Recently, Codexis has signed a platform technology license agreement with GlaxoSmithKline (GSK). Under the terms of the agreement, Codexis, a developer of biocatalysts for the pharmaceutical and fine chemical industries, granted GSK a license to use the company's proprietary CodeEvolver protein engineering platform technology in the field of human healthcare. The license allows GSK to use Codexis' platform technology to develop novel enzymes for use in the manufacture of GSK's pharmaceutical and health care products. Dr. Michael Reubold asked John Nicols, President and CEO of Codexis, and Doug Fuerst, Technology Development Lead, Synthetic Biology at GSK, to explain the details of this agreement.

CHEManager International: Mr. Nicols, what are the specific properties of the CodeEvolver protein engineering technology and what advantages does it offer to your licensing partners?

J. Nicols: CodeEvolver, which is Codexis' proprietary protein engineering technology platform, enables the rapid development of custom-designed biocatalysts that are highly optimized for efficient chemical transformations and manufacturing processes. CodeEvolver is among the most advanced achievements standing on the intersection of three great technologies - molecular biology, high throughput chemistry, and bioinformatics. CodeEvolver excels at all three - it is comprised of a) proprietary methods for the design and generation of diverse genetic libraries, b) automated screening techniques that rapidly validate chemistry in high throughput on thousands of the best candidate variants and c) computational algorithms for the interpretation of screening data thereby enabling us to eliminate the need to run tens of thousands of additional costly experiments. It is only through the merging of these leading edge scientific capabilities that we can achieve the goal of rapidly engineering the ideal biocatalyst.

The advantages of CodeEvolver stem from the technology's unique ability to design performing proteins more effectively than other engineering tools on the market, both in terms of its speed and the specificity of the results it delivers. Our technology enables the design of proteins that can perform multiple potential functions for use in the field of human healthcare. These functions could range from biocatalysts that will catalyze chemical reactions more cost-effectively than alternative chemistries, to the creation of various types of potential new therapeutics, diagnostic or prophylactic products. GSK surely considered other protein engineering tools, including those that they might have in-house, and they chose the acquisition of a license as their preferred path to step up their ability to engineer novel proteins.

Besides milestone payments for the successful technology transfer, and for successful application of the technology to making biocatalysts for small molecule manufacturing, Codexis will be eligible to receive further milestone payments and additional royalties based on net sales of a limited set of products developed by GSK. Is this your preferred licensing model or are there alternative options to get rewarded by licensing partners?

J. Nicols: This is a very attractive approach for Codexis to work with a major drug company wanting to accelerate the benefits achievable from the application of biocatalysis. This approach truly accelerates a large pharma company's ability to apply biocatalysis. By lining up other biocatalysis development partners working in parallel with us via CodeEvolver licensing, over time more drugs can be converted to incorporate biocatalytic processes. We see this as an ideal and a preferred way to work with our customers, and believe that all major drug companies with wide pipelines of small molecule drugs could benefit from this type of deal. Given that the drug majors all have multiple APIs that they could work on, we believe, as GSK has shown, that they could justify having their own in-house CodeEvolver protein engineering technology versus working with Codexis on an arm's-length project-by-project basis.

Of course, as Codexis has been doing for more than a decade, we are still very happy to work on a project-by-project approach with customers who prefer to work in this way. These two different approaches are very complementary to one another. Depending on how much applicability the customer sees for biocatalysis, how much they want to liberate the value that biocatalysis can generate, and how quickly they want to generate that value, we are now set up to work in either of these two partnering modes.

 What kind of technical support or assistance does Codexis offer to a licensing partner to ensure proper function and successful application of the technology?

 J. Nicols: We will provide tech transfer services to each prospective licensee with the same end goal for each - to enable a licensing partner to independently run CodeEvolver protein engineering. Potential licensing partners have varying degrees of expertise in using protein engineering technology today, with some having more advanced in-house capabilities than others. We would therefore tailor the technology transfer support services needed to a prospective licensee given their starting expertise.

