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What changed in CODEXIS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CODEXIS, INC.'s 2022 and 2023 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 2023 report.

+492 added−734 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in CODEXIS, INC.'s 2023 10-K

492 paragraphs added · 734 removed · 309 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

87 edited+53 added−186 removed22 unchanged
Biggest changeThe process required by the FDA before a biologic product 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 (“GLP”) regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the United States may begin; • approval by an institutional review board (“IRB”), or ethics committee at each clinical site before the trial is commenced; • 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 BLA after completion of all pivotal clinical trials: • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of a BLA to file the application for review; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice (“cGMP”) regulations and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCPs; and 14 • FDA review and approval of the BLA prior to any commercial marketing, sale or distribution of the product.
Biggest changeThe 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.
In April 2022, we and MAI announced that, using our CodeEvolver ® platform technology, we had developed a novel, engineered terminal deoxynucleotidyl transferase (“TdT”) enzyme which would enable MAI’s Fully Enzymatic Synthesis™ (“FES™”) technology that produces highly pure, sequence-specific DNA on demand.
In April 2022, we and MAI announced that, using our CodeEvolver ® technology platform, we had developed a novel, engineered terminal deoxynucleotidyl transferase (“TdT”) enzyme which would enable MAI’s Fully Enzymatic Synthesis™ (“FES™”) technology that produces highly pure, sequence-specific DNA on demand.
The license is exclusive for the research, development and manufacture of novel enzymes for use by Novartis as biocatalysts in the chemical synthesis of API owned or controlled by Novartis (“Novartis Exclusive Field”) and non-exclusive license for the research, development and manufacture of novel enzymes for use by Novartis in the chemical synthesis of API not owned or controlled by Novartis or any third party (“Novartis Non-Exclusive Field”).
The license is exclusive for the research, development and manufacture of novel enzymes for use by Novartis as biocatalysts in the chemical synthesis of API owned or controlled by Novartis (“Novartis Exclusive Field”) and non-exclusive for the research, development and manufacture of novel enzymes for use by Novartis in the chemical synthesis of API not owned or controlled by Novartis or any third party (“Novartis Non-Exclusive Field”).
In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary CodeEvolver ® platform technology to Novartis (the “Technology Transfer Period”). Pursuant to the Novartis CodeEvolver ® Agreement , we received an upfront payment of $5.0 million shortly after the effective date.
In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary CodeEvolver ® technology platform to Novartis (the “Technology Transfer Period”). Pursuant to the Novartis CodeEvolver ® Agreement , we received an upfront payment of $5.0 million shortly after the effective date.
Any improvements to the CodeEvolver ® platform technology during the Technology Transfer Period will also be included in the license grants from Codexis to Novartis. 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.
Any improvements to the CodeEvolver ® technology platform during the Technology Transfer Period will also be included in the license grants from Codexis to Novartis. 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.
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 delivery of product.
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.
Pharmaceutical manufacturers that use biocatalytic processes can face competition from manufacturers that use more conventional processes and/or manufacturers that are based in regions (such as India and China) with lower regulatory, safety and environmental costs. We also compete with companies developing and marketing conventional catalysts including, for example, Solvias AG, BASF, Johnson-Matthey and Takasago International Corporation.
Pharmaceutical manufacturers that use biocatalytic processes can face competition from manufacturers that use more conventional processes and/or manufacturers that are based in regions (such as India and China) with lower operating, regulatory, safety and environmental costs. We also compete with companies developing and marketing conventional catalysts including, for example, Solvias AG, BASF, Johnson-Matthey and Takasago International Corporation.
Our biocatalyst-based manufacturing processes must compete effectively on cost and efficiency with these internally developed routes. 12 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 biocatalysts for existing and new intermediates and APIs in the pharmaceutical manufacturing market.
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. It is also possible that some patents and patent applications (if issued) in other jurisdictions will be entitled to additional patent term.
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. It is also possible that some patents and patent applications (if issued) in other jurisdictions will be entitled to additional patent terms.
Our pharmaceutical manufacturing customers, which include many large global pharmaceutical companies, partner with us to develop optimized enzymes for use as biocatalysts, meeting precisely defined criteria, with the goal of lowering costs and improving the efficiency, productivity and sustainability of their manufacturing processes by: improving productivity, yield and purity; using water as a primary solvent; eliminating hazardous inputs; enabling the use of simple equipment and reducing the need for capital expenditure; reducing energy requirements; reducing the generation of chemical byproducts or waste; and reducing the need for late-stage purifications.
Our pharmaceutical manufacturing customers, which include many large global pharmaceutical companies, partner with us to develop engineered enzymes for use as biocatalysts, meeting precisely defined criteria, with the goal of lowering costs and improving the efficiency, productivity and sustainability of their manufacturing processes by: improving productivity, yield and purity; using water as a primary solvent; eliminating hazardous inputs; enabling the use of simple equipment and reducing the need for capital expenditure; reducing energy requirements; reducing the generation of chemical byproducts or waste; and reducing the need for late-stage purifications.
In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC 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.
Under the terms of the Merck CodeEvolver ® Agreement, we granted to Merck an exclusive license under certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering technology platform for the research, development and manufacture of novel enzymes for use by Merck in the chemical synthesis of therapeutic products owned or controlled by Merck ("Merck Exclusive Field") and a non-exclusive worldwide license to use the CodeEvolver ® enzyme engineering technology platform to research, develop and manufacture novel enzymes for use by Merck in its internal research programs (“Merck Non-Exclusive Field”).
Under the terms of the Merck CodeEvolver ® Agreement, we granted to Merck an exclusive license under certain patents, patent applications and know-how from our CodeEvolver ® technology platform for the research, development and manufacture of novel enzymes for use by Merck in the chemical synthesis of therapeutic products owned or controlled by Merck ("Merck Exclusive Field") and a non-exclusive worldwide license to use the CodeEvolver ® technology platform to research, develop and manufacture novel enzymes for use by Merck in its internal research programs (“Merck Non-Exclusive Field”).
We also have the potential to receive product-related payments of up to $15.0 million for each active pharmaceutical ingredient (“API”) that is manufactured by Merck using one or more enzymes that have been developed or are in development using the CodeEvolver ® enzyme engineering technology platform during the 10-year period that begins on the conclusion of the 15-month technology transfer period.
We also have the potential to receive product-related payments of up to $15.0 million for each active pharmaceutical ingredient (“API”) that is manufactured by Merck using one or more enzymes that have been developed or are in development using the CodeEvolver ® technology platform during the 10-year period that begins on the conclusion of the 15-month technology transfer period.
The CodeEvolver ® platform has the power to transform the performance of an enzyme, tailoring it for a specific application and/or process.
The CodeEvolver ® technology platform has the power to transform the performance of an enzyme, tailoring it for a specific application and/or process.
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. We initially commercialized our CodeEvolver ® enzyme engineering technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.
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. We initially commercialized our CodeEvolver ® technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.
Finally, we also sell even smaller quantities of enzymes (typically grams to multi-kilograms scale) to customers for experimental, testing and qualification purposes, or as part of an enzyme engineering project. In addition to the sale of biocatalysts, we also offer research and development partnerships to our customers.
Finally, we also sell even smaller quantities of enzymes (typically grams to multi-kilogram scale) to customers for experimental, testing, and qualification purposes, or as part of an enzyme engineering project. In addition to the sale of biocatalysts, we also offer research and development partnerships to our customers.
Under this agreement, we have the potential to receive contingent payments that range from $5.75 million to $38.5 million per project based on GSK's successful application of the licensed technology. We are also eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using our CodeEvolver ® enzyme engineering technology platform.
Under this agreement, we have the potential to receive contingent payments that range from $5.75 million to $38.5 million per project, dependent on GSK's successful application of the licensed technology. We are also eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using our CodeEvolver ® technology platform.
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 ® enzyme engineering platform technology in the field of human and animal healthcare.
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.
ITEM 1. BUSINESS COMPANY OVERVIEW We are a leading enzyme engineering company leveraging our proprietary CodeEvolver ® technology platform to discover, develop and enhance 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 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.
GOVERNMENT REGULATION In the United States, the FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drug and biologic products under the Federal Food, Drug and Cosmetic Act, its implementing regulations and other laws, including, in the case of biologics, the Public Health Service Act.
The FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drug and biologic products under the Federal Food, Drug and Cosmetic Act, its implementing regulations and other laws, including, in the case of biologics, the Public Health Service Act.
Under the GSK CodeEvolver ® Agreement, we licensed and transferred our certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering technology platform to GSK, completing the transfer in April 2016.
Under the GSK CodeEvolver ® Agreement, we licensed and transferred our certain patents, patent applications and know-how from our CodeEvolver ® technology platform to GSK, completing the transfer in April 2016.
Diversity, inclusion and belonging We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports the global workforce and the communities we serve.
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.
We also have the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® platform technology during the period that began on the conclusion of the Technology Transfer Period and ends on the expiration date of the last to expire licensed patent.
We also have the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® technology platform during the period beginning on the conclusion of the Technology Transfer Period and ending on the expiration date of the last to expire licensed patent.
