Codexis, a developer of engineered enzymes for pharmaceutical, biofuel and chemical production, today announced financial results for the fourth quarter and year ended December 31, 2012.

"After a period of transition in 2012, we are very encouraged by the company's progress and our better than projected cash balance at the end of the year," said John Nicols, President and CEO of Codexis. "While making necessary strategic reductions of our operational expenses and cash burn associated with the ongoing repositioning of CodeXyme cellulase enzymes and CodeXo detergent alcohols following the loss of Shell funding, we have continued to build the long-term strength of our pharmaceutical business. Specifically, in addition to finalizing the previously announced agreement with Arch Pharmalabs, we have also added new collaboration with Albany Molecular Research and Strem Chemicals designed to help our core biocatalysis enzyme business more widely penetrate the world's complex chemistry markets," Nicols added.

Fourth Quarter Financial Highlights

Revenues for the fourth quarter of 2012 were $7.9 million, a 76% decrease from $33.5 million in the fourth quarter of 2011. The revenue decrease was primarily due to the termination of Codexis' Collaborative Research Agreement with Shell as of August 31, 2012. Product revenue in the fourth quarter of 2012 was $6.8 million, a 56% decrease from $15.5 million in the prior year quarter, primarily due to the timing of generic and innovator pharmaceutical product orders. Product gross margin in the fourth quarter was 15%, a decrease compared to 16% in the prior year quarter and an increase compared to 10% in the third quarter of 2012. Collaborative research and development revenue of $1.1 million decreased 94% from $17.3 million in the fourth quarter of 2011 due to the termination of Codexis' Collaborative Research Agreement with Shell.

Research and development expenses in the fourth quarter of 2012 were $10.6 million, a decrease of 32% from $15.5 million for the fourth quarter of 2011. The decrease was primarily due to headcount reductions implemented as part of a company-wide restructuring undertaken by Codexis after the termination of its Collaborative Research Agreement with Shell.

Selling, general and administrative expenses in the fourth quarter of 2012 were $7.3 million, a decrease of 26% compared to $9.8 million in the same period of 2011. The decrease was primarily due to reductions in headcount and other discretionary expenses implemented as part of the company-wide restructuring.

Net loss for the fourth quarter was $15.5 million, or a loss of $0.41 per share, based on 37.6 million weighted average common shares outstanding in the fourth quarter of 2012. This compares to a net loss of $5.3 million, or a loss of $0.15per share, during the fourth quarter of 2011.

Full Year 2012 Financial Highlights

Revenues for fiscal 2012 were $88.3 million, a 29% decrease from $123.9 million in fiscal 2011. The revenue decrease was primarily due to the termination of our Collaborative Research Agreement with Shell as of August 31, 2012. Product revenue in 2012 was $35.9 million, a 27% decrease from $49.0 million in 2011. The product revenue decrease was primarily due to the timing of orders from our innovator pharmaceutical customers. Product gross margin in 2012 was 15%, the same as for 2011. Collaborative research and development revenue of $50.1 million decreased 30% from $71.4 million in 2011 due primarily to the termination of the Collaborative Research Agreement with Shell.

Research and development expenses for fiscal 2012 were $56.8 million, a decrease of 7% from $61.0 million in fiscal 2011. The decrease was primarily due to headcount reductions implemented as part of the company-wide restructuring undertaken by Codexis after the termination of the Collaborative Research Agreement with Shell.

Selling, general and administrative expenses for fiscal 2012 were $31.4 million, a decrease of 15% compared to $36.9 million in fiscal 2011. The decrease was primarily due to reductions in headcount and other discretionary expenses implemented as part of the company-wide restructuring.

Net loss for fiscal 2012 was $30.9 million, or a loss of $0.84 per share, based on 36.8 million weighted average common shares outstanding. This compares to a net loss of $16.6 million, or a loss of $0.46 per share, during fiscal 2011.

Cash, cash equivalents, and marketable securities at December 31, 2012 were $49.2 million compared to $63.8 million at December 31, 2011.

2013 Financial Outlook

Codexis' statements with regard to its outlook are based on current expectations.

For the full year 2013, Codexis expects total pharmaceutical related revenue in the range of $35 million to $40 million. Of this amount, we expect product revenue to be approximately $30 million. Codexis expects that its product gross margin will be in the range of 30% to 35% and total gross margin for pharmaceutical revenue will be approximately 50%. Regarding cash burn, the company is adjusting its previously disclosed outlook for 2013, which was based on having a funding partner in place at the end of 2012, to a cash burn range of $12 million to $16 million for the year.

"As part of the projections for 2013, we are encouraged that our previous financial support of the specialty pharmaceutical company, Exela Pharma Sciences, in its partnership with Hikma Pharmaceuticals  for the development of argatroban injection will begin to generate royalty revenue in 2013. We expect to receive a milestone payment triggered by Hikma's commercial launch of argatroban injection and are expecting further royalty payments starting in the first quarter of 2013," said David O'Toole, Senior Vice President and Chief Financial Officer.