What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-01 · 435 added, 677 removed, 448 unchanged (71% of the section changed)

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The following is a summary of the principal factors that cause an investment in the company to be speculative or risky:

• The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

• During our operating history, the markets in which we have participated have changed significantly, which may make it difficult to evaluate our current business and predict our future performance.

• Our quarterly or annual operating results may fluctuate in the future.

As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

• A significant portion of revenue growth in 2021 is as a result of the receipt of purchase orders from Pfizer for CDX-616.

Revenues in 2022 and in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

• We do not have a long term sale and purchase agreement with Pfizer for CDX-616 and we currently expect that future orders for quantities of CDX-616 by Pfizer will continue to be based on the needs of Pfizer for quantities of CDX-616.

• We have a history of net losses and we may not achieve or maintain profitability.

• We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products and achieving or sustaining profitability, and could lead to disagreements with our current or former collaborators.

• We are dependent on a limited number of customers.

• Our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

• With respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

• We are dependent on a limited number of products in our biocatalysts business.

• We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes.

• If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and life science tools markets, our business and prospects will be harmed.

• We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products.

• We are dependent on a limited number of customers, including Pfizer.

• The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

• Our product supply agreements with customers have finite duration and may not be extended or renewed.

• With respect to customers purchasing our products for the manufacture of API, the termination or expiration of such patent protection may materially and adversely affect our revenues, financial condition or results of operations.

• We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes, including CDX-616.

• If we are unable to develop and commercialize new products for the target markets, our business and prospects will be harmed.

• Our biotherapeutic programs are early stage, highly regulated and expensive.

Our ability to obtain additional development partners for the programs, to advance our product candidates to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

• If either Nestlé Health Science or Takeda terminate their development programs under their respective license agreements with us, any potential revenue from those license agreements will be significantly reduced or non-existent, and our results of operations and financial condition will be materially and adversely affected.

• Our business could be adversely affected if our customers’ products are not received well in the market, if their products, or the processes used by our customers to manufacture their final products, fail to be approved, or if our customers discontinue their development activities for any reason.

• We or our customers may not be able to obtain regulatory approval for the use of our products in food and food ingredients, if required, and, even if approvals are obtained, complying on an ongoing basis with the numerous regulatory requirements applicable to these products will be time-consuming and costly.

• Our efforts to deploy our technology in the life science tools markets may fail.

• The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

• Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome, and the inability to successfully conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.

• Our efforts to deploy our technology platform in the fine chemicals market may fail.

• We may need additional capital in the future in order to expand our business.

• We have investments in non-marketable securities, which may subject us to significant impairment charges.

• Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete.

• Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our products, processes, and technologies and limit our revenues.

• If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

• We use hazardous materials in our business and we must comply with environmental laws and regulations.

• Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

• We or our customers may not be able to obtain regulatory approval for the use of our products in food and food ingredients, if required.

• Our ongoing efforts to deploy our technology in the life science tools market may fail.

• The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and we may be unable to obtain regulatory approval for our product candidates.

• Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome.

• Results of preclinical studies and early clinical trials of product candidates may not be predictive of results of later studies or trials.

Our product candidates may not have favorable results in later clinical trials, if any, or receive regulatory approval.

• If any of our product candidates do not work as intended or cause undesirable side effects, it could hinder or prevent receipt of regulatory approval or realization of commercial potential for them or our other product candidates and could substantially harm our business.

• Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

• Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements.

• Our business operations and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

• The successful commercialization of product candidates developed by us or our partners will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies.

• Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.

• We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies, which if not satisfactorily carried out or fail to meet expected deadlines, may have an adverse effect on our business and prospects.

• We contract with third parties for the manufacturing and supply of product candidates, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

• Our efforts to prosecute and protect our intellectual property may not be successful.

• Our ability to compete may decline if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights.

• Third parties may claim that we are infringing their intellectual property rights or other proprietary rights, which may subject us to costly and time-consuming litigation and prevent us from developing or commercializing our products.

• Third parties may claim that we are infringing their intellectual property rights or other proprietary rights, which may subject us to costly and time-consuming litigation.

• We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.

• We may not be able to enforce our intellectual property rights throughout the world.

• If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

• If our biocatalysts are stolen, misappropriated or reverse engineered, others could use these biocatalysts to produce competing products.

• We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company.

• Our quarterly or annual operating results may fluctuate in the future.

• We do not intend to pay cash dividends for the foreseeable future.

• If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

• We face risks associated with our international business.

• Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales.

• Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.

• We may need additional capital in the future in order to expand our business.

• If we are unable to maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

• We are dependent on information technology systems, infrastructure and data, and any failure of these systems could harm our business.

Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business, results of operations and financial condition.

• Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense.

• Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales.

Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster or other disturbance.

• Epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

• Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

• Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

• Evolving expectations around ESG matters may expose us to reputational and other risks.

Risks Relating to Our Business and Strategy

The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

In the United States, the COVID-19 pandemic has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition, including as a result of compliance with governmental orders governing the operation of businesses during the pandemic, the temporary closure of our Redwood City, California facilities and disruption of our research and development operations.

We believe that these disruptions have had a negative impact on revenue for the twelve months ended December 31, 2020, although we are unable to fully determine and quantify the extent to which this pandemic has affected the amount and timing of our total revenues.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, including the ongoing COVID-19 pandemic.

National, state and local governments in affected regions have implemented and may continue to implement safety

precautions, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures.

Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

The potential impact and duration of COVID-19 or another pandemic or public health crisis has had and could continue to have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.

The outbreak of COVID-19 in many countries continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets.

As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.

In addition, our customers may terminate or amend their agreements for the purchase of our products or services due to bankruptcy, lack of liquidity, lack of funding, operational failures, or other reasons.

We continue to monitor our operations and applicable government recommendations, and we have made modifications to our normal operations because of the COVID-19 pandemic, including requiring most office-based employees to work remotely.

Notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties we rely on taking similar measures.

If members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted.

We may also experience limitations in employee resources, including because of sickness of employees or their families or the desire of employees to avoid contact with individuals or large groups of people.

In addition, we have experienced and will continue to experience disruptions to our business operations resulting from quarantines, self-isolations and other restrictions on the ability of our employees to perform their jobs.

The COVID-19 pandemic has disrupted, and may continue to disrupt, our business operations.

The extent and severity of the impact on our business and clinical trials will be determined largely by the extent of disruptions in the supply chains for our products and product candidates;

disruptions in access by patients to therapies for which our products are components of the supply chain;

delays in the performance of R&D service work, and delays in current and future clinical trials that we or our collaboration partners may conduct.

In addition, the impact of the COVID-19 pandemic on the operations of the FDA and other health authorities may delay potential approvals of product candidates for which our products are components of the supply chain.

While it is not possible at this time to estimate the entirety of the impact that the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or our collaboration partners, continued spread of COVID-19, measures taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, results of operations and financial condition.

During our operating history, the markets in which we have participated have changed significantly, which may make it difficult to evaluate our current business and predict our future performance.

Our company has been in existence since January 2002.

From 2002 until 2005, our operations focused on organizing and staffing our company and developing our technology platform.

In 2005, we recognized our first revenues from product sales.

From 2006 to August 2012, a major portion of our business revolved around our research and development collaboration with Shell with respect to advanced biofuels.

The Shell collaboration was terminated in August 2012 and did not contribute to our revenues after the termination.

As a result of the termination of the Shell collaboration, we undertook a significant restructuring of our operations and refocused our business on the biocatalysis market.

In November 2013, we announced that we had begun to wind down our CodeXyme ® cellulase enzymes program, and that we had stopped further development of our CodeXol ® detergent alcohols program in the third quarter of 2013.

Our Novel Biotherapeutics business is relatively new to Codexis.

As a result of these changes in our business and any changes to our business focus that we may make as we move forward, our operating history in past periods may not provide a basis to evaluate our current business or be indicative of our future performance.

We have encountered and will continue to encounter risks and difficulties frequently experienced by young companies in rapidly changing industries.

If we do not address these risks successfully, our business will be harmed.

Our quarterly or annual operating results may fluctuate in the future.

As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

Our financial condition and operating results have varied significantly in the past and may continue to fluctuate from quarter to quarter and year to year in the future due to a variety of factors, many of which are beyond our control.