While we have generated significant revenue from supplying CDX-616 to Pfizer, there is no future binding commitment for them to purchase any particular quantity or quantities of CDX-616 from us. We regularly sell biocatalysts, at multi-kilograms to metric tons per annum scale, that have already been engineered, scaled up, and installed in a customer’s commercial process.
While we have generated significant revenue from supplying CDX-616 to Pfizer, particularly in 2021 and 2022, there is no future binding commitment for Pfizer to purchase any particular quantity or quantities of CDX-616 from us. 5 We regularly sell biocatalysts, at multi-kilograms to metric tons per annum scale, that have already been engineered, scaled up, and installed in a customer’s commercial process.
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 drugs to offer to their customers and are under significant competitive pressure both to reduce costs and to increase the speed to market for their products.
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.
In addition, academic institutions such as the California Institute of Technology, the Max Planck Institute 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 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.
Securities and Exchange Commission (the “SEC”). We make available on or through our website certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Exchange Act.
We make available on or through our website certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Exchange Act.
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 Royal DSM N.V. (“DSM”), Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd.
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.
In October 2018, we entered into an amendment to the Merck CodeEvolver ® Agreement whereby we amended certain licensing provisions and one exhibit. In January 2019, we entered in to an amendment to the Merck CodeEvolver ® Agreement whereby we installed certain CodeEvolver ® enzyme engineering technology upgrades into Merck’s platform license installation.
In October 2018, we entered into an amendment to the Merck CodeEvolver ® Agreement whereby we amended certain licensing provisions and one exhibit. In January 2019, we entered in to a second amendment to the Merck CodeEvolver ® Agreement whereby we installed certain CodeEvolver ® technology platform upgrades into Merck’s platform license installation.
In our pharmaceutical manufacturing business, we utilize our CodeEvolver ® 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 some small molecule therapeutics.
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.
Further, the references to website URLs are intended to be inactive textual references only. 23
Further, the references to website URLs are intended to be inactive textual references only. 15
History and Core Technology We are a pioneer in harnessing computational technologies to drive biology advancements. Since 2002, we have made substantial investments in the development of our proprietary CodeEvolver ® technology platform, the primary source of our competitive advantage for both our performance enzymes and biotherapeutics businesses.
History and Core Technology We are a pioneer in harnessing computational technologies to drive biology advancements. 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.
Our United States ("U.S.") patents and pending patent applications directed to the CodeEvolver ® proprietary enabling 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.
There is also a large network of contract (development &) manufacturing organizations (“C(D)MOs”) servicing the innovator companies with supply of APIs and/or intermediates, These C(D)MOs include Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd, among many others. The processes used by these companies (both C(D)MOs and innovators) include classical organic chemistry reactions, chemo-catalytic reactions, biocatalytic reactions or combinations thereof.
There is also a large network of CDMOs servicing the innovator companies with supply of APIs and/or intermediates. These C(D)MOs include Cambrex Corporation, Asymchem, WuXi STA and Almac Group Ltd, among many others. The processes used by these companies (both C(D)MOs and innovators) include classical organic chemistry reactions, chemo-catalytic reactions, biocatalytic reactions or combinations thereof.
Our primary competitors in that market are companies marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services, or from full service contract development and manufacturing service providers (“CDMOs”) offering conventional chemistry approaches to the production of APIs. We also sometimes face competition from existing in-house technologies (both biocatalysts 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 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.
These include, but are not limited to: Codexis ® , Codex ® , CodeEvolver ® , Mosaic ® , Sage ® , Microcyp ® , MCYP ® , ProSAR ® , Unlock the Power of Proteins ® , the Codexis Protein Engineering Experts ® logo, Strategist ® , Continuity ® , Ameli ® , Forager ® , Analogene ® , Harvester ® , Atoms ® , Riptide ® , APS ® and a Codexis design mark (i.e., the stylized Codexis logo).
These include, but are not limited to: Codexis ® , Codex ® , CodeEvolver ® , Mosaic ® , Sage ® , Microcyp ® , MCYP ® , ProSAR ® , Unlock the Power of Proteins ® , the Codexis Protein Engineering Experts ® logo, Strategist ® , Continuity ® , Ameli ® , Forager ® , Analogene ® , Harvester ® , Atoms ® , Riptide ® , APS ® and a Codexis design mark (i.e., the stylized Codexis logo), as well as pending registration applications for ECO Synthesis™ and ecoRNA™ .
Under the terms of the Novartis CodeEvolver ® Agreement, Codexis granted to Novartis a worldwide license to use certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering 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.
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.
We have also received an aggregate of $5.0 million for the completion of the third technology transfer milestone in 2021. 10 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 (“Improvements Term”), Novartis will pay us annual payments over four years which amount to an additional $8.0 million in aggregate.
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.
Of particular note for 2022, in July 2022 we announced that we and Pfizer had entered into an agreement to supply Pfizer with CDX-616, a proprietary high performance enzyme used to manufacture a critical intermediate for nirmatrelvir, an active pharmaceutical ingredient in PAXLOVID™, Pfizer’s antiviral therapeutic, which is currently authorized for emergency use by the FDA for the treatment of mild-to-moderate COVID-19 in people at high risk of progression to severe illness and authorized or approved by other regulatory authorities across the globe.
( “Pfizer” ) had entered into an agreement to supply Pfizer with CDX-616, a proprietary high-performance enzyme used to manufacture a critical intermediate for nirmatrelvir, an active pharmaceutical ingredient in PAXLOVID™, Pfizer’s antiviral therapeutic, which is now approved in the United States for the treatment of mild-to-moderate COVID-19 in people at high risk of progression to severe illness, and also authorized or approved by other regulatory authorities across the globe.
As of December 31, 2022, we owned or controlled approximately 2,090 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 markets.
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.
We intend to increase the number of pharmaceutical customers and processes that utilize and benefit from our novel, cost-saving enzyme biocatalyst solutions. • Developing high-performance enzymes for use in life science applications and nucleic acid synthesis .
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 .
GSK can terminate the GSK CodeEvolver ® Agreement by providing 90 days written notice to us. 9 In 2019, we received a $2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® enzyme engineering platform technology. In 2021, we received two additional milestone payments from GSK under the GSK CodeEvolver ® Agreement .
In 2019, we received a $2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® technology platform. In 2021, we received two additional milestone payments from GSK under the GSK CodeEvolver ® Agreement.
Other Core Technology We are a leader in the field of enzyme engineering to create novel enzymes. Each of our segments rely 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.
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.
We maintained those upgrades for a multi-year term that expired in January 2022. Novartis In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis. The Novartis CodeEvolver ® Agreement allows Novartis to use our proprietary CodeEvolver ® enzyme engineering platform technology in the field of human healthcare.
We maintained those upgrades for a multi-year term that expired in January 2022. Novartis In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.
We have also engineered a series of transgenes that code for enzymes that may be used as gene therapies to treat rare lysosomal storage disorders with our partner Takeda, such as Fabry Disease and Pompe Disease, as well as a blood factor disorder.
In addition, we used our CodeEvolver® technology platform to engineer a series of transgenes that code for enzymes that may be used as gene therapies to treat rare lysosomal storage disorders, such as Fabry Disease and Pompe Disease, as well as a blood factor disorder, with Takeda Pharmaceutical Co. Ltd. (“Takeda”).
We, along with third-party contractors and our collaborators, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
Our third-party contractors, collaborators, and customers will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which they wish to conduct studies or seek approval or licensure of their product candidates, which may include regulatory inspections for compliance with current good manufacturing practices (“cGMP”).
We completed the second technology milestone transfer under the agreement and received a milestone payment of $4.0 million in 2020.
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.
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. Novel Biotherapeutics We are developing a diverse pipeline of product candidates in our novel biotherapeutics business.
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.
In addition, our portfolio includes patents and pending patent applications that support our businesses in the biotherapeutics, mo lecular diagnostics, food and other markets. Our patents and pending patent applications, if issued, have terms that expire between 2023 and approximately 2043.
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.
As of December 31, 2022, we are selling biocatalysts to pharmaceutical manufacturers for 18 therapeutic drugs that are currently approved for commercial sales.
As of December 31, 2023, we are selling biocatalysts to pharmaceutical manufacturers fo r 16 therapeutic drugs that are currently approved for commercial sales. In July 2022, we announced that we and Pfizer Inc.
For example, we are aware that other companies, includin g Zymergen, which was acquired by Gingko Bioworks, Amyris, Absci and Amicus Therapeutics 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, Enzymaster, and Enzymicals AG have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.
Our scientists, bioinformatics experts and other professionals work collaboratively as interdisciplinary teams to unlock and advance technological innovation. 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.
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.
The term of the GSK CodeEvolver ® Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the GSK CodeEvolver ® Agreement.
The term of the GSK CodeEvolver ® Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the GSK CodeEvolver ® Agreement. GSK can terminate the GSK CodeEvolver ® Agreement by providing 90 days written notice to us.
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. We continue to file new patent applications, for which terms generally extend 20 years from the non-provisional filing date in the United States.
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.
In the first quarter of 2021, we entered into an arrangement to lease a facility in San Carlos, California to serve as an additional office and research and development laboratory space which we occupied beginning December 20 21.
