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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-34705
___________________________
Codexis, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware 71-0872999
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
200 Penobscot Drive, Redwood City, California
 94063
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (650) 421-8100

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTradingName of Each Exchange on Which Registered
Symbol(s)
Common Stock, par value $0.0001 per shareCDXSThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of August 5, 2024, there were 70,927,377 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.
1



Codexis, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2024


TABLE OF CONTENTS
 PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands, Except Per Share Amounts)
June 30, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$18,595 $65,116 
Restricted cash, current517 519 
Short-term investments54,604 — 
Financial assets:
Accounts receivable4,860 10,036 
Contract assets3,213 815 
Unbilled receivables4,380 9,142 
Total financial assets12,453 19,993 
Less: allowances(65)(65)
Total financial assets, net12,388 19,928 
Inventories2,232 2,685 
Prepaid expenses and other current assets3,062 5,218 
Total current assets91,398 93,466 
Restricted cash1,062 1,062 
Investment in non-marketable equity securities9,700 9,700 
Right-of-use assets - Operating leases, net11,576 13,137 
Property and equipment, net13,966 15,487 
Goodwill2,463 2,463 
Other non-current assets1,841 1,246 
Total assets$132,006 $136,561 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$3,685 $5,947 
Accrued compensation7,658 11,246 
Other accrued liabilities5,417 4,735 
Current portion of lease obligations - Operating leases3,979 3,781 
Deferred revenue9,800 10,121 
Total current liabilities30,539 35,830 
Deferred revenue, net of current portion200 640 
Long-term lease obligations - Operating leases10,191 12,243 
Long-term debt28,365 — 
Other long-term liabilities1,264 1,233 
Total liabilities70,559 49,946 
Commitments and Contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value per share; 5,000 shares authorized, none issued and outstanding
— — 
Common stock, $0.0001 par value per share; 200,000 shares authorized;
70,914 shares and 69,905 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
7 7 
Additional paid-in capital593,253 584,138 
Accumulated other comprehensive loss(23)— 
Accumulated deficit(531,790)(497,530)
Total stockholders' equity61,447 86,615 
Total liabilities and stockholders' equity$132,006 $136,561 

See accompanying notes to the unaudited condensed consolidated financial statements.
3


Codexis, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Revenues:
Product revenue$6,259 $11,048 $15,810 $19,412 
Research and development revenue1,720 10,275 9,242 14,893 
Total revenues7,979 21,323 25,052 34,305 
Costs and operating expenses:
Cost of product revenue3,462 3,178 8,317 7,698 
Research and development11,413 17,334 22,659 33,988 
Selling, general and administrative15,671 13,365 28,531 28,765 
Restructuring charges— 72 — 145 
Asset impairment and other charges165 — 165 — 
Total costs and operating expenses30,711 33,949 59,672 70,596 
Loss from operations(22,732)(12,626)(34,620)(36,291)
Interest income972 1,121 1,881 2,209 
Interest and other expense, net
(985)(9)(1,500)(33)
Loss before income taxes(22,745)(11,514)(34,239)(34,115)
Provision for income taxes10 9 21 25 
Net loss$(22,755)$(11,523)$(34,260)$(34,140)
Net loss per share, basic and diluted$(0.32)$(0.17)$(0.49)$(0.51)
Weighted average common stock shares used in computing net loss per share, basic and diluted70,376 67,573 70,115 66,756 
See accompanying notes to the unaudited condensed consolidated financial statements.
4


Codexis, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In Thousands)
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Net loss$(22,755)$(11,523)$(34,260)$(34,140)
Other comprehensive loss:
Unrealized loss on available-for-sale short-term investments, net of tax
(7)— (23)— 
Comprehensive loss$(22,762)$(11,523)$(34,283)$(34,140)
See accompanying notes to the unaudited condensed consolidated financial statements.
5


Codexis, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
Common StockAdditional
Paid-in
Capital 		Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Three Months Ended June 30, 2024SharesAmount
Balance as of April 1, 2024
70,554 $7 $588,311 $(16)$(509,035)$79,267 
Issuance of common stock upon release of stock awards236 — — — — — 
Issuance of common stock under employee stock purchase plan124 — 260 — — 260 
Stock-based compensation— — 4,682 — — 4,682 
Net Loss— — — — (22,755)(22,755)
Other comprehensive loss— — — (7)— (7)
Balance as of June 30, 2024
70,914 $7 $593,253 $(23)$(531,790)$61,447 

Common StockAdditional
Paid-in
Capital 		Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Three Months Ended June 30, 2023SharesAmount
Balance as of April 1, 2023
66,696 $6 $569,917 $— $(443,907)$126,016 
Issuance of common stock upon exercise of stock options71 — 141 — — 141 
Issuance of common stock upon release of stock awards285 — — — — — 
Issuance of common stock in connection with an equity sales agreement, net of issuance costs of $331
2,752 — 6,781 — — 6,781 
Stock-based compensation— — 2,716 — — 2,716 
Net Loss— — — (11,523)(11,523)
Balance as of June 30, 2023
69,804 $6 $579,555 $— $(455,430)$124,131 

