaborators develop and commercialize products or achieve technical milestones.
Our collaboration opportunities could be harmed and our financial condition and results of operations could be negatively affected if: • we do not achieve our research and development objectives under our collaboration agreements in a timely manner or at all; 20 • we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators; • our collaborators and/or our contract manufacturers do not receive the required regulatory and other approvals necessary for the commercialization of the applicable product; • we disagree with our collaborators as to rights to intellectual property that are developed during the collaboration, or their research programs or commercialization activities; • we are unable to manage multiple simultaneous collaborations; • our collaborators or licensees are unable or unwilling to implement or use the technology or products that we provide or license to them; • our collaborators become competitors of ours or enter into agreements with our competitors; • our collaborators become unable or less willing to expend their resources on research and development or commercialization efforts due to general market conditions, their financial condition or other circumstances beyond our control; or • our collaborators experience business difficulties, which could eliminate or impair their ability to effectively perform under our agreements.
Our collaboration opportunities could be harmed and our financial condition and results of operations could be negatively affected if: • we or our collaborators do not achieve our research and development objectives under our collaboration agreements in a timely manner, or at all; • we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators; • our collaborators and/or our contract manufacturers do not receive the required regulatory and other approvals necessary for the commercialization of the applicable product; • we are unable to manage multiple simultaneous collaborations; • our collaborators or licensees are unable or unwilling to implement or use the technology or products that we provide or license to them; • our collaborators become competitors of ours or enter into agreements with our competitors; • our collaborators become unable or less willing to expend their resources on research and development or commercialization efforts due to general market conditions, their financial condition or other circumstances beyond our control; or • our collaborators experience business difficulties, which could eliminate or impair their ability to effectively perform under our agreements.
We have investments in non-marketable securities, which may subject us to significant impairment charges. We have investments in illiquid or non-marketable equity securities acquired in private transactions. As of December 31, 2023, 7.1% of our consolidated assets consisted of investment securities, which are illiquid investments. Investments in non-marketable, securities are inherently risky and difficult to value.
We have investments in non-marketable securities, which may subject us to significant impairment charges. We have investments in illiquid or non-marketable equity securities acquired in private transactions. As of December 31, 2024, 1.9% of our consolidated assets consisted of investment securities, which are illiquid investments. Investments in non-marketable, securities are inherently risky and difficult to value.
In addition, if our customers or collaborators fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may: • issue an untitled letter or a warning letter asserting a violation of the law; • seek an injunction, impose civil or criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues; • suspend or withdraw regulatory approval; 29 • issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product; • mandate modification of promotional materials and labeling and issuance of corrective information; • issue consent decrees or corporate integrity agreements, or debar or exclude from federal healthcare programs; • suspend or terminate any ongoing clinical trials or implement requirements to conduct post-marketing studies or clinical trials; • refuse to approve a pending NDA, BLA or comparable foreign marketing application (or any supplements thereto); • restrict the labeling, marketing, distribution, use or manufacturing of products; • seize or detain products or otherwise require the withdrawal or recall of products from the market; • refuse to approve pending applications or supplements to approved applications; • refuse to permit the import or export of products; or • refuse government contracts.
In addition, if our customers or collaborators fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may: • issue an untitled letter or a warning letter asserting a violation of the law; • seek an injunction, impose civil or criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues; • suspend or withdraw regulatory approval; • issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product; • mandate modification of promotional materials and labeling and issuance of corrective information; • issue consent decrees or corporate integrity agreements, or debar or exclude from federal healthcare programs; • suspend or terminate any ongoing clinical trials or implement requirements to conduct post-marketing studies or clinical trials; • refuse to approve a pending NDA, BLA or comparable foreign marketing application (or any supplements thereto); • restrict the labeling, marketing, distribution, use or manufacturing of products; • seize or detain products or otherwise require the withdrawal or recall of products from the market; • refuse to approve pending applications or supplements to approved applications; • refuse to permit the import or export of products; or • refuse government contracts. 29 Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
Conducting business internationally exposes us to a variety of risks, including: • changes in or interpretations of U.S. or foreign laws or regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities; • the imposition of tariffs; • the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; • the imposition of limitations on genetically-engineered or other products or processes and the production or sale of those products or processes in foreign countries; • currency exchange rate fluctuations; • uncertainties relating to foreign laws, regulations and legal proceedings including pharmaceutical, tax, import/export, anti-corruption and exchange control laws; • the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; • increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our ability to attract, train, manage and retain qualified management, technicians, scientists and other personnel; • economic or political instability in foreign countries; • difficulties associated with staffing and managing foreign operations; and • the need to comply with a variety of United States and foreign laws applicable to the conduct of international business, including import and export control laws and anti-corruption laws. 38 Market and economic conditions may negatively impact our business, financial condition, and share price.
Conducting business internationally exposes us to a variety of risks, including: • changes in or interpretations of U.S. or foreign laws or regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities; 38 • the imposition or increase of tariffs and other trade barriers, including as a result of the recent U.S. presidential election; • the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; • the imposition of limitations on genetically-engineered or other products or processes and the production or sale of those products or processes in foreign countries; • currency exchange rate fluctuations; • uncertainties relating to foreign laws, regulations and legal proceedings including pharmaceutical, tax, import/export, anti-corruption and exchange control laws; • the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; • increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our ability to attract, train, manage and retain qualified management, technicians, scientists and other personnel; • economic or political instability in foreign countries; • difficulties associated with staffing and managing foreign operations; and • the need to comply with a variety of United States and foreign laws applicable to the conduct of international business, including import and export control laws and anti-corruption laws.
We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products and achieving or sustaining profitability, and could lead to disagreements with our current or former collaborators. Our ability to maintain and manage collaborations in our markets is fundamental to the success of our business.
We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products and achieving or sustaining profitability. Our ability to maintain and manage collaborations in our markets is fundamental to the success of our business.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. 17 Biotherapeutic programs are highly regulated and expensive, and our enzyme products are complex and subject to quality control requirements.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. 16 Therapeutics development programs are highly regulated and expensive, and our enzyme products are complex and subject to quality control requirements.
As such, as of December 31, 2023 , we owned or controlled approximately 1,990 active issued patents and pending patent applications in the United States and in various foreign jurisdictions. As of December 31, 2023, our patents and patent applications, if issued, have terms that expire between 2024 and approximately 2044.
As such, as of December 31, 2024 , we owned or controlled approximately 1,760 active issued patents and pending patent applications in the United States and in various foreign jurisdictions. As of December 31, 2024 , our patents and patent applications, if issued, have terms that expire between 2024 and approximately 2045.
Our product supply agreements with customers generally have a finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.
Some of our product supply agreements with customers, if in place, have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.
Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows and the timeliness with which we report our internal and external operating results. Our business may require us to use and store personal information of our customers, employees, and business partners.
Any such issues could materially and adversely affect our financial condition, results of operations, cash flows and the timeliness with which we report our internal and external operating results. The accessibility of AI intensifies these risks. Our business may require us to use and store personal information of our customers, employees, and business partners.
The systems of these external vendors may contain defects in design or manufacture or other problems that could unexpectedly compromise information security of our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their systems.
We also rely on external vendors to supply and/or support certain aspects of our information technology systems. The systems of these external vendors may contain defects in design or manufacture or other problems that could unexpectedly compromise information security of our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their systems.
Other challenges with a new technology such as our ECO Synthesis™ manufacturing platform include having an unknown and unproven regulatory path, uncertainly around the value that we can realize from the technology, uncertainty around the timeline for adoption of the technology by customers, and uncertainly around our ability to manufacture and partner with customers on manufacturing and utilizing the technology.
Other challenges with a new technology such as our ECO Synthesis manufacturing platform include having an unknown and unproven development and regulatory path, uncertainly around the value that we can realize from the technology, uncertainty around the timeline for adoption of the technology by customers, and uncertainly around our ability to secure supply of necessary materials or to manufacture at GMP at scale and partner with customers on manufacturing and utilizing the technology.
The UK Information Commissioner’s Office has also published its own version of the TIA and guidance on international transfers, although entities may choose to adopt either the EU or UK-style TIA.
The UK Information Commissioner’s Office has also published its own version of the TIA, although entities may choose to adopt either the EU or UK-style TIA.
If a natural disaster or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
If a natural disaster or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, including due to impacts on our collaborators, suppliers or other third parties on which we rely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
We believe our enzyme products are exempt from compliance with the Food, Drug, and Cosmetic Act (“FDCA”) and the current GMP (“cGMP”) regulations of the FDA, as our products are further processed and incorporated into final drug or biologic products by our customers and we do not make claims related to their safety or effectiveness.
We believe our enzyme products are exempt from compliance with the FDCA and the implementing GMP regulations of the FDA, as our products are further processed and incorporated into final drug or biologic products by our customers and we do not make claims related to their safety or effectiveness.
