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Item 1. Business

2023-02-27 compared with 2022-02-28 · 271 added, 377 removed, 264 unchanged (71% of the section changed)

COMPANY OVERVIEW

We discover, develop and sell enzymes and other proteins that deliver value to our clients in a growing set of industries.

We view proteins as a vast, largely untapped source of value-creating products, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel enzymes, both as proprietary Codexis products and in partnership with our customers.

We are a leading enzyme engineering company leveraging our proprietary CodeEvolver ® technology platform to discover, develop and enhance novel, high performance enzymes and other classes of proteins.

Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life.

They can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to perform (bio)chemical transformations different than those for which they naturally evolved.

The capacity to enhance the properties and performance of enzymes has led to pivotal improvements across three healthcare industry pillars:

pharmaceutical manufacturing, life sciences, and biotherapeutics.

The enzymes we produce solve for real-world challenges associated with small molecule pharmaceuticals manufacturing, nucleic acid synthesis and genomic sequencing, and – as biotherapeutic candidates – they have the potential to treat challenging diseases.

Our unique enzymes drive improvements such as higher yields, reduced energy usage and waste generation, improved efficiency in manufacturing, greater sensitivity in genomic and diagnostic applications, and potentially more efficacious therapeutics.

Our novel biotherapeutics business includes a diverse pipeline of product candidates in clinical and preclinical development.

Our initial biotherapeutic product candidates include enzymes that are orally administered for function in the gastrointestinal tract (“GI”), such as our partnered product candidates CDX-7108 for the treatment of exocrine pancreatic insufficiency and CDX-6114 for the treatment of phenylketonuria, which are both in Phase 1 clinical trials.

We have also engineered a series of transgenes that code for enzymes that may be used as gene therapies to treat rare lysosomal storage disorders with our partner Takeda, such as Fabry Disease and Pompe Disease, as well as a blood factor disorder.

Our performance enzymes business consists primarily of two focus areas:

i) biocatalysts for the sustainable manufacturing of pharmaceuticals and ii) enzymes for life science applications, including genomic sequencing and nucleic acid synthesis.

In our pharmaceutical manufacturing business, we utilize our CodeEvolver ® platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to reduce their costs and improve the efficiency and productivity of their manufacturing processes for some small molecule therapeutics.

In life science markets, we use our platform technology to develop enzymes for customers using next generation sequencing (“NGS”), a parallel sequencing technology used to identify genomic information in the study of biological systems, and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well as for synthesis of nucleic acids such as DNA/RNA.

History and Core Technology

We are a pioneer in harnessing computational technologies to drive biology advancements.

Since 2002, we have made substantial investments in the development of our CodeEvolver ® protein engineering technology platform, the primary source of our competitive advantage.

Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine the structural and performance attributes of our large and continuously growing library of protein variants.

These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling time- and cost-efficient delivery of the targeted performance enhancements.

In addition to its computational prowess, our CodeEvolver ® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and bioprocess development which are all coordinated to rapidly innovate novel, fit-for-purpose products.

The core historical application of the technology has been in developing commercially viable biocatalytic manufacturing processes for more sustainable production of complex chemicals.

It begins by conceptually designing the most cost-effective and practical process for a targeted product.

We then develop optimized biocatalysts to enable the designed process, using our CodeEvolver ® platform.

Engineered biocatalyst candidates, numbering many thousands for each project, are then rapidly screened and validated using high throughput methods under process-relevant operating conditions.

This approach results in an optimized biocatalyst that enables cost-efficient processes that are relatively simple to run in conventional manufacturing equipment allowing for efficient technical transfer of our processes to our manufacturing partners.

This also allows for efficient technical transfer of our processes to our manufacturing partners.

The successful embodiment of our CodeEvolver ® protein engineering technology platform in commercial manufacturing processes requires well-integrated expertise in a number of technical disciplines.

In addition to those competencies directly integrated in our CodeEvolver ® protein engineering platform, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, bioprocess development and fermentation engineering.

Our integrated, multi-disciplinary approach to product and process development is a critical success factor for the Company.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.

Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing.

Additionally, we have licensed our proprietary CodeEvolver ® protein engineering technology platform to global pharmaceutical companies enabling them to use this technology, in house, to engineer enzymes for their own businesses.

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis Pharma AG (“Novartis”).

The Novartis CodeEvolver ® Agreement (Codexis’ third such agreement with large pharma companies) allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

As evidence of our strategy to extend our technology beyond pharmaceutical manufacturing, we have also used the technology to develop biocatalysts and enzyme products for use in a broader set of industrial markets, including several large verticals, such as food, feed, consumer care and fine chemicals.

In addition, we are using our technology to develop enzymes for various life science related applications, such as next generation sequencing (“NGS”), DNA and RNA synthesis and other molecular biology research applications.

In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc.

("Roche") with our first enzyme for this target market:

the Company’s EvoT4™ DNA ligase.

In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC for the production and co-marketing of enzymes for life science applications including, initially, high-fidelity DNA polymerase, T7 RNA polymerase and reverse transcriptase enzymes.

In June 2020, we also entered into a Master Collaboration and Research Agreement with Molecular Assemblies, Inc.

("MAI") (the “MAI Agreement”) pursuant to which we are leveraging our CodeEvolver ® platform

technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

We anticipate completing an enzyme engineering project with MAI in the first quarter of 2022.

We have been using the CodeEvolver ® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both in partnership with customers and for our own proprietary Codexis drug candidates.

Our first program was for the potential treatment of phenylketonuria ("PKU") in humans.

PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

In October 2017, we entered into a Global Development, Option and License Agreement (the “Nestlé License Agreement”) with Societé des Produits Nestlé S.A., formerly known as Nestec Ltd.