See accompanying notes to the unaudited condensed consolidated financial statements.
6


Codexis, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Six Months Ended June 30, 2024SharesAmount
Balance as of January 1, 2024
69,905 $7 $584,138 $— $(497,530)$86,615 
Issuance of common stock upon exercise of stock options73 — 143 — — 143 
Issuance of common stock upon release of stock awards812 — — — — — 
Issuance of common stock warrants in connection with debt issuance— — 859 — — 859 
Issuance of common stock under employee stock purchase plan124 — 260 — — 260 
Stock-based compensation— — 7,853 — — 7,853 
Net Loss— — — (34,260)(34,260)
Other comprehensive loss— — — (23)— (23)
Balance as of June 30, 2024
70,914 $7 $593,253 $(23)$(531,790)$61,447 

Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Six Months Ended June 30, 2023SharesAmount
Balance as of January 1, 2023
65,811 $6 $566,081 $— $(421,290)$144,797 
Issuance of common stock upon exercise of stock options214 — 422 — — 422 
Issuance of common stock upon release of stock awards764 — — — — — 
Issuance of common stock in connection with an equity sales agreement, net of issuance costs of $721
3,080 — 7,931 — — 7,931 
Stock-based compensation— — 5,525 — — 5,525 
Taxes paid related to net share settlement of equity awards(65)— (404)— — (404)
Net Loss— — — (34,140)(34,140)
Balance as of June 30, 2023
69,804 $6 $579,555 $— $(455,430)$124,131 

See accompanying notes to the unaudited condensed consolidated financial statements.
7


Codexis, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Six Months Ended June 30,
 20242023
Operating activities:
Net loss$(34,260)$(34,140)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
2,516 2,946 
Reduction in the carrying amount of right-of-use assets1,561 2,517 
Stock-based compensation7,853 5,525 
Asset impairment and other charges
165 — 
Equity securities earned from research and development activities— (118)
Non-cash interest expense345 — 
Amortization of discount on short-term investments(487)— 
Other non-cash items14 (15)
Changes in operating assets and liabilities:
Financial assets7,137 19,261 
Inventories453 (23)
Prepaid expenses and other assets2,402 1,324 
Accounts payable(2,275)631 
Accrued compensation and other accrued liabilities(2,598)(10,373)
Other long-term liabilities(2,022)(2,864)
Deferred revenue(761)(9,970)
Net cash used in operating activities(19,957)(25,299)
Investing activities:
Purchase of property and equipment(1,525)(4,120)
Proceeds from sale of property and equipment15 15 
Investment in short-term investments(57,140)— 
Proceeds from maturity of short-term investments
3,000 — 
Investment in non-marketable securities— (750)
Net cash used in investing activities(55,650)(4,855)
Financing activities:
Proceeds from exercises of stock options281 422 
Proceeds from issuance of stock under employee stock purchase plan
327 — 
Proceeds from issuance of common stock in connection with equity sales agreement
— 8,652 
Costs incurred in connection with equity sales agreements
(403)(395)
Proceeds from long-term debt29,521 — 
Payment of debt issuance costs(642)— 
Taxes paid related to net share settlement of equity awards— (404)
Net cash provided by financing activities
29,084 8,275 
Net decrease in cash, cash equivalents and restricted cash(46,523)(21,879)
Cash, cash equivalents and restricted cash at the beginning of the period66,697 116,026 
Cash, cash equivalents and restricted cash at the end of the period$20,174 $94,147 
8


Supplemental disclosure of cash flow information:
Interest paid$890 $10 
Income taxes paid$17 $193 
Supplemental non-cash investing and financing activities:
Capital expenditures incurred but not yet paid$768 $434 
Transfer from property and equipment to assets held for sale
$59 $— 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of June 30, 2024 and 2023 to the total of the same such amounts shown above in the unaudited condensed consolidated statements of cash flows:
 June 30,
 20242023
Cash and cash equivalents$18,595 $92,093 
Restricted cash, current and non-current 1,579 2,054 
Total cash, cash equivalents and restricted cash$20,174 $94,147 

This table excludes short-term investments of $54.6 million as of June 30, 2024. Total cash, cash equivalents, and short-term investments as of June 30, 2024 were $73.2 million.

See accompanying notes to the unaudited condensed consolidated financial statements.
9


Codexis Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
In these notes to the unaudited condensed consolidated financial statements, the “Company,” “Codexis,” “we,” “us,” and “our” refers to Codexis, Inc. and its subsidiaries on a consolidated basis.
We discover, develop, enhance, and commercialize novel, high performance enzymes and other classes of proteins leveraging our proprietary CodeEvolver® directed evolution technology platform.
We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics. During the third and fourth quarters of 2023, we made changes to the structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction. In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”), our chief operating decision maker, assesses performance and allocates resources. As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined into a single reportable segment. Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. We believe that these changes better align internal resources to create a more efficient and effective organizational structure. Under this new organizational and reporting structure, we managed our business as one reportable segment as of December 31, 2023. Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information but does not include all the information and notes required by GAAP for complete financial statements. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements. The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2023 Annual Report on Form 10-K and are updated below as necessary. There have been no significant changes in our significant accounting policies or critical accounting estimates since December 31, 2023.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of June 30, 2024 and results of operations for the interim periods presented. The interim results are not necessarily indicative of the results for any future interim period or for the entire year.
The unaudited condensed consolidated financial statements include the accounts of Codexis, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly assess these estimates which primarily affect revenue recognition, deferred revenue, inventories, valuation of equity investments, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements.
10