Factors relating to our

business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report:

• our ability to achieve or maintain profitability;

• our relationships with, and dependence on, collaborators in our principal markets;

• our dependence on a limited number of customers;

• our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

• with respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations;

• our dependence on a limited number of products in our biocatalysis business;

• our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products;

• our ability to develop and successfully commercialize new products for the biocatalysis market(s);

• our ability to obtain additional development partners for our biotherapeutic programs;

• potential of Nestlé Health Science or Takeda terminating any development program under their license agreements with us;

• our ability to deploy our technology platform in the fine chemicals market;

• the success of our customers’ pharmaceutical products in the market and the ability of such customers to obtain regulatory approvals for products and processes;

• our or our customers’ ability to obtain regulatory approval for the sale and manufacturing of food products using our enzymes;

• our ability to deploy our technology platform in life science tools markets;

• our ability to successfully achieve domestic and foreign regulatory approval for product candidates;

• our ability to successfully design and execute clinical testing at a reasonable cost and on an acceptable time-frame;

• our dependence on product candidates which could unexpectedly fail at any stage of preclinical or clinical development;

• our dependence on product candidates which may lack the ability to work as intended or cause undesirable side effects;

• our dependency on third parties to conduct clinical trials, research, and preclinical studies;

• our ability to successfully prosecute and protect our intellectual property;

• our ability to compete if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights;

• our ability to avoid infringing the intellectual property rights of third parties;

• our involvement in lawsuits to protect or enforce our patents or other intellectual property rights;

• our ability to enforce our intellectual property rights throughout the world;

• our dependence on, and the need to attract and retain, key management and other personnel;

• our ability to prevent the theft or misappropriation of our biocatalysts, the genes that code for our biocatalysts, know-how or technologies;

• our ability to protect our trade secrets and other proprietary information from disclosure by employees and others;

• our ability to obtain substantial additional capital that may be necessary to expand our business;

• our ability to comply with the terms of our credit facility;

• our ability to timely pay debt service obligations;

• our customers’ ability to pay amounts owed to us in a timely manner;

• our ability to avoid charges to earnings as a result of any impairment of goodwill, intangible assets or other long-lived assets;

• changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations;

• our ability to maintain effective internal control over financial reporting;

• our dependency on information technology systems, infrastructure and data;

• our ability to control and to improve product gross margins;

• our ability to protect against risks associated with the international aspects of our business;

• the cost of compliance with European Union chemical regulations;

• potential advantages that our competitors and potential competitors may have in securing funding or developing products;

• our ability to accurately report our financial results in a timely manner;

• results of regulatory tax examinations;

• business interruptions due to natural disasters, disease outbreaks or other events beyond our control;

• public concerns about the ethical, legal and social ramifications of genetically engineered products and processes;

• our ability to integrate our current business with any businesses that we may acquire in the future;

• our ability to properly handle and dispose of hazardous materials in our business;

• potential product liability claims;

• changes to tax law and related regulations could materially affect our tax obligations and effective tax rate;

• our ability to use our net operating loss carryforwards to offset future taxable income.

Due to the various factors mentioned above, and others, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance.

A significant portion of our revenue growth in 2021 is as a result of the receipt of purchase orders from Pfizer for a proprietary enzyme product ("CDX-616") used by Pfizer in the manufacture of its active pharmaceutical ingredient nirmatrelvir for its COVID-19 antiviral therapeutic, PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets).

Revenues in 2022 and in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

Starting the first and second quarters of 2021, we began to receive purchase orders from Pfizer, Inc.

(“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir.

Pfizer markets, sells and distributes nirmatrelvir, in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product, which received emergency use authorization (“EUA”) by the U.S.

Food and Drug Administration (“FDA”) in late 2021 for the treatment of COVID-19 infections in humans.

In 2021, we recognized $34.5 million in revenue from the sale of quantities of CDX-616 to Pfizer.

In addition, as of December 31, 2021, we have received additional purchase orders from Pfizer for delivery of a significant quantity of CDX-616 in 2022.

We have received and currently expect to receive additional purchase orders from Pfizer for significant quantities of CDX-616 during the course of 2022 for delivery in 2022 and 2023.

Revenues in 2022 and in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-616, and therefore materially and adversely affect our business, results of operations and financial condition:

• Pfizer has no future binding commitment to purchase any particular quantity or quantities of CDX-616 from us, and we are dependent upon Pfizer continuing to place orders with us (whether on a spot basis or under a long term agreement, when and if executed) for their requirements, if any, for CDX-616;

• to our knowledge, sublicensees of Pfizer technology from The Medicines Patent Pool (MPP) have no obligation to purchase CDX-616 from us under their sublicenses with MPP;

• the EUA granted by the FDA for the use of PAXLOVID™ for the treatment of COVID-19 infections in humans could be withdrawn at any time;

• future vaccine development and usage and the development and usage of other new therapies for the treatment or elimination of COVID-19 may eliminate or reduce demand for PAXLOVID™;

• new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating;

• Pfizer may not ultimately receive full marketing authorization for PAXLOVID™ from the FDA and other international regulatory authorities;

• Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture;

• sublicensees of Pfizer technology for the manufacture, sale and distribution of PAXLOVID™ from the MPP may not utilize CDX-616 in the manufacture of nirmatrelvir;

• national and regional governmental authorities (including those of the United States government) may mandate that raw materials and intermediates used in the manufacture of PAXLOVID™ to be marketed, sold and distributed within the borders of that country be domestically produced, which could eliminate or reduce demand for the use of CDX-616 in such country;

• we may be unable (because of lack of available manufacturing capacity at our contract manufacturers, supply chain disruptions or an inability to obtain applicable regulatory approvals) to manufacture the quantities of CDX-616 that Pfizer may desire to purchase from us.

We do not have a long term sale and purchase agreement with Pfizer for CDX-616.

\Whether or not a long term-purchase and sale agreement is executed, we currently expect that future orders for quantities of CDX-616 by Pfizer will continue to be based on the needs of Pfizer for quantities of CDX-616 and there will be no minimum purchase obligation on the part of Pfizer.

If Pfizer ceases to issue or delays the issuance of orders for CDX-616, our results of operations and financial condition will be materially and adversely affected.

As of December 31, 2021, we have not yet executed a long term sale and purchase agreement with Pfizer for CDX-616.

All of the orders for CDX-616 that we have received from Pfizer to date have been in the form of purchase orders for individual deliveries of quantities of CDX-616 at mutually agreed upon pricing.

Whether or not a long term purchase and sale agreement is executed, we currently expect that future orders for quantities of CDX-616 by Pfizer will continue to be based on the then current needs of Pfizer for quantities of CDX-616 and there will be no minimum purchase obligation on the part of Pfizer.

If Pfizer's demand for CDX-616 declines or is eliminated, and Pfizer ceases to issue or delays the issuance of orders for CDX-616, our results of operations and financial condition will be materially and adversely affected.

We have a history of net losses and we may not achieve or maintain profitability.

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As of December 31, 2021 and 2020, we had an accumulated deficit of $387.7 million and $366.4 million, respectively.

If we are unable to expand our biocatalysis business, through new or expanded collaborations, development of new products or services, or increased sales of existing products and services, our net losses may increase and we may never achieve profitability.

In addition, some of our collaboration agreements, including our collaboration with Nestlé Health Science and Takeda, provide for milestone payments and/or future royalty payments, which we will only receive if we and our collaborators develop and commercialize products.

We also may fund development of additional proprietary biocatalysis and/or biotherapeutic products.

If we are unable to expand our business, through new or expanded col laborations, development of new products or services, or increased sales of existing products and services, our net losses may increase and we may never achieve profitability.

In addition, some of our collaboration agreements, including our collaboration with Nestlé Health Science and Takeda, and our performance enzyme agreements, including the agreements with GSK, Merck and Novartis, provide for milestone payments, usage payments, and/or future royalty payments, which we will only receive if we and our collaborators develop and commercialize products.

We also may fund development of additional proprietary performance enzymes and/or biotherapeutic products.

There can be no assurance that any of these products will become commercially viable or that we will ever achieve profitability on a quarterly or annual basis.

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We currently have license agreements, research and development agreements, supply agreements and/or distribution agreements with various collaborators.

For example, we have ongoing collaborations with GSK, Merck, Novartis, Nestlé Health Science and Takeda that are important to our business and financial results.

For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis, Nestlé Health Science and Takeda that are important to our business and financial results.

We may have limited or no control over the amount or timing of resources that any collaborator is able or willing to devote to our partnered products or collaborative efforts.

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Further, our collaborators may not develop products arising out of our collaborative arrangements or devote sufficient resources to the development, manufacture, marketing or sale of these products.

Moreover, disagreements with a collaborator could develop, and any conflict with a collaborator could lead to litigation and could reduce our ability to enter into future collaboration agreements and negatively impact our relationships

with one or more existing collaborators.

If any of these events occur, especially if they occur in our collaborations with GSK, Merck, Novartis, Nestlé Health Science or Takeda, or if we fail to maintain our agreements with our collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation.

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Finally, our business could be negatively affected if any of our collaborators or suppliers undergoes a change of control or were to otherwise assign the rights or obligations under any of our agreements.

We are dependent on a limited number of customers.