(“Nestlé Health Science”) to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive license to develop and commercialize CDX-6114.

Also in October 2017, we entered into a strategic collaboration agreement with Nestle Health Science (“Nestlé SCA”) pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

In March 2020, we entered into a Strategic Collaboration and License Agreement (“Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”), for the research and development of novel gene therapies for certain disease indications, including the treatment of lysosomal storage disorders and a blood factor deficiency.

BUSINESS SEGMENTS

We manage our business as two business segments:

Performance Enzymes and Novel Biotherapeutics.

See Note 15, “Segment, Geographical and Other Revenue Information” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.

Performance Enzymes

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals and, to date, this continues to be our largest market served.

Our customers, which include many large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development.

We have also used the technology to develop customized enzymes for use in other industrial markets.

These markets consist of several large industrial verticals, including food, feed, consumer care, and fine chemicals.

We also use our technology in the life sciences markets to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well DNA/RNA synthesis and health monitoring applications.

Since 2002, we have made substantial investments in the development of our proprietary CodeEvolver ® technology platform, the primary source of our competitive advantage for both our performance enzymes and biotherapeutics businesses.

The CodeEvolver ® platform has the power to transform the performance of an enzyme, tailoring it for a specific application and/or process.

Using powerful machine learning tools and sophisticated molecular, cellular, and bioanalytical workflows, we design and screen libraries of thousands of variants in high throughput every two to four weeks on each project, sequencing every variant and correlating its sequence with its performance in a highly application-relevant screen.

Content-rich libraries screened under real-world conditions can yield dense and valuable datasets, when data-mined effectively, and multiple parameters can be optimized in parallel.

The resulting evolved variants often have a combination of enhanced properties, such as increased activity, specificity, and stability under desired conditions, or improved expression in the production host.

These enhanced properties provide differentiated technical performance in the target application and can provide our customers increased value in the commercial deployment of their products.

Novel Biotherapeutics

We are also targeting new opportunities in the pharmaceutical industry to discover, improve, and/or develop biotherapeutic drug candidates.

We believe that our CodeEvolver ® protein engineering platform technology can be used to discover novel biotherapeutic drug candidates that will target human diseases that are in need of improved therapeutic interventions.

Similarly, we believe that we can deploy our platform technology to improve specific characteristics of a customer’s pre-existing biotherapeutic drug candidate, such as its activity, stability or immunogenicity.

Our first lead program was for the potential treatment of hyperphenylalaninemia (“HPA”) (also referred to as PKU) in humans.

PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

In October 2017, we announced a global development, option and license agreement with Nestlé Health Science to advance CDX-6114, our own novel orally administrable enzyme therapeutic candidate for the potential treatment of PKU.

In July 2018, we announced that we had dosed the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, which was conducted in Australia.

The initiation of the trial triggered a $4.0 million milestone payment from Nestlé Health Science.

The $1.0 million milestone payment that was triggered by the achievement of a formulation relating to CDX-6114 was received in February 2019.

In January 2019, we received notice from the U.S.

Food and Drug Administration ("FDA") that it had completed its review of our investigational new drug application ("IND") for CDX-6114 and concluded that we may proceed with the proposed Phase 1b multiple ascending dose study in healthy volunteers in the United States.

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU.

As a result of the option exercise, we earned a milestone and recognized $3.0 million in revenues in the first quarter of 2019.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114 .

In October 2017, we separately entered into the Nestlé SCA with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

The term of the Nestlé SCA has been extended through December 2022.

In January 2020, we and Nestlé Health Science entered into a development agreement pursuant to which we and Nestlé Health Science are collaborating to advance CDX-7108, a lead candidate targeting a gastrointestinal disorder, discovered through the Nestlé SCA, into preclinical and early clinical studies.

During 2021, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial with the first subject being dosed in November 2021.

In March 2020, we entered into the Takeda Agreement with Takeda pursuant to which we are collaborating to research and develop protein sequences for use in gene therapy products for certain disease indications in accordance with the respective program plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency.

We are developing a diverse pipeline of product candidates in our novel biotherapeutics business.

These product candidates, which are in clinical and preclinical development, range from orally delivered enzymes to engineered transgenes for delivery as gene therapies that have the potential to address a range of diseases with high unmet patient need.

Each of our product candidates is discovered utilizing our proprietary CodeEvolver ® protein engineering platform.

Our Partnered Oral Enzyme Programs

CDX-7108 for the treatment of exocrine pancreatic insufficiency

Under a Strategic Collaboration Agreement with Nestlé Health Science (“Nestlé SCA”), we have collaboratively developed CDX-7108, a potent lipase intended for use as a pancreatic enzyme replacement therapy (“PERT”).

PERT is used to treat pancreatic exocrine insufficiency.

There are multiple causes of pancreatic exocrine insufficiency including chronic pancreatitis, cystic fibrosis and pancreatic cancer.

We estimate there are approximately 190,000 patients in the United States and the market for current therapies is greater than $2.5 billion globally.

Although existing therapies are reasonably effective at delivering amylase and protease activity, achieving adequate levels of lipase activity is challenging due to patient compliance and pill burden often leading patients to experience continued symptoms associated with fat malabsorption.

CDX-7108 has been specifically engineered for increased potency as a lipase and also to remain stable in acidic conditions such as those encountered in the stomach.

The goal is to study whether this combination of properties will deliver adequate lipase activity with a less burdensome dosing schedule.

Under the Nestlé SCA, we and Nestlé Health Science are also working on the development of engineered amylase and protease enzymes for possible use with CDX-7108.

Nestlé Health Science is currently dosing patients in a Phase 1b three-party study.