In the first quarter of 2021, we entered into an arrangement to lease this facility to serve as an additional office and research and development laboratory space which we occupied beginning December 20 21. As part of the restructuring of our business announced in July 2023, we consolidated operations to our Redwood City headquarters and discontinued investment in biotherapeutics.
We continue to enhance our diversity, equity and inclusion policies which are guided by our executive leadership team. Health and safety We are committed to maintain a safe and healthy workplace for our employees. Our policies and practices are intended to protect our employees and surrounding communities in which we operate.
We continue to enhance our diversity, equity and inclusion policies which are guided by our executive leadership team, including our commitment to green chemistry, demonstrated, among other things, by our “My Green Lab Certification. ” Health and safety We are committed to maintain a safe and healthy workplace for our employees.
We offer competitive compensation and benefit programs including a company-matched 401(k) Plan, stock options for eligible employees, health savings and flexible spending accounts, paid time off, education and training programs, and employee assistance programs. We believe it is important to help build community and enabling our employees actively participate in community service projects and in company-sponsored philanthropic activities.
We offer competitive compensation and benefit programs including a company-matched 401(k) Plan, an Employee Stock Purchase Plan ( “ ESPP ” ), stock options for eligible employees, health savings and flexible spending accounts, paid time off, education and training programs, and employee assistance programs.
("Kyorin"), Urovant Sciences GmbH ("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.
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 and that cover the CodeEvolver ® platform technology.
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.
We also supply initial commercial quantities of biocatalysts for use by our collaborators to produce pharmaceutical intermediates and manufacture biocatalysts that we sell.
We also supply initial commercial quantities of biocatalysts for use by our collaborators to produce pharmaceutical intermediates and manufacture biocatalysts that we sell. In September 2023, we announced that we had entered into an agreement for the assignment and assumption of lease for our San Carlos, California facility.
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. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or any other filings we make with the U.S.
The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or any other filings we make with the U.S. Securities and Exchange Commission (the “SEC”).
Licensing Our CodeEvolver ® Enzyme Engineering Technology Platform GlaxoSmithKline We entered into our first CodeEvolver ® enzyme engineering 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 ® enzyme engineering technology platform in the field of human healthcare for its internal development purposes.
Recent 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.
Also, in June 2020, we entered into a Master Collaboration and Research Agreement with Molecular Assemblies, Inc. ("MAI") (the “MAI Agreement”) pursuant to which we are leveraging our CodeEvolver ® platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.
(“MAI ” ) (the “MAI Agreement”), and between June 2020 and April 2022, we leveraged our CodeEvolver ® technology platform to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis. At the time we entered into the MAI Agreement, we purchased $1.0 million in MAI’s Series A financing.
Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing.
Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing. Additionally, we have licensed our proprietary CodeEvolver ® technology platform to global pharmaceutical companies enabling them to use this technology, in-house, to engineer enzymes for their own businesses.
Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing, representing a large percentage of our production of novel enzymes, to contract manufacturing organizations.
KG (“Lactosan”) in Kapfenberg, Austria, ACS Dobfar S.p.A. (“ACSD”) (formerly known as DPhar S.p.A.) in Anagni, Italy, and Alphazyme in Jupiter, Florida, United States. Generally, we perform smaller scale manufacturing in-house and outsource larger scale manufacturing, representing a large percentage of our production of novel enzymes, to contract manufacturing organizations.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. This regulatory scrutiny results in our customers imposing rigorous quality and other requirements on us as their supplier through supplier qualification processes and customer contracts and specifications.
Life Sciences We also apply our CodeEvolver ® technology to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well DNA/RNA synthesis applications.
Other Differentiated Enzymes In addition to DNA/RNA synthesis applications, we have also applied our CodeEvolver ® technology platform to develop customized enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications. In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc.
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. Development of other novel enzymes for life science applications continues.
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.
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, Sharp & Dohme ("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 and Novartis Pharma AG (“Novartis”).
In connection with the execution of the MAI Supply Agreement, we received a milestone payment of $1.0 million in the form of an additional 1,587,049 shares of Series B preferred stock pursuant to the MAI Agreement. 7 In March 2022, we announced the initiation of a strategic partnership with seqWell Inc., a developer of transformative library preparation products for demanding genomics plan application, which included an investment to accelerate the commercialization of seqWell’s genomics workflow solutions.
In connection with the execution of the MAI Supply Agreement, we received a milestone payment of $1.0 million in the form of an additional 1,587,049 shares of MAI Series B preferred stock pursuant to the MAI Agreement. In March 2023, we purchased an additional 985,545 shares of MAI Series B preferred stock for $0.8 million.
In 2020, in response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees. These protocols include complying with social distancing and other health and safety standards as required by state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
These protocols include health and safety standards as required by state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities. 14 CORPORATE & AVAILABLE INFORMATION We were incorporated in Delaware in January 2002 as a wholly-owned subsidiary of Maxygen, Inc.
At that time, we purchased $1.0 million in MAI’s Series A financing and John Nicols, the Codexis’ then President and CEO, and current director, joined MAI’s board of directors. In April 2021, Codexis invested an additional $0.6 million in MAI’s Series A financing and, in September 2021, Codexis invested an additional $7.0 million in MAI’s Series B financing.
In April 2021, Codexis invested an additional $0.6 million in MAI’s Series A financing and, in September 2021, Codexis invested an additional $7.0 million in MAI’s Series B financing.
Current marketed PERT therapies as well as potential future PERT therapies in development could compete with CDX-7108. 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 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.
We believe that our CodeEvolver ® enzyme engineering platform technology provides substantially superior results, in shorter time frames, than companies offering competing biocatalyst development services. Life Sciences Our Life Sciences business is focused in two key areas, nucleic acid manufacturing and genomics.
We believe that our CodeEvolver ® technology platform can provide substantially superior results, in shorter time frames, than companies offering competing biocatalyst development services. 11 ECO Synthesis TM Manufacturing Platform for RNAi Therapeutics Following the restructuring of our business announced in July 2023, our Life Sciences business is now primarily focused on RNAi therapeutics manufacturing as we develop and commercialize the ECO Synthesis™ manufacturing platform.
Some fermentation pathway design companies, such as Zymergen, which was acquired by Gingko BioWorks, and Amyris, whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into designing organisms that express enzymes.
Some fermentation pathway design companies, such as Ginkgo Bioworks, 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, evoxx technologies GmbH, c-LEcta GmbH, Enzymicals AG, and Enzymaster.
For example, in addition to Pfizer, we sell biocatalysts to Merck for their manufacture of sitagliptin, the active ingredient in JANUVIA ® , to Urovant and 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. 6 In addition to these larger volumes of biocatalysts that are sold for our customers’ ongoing commercial requirements, we also sell lesser quantities of enzymes for use in a customer’s developmental, qualification or regulatory approval operations.
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 December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc. ("Roche") with an improved DNA ligase (EvoT4™ DNA ligase) for NGS library prep, which continues to progress towards commercialization in new NGS kits.
("Roche ” ) with an evolved DNA ligase for NGS library prep. In February 2024, we entered into a new license agreement with Roche granting them rights to our newly engineered DNA ligase, superseding our prior agreement in December 2019 for our evolved T4 DNA ligase.
Our unique enzymes drive improvements such as higher yields, reduced energy usage and waste generation, improved efficiency in manufacturing, greater sensitivity in genomic and diagnostic applications, and potentially more efficacious therapeutics. Our novel biotherapeutics business includes a diverse pipeline of product candidates in clinical and preclinical development.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing.
Each of our product candidates is discovered utilizing our proprietary CodeEvolver ® protein engineering platform. 4 Our Partnered Oral Enzyme Programs CDX-7108 for the treatment of exocrine pancreatic insufficiency Under a Strategic Collaboration Agreement with Nestlé Health Science (“Nestlé SCA”), we have collaboratively developed CDX-7108, a potent lipase intended for use as a pancreatic enzyme replacement therapy (“PERT”).
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.
As of December 31, 2022, we owned approximately 100 trademark registrations in the United States and foreign jurisdictions, as well as many 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. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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. • 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. • We or our customers may not be able to obtain regulatory approval for the use of our products in food and food ingredients, if required. • Our ongoing efforts to deploy our technology in the life science tools market may fail. • The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and we may be unable to obtain regulatory approval for our product candidates. • Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome. • Results of preclinical studies and early clinical trials of product candidates may not be predictive of results of later studies or trials. • We may not be able to maintain orphan drug designations for certain of our product candidates, and may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity. 24 • We have obtained rare pediatric disease designation for CDX-6512 and CDX-6210, however, there is no guarantee that such designation will result in approval of CDX-6512 or CDX-6210, and even if we obtain approval of CDX-6512 or CDX-6210 for the indication for which we have been awarded rare pediatric disease designation, there is no guarantee that such approval will result in an aware of a rare pediatric disease priority review voucher. • Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved, or commercialized in a timely manner, or at all, which could negatively impact our business. • Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements. • Our business operations and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties. • The successful commercialization of product candidates developed by us or our partners will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. • Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for our partners to obtain marketing approval for and commercialize product candidates developed by us. • Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations. • We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies, which if not satisfactorily carried out or fail to meet expected deadlines, may have an adverse effect on our business and prospects. • We contract with third parties for the manufacturing and supply of product candidates, which supply may become limited or interrupted or may not be of satisfactory quality and quantity. • 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. • 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. • 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. • Our quarterly or annual operating results may fluctuate in the future. • We do not intend to pay cash dividends for the foreseeable future. • If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. • We face risks associated with our international business. • 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. • We are dependent on information technology systems, infrastructure and data, and any failure of these systems could harm our business. • Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition. • Evolving expectations around environmental, social and governance matters may expose us to reputational and other risks. 25 Risks Relating to Our Business and Strategy We have a history of net losses and we may not achieve or maintain profitability.