We are dependent on a limited number of customers, including Pfizer.

Our current revenues are derived from a limited number of key customers.

For the years ended December 31, 2021 and 2020, customers that each individually contributed 10% or more of our total revenue accounted for 44% and 56% of our total revenues in 2021 and 2020, respectively.

In particular, in 2021 Pfizer accounted for $34.5 million, or approximately 33%, of our total revenue.

We expect a limited number of customers to continue to account for a significant portion of our revenues for the foreseeable future.

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The loss or reduction of business from one or a combination of our significant customers could, materially adversely affect our revenues, financial condition and results of operations.

The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic has had, and continues to have, a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

In the United States, the COVID-19 pandemic has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition, including as a result of compliance with governmental orders governing the operation of businesses during the pandemic, the temporary closure of our Redwood City, California facilities from mid-March 2020 through the end of April 2020 and disruption of our research and development operations.

The extent and severity of the impact on our business and clinical trials will be determined largely by the extent of disruptions in the supply chains for our products and product candidates;

disruptions in access by patients to therapies for which our products are components of the supply chain;

delays in the performance of research and development ("R&D") service work, and delays in current and future clinical trials that we or our collaboration partners may conduct.

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide, however there can be no guarantee this will continue.

Furthermore, our ability to provide future R&D services will continue to be impacted as a result of governmental orders and any disruptions in operations of our customers with whom we collaborate.

We believe that these disruptions have had a minimal impact on our revenue for the year ended December 31, 2021.

The extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are uncertain and cannot be predicted with confidence.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, including the ongoing COVID-19 pandemic.

National, state and local governments in affected regions have implemented and may continue to implement safety precautions, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public

gatherings and other measures.

Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.

Notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties we rely on taking similar measures.

While it is not possible at this time to estimate the entirety of the impact that the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or our collaboration partners, the continued spread of COVID-19 and the prevalence of more contagious and or virulent variants such as the Delta and Omicron variants, measures taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, results of operations and financial condition.

Our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

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For the year ended December 31, 2021, we derived a majority of our product revenue from these product supply agreements.

With respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

With respect to customers purchasing our products for the manufacture of API for which exclusivity due to patent protection has or is about to expire, we can expect that the quantity of our products sold to such customers for such products may decline as generic competition for the API increases.

While we anticipate that we may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, the overall effect on our revenues, financial condition and results of operations could be materially adverse.

We are dependent on a limited number of products in our biocatalysts business.

Our current product sales are derived from a limited number of biocatalyst products.

We expect a limited number of biocatalyst products to continue to account for a significant portion of our product sales for the foreseeable future.

This product concentration increases the risk of quarterly fluctuations in our revenues and operating results.

The loss or reduction of business of one or a combination of our significant products could materially adversely affect our revenues, financial condition and results of operations.

We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes.

Manufacturing of our enzymes is conducted primarily in three locations:

our in-house facility in Redwood City, California, and at two third-party contract manufacturing organizations, Lactosan GmbH & Co.

KG (“Lactosan”), in Kapfenberg, Austria, and DPhar S.p.A.

(“DPhar”), in Anagni, Italy.

With respect to customers purchasing our products for the manufacture of active pharmaceutical ingredients ("API") for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

With respect to customers purchasing our products for the manufacture of API, or lead to the manufacture of API, for which exclusivity due to patent protection has or is about to expire, we can expect that the quantity of our products sold to such customers for such products may decline as generic competition for the API increases.

While we anticipate that we may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, or lead to

the manufacture of these APIs, the overall effect on our revenues, financial condition and results of operations could be materially adverse.

We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes, including CDX-616.

We are working to qualify new contract manufacturers to produce certain of our enzymes, including CDX-616, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.

Manufacturing of our enzymes is conducted primarily in four locations:

our in-house facility in Redwood City, California, and at three third-party contract manufacturing organizations, Lactosan GmbH & Co.

KG (“Lactosan”), in Kapfenberg, Austria, ACS Dobfar S.p.A.

(“ACSD”) (formerly known as DPhar S.p.A.), in Anagni, Italy, and Alphazyme LLC in Florida, United States.

Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing to these contract manufacturers.

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Accordingly, we face risks of difficulties with, and interruptions in, performance by third party manufacturers, the occurrence of which could adversely impact the availability, launch and/or sales of our enzymes in the future.

Manufacturing delays at a contract manufacturer could negatively affect our business, reputation, results of operations and financial condition.

The failure of any contract manufacturer to supply us enzymes on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and fine and complex chemicals products, could harm our relationships with our collaborators or customers and could negatively affect our revenues and operating results.

Enzyme manufacturing capacity limitations at our third party manufacturers and manufacturing delays could negatively affect our business, reputation, results of operations and financial condition.

The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and fine and complex chemicals products, could harm our relationships with our collaborators or customers and could negatively affect our revenues and operating results.

We may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, and could cause delays in our ability to deliver products to our customers, increase our costs and decrease our profit margins.

We currently have supply agreements in place with Lactosan and DPhar.

We currently have supply agreements in place with Lactosan, ACSD, and Alphazyme.

In the absence of a supply agreement, a contract manufacturer will be under no obligation to manufacture our enzymes and could elect to discontinue their manufacture at any time.

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In addition, if we contract with other manufacturers, we may experience delays of several months in qualifying them, which could harm our relationships with our collaborators or customers and could negatively affect our revenues or operating results.

If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and other life science tools markets, our business and prospects will be harmed.

If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and life science tools markets, our business and prospects will be harmed.

We plan to launch new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and other life science tools markets.

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Our biotherapeutic programs are early stage, highly regulated and expensive.

Our ability to obtain additional development partners for the programs, to advance our product candidates to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

Our ability to obtain additional development partners or additional funding for the programs, to advance our product candidates to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

We are developing and have developed novel biotherapeutic candidates, including CDX-6114, the novel oral enzyme product candidate for the treatment of PKU that we licensed to Nestlé Health Science.

We are also developing protein sequences for use in gene therapy products for Fabry Disease, Pompe Disease, and an undisclosed blood factor for Takeda.

We are also developing protein sequences for use in gene therapy products for Fabry Disease, Pompe Disease, an undisclosed blood factor deficiency and a certain undisclosed rare genetic disorder for Takeda.

The successful development of biotherapeutic candidates involves many risks and uncertainties, requires long timelines and may lead to uncertain results.

In addition, drug development is highly regulated and requires areas of expertise and capital resources we do not currently possess.

In order to market a biologic product in the United States, we must undergo the following process required by the FDA:

In order to market a biologic product in the United States, we or our collaborators must undergo the following process required by the FDA:

• completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with GLP requirements;

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• approval by an independent IRB representing each clinical site before the clinical study may be initiated at the site;

• performance of adequate and well-controlled human clinical studies (generally divided into three phases) in accordance with GCP requirements to establish the safety and efficacy of the product candidate for each proposed indication;

• performance of adequate and well-controlled human clinical studies (generally divided into three phases) in accordance with GCP requirements to establish the safety, purity and potency (or efficacy) of the product candidate for each proposed indication;

• preparation of and submission to the FDA of a BLA after completion of all clinical studies;

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To obtain regulatory approval to market any product candidate, preclinical studies and costly and lengthy clinical trials are required, and the results of the studies and trials are highly uncertain.

A failure of one or more pre-clinical or clinical trials can occur at any stage,

and many companies that have believed their drug candidates performed satisfactorily in pre-clinical and clinical testing have nonetheless failed to obtain marketing approval of their product candidates.

A failure of one or more preclinical or clinical trials can occur at any stage, and many companies that have believed their drug candidates performed satisfactorily in preclinical and clinical testing have nonetheless failed to obtain marketing approval of their product candidates.

• We may find it difficult to enroll patients in our clinical trials for product candidates.

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• We have limited experience in drug development or regulatory matters related to drug development.

As a result, we rely or will rely on third parties to conduct our pre-clinical and clinical studies, assist us with drug manufacturing and formulation and perform other tasks for us.

As a result, we rely or will rely on third parties to conduct our preclinical and clinical studies, assist us with drug manufacturing and formulation and perform other tasks for us.

If these third parties do not successfully carry out their responsibilities or comply with regulatory requirements, we may receive lower quality products or services, suffer reputational harm and not be able to obtain regulatory approval for product candidates.

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We have invested significant time and financial resources in the development of CDX-6114 and other product candidates for the treatment of HPA now included in the Nestlé License Agreement as well as in the development of candidates for the treatment of Fabry disease and Pompe disease which are now included in the Takeda Agreement.

Under the Nestlé License Agreement, we are eligible to receive from Nestlé Health Science development and approval milestones of up to $85.0 million, sales-based milestones of up to $250.0 million, and tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of products containing a licensed Compound as its sole active ingredient.