The first two parts of the study evaluated the safety, tolerability, and pharmacokinetics (“PK”) of escalating single and multiple oral doses of CDX-7108 in 48 healthy adult subjects, with no safety issues noted.

The third part of the study is evaluating the pharmacodynamics of a single dose of oral CDX-7108 in six enrolled patients with exocrine pancreatic insufficiency (“EPI”).

An interim analysis conducted in January 2023 of five patients who had completed the study at the time showed a clear indication of improved lipid absorption when patients are administered CDX-7108 versus placebo, which we believe supports a path forward together with Nestlé Health Science to further develop CDX-7108, with the potential for the initiation of a Phase 2 study in early 2024.

CDX-6114 for the treatment of phenylketonuria

We internally developed CDX-6114, an enzyme we engineered to be orally administrated for the treatment of phenylketonuria (“PKU”) in humans.

PKU, one of the most common inborn errors of metabolism (“IEMs”), is a metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

As a result, phenylalanine accumulates to toxic levels in the brain, causing serious neurological problems including intellectual disability, seizures and cognitive and behavioral problems.

To avoid toxic levels of phenylalanine in their blood, individuals with PKU must follow a strict, life-long diet that is low in phenylalanine and supplement their diet with a synthetic phenylalanine-free protein supplements to provide them with sufficient nutrients.

Maintaining a strict, life-long diet can be challenging for individuals with PKU.

There are an estimated 50,000 patients with PKU in the developed world.

We have partnered with Nestlé Health Science under a Global Development, Option and License Agreement (“Nestlé License Agreement”) to further develop CDX-6114.

In February 2019, Nestlé Health Science exercised its option under the Nestlé License Agreement to obtain an exclusive license to develop and commercialize CDX-6114.

Nestlé Health Science is currently optimizing the formulation of CDX-6114 to improve performance and we expect Nestlé Health Science to announce an IND filing and clinical trial initiation in 2023.

If this collaboration can successfully demonstrate benefit in PKU patients with CDX-6114, this will inform our decisions around the oral enzyme approach to several other IEMs.

Our Wholly-owned Oral Enzyme Programs

In the past we have also worked on internal programs to develop orally administrable enzyme substitution therapy candidates for the treatment of homocystinuria (“HCU”) and Maple Syrup Urine Disease (“MSUD”), that we are now considering partnering options for pursuing further development.

In addition, we have a program to develop orally administrable enzyme substitution therapy candidates for the treatment of Celiac Disease (“CD”).

We have also used CodeEvolver ® to engineer transgenes that encode for enzymes which may improve targeting and expression within the body when administered as gene therapies, offering potentially improved therapeutic benefit as compared to current options.

Our Partnered Gene Therapy Programs

Our first significant program involving engineered transgenes commenced in March 2020 when we entered into a Strategic Collaboration and License Agreement (“Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Co.

(“Takeda”) pursuant to which we are collaborating to research and develop transgenes for use in gene therapy delivery technology for rare lysosomal storage disorders such as Fabry Disease, Pompe Disease, a blood factor disorder, and another lysosomal storage disorder.

In March 2020, we received a one-time, non-refundable cash payment of $8.5 million.

Of these programs, the Fabry disease program is the most advanced, with multiple sequences, including CDX-6311, which were provided to Takeda.

We also provided sequences to Takeda for the Pompe program.

Of these programs, the Fabry disease program is the most advanced, with a lead candidate identified in investigational new drug ("IND") enabling activities.

We have also provided sequences to Takeda for the Pompe program and await updates on preclinical testing and potential IND enabling activities.

In May 2021, Takeda elected to exercise their option to initiate an additional program for a certain undisclosed rare genetic disorder and we received the option exercise fee during the third quarter of 2021.

RECENT DEVELOPMENT - PFIZER (PAXLOVID™)

In 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 by the U.S.

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

In 2021, we recognized approximately $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.

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

with or without a long-term purchase and sale agreement, 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.

BUSINESS UPDATE REGARDING COVID-19

We are subject to risks and uncertainties as a result of the current COVID-19 pandemic.

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the U.S.

economy and other economies worldwide.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and may not be accurately predicted, including the duration and severity of the pandemic, the prevalence of more contagious and or virulent variants such as the Delta and Omicron variants, and the extent and severity of the impact on our customers, new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

In the United States, the impact of COVID-19, including governmental orders (“Orders”) governing the operation of businesses during the pandemic, caused the temporary closure of our Redwood City, California facilities in 2020 and disrupted our R&D operatio ns.

R&D operations for several projects were temporarily suspended from mid-March 2020 through the end of April 2020 in accordance with these Orders.

In May 2020, we re-initiated limited R&D operations and have ramped up operations such that we are currently utilizing our normal R&D capacity while following county, state and federal COVID-19 guidance for the protection of our employees.

Additionally, we resumed manufacturing at our Redwood City pilot plant in May 2020.

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide.

However, we are dependent on our manufacturing and logistics partners and consequently, disruptions in operations of our partners and customers may affect our ability to supply enzymes to our customers.

Furthermore, our ability to provide future research and development (“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.

Our future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges faced by our customers.

The near-and-long term impact of COVID-19 to our financial condition, liquidity, or results of operations remains uncertain.

Although some of the Orders that were enacted to control the spread of COVID-19 have begun to be scaled back and the vaccine rollout has expanded, surges in the spread of COVID-19 due to the emergence of new more contagious or virulent variants or the ineffectiveness of the vaccines against such strains, may result in the reimplementation of certain Orders, which could adversely impact our business.

The extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

As a result of the COVID-19 pandemic we have received purchase orders from 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, used by Pfizer in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product for the treatment of COVID-19 infections in humans.