In addition, if our customers, future customers or collaborators fail to comply with applicable FDA or other regulatory requirements at any time during the drug development process, clinical testing, the approval process or after approval, they may become subject to administrative or judicial penalties, including the FDA’s refusal to approve a pending application, withdrawal of an approval, warning letters, product recalls and additional enforcement actions, any of which may have an adverse effect on our financial condition.
In addition, if our customers, future customers or collaborators fail to comply with applicable FDA or other regulatory requirements at any time during the drug development process, clinical testing, the approval process or after approval, they may become subject to administrative or judicial penalties, including the FDA’s refusal to approve a pending application, withdrawal of an approval, warning letters, product recalls and additional enforcement actions, any of which may have an adverse effect on our financial condition. 17 We believe that our products are exempt from FDCA requirements, but FDA or other regulators may disagree and find that our products are subject to such requirements.
Manufacturing of our enzymes is conducted primarily in four locations: our in-house facility in Redwood City, California, and at three third-party contract manufacturing organizations, Lactosan in Kapfenberg, Austria, ACSD ( in Anagni, Italy, and Alphazyme in Jupiter, Florida, United States. Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing to these contract manufacturers.
Manufacturing of our enzymes is conducted primarily in four locations: our in-house facility in Redwood City, California, and at three third-party CMOs: Lactosan in Kapfenberg, Austria, ACSD in Anagni, Italy, and Sekisui in Maidstone, United Kingdom. Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing to these contract manufacturers.
We have programs in place to detect, contain and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.
The accessibility of AI intensifies these risks. We have programs in place to detect, contain and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.
These regulations result in our customers imposing quality requirements on us for the manufacture of our enzyme products through supplier qualification processes and customer contracts and specifications In order to market a biologic or drug product in the United States, our customers, future customers or collaborators must undergo the following process required by the FDA: • completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA's Good Laboratory Practice requirements; • submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before human clinical studies may begin in the United States; • approval by an independent institutional review board (“IRB”) representing each clinical site before the clinical study may be initiated at the site; • performance of adequate and well-controlled human clinical studies in accordance with Good Clinical Practice (“GCP”) requirements to establish the safety, purity and potency (or efficacy) of the product candidate for each proposed indication; • preparation of and submission to the FDA of a Biologics License Application (“BLA”) or New Drug Application (“NDA”)after completion of all clinical studies; • potential review of the product candidate by an FDA advisory committee; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the product candidate is produced to assess compliance with current Good Manufacturing Practice (“cGMP”) requirements; • FDA review and approval of a BLA or NDA prior to any commercial marketing or sale of the product in the United States; and • any post-approval requirements, if applicable.
In order to market a biologic or drug product in the United States, our customers, future customers or collaborators must undergo the following process required by the FDA: • completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA's Good Laboratory Practice requirements; • submission to the FDA of an IND, which must become effective before human clinical studies may begin in the United States; • approval by an independent institutional review board (“IRB”) representing each clinical site before the clinical study may be initiated at the site; • performance of adequate and well-controlled human clinical studies in accordance with GCP requirements to establish the safety, purity and potency (or efficacy) of the product candidate for each proposed indication; • preparation of and submission to the FDA of an NDA or BLA after completion of all clinical studies; • potential review of the product candidate by an FDA advisory committee; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the product candidate is produced to assess compliance with current Good Manufacturing Practice (“cGMP”) requirements; • FDA review and approval of a BLA or NDA prior to any commercial marketing or sale of the product in the United States; and • any post-approval requirements, if applicable.
We face competitive challenges related to our ECO Synthesis™ manufacturing platform. Phosphoramidite chemistry is the current and long-established industry standard for the manufacture of RNA therapeutics. Primary competitors in this space include CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their RNA manufacturing capabilities using phosphoramidite chemistry.
We face competitive challenges related to our ECO Synthesis manufacturing platform. The current industry standard for manufacturing RNAi therapeutics is a well-established, chemical-based method, SPOS, utilizing phosphoramidite chemistry. Primary competitors in this space include CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their RNA manufacturing capabilities using phosphoramidite chemistry.
Similar laws regulating personal information generally or health information in particular have passed in more than a dozen states and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
Similar laws regulating personal information generally or health information in particular have passed in more than a dozen states and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. The same is true for emerging laws and regulations related to AI.
We use hazardous materials in our business and we must comply with environmental laws and regulations. Any claims relating to improper handling, storage or disposal of these materials or noncompliance of applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.
Any claims relating to improper handling, storage or disposal of these materials or noncompliance of applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.
Additionally, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further development of our products could be delayed.
Additionally, we could become the subject of regulatory action or investigation, litigation, including class actions, or other claims and our competitive position could be harmed and the further development of our products could be delayed.
If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results. 30 Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.
Takeda announced in April 2023 the discontinuance of these development programs . Even after collaboration relationships expire or terminate, some elements of the collaboration may survive. For instance, certain rights, licenses and obligations of each party with respect to intellectual property and program materials may survive the expiration or termination of the collaboration.
Even after collaboration relationships expire or terminate, some elements of the collaboration may survive. For instance, certain rights, licenses and obligations of each party with respect to intellectual property and program materials may survive the expiration or termination of the collaboration.
Our research and development and commercial processes involve the use of hazardous materials, including chemical, radioactive and biological materials. Our operations also produce hazardous waste. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials.
Our research and development, manufacturing, and commercial processes involve the use of hazardous materials, including chemical, radioactive and biological materials, such as acetonitrile, which is used in some of our purification processes. Our operations also produce hazardous waste. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials.
We may have limited or no control over the amount or timing of resources that any collaborator is able or willing to devote to our partnered products or collaborative efforts. Any of our collaborators may fail to perform its obligations.
We currently have license agreements, research and development agreements, supply agreements and/or distribution agreements with various collaborators. We may have limited or no control over the amount or timing of resources that any collaborator is able or willing to devote to our partnered products or collaborative efforts. Any of our collaborators may fail to perform its obligations.
Any failure, or perceived failure, by us to comply with federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation and a loss of customers, any of which could have an adverse effect on our business.
Any failure, or perceived failure, by us to comply with federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation and a loss of customers, any of which could have an adverse effect on our business. 43 Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.
President Biden introduced an Executive Order to facilitate a new Trans-Atlantic Data Privacy Framework (“DPF”) and in July 2023, the European Commission adopted its Final Implementing Decision granting the United States adequacy (“Adequacy Decision”) for EU-U.S. transfers of personal data for entities self-certified to the DPF.
In July 2023, the European Commission adopted its Final Implementing Decision granting the United States adequacy (“Adequacy Decision”) for EU-U.S. transfers of personal data for entities self-certified to the Atlantic Data Privacy Framework (“DPF”).
While we anticipate that we may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, or lead to the manufacture of these APIs, the overall effect on our revenues, financial condition and results of operations could be materially adverse. 19 We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes.
While we anticipate that we may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, or lead to the manufacture of these APIs, the overall effect on our revenues, financial condition and results of operations could be materially adverse.
Due to uncertainties inherent in prosecuting patent applications, sometimes patent applications are rejected, and we subsequently abandon them. It is also possible that we may develop proprietary technology, products or services in the future that are not patentable or that the patents of others will limit or altogether preclude our ability to conduct business.
It is also possible that we may develop proprietary technology, products or services in the future that are not patentable or that the patents of others will limit or altogether preclude our ability to conduct business.
We are aware of some patents and patent applications relating to aspects of our technologies, products or services filed by, and issued to, third parties. We cannot assure that if such third-party patents rights are asserted against us that we would ultimately prevail.
Many biotechnology companies have employed intellectual property litigation as a way to gain a competitive advantage. We are aware of some patents and patent applications relating to aspects of our technologies, products or services filed by, and issued to, third parties. We cannot assure that if such third-party patents rights are asserted against us that we would ultimately prevail.
As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business. 42 Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.
Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.
As a result of this refined focus, we may fail to capitalize on other opportunities that may be more profitable or for which there is a greater likelihood of success. Because we have limited financial and managerial resources, we have recently focused our efforts on developing certain programs and business lines.
As a result of our strategic shift and our refined focus on certain programs and business lines, we may fail to capitalize on other opportunities that may be more profitable or for which there is a greater likelihood of success.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. 41 In the European Union (“EU”), the EU General Data Protection Regulation (“EU GDPR”) governs the processing of personal data.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
We may seek to obtain such additional capital through equity offerings, including pursuant to the EDA, debt financings, credit facilities and/or strategic collaborations. If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.
We may seek to obtain such additional capital through equity offerings, including pursuant to our Controlled Equity Offering℠ Sales Agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor”), debt financings, credit facilities and/or strategic collaborations. If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.