Under the Takeda Agreement, we are eligible to earn up to $15.4 million of research and development fees and pre-clinical milestone payments from Takeda for the Initial Programs.

We are eligible to receive certain development and commercialization milestone payments up to $100.0 million per target gene, the modulation of which would lead to the treatment of the disease indications by the applicable Product.

We are also eligible to receive tiered royalties based on net sales of Products at percentages ranging from the middle-single digits to low single-digits.

Under the Nestlé License Agreement, we are eligible to receive payments from Nestlé Health Science that include (i) development and approval milestones of up to $85.0 million, (ii) sales-based milestones of up to $250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the mid-single digits to low double-digits, of net sales of product.

Under the Takeda Agreement, we are eligible to earn potential payments that include (i) reimbursement of research and development fees and preclinical development milestone payments for the three initial programs of $10.5 million, in aggregate, and $8.3 million for the fourth program, (ii) clinical development and commercialization-based milestone, per target gene, of up to $100.0 million, and (iii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits.

While we have received milestone payments under the Nestlé License Agreement to date there is no guarantee that we will receive further milestone payments under the Nestlé Agreement or Takeda Agreement in the future.

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The failure to successfully deploy products in the fine chemicals space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.

Our business could be adversely affected if our customers’ products are not received well in the market, if their products, or the processes used by our customers to manufacture their final products, fail to be approved, or if our customers discontinue their development activities for any reason.

Our enzymes are used by our pharmaceutical customers in the manufacture of intermediates and APIs which are then used in the manufacture of final pharmaceutical products by our existing and potential branded and generic drug customers, and by our fine chemicals customers to manufacture food ingredients.

Our business could be adversely affected if these final products do not perform in the market as well as expected, or if our customers encounter competition from new entrants into the market with competing, and possibly superior, products.

Additionally, many of these pharmaceutical and food products must be reviewed and approved by the FDA in the United States and similar regulatory bodies in other markets prior to commercialization.

If our customers who sell branded drugs, which we refer to as innovators, fail to receive regulatory approval for the drugs, fail to receive regulatory approval for new manufacturing processes for previously approved drugs, or decide for business or other reasons to discontinue their drug development activities, our revenues and prospects will be negatively impacted.

The process of producing these drugs, and their generic equivalents, is also subject to regulation by the FDA in the United States and equivalent regulatory bodies in other markets.

Similarly, if our food ingredient product and other fine chemical customers were to delay or discontinue development on their products, our revenues and prospects will be negatively impacted.

If any pharmaceutical or food manufacturing process that uses our enzymes or enzyme technology does not receive required approval by the appropriate regulatory body or if customers decide not to pursue approval, our business could be adversely affected.

We may need additional capital in the future in order to expand our business.

Our future capital requirements may be substantial, particularly as we continue to develop our business.

Although we believe that, based on our current level of operations, our existing cash, cash equivalents and equity securities will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months, we may need additional capital if our current plans and assumptions change.

Our need for additional capital will depend on many factors, including the financial success of our performance enzyme business, our spending to develop and commercialize new and existing products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including opportunities in the fine chemicals markets, and the filing, prosecution, enforcement and defense of patent claims.

If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

We may seek to obtain such additional capital through equity offerings, debt financings, credit facilities and/or strategic collaborations.

If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.

If we raise debt financing or enter into credit facilities, we may be subject to restrictive covenants that limit our ability to conduct our business.

Strategic collaborations may also place restrictions on our business.

We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.

If we fail to raise sufficient funds and fail to generate sufficient revenues to achieve planned gross margins and to control operating costs, our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly limited.

If this happens, we may be forced to delay or terminate research or development programs or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us.

If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

We have investments in non-marketable securities, which may subject us to significant impairment charges.

We have investments in illiquid non-marketable equity securities acquired in private transactions.

At December 31, 2021, 5.7% of our consolidated assets consisted of investment securities, which are illiquid investments.

Investments in illiquid, or non-marketable, securities are inherently risky and difficult to value.

We account for our non-marketable equity securities under the measurement alternative.

Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment.

We evaluate our investment in non-marketable securities when circumstances indicate that we may not be able to recover the carrying value.

We may impair these securities and establish an allowance for a credit loss when

we determine that there has been an “other-than-temporary” decline in estimated fair value of the equity security compared to its carrying value.

The impairment analysis requires significant judgment to identify events or circumstances that would likely have a material adverse effect on the fair value of the investment.

Because over 5% of our total assets consisted of non-marketable investment securities, any future impairment charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.

Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense.

The biocatalysis industry and each of our target markets are characterized by rapid technological change.

Our future success will depend on our ability to maintain a competitive position with respect to technological advances.

In addition, as we enter new markets, we will face new competition and will need to adapt to competitive factors that may be different from those we face today.

We are aware that other companies, including Royal DSM, N.V.

(“DSM”), BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.

Academic institutions such as the California Institute of Technology, the Max Planck Institute and the Austrian Centre of Industrial Biotechnology are also working in this field.

Technological development by others may result in our products and technologies, as well as products developed by our customers using our biocatalysts, becoming obsolete.

Our primary competitors in the performance enzymes for pharmaceutical products are companies marketing either conventional, non-enzymatic processes or biocatalytic enzymes to manufacturers of pharmaceutical intermediates and APIs, and also existing in-house technologies (both biocatalysts and conventional catalysts) within our client and potential client companies.

The principal methods of competition and competitive differentiation in this market are price, product quality and performance, including manufacturing yield, safety and environmental benefits, and speed of delivery of product.

Pharmaceutical manufacturers that use biocatalytic processes can face increased competition from manufacturers that use more conventional processes and/or manufacturers that are based in regions (such as India and China) with lower regulatory, safety and environmental costs.

The market for the manufacture and supply of APIs and intermediates is large with many established companies.

These companies include many of our large innovator and generic pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers, Kyorin, Urovant and Teva which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates.

The processes used by these companies include classical conventional organic chemistry reactions, chemo catalytic reactions, biocatalytic reactions or combinations thereof.

Our biocatalytic based manufacturing processes must compete with these internally developed routes.

Additionally, we also face competition from companies developing and marketing conventional catalysts such as Solvias Inc., BASF and Takasago International Corporation.

The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented.

There is competition from large industrial enzyme companies, such as Novozymes, and Dupont, as well as subsidiaries of larger contract research/contract manufacturing organizations (“CRO/CMO”), such as DSM, Cambrex Corporation, Lonza, WuXi STA, and Almac Group Ltd.

Some fermentation pathway design companies, like Ginkgo Bioworks and Zymergen, whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into designing organisms that express enzymes.

There is also competition in the enzyme customization and optimization area from several smaller companies, such as BRAIN AG, Arzeda, c-LEcta GmbH and Evocatal GmbH.

We entered the fine chemicals market in 2013, by applying our protein engineering technology in the food market.

We face similar forms of competition in this market as in the pharmaceutical markets with the exception that the risk of losing opportunities to larger competitors in fine chemicals is greater given the larger scale of opportunities available in the fine chemicals market compared to the pharmaceutical market.

Our significant competitors in the fine chemicals markets include companies that have been in these marketplaces for many years, such as DuPont Industrial Biosciences (DuPont Genencor), DSM, Novozymes and A.B.

These companies have greater resources in these markets than we do and have long-term supply arrangements already in place with customers.

Our ability to compete in these markets may be limited by our relatively late entrance.

We also face competition in both the fine chemicals and pharmaceutical markets from emerging companies offering whole cell metabolic pathway approaches to these markets.

There are numerous companies that participate in the biotherapeutics market generally and the PKU market specifically.

Many of these companies are large, successful and well-capitalized.

BioMarin Pharmaceutical Inc.

(“BioMarin”) and Daiichi Sankyo Company market Kuvan ® in the United States, Europe and Japan for the treatment of a certain type of PKU.

In addition, BioMarin gained US FDA approval in 2018 and began commercial sales of Palynziq TM as

an injectable enzyme substitution therapy for the potential treatment of PKU.

Several companies, i.e., Synlogic, Homology Medicines, and Rubius have reported clinical efforts to develop biotherapeutic candidates for PKU.

Beyond targeting PKU, Takeda (who recently acquired Shire Plc), Genzyme / Sanofi S.A., BioMarin, and other companies market or are actively developing new enzyme therapeutics.

There are numerous companies that are developing other forms of therapeutics, such as small molecules, gene therapies, as well as therapies based on gene editing, which could compete with biotherapeutics.

Our ability to compete successfully in any of these markets will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to and/or are less expensive than other products on the market.

Many of our competitors have substantially greater production, financial, research and development, personnel and marketing resources than we do.

They also started developing products earlier than we did, which may allow them to establish blocking intellectual property positions or bring products to market before we can.

In addition, certain of our competitors may also benefit from local government subsidies and other incentives that are not available to us.