Short-term Investments
We classify all marketable debt securities that have effective maturities of three months or less from the date of purchase as cash equivalents and those with effective maturities of greater than three months as short-term investment securities in the condensed consolidated balance sheets. We determine the appropriate classification of our short-term investments at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our short-term investments as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their effective maturities.
We carry these short-term investments at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except for the changes in allowance for expected credit losses, which are included in “Interest and other expense, net” in the unaudited condensed consolidated statements of operations. We determine any realized gains or losses on the sale of short-term investments on a specific identification method, and we record such gains and losses as a component of interest income.
Short-term investments are reviewed periodically for allowances for credit losses and impairment. When evaluating the investments, the Company reviews factors such as the extent to which the fair value of the security is less than the amortized cost basis, adverse conditions specifically related to the security, the financial condition of the issuer, the Company’s intent to sell, and whether it would be more likely than not that the Company would be required to sell the investments before the recovery of the amortized cost basis.
Impairment of Long-Lived Assets
We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances exist, we assess for recovery by comparing the carrying values of long-lived assets with the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Assets Held For Sale
The Company classifies assets as held for sale when the following conditions are met: (i) management has committed to a plan to sell, (ii) the assets are available for immediate sale in their present condition, (iii) the Company has initiated an active program to identify a buyer, (iv) it is probable that a sale will occur within one year, (v) the assets are actively marketed for sale at a reasonable price in relation to their current fair value, and (vi) there is a low likelihood of significant changes to the plan or that the plan will be withdrawn. If all of the criteria are met as of the balance sheet date, the assets are presented separately in the consolidated balance sheet as held for sale at the lower of the carrying amount or fair value less costs to sell. The assets are then no longer depreciated or amortized while classified as held for sale.
Accounting Pronouncements
Recently adopted accounting pronouncements
There were no recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2024, that are of significance or potential significance to us.
Recently issued accounting pronouncements not yet adopted
In March 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. This ASU amends the FASB Accounting Standard Codification (the “ASC”) to remove references to various concepts statements and impacts a variety of topics in the ASC. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU require public companies, on an annual basis, to provide disclosures of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
11

In November 2023, FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The standard should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
In October 2023, FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in the ASU are intended to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, as announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
Note 3. Revenue Recognition
Disaggregation of Revenue
The following table provides information about disaggregated revenue from contracts with customers by geographic regions. The geographic regions that are tracked are the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle East, and Africa), and APAC (Australia, New Zealand, Southeast Asia, and China).
Disaggregated information is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Primary geographical markets:
Americas$1,046 $3,937 $8,289 $6,521 
EMEA1,967 8,349 4,539 11,438 
APAC4,966 9,037 12,224 16,346 
Total revenues$7,979 $21,323 $25,052 $34,305 
Contract Balances
The following table presents balances of contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):
June 30, 2024December 31, 2023
Contract assets$3,213 $815 
Unbilled receivables$5,545 $9,904 
Contract liabilities: deferred revenue$10,000 $10,761 
We had no asset impairment charges related to financial assets in the three and six months ended June 30, 2024 and 2023.
The increase in contract assets was primarily due to increases in product revenue from contracts subject to over time revenue recognition. The decrease in unbilled receivables was primarily due to the timing of billings. The decrease in deferred revenue was primarily due to the timing of recognition of revenue.
As of June 30, 2024, we have $4.4 million of short-term unbilled receivables presented as unbilled receivables within current assets and $1.2 million of long-term unbilled receivables that is included within the other non-current assets line item in the condensed consolidated balance sheets. As of December 31, 2023, we had $9.1 million of short-term unbilled receivables presented as unbilled receivables within current assets and $0.8 million of long-term unbilled receivables that is included within the other non-current assets line item in the condensed consolidated balance sheets.
12

We recognized the following revenues (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Revenue recognized in the period for:2024202320242023
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied$129 $6,107 $500 $7,814 
Changes in the period:
Changes in the estimated transaction price allocated to performance obligations satisfied in prior periods(695)3,356 (543)3,140 
Performance obligations satisfied from new activities in the period - contract revenue8,545 11,860 25,095 23,351 
Total revenues$7,979 $21,323 $25,052 $34,305 
Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting periods. The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of June 30, 2024.
The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts as of June 30, 2024 (in thousands):
Remainder of 2024
20252026
2027 and Thereafter
Total
Product revenue$9,800 $100 $100 $— $10,000 
Note 4. Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject to forfeiture. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities. For all periods presented, diluted and basic net loss per share are identical since potential common stock shares are excluded from the calculation, as their effect was anti-dilutive.
Anti-Dilutive Securities
In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.
The following shares were not considered in the computation of diluted net loss per share because their effect was anti-dilutive (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Shares issuable under the Equity Incentive Plan and ESPP12,8939,31212,8939,312
Warrants(1)
424—424—
Total potentially dilutive securities13,3179,31213,3179,312
(1) Pertains to the warrants issued in connection with the Innovatus Loan. For additional information, see Note 11, “Debt.”
13