We are working to qualify new contract manufacturers to produce certain of our enzymes, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.
We are dependent on a limited number of third-party contract manufacturers for large scale production of substantially all of our enzymes. We are working to qualify new contract manufacturers to produce certain of our enzymes, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.
With respect to customers purchasing our products for the manufacture of APIs for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.
With respect to customers purchasing our products for the manufacture of APIs for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations. 19 With respect to customers purchasing our products for the manufacture of API, or lead to the manufacture of API, for which exclusivity due to patent protection has or is about to expire, we can expect that the quantity of our products sold to such customers for such products may decline as generic competition for the API increases.
A TIA, among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under the EU SCCs will need to be implemented to ensure an ‘essentially equivalent’ level of data protection to that afforded in the EEA. On October 7, 2022, U.S.
In certain cases, companies must also carry out a transfer privacy impact assessment (“TIA”) which, among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under the EU SCCs will need to be implemented to ensure an ‘essentially equivalent’ level of data protection to that afforded in the EEA.
Additional uncertainty may result from legal precedent handed down by the United States Federal Circuit Court and Supreme Court as they determine legal issues concerning the scope and construction of patent claims and inconsistent interpretation of patent laws by the lower courts.
Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete. 32 Additional uncertainty may result from legal precedent handed down by the United States Federal Circuit Court and Supreme Court as they determine legal issues concerning the scope and construction of patent claims and inconsistent interpretation of patent laws by the lower courts.
There can be no assurance that these events we may experience in the future related to enzymatic synthesis will not cause significant delays or unanticipated costs, or that such development problems can be solved.
We may also be unable to achieve the expected benefits of the ECO Synthesis manufacturing platform in a timely manner, or at all. There can be no assurance that these events we may experience in the future related to enzymatic synthesis will not cause significant delays or unanticipated costs, or that such development problems can be solved.
Risks Related to Owning our Common Stock We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.
If the steps we have taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. 35 Risks Related to Owning our Common Stock We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.
As a result, we are renegotiating some of these, along with other license agreements for product candidates in our biotherapeutics, food and feed, and non-core life science assets.
While we have historically invested significant time and financial resources in the development of biotherapeutics assets, we have terminated investment in our biotherapeutics business and in other programs. As a result, we are renegotiating some of these, along with other license agreements for product candidates in our biotherapeutics, food and feed, and non-core life science assets.
Any failure or perceived failure by us to comply with applicable laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
Any failure or perceived failure by us to comply with applicable laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business. 41 In the United States, Health Insurance Portability and Accountability Act (“HIPAA”) imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of certain individually identifiable health information.
If this were to occur, it may be difficult for us to challenge this type of use, especially in countries with limited intellectual property rights protection or in countries in which we do not have patents covering the misappropriated biocatalysts. 34 Confidentiality and non-use agreements with employees, consultants, advisors and other third parties may not adequately prevent disclosures and non-use of trade secrets and other proprietary information.
If this were to occur, it may be difficult for us to challenge this type of use, especially in countries with limited intellectual property rights protection or in countries in which we do not have patents covering the misappropriated biocatalysts.

… 122 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+3 added−0 removed11 unchanged
Biggest changeAreas of cybersecurity risk are assessed bi-annually, and updates are reported by the VP IT to the Audit Committee and senior management annually. Where our bi-annual cybersecurity risk assessment identifies areas for improvement, we document and track our remediation activities, which are also reported to the Audit Committee and senior management annually.
Biggest changeWhere our bi-annual cybersecurity risk assessment identifies areas for improvement, we document and track our remediation activities, which are also reported to the Audit Committee and senior management annually. 45 Senior management has appointed a Cybersecurity Council that is responsible for identifying, escalating, and facilitating the assessment and determination of the materiality of cybersecurity incidents and threats.
With respect to third parties who provide services affecting critical business management systems, we collect and maintain SOC2 type II reports (attestation of controls at a service organization over a minimum six-month period). For other third-party service providers, cybersecurity risk is addressed as appropriate.
With respect to third parties who provide services affecting critical business management systems, we collect and maintain SOC2 or SOC1 type II reports (attestation of controls at a service organization over a minimum six-month period). For other third-party service providers, cybersecurity risk is addressed as appropriate.
The members of the Cybersecurity Council do not have specific expertise in cybersecurity risk other than the VP IT who has more than 20 years of experience, and engages with trusted third-party experts for support and guidance when additional expertise is required.
The members of the Cybersecurity Council do not have specific expertise in cybersecurity risk other than the Vice President of Information Technology (“VP IT”) who has more than 20 years of experience, and engages with trusted third-party experts for support and guidance when additional expertise is required.
In addition, we maintain insurance that includes cybersecurity coverage. Areas of cybersecurity risk are assessed bi-annually, and updates are reported by our Vice President of Information Technology (“VP IT”) to the Board’s Audit Committee and senior management annually.
In addition, we maintain insurance that includes cybersecurity coverage. Areas of cybersecurity risk are assessed bi-annually, and updates are reported by our Chief Financial Officer to the Board’s Audit Committee and senior management annually.
Senior management has appointed a Cybersecurity Council that is responsible for identifying, escalating, and facilitating the assessment and determination of the materiality of cybersecurity incidents and threats. The Cybersecurity Council is made up of representatives of IT, Legal and Finance, as well as ad hoc additional members depending on the circumstances of the incident or threat.
The Cybersecurity Council is made up of representatives of IT, Legal and Finance, as well as ad hoc additional members depending on the circumstances of the incident or threat.
Prior to joining Codexis, our VP IT has managed cybersecurity functions, where he was responsible for overseeing cybersecurity strategy and operations, including incident response, threat intelligence, security awareness training programs, risk assessments and remediation, and regulatory and compliance matters. 44 An actual or suspected cybersecurity incident that jeopardizes the confidentiality, integrity, or availability of Codexis' information systems or any information residing therein (or threat that presents significant risk to our information systems as identified by IT) is reported to the Cybersecurity Council by our IT Department.
An actual or suspected cybersecurity incident that jeopardizes the confidentiality, integrity, or availability of Codexis' information systems or any information residing therein (or threat that presents significant risk to our information systems as identified by IT) is reported to the Cybersecurity Council by our IT Department.
Added
Areas of cybersecurity risk are assessed bi-annually, and updates are reported by the Chief Financial Officer to the Audit Committee and senior management annually.
Added
In December 2024, the VP IT exited the company, and IT expert advice to the Cybersecurity Council is currently provided by an external cybersecurity specialist.
Added
This specialist has extensive experience managing cybersecurity functions in his prior external roles, where he was responsible for overseeing cybersecurity strategy and operations, including incident response, threat intelligence, security awareness training programs, risk assessments and remediation, and regulatory and compliance matters.

Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−5 removed2 unchanged
Biggest changeIn February 2019, we entered into an Eighth Amendment to the RWC Lease (the “Eighth Amendment”) with MetLife with respect to the Penobscot Space and the 501 Chesapeake Space to extend the term of the RWC Lease for additional periods. Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space has been extended through May 2027.
Biggest changeIn December 2024, we entered into a Ninth Amendment to the RWC Lease (the “Ninth Amendment”) with MetLife with respect to the Penobscot Space and the Chesapeake Space to extend the term of the RWC Lease for additional periods.
We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC lease has been amended multiple times since then to adjust the leased space and terms of the RWC Lease.
We entered into the initial lease with MetLife for our facilities in Redwood City in 2003 and the RWC lease has been amended multiple times since then to adjust the leased space and terms of the RWC Lease.
The effective date of the assignment was October 1, 2023. We believe that the facility that we currently lease in Redwood City, California is adequate for our needs for the immediate future and that, should it be needed, additional space can be leased to accommodate any future growth.
We believe that the facility that we currently lease in Redwood City, California is adequate for our needs for the immediate future and that, should it be needed, additional space can be leased to accommodate any future growth.
The lease term for the 501 Chesapeake Space has been extended to May 2029. We have one (1) option to extend the term of the lease for the Penobscot Space for five (5) years, and one (1) separate option to extend the term of the lease for the 501 Chesapeake Space for five (5) years.
We have one (1) option to extend the term of the lease for the Penobscot Space for five (5) years, and one (1) separate option to extend the term of the lease for the Chesapeake Space for five (5) years.
Removed
In January 2021, we entered into a lease agreement with ARE-San Francisco No. 63, LLC ( “ ARE ” ) to lease a portion of a facility comprising approximately 36,593 rentable square feet at 825 Industrial Road, San Carlos, California to serve as additional office and research and development laboratory space (the “ San Carlos Space ” ).
Added
Pursuant to the Ninth Amendment, the term of the lease for both the Penobscot Space and the Chesapeake Space has been extended through August 2032.