As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could.

Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors.

We cannot be certain that any products we develop in the future will compare favorably to products offered by our competitors or that our existing or future products will compare favorably to any new products that are developed by our competitors.

As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, which could lead to litigation.

Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures.

This failure could reduce our competitiveness and market share, adversely affect our results of operations and financial position, and prevent us from obtaining or maintaining profitability.

Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our products, processes, and technologies and limit our revenues.

Some of our products and processes are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies.

If we and/or our collaborators are not able to overcome the ethical, legal, and social concerns relating to genetic engineering, our products and processes may not be accepted.

Any of the risks discussed below could result in increased expenses, delays, or other impediments to our programs or the public acceptance and commercialization of products and processes dependent on our technologies or inventions.

Our ability to develop and commercialize one or more of our technologies, products, or processes could be limited by the following factors:

• public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could influence public acceptance of our technologies, products and processes;

• public attitudes regarding, and potential changes to laws governing ownership of genetic material, which could harm our intellectual property rights with respect to our genetic material and discourage collaborators from supporting, developing, or commercializing our products, processes and technologies;

• governmental reaction to negative publicity concerning genetically modified organisms, which could result in greater government regulation of genetic research and derivative products.

The subject of genetically modified organisms has received negative publicity, which has aroused public debate.

This adverse publicity could lead to greater regulation and trade restrictions on imports of genetically altered products.

The biocatalysts that we develop have significantly enhanced characteristics compared to those found in naturally occurring enzymes or microbes.

While we produce our biocatalysts only for use in a controlled industrial environment, the release of such biocatalysts into uncontrolled environments could have unintended consequences.

Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, and we may have exposure to liability for any resulting harm.

If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

We have made acquisitions in the past, and if appropriate opportunities become available, we expect to acquire additional businesses, assets, technologies, or products to enhance our business in the future.

For example, in October 2010, we acquired substantially all of the patents and other intellectual property rights associated with Maxygen’s directed evolution technology.

In connection with any future acquisitions, we could:

• issue additional equity securities, which would dilute our current stockholders;

• incur substantial debt to fund the acquisitions;

• use our cash to fund the acquisitions;

• assume significant liabilities including litigation risk.

Acquisitions involve numerous risks, including problems integrating the purchased operations, technologies or products, unanticipated costs and other liabilities, diversion of management’s attention from our core businesses, adverse effects on existing business relationships with current and/or prospective collaborators, customers and/or suppliers, risks associated with entering markets in which we have no or limited prior experience and potential loss of key employees.

We do not have extensive experience in managing the integration process and we may not be able to successfully integrate any businesses, assets, products, technologies, or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all.

The integration process could divert management’s time from focusing on operating our business, result in a decline in employee morale and cause retention issues to arise from changes in compensation, reporting relationships, future prospects or the direction of the business.

Acquisitions may also require us to record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write offs and restructuring and other related expenses, all of which could harm our operating results and financial condition.

In addition, we may acquire companies that have insufficient internal financial controls, which could impair our ability to integrate the acquired company and adversely impact our financial reporting.

If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization, our business and financial condition may be adversely affected.

We use hazardous materials in our business and we must comply with environmental laws and regulations.

Any claims relating to improper handling, storage or disposal of these materials or noncompliance of applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.

Our research and development and commercial processes involve the use of hazardous materials, including chemical, radioactive, and biological materials.

Our operations also produce hazardous waste.

We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials.

Federal, state, local and foreign laws and regulations govern the use, manufacture, storage, handling and disposal of, and human exposure to, these materials.

We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets.

Although we believe that our activities comply in all material respects with environmental laws, there can be no assurance that violations of environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment failure or other causes.

Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present, or future laws could result in the imposition of fines, third party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production, or a cessation of operations, and our liability may exceed our total assets.

Liability under environmental laws can be joint and several and without regard to comparative fault.

Environmental laws could become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts and harm our business.

In addition, we may have to indemnify some of our customers or suppliers for losses related to our failure to comply with environmental laws, which could expose us to significant liabilities.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards (“NOLs”), to offset future taxable income.

If the Internal Revenue Service challenges our analysis that our existing NOLs are not subject to limitations arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code.

Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code.

Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations.

For these reasons, we may not be able to utilize a material portion of the NOLs reflected in our financial statements, even if we attain profitability.

Risks Related to Government Regulation and Clinical Product Development

We or our customers may not be able to obtain regulatory approval for the use of our products in food and food ingredients, if required, and, even if approvals are obtained, complying on an ongoing basis with the numerous regulatory requirements applicable to these products will be time-consuming and costly.

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A substance can be listed or affirmed as GRAS by the FDA or self-affirmed by its manufacturer upon determination that independent qualified experts would generally agree that the substance is GRAS for a particular use.

While we generally self-affirm GRAS status for the products that we develop for the food market, our customer(s) will need to submit a GRAS Notice of Determination for its final commercial product.

There can be no assurance that our customer(s) will not receive any objections from the FDA to their Notice of Determination.

If the FDA were to disagree with our customer’s determination, they could ask our customer to voluntarily withdraw the final commercial product from the market or could initiate legal action to

halt its sale.

While we generally self-affirm GRAS status for the ingredients used in the products that we develop for the food market, our customer(s) may be required to submit a GRAS notification to FDA to establish that ingredients in a final commercial product may be considered GRAS.

There can be no assurance that our customer(s) will not receive any objections from the FDA with respect to any GRAS notification our customer(s) may submit.

If the FDA were to disagree with our customer’s determination that their commercial product and/or its ingredients are GRAS or otherwise compliant, the FDA could ask such customer to voluntarily withdraw the final commercial product from the market or could initiate legal action to halt its sale.

Such actions by the FDA could have an adverse effect on our business, financial condition, and results of our operations.

Food ingredients that are not GRAS are regulated as food additives and require FDA approval prior to commercialization.

The food additive petition process is generally expensive and time consuming, with approval, if secured, potentially taking years.

Changes in regulatory requirements, laws and policies, or evolving interpretations of existing regulatory requirements, laws and policies, may result in increased compliance costs, delays, capital expenditures and other financial obligations that could adversely affect our business or financial results.

We expect to encounter regulations in most if not all of the countries in which we may seek to sell our products which are used in food and food ingredients, and we cannot be sure that we or our customers will be able to obtain necessary approvals in a timely manner or at all.

If our existing and future products which are used in food and food ingredients do not meet applicable regulatory requirements in a particular country or at all, then we may not be able to commercialize them and our business will be adversely affected.

The various regulatory schemes applicable to our products which are used in food and food ingredients will continue to apply following initial approval for sale, including FDA requirements for food safety, mandatory labeling, and certain nutrient content or health claims made about the product.

Monitoring regulatory changes and ensuring our ongoing compliance with applicable requirements will be time-consuming and may affect our results of operations.

If we fail to comply with such requirements on an ongoing basis, we may be subject to fines or other penalties, or may be prevented from selling our products which are used in food and food ingredients and our business may be harmed.

Our efforts to deploy our technology in the life science tools markets may fail.

Food ingredients that are not GRAS are regulated as food additives and require FDA approval prior to commercialization or must be the subject of an existing food additive regulation.

The food additive petition process for ingredients that are not already authorized by regulation is generally expensive and time consuming, with approval, if secured, potentially taking years.

Our ongoing efforts to deploy our technology in the life science tools markets may fail.

We have recently begun to use our CodeEvolver ® protein engineering technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications.

We do not know if we can successfully compete in this new market.

while we have entered into some license agreements for products in this market, we do not know if we can successfully compete in this new market.

This new market is well established and consists of numerous large, well-funded entrenched market participants who have long and established track records and customer relationships.

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The failure to successfully deploy products on timely basis in this space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.

Interim “top-line” and preliminary data from studies or trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim “top-line” or preliminary data from preclinical studies or clinical trials.

Interim data are subject to the risk that one or more of the outcomes may materially change as more data become available.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.

As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, interim and preliminary data should be viewed with caution until the final data are available.

Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure.

Any information we determine not to disclose may ultimately be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business.

If the topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could significantly harm our business prospects.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

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To date, neither we nor our collaborators have submitted a BLA to FDA or similar drug approval submissions to comparable foreign regulatory authorities for any product candidate.

We and any collaborators must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates in humans to the satisfaction of the regulatory authorities before we will be able to obtain these approvals.