Note 5. Investments in Non-Marketable Securities
Non-Marketable Equity Securities
Our non-marketable equity securities are investments in privately held companies without readily determinable market value and primarily relate to our investments in Molecular Assemblies, Inc. (“MAI”) and seqWell, Inc. (“seqWell”). These investments are accounted for under the measurement alternative and are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer. Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within Level 2 in the fair value hierarchy when we estimate the fair value of these investments using the observable transaction price paid by third party investors for the same or similar security of the same issuers. The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using unobservable inputs such as when we remeasure due to impairment and we use discount rates, market data of comparable companies, and rights and obligations of the securities the Company holds, among others. We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of interest and other expense, net in the unaudited condensed consolidated statements of operations.
There was no remeasurement event for our investments in MAI, seqWell, and other non-marketable equity securities that occurred during the three and six months ended June 30, 2024 and 2023. We recognized no realized gains or losses during the three and six months ended June 30, 2024 and 2023.
The following table presents the carrying value of our non-marketable equity securities (in thousands):
 June 30, 2024December 31, 2023
MAI
$6,693 $6,693 
seqWell2,625 2,625 
Other investments in non-marketable equity securities382 382 
Total non-marketable equity securities$9,700 $9,700 
Note 6. Fair Value Measurements
The following tables show the Company’s cash, cash equivalents, and short-term investments by significant investment category as of June 30, 2024 and December 31, 2023 (in thousands):
June 30, 2024
Amortized CostUnrealized GainsUnrealized LossesFair ValueCash and Cash Equivalents
Short-term Investments
Cash$6,195 $— $— $6,195 $6,195 $— 
Level 1:
Money market funds
12,400 — — 12,400 12,400 — 
Level 2(1):
Commercial paper11,360 — (6)11,354 — 11,354 
Corporate debt3,934 — (5)3,929 — 3,929 
U.S. treasury securities39,333 — (12)39,321 — 39,321 
Subtotal54,627 — (23)54,604 — 54,604 
Total$73,222 $— $(23)$73,199 $18,595 $54,604 
(1) The valuation techniques used to measure the fair values of the Company’s Level 2 financial instruments uses inputs that are either directly or indirectly observable for the asset through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
14

December 31, 2023
Amortized CostUnrealized GainsUnrealized LossesFair ValueCash and Cash Equivalents
Short-term Investments
Cash$8,742 $— $— $8,742 $8,742 $— 
Level 1:
Money market funds
56,374 — — 56,374 56,374 — 
Total$65,116 $— $— $65,116 $65,116 $— 
We limit the credit risk associated with our cash equivalents and short-term investments by placing them with banks and institutions we believe are highly credit-worthy and investing in highly-rated investments. As of June 30, 2024, and December 31, 2023, the contractual maturity of all investments held was less than one year.
During the three and six months ended June 30, 2024 and 2023, we did not recognize any significant credit losses nor other-than-temporary impairment losses on our short-term investments.
Note 7. Balance Sheets Details
Inventories
Inventories consisted of the following (in thousands):
June 30, 2024December 31, 2023
Raw materials$108 $108 
Work-in-process6 7 
Finished goods2,118 2,570 
Total Inventories$2,232 $2,685 
Prepaid expenses and other current assets
As of June 30, 2024, prepaid expenses and other current assets consisted of prepaid expenses of $2.1 million, assets held for sale of $0.1 million, and other current assets of $0.9 million. As of December 31, 2023, prepaid expenses and other current assets consisted of prepaid expenses of $4.6 million and other current assets of $0.6 million.
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
June 30, 2024December 31, 2023
Laboratory equipment$36,547 $37,216 
Leasehold improvements11,960 11,912 
Computer equipment and software2,651 2,565 
Office equipment and furniture1,116 1,469 
Construction in progress1,513 1,636 
Property and equipment53,787 54,798 
Less: accumulated depreciation and amortization(39,821)(39,311)
Property and equipment, net
$13,966 $15,487 
Depreciation expense included in both research and development expenses and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Research and development$1,020 $1,242 $2,052 $2,486 
Selling, general and administrative219 238 439 460 
Total depreciation expense$1,239 $1,480 $2,491 $2,946 
15