Removed
In December 2021, we commenced occupancy of the San Carlos Space. The lease term for the San Carlos Space was through the end of November 2031, with one (1) option to extend the term of the lease for the San Carlos Space for five (5) years.
Removed
In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City. On September 1, 2023, the Company entered into an Assignment and Assumption of Lease (the “Assignment Agreement”) with Vaxcyte, Inc.
Removed
(“Vaxcyte”) to assign to Vaxcyte all of the Company’s right, title and interest in, under and to the San Carlos Space and the Lease Agreement, dated as of January 29, 2021.
Removed
On September 6, 2023, the Company, Vaxcyte and ARE entered into a Consent to Assignment and First Amendment (the “Consent”) pursuant to which ARE consented to the Assignment Agreement and the assignment by the Company and the assumption by Vaxcyte of the Company’s interest as tenant in the lease and agreed to release the Company from all of its obligations under the lease that accrue from and after the assignment.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−0 removed3 unchanged
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The information required by this item concerning securities authorized for issuance under equity compensation plans is incorporated by reference from the information that will be set forth in the Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2024 (the “2024 Proxy Statement ” ) under the heading “Executive Compensation—Equity Compensation Plan Information. ” Stock Price Performance Graph The following tabular information and graph compare our total common stock return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology Total Return Index for the period December 31, 2018 through December 31, 2023.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The information required by this item concerning securities authorized for issuance under equity compensation plans is incorporated by reference from the information that will be set forth in the Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2025 (the “2025 Proxy Statement ” ).
The figures represented below assume an investment of $100 in our common stock at the closing price on December 31, 2018 and in the Nasdaq Composite Index and the Nasdaq Biotechnology Total Return Index on December 31, 2018 and the reinvestment of dividends into shares of common stock.
The figures represented below assume an investment of $100 in our common stock at the closing price on December 31, 2019 and in the Nasdaq Composite Index and the Nasdaq Biotechnology Total Return Index on December 31, 2019 and the reinvestment of dividends into shares of common stock.
A substantially greater number of stockholders may be "street name" or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions. Dividend Policy We have never declared or paid cash dividends on our common stock, and we currently do not plan to declare dividends on shares of our common stock in the foreseeable future.
A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions. Dividend Policy We have never declared or paid cash dividends on our common stock, and we currently do not plan to declare dividends on shares of our common stock in the foreseeable future.
December 31, $100 investment in stock or index Ticker 2018 2019 2020 2021 2022 2023 Codexis, Inc.
December 31, $100 investment in stock or index Ticker 2019 2020 2021 2022 2023 2024 Codexis, Inc.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is quoted on the Nasdaq Global Select Market (“Nasdaq ” ), under the symbol “CDXS.” As of February 23, 2024, there were approximately 125 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is quoted on the Nasdaq Global Select Market (“Nasdaq ” ), under the symbol “CDXS.” As of February 24, 2025, there were approximatel y 123 stockholders of record.
We expect to retain our future earnings, if any, for use in the operation and expansion of our business. In addition, unless waived, the terms of our Loan Agreement prohibit us from paying any cash dividends or making other distributions.
We expect to retain our future earnings, if any, for use in the operation and expansion of our business. In addition, unless waived, the terms of our five-year term loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”) prohibit us from paying any cash dividends or making other distributions.
CDXS $ 100.00 $ 95.75 $ 130.72 $ 187.25 $ 27.90 $ 18.26 Nasdaq Composite Total Return XCMP $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 Nasdaq Biotechnology (Total Return) Index XNBI $ 100.00 $ 125.11 $ 158.17 $ 158.20 $ 142.19 $ 148.72 46 Unregistered Sales of Equity Securities and Use of Proceeds During the year ended December 31, 2023, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
CDXS $ 100.00 $ 136.52 $ 195.56 $ 29.14 $ 19.07 $ 29.83 Nasdaq Composite Total Return XCMP $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.78 $ 223.87 Nasdaq Biotechnology (Total Return) Index XNBI $ 100.00 $ 126.42 $ 126.45 $ 113.65 $ 118.87 $ 118.20 47 Unregistered Sales of Equity Securities and Use of Proceeds During the year ended December 31, 2024, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Added
Stock Price Performance Graph The following tabular information and graph compare our total common stock return with the total return for (i) the Nasdaq Composite Index and (ii) the Nasdaq Biotechnology Total Return Index for the period December 31, 2019 through December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+33 added−38 removed38 unchanged
Biggest changePotential revenues in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicine Patent Pool) are subject to a number of factors which are outside of our control and could reduce or eliminate our sales of CDX-616. 49 RESULTS OF OPERATIONS The following table shows the amounts from our consolidated statements of operations for the periods presented (in thousands, except percentages): Year Ended December 31, % of Total Revenues 2023 2022 2021 2023 2022 2021 Revenues: Product revenue $ 42,906 $ 116,676 $ 70,657 61 % 84 % 67 % Research and development revenue 27,237 21,914 34,097 39 % 16 % 33 % Total revenues 70,143 138,590 104,754 100 % 100 % 100 % Costs and operating expenses: Cost of product revenue 12,809 38,033 22,209 18 % 27 % 21 % Research and development 58,885 80,099 55,919 84 % 58 % 53 % Selling, general and administrative 53,250 52,172 49,323 76 % 38 % 47 % Restructuring charges 3,284 3,167 — 5 % 2 % — % Asset impairment and other charges 9,984 — — 14 % — % — % Total costs and operating expenses 138,212 173,471 127,451 197 % 125 % 121 % Loss from operations (68,069) (34,881) (22,697) (97) % (25) % (21) % Interest income 4,172 1,441 459 6 % 1 % — % Other income (expense), net (12,274) 124 1,148 (17) % — % 1 % Loss before income taxes (76,171) (33,316) (21,090) (108) % (24) % (20) % Provision for income taxes 69 276 189 — % — % — % Net loss $ (76,240) $ (33,592) $ (21,279) (108) % (24) % (20) % Revenues Our revenues consist of product revenue and research and development revenue as follows: • Product revenue consist of sales of biocatalysts, pharmaceutical intermediates, and Codex ® biocatalyst panels and kits. • Research and development revenue include license, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and screening fees.
Biggest changeRESULTS OF OPERATIONS The following table shows the amounts from our consolidated statements of operations for the periods presented (in thousands, except percentages): Year Ended December 31, % of Total Revenues 2024 2023 2022 2024 2023 2022 Revenues: Product revenue $ 36,786 $ 42,906 $ 116,676 62 % 61 % 84 % Research and development revenue 22,559 27,237 21,914 38 % 39 % 16 % Total revenues 59,345 70,143 138,590 100 % 100 % 100 % Costs and operating expenses: Cost of product revenue 16,288 12,809 38,033 27 % 18 % 27 % Research and development 46,263 58,885 80,099 78 % 84 % 58 % Selling, general and administrative 55,148 53,250 52,172 93 % 76 % 38 % Restructuring charges — 3,284 3,167 — % 5 % 2 % Asset impairment and other charges 165 9,984 — — % 14 % — % Total costs and operating expenses 117,864 138,212 173,471 199 % 197 % 125 % Loss from operations (58,519) (68,069) (34,881) (99) % (97) % (25) % Interest income 3,670 4,172 1,441 6 % 6 % 1 % Interest and other expense, net (10,393) (12,274) 124 (18) % (17) % — % Loss before income taxes (65,242) (76,171) (33,316) (111) % (108) % (24) % Provision for income taxes 34 69 276 — % — % — % Net loss $ (65,276) $ (76,240) $ (33,592) (111) % (108) % (24) % Revenues Our revenues consist of product revenue and research and development revenue as follows: • Product revenue consist of sales of biocatalysts, pharmaceutical intermediates, and Codex biocatalyst panels and kits. • Research and development revenue include license, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and screening fees.
The decrease was primarily due to lower volu me of product sales as compared to prior year.
The decrease was primarily due to lower volu me of product sales as compared to the prior year.
Net Loss Net loss for 2023 was $76.2 million, or a net loss per basic and diluted share of $1.12. This compared to a net loss of $33.6 million, or $0.51 per basic and diluted share for 2022.
Net loss for 2023 was $76.2 million, or a net loss per basic and diluted share of $1.12. This compared to a net loss of $33.6 million, or $0.51 per basic and diluted share, for 2022.
For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on hours incurred or output of services provided. 57 Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations.
For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on hours incurred or output of services provided. Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations.
Cash Flows from Financing Activities The $8.7 million increase in net cash provided by financing activities in 2023 as compared to 2022 was primarily due to proceeds from issuance of common stock under the EDA and lower cash paid on taxes related to net share settlement of equity awards.
The $8.7 million increase in net cash provided by financing activities in 2023 as compared to 2022 was primarily due to proceeds from issuance of common stock under the EDA and lower cash paid on taxes related to net share settlement of equity awards.