We and any collaborators must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety, purity and potency (or efficacy) of our product candidates in humans to the satisfaction of the regulatory authorities before we will be able to obtain these approvals.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

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• obtaining regulatory authorization to commence a trial;

• reaching an agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• reaching an agreement on acceptable terms with prospective contract research organizations ("CROs"), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• obtaining IRB approval at each site;

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• non-compliance with applicable regulatory requirements by us or third parties or changes in such regulations or administrative actions;

• suspensions or terminations by IRBs of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities due to a number of factors, including those described above;

• suspensions or terminations by IRBs of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities due to a number of factors, including those described above;

• third parties being unable or unwilling to satisfy their contractual obligations to us;

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Furthermore, the product candidates that are the subject of such trials may never receive regulatory approval, and their commercial prospects and our ability to generate product revenues from them could be impaired or not realized at all.

We or our collaborators may experience delays or difficulties in enrolling patients in clinical trials, which could delay or prevent receipt of regulatory approvals.

We or our collaborators may not be able to initiate or continue clinical trials on a timely basis or at all for any product candidates we or our collaborators identify or develop if we or our collaborators are unable to locate and enroll a sufficient number of eligible patients to participate in the trials as required by applicable regulations or as needed to provide appropriate statistical power for a given trial.

Additionally, some of our competitors may have ongoing clinical trials for product candidates that would treat the same indications as one or more of our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in our competitors’ clinical trials.

Patient enrollment may also be affected by many factors, including:

• severity and difficulty of diagnosing of the disease under investigation;

• size of the patient population and process for identifying subjects;

• eligibility and exclusion criteria for the trial in question;

• our or our collaborators’ ability to recruit clinical trial investigators with the appropriate competencies and experience;

• design of the trial protocol;

• availability and efficacy of approved medications or therapies, or other clinical trials, for the disease or condition under investigation;

• perceived risks and benefits of the product candidate under trial or testing, or of the application of genome editing to human indications;

• efforts to facilitate timely enrollment in clinical trials;

• patient referral practices of physicians;

• ability to obtain and maintain subject consent;

• risk that enrolled subjects will drop out before completion of the trial;

• ability to monitor patients adequately during and after treatment;

• proximity and availability of clinical trial sites for prospective patients.

Disruptions caused by the COVID-19 pandemic may increase the likelihood that we or our collaborators encounter such difficulties or delays in enrolling patients in clinical trials.

In addition, we expect that some of our product candidates will focus on diseases with limited patient pools from which to draw for enrollment in clinical trials.

The eligibility criteria of our clinical trials will further limit the pool of available trial participants.

In addition to the factors identified above, patient enrollment in any clinical trials we or our collaborators may conduct may be adversely impacted by any negative outcomes our competitors may experience, including adverse side effects, clinical data showing inadequate efficacy or failures to obtain regulatory approval.

Enrollment delays in clinical trials may result in increased development costs for any of our product candidates, which may cause the value of our company to decline and limit our ability to obtain additional financing.

If we or our collaborators have difficulty enrolling a sufficient number of patients to conduct clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which may have an adverse effect on our results of operations and prospects.

Results of preclinical studies and early clinical trials of product candidates may not be predictive of results of later studies or trials.

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Any safety or efficacy concerns observed in any one of our preclinical studies or clinical trials in a targeted area could limit the prospects for regulatory approval of product candidates in that and other areas, which could have a material adverse effect on our business and prospects.

If any of our product candidates do not work as intended or cause undesirable side effects, it could hinder or prevent receipt of regulatory approval or realization of commercial potential for them or our other product candidates and could substantially harm our business.

Our product candidates may be associated with serious adverse events, undesirable side effects or unexpected characteristics.

Results of clinical trials could reveal severe or recurring side effects, toxicities or unexpected events.

In addition to serious adverse events or side effects caused by product candidates we develop alone or with collaborators, the administration process or related procedures may also cause undesirable side effects.

If any such events occur, clinical trials or commercial distribution of any product candidates or products we develop alone or with collaborators could be suspended or terminated, and our business and reputation could suffer substantial harm.

Treatment-related side effects could affect patient recruitment and the ability of enrolled patients to complete the trial or result in potential liability claims.

Regulatory authorities could order us or our collaborators to cease further development of, deny approval of or require us to cease selling any product candidates or products for any or all targeted indications.

If we or our collaborators elect, or are required, to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates or products may be harmed, and our ability to generate product revenues from them or other product candidates that we develop may be delayed or eliminated.

Additionally, if we successfully develop a product candidate alone or with collaborators and it receives marketing approval, the FDA could require us to adopt a REMS to ensure that the benefits of treatment with such product candidate outweigh the risks for each potential patient, which may include, among other things, a communication plan to health care practitioners, patient education, extensive patient monitoring or distribution systems and processes that are highly controlled, restrictive and more costly than what is typical for the industry.

We or our collaborators may also be required to adopt a REMS or engage in similar actions, such as patient education, certification of health care professionals or specific monitoring, if we or others later identify undesirable side effects caused by any product that we develop alone or with collaborators.

Such identification could also have several additional significant negative consequences, such as:

• regulatory authorities may suspend, withdraw or limit approvals of such product, or seek an injunction against its manufacture or distribution;

• regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

• we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;

• we may be required to change the way a product is administered or conduct additional trials;

• the product may become less competitive;

• we or our collaborators may decide to remove the product from the marketplace;

• we may be subject to fines, injunctions or the imposition of civil or criminal penalties;

• we could be sued and be held liable for harm caused to patients;

• our reputation may suffer.

Any of these events could prevent us or our collaborators from achieving or maintaining market acceptance of any potential product.

Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

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We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

For example, the results of the 2020 U.S.

Presidential Election may impact our business and industry.

Namely, the Trump administration took several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

It is difficult to predict whether or how these orders will be implemented, or whether they will be rescinded and replaced under the Biden administration.

The policies and priorities of the new administration are unknown and could materially impact the regulations governing our product candidates.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions.

Average review times at the FDA have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new biologics or modifications to approved biologics to be reviewed and/or approved by necessary government agencies, which could adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products, and on March 18, 2020 the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our or our collaborators’ regulatory submissions, which could have a material adverse effect on our business.

Our product candidates for which we intend to seek approval as a biologic products may face competition sooner than anticipated.

The BCPIA enacted in the Patient Protection and Affordable Care Act, signed into law on March 23, 2010, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA.

In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed.

During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product.

The law is complex and is still being interpreted and implemented by the FDA.

As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity.

However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated.

Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation.

Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Our business operations and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

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federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services;

concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services;

similar to the U.S.

federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;

federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals beginning in 2022, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners such as physician assistants and nurse practitioners, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

• analogous U.S.

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state anti-kickback and false claims laws, which may apply to our future business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers;

state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s

voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

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It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product.

Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates.

Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party

therapeutics may limit the amount we will be able to charge for our product candidates.

These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates.

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As a result, increasingly high barriers are being erected to the entry of new products.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.

In the United States, the EEA and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations.

In particular, there have been and continue to be a number of initiatives at the U.S.

federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers.

Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

• an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

• a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

• extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA.

Supreme Court is currently reviewing the constitutionality of the ACA, although it is unclear when a decision will be made or how the Supreme Court will rule.

It is also unclear how this decision or other efforts, if any, to challenge, repeal, or replace the ACA will impact the law, our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.

For example, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional action is taken by Congress.

In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from

three to five years.

These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our future customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.

For example, CMS may develop new payment and delivery models, such as bundled payment models.

In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

We expect that additional U.S.

federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S.

federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.

This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction.

If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.

Some of our products are subject to the European Union regulatory regime known as The Registration, Evaluation and Authorization of Chemicals (“REACH”).

REACH mandates that certain chemicals manufactured in, or imported into, the European Union be registered and evaluated for their potential effects on human health and the environment.

Under REACH, we and our contract manufacturers located in the European Union are required to register certain of our products based on the quantity of such product imported into or manufactured in the European Union and on the product’s intended end-use.

The registration, evaluation and authorization process under REACH can be costly and time consuming.

Problems or delays in the registration, evaluation or authorization process under REACH could delay or prevent the manufacture of some of our products in, or the importation of some of our products into, the European Union, which could adversely affect our business and results of operations.

In addition, if we or our contract manufacturers fail to comply with REACH, we may be subject to penalties or other enforcement actions, which could have a material adverse effect on our business and results of operations.

Risks Related to our Dependence on Third Parties

We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies.

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As a result, we are and expect to remain dependent on third parties to conduct clinical trials of our product candidates.

Specifically, we expect CROs, clinical investigators, and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data.

Specifically, we expect CROs, clinical investigators, and consultants to play a significant role in the conduct of these trials and the

subsequent collection and analysis of data.

However, we will not be able to control all aspects of their activities.

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In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on commercially reasonable terms, if at all.

In particular, any replacement of our manufacturers could require significant effort and expertise because there may be a limited number of qualified replacements.

In particular, any replacement of our manufacturers could require significant effort

and expertise because there may be a limited number of qualified replacements.

In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.

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▪ in the event of approval to market and commercialize our product candidates, an inability to meet commercial demands for our product or any other future product candidates.