Other Accrued Liabilities
Other accrued liabilities consisted of the following (in thousands):
June 30, 2024December 31, 2023
Accrued professional and outside service fees$2,766 $2,330 
Accrued purchases 2,252 1,402 
Other399 1,003 
Total other accrued liabilities$5,417 $4,735 
Note 8. Stock-based Compensation
Employee Stock Purchase Plan
In April 2023, the Board approved an employee stock purchase plan (the “ESPP”) which became effective upon approval at the Annual Meeting in June 2023. The ESPP allows eligible employees of the Company to purchase shares of our common stock through payroll deductions. Offering periods are generally over a 24-month period and begin in May and November of each year. The per share purchase price will be the lower of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date. Participant purchases are limited to a maximum of $25,000 of fair value of our stock per calendar year. The Company is authorized to grant up to 2,000,000 shares of common stock under the ESPP. The first offering period of the ESPP commenced in December 2023. For the three and six months ended June 30, 2024, 123,889 shares of common stock were purchased under the ESPP. As of June 30, 2024, 1,876,111 shares of common stock were available for future issuance under the ESPP.
We recognized $72 thousand and $149 thousand of stock-based compensation expenses related to the ESPP for the three and six months ended June 30, 2024, respectively. As of June 30, 2024, the total unrecognized stock-based compensation expense, net of expected forfeitures, related to the ESPP was $0.6 million and is expected to be recognized over the remaining offering period.
Stock Options
Stock options granted to employees generally have a maximum term of ten years and vest over four years from the date of grant, of which 25% vest at the end of one year, and 75% vest monthly over the remaining three years. In January 2024, the Board approved the grants of stock options with a vesting term over three years from the date of grant, of which 33% vest at the end of one year, and 67% vest monthly over the remaining two years.
Restricted Stock Units (“RSUs”)
We also grant employees RSUs, which generally vest over either a period with 33% of the shares subject to the RSUs vesting on each yearly anniversary of the vesting commencement date, in each case contingent upon such employee’s continued service on such vesting date. We may grant RSUs with different vesting terms from time to time.
Stock-Based Compensation Expense
Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Cost of product revenue$101 $83 $216 $212 
Research and development 641 806 1,461 1,528 
Selling, general and administrative3,940 1,827 6,176 3,785 
Total$4,682 $2,716 $7,853 $5,525 
16