The decrease was driven by lower product revenue as compared to the prior year. 50 Product revenue was $42.9 million in 2023, a decrease of 63% compared with $116.7 million in 2022. The decrease in product revenue was primarily due to decreased sales of CDX-616 to Pfizer.
The decrease was driven by lower product revenue as compared to the prior year. Product revenue was $42.9 million in 2023, a decrease of 63% compared with $116.7 million in 2022. The decrease in product revenue was primarily due to decreased sales of CDX-616 to Pfizer.
Equity Distribution Agreement In May 2021, we entered into an Equity Distribution Agreement (“EDA ” ) with Piper Sandler & Co (“PSC ” ), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.
Sales Agreements In May 2021, we entered into an Equity Distribution Agreement (“EDA ” ) with Piper Sandler & Co (“PSC ” ), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.
Recent Accounting Pronouncements See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K for a full description of recent accounting standards, including the respective dates of adoption and effects on our consolidated financial position, results of operations and cash flows. 59
Recent Accounting Pronouncements See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K for a full description of recent accounting standards, including the respective dates of adoption and effects on our consolidated financial position, results of operations and cash flows. 60
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, expectations regarding our strategy, business plans, financial performance and developments relating to our industry.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, expectations regarding our strategy, business plans, financial performance and developments relating to our industry.
The majority of our contracts with customers typically contain multiple products and services. The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others.
Some of our contracts with customers contain multiple products and services. The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others.
Our cash flows from operations will continue to be affected principally by product sales and product gross margins, sales from licensing our technology to major pharmaceutical companies, and collaborative research and development services provided to customers, as well as our headcount costs, primarily in research and development.
Our cash flows from operations will continue to be affected principally by product sales and product gross margins, sales from licensing our technology to major pharmaceutical companies, and collaborative research and development services provided to customers, as well as our headcount costs.
Gains and losses on these securities are recognized in other income (expense), net. We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value.
Gains and losses on these securities are recognized in interest and other expense, net. We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our capital resources sooner than we expect. 55 However, we may need additional capital if our current plans and assumptions change.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our capital resources sooner than we expect. 56 However, we may need additional capital if our current plans and assumptions change.
Asset Impairment and Other Charges Asset impairment and other charges for the year ended December 31, 2023 were $10.0 million , consisting o f a $9.2 million long-lived asset impairment charge and a $0.8 million goodwill impairment charge, all of which are non-cash charges. No asset impairment charges were recorded for the years ended December 31, 2022 or 2021.
Asset impairment and other charges for the year ended December 31, 2023 were $10.0 million, consisting o f a $ 9.2 million long-lived asset impairment charge and a $0.8 million goodwill impairment charge, all of which are non-cash charges. No asset impairment charges were recorded for the year ended December 31, 2022.
If such assets are considered to be impaired, the impairment to be recognized is measure by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
In May 2021, we entered into an Equity Distribution Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.
In May 2021, we entered into an Equity Distribution Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we determined from time to time, may have sold over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.
Sales of our common stock under this arrangement could be subject to business, economic or competitive unce rtainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.
Sales of our common stock under the Cantor Sales Agreement could be subject to business, economic or competitive unce rtainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.
During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA for gross proceeds of $8.7 million, or $7.9 million in net proceeds after PSC's commissions and direct offering expenses of $0.7 million. As of December 31, 2023, $41.3 million of shares remained available for sale under the EDA.
During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA for gross proceeds of $8.7 million, or $7.9 million in net proceeds after PSC's commissions and direct offering expenses of $0.7 million.
Under the terms of the EDA, PSC may sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended.
Under the terms of the EDA, PSC was permitted to sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).
This decrease was primarily due $10.0 million decrease in costs associated with lower headcount, $6.4 million decrease in outside services and Chemistry, Manufacturing and Controls (“CMC”) and regulatory expense, $4.1 million in lower lab supplies expense, $1.3 million in lower stock comp expense, and $1.0 million decrease in lease costs due to the assignment of our San Carlos facility lease.
This decrease was primarily due to a $10.0 million decrease in costs associated with lower headcount, $6.4 million decrease in outside services and CMC and regulatory expense, $4.1 million in lower lab supplies expense, $1.3 million in lower stock comp expense, and a $1.0 million decrease in lease costs due to the assignment of our San Carlos facility lease.
Product gross margins increased to 70% in 2023 as compared to 67% in 2022, primarily due to product revenue recognized with no related costs in 2023 related to the utilization of Pfizer's fee and early termination of an enzyme supply agreement with a customer, and was partially offset by variability in the product mix. 2022 compared to 2021 Cost of product revenue increased by $15.8 million in 2022 to $38.0 million, as compared to 2021.
Product gross margins increased to 70% in 2023 as compared to 67% in 2022, primarily due to product revenue recognized with no related costs in 2023 related to the utilization of Pfizer's fee and early termination of an enzyme supply agreement with a customer, and was partially offset by variability in the product mix.
The provision for income taxes in 2021 was primarily due to the income tax withholding imposed by foreign taxing authorities on income earned in certain countries outside of the Unites Stated and remitted to the United States and the accrual of interest and penalties on historic uncertain tax positions.
The provision for income taxes in 2022 was primarily due to the income tax withholding imposed by foreign taxing authorities on income earned in certain countries outside of the Unites Stated and remitted to the United States and the accrual of interest and penalties on historic uncertain tax positions, as well as current year state income taxes.
In addition, pursuant to the Loan Agreement, we received $30.0 million from Innovatus, as Lender, on February 13, 2024 and may become eligible to borrow up to an additional $10.0 million upon the achievement of certain financial milestones.
In addition, pursuant to our Loan Agreement with Innovatus, an affiliate of Innovatus Capital Partners, LLC, we borrowed $30.0 million from Innovatus, as Lender, on February 13, 2024 and may become eligible to borrow up to an additional $10.0 million upon the achievement of certain financial milestones.
Considering these industry practices and our experience, we do not believe the total of customer purchase orders outstanding (backlog) provides meaningful information that can be relied on to predict actual sales for future periods. 2023 compared to 2022 Total revenues decreased by $68.4 million in 2023 to $70.1 million, as compared to 2022.
Considering these industry practices and our experience, we do not believe the total of customer purchase orders outstanding (backlog) provides meaningful information that can be relied on to predict actual sales for future periods. 2024 compared to 2023 Total revenues decreased by $10.8 million in 2024 to $59.3 million, as compared to 2023.
If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted. 58 Impairment of Long-Lived Assets We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate.
Impairment of Long-Lived Assets We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate.
We recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make significant judgments when determining the appropriate timing of revenue recognition.
We recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer.
Product Revenue Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at discounted prices and an option to extend their contract, among others.
We make significant judgments when determining the appropriate timing of revenue recognition. 58 Product Revenue Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at discounted prices and an option to extend their contract, among others.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist of employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), hiring and training costs, consulting and outside services expenses (including audit and legal counsel related costs), marketing costs, building lease costs, and depreciation expenses and amortization expenses. 2023 compared to 2022 Selling, general and administrative expenses were $53.3 million in 2023 compared to $52.2 million in 2022, an increase of $1.1 million, or 2%.
These were partially offset by $1.7 million in higher allocable costs. 53 Selling, General and Administrative Expenses Selling, general and administrative expenses consist of employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), hiring and training costs, consulting and outside services expenses (including audit and legal counsel related costs), marketing costs, building lease costs, and depreciation expenses and amortization expenses. 2024 compared to 2023 Selling, general and administrative expenses were $55.1 million in 2024 compared to $53.3 million in 2023, an increase of $1.9 million, or 4%.
These costs primarily consist of (i) employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), (ii) various allocable expenses, which include occupancy-related costs, supplies, depreciation of facilities and laboratory equipment, and (iii) external costs.
Research and Development Expenses Research and development expenses consist of costs incurred for internal projects as well as collaborative research and development activities. These costs primarily consist of (i) employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), (ii) various allocable expenses, which include occupancy-related costs, supplies, depreciation of facilities and laboratory equipment, and (iii) external costs.
This increase was primarily due to $3.6 million higher in payroll-based expenses, $0.6 million in higher legal expense, $0.4 million in higher repairs and maintenance expense, and $0.3 million in higher consulting and outside services.
This increase was primarily due to $3.6 million in higher payroll-based expenses, $0.6 million in higher legal expense, $0.4 million in higher repairs and maintenance expense, and $0.3 million in higher consulting and outside services. This was partially offset by $3.2 million in lower stock-based compensation expense and $0.4 million in lower allocable expenses.
We focus on leveraging our capacity to enhance the properties and performance of enzymes to drive pivotal improvements across two key focus areas: our foundational, revenue-generating pharmaceutical manufacturing business and our Enzyme-Catalyzed Oligonucleotide (ECO) Synthesis™ (“ECO Synthesis™”) manufacturing platform, which is currently in development to enable the commercial scale manufacture of RNA interference (RNAi) therapeutics.