Risks Related to Intellectual Property and Information Technology

Our efforts to prosecute and protect our intellectual property may not be successful.

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Any such litigation could result in substantial costs and diversion of our resources.

Moreover, any settlement of or adverse judgment resulting from litigation relating to intellectual property could require us to obtain a license to continue to make, use or sell the products or technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology, product or services.

Moreover, any settlement of or adverse judgment resulting from litigation relating to intellectual property could require us to obtain a license to continue to

make, use or sell the products or technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology, product or services.

Our ability to compete may decline if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights.

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Even unsuccessful claims brought by third parties could result in significant legal fees and other expenses, diversion of management time, and disruption in our business.

Uncertainties resulting from initiation and continuation of any patent or

related litigation could harm our ability to compete.

Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete.

We have not assessed the applicability of the AIA and new regulations on our patent portfolio.

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Third parties may claim that we are infringing their intellectual property rights or other proprietary rights, which may subject us to costly and time consuming litigation and prevent us from developing or commercializing our products.

Our commercial success also depends in part on our ability to operate without infringing patents and proprietary rights of third parties, and without breaching any licenses or other agreements that we have entered into with regard to our technologies, services, products and business.

technologies, services, products and business.

We cannot ensure that patents have not been issued to third parties that could block our ability to obtain patents or to operate as we would like.

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To prevent infringement or unauthorized use, we have in the past filed, and may in the future be required to file, infringement claims, which can be expensive and time-consuming.

In addition, in an infringement proceeding, a court may decide that the intellectual property that we own or in-

license is not valid, is unenforceable and/or is not infringed.

In addition, in an infringement proceeding, a court may decide that the intellectual property that we own or in-license is not valid, is unenforceable and/or is not infringed.

In addition, in legal proceedings against a third party to enforce a patent directed at one of our technologies, services or products, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part.

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Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Furthermore, because of the substantial amount of discovery

required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

We may not be able to enforce our intellectual property rights throughout the world.

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Additionally, proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.

If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel as needed in the future, it could disrupt the operation of our business, delay our product development programs, harm our research and development efforts, and/or impact our ability to pursue and build collaborations.

Our business involves complex, global operations across a variety of markets and requires a management team and employee workforce that is knowledgeable in the many areas in which we operate.

The loss of any key members of our management team or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our business could prevent us from developing and commercializing our products for our target markets and entering into collaborations or licensing arrangements to execute on our business strategy.

In addition, the loss of any key scientific staff, or the failure to attract or retain other key scientific employees, could prevent us from developing and commercializing our products for our target markets and entering into collaborations or licensing arrangements to execute on our business strategy.

We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among biotechnology and other technology-based businesses or due to the availability of personnel with the qualifications or experience necessary for our business.

If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing constraints that will adversely affect our ability to meet the demands of our collaborators and customers in a timely fashion or to support our internal research and development programs.

Competition for experienced scientists and other technical personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.

All of our employees are at-will employees, which mean that either the employee or we may terminate their employment at any time.

Our planned activities will require additional expertise in specific industries and areas applicable to the products and processes developed through our technology platform or acquired through strategic or other transactions, especially in the end markets that we seek to penetrate.

These activities will require the addition of new personnel, and the development of additional

expertise by existing personnel.

The inability to attract personnel with appropriate skills or to develop the necessary expertise could impair our ability to grow our business.

If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

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If this were to occur, it may be difficult for us to challenge this type of use, especially in countries with limited intellectual property protection or in countries in which we do not have patents covering the misappropriated biocatalysts.

Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.

We rely in part on trade secret and confidentiality protection to protect our confidential and proprietary information and processes.

However, trade secrets and confidential information are difficult to protect.

We have taken measures to protect our trade secrets and confidential and proprietary information, but these measures may not be effective.

We require employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting arrangement with us.

These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties.

These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property.

Nevertheless, our confidential and proprietary information may be disclosed, third parties could reverse engineer our biocatalysts and others may independently develop substantially equivalent confidential and proprietary information and techniques or otherwise gain access to our trade secrets.

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our confidential and proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may need additional capital in the future in order to expand our business.

Our future capital requirements may be substantial, particularly as we continue to develop our business.

Our need for additional capital will depend on many factors, including the financial success of our biocatalysis business, our spending to develop and commercialize new and existing products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including opportunities in the fine chemicals markets, and the filing, prosecution, enforcement and defense of patent claims.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

We may seek to obtain such additional capital through equity offerings, debt financings, credit facilities and/or strategic collaborations.

If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.

If we raise debt financing or enter into credit facilities, we may be subject to restrictive covenants that limit our ability to conduct our business.

Strategic collaborations may also place restrictions on our business.

We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.

If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

If we are unable to comply with the terms of our credit facility, our business and financial condition would be materially and adversely affected.

On June 30, 2017 we entered into a credit facility (“Credit Facility”) financing arrangement with Western Alliance Bank which is secured by a lien on substantially all of our personal property other than our intellectual property.

Although we have made no loans or draws under the Credit Facility as of December 31, 2020, the Credit Facility includes affirmative and negative covenants including, among others, covenants requiring us to achieve consolidated product revenues at minimum levels and restricting our ability to transfer collateral, incur additional indebtedness, engage in mergers or acquisitions, pay dividends or make other distributions, make investments, create liens and sell assets.

The Credit Facility also includes events of default including, among other things, our failure to pay any amounts due under the Credit Facility, a breach of covenants under the Credit Facility, our insolvency, a material adverse change, the occurrence of any default under certain other indebtedness in an amount greater than $250,000 and a final judgment against us in an amount greater than $250,000.

If an event of default occurs, it could cause our obligations to become immediately due and payable and our lender would be entitled to foreclose against the collateral securing the indebtedness, including our cash.

If our indebtedness were to be accelerated, we may be unable to repay such debt and, therefore, such acceleration could materially and adversely affect our business and financial condition.

For more information regarding our compliance with our financial covenants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Debt service obligation may place us at a competitive disadvantage in our industry.

Draws under the Credit Facility would create debt service obligations for us.

Although we have not drawn on the Credit Facility to date, any future draws under the Credit Facility and the related debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities.

For example, the Credit Facility presents the following risks, certain of which apply regardless of whether we draw on the Credit Facility:

• we may be required to use a portion of our cash flow from operations to make debt service payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts, research and development, and other general corporate requirements;

• our interest expense could increase if prevailing interest rates increase, because a portion of draws which could be made under the Credit Facility bear interest at floating rates;

• the Credit Facility could reduce our flexibility to adjust to changing business conditions or obtain additional financing to fund working capital, capital expenditures, product development efforts, research and development, and other general corporate requirements;

• restrictive covenants in our Credit Facility, which apply regardless of whether we draw down under the facility, limit our ability to, among other things, transfer collateral, incur additional indebtedness, engage in mergers or acquisitions, pay dividends or make other distributions, make investments, create liens and sell assets.

Our revenues, financial condition and results of operations may also be adversely affected if one or more of our customers is delayed in paying, or becomes unable to pay, for our delivered products on a timely basis.

Certain of our customers may become subject to financial and other challenges that affect their cash flow.

If these customers fail to pay us on a timely basis it may cause our financial results to fluctuate.

Failure by such customers to pay us on timely basis, or at all, would adversely impact our financial condition.

If goodwill or other long-lived assets become impaired, we may be required to record a significant charge to earnings.

Our total assets reflect goodwill of $3.2 million and other long-lived assets of $31.2 million as of December 31, 2020.

Under accounting principles generally accepted in the United States (“GAAP”), we review goodwill for impairment on at least an annual basis and at any interim date whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

We review our long lived assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Events or changes in circumstances (i.e., information that indicates an impairment might exist) could include:

a significant decrease in the market price of our common stock;

current period cash flow losses or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the assets;

slower growth rates in our industry;

significant adverse changes in the business climate or legal factors;

accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the assets;

loss of significant customers or partners;

or the current expectation that the assets will more likely than not be sold or disposed of significantly before the end of their estimated useful life.

We tested goodwill for impairment as of December 31, 2020.

Based on our analysis, we determined that the fair value of goodwill at the reporting unit level exceeded their carrying value and that no impairment was necessary as of December 31, 2020.

Nevertheless, we may experience additional events or changes

in circumstances in the future that we determine to be indicators of impairment and that may in turn require us to undertake impairment analysis in future periods.

Depending on the circumstances and judgments made at such future time, the outcome of the analysis may require us to recognize impairment.

We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or other long-lived assets is determined, resulting in an adverse impact on our financial position and results of operations.

We have investments in non-marketable securities, which may subject us to significant impairment charges.

We have investments in illiquid non-marketable equity and debt securities acquired in private transactions.