The following table presents total stock-based compensation expense by security type included in the unaudited condensed consolidated statements of operations (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Stock options$2,117 $1,096 $3,631 $2,018 
RSUs and restricted stock awards (“RSAs”)
1,152 1,373 2,469 2,499 
Performance-contingent restricted stock units (“PSUs”)
— 279 247 1,116 
Performance based options (“PBOs”)
1,341 (32)1,357 (108)
ESPP72 — 149 — 
Total$4,682 $2,716 $7,853 $5,525 
On June 29, 2024, we entered into an Advisory Services Agreement with a former executive of the Company. Pursuant to the advisory agreement, the exercise period for the former executive’s vested stock options and performance-based options was also extended. The modification resulted in a stock-based compensation expense of $2.0 million recognized in selling, general and administrative expenses for the three and six months ended June 30, 2024.
As of June 30, 2024, unrecognized stock-based compensation expense, net of expected forfeitures, was $12.0 million related to unvested stock options, and $6.0 million related to unvested RSUs and RSAs. Stock-based compensation expense for these awards will be recognized through 2028.
Note 9. Capital Stock
Exercise of Options
For the six months ended June 30, 2024 and June 30, 2023, we issued 75,856 and 214,284 shares, respectively, upon option exercises at a weighted-average exercise price of $1.97 per share, with net cash proceeds of $0.1 million and $0.4 million, respectively.
Sales Agreements
In May 2021, we filed a Registration Statement on Form S-3 with the SEC (the “2021 Registration Statement”), 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. On February 27, 2023, we filed a post-effective amendment to the 2021 Registration Statement. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities. 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 (the “Securities Act”).
We are not required to sell any shares at any time during the term of the EDA. The EDA will terminate upon the earlier of: (i) the issuance and sale of all shares through PSC on the terms and conditions of the EDA, or (ii) the termination of the EDA in accordance with its terms. Either party may terminate the EDA at any time upon written notification to the other party in accordance with the EDA, and upon such notification, the offering will terminate. Under no circumstances shall any shares be sold pursuant to the EDA after the date which is three years after the registration statement is first declared effective by the SEC. We agreed to pay PSC a commission of 3% of the gross sales price of any shares sold pursuant to the EDA. With the exception of certain expenses, we will pay PSC up to 8% of the gross sales price of the shares sold pursuant to the EDA for a combined amount of commission and reimbursement of PSC's expenses and fees.
No shares of our common stock were issued and sold pursuant to the EDA during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, 2,751,941 and 3,079,421 shares of our common stock, respectively, were issued and sold pursuant to the EDA and we received gross proceeds of $7.1 million and $8.7 million, or $6.8 million and $7.9 million in net proceeds after PSC's commissions and direct offering expenses of $0.3 million and $0.7 million, respectively. On April 24, 2024, we terminated the EDA.
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On May 2, 2024, we entered into a Controlled Equity Offering℠ Sales Agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor”), under which Cantor, at our discretion and at such times that we may determine from time to time, may sell up to a maximum of $75.0 million of shares of our common stock. Under the terms of the Cantor Sales Agreement, Cantor 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. On May 2, 2024, we filed a registration statement on Form S-3 registering the offer and sale of these shares under the Securities Act which became effective on May 14, 2024. We will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the Cantor Sales Agreement. We have made no sales under the Cantor Sales Agreement and as of June 30, 2024, $75.0 million of shares remained available for sale under the Cantor Sales Agreement.
Note 10. Commitments and Contingencies
Lease and other information
The Company has entered into operating leases primarily for office and laboratory space. Lease cost amounts included in the measurement of lease obligations and other information related to non-cancellable operating leases were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Operating lease costs(1)
$1,033 $1,830 $2,065 $3,660 
(1) The Company had no variable lease costs.
Other information:Operating Leases
Weighted-average remaining lease term (in years)3.4 years
Weighted-average discount rate6.6 %
Six Months Ended June 30,
Cash paid (in thousands):
20242023
Operating cash flows from operating leases$2,357 $3,775 
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As of June 30, 2024, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):
Years Ending December 31,Operating Leases
2024 (remaining 6 months)$2,369 
20254,868 
20265,014 
20272,533 
2028760 
Thereafter318 
Total minimum lease payments15,862 
Less: imputed interest1,692 
Lease obligations$14,170 
Reconciliation of operating lease liabilities as shown within the unaudited condensed consolidated balance sheets (in thousands):
Current portion of lease obligations - Operating leases$3,979 
Long-term lease obligations - Operating leases10,191 
Total operating lease liabilities$14,170 
Other Commitments
We enter into supply and service arrangements in the normal course of business. Supply arrangements are primarily for fixed-price manufacture and supply. Service agreements are primarily for the development of manufacturing processes. Commitments under service agreements are typically subject to cancellation at our discretion which may require payment of certain cancellation fees. The timing of completion of service arrangements is subject to variability in estimates of the time required to complete the work.
The following table provides quantitative data regarding our other commitments. Future minimum payments reflect amounts that we expect to pay including potential obligations under services agreements subject to risk of cancellation by us (in thousands):
Payments Due by Period
Total2024 (Remaining 6 Months)2025 and Thereafter
Facility maintenance agreement$281 $281 $— 
Legal Proceedings
We may be involved in legal actions in the ordinary course of business, including inquiries and proceedings concerning business practices and intellectual property infringement, employee relations and other claims. We will recognize a loss contingency in the condensed consolidated financial statements when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. We will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a material loss may have been incurred. Gain contingencies are not recorded until they are realized.
Indemnifications
We are required to recognize a liability for the fair value of any obligations we assume upon the issuance of a guarantee. We have certain agreements with licensors, licensees and collaborators that contain indemnification provisions. In such provisions, we typically agree to indemnify the licensor, licensee and collaborator against certain types of third party claims. The maximum amount of the indemnifications is not limited. We accrue for known indemnification issues when a loss is probable and can be reasonably estimated. There were no accruals for expenses related to indemnification issues for any periods presented.
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Note 11. Debt
Innovatus Loan Agreement