We focus on leveraging our technology and capacity to enhance the properties and performance of enzymes to drive pivotal improvements in manufacturing of complex therapeutics across two key focus areas: our foundational, revenue-generating pharma biocatalysis business and our Enzyme-Catalyzed Oligonucleotide (ECO) Synthesis (“ECO Synthesis”) manufacturing platform, which is comprised of enzymatic tools and processes, designed to enable large-scale manufacture of RNA interference ( “ RNAi ” ) therapeutics.
Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life. They can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to perform (bio)chemical transformations different than those for which they naturally evolved.
They can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to perform (bio)chemical transformations different than those for which they naturally evolved.
Research and development revenue increased by $5.3 million in 2023 to $27.2 million, or 24% compared with $21.9 million in 2022, primarily due to higher revenue from the Pfizer license agreement and from Nestlé Health Science under the Nestlé SCA and development agreement and the Acquisition Agreement, which was partially offset by lower research and development fees from existing collaboration agreements being recognized in 2023 as compared to the prior year. 2022 compared to 2021 Total revenues increased b y $33.8 million in 2022 to $138.6 million, as compared to 2021.
Research and development revenue increased by $5.3 million in 2023 to $27.2 million, or 24% compared with $21.9 million in 2022, primarily due to higher revenue from a 2023 Pfizer license agreement and from Nestlé Health Science under a Strategic Collaboration Agreement with Nestlé (the “Nestlé SCA”) and development agreement and an acquisition agreement with Nestlé (the “Acquisition Agreement”), which was partially offset by lower research and development fees from existing collaboration agreements being recognized in 2023 as compared to the prior year.
Within the pharmaceutical manufacturing business, we utilize our CodeEvolver ® technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to reduce their costs and improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics.
In o ur revenue-generating pharma biocatalysis business (formerly our pharmaceuticals manufacturing business), we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics.
Costs and Operating Expenses (in thousands, except percentages): Change Year Ended December 31, 2023 2022 2023 2022 2021 $ % $ % Cost of product revenue $ 12,809 $ 38,033 $ 22,209 $ (25,224) (66) % $ 15,824 71 % Research and development 58,885 80,099 55,919 (21,214) (26) % 24,180 43 % Selling, general and administrative 53,250 52,172 49,323 1,078 2 % 2,849 6 % Restructuring charges 3,284 3,167 — 117 4 % 3,167 100 % Asset impairment and other charges 9,984 — — 9,984 100 % — — % Total costs and operating expenses $ 138,212 $ 173,471 $ 127,451 $ (35,259) (20) % $ 46,020 36 % Costs of Product Revenue and Product Gross Margin The following table shows the amounts of our product revenue, cost of product revenue, product gross profit and product gross margin from our consolidated statements of operations (in thousands, except percentages): Year Ended December 31, Change Year Ended December 31, Change 2023 2022 $ % 2022 2021 $ % Product revenue $ 42,906 $ 116,676 $ (73,770) (63) % $ 116,676 $ 70,657 $ 46,019 65 % Cost of product revenue (1) 12,809 38,033 (25,224) (66) % 38,033 22,209 15,824 71 % Product gross profit $ 30,097 $ 78,643 $ (48,546) (62) % $ 78,643 $ 48,448 $ 30,195 62 % Product gross margin (%) (2) 70 % 67 % 67 % 69 % (1) Cost of product revenue comprises both internal and third-party fixed and variable costs, including materials and supplies, labor, facilities and other overhead costs associated with our product revenue.
Costs and Operating Expenses (in thousands, except percentages): Change Year Ended December 31, 2024 2023 2024 2023 2022 $ % $ % Cost of product revenue $ 16,288 $ 12,809 $ 38,033 $ 3,479 27 % $ (25,224) (66) % Research and development 46,263 58,885 80,099 (12,622) (21) % (21,214) (26) % Selling, general and administrative 55,148 53,250 52,172 1,898 4 % 1,078 2 % Restructuring charges — 3,284 3,167 (3,284) (100) % 117 4 % Asset impairment and other charges 165 9,984 — (9,819) (98) % 9,984 100 % Total costs and operating expenses $ 117,864 $ 138,212 $ 173,471 $ (20,348) (15) % $ (35,259) (20) % 52 Costs of Product Revenue and Product Gross Margin The following table shows the amounts of our product revenue, cost of product revenue, product gross profit and product gross margin from our consolidated statements of operations (in thousands, except percentages): Year Ended December 31, Change Year Ended December 31, Change 2024 2023 $ % 2023 2022 $ % Product revenue $ 36,786 $ 42,906 $ (6,120) (14) % $ 42,906 $ 116,676 $ (73,770) (63) % Cost of product revenue (1) 16,288 12,809 3,479 27 % 12,809 38,033 (25,224) (66) % Product gross profit $ 20,498 $ 30,097 $ (9,599) (32) % $ 30,097 $ 78,643 $ (48,546) (62) % Product gross margin (%) (2) 56 % 70 % 70 % 67 % (1) Cost of product revenue comprises both internal and third-party fixed and variable costs, including materials and supplies, labor, facilities and other overhead costs associated with our product revenue.
(2) Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis. 51 2023 compared to 2022 Cost of product revenue decreased by $25.2 million in 2023 to $12.8 million, as compared to 2022.
(2) Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis. 2024 compared to 2023 Cost of product revenue increased by $3.5 million in 2024 to $16.3 million, as compared to 2023.
The Term Loan carries an interest-only period of 36 months and will bear an interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50%, plus (b) 3.25%.
The Term Loan carries an interest-only period of 36 months (with the possibility to extend up to 48 months upon achievement of certain pre-specified financial milestones) and will bear interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50%, plus (b) 3.25%.
Revenues are as follows (in thousands, except percentages): Change Year Ended December 31, 2023 2022 2023 2022 2021 $ % $ % Product revenue $ 42,906 $ 116,676 $ 70,657 $ (73,770) (63) % $ 46,019 65 % Research and development revenue 27,237 21,914 34,097 5,323 24 % (12,183) (36) % Total revenues $ 70,143 $ 138,590 $ 104,754 $ (68,447) (49) % $ 33,836 32 % Revenues typically fluctuate on a quarterly basis due to the variability in our customers' manufacturing schedules and the timing of our customers' clinical trials.
Revenues are as follows (in thousands, except percentages): Change Year Ended December 31, 2024 2023 2024 2023 2022 $ % $ % Product revenue $ 36,786 $ 42,906 $ 116,676 $ (6,120) (14) % $ (73,770) (63) % Research and development revenue 22,559 27,237 21,914 (4,678) (17) % 5,323 24 % Total revenues $ 59,345 $ 70,143 $ 138,590 $ (10,798) (15) % $ (68,447) (49) % Revenues typically fluctuate on a quarterly basis due to the variability in our customers' manufacturing schedules and the timing of our customers' clinical trials.
Research and development expenses are expensed when incurred. 2023 compared to 2022 Research and development expenses were $58.9 million in 2023 compared to $80.1 million in 2022, a decrease of $21.2 million, or 26%.
Research and development expenses are expensed when incurred. 2024 compared to 2023 Research and development expenses were $46.3 million in 2024 compared to $58.9 million in 2023, a decrease of $12.6 million, or 21%.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly owned subsidiaries.
The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly owned subsidiaries.
If we determine that a license is distinct, we would recognize an allocable portion of the transaction price when the license is transferred to the customer, and the customer can use and benefit from it.
If we determine that a license is distinct, we would recognize an allocable portion of the transaction price when the license is transferred to the customer, and the customer can use and benefit from it. We estimate the SSP for license rights by using historical information if licenses have been previously sold to customers.
As of December 31, 2023, we have 1,293,535 shares of seqWell's Series C and C-1 preferred stock that we have earned or purchased since executing the Stock Purchase Agreement with seqWell. 48 In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, under which we may sell common stock, preferred stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings.
Financing Activities In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, under which we may sell common stock, preferred stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings.
This was partially offset by $3.2 million lower stock based compensation expense and $0.4 million in lower allocable expenses. 52 2022 compared to 2021 Selling, general and administrative expenses were $52.2 million in 2022 compared to $49.3 million in 2021, an increase of $2.8 million, or 6%.
This was partially offset by a $1.9 million in lower payroll-based expenses and $0.7 million in lower allocable expenses. 2023 compared to 2022 Selling, general and administrative expenses were $53.3 million in 2023 compared to $52.2 million in 2022, an increase of $1.1 million, or 2%.
