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CI

CODEXIS, INC. (CDXS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue was $8.60M and EPS was $-0.22, a significant miss vs S&P Global consensus ($18.52M revenue*, $-0.13 EPS*), driven by variability in customer manufacturing schedules and clinical trial progression .
  • Signed a $37.8M Supply Assurance Agreement with Merck; management expects cash in Q4 and revenue recognition split between Q4 2025 and Q1 2026, extending cash runway through 2027 .
  • Organizational actions: 24% workforce reduction (46 roles) with ~$3.5M charge in Q4; CEO transition to Alison Moore; strategic focus tightened on ECO Synthesis and ligase to reduce burn ~25% and pivot away from lower-return small molecule biocatalysis sales efforts .
  • Product gross margin improved to 64% (+300 bps YoY) on favorable mix; cash and investments ended Q3 at $58.7M (pre-Merck cash), positioning for facility lease and scaling of GMP-grade siRNA manufacturing capability .

What Went Well and What Went Wrong

What Went Well

  • Merck agreement provides a substantial non-dilutive cash infusion and near-term revenue recognition; management expects to “make or slightly exceed the top end” of 2025 revenue guidance .
  • ECO Synthesis commercial traction: 11 revenue-bearing contracts in hand and ~40 more in the pipeline; a customer used Codexis ligase in a 3 kg siRNA production run, evidencing scalability .
  • Mix-driven margin improvement: product gross margin rose to 64% versus 61% a year ago, reflecting a shift toward more profitable products and away from less profitable legacy offerings .
    Quote: “We will recognize a significant portion of the revenue from the Merck contract in the fourth quarter, with the rest recognized in the first quarter of 2026… we will make or slightly exceed the top end of our guidance range for 2025.” — CFO Georgia Erbez .

What Went Wrong

  • Material top-line miss vs consensus in Q3 as revenue fell 33% YoY, attributed to variability in customers’ manufacturing schedules and clinical trial progression .
  • Higher R&D expense due to headcount and reclassification into R&D; net loss remained large ($19.6M), and EPS missed consensus .
  • Structural headwinds in small molecule biocatalysis: pricing pressure on new enzyme contracts lowers ROI, prompting reduced sales and marketing effort in that segment .

Financial Results

Summary Results vs Prior Periods and Estimates

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$7.54 $15.33 $8.60
Revenue Consensus Mean ($USD Millions)$9.66*$14.18*$18.52*
Product Gross Margin %55% 72% 64%
Net Loss ($USD Millions)$(20.69) $(13.27) $(19.62)
EPS ($USD)$-0.25 $-0.16 $-0.22
EPS Consensus Mean ($USD)$-0.21*$-0.15*$-0.13*
Cash, Cash Equivalents & ST Investments ($USD Millions)$59.80 $66.30 $58.70

Values with asterisk are S&P Global consensus estimates (Values retrieved from S&P Global).

Highlights:

  • Q3 revenue and EPS missed consensus; Q2 revenue beat but EPS slightly missed; Q1 missed on both .

Segment Breakdown

MetricQ1 2025Q2 2025Q3 2025
Product Revenue ($USD Millions)$6.06 $7.38 $6.81
R&D Revenue ($USD Millions)$1.48 $7.95 $1.79
Total Revenues ($USD Millions)$7.54 $15.33 $8.60

KPIs (Q3 2025 Focus)

KPIQ3 2025
ECO Synthesis revenue-bearing contracts11
Pipeline opportunities~40 in pipeline
Largest reported ligase-assisted batch3 kg siRNA
Workforce reduction46 roles (~24%)
Merck Supply Assurance Agreement$37.8M signed; cash expected by year-end
Cash runwayExtended through 2027

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY 2025$64–$68M “Make or slightly exceed the top end of guidance” Raised (qualitative)
Cash RunwayMulti-yearThrough end of 2026 Through 2027 Extended
Burn Rate2026 planningn/a~25% reduction from restructuring New
Workforce Reduction ExpenseQ4 2025n/a~$3.5M one-time charge New
ECO/GMP Path2025Sign GMP scale-up partner by end of 2025 Expect facility lease in “next week or two” to enable GMP-grade siRNA kg-scale manufacturing Execution update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
ECO Synthesis commercial tractionQ1: First revenue-generating ECO contract; reiterated FY25 guidance . Q2: 30+ engagements; CDMO presentations (Bachem, Nitto Avecia, ST Pharm); pursuing early-phase lock-ins .11 revenue-bearing contracts; ~40 pipeline; 3 kg ligase batch shown; scaling emphasis .Accelerating demand and validation
Small molecule biocatalysis strategyQ2: Strong revenue but lumpy; focus on higher-margin products .Reduce sales/marketing effort due to pricing pressure; heritage business remains supply focus .Strategic deprioritization; margin preservation
Cash runway and financingQ1: $60M cash; runway to end-2026; positive cash flow by end-2026 . Q2: $27.3M capital raises; runway to 2027 .Merck $37.8M non-dilutive cash; runway through 2027 .Strengthened liquidity profile
Manufacturing scale-up (GMP path)Q1/Q2: Aim to sign GMP scale-up partner by year-end; pilot GLP-grade in 2025 .Expect lease signing imminently for in-house GMP-grade siRNA kg-scale capability .Increasing in-house execution
Regulatory/process analyticsQ2: Validations at TIDES USA .TIDES Europe to present scale data and in-process analytics; FDA interest in in-process control .Maturing regulatory engagement
Leadership and organizationQ1/Q2: Board additions; COO leading realignment .CEO transition to Alison Moore; CSO promotion; workforce reduction (24%) .Streamlining, technical leadership emphasis