On February 13, 2024 (the “Closing Date”), we entered into a five-year term loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of Innovatus Capital Partners, LLC, for an aggregate principal amount of up to $40.0 million and with a maturity date of February 13, 2029 (the “Innovatus Loan”). The Innovatus Loan consists of two tranches, of which the first tranche of $30.0 million was funded on February 13, 2024. We will be eligible to draw down the second tranche of $10.0 million upon achievement of certain milestones including pre-specified revenue thresholds.
The floating per annum interest rate of the Innovatus Loan is equal to the sum of (a) the greater of (i) prime rate published in the Money Rates section of the Wall Street Journal and (ii) 7.50%, plus (b) 3.25%; provided that, at the election of the Company, up to 2.0% of such rate shall be payable in-kind until the third anniversary of the closing date. The Company is required to make monthly interest-only payments through February 1, 2027, after which the Company is required to make monthly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. 2.0% of the interest is payable in-kind for the first three years of the term by increasing the principal balance. Prepayments of the loan, in whole or in part, will be subject to an early prepayment fee which ranges between 3.0% and 1.0% and declines each year until the third anniversary date of the Closing Date, after which no prepayment fee is required. The Company is also required to pay an exit fee upon any payment or prepayment equal to 3.0% of the aggregate principal amount of the tranches funded under the Innovatus Loan.
The Innovatus Loan contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and net product revenue, with the latter beginning with the period ending September 30, 2024. The Company believes it is in compliance with the terms included within the Innovatus Loan as of June 30, 2024. The Innovatus Loan is secured by perfected first priority liens on the Company's assets, including a commitment by the Company to not allow any liens to be placed upon the Company's intellectual property.
In connection with the issuance of the Innovatus Loan, we recorded a debt discount of $1.3 million and capitalized debt issuance costs of $0.6 million. The discount and issuance costs will be amortized over the life of the Innovatus Loan. Interest expense for the Innovatus Loan for the three and six months ended June 30, 2024 was $1.0 million and $1.5 million respectively, and is inclusive of non-cash amortization of the debt discount, debt issuance costs, payable in-kind interest, and accretion of final payment. The carrying amount of the Innovatus Loan approximates fair value given its recent issuance and the interest rate is based on the prime rate. The effective interest rate for the Innovatus Loan was 14.0% as of June 30, 2024.
Additionally, in connection with entering into the Innovatus Loan, we entered into a Warrant Agreement with Innovatus on February 13, 2024 and issued to Innovatus a warrant to purchase an aggregate of 424,028 shares of the Company’s common stock at an exercise price of $2.83 per share. The warrants may be exercised on a cashless basis, and are immediately exercisable through the 10th anniversary of the issuance date. At the time of issuance, the Company determined the estimated fair value of the warrants of $0.9 million using the Black-Scholes model. As the warrants represent a freestanding equity instrument, the Company recorded the fair value of the warrants in additional paid-in capital during the first quarter of 2024.
The Company accounts for the amortization of the debt discount and issuance costs utilizing the effective interest method. Long-term debt consisted of the following at June 30, 2024 (in thousands):
June 30, 2024
Face value of debt$30,000 
Add: payment in-kind interest180 
Add: amortized exit fee52 
Less: unamortized debt discount(1,261)
Less: unamortized debt issuance costs(605)
Total long-term debt$28,365 
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The future principal payments under the Innovatus Loan are as follows (in thousands):
Years Ending December 31,
2024$— 
2025— 
2026— 
202713,264 
202815,917 
20292,653 
Total principal payments31,834 
Add: amortized exit fee52 
Less: uncapitalized payment in-kind interest(1,655)
Less: unamortized debt issuance fee(1,261)
Less: unamortized debt issuance costs(605)
Total long-term debt$28,365 
Note 12. Segment, Geographical and Other Revenue Information
Segment Information
We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics. During the third and fourth quarters of 2023, we made changes to the structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction. In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our CEO, our chief operating decision maker, assesses performance and allocates resources. As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined into a single reportable segment.
Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis. The CEO assesses performance and allocated resources based on the consolidated results of operations. We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure. Under this new organizational and reporting structure, we managed our business as one reportable segment as of December 31, 2023. Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.
Significant Customers
Customers that each accounted for 10% or more of our total revenues were as follows:
Percentage of Total Revenues for the
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Customer A
18 %*16 %11 %
Customer B
18 %***
Customer C
18 %***
Customer D
15 %***
Customer E
*28 %*17 %
Customer F
*18 %*11 %
Customer G
*11 %**
Customer H
**24 %*
Customer I
***10 %
* Percentage was less than 10%
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Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented as follows:
Percentage of Accounts Receivables as of
June 30, 2024December 31, 2023
Customer A
31 %12 %
Customer D
23 %*
Customer F
*21 %
Customer J
12 %*
Customer K
*13 %
Customer L
*12 %
* Percentage was less than 10%
Identifiable long-lived assets by location was as follows (in thousands):
June 30, 2024December 31, 2023
United States$25,878 $28,624 
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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 28, 2024 (the “Annual Report”). This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, expectations regarding our strategy, business plans, financial performance and developments relating to our industry. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part II, Item 1A: “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Item 1A: “Risk Factors” of our Annual Report, as incorporated herein and referenced in Part II, Item 1A: “Risk Factors” of this Quarterly Report on Form 10-Q and elsewhere in this report. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
Business 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. They can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to perform (bio)chemical transformations different than those for which they naturally evolved. 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”) and other RNA-based therapeutics. Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, and improved efficiency in manufacturing. In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment and that we are actively exploring options to drive value by potentially monetizing non-core assets within our Biotherapeutics and Life Science portfolios.
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. We also use the CodeEvolver® technology platform to develop enzymes for the synthesis of nucleic acids such as DNA/RNA, including enzymes utilized in 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. 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.