These purchase orders have had a substantial impact on our revenue in 2021.

For additional information on the various risks posed by the COVID-19 pandemic, see “Risk Factors” set forth in Item 1A of this Annual Report on Form 10-K.

Our strategy is to grow our revenues, profits, and stockholder value by leveraging our CodeEvolver ® protein engineering technology platform in the following ways:

• Licensing our CodeEvolver ® protein engineering technology platform.

We intend to continue to pursue opportunities to license our CodeEvolver ® protein engineering technology platform to third parties so they can create cost-saving biocatalyst solutions utilizing their own in-house protein engineering capability.

• Growing our pharmaceutical biocatalysts business.

We intend to continue to pursue opportunities in the pharmaceutical market to use our protein catalysis products and services to reduce the costs for manufacturing small molecule drugs.

We intend to increase the number of pharmaceutical customers and processes that utilize and benefit from our novel, cost-saving biocatalyst solutions.

• Creating and advancing novel biotherapeutic drug candidates.

We intend to continue to pursue opportunities to apply our protein engineering capabilities to the creation and development of novel biotherapeutic drug candidates, both in partnership with customers and as proprietary Codexis drug candidates.

We have also invested in research and development in an effort to generate additional early stage novel biotherapeutic candidates.

• Extending our biocatalysts and industrial enzymes business into new markets.

We intend to continue to pursue opportunities to use biocatalyst products and services to reduce the costs and improve sustainability for manufacturing in markets such as food and food ingredients.

We intend to increase the number of customers and industrial verticals that utilize and benefit from our novel performance enzyme solutions.

• Developing high-performance enzymes for use in diagnostic applications .

We intend to offer high-performance enzymes to customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications.

In this Annual Report, the “Company,” “we,” “us” and “our” refer to Codexis, Inc.

and its subsidiaries on a consolidated basis.

OUR MARKET OPPORTUNITIES

Pharmaceutical Market

We believe the pharmaceutical industry represents a significant market opportunity for us and is our primary business focus.

Pharmaceutical companies are in constant search for new drugs to offer to their customers, and are under significant competitive pressure both to reduce costs and to increase the speed to market for their products.

To meet these pressures, pharmaceutical companies are discovering and developing novel protein-based drug products, as well as seeking manufacturing processes for their new and existing drugs that reduce overall costs, simplify production and increase efficiency and product yield, while not affecting drug safety and efficacy.

Cost reduction is even more important to developers (known as innovators)

of patent-protected pharmaceutical products when the patents for those products expire and such innovators are forced to compete with manufacturers of generic drugs.

The pharmaceutical product lifecycle begins with the discovery of new chemical entities and continues through preclinical and clinical development, regulatory review and approval, commercial scale-up, product launch, and, ultimately, patent expiration and the transition from branded to generic products.

As innovators develop, produce and then market products, manufacturing priorities and processes evolve.

Historically, innovators have focused on production cost reduction in the later stages of clinical development and have been reluctant to make process changes after a product has been launched.

However, as pressures to reduce costs have increased, innovators have pursued cost reduction measures much earlier in the pharmaceutical product lifecycle and are increasingly looking for opportunities to improve their operating margins, including making manufacturing process changes for marketed products after the products have been launched if these changes can result in significant cost reductions.

As a result, innovators are investing in new technologies, including our CodeEvolver ® protein engineering technology platform, to improve their manufacturing productivity and efficiency or outsourcing the manufacture of their intermediates and active pharmaceutical ingredients ("API").

Our Solutions for the Pharmaceutical Market

Small Molecule Manufacturing Cost Reduction

Our pharmaceutical customers, which include many large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development.

Our CodeEvolver ® protein engineering technology platform enables us to deliver solutions to our customers in this market by developing and delivering optimized biocatalysts that perform chemical transformations at a lower cost and improve the efficiency and productivity of manufacturing processes.

We provide value throughout the pharmaceutical product lifecycle.

Our products and services allow us to provide benefits to our pharmaceutical customers in a number of cost saving ways, including any - and sometimes all - of the following:

• reducing the use of raw materials and reagents;

• eliminating multiple steps in the manufacturing process;

• improving purity, productivity and yield;

In addition to our partnered gene therapy programs, we continue to explore the possible application of our CodeEvolver ® technology to develop therapeutic options for devastating diseases as well as to develop and test our own proprietary gene therapy delivery mechanisms.

Performance Enzymes

Our performance enzymes business consists primarily of two focus areas, pharmaceutical manufacturing and life science products.

Pharmaceutical Manufacturing

We believe the pharmaceutical industry represents a significant market opportunity for our performance enzymes as pharmaceutical companies are in constant search of new drugs to offer to their customers and are under significant competitive pressure both to reduce costs and to increase the speed to market for their products.

To address these pressures, pharmaceutical companies are driven to identify reliable, cost effective and sustainable manufacturing processes to produce both their new drug candidates and their existing products, while not impacting drug safety and efficacy.

Cost reduction is increasingly important to drug developers (known as innovators) closer to their product launch and during the commercial stage of the product, which can last a decade or more.

In addition, cost pressures further intensify as innovators lose their patent exclusivities and begin to experience competition from manufacturers of generic versions of their products.

Our pharmaceutical manufacturing customers, which include many large global pharmaceutical companies, partner with us to develop optimized enzymes for use as biocatalysts, meeting precisely defined criteria, with the goal of lowering costs and improving the efficiency, productivity and sustainability of their manufacturing processes by:

improving productivity, yield and purity;

using water as a primary solvent;

3 unchanged sentences

reducing the generation of chemical byproducts or waste;

• reducing the need for late-stage purifications.