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.
Moreover, disagreements with a collaborator could develop, and any conflict with a collaborator could lead to litigation and could reduce our ability to enter into future collaboration agreements and negatively impact our relationships with one or more existing collaborators.
Moreover, disagreements with a collaborator could develop, and any conflict with a collaborator could lead to litigation, reduce our ability to enter into future collaboration agreements and negatively impact our relationships with one or more existing collaborators.
In addition, if we contract with other manufacturers, we may experience delays of several months in qualifying them, which could harm our relationships with our collaborators or customers and could negatively affect our revenues or operating results.
In addition, if we contract with other manufacturers, we may experience delays of several months in qualifying them, which could harm our relationships with our customers or collaborators and could negatively affect our revenues or operating results.
Our ability to develop and commercialize one or more of our technologies, products, or processes could be limited by the following factors: • public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could influence public acceptance of our technologies, products and processes; • public attitudes regarding, and potential changes to laws governing ownership of genetic material, which could harm our intellectual property rights with respect to our genetic material and discourage collaborators from supporting, developing, or commercializing our technology, products and services ; and • governmental reaction to negative publicity concerning genetically modified organisms, which could result in greater government regulation of genetic research and derivative products.
Our ability to develop and commercialize one or more of our technologies, products, or processes could be limited by the following factors: • public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could influence public acceptance of our technologies, products and processes; • public attitudes regarding, and potential changes to laws governing ownership of, genetic material, which could harm our intellectual property rights with respect to our genetic material and/or discourage collaborators from supporting, developing, or commercializing our technology, products and services ; and • governmental reaction to negative publicity concerning genetically modified organisms, which could result in greater government regulation of genetic research and derivative products.
The failure to successfully deploy products on timely basis in this space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.
The failure to successfully deploy products on a timely basis in this space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.
Any involvement in litigation or other intellectual property proceedings inside and outside of the United States to defend against claims that we infringe, misappropriate or violate the intellectual property of the rights of others may divert our management’s time from focusing on business operations and could cause us to spend significant amounts of money.
Any involvement in litigation or other intellectual property proceedings inside and/or outside of the United States to defend against claims that we infringe, misappropriate or violate the intellectual property rights of others may divert our management’s time from focusing on business operations and could cause us to spend significant amounts of money.
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.
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.
The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and fine and complex chemicals products, could harm our relationships with our collaborators or customers and could negatively affect our revenues and operating results.
The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and complex chemicals products, could harm our relationships with our customers or collaborators and could negatively affect our revenues and operating results.
For these reasons, we may not be able to utilize a material portion of the NOLs reflected in our financial statements, even if we attain profitability. As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal controls over financial reporting.
For these reasons, we may not be able to utilize a material portion of the NOLs reflected in our financial statements, even if we attain profitability. 25 As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal controls over financial reporting.
Third parties may also design around our proprietary rights, which may render our protected technology, services and products less valuable, if the design around is favorably received in the marketplace. In addition, if any of our technology, products and services is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.
Third parties may also design around our proprietary rights, which may render our protected technology, services and products less valuable, if the design around is favorably received in the marketplace. In addition, if any of our technology, products and services are covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.
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. 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 pharmaceutical manufacturing is quite fragmented.
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. 50 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. We may not be able to enforce our intellectual property rights throughout the world.
Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being materially and adversely affected.
Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or that are perceived to have not responded appropriately, may suffer from reputational damage, which could result in the business, financial condition and/or stock price of a company being materially and adversely affected.
Given that the degree of future protection for our proprietary rights is uncertain, we cannot ensure that: (i) we were the first to invent the inventions covered by each of our pending applications, (ii) we were the first to file patent applications for these inventions, or (iii) the proprietary technology, products or services we develop will be patentable.
Given that the degree of future protection for our proprietary rights is uncertain, we cannot ensure that: (i) we or our licensors were the first to invent the inventions covered by each of our pending applications, (ii) we or our licensors were the first to file patent applications for these inventions, or (iii) the proprietary technology, products or services we develop will be patentable.
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. 55 Our business may require us to use and store personal information of our customers, employees, and business partners.
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.
Due to the various factors mentioned above, and others, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance. 53 We do not intend to pay cash dividends for the foreseeable future.
Due to the various factors mentioned above, and others, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance. We do not intend to pay cash dividends for the foreseeable future.
Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.
Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.
In the United States, the holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Similar provisions apply in the European Union (the “EU”).
In the United States, the holder of an approved NDA or BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Similar provisions apply in the European Union (the “EU”).
Accordingly, we cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth of the claims upheld in our and other companies' patents.
Accordingly, we cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth of the claims upheld in our, our licensors', and other companies' patents.
Conducting business internationally exposes us to a variety of risks, including: • changes in or interpretations of foreign 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 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 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. 54 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; • 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.
If any of our trade secrets were lawfully obtained, we may be unable to prevent them, or those to whom they communicate it, from using that technology or information to compete with us or disclosing it publicly. Therefore, these events could have a material adverse effect ob our business, financial condition and results of operations.
If any of our trade secrets were lawfully obtained, we may be unable to prevent them, or those to whom they communicate it, from using that technology or information to compete with us or disclosing it publicly. Therefore, these events could have a material adverse effect on our business, financial condition and results of operations.
Even if identified, we may be unable to adequately 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.
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.
If we choose to build our own additional manufacturing facility, it could take two years or longer before our facility is able to produce commercial volumes of our enzymes. Any resources we expend on acquiring or building internal manufacturing capabilities could be at the expense of other potentially more profitable opportunities.
If we choose to build our own additional manufacturing facility, it could take several years or longer before our facility is able to produce commercial volumes of our enzymes. Any resources we expend on acquiring or building internal manufacturing capabilities could be at the expense of other potentially more profitable opportunities.
In addition, we may have to indemnify some of our customers or suppliers for losses related to our failure to comply with environmental laws, which could expose us to significant liabilities. Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
In addition, we may be required to indemnify some of our customers or suppliers for losses related to our failure to comply with environmental laws, which could expose us to significant liabilities. Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our or our collaborators’ ability to commercialize products and our ability to generate revenues.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may also inhibit our customers or collaborators’ ability to commercialize products and our ability to generate revenues.
The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans.
The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event, and we may incur substantial expenses as a result of the limited nature of such plans.
Any potential intellectual property litigation also could force us to do one or more of the following: 49 • 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 • redesign those technologies, products, services or processes that use any allegedly infringing, misappropriating or violating intellectual property rights, or relocate the operations relating to the allegedly infringing misappropriating or violating 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 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.
For example, the holder of an approved BLA in the United States is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA.
For example, the holder of an approved NDA or BLA in the United States is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the NDA or BLA.
If any of these events occur, especially if they occur in our collaborations with GSK, Merck, Novartis, Nestlé Health Science or Takeda, or if we fail to maintain our agreements with our collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation.
If any of these events occur, especially if they occur in our collaborations with GSK, Merck or Novartis, or if we fail to maintain our agreements with our collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation.
If we or our third-party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material. Our remediation efforts may not be successful.
If we or our third-party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material. Our remediation efforts may not be successful.
Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock. Additionally, an allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation. 59
Further, this increased focus on ESG issues may result in new regulations, international accords and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock. An allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation.
Nevertheless, without our permission or awareness, our confidential and proprietary information may be disclosed to third parties, used by the respective individuals for purposes other than for the Company’s business, or obtained through illegal means, such that third parties could reverse engineer our biocatalysts, product candidates, and processes, to attempt to develop the same technology or develop substantially equivalent technology.
Nevertheless, without our permission or awareness, our confidential and proprietary information may be disclosed to third parties, used by the respective individuals for purposes other than for the Company’s business, or obtained through illegal means, such that third parties could reverse engineer our biocatalysts, enzyme products and processes, to attempt to develop the same technology or develop substantially equivalent technology.
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; 30 • 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.
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.
Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense. The biocatalysis industry and each of our target markets are characterized by rapid technological change.
Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense. The biocatalysis and performance enzyme industries and each of our target markets are characterized by rapid technological change.
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; • we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators; • we, 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. 26 Even after collaboration relationships expire or terminate, some elements of the collaboration may survive.
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.
This enzyme, and any products that we may develop in the future for this market, may not succeed in displacing current products. If we succeed in commercializing new products for this market, we may not generate significant revenues and cash flows from these activities.
These enzymes, and any additional products that we may develop in the future for this market, may not succeed in displacing current products. If we succeed in commercializing new products for this market, we may not generate significant revenues and cash flows from these activities.