Management Commentary

  • “We will recognize a significant portion of the revenue from the Merck contract in the fourth quarter, with the rest recognized in the first quarter of 2026… we will make or slightly exceed the top end of our guidance range for 2025.” — CFO Georgia Erbez .
  • “We are confident… to complete our transition to an innovative manufacturing solutions provider in the field of oligonucleotide manufacturing… Alison Moore is succeeding me as CEO.” — Stephen Dilly .
  • “Our ECO Synthesis technology is a powerful production solution… a customer has used our ligase to produce a 3 kilogram batch of siRNA.” — Alison Moore .
  • “We made the hard decision to reduce our headcount… we expect this restructuring will reduce our burn by approximately 25%… extend our runway through 2027.” — CFO Georgia Erbez .
  • “We see pricing pressure on new prospective enzyme development contracts… we have made the decision to reduce our sales and marketing efforts in this segment and refocus on ligase and ECO.” — CFO Georgia Erbez .

Q&A Highlights

  • Partnering strategy and scalability: Management emphasized optionality across three models—ISO-quality ligase scaling, supplying core enzymes/reagents with royalties, and in-house siRNA manufacturing—supported by an imminent facility lease .
  • Nitto Avecia evaluation: Seen as a top-tier CDMO partner to scale ECO technology to larger batch sizes for later-stage clinical and commercial production .
  • Revenue mix and segment impact: New ECO contracts currently flow through services, not product revenue; service revenue expected to remain consistent with shifting sources .
  • TIDES Europe content: Presenting scaling performance data and in-process analytics—areas of interest highlighted in FDA discussions—supporting commercial credibility .

Estimates Context

  • Q3 2025: Revenue $8.60M vs consensus $18.52M* (miss); EPS $-0.22 vs $-0.13* (miss) .
  • Q2 2025: Revenue $15.33M vs $14.18M* (beat); EPS $-0.16 vs $-0.15* (slight miss) .
  • Q1 2025: Revenue $7.54M vs $9.66M* (miss); EPS $-0.25 vs $-0.21* (miss) .
    Values with asterisk are S&P Global consensus estimates (Values retrieved from S&P Global).

Implications:

  • Street models likely need to reduce near-term revenue for heritage biocatalysis and services phasing, while increasing Q4/Q1’26 revenue to reflect Merck recognition and updated cash timing .

Key Takeaways for Investors

  • Near-term print was weak relative to consensus, but the Merck $37.8M agreement and runway extension to 2027 materially de-risk liquidity and support execution into GMP-scale capability — watch Q4 recognition and any additional ECO/lignase wins .
  • Strategic pivot away from lower-return small molecule sales to ECO/ligase should compress burn (~25%) and enhance margin mix; monitor service-to-product transition as platform matures .
  • Execution catalysts: TIDES Europe data on scaling and in-process analytics, facility lease for GMP-grade siRNA manufacturing, and further CDMO partnerships (e.g., Nitto Avecia) .
  • Pipeline breadth (11 contracts; ~40 opportunities) and demonstrable 3 kg batch evidence support a scaling narrative; keep an eye on conversion of early-phase ECO projects into GLP/GMP supply agreements .
  • Organizational changes (CEO transition; 24% workforce reduction) align leadership and resources to technical/manufacturing scale-up — assess any near-term disruption vs. long-term efficiency gains .
  • Model considerations: Shift revenue from heritage biocatalysis services to ECO services in FY26; incorporate Q4/Q1’26 Merck revenue, lower opex run-rate, and improved product gross margin trajectory .
  • Trading setup: Q4 print and Merck revenue recognition are key near-term catalysts; any confirmation of facility lease/GMP timeline and additional CDMO or originator contracts could improve sentiment despite Q3 miss .