Early in a pharmaceutical product’s lifecycle, pharmaceutical manufacturers can use our biocatalyst products and services to reduce manufacturing costs.

If an innovator incorporates our products or processes into an approved product, we expect the innovator to continue to use our products or processes at least over the patent life of the marketed drug.

Pharmaceutical manufacturers can also use our products and services to reduce manufacturing costs after a product is launched.

At this stage, changes in the manufacturing process originally approved by the drug regulator may require additional regulatory review.

Typically, pharmaceutical companies will only seek regulatory approval for a manufacturing change if substantial cost savings are realizable.

We believe that the cost savings associated with our products may lead our customers to change their manufacturing processes for approved products and, if necessary, seek regulatory approval of the new processes which incorporate our biocatalyst products.

Moreover, we believe these cost savings are potentially attractive to generics manufacturers, who compete primarily on price.

In addition, manufacturing processes that utilize our biocatalysts can frequently enable processes that are more sustainable and environmentally friendly compared to alternative, traditional manufacturing approaches.

This has led us to earn three U.S.

EPA Presidential Green Chemistry Challenge awards for improved pharmaceutical manufacturing processes since we were founded.

All three of these awards were associated with blockbuster drug products.

Licensing Our CodeEvolver ® Protein Engineering Technology Platform

Licensing our CodeEvolver ® protein engineering technology platform to pharmaceutical companies enables them to rapidly develop custom-designed enzymes that are highly optimized for efficient manufacturing processes.

To date, we have entered into platform technology licensing agreements with each of GlaxoSmithKline Intellectual Property Development Limited, a

subsidiary of GlaxoSmithKline plc ("GSK"), Merck, Sharp & Dohme ("Merck") and Novartis Pharma AG ("Novartis"), and we intend to continue to enter into license arrangements with third parties that will allow them to use our CodeEvolver ® protein engineering technology platform to discover and develop novel proteins for their internal use.

GlaxoSmithKline

We entered into our first CodeEvolver ® protein engineering Platform Technology Transfer, Collaboration and License Agreement (“GSK CodeEvolver ® Agreement”) in July 2014 with GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GSK, pursuant to which we granted GSK a non-exclusive, worldwide license to use our CodeEvolver ® protein engineering technology platform in the field of human healthcare for its internal development purposes.

Under the GSK CodeEvolver ® Agreement, we licensed and transferred our certain patents, patent applications and know-how from our CodeEvolver ® protein engineering technology platform to GSK, completing the transfer in April 2016.

Under this agreement, we have the potential to receive contingent payments that range from $5.75 million to $38.5 million per project based on GSK's successful application of the licensed technology.

We are also eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using our CodeEvolver ® protein engineering technology platform.

The term of the GSK CodeEvolver ® Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the GSK CodeEvolver ® Agreement.

GSK can terminate the GSK CodeEvolver ® Agreement by providing 90 days written notice to us.

In 2019, we received a $2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® protein engineering platform technology.

In 2021, we received two additional milestone payments from GSK under the GSK CodeEvolver ® Agreement .

In August 2015, we entered into a CodeEvolver ® Platform Technology Transfer and License Agreement (the “Merck CodeEvolver ® Agreement”) with Merck.

The Merck CodeEvolver ® Agreement allows Merck to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human and animal healthcare.

Under the terms of the Merck CodeEvolver ® Agreement, we granted to Merck an exclusive license under certain patents, patent applications and know-how from our CodeEvolver ® protein engineering technology platform for the research, development and manufacture of novel enzymes for use by Merck in the chemical synthesis of therapeutic products owned or controlled by Merck ("Merck Exclusive Field") and a non-exclusive worldwide license to use the CodeEvolver ® protein engineering technology platform to research, develop and manufacture novel enzymes for use by Merck in its internal research programs (“Merck Non-Exclusive Field”).

Under the terms of the Merck CodeEvolver ® Agreement, Merck paid us upfront technology transfer and license fees and milestone payments over the technology transfer period of 15 months from August 2015.

We also have the potential to receive product-related payments of up to $15.0 million for each API that is manufactured by Merck using one or more enzymes that have been developed or are in development using the CodeEvolver ® protein engineering technology platform during the 10-year period that begins on the conclusion of the 15-month technology transfer period.

These product-related payments, if any, will be paid by Merck to us for each quarter that Merck manufactures API using a CodeEvolver ® -developed enzyme.

The payments will be based on the total volume of API produced using the CodeEvolver ® -developed enzyme.

In September 2016, we completed the full transfer of the engineering platform technology.

In October 2018, we entered into an amendment to the Merck CodeEvolver ® Agreement whereby we amended certain licensing provisions and one exhibit.

In January 2019, we entered in to an amendment to the Merck CodeEvolver ® Agreement whereby we installed certain CodeEvolver ® protein engineering technology upgrades into Merck’s platform license installation.

We maintained those upgrades for a multi-year term that expired in January 2022.

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.

The Novartis CodeEvolver ® Agreement allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

Under the terms of the Novartis CodeEvolver ® Agreement, Codexis granted to Novartis a worldwide license to use certain patents, patent applications and know-how from our CodeEvolver ® protein engineering technology platform to research, develop and manufacture novel enzymes for use by or on behalf of Novartis as biocatalysts in the chemical synthesis of small molecule and bioconjugate active pharmaceutical ingredients (“API”).

The license is exclusive for the research, development

and manufacture of novel enzymes for use by Novartis as biocatalysts in the chemical synthesis of API owned or controlled by Novartis (“Novartis Exclusive Field”) and non-exclusive license for the research, development and manufacture of novel enzymes for use by Novartis in the chemical synthesis of API not owned or controlled by Novartis or any third party (“Novartis Non-Exclusive Field”).