Revenues in 2023 and in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool (the “MPP”)) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-616, and therefore materially and adversely affect our business, results of operations and financial condition: • Pfizer has no future binding commitment to purchase any particular quantity or quantities of CDX-616 from us, and we are dependent upon Pfizer continuing to place orders with us (whether on a spot basis or under a long term agreement, when and if executed) for their requirements, if any, for CDX-616; • to our knowledge, sublicensees of Pfizer technology from the MPP have no obligation to purchase CDX-616 from us under their sublicenses with the MPP; • the EUA granted by the FDA for the use of PAXLOVID™ for the treatment of COVID-19 infections in humans could be withdrawn at any time; • future vaccine development and usage and the development and usage of other new therapies for the treatment or elimination of COVID-19 may eliminate or reduce demand for PAXLOVID™; • new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating; • Pfizer may not ultimately receive full marketing authorization for PAXLOVID™ from the FDA and other international regulatory authorities; • Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture; 33 • sublicensees of Pfizer technology for the manufacture, sale and distribution of PAXLOVID™ from the MPP may not utilize CDX-616 in the manufacture of nirmatrelvir; • national and regional governmental authorities (including those of the United States government) may mandate that raw materials and intermediates used in the manufacture of PAXLOVID™ to be marketed, sold and distributed within the borders of that country be domestically produced, which could eliminate or reduce demand for the use of CDX-616 in such country; and • we may be unable (because of lack of available manufacturing capacity at our contract manufacturers, supply chain disruptions or an inability to obtain applicable regulatory approvals) to manufacture the quantities of CDX-616 that Pfizer may desire to purchase from us.
Potential revenues in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool (the “MPP”)) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-616, and therefore materially and adversely affect our business, results of operations and financial condition: • Pfizer has no future binding commitment to purchase any particular quantity or quantities of CDX-616 from us, and we are dependent upon Pfizer continuing to place orders with us (whether on a spot basis or under a long-term agreement, when and if executed) for their requirements, if any, for CDX-616; • to our knowledge, sublicensees of Pfizer technology from the MPP have no obligation to purchase CDX-616 from us under their sublicenses with the MPP; • future vaccine development and usage and the development and usage of other new therapies for the treatment or elimination of COVID-19 may eliminate or reduce demand for PAXLOVID™; 23 • new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating; • Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture; • sublicensees of Pfizer technology for the manufacture, sale and distribution of PAXLOVID™ from the MPP may not utilize CDX-616 in the manufacture of nirmatrelvir; • national and regional governmental authorities (including those of the United States government) may mandate that raw materials and intermediates used in the manufacture of PAXLOVID™ to be marketed, sold and distributed within the borders of that country be domestically produced, which could eliminate or reduce demand for the use of CDX-616 in such country; and • we may be unable (because of lack of available manufacturing capacity at our contract manufacturers, supply chain disruptions or an inability to obtain applicable regulatory approvals) to manufacture the quantities of CDX-616 that Pfizer may desire to purchase from us.
In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. Certain states have also adopted comparable privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.
In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of certain individually identifiable health information. Certain states have also adopted and continue to adopt new privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.
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 relationships with, and dependence on, collaborators in our principal markets; • 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 ability to develop and successfully commercialize new products for the markets we serve; • our ability to obtain additional development partners for our novel biotherapeutic programs; • potential of Nestlé Health Science or Takeda terminating any development program under their license agreements with us; • 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 or our customers’ ability to obtain regulatory approval for the sale and manufacturing of food products using our enzymes; • our ability to deploy our technology platform in life science tools markets; • our ability to successfully achieve domestic and foreign regulatory approval for product candidates; 52 • our ability to successfully design and execute clinical testing at a reasonable cost and on an acceptable time-frame; • our dependence on product candidates which could unexpectedly fail at any stage of preclinical or clinical development; • our dependence on product candidates which may lack the ability to work as intended or cause undesirable side effects; • our dependency on third parties to conduct clinical trials, research, and preclinical studies; • 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 credit facility; • 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; • 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; • 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.
The outbreak of COVID-19 in many countries continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets. As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.
The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has continued to contribute to significant volatility and negative pressure in financial markets. As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.
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 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 opportunities in the biotherapeutics markets, 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 , and the filing, prosecution, enforcement and defense of patent claims.
We also have license rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions. Our owned and licensed patents and patent applications include those directed to our enabling technology and to the methods and products that support our business in the biotherapeutics, pharma manufacturing, life sciences, food and other markets.
We also have license rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions. Our owned and licensed patents and patent applications include those directed to our enabling technology and to the methods and products that support our business in the pharmaceutical manufacturing, life sciences, oligonucleotide synthesis, and other markets.
We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.
We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, public health emergencies, domestic or foreign conflicts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of the Company.
(“DSM”), BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity. Academic institutions such as the California Institute of Technology, the Max Planck Institute and the Austrian Centre of Industrial Biotechnology are also working in this field.
We are aware that other companies, including DSM, BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity. Academic institutions such as the California Institute of Technology, the Max Planck Institute and the Austrian Centre of Industrial Biotechnology are also working in this field.
We currently have license agreements, research and development agreements, supply agreements and/or distribution agreements with various collaborators. For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis, Nestlé Health Science and Takeda that are important to our business and financial results.
We currently have license agreements, research and development agreements, supply agreements and/or distribution agreements with various collaborators. For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis, Roche and Aldevron that are important to our business and financial results.
Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing to these contract manufacturers. 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 larger scale manufacturing of the enzymes used in our pharmaceutical and life sciences businesses.
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 larger scale manufacturing of the enzymes used in our pharmaceutical and life sciences businesses.
Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our technology, products and processes and limit our revenues. Some of our technology, products and services are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies.
Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our technology, products and processes and limit our revenues. Some of our technology, products and services, such as our ECO Synthesis ™ manufacturing platform, are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies.
We have investments in non-marketable securities, which may subject us to significant impairment charges. We have investments in illiquid non-marketable equity securities acquired in private transactions. At December 31, 2022, 8.2% of our consolidated assets consisted of investment securities, which are illiquid investments. Investments in illiquid, or 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, 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.
Our primary competitors in the performance enzymes for pharmaceutical products are companies marketing either conventional, non-enzymatic processes or biocatalytic enzymes to manufacturers of pharmaceutical intermediates and APIs, and also existing in-house technologies (both biocatalysts and conventional catalysts) within our client and potential client companies.
Our primary competitors in the performance enzymes for the pharmaceutical products markets include (i) companies marketing either conventional, non-enzymatic processes or biocatalytic enzymes; (ii) manufacturers of pharmaceutical intermediates and APIs; and (iii) existing in-house technologies (both biocatalysts and conventional catalysts) within our client and potential client companies.
As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
As a result of the remote work policies we initiated in response to the COVID-19 pandemic, and our continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
Our future success will depend on our ability to maintain a competitive position with respect to technological advances. In addition, as we enter new markets, we will face new competition and will need to adapt to competitive factors that may be different from those we face today. We are aware that other companies, including Royal DSM, N.V.
Our future success will depend on our ability to maintain a competitive position with respect to technological advances. In addition, as we enter new markets, we will face new competition and will need to adapt to competitive factors that may be different from those we face today.
We have recently begun to use our CodeEvolver ® protein engineering technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications. while we have entered into some license agreements for products in this market, we do not know if we can successfully compete in this new market.
We have used our CodeEvolver ® directed evolution technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications. While we have entered into license agreements for products in this market, we do not know if we can successfully compete in this new market.
The GDPR provides that EEA member states may make their own additional laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase and harm our business and financial condition.
The EU GDPR provides that EU member states may enact their own additional national laws and regulations regarding the processing of genetic, biometric or health data, which could affect our ability to use and share personal data or could cause our costs to increase and potentially harm our business and financial condition.
As such, as of December 31, 2022, we owned or controlled approximately 2,090 issued patents and pending patent applications in the United States and in various foreign jurisdictions. Our patents and patent applications, if issued, as of December 31, 2022, have terms that expire between 2023 and approximately 2043.
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 a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.
Our quarterly or annual operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.
If we 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, we 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.
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, some of our collaboration agreements, including our collaboration with Nestlé Health Science and Takeda, and our performance enzyme agreements, including the agreements with GSK, Merck and Novartis, provide for milestone payments, usage payments, and/or future royalty payments, which we will only receive if we and our collaborators develop and commercialize products.
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.
Failure to comply with the requirements of the GDPR can result in fines of up to the greater of €20 million and 4% of the total worldwide annual turnover of the preceding financial year and other administrative penalties.
Failure to comply with the requirements of the GDPR can result in (among other things) fines of up to the greater of €20 million (under the EU GDPR) or £17.5 million (under the UK GDPR) or 4% of an organization’s total worldwide annual turnover of the preceding financial year and other administrative penalties.
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.
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.
Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.
Even if our customers, future 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 fail to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
If we fail to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business.
In addition, our customers may terminate or amend their agreements for the purchase of our technology, products and services due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons.
In addition, our customers may terminate or amend their agreements for the purchase of our technology, products and services due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons. Risks Related to Government Regulation Our ongoing efforts to deploy our technology in the life science tools markets may fail.
We are subject to the rules and regulations established from time to time by the Securities and Exchange Commission, 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.
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.