At December 31, 2020, 1.1% of our consolidated assets were comprised of investment securities, which are illiquid investments.

Investments in illiquid, or non-marketable, securities are inherently risky and difficult to value.

We account for our non-marketable equity securities under the measurement alternative.

Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net.

We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.

We measure available for sale investments in non-marketable debt at fair value.

Unrealized gains and losses on these securities are recognized in other comprehensive income until realized.

We evaluate our investment in non-marketable securities when circumstances indicate that we may not be able to recover the carrying value.

We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value.

The impairment analysis requires significant judgment to identify events or circumstances that would likely have a material adverse effect on the fair value of the investment.

Because a portion amount of our assets are comprised of non-marketable investment securities, any future impairment charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.

If we are unable to maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to conduct a comprehensive evaluation of their disclosure controls and procedures over financial reporting.

At the end of each fiscal year, we must perform an evaluation of our disclosure controls and procedures over financial reporting, include in our annual report the results of the evaluation, and have our external auditors publicly attest to such evaluation.

We have identified material weaknesses and other control deficiencies in the past, and while the material weaknesses have since been remediated, we cannot assure you that in the future additional material weaknesses or significant deficiencies will not exist or otherwise be discovered.

If other deficiencies are discovered in the future, our ability to accurately report our financial position, results of operations or cash flows on timely basis could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements, a decline in our stock price, suspension or delisting of our common stock by the Nasdaq Stock Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

We are dependent on information technology systems, infrastructure and data, and any failure of these systems could harm our business.

Information technology helps us operate efficiently, interface with customers, maintain financial accuracy and efficiency, and accurately produce our financial statements.

If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach.

If our data management systems do not effectively collect, store, process, and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies, or human error, our ability to effectively plan, forecast, and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.

Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows, and the timeliness with which we report our internal and external operating results.

Our business may require us to use and store customer, employee, and business partner personally identifiable information (“PII”).

This may include names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers, and payment account information.

We require usernames and passwords in order to access our information technology systems.

We also use encryption and authentication technologies to secure the transmission and storage of data.

These security measures may be compromised as a result of security breaches by unauthorized persons, employee error, malfeasance, faulty password management, or other irregularity, and result in persons obtaining unauthorized access to our data or accounts.

Third parties may attempt to fraudulently induce employees or customers into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access our information technology systems.

For example, our employees have received “phishing” emails and phone calls attempting to induce them to divulge passwords and other sensitive information.

In addition, unauthorized persons may attempt to hack into our products or systems to obtain personal data relating to employees and other individuals, our confidential or proprietary information or confidential information we hold on behalf of third parties.

If the unauthorized persons successfully hack into or interfere with our connected products or services, they may create issues with product functionality that could pose a risk of loss of data.

We have programs in place to detect, contain, and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.

However, because the techniques used to obtain unauthorized access to or sabotage systems change frequently and may be difficult to detect, we may not be able to anticipate and prevent these intrusions or mitigate them when and if they occur.

We also rely on external vendors to supply and/or support certain aspects of our information technology systems.

The systems of these external vendors may contain defects in design or manufacture or other problems that could unexpectedly compromise information security of our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their systems.

While we devote significant resources to network security, data encryption, and other security measures to protect our systems and data, these security measures cannot provide absolute security.

We may experience a breach of our systems and may be unable to protect sensitive data.

The costs to us to eliminate or alleviate network security problems, bugs, viruses, worms, malicious software programs, and security vulnerabilities could be significant.

Our efforts to address these problems may not be successful and could result in unexpected interruptions, delays, cessation of service, and harm to our business operations.

Moreover, if a computer security breach affects our systems or results in the unauthorized release of PII, our reputation and brand could be materially damaged and use of our products and services could decrease.

We would also be exposed to a risk of loss or litigation and potential liability, which could have a material adverse impact on our business, financial condition, results of operations, or cash flows.

Our business is subject to complex and evolving laws and regulations regarding privacy, data protection and other matters relating to information collection.

There are numerous state, federal and foreign laws, regulations, decisions, and directives regarding privacy and the collection, storage, transmission, use, processing, disclosure and protection of different types of personal data and personal information (“Personal Information”) and other personal, customer, or other data, the scope of which is continually evolving and subject to differing interpretations.

We may be subject to significant consequences, including penalties and fines, for any failure to comply with such laws, regulations and directives.

For example, the GDPR is in effect across the EEA, which imposes several stringent requirements for controllers and processors of personal data and increased our obligations, for example, by imposing higher standards when obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information, increasing requirements pertaining to health data as well as pseudonymized (i.e., key-coded) data, and imposing additional obligations when we contract third-party processors in connection with the processing of personal data.

The GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of genetic, biometric, or health data, which could limit our ability to use and share personal data or could cause our costs to increase and harm our business and financial condition.

Failure to comply with the requirements of the GDPR and the applicable national data protection laws of the European Union member states may result in fines of up to the greater of EUR20 million and 4% of the total worldwide annual turnover of the preceding financial year and other administrative penalties.

If we are required to comply with the new data protection rules imposed by GDPR, such compliance may be onerous and adversely affect our business, financial condition, and results of operations.

To the extent applicable to our business, compliance with the new data protection rules imposed by GDPR may be onerous and adversely affect our business, financial condition, and results of operations.

In addition, recent legal developments in Switzerland and Europe have created complexity and compliance uncertainty regarding certain transfers of information from Switzerland and the European Union to the United States.

For example, the EU-US Privacy Shield Framework is regularly reviewed, and there is current litigation challenging the adequacy of EU-specified standard contractual clauses (another data transfer mechanism).

It is uncertain whether the Privacy Shield Framework and/or the standard contractual clauses will be invalidated by the European courts or legislature.

We rely on a mixture of mechanisms to transfer personal data from our European Union business to the U.S.

and could be impacted by changes in law as a result of a future review of these transfer mechanisms by European regulators under the GDPR as well as current challenges to these mechanisms in the European courts.

If one or more of the legal bases for transferring Personal Information from Europe to the U.S.

is invalidated, or if we are unable to transfer Personal Information between and among countries and regions in which we operate, it could affect the manner in which we provide our services or could adversely affect our financial results.

California has also recently passed the California Consumer Privacy Act (the “CCPA”), which is the most far-reaching data privacy law introduced in the United States to date, and introduces new compliance burdens on organizations doing business in California who collect Personal Information about California residents.

The CCPA’s definition of Personal Information is very broad and specifically includes biometric information.

It went into effect in 2020 and allows for fines on a dramatic scale, as well as a private right of action from individuals in relation to certain security breaches.

The CCPA is also prompting a wave of similar legislative developments in other U.S.

states and creating the potential for a patchwork of overlapping but different laws.

These developments increase our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm.

Furthermore, any failure, or perceived failure, by us to comply with or make effective modifications to our policies, or to comply with any federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation and a loss of customers, any of which could have an adverse effect on our business.

In addition, various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data-retention and data-protection issues, including laws or regulations mandating disclosure to domestic or international law enforcement bodies, which could adversely impact our business or our reputation with customers.

For example, some countries have adopted laws mandating that some Personal Information regarding customers in their country be maintained solely in their country.

Having to maintain local data centers and redesign product, service and business operations to limit Personal Information processing to within individual countries could increase our operating costs significantly.

Our product gross margins are variable and may decline from quarter to quarter.

Our product gross margins have varied significantly in the past and may continue to fluctuate from quarter to quarter and year to year in the future due to a variety of factors, including product mix, pricing pressure from our pharmaceutical customers and competition from other products or technologies.

This variability may have a material adverse impact on our operating results and financial condition and cause our stock price to decline.

Risks Related to Owning our Common Stock

We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.

Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us.

Among other things, our amended and restated certificate of incorporation and bylaws provide for a board of directors which is divided into three classes, with staggered three-year terms and provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our board of directors, the chairman of the board of directors, our chief executive officer or president may call a special meeting of the stockholders.

In addition, our amended and restated certificate of incorporation allows our board of directors, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.

These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Finally, our charter documents establish advanced notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.

Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire our company may be considered beneficial by some stockholders.

Our quarterly or annual operating results may fluctuate in the future.

As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report:

• our ability to achieve or maintain profitability;

• our relationships with, and dependence on, collaborators in our principal markets;

• our dependence on a limited number of customers, including Pfizer;

• our dependence on a limited number of products in our performance enzymes business;

• our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products;

• our ability to develop and successfully commercialize new products for the markets we serve;

• our ability to obtain additional development partners for our novel biotherapeutic programs;

• potential of Nestlé Health Science or Takeda terminating any development program under their license agreements with us;

• potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us;

• our ability to deploy our technology platform in the fine chemicals market;

• the success of our customers’ products in the market and the ability of such customers to obtain regulatory approvals for products and processes;