In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary CodeEvolver ® platform technology to Novartis (the “Technology Transfer Period”).

Pursuant to the Novartis CodeEvolver ® Agreement , we received an upfront payment of $5.0 million shortly after the effective date.

We completed the second technology milestone transfer under the agreement and received a milestone payment of $4.0 million in 2020.

We have also received an aggregate of $5.0 million for the completion of the third technology transfer milestone in 2021.

In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the Technology Transfer Period (“Improvements Term”), Novartis will pay us annual payments over four years which amount to an additional $8.0 million in aggregate.

We also have the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® platform technology during the period that began on the conclusion of the Technology Transfer Period and ends on the expiration date of the last to expire licensed patent.

These product-related usage payments, if any, will be paid by Novartis to Codexis for each quarter that Novartis manufactures API using a CodeEvolver ® -developed enzyme.

The licenses to Novartis are granted under patents, patent applications and know-how that Codexis owns or controls as of the effective date and that cover the CodeEvolver ® platform technology.

Any improvements to the CodeEvolver ® platform technology during the Technology Transfer Period will also be included in the license grants from Codexis to Novartis.

See also "Recent Development - Pfizer (PAXLOVID™)" above for information on our relationship with Pfizer.

Biotherapeutic Discovery and Development Partnerships

We are also targeting new opportunities in the pharmaceutical industry to discover or improve biotherapeutic drug candidates for our customers.

We approach biopharmaceutical companies to collaborate and utilize our platform technology for the discovery of specific novel biotherapeutic candidates.

We currently have one such biotherapeutic discovery partnership in progress under the Nestlé SCA with Nestlé Health Science and another discovery partnership in progress under the Takeda Agreement with Takeda.

We continue to pursue other partners who could benefit by the application of our CodeEvolver ® protein engineering platform technology to improve the discovery and/or development of other biotherapeutics in partnership with us.

Biotherapeutic Product Discovery and Development

We are also using our platform technology to self-fund the development of our own early stage, novel enzyme therapeutic product candidates.

The first product candidate that resulted from this is CDX-6114, an enzyme which we have engineered to be orally administered and is being developed by Nestlé Health Science as a potential treatment of PKU in humans.

PKU is an inborn metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

As a result, phenylalanine accumulates to toxic levels in the brain, causing serious neurological problems including intellectual disability, seizures and cognitive and behavioral problems.

Maintaining a strict, life-long diet can be challenging for individuals with PKU.

There are an estimated 50,000 people with PKU in the developed world.

Our self-funded biotherapeutic investments aim to discover therapeutic solutions for five additional rare disease conditions.

Two of those programs are targeting potential enzyme substitution treatments for patients with inborn errors of amino acid metabolism diseases.

CDX-6512 is an orally administrable enzyme substitution therapy candidate in IND-enabling studies for potential treatment of homocystinuria (HCU).

Food and Drug Administration (FDA) has granted the company orphan drug designation (ODD) and rare pediatric disease (RPD) designation for CDX-6512 for the treatment of HCU, an inborn metabolic disorder most commonly due to cystathionine beta-synthase (CBS) deficiency.

CBS is an enzyme involved in the metabolism of

homocysteine, a methionine metabolite.

As a result, methionine and/or homocysteine accumulate to toxic levels, that may lead to learning and intellectual disabilities, cardiovascular disease, osteoporosis, and stroke.

To prevent blood levels of methionine and/or homocysteine to become toxic, individuals with HCU must follow a strict, life-long diet that is low in methionine and supplement their diet with a synthetic methionine-free formula to provide them with sufficient nutrients.

Maintaining a strict, life-long diet can be challenging for individuals with HCU.

World-wide about 1 in 150,000 people has HCU due to either a CBS or an MTHFR gene mutation.

HCU is listed on the Recommended Uniform Screening Panel of disorders recommended by the Secretary of the Department of Health and Human Services for states to screen as part of their universal newborn screening programs.

CDX-6210 is an orally administrable enzyme substitution therapy lead for potential treatment of Maple Syrup Urine Disease (MSUD).

MSUD is an inborn metabolic disorder in which the branched-chain keto acid dehydrogenase enzyme that is involved in the metabolism of branched-chain amino acids such as leucine, isoleucine, and valine, is deficient.

As a result, these amino acids and their ketoacid metabolites accumulate to toxic levels, that can lead to intellectual and developmental disabilities.

To prevent blood levels of these amino acids and their metabolites to become toxic, individuals with MSUD must follow a strict, life-long diet that is low in branched-chain amino acids and supplement their diet with a synthetic branched-chain amino acids-free formula to provide them with sufficient nutrients.

Maintaining a strict, life-long diet can be challenging for individuals with MSUD.

According to the Genetic and Rare Disease Information Center (GARD), about 1 in 150,000-185,000 people is born with MSUD.

MSUD is listed on the Recommended Uniform Screening Panel of disorders recommended by the Secretary of the Department of Health and Human Services for states to screen as part of their universal newborn screening programs.

Our discovery program target a potential enzyme therapy for gluten management and potential treatments for patients with lysosomal storage diseases, via a specific novel transgene, or via a new AAV technology.

We expect to continue to make additional investments with the aim of generating additional product candidates targeting these, and potentially other therapeutic areas.

and reducing the need for late-stage purifications.

As of December 31, 2022, we are selling biocatalysts to pharmaceutical manufacturers for 18 therapeutic drugs that are currently approved for commercial sales.

