Codexis, Inc. developer of biocatalysts for the pharmaceutical and fine chemical industries, today announced its financial results for the fourth quarter and year ended December 31, 2013.

"We had a strong finish in 2013 as we executed well on our restructuring plans and delivered a solid financial result in the fourth quarter in our core biocatalysts business," said John Nicols, President and CEO of Codexis. "Our talent base in Redwood City, California is now in place and is well equipped to drive our strategy of engineering and delivering novel, value-adding biocatalysts to blue chip, innovation hungry customers.

We also added top tier talent to accelerate our growth going forward. Dr. Greg Hughes joined us from Merck to lead key customer alliances and product innovation. Dr. Patrick Yang joined our Board of Directors, which will benefit from his decades of experience in biopharmaceutical manufacturing at Roche, Genentech and Merck.

Furthermore, in the fourth quarter, we achieved a material commercialization milestone in our pipeline, with the delivery to Novartis of the first major shipments of a key chemical intermediate that is manufactured using a proprietary Codexis biocatalyst. With the major restructuring elements now behind us, I am very pleased that the company's operating expenses are now at levels that will allow us to significantly reduce our 2014 cash burn compared to 2013."

Fourth Quarter Financial Highlights:

Revenues for the fourth quarter of 2013 were $9.5 million, a 20% increase from $7.9 million in the fourth quarter of 2012. Product revenue in the fourth quarter of 2013 was $5.3 million, a 23% decrease from $6.8 million in the prior year quarter. Product gross margin in the fourth quarter was 9%, a decrease compared to 15% in the prior year quarter, primarily due to inventory adjustments required at year end and the relatively low gross margin achieved for the intermediate order that Codexis delivered to Novartis. Collaborative research and development revenue of $1.9 million increased 79% from $1.1 million in the fourth quarter of 2012. In addition, revenue from our arrangement with Exela Pharma Sciences for their argatroban injectable drug was $2.3 million in the fourth quarter.

Research and development expenses in the fourth quarter of 2013 were $8.8 million, a decrease of 17% from $10.6 million for the fourth quarter of 2012. The decrease was primarily due to headcount reductions implemented as part of company-wide restructurings undertaken by Codexis over the last five quarters. Also included in research and development expenses in the fourth quarter of 2013 is a write down adjustment of $1.6 million to bring the carrying value of certain assets related to the winding down of the company's biofuels business to their estimated realizable value and $0.6 million related to severance charges associated with the headcount reduction announced in the fourth quarter of 2013. These two charges represented 25% of total research and development expenses for the fourth quarter.

Selling, general and administrative expenses in the fourth quarter of 2013 were $5.8 million, a decrease of 21% compared to $7.3 million in the same period of 2012. The decrease was primarily due to reductions in headcount and other discretionary expenses implemented as part of those same company-wide restructurings.  

Net loss for the fourth quarter was $9.8 million, or a loss of $0.26 per share, based on 38.3 million weighted average common shares outstanding in the fourth quarter of 2013. This compares favorably to a net loss of $15.5 million, or a loss of $0.41 per share, during the fourth quarter of 2012.

Full Year 2013 Financial Highlights:

Revenues for fiscal 2013 were $31.9 million, a 64% decrease from $88.3 million in fiscal 2012. The revenue decrease was primarily due to the termination of the Collaborative Research Agreement with Shell as of August 31, 2012. Product revenue in 2013 was $20.4 million, a 43% decrease from $35.9 million in 2012. The product revenue decrease was primarily due to the impact of the enzyme supply agreement with Arch Pharmalabs Ltd. executed in November of 2012, and Arch's subsequent financial difficulties in 2013, which impaired Arch's ability to compete effectively for business against low-cost Chinese manufacturers. Product gross margin in 2013 was 29%, compared to 15% in 2012. Collaborative research and development revenue was $6.9 million, a decrease of 86% from $50.0 million in 2012 due primarily to the termination of the Collaborative Research Agreement with Shell. Revenue from the arrangement with Exela Pharma Sciences for their argatroban injectable drug was $4.6 million for 2013, compared to $0.2 million in 2012.

Research and development expenses for fiscal 2013 were $31.6 million, a decrease of 44% from $56.8 million in fiscal 2012. 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 2013 were $26.9 million, a decrease of 14% compared to $31.4 million in fiscal 2012. 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 2013 was $41.3 million, or a loss of $1.08 per share, based on 38.2 million weighted average common shares outstanding. This compares to a net loss of $30.9 million, or a loss of $0.84 per share, during fiscal 2012.

Cash, cash equivalents, and marketable securities at December 31, 2013 were $25.9 million, which met the company's prior guidance. This compared to $49.1 million at December 31, 2012. 

Financial Outlook

Codexis' statements with regard to its financial outlook are based on current expectations. The following statements are forward looking, and actual results could differ materially depending on market conditions and the factors set forth under "Forward-Looking Statements" below.

For the full year 2014, Codexis expects total revenue in the range of $33 million to $35 million, or a year-on-year sales growth of 3% to 10%, and total gross profit (defined as Total Revenue less Cost of Product Revenue) of approximately $19 million to $20 million in 2014, which would be an increase of 9% to 15% compared to 2013.

David O'Toole, Senior Vice President and Chief Financial Officer of Codexis said, "Our 2014 revenue guidance demonstrates the solid underlying revenue growth fundamentals of our biocatalyst business, especially when taking into account the expected loss of all our biocatalyst and intermediate sales to customers in the hepatitis C drug marketplace due to a recently approved therapy that is competitive with our customers' products. Hepatitis C-related sales accounted for almost 20% of our revenue in 2013, so our expectation of 3% to 10% year-on-year revenue growth above that 'headwind' reinforces our expected strong growth."

As Codexis previously guided in November 2013, the company continues to expect a cash burn of less than $8 million in 2014.