As of June 30, 2024, we manage our business as one business segment. For additional information, see Note 12, “Segment, Geographical and Other Revenue Information” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.
Recent Developments
Finalized Purchase Agreements for Biotherapeutics Assets
In July 2024, we announced that we entered into an asset purchase agreement with Crosswalk Therapeutics for our investigational Fabry and Pompe disease compounds. Under the terms of the agreement, Codexis is eligible to receive future development and commercial milestone payments in addition to a low-to-mid single-digit percentage net sales-based royalty.
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Both programs were previously part of Codexis’ collaboration agreement with Takeda Pharmaceutical Co. Ltd. (“Takeda”). In April 2023, Takeda discontinued its efforts in AAV gene therapy, which included these development programs.
Additionally, in April 2024 we entered into an asset acquisition agreement with another private biotherapeutics company under which we divested assets related to our investigational homocystinuria and maple syrup urine disease programs, and in June 2024, we entered into an asset sale agreement under which we divested assets related to our programs for the GLB1, GBM1, and SGSH genes, and our investigational AAV capsid technology. Under these agreements, Codexis is eligible to receive milestone and earnout payments.
Presentation of Groundbreaking Enzymatic Synthesis Data at TIDES USA Annual Meeting and Launch of RNA Ligase Screening and Optimization Services
In May 2024, we announced that we successfully synthesized an oligonucleotide via an enzymatic route using our ECO Synthesis™ manufacturing platform from a starter oligonucleotide to the inclusion of a conjugation moiety to support RNA-based therapeutics manufacturing. We presented data highlighting this manufacturing milestone at the TIDES USA annual meeting in Boston, Massachusetts held from May 14 to 17, 2024. We also announced the launch of our RNA Ligase Screening and Optimization Services.
Significant Collaborative Arrangements Update
Acquisition Agreement
In December 2023, we entered into an acquisition agreement (the “Acquisition Agreement”) with Nestlé Health Science, pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé Health Science. Under the terms of the Acquisition Agreement, Nestlé Health Science will be solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, and Codexis will receive upfront payment, future potential milestone payments and net-sales based royalties. We recognized research and development revenue of $5.0 million during the fourth quarter of 2023 related to the Acquisition Agreement and received the $5.0 million upfront fee in January 2024.
Pfizer Enzyme Supply Agreement
We are a party to an Enzyme Supply Agreement (the “Pfizer Supply Agreement”), with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer, Inc. (“Pfizer”), covering the manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture of nirmatrelvir. Under 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. 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. On March 31, 2023, we entered into a license agreement whereby Pfizer utilized a portion of the $23.3 million credit towards a license to develop future product candidates, for which we recognized $5.0 million as non-cash research and development revenue in the second quarter of 2023. Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item (ii) above expired on April 4, 2023. 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.
No product revenue was recognized from the Pfizer Supply Agreement during the three and six months ended June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, we had $9.5 million in deferred revenue related to the $25.9 million fee received from Pfizer.
Strategic Collaboration Agreement
In October 2017, we entered into the Nestlé Strategic Collaboration Agreement (the “Nestle SCA”) pursuant to which we and Nestlé Health Science have collaborated to leverage the CodeEvolver® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.
In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science have collaborated to advance a lead candidate discovered through our Nestlé SCA, CDX-7108, targeting exocrine pancreatic insufficiency, into preclinical and early clinical studies. We, together with Nestlé Health Science, initiated a Phase 1 clinical trial of CDX-7108 in the fourth quarter of 2021, and on February 23, 2023, we and Nestlé Health Science announced interim results. In July 2023, we announced plans to discontinue our development support of CDX-7108. Both the Nestlé SCA and development agreement were terminated under the terms of the CDX-7108 Acquisition Agreement with Nestlé Health Science.
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Under the Nestlé SCA and the development agreement, we recognized nil in research and development fees for the three and six months ended June 30, 2024, compared to $1.7 million and $3.6 million for the three and six months ended June 30, 2023, respectively.
License Agreement
In February 2024, we entered into an agreement with Roche Sequencing Solutions, Inc. (“Roche”) for an exclusive, global license for the Company’s newly engineered double-stranded DNA (dsDNA) ligase for next-generation sequencing (NGS) library preparation and the Company’s EvoT4™ DNA ligase. Under the terms of the deal, Codexis will receive upfront and technical milestone payments. This deal superseded the prior exclusive license on the EvoT4™ DNA ligase. We recognized research and development revenue of $6.0 million during the first quarter of 2024 related to the license agreement.
Results of Operations
The following table shows the amounts from our unaudited condensed consolidated statements of operations for the periods presented (in thousands, except percentages):
 Three Months Ended June 30,ChangeSix Months Ended June 30,Change
 20242023$%20242023$%
Revenues:
Product revenue$6,259 $11,048 $(4,789)(43)%$15,810 $19,412 $(3,602)(19)%
Research and development revenue1,720 10,275 (8,555)(83)%9,242 14,893 (5,651)(38)%
Total revenues7,979 21,323 (13,344)(63)%25,052 34,305 (9,253)(27)%
Costs and operating expenses:
Cost of product revenue3,462 3,178 284 9 %8,317 7,698 619 8 %
Research and development11,413 17,334 (5,921)(34)%22,659 33,988 (11,329)(33)%
Selling, general and administrative15,671 13,365 2,306 17 %28,531 28,765 (234)(1)%
Restructuring charges— 72 (72)(100)%— 145 (145)(100)%
Asset impairment and other charges165 — 165 100 %165 — 165 100 %
Total costs and operating expenses30,711 33,949 (3,238)(10)%59,672 70,596 (10,924)(15)%
Loss from operations(22,732)(12,626)(10,106)80 %(34,620)(36,291)1,671 (5)%
Interest income972 1,121 (149)(13)%1,881 2,209 (328)(15)%
Interest and other expense, net
(985)(9)(976)10,844 %(1,500)(33)(1,467)4,445 %
Loss before income taxes(22,745)(11,514)(11,231)98 %(34,239)(34,115)(124)— %
Provision for income taxes10 9 1 11 %21 25 (4)(16)%
Net loss$(22,755)$(11,523)$(11,232)97 %$(34,260)$(34,140)$(120)— %
Revenues
Our revenues consisted of product revenue, research and development revenue, and royalties and license revenue as follows:
•Product revenue consist of sales of biocatalysts, pharmaceutical intermediates, and Codex® biocatalyst panels and kits.
•Research and development revenue include license, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and screening fees.
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Revenues are as follows (in thousands, except percentages):
Three Months Ended June 30,ChangeSix Months Ended June 30,Change
20242023$%