Of particular note for 2022, in July 2022 we announced that we and Pfizer had entered into an agreement to supply Pfizer with CDX-616, a proprietary high performance enzyme used to manufacture a critical intermediate for nirmatrelvir, an active pharmaceutical ingredient in PAXLOVID™, Pfizer’s antiviral therapeutic, which is currently authorized for emergency use by the FDA for the treatment of mild-to-moderate COVID-19 in people at high risk of progression to severe illness and authorized or approved by other regulatory authorities across the globe.

While we have generated significant revenue from supplying CDX-616 to Pfizer, there is no future binding commitment for them to purchase any particular quantity or quantities of CDX-616 from us.

We regularly sell biocatalysts, at multi-kilograms to metric tons per annum scale, that have already been engineered, scaled up, and installed in a customer’s commercial process.

For example, in addition to Pfizer, we sell biocatalysts to Merck for their manufacture of sitagliptin, the active ingredient in JANUVIA ® , to Urovant and Kyorin for the manufacture of vibregon, the active ingredient in Urovant’s GEMTESA™ and Kyorin’s BEOVA ® , products for the treatment of overactive bladder, as well as supporting other products and customers for which public disclosures have not been made.

In addition to these larger volumes of biocatalysts that are sold for our customers’ ongoing commercial requirements, we also sell lesser quantities of enzymes for use in a customer’s developmental, qualification or regulatory approval operations.

As of December 31, 2022, 18 drug candidates currently in Phase 2 and Phase 3 clinical trials use enzymes engineered using CodeEvolver ® technology (either by Codexis or by our platform licensing partners) in their chemistry, manufacturing and control processes.

This pipeline of potential approvals reinforces our confidence in our ability to continue to grow this business over time.

Finally, we also sell even smaller quantities of enzymes (typically grams to multi-kilograms scale) to customers for experimental, testing and qualification purposes, or as part of an enzyme engineering project.

In addition to the sale of biocatalysts, we also offer research and development partnerships to our customers.

These research and development activities are typically governed by collaboration agreements, which often contain research fee payments and intellectual property provisions, under which we screen and/or engineer biocatalysts for customers in connection with their process development efforts.

In these collaborations, we typically receive consideration in the form of one or more of the following:

upfront payments, milestone payments, payments for screening and engineering, with other exclusive supply of enzyme or licensing fees and royalties as the customer’s product commercializes.

We also have licensed our CodeEvolver ® enzyme engineering technology platform to pharmaceutical companies to help them develop custom-designed enzymes that are highly optimized for efficient manufacturing processes.

To date, we have entered into platform technology licensing agreements with each of GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GlaxoSmithKline plc ("GSK"), Merck, Sharp & Dohme ("Merck") and Novartis Pharma AG ("Novartis").

Life Sciences

We also apply our CodeEvolver ® technology to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well DNA/RNA synthesis applications.

We view these as attractive markets in which Codexis’ technology and products can deliver a strong competitive advantage – in part because manipulation of nucleic acids by enzymes (be it “reading” or “writing”) is at the core of these markets and our technology has the proven ability to create enzymes which are stable to the workflow and/or supply chain demands or – importantly – which are less biased in the nucleic acids they are able to sequence or synthesis, which can be of significant benefit in various applications.

In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc.

("Roche") with an improved DNA ligase (EvoT4™ DNA ligase) for NGS library prep, which continues to progress towards commercialization in new NGS kits.

In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC for the production and co-marketing of enzymes for life science applications.

Since then, this collaboration has enabled the commercialization of Codex ® HiFi DNA Polymerase, Codex ® HiFi Hot Start DNA Polymerase, Codex ® HiFi Hot Start 2X NGS Mix, Codex ® HiCap RNA Polymerase, Codex ® HiFi UL DNA Polymerase, and Codex ® HiTemp Reverse Transcriptase.

Development of other novel enzymes for life science applications continues.

Also, in June 2020, we entered into a Master Collaboration and Research Agreement with Molecular Assemblies, Inc.

("MAI") (the “MAI Agreement”) pursuant to which we are leveraging our CodeEvolver ® platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

At that time, we purchased $1.0 million in MAI’s Series A financing and John Nicols, the Codexis’ then President and CEO, and current director, joined MAI’s board of directors.

In April 2021, Codexis invested an additional $0.6 million in MAI’s Series A financing and, in September 2021, Codexis invested an additional $7.0 million in MAI’s Series B financing.

As of December 31, 2022, we currently hold 5,443,734 shares of MAI Series A preferred stock and 12,848,635 shares of MAI Series B preferred stock.

In April 2022, we and MAI announced that, using our CodeEvolver ® platform technology, we had developed a novel, engineered terminal deoxynucleotidyl transferase (“TdT”) enzyme which would enable MAI’s Fully Enzymatic Synthesis™ (“FES™”) technology that produces highly pure, sequence-specific DNA on demand.

In August 2022, we and MAI announced that we had entered into a Commercial License and Enzyme Supply Agreement with MAI (the “MAI Supply Agreement”) under which Codexis shall manufacture and sell the TdT enzyme to MAI for use in native DNA synthesis.

In connection with the execution of the MAI Supply Agreement, we received a milestone payment of $1.0 million in the form of an additional 1,587,049 shares of Series B preferred stock pursuant to the MAI Agreement.

In March 2022, we announced the initiation of a strategic partnership with seqWell Inc., a developer of transformative library preparation products for demanding genomics plan application, which included an investment to accelerate the commercialization of seqWell’s genomics workflow solutions.

Codexis and seqWell plan to collaborate on using our CodeEvolver ® platform technology for enzyme optimization with seqWell’s growing portfolio of genomics workflow and library preparation products.

As part of this partnership, we led seqWell’s Series C financing with a $5.0 million investment.

Our strategy is to grow our revenues, profits, and stockholder value by leveraging our CodeEvolver ® enzyme engineering technology platform in the following ways:

• Creating and advancing novel biotherapeutic drug candidates.