In addition, if we or our contract manufacturers fail to comply with REACH, we may be subject to penalties or other enforcement actions, which could have a material adverse effect on our business and results of operations. 45 Risks Related to our Dependence on Third Parties We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies.
In addition, if we or our contract manufacturers fail to comply with REACH, we may be subject to penalties or other enforcement actions, which could have a material adverse effect on our business and results of operations.
Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete. 48 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.
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.
We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes, including CDX-616. We are working to qualify new contract manufacturers to produce certain of our enzymes, including CDX-616, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.
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.
Any material weaknesses in our internal controls may adversely affect our ability to record, process, summarize and accurately report timely financial information and, as a result, our consolidated financial statements may contain material misstatements or omissions. 35 Reporting obligations as a public company place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel.
Any material weaknesses in our internal controls may adversely affect our ability to record, process, summarize and accurately report timely financial information and, as a result, our consolidated financial statements may contain material misstatements or omissions.
It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
It also created a new California privacy protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Additional compliance investment and potential business process changes may also be required.
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. 51 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.
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.
Revenues in in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize. Starting the first and second quarters of 2021, we began to receive purchase orders from Pfizer, Inc.
Revenues in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and the results are inherently unpredictable. If our customers, future customers or collaborators are ultimately unable to obtain regulatory approval for their biotherapeutic product candidates utilizing our enzyme products, our business may be harmed.
Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. In addition, if the market and economic conditions described above continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive.
In addition, if the market and economic conditions described above continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive.
We may also be exposed to a risk of loss or litigation and potential liability, which could materially and adversely affect our business, results of operations and financial condition. 56 Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.
Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners.
Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act (“CCPA”) went into effect on January 1, 2020.
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.
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.
As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, which could lead to litigation. Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures.
As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, and could additionally lead to litigation.
Even if products we develop alone or with collaborators receive regulatory approval, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, among other things.
Any products that receives FDA approval will remain subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, among other things.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure, penalties and fines, 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.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure, penalties and fines, which may not be covered by insurance or may be in excess of our insurance coverage.
We also may fund development of additional proprietary performance enzymes and/or biotherapeutic products. There can be no assurance that any of these products will become commercially viable or that we will ever achieve profitability on a quarterly or annual basis.
We also intend to continue to fund the development of additional proprietary performance enzyme products and advance new technologies like our ECO Synthesis ™ manufacturing platform. There can be no assurance that any of these products or services will become commercially viable or that we will ever achieve profitability on a quarterly or annual basis.

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Item 2. Properties

Properties — owned and leased real estate

5 edited+3 added−1 removed3 unchanged
Biggest changeWe believe that the facilities that we currently lease in Redwood City and San Carlos, California are adequate for our needs for the immediate future and that, should it be needed, additional space can be leased to accommodate any future growth.
Biggest changeThe 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.
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").
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 ” ).
In 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.
In 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.
In December 2021, we commenced occupancy of the San Carlos Space. The lease term for the San Carlos Space is through the end of November 2031. We have one (1) option to extend the term of the lease for the San Carlos Space for five (5) years.
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.
Our lease ("RWC Lease") with Metropolitan Life Insurance Company ("MetLife") includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the "200/220 Penobscot Space"), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the "400 Penobscot Space") (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the "Penobscot Space"), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the "Chesapeake Space").
Our lease (“RWC Lease”) with Metropolitan Life Insurance Company (“MetLife”) includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “200/220 Penobscot Space”), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “400 Penobscot Space”) (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the “Penobscot Space”), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “Chesapeake Space”).
Removed
In May 2021, we entered into a short-term office lease with The Inside Source, Inc., to sublease approximately 3,313 square feet of office space in a building located at 985 Industrial Blvd. San Carlos, California. This lease expired in April 2022.
Added
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.
Added
(“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.
Added
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+0 added−0 removed3 unchanged
Biggest changeCDXS $ 100.00 $ 200.00 $ 191.50 $ 261.44 $ 374.49 $ 55.81 Nasdaq Composite Total Return XCMP $ 100.00 $ 97.16 $ 132.81 $ 192.48 $ 235.16 $ 158.65 Nasdaq Biotechnology (Total Return) Index XNBI $ 100.00 $ 91.14 $ 114.02 $ 144.14 $ 144.17 $ 129.58 61 Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities During the year ended December 31, 2022, 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.
Biggest changeCDXS $ 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.
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 Credit Facility 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 Loan Agreement prohibit us from paying any cash dividends or making other distributions.
Securities 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 2023 (the "2023 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 Index for the period December 31, 2017 through December 31, 2022.
Securities 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.
December 31, $100 investment in stock or index Ticker 2017 2018 2019 2020 2021 2022 Codexis, Inc.
December 31, $100 investment in stock or index Ticker 2018 2019 2020 2021 2022 2023 Codexis, Inc.
The figures represented below assume an investment of $100 in our common stock at the closing price on December 31, 2017 and in the Nasdaq Composite Index and the Nasdaq Biotechnology Index on December 31, 2017 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, 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 tabular information and graph shall not be deemed "soliciting material" or to be "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
The tabular information and graph shall not be deemed “soliciting material ” or to be “filed ” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
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 22, 2023, 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 23, 2024, there were approximately 125 stockholders of record.

Item 7. Management's Discussion & Analysis

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

67 edited+35 added−52 removed46 unchanged
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 2022 2021 2020 2022 2021 2020 Revenues: Product revenue $ 116,676 $ 70,657 $ 30,220 84 % 67 % 44 % Research and development revenue 21,914 34,097 38,836 16 % 33 % 56 % Total revenues 138,590 104,754 69,056 100 % 100 % 100 % Costs and operating expenses: Cost of product revenue 38,033 22,209 13,742 27 % 21 % 20 % Research and development 80,099 55,919 44,185 58 % 53 % 64 % Selling, general and administrative 52,172 49,323 35,049 38 % 47 % 51 % Restructuring charges 3,167 — — 2 % — % — % Total costs and operating expenses 173,471 127,451 92,976 125 % 121 % 135 % Loss from operations (34,881) (22,697) (23,920) (25) % (21) % (35) % Interest income 1,441 459 405 1 % — % 1 % Other income (expense), net 124 1,148 (156) — % 1 % — % Loss before income taxes (33,316) (21,090) (23,671) (24) % (20) % (34) % Provision for income taxes 276 189 339 — % — % — % Net loss $ (33,592) $ (21,279) $ (24,010) (24) % (20) % (34) % 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. 65 Revenues are as follows (in thousands, except percentages): Change Year Ended December 31, 2022 2021 2022 2021 2020 $ % $ % Product revenue $ 116,676 $ 70,657 $ 30,220 $ 46,019 65 % $ 40,437 134 % Research and development revenue 21,914 34,097 38,836 (12,183) (36) % (4,739) (12) % Total revenues $ 138,590 $ 104,754 $ 69,056 $ 33,836 32 % $ 35,698 52 % Revenues typically fluctuate on a quarterly basis due to the variability in our customers' manufacturing schedules and the timing of our customers' clinical trials.
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.
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 and enhance 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. 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.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our capital resources sooner than we expect. 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. 55 However, we may need additional capital if our current plans and assumptions change.
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 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. 77
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
If our capital resources are insufficient to meet our longer term 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 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.
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 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.
Cash Flows from Investing Activities 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 $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.
Our need for additional capital will depend on many factors, including the financial success of our business, the spending required to develop and commercialize new and existing products, 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, and the potential costs for the filing, prosecution, enforcement and defense of patent claims, if necessary.
Our need for additional capital will depend on many factors, including the financial success of our business, the spending required to develop and commercialize new and existing products including our ECO Synthesis ™ manufacturing platform, 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, and the potential costs for the filing, prosecution, enforcement and defense of patent claims, if necessary.
We determine the stand-alone selling price ("SSP") and allocate consideration to distinct performance obligations. 75 We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities.
We determine the stand-alone selling price (“SSP”) and allocate consideration to distinct performance obligations. We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities.
Sales of our common stock under this arrangement could be subject to business, economic or competitive uncertainties 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 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.
We may impair these securities and establish an allowance for a credit loss when we determine that there has been an "other-than-temporary" decline in estimated fair value of the debt or equity security compared to its carrying value.
We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value.
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 Chemistry, Manufacturing and Controls (“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.
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.
We primarily account for options which provide material rights using the alternative approach available under ASC 606, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is calculated as the expected consideration to be received for all the goods and services we expect to provide.
We primarily account for options which provide material rights using the alternative approach available under the Accounting Standards Codification (“ASC”) 606, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is calculated as the expected consideration to be received for all the goods and services we expect to provide.
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 and amortization expenses. 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%.
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%.
We believe that our existing cash and cash equivalents, combined with our future expectations for product revenues, research and development revenue, and expense management will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next twelve months.
Liquidity We believe that our existing cash and cash equivalents, combined with our future expectations for product revenues, research and development revenue, and expense management will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirement s for at least the next 12 months.
The increase in net loss was primarily related to lower research and development revenues and higher operating expenses. Net loss for 2021 was $21.3 million, or a net loss per basic and diluted share of $0.33. This compared to a net loss of $24.0 million, or $0.40 per basic and diluted share for 2020.