 For example, with GSK we are providing significant and intensive support services, including help in design of their lab and specifying the equipment and bioinformatic software, and we have also agreed to collaborate with GSK on four specific API biocatalyst projects during the two-year technology transfer period. We expect to run the first two projects in Codexis' facilities at Redwood City, California, where we will house GSK's scientists to work in partnership alongside Codexis' teams. In that way, GSK's scientists will be able to learn firsthand the full process involved in designing a novel biocatalyst and how we run a project, at the same time as GSK is building the lab in its Pennsylvania facility. Once GSK's facility is up and commissioned, then Codexis scientists will visit GSK's site, providing advisory support while the GSK scientists, many of whom were previously trained at Redwood City, take over the lead roles in running our technology platform on the first two projects at GSK. We envision the whole technology transfer process with GSK will provide substantial customer intimacy learnings for Codexis, as well as substantial access to our technological expertise for GSK. The process has already kicked off very well in the first two months since signing the deal.

The agreement marks the first time that Codexis has licensed this technology to a healthcare company. What are your expectations for the future?

 J. Nicols: We are excited about the deal with GSK and we believe our offering of a CodeEvolver license makes sense to all pharmaceutical companies who have yet to fully apply the value creating potential of biocatalysis across their drug portfolio. This licensing approach allows the customer to run CodeEvolver at their facilities, and drive more of their portfolio to utilize the cost saving and sustainability benefits of biocatalysis than Codexis could ever provide them on a project-by-project basis. The licensing approach also changes the cost structure for the customer to install biocatalysts, as well as enables them to have more control over those projects and minimize their need for disclosure of confidential information and materials. As has been demonstrated now with GSK, we see these as substantial benefits enabling others to also get significant returns on the licensing investment.

We expect to deliver a series of CodeEvolver licenses for the foreseeable future, in the range of one new license every year or two. We are already in discussion with other companies who may be interested in licensing CodeEvolver, some of whom had begun discussions prior to the announcement of the GSK deal. We are encouraged by the reception of other major drug companies to the possibility of a similar CodeEvolver licensing deal. We can additionally envision executing CodeEvolver licenses in other industries beyond pharmaceuticals. Any company who can derive value from using or marketing novel, performance enzymes or proteins would be a candidate for a CodeEvolver license as well.

Mr. Fuerst, what will GSK use Codexis' platform technology for and where will you install the protein engineering platform?

D. Fuerst: The Codexis platform will be used to evolve designer enzymes to be used in the manufacture of GSK small molecules. The platform is being installed in GSK labs at Upper Merion, Pennsylvania.

What are your foremost goals regarding the use of the technology and why did you decide for the Codexis platform?

 D. Fuerst: We chose the Codexis platform after a thorough evaluation of the enzyme evolution landscape. Codexis has a significant track record of delivering evolved biocatalysts for pharmaceutical and fine chemical applications over an extended period of time. The Codexis CodeEvolver technology is enzyme class agnostic which allows it to be applied to a wide range of chemical transformations. This flexibility allows for application across a wide range of chemical manufacturing opportunities. Codexis is also constantly improving the CodeEvolver platform which has allowed them stay at the cutting-edge of enzyme evolution technology.

For which pharmaceuticals and health care products in GSK's portfolio will the Codexis technology be used?

D. Fuerst: We are evaluating opportunities and planning to use Codexis technology across the entire GSK development portfolio of small molecule assets. This includes all therapeutic classes. We are also exploring all existing commercial GSK molecules for lifecycle management opportunities.

Experts believe that biocatalysts will increase the efficiency of pharmaceutical manufacturing. Which potential do you see in the use of enzymes to manufacture pharmaceuticals?

D. Fuerst: For individual transformations biocatalysts typically offer more efficient and sustainable manufacturing processes with lower costs than traditional chemical reactions. At GSK we are also excited about the possibility to use enzymes to design shorter and simpler synthetic routes that are not accessible by classical chemical approaches. By decreasing the number of steps to make a molecule the cost savings and sustainability benefits are even greater. Having access to Codexis technology will enable us to develop enzymes for these types of novel synthetic routes.