The following summarizes our cash and cash equivalents balance and working capital as of December 31, 2023, 2022 and 2021 (in thousands): December 31, 2023 2022 2021 Cash and cash equivalents $ 65,116 $ 113,984 $ 116,797 Working capital $ 57,636 $ 113,828 $ 128,517 Sources of Capital In addition to our existing cash and cash equivalents and revenue generated through our existing operations, we are eligible to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain royalty payments under our collaboration agreements with Merck, Nestlé, and Novartis of up to $59.0 million in aggregate.
The following summarizes our cash and cash equivalents and short-term investments balances and working capital as of December 31, 2024, 2023 and 2022 (in thousands): December 31, 2024 2023 2022 Cash and cash equivalents $ 19,264 $ 65,116 $ 113,984 Short-term investments $ 54,194 $ — $ — Working capital $ 75,124 $ 57,636 $ 113,828 Sources of Capital In addition to our existing cash and cash equivalents, short-term investments and revenue generated through our existing operations, we are eligible to earn milestone and other contingent payments for the achievement of defined collaboration objectives under our collaboration agreements.
Loan Agreement and Term Loans On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of two tranches, of which the first tranche of $30.0 million was completed upon execution of the Loan Agreement. We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds.
Loan Agreement and Term Loans On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of up to two tranches, of which the first tranche of $30.0 million was disbursed upon execution of the Loan Agreement.
During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA, all during the first half of 2023, and we received net proceeds of $7.9 million. As of December 31, 2023, $41.3 million of shares remained available for sale under the EDA.
In 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA, all during the first half of 2023, and we received net proceeds of $7.9 million. On April 24, 2024, we terminated the EDA.
Investment in Non-Marketable Securities Investment in Non-Marketable Equity Securities We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.
We recognize revenue at the later of (i) when the related sale of the product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied. 59 Investment in Non-Marketable Securities Investment in Non-Marketable Equity Securities We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.
Interest Income and Other Income (Expense), net (in thousands, except percentages): Change Year Ended December 31, 2023 2022 2023 2022 2021 $ % $ % Interest income $ 4,172 $ 1,441 $ 459 $ 2,731 190 % $ 982 214 % Other income (expense), net (12,274) 124 1,148 (12,398) (9,998) % (1,024) (89) % Total other income (expense), net $ (8,102) $ 1,565 $ 1,607 $ (9,667) (618) % $ (42) (3) % Interest Income Interest income increased by $2.7 million in 2023 compared to 2022, primarily due to higher average interest rates on cash balances.
Interest Income and Interest and Other Expense, net (in thousands, except percentages): Change Year Ended December 31, 2024 2023 2024 2023 2022 $ % $ % Interest income $ 3,670 $ 4,172 $ 1,441 $ (502) (12) % $ 2,731 190 % Interest and other expense, net (10,393) (12,274) 124 1,881 (15) % (12,398) (9,998) % Total other income (expense), net $ (6,723) $ (8,102) $ 1,565 $ 1,379 (17) % $ (9,667) (618) % Interest Income Interest income decreased by $0.5 million in 2024 compared to 2023, primarily due to lower average cash balances.
We have historically experienced negative cash flows from operations as we continue to invest in key technology development projects and improvements to our CodeEvolver ® technology platform, develop and commercialize new and existing products including our ECO Synthesis™ manufacturing platform and expand our business development and collaboration with new customers.
Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and development activities and is uncertain at this time . 55 We have historically experienced negative cash flows from operations as we continue to invest in key technology development projects and improvements to our CodeEvolver technology platform, develop and commercialize new and existing products including our ECO Synthesis manufacturing platform and expand our business development and collaboration with new customers.
These were partially offset by $1.7 million in higher allocable costs. 2022 compared to 2021 Research and development expenses were $80.1 million in 2022 compared to $55.9 million in 2021, an increase of $24.2 million, or 43%.
These were partially offset by $0.4 million in higher allocable costs. 2023 compared to 2022 Research and development expenses were $58.9 million in 2023 compared to $80.1 million in 2022, a decrease of $21.2 million, or 26%.
Cash Flows from Investing Activities The $8.7 million decrease in net cash used in investing activities in 2023 as compared to 2022 was primarily due to higher cash utilized for additional investments in equity securities and purchases of property and equipment in the prior year.
Cash Flows from Investing Activities The $52.1 million increase in net cash used in investing activities in 2024 as compared to 2023 was primarily due to higher cash utilized for purchases of short-term investments, partially offset by lower purchases of property and equipment in the current year.
Cash Flows The following is a summary of cash flows for the years ended December 31, 2023, 2022 and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ (52,638) $ 11,284 $ (14,267) Net cash used in investing activities (4,858) (13,578) (21,422) Net cash provided by (used in) financing activities 8,167 (575) 3,767 Net decrease in cash, cash equivalents and restricted cash $ (49,329) $ (2,869) $ (31,922) Cash Flows from Operating Activities The $63.9 million decrease in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to the net effect of decreases in cash received from our customers due to lower revenue in 2023 and with 2022 benefiting from the receipt of a $25.9 million fee from Pfizer that is creditable against future orders, partially offset by decreases in cash paid for cost of revenues and operating expenses.
The $63.9 million decrease in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to the net effect of decreases in cash received from our customers due to lower revenue in 2023 and with 2022 benefiting from the receipt of a $25.9 million fee from Pfizer that is creditable against future orders, partially offset by decreases in cash paid for cost of revenues and operating expenses.
We actively manage our cash usage and investment of liquid cash to ensure the maintenance of sufficient funds to meet our working capital needs. Our cash and cash equivalents are held in U.S. banks.
The Loan Agreement provides for an aggregate principal amount of up to $40.0 million and with a maturity date of February 13, 2029 (the “Innovatus Loan”). We actively manage our cash usage and investment of liquid cash to ensure the maintenance of sufficient funds to meet our working capital needs. Our cash and cash equivalents are held in U.S. banks.
In addition, we may choose to seek other sources of capital even if we believe we have generated sufficient cash flows to support our operating needs.
In addition, we may choose to seek sources of capital, which may arise through a combination of equity offerings, debt financings, other third-party funding and other collaborations, strategic alliances and partnering arrangements, even if we believe we have generated sufficient cash flows to support our operating needs.
Net loss for 2022 was $33.6 million, or a net loss per basic and diluted share of $0.51. This compared to a net loss of $21.3 million, or $0.33 per basic and diluted share for 2021. The increase in net loss was primarily related to lower research and development revenues and higher operating expenses.
Net Loss Net loss for 2024 was $65.3 million, or a net loss per basic and diluted share of $0.89. This compared to a net loss of $76.2 million, or $1.12 per basic and diluted share, for 2023. The decrease in net loss was primarily related to lower operating expenses in 2024.
In addition, we have limited internal capacity to manufacture enzymes. As a result, we are dependent upon the performance and capacity of third party manufacturers for the commercial scale manufacturing of the enzymes used in our pharmaceutical and fine chemicals business.
As a result, we are dependent upon the performance and capacity of third party manufacturers for the commercial scale manufacturing of the enzymes used in our pharmaceutical and fine chemicals business. 51 We accept purchase orders for deliveries covering periods from one day up to 14 months from the date on which the order is placed.
Provision for Income Taxes (in thousands, except percentages): Change Year Ended December 31, 2023 2022 2023 2022 2021 $ % $ % Provision for income taxes $ 69 $ 276 $ 189 $ (207) (75) % $ 87 46 % The provision for income taxes in 2023 was primarily for current year state income taxes and the accrual of interest and penalties on historic uncertain tax positions.
The provision for income taxes in 2023 was primarily for fiscal year 2023 state income taxes and the accrual of interest and penalties on historic uncertain tax positions.
The valuation may be reduced if the company's potential has deteriorated significantly.
The valuation may be reduced if the company's potential has deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.
You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K. Business Overview We are a leading enzyme engineering company leveraging our proprietary CodeEvolver ® technology platform to discover, develop, enhance, and commercialize novel, high performance enzymes and other classes of proteins.
You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.
The $7.8 million decrease in net cash used in investing activities in 2022 as compared to 2021 was primarily due to higher cash utilized for additional investments in equity securities and purchases of property and equipment in 2021.
The $8.7 million decrease in net cash used in investing activities in 2023 as compared to 2022 was primarily due to higher cash utilized for additional investments in equity securities and purchases of property and equipment in the prior year. 57 Cash Flows from Financing Activities The $52.4 million increase in net cash provided by financing activities in 2024 as compared to 2023 was primarily due to proceeds from the Innovatus Loan in February 2024 and proceeds from issuance of common stock under the Cantor Sales Agreement in the third quarter of 2024, partially offset by proceeds from issuance of common stock under the EDA during the first half of 2023.
We accept purchase orders for deliveries covering periods from one day up to 14 months from the date on which the order is placed. However, some of our purchase orders can be revised or cancelled by the customer without penalty.