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.
For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on hours incurred or based on stage of progress under the project. 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. 57 Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations.
The following summarizes our cash and cash equivalents balance and working capital as of December 31, 2022, 2021 and 2020 (in thousands): December 31, 2022 2021 2020 Cash and cash equivalents $ 113,984 $ 116,797 $ 149,117 Working capital $ 113,828 $ 128,517 $ 159,442 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, Novartis and Nestlé Health Science of up to $439.0 million in aggregate.
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.
If this happens, we may be forced to delay or terminate research or development programs or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us.
If this happens, we may be forced to delay or terminate development of new products or services, such as our ECO Synthesis ™ manufacturing platform, or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us.
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 . In addition, pursuant to the terms of the Pfizer Supply Agreement, we received a fee of $25.9 million in August 2022.
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 . 54 In addition, pursuant to the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which was recorded as deferred revenue.
Concurrently with our initial equity investment, we entered into the MAI Agreement pursuant to which performed services utilizing our CodeEvolver ® protein engineering platform technology to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A preferred stock.
Concurrently with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”), pursuant to which we performed services utilizing our CodeEvolver ® directed evolution technology platform to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A and B preferred stock.
(2) Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis. 2022 compared to 2021 Cost of product revenue increased by $15.8 million in 2022 to $38.0 million, as compared to 2021.
(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.
We have historically experienced negative cash flows from operations as we continue to invest in key technology development projects and improvements to our CodeEvolver ® protein engineering technology platform, and expand our business development and collaboration with new customers.
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.
On the date of this filing, we also filed a post-effective amendment to that Registration Statement on Form S-3. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities.
On February 27, 2023, we filed a post-effective amendment to that Registration Statement on Form S-3. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities.
As of December 31, 2022, we have 18,292,369 shares of MAI's Series A and B preferred stock that we have earned or purchased since executing the Stock Purchase Agreement with MAI.
As of December 31, 2023, we held 19,277,914 shares of MAI's Series A and B preferred stock that we have earned or purchased since executing the Stock Purchase Agreement with MAI.
The increase was driven by growth in product revenue of $46.0 million, or 65%, but partially offset by a decrease in research and development revenue of $12.2 million, or 36%.
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.
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. 2022 compared to 2021 Total revenues increased b y $33.8 million in 2022 to $138.6 million, as compared to 2021.
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.
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.
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.
The increase in product revenue of $46.0 million, or 65%, to $116.7 million in 2022, compared to $70.7 million in 2021 was primarily due to $40.9 million higher revenue from Pfizer sales related to the purchase of CDX-616.
The increase in product revenue was primarily due to $40.9 million higher revenue from Pfizer sales related to the purchase of CDX-616.
Cash Flows from Financing Activities The $4.3 million decrease in net cash provided by financing activities in 2022 as compared to 2021 was primarily due to higher cash paid on taxes related to net share settlement of equity awards and lower proceeds from exercises of stock options.
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 fee is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates prior to December 31, 2023 and for fees associated with any new development and licensing agreements with Pfizer entered into prior to March 31, 2023 that are invoiced prior to December 31, 2023.
Pursuant to the agreement, 90% of the fee ($23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID™ with shipment dates prior to December 31, 2023 , and (ii) fees associated with any new development and licensing agreements with Pfizer entered into prior to April 4, 2023.
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.
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.
Our largest uses of cash from operating activities are for employee-related expenditures, rent payments, inventory purchases to support our product sales and non-payroll research and development costs. 73 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.
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.
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. During the year ended December 31, 2022, no shares of our common stock were issued pursuant to the EDA.
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.
Research and development expenses are expensed when incurred. 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 $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%.
Our primary source of cash flows from operating activities is cash receipts from our customers for purchases of products, collaborative research and development services, and licensing our technology to major pharmaceutical companies.
Our primary source of cash flows from operating activities is cash receipts from our customers for purchases of products, collaborative research and development services, and licensing our technology to major pharmaceutical companies. Our largest uses of cash from operating activities are for employee-related expenditures, rent payments, inventory purchases to support our product sales and non-payroll research and development costs.
Our unique enzymes drive improvements such as higher yields, reduced energy usage and waste generation, improved efficiency in manufacturing, greater sensitivity in genomic and diagnostic applications, and potentially more efficacious therapeutics.
Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing.
Interest income increased by $0.1 million in 2021 compared to 2020, primarily due to earned interest income on a non-marketable debt security, which was partially offset by a reduction in interest income from lower average interest rates on lower average cash balances Other Income (Expense), net Other income (expense), net, decreased by $1.0 million in 2022 compared to 2021, primarily due to a higher gain from remeasurement on the carrying value of our investment in MAI in the prior year compared to this year .
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.
Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, research and development expenses including costs related to the potential clinical development of our product candidates, manufacturing costs, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs.
Our primary uses of capital for the foreseeable future, including the next 12 months, are for compensation and related expenses, research and development expenses including manufacturing costs, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs.
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. 76 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.
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.
Cash Flows The following is a summary of cash flows for the years ended December 31, 2022, 2021 and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 11,284 $ (14,267) $ (16,464) Net cash used in investing activities (13,578) (21,422) (5,748) Net cash provided by (used in) financing activities (575) 3,767 80,808 Net increase (decrease) in cash, cash equivalents and restricted cash $ (2,869) $ (31,922) $ 58,596 74 Cash Flows from Operating Activities The $25.6 million increase in net cash provided by operating activities in 2022 as compared to 2021 was primarily due to the receipt of a $25.9 million fee from Pfizer in August 2022 creditable against future orders and increases in cash received from revenue, which was partially offset by increased payments associated with higher operating costs.
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.
A portion of our research and development revenue in 2022 and 2021 was paid to us by MAI in the form of additional shares of MAI Series A and Series B preferred stock.
A portion of our research and development revenue in 2022 and 2021 was paid to us by MAI in the form of additional shares of MAI Series A and Series B preferred stock. We received an aggregate of 1,587,049 and 3,491,505 shares of MAI's Series A and B preferred stock for the years ended December 31, 2022 and 2021, respectively.
The $2.2 million decrease in net cash used by operating activities in 2021 as compared to 2020 was primarily due to increases in cash received from revenue, which was partially offset by increased payments associated with higher operating costs.
The $25.6 million increase in net cash provided by operating activities in 2022 as compared to 2021 was primarily due to the receipt of a $25.9 million fee from Pfizer in August 2022 creditable against future orders and increases in cash received from revenue, which was partially offset by increased payments associated with higher operating costs.
During the year ended December 31, 2022, no shares of our common stock were issued pursuant to the EDA, and as of December 31, 2022, $50.0 million worth 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, 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.
Interest Income and Other Income (Expense), net (in thousands, except percentages): Change Year Ended December 31, 2022 2021 2022 2021 2020 $ % $ % Interest income $ 1,441 $ 459 $ 405 $ 982 214 % $ 54 13 % Other income (expense), net 124 1,148 (156) (1,024) 89 % 1,304 836 % Total other income (expense), net $ 1,565 $ 1,607 $ 249 $ (42) (3) % $ 1,358 545 % Interest Income 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 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.
The $15.7 million increase in net cash used in investing activities in 2021 as compared to 2020, was primarily due to higher cash utilized for the additional investments in MAI's Series A and B preferred stock for $7.6 million and higher purchases of property and equipment during 2021.
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.
Starting in 2022, changes to Internal Revenue Code Section 174 made by the Tax Cuts and Jobs Act of 2017 no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are incurred.
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. 53 Starting in 2022, changes to Internal Revenue Code Section 174 made by the Tax Cuts and Jobs Act of 2017 no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are incurred.
If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution. If we raise debt financing or enter into credit facilities, we may be subject to restrictive covenants that limit our ability to conduct our business. We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.
If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution. 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.
Restructuring Charges Restructuring charges in 2022 consist of one-time employee severance and other termination benefits due to a workforce reduction plan that occurred in the fourth quarter of 2022.
Some of these cost increases are a result of the impact of inflation seen in 2022. Restructuring Charges Restructuring charges consist of employee severance and other termination benefits due to workforce reduction plans that were initiated during the third quarter of 2023 and in the fourth quarter of 2022.
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.
The valuation may be reduced if the company's potential has deteriorated significantly.
We have historically funded our operations primarily through cash generated from operations, stock option exercises and public and private offerings of our common stock. We also have the ability to borrow up to $5.0 million under our Credit Facility (defined below).
LIQUIDITY AND CAPITAL RESOURCES Liquidity is the measurement of our ability to meet working capital needs and to fund capital expenditures. We have historically funded our operations primarily through cash generated from operations, stock option exercises and public and private offerings of our common stock.
Up to 50% of any portion of the fee which has not been credited pursuant to credits granted under the preceding sentence is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates prior to December 31, 2024.
Up to 50% of any portion of the $25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates in 2024, and any portion of the fee that is not utilized within the specific period will be forfeited and recognized as revenue.
In June 2020, we entered into a Stock Purchase Agreement with MAI pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $1.0 million. In connection with the transaction, John Nicols, our former President and Chief Executive Officer, also joined MAI’s board of directors.
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.