We intend to continue to pursue opportunities to apply our protein engineering capabilities to the creation and development of novel biotherapeutic drug candidates.

In addition, we intend to extend our biotherapeutics pipeline by developing, with our partner Takeda and developing internally, novel gene therapies and transgene products.

• Growing our pharmaceutical manufacturing business.

We intend to continue to pursue opportunities in the pharmaceutical market to use our enzymes to reduce the costs for manufacturing small molecule drugs.

We intend to increase the number of pharmaceutical customers and processes that utilize and benefit from our novel, cost-saving enzyme biocatalyst solutions.

• Developing high-performance enzymes for use in life science applications and nucleic acid synthesis .

We intend to offer high-performance enzymes to customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications and to enable the future of enzymatic nucleic acid synthesis.

Strategic Collaborations

Biotherapeutics

Nestlé Health Science

In October 2017, we entered into the Nestlé License Agreement with Nestlé Health Science pursuant to which we granted to Nestlé Health Science, under certain of our patent rights and know-how:

(i) an option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to develop and commercialize certain products (each, a “Product”) based on CDX-6114 and our other therapeutic enzyme product candidates covered by specified patent applications for the treatment of HPA (also referred to as PKU), and (ii) an exclusive right of first negotiation (the “Right of First Negotiation”) for a period of five years to obtain an exclusive worldwide license to develop and commercialize up to two enzymes discovered by us for use in the field of the prevention, diagnosis, treatment and management of inborn errors of amino acid metabolism.

(i) an option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to develop and commercialize certain products (each, a “Product”) based on CDX-6114 and our other therapeutic enzyme product candidates covered by specified patent applications for the treatment of hyperphenylalaninaemia (“HPA”) (also referred to as PKU), and (ii) an exclusive right of first negotiation (the “Right of First Negotiation”) for a period of five years to obtain an exclusive worldwide license to develop and commercialize up to two enzymes discovered by us for use in the field of the prevention, diagnosis, treatment and management of inborn errors of amino acid metabolism.

We are not under any obligation to undertake any research and development activities relating to inborn errors of amino acid metabolism.

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We are also eligible to receive payments from Nestlé Health Science under the Nestlé License Agreement 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 products.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s e stablished Consumer Care and Medical Nutrition business areas.

The term of the Nestlé SCA has been extended through December 2022 .

In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance CDX-7108 into preclinical and early clinical studies.

CDX-7108 is the lead candidate targeting exocrine pancreatic insufficiency discovered under the Nestlé SCA.

During 2021, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial with the first subject being dosed in November 2021.

Additionally, the parties are progressing one orally administered enzyme therapy program under the Nestlé SCA targeting a gastrointestinal disorder.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® enzyme engineering technology platform to develop novel enzymes for Nestlé Health Science’s e stablished Consumer Care and Medical Nutrition business areas.

The term of the Nestlé SCA has been extended through December 2023 with automatic renewal through December 2024 .

In January 2020, we entered into the Nestlé development agreement (the “ Nestlé DA ” ) pursuant to which we and Nestlé Health Science are collaborating to advance CDX-7108 into preclinical and early clinical studies.

CDX-7108 is the lead candidate discovered under the Nestlé SCA targeting exocrine pancreatic insufficiency.

The term of the Nestlé DA has been extended through December 2023 with automatic renewal through December 2024.

Shire Human Genetic Therapies/Takeda Pharmaceutical

In March 2020, we entered into the Takeda Agreement with Takeda pursuant to which we are collaborating to research and develop protein sequences for use in gene therapy products for certain diseases (each, a “Field”) in accordance with each applicable program plan (each, a “Program Plan”).

On execution of the Takeda Agreement, we received an upfront nonrefundable cash payment of $8.5 million and we initiated activities under three Program Plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency, respectively (the “Initial Programs”).

On execution of the Takeda Agreement, we received an upfront nonrefundable cash payment of $8.5 million and we initiated activities under three Program Plans for Fabry Disease, Pompe Disease, and an unnamed blood factor disorder, respectively (the “Initial Programs”).

We are primarily responsible for the research and development of protein sequences under the Program Plans (the “Protein Sequences”) and we are eligible to earn up to $10.5 million of resea rch and development fees and preclinical milestone payments for the Initial Programs.

Takeda has the right, but not the obligation, to develop, manufacture and commercialize gene therapy products that include nucleic acid sequences that encode the protein sequences (“products”) at their expense.

Takeda has the right to a certain number of additional disease indications (“Reserved Target Indications”) for a limited time period during which Takeda may initiate a Program Plan for one or more Reserved Target Indications (“Additional/Option Program,” with Initial Programs, the “Programs”), provided, (a) if Takeda elects to initiate an Additional/Option Program while the parties are collaborating on three other Programs at the time of such election, or (b) if Takeda elects to initiate an Additional/Option Program using the last remaining Reserved Target Indication, then Takeda must pay us an option exercise fee to initiate such Additional/Option Program.

We will own all rights to the protein sequences and corresponding nucleic acid sequences and related intellectual property rights and Takeda will own all rights to products and related intellectual property rights.

In May 2021, Takeda elected to exercise their option to initiate an additional program for a certain undisclosed rare genetic disorder;

In May 2021, Takeda elected to exercise their option to initiate an additional (fourth) program for a certain undisclosed rare genetic disorder;

as a result, we received the option exercise fee during the third quarter of 2021.

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We granted to Takeda an exclusive, worldwide, royalty-bearing, sublicensable license to use the protein sequences and their corresponding nucleic acid sequences to develop, manufacture and commercialize the applicable products in the applicable Field.

We