However, some of our purchase orders can be revised or cancelled by the customer without penalty.
These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "should," "estimate," or "continue," and similar expressions or variations.
These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations.
Restructuring charges were $3.3 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively.
Restructuring Charges Restructuring charges consist of employee severance and other termination benefits due to workforce reduction plans that were initiated in the prior years. There were no restructuring charges recognized for the year ended December 31, 2024. Restructuring charges were $3.3 million and $3.2 million for the years ended December 31, 2023, and 2022, respectively.
We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds. The two tranches collectively are referred to as the “Term Loans.” Investing and Financing Activities In March 2022, we entered into a Stock Purchase Agreement with seqWell Inc.
We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds and subject to payment of a facility fee equal to 1.00% of the amount of such term loan.
Other Income (Expense), net Other income (expense), net, decreased by $12.4 million in 2023 compared to 2022, primarily due to impairment of our investments in MAI, seqWell and Arzeda.
Interest and other expense, net, increased by $12.4 million in 2023 compared to 2022, primarily due to impairment of our investments in MAI, seqWell and Arzeda. 54 Provision for Income Taxes (in thousands, except percentages): Change Year Ended December 31, 2024 2023 2024 2023 2022 $ % $ % Provision for income taxes $ 34 $ 69 $ 276 $ (35) (51) % $ (207) (75) % The provision for income taxes in 2024 was primarily due to the accrual of interest and penalties on historic uncertain tax positions.
Recent Developments On February 13, 2024, we entered into a five-year loan and security agreement with Innovatus Life Sciences Lending Fund I, LP, an affiliate of Innovatus Capital Partners, LLC (“Innovatus”), for an aggregate principal amount of up to $40.0 million (the “Loan Agreement”) consisting of two tranches, of which the first tranche of $30.0 million was completed on execution of the Loan Agreement.
As of December 31, 2024, $43.7 million remained available for sale under the Cantor Sales Agreement. 50 On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of up to two tranches, of which the first tranche of $30.0 million was disbursed upon execution of the Loan Agreement.
In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment and that we are actively exploring options to drive value by potentially monetizing other non-core assets within our Life Sciences portfolio.
In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment. As part of this strategic prioritization, during 2024, we completed the divestiture and monetization of certain biotherapeutics assets as well as certain non-core life science assets, including in genomics and next generation sequencing applications.
Interest income increased by $1.0 million in 2022 compared to 2021, primarily due to higher average interest rates on cash balances, and was partially offset by earned interest income on a non-marketable debt security in the prior year.
Interest income increased by $2.7 million in 2023 compared to 2022, primarily due to higher average interest rates on cash balances. Interest and Other Expense, net Interest and other expense, net, decreased by $1.9 million in 2024 compared to 2023, primarily due to the higher impairment charges recognized in 2023 related to our investments in Molecular Assemblies, Inc.
The increase was driven by growth in product revenue of $46.0 million, or 65%, partially offset by a decrease in research and development revenue of $12.2 million, or 36%. Product revenue was $116.7 million in 2022, an increase of 65% compared with $70.7 million in 2021.
The decrease was driven by lower product revenue and lower research and development revenue as compared to the prior year. Product revenue was $36.8 million in 2024, a decrease of 14% compared with $42.9 million in 2023.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, all of which lead to improved efficiency and reduced costs in small-molecule manufacturing. 49 We also use the CodeEvolver platform technology to develop enzymes for the synthesis of RNAi therapeutics through our ECO Synthesis manufacturing platform, where our enzymes are poised to deliver many of the same benefits we offer in pharma biocatalysis across purity, yield, and improved manufacturing efficiency.
The increase in product revenue was primarily due to $40.9 million higher revenue from Pfizer sales related to the purchase of CDX-616.
The increase was primarily due to the combination of increased sales of certain enzyme product and higher costs.
The increase was primarily due to an increase of $7.4 million in costs associated with higher headcount, $4.8 million in higher facilities and repair and maintenance expenses, $5.3 million increase in outside services and CMC and regulatory expenses , $2.6 million in higher lab supplies, $2.1 million in higher depreciation expenses, $1.1 million in higher stock-based compensation expenses and $0.7 million in higher allocable expenses.
This increase was primarily due to $2.9 million in higher stock-based compensation expense, $0.9 million in higher consulting and outside services, and $0.7 million in higher legal fees.
Removed
We also use the CodeEvolver ® technology platform to develop enzymes for the synthesis of nucleic acids such as DNA/RNA, including our ECO Synthesis™ manufacturing platform. We demonstrated gram-scale synthesis with the ECO Synthesis™ manufacturing platform in December 2023 and expect to begin pre-commercial customer testing in 2024.
Added
Business Overview We are a leading provider of enzymatic solutions for efficient and scalable therapeutics manufacturing, and we leverage our proprietary CodeEvolver directed evolution technology platform to discover, develop, enhance, and commercialize novel, high-performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life.
Removed
We anticipate that this will be followed by early commercial licenses to the ECO Synthesis™ manufacturing platform in 2025 and a full commercial launch in 2026.
Added
In November 2024, we presented data at the TIDES EU conference demonstrating the successful end-to-end enzymatic synthesis of an entire commercially approved siRNA therapeutic asset with the ECO Synthesis manufacturing platform.
Removed
(“seqWell ” ), a privately held biotechnology company, pursuant to which we purchased 1,000,000 shares of seqWell's Series C preferred stock for $5.0 million. In September 2023, we purchased an additional 88,256 shares of seqWell's Series C-1 preferred stock and 44,128 common stock warrants for $0.4 million.
Added
In addition to using full enzymatic sequential synthesis, adding one nucleotide at time to synthesize the two strands from beginning to end, we demonstrated synthesis of the same siRNA asset using three other routes utilizing enzymatic ligation with our double-stranded RNA (“dsRNA”) ligase, which can stitch together fragments of chemically and/or enzymatically synthesized RNA to form the full siRNA drug structure.
Removed
During the year ended December 31, 2022, no shares of our common stock were sold pursuant to the EDA. In June 2020, we entered into a Stock Purchase Agreement with MAI, a privately held life sciences company, pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $1.0 million. Mr.
Added
For the three other routes, our data highlighted that full-length oligos of equal quality and yields were obtained whether the fragments were made with enzymes or by traditional phosphoramidite chemistry.

… 63 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+3 added−0 removed3 unchanged
Biggest changeAs of December 31, 2023, the effect of a hypothetical 10% decrease in market interest rates would have an $0.3 million impact on a potential loss in future interest income and cash flows. Foreign Currency Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
Biggest changeAn immediate 10% change in the prime interest rate would result in a $0.2 million impact on our results of operations over the next twelve months from December 31, 2024. Foreign Currency Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
These non-functional currency denominated monetary assets are subject to re-measurement which may create fluctuations in other expense, net, a component in our consolidated statement of operations and in the fair value of the assets in the consolidated balance sheets.
These non-functional currency denominated monetary assets are subject to re-measurement which may create fluctuations in interest and other expense, net, a component in our consolidated statement of operations and in the fair value of the assets in the consolidated balance sheets.
As of December 31, 2023, the effect of a hypothetical 10% unfavorable change in exchange rates on currencies denominated in other than their functional currency would result in a potential loss in future earnings in our consolidated statement of operations and a reduction in the fair value of the assets of approximately $41 thousand.
As of December 31, 2024, the effect of a hypothetical 10% unfavorable change in exchange rates on currencies denominated in other than their functional currency would result in a potential loss in future earnings in our consolidated statement of operations and a reduction in the fair value of the assets of approximately $40 thousand.
The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify. 60
The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify. 61
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity Our unrestricted cash and cash equivalents total $65.1 million at December 31, 2023. We primarily invest these amounts in money market funds which are held for working capital purposes. We do not enter into investments for trading or speculative purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity Our unrestricted cash, cash equivalents, and short-term investments in marketable securities tot al $73.5 million as of December 31, 2024. We primarily invest these amounts in money market funds and short-term debt which are held for working capital purposes.
Added
We do not enter into investments for trading or speculative purposes. As of December 31, 2024, the effect of a hypothetical 10% decrease in market interest rates would have an $0.3 million impact on a potential loss in future interest income and cash flows.
Added
We are also exposed to market risk from changes in interest rates as a result of our indebtedness under the Innovatus Loan. At December 31, 2024, we had $30.0 million principal amount outstanding under the Innovatus Loan.
Added
The floating per annum interest rate of the Innovatus Loan is equal to the sum of (a) the greater of (i) prime rate published in the Money Rates section of the Wall Street Journal and (ii) 7.50% , plus (b) 3.25%; provided that, at the election of the Company, up to 2.00% of such rate shall be payable in-kind until the third anniversary of the closing date.

Other CDXS 10-K year-over-year comparisons