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 2022 2021 $ % 2021 2020 $ % Product revenue $ 116,676 $ 70,657 $ 46,019 65 % $ 70,657 $ 30,220 $ 40,437 134 % Cost of product revenue (1) 38,033 22,209 15,824 71 % 22,209 13,742 8,467 62 % Product gross profit $ 78,643 $ 48,448 $ 30,195 62 % $ 48,448 $ 16,478 $ 31,970 194 % Product gross margin (%) (2) 67 % 69 % 69 % 55 % (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, 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.
Research and development revenue decrea sed by $4.7 million in 2021 to $34.1 million, or 12% compared with $38.8 million in 2020, primarily due to lower license and research and development fees from Takeda and lower revenues from Novartis recognized in 2021 compared to the prior year, which was partially offset by higher license fees from other existing collaboration agreements.
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.
The provision for income taxes in 2020 was primarily due to foreign withholding taxes on certain sales to non-U.S. customers. Net Loss 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.
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.
Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which is creditable against future orders of CDX-616 used to manufacture its PAXLOVID™ . The sale of CDX-616 to Pfizer had a substantial impact on our revenue for the year ended December 31, 2022.
Up to 50% of any portion of the $25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates in 2024. The sale of CDX-616 to Pfizer had a substantial impact on our revenues in 2021 and 2022, and to a lesser extent in 2023.
Stewart Parker to our Board of Directors. 63 Recent Investing and Financing Activities In March 2022, we entered into a Stock Purchase Agreement with seqWell Inc. ("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.
(“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.
Other income (expense), net increased by $1.3 million in 2021 compared to 2020, primarily due to a $1.0 million gain from remeasurement on the carrying value of our investment in MAI. 68 Provision for Income Taxes (in thousands, except percentages): Change Year Ended December 31, 2022 2021 2022 2021 2020 $ % $ % Provision for income taxes $ 276 $ 189 $ 339 $ 87 46 % (150) (44) % The provision for income taxes for 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.
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 increase was primarily due to an increase in costs associated with outside services and higher headcount but partially offset by lower allocable expenses. Selling, general and administrative expense in the Performance Enzymes segment increased by $2.6 million, or 22%, to $14.7 million in 2022, compared to $12.1 million in 2021.
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%.
The decrease in net loss was primarily related to an increase in product revenue with higher margins, which was partially offset by higher operating expenses and lower research and development revenues.
The increase in net loss was primarily related to lower product revenues from CDX-616 and one-time charges recognized during 2023 related to asset impairment, including impairment in our investments in non-marketable equity securities, and restructuring charges, which was partially offset by lower operating expenses in 2023.
Some of these cost increases are a result of the impact of inflation seen in 2022. 2021 compared to 2020 Selling, general and administrative expenses were $49.3 million in 2021 compared to $35.0 million in 2020, an increase of $14.3 million, or 41%.
Some of these cost increases are a result of the impact of inflation seen in 2022.
The increase was primarily due to $7.6 million in costs associated with higher headcount, $0.8 million in higher stock-based compensation expenses, $2.6 million in higher lab supplies, $2.2 million in higher allocable expenses, $1.1 million increase in outside services, and $1.0 million in higher depreciation expenses, which was partially offset by a $3.7 million decrease in costs associated with outside services related to CMC and regulatory expenses.
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.
The spread of COVID-19 has affected segments of the global economy and may affect our operations, including the potential interruption of our supply chain.
Business Impact of COVID-19 and Sales of CDX-616 to Pfizer for PAXLOVID™ In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The impact of COVID-19 affected segments of the global economy and its continuing impacts may affect our operations, including the potential interruption of our supply chain.
Some of these cost increases are a result of the impact of inflation seen in 2022. 67 2021 compared to 2020 Research and development expenses were $55.9 million in 2021 compared to $44.2 million in 2020, an increase of $11.7 million, or 26%.
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%.
Product revenue, which consist primarily of sales of biocatalysts, pharmaceutical intermediates, and Codex ® biocatalyst panels and kits, was $116.7 million in 2022, an increase of 65% compared with $70.7 million in 2021. 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 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 product gross margin increased to 69% in 2021 as compared to 55% in 2020, primarily due to the sale of higher margin branded products. Research and Development Expenses Research and development expenses consist of costs incurred for internal projects as well as collaborative research and development activities.
Some of these cost increases are a result of the impact of inflation and supply chain pressures seen in 2022. Research and Development Expenses Research and development expenses consist of costs incurred for internal projects as well as collaborative research and development activities.
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The capacity to enhance the properties and performance of enzymes has led to pivotal improvements across three healthcare industry pillars: pharmaceutical manufacturing, life sciences, and biotherapeutics. The enzymes we produce solve for real-world challenges associated with small molecule pharmaceuticals manufacturing, nucleic acid synthesis and genomic sequencing, and – as biotherapeutic candidates – they have the potential to treat challenging diseases.
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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.
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Recent Developments Announcement of interim results from Phase 1 trial of CDX-7108 for Exocrine Pancreatic Insufficiency (“EPI”) On February 23, 2023, we and our partner, Nestlé Health Science announced interim results from a Phase 1 clinical trial of CDX-7108 for the treatment of EPI. Data from the proof-of-concept arm indicated improved lipid absorption when patients are administered CDX-7108 versus placebo.
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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.
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Importantly, no safety issues were noted in the 48 subjects that participated in the single ascending dose and multiple ascending dose portion of the study. We believe the interim data support further development of CDX-7018 in partnership with Nestlé Health Science, with potential for the initiation of a Phase 2 study in early 2024.
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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.
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Presentation of pre-clinical data from the Fabry disease transgene program O n February 22, 2023, w e announced that Takeda Pharmaceutical Company Limited (Takeda) presented pre-clinical data from the Fabry disease transgene program, part of its Strategic Collaboration and License Agreement with Codexis, at the 19th Annual WORLD Symposium ™.
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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.
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The gene therapy candidate is being developed to encode the codon optimized, CodeEvolver ® engineered -GAL enzyme, which is designed to have improved serum and lysosomal stability and a predicted reduced immunogenicity.
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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.
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Strengthened management team and Board of Directors with new appointments On January 23,2023, we announced the appointment of Sri Ryali as Chief Financial Officer and on December 20, 2022, we announced the appointment of H.
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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.
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In December 2020, we completed an underwritten public offering of 4,928,572 shares of our common stock at a public offering price of $17.50 per share. The net proceeds to us were approximately $80.8 million after deducting offering costs, underwriting discounts and commissions and other offering expenses of $5.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSince we have no outstanding borrowings under our 2017 Credit Facility as of December 31, 2022, the effect of a hypothetical 10% change in interest rates would have an impact of nil on our interest expense. Foreign Currency Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
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.
Although substantially all of our sales are denominated in United States dollars, future fluctuations in the value of the USD may affect the price competitiveness of our products outside the United States. Our most significant foreign currency exposure is due to non-functional currency denominated monetary assets, primarily currencies denominated in other than their functional currency.
Although substantially all of our sales are denominated in USD, future fluctuations in the value of the USD may affect the price competitiveness of our products outside the United States. Our most significant foreign currency exposure is due to non-functional currency denominated monetary assets, primarily currencies denominated in other than their functional currency.
As of December 31, 2022, 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 $42 thousand.
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.
The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify. 78
The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify. 60
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity Our unrestricted cash and cash equivalents total $114.0 million at December 31, 2022. 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 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.
In periods when the USD declines in value as compared to the foreign currencies in which we incur expenses, our foreign-currency based expenses increase when translated into United States dollars.
In periods when the United States dollar ( “ USD”) declines in value as compared to the foreign currencies in which we incur expenses, our foreign-currency based expenses increase when translated into USD.
We may value these equity securities based on significant recent arms-length equity transactions with sophisticated non-strategic unrelated investors, providing the terms of these security transactions are substantially similar to the security transactions terms between the investors and us.
Investment in Non-Marketable Equity Securities We own investments in non-marketable equity securities without readily determinable fair values. We may value these equity securities based on significant recent arms-length equity transactions with sophisticated non-strategic unrelated investors, providing the terms of these security transactions are substantially similar to the security transactions terms between the investors and us.
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As of December 31, 2022, the effect of a hypothetical 10% decrease in market interest rates would have an $316 thousand impact on a potential loss in future interest income and cash flows.
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In June 2017, we entered into a Credit Facility with Western Alliance Bank consisting of term loans up to $10.0 million, and advances under a revolving line of credit up to $5.0 million. Our right to take draws on the long term debt expired on December 31, 2021.
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On October 1, 2024, loans drawn, if any, under the Revolving Line of Credit terminate. Advances made under the Revolving Line of Credit bear interest at a variable annual rate equal to the greater of (i) 4.25% or (ii) the sum of (A) the prime rate plus (B) 1.00%.
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Increases in these variable interest rates will increase our future interest expense and decrease our results of operations and cash flows. Our exposure to interest rates risk relates to our 2017 Credit Facility with variable interest rates, where an increase in interest rates may result in higher borrowing costs.
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We did not engage in hedging transactions in 2022, 2021 and 2020. Investment in Non-Marketable Equity Securities We own investments in non-marketable equity securities without readily determinable fair values.

Other CDXS 10-K year-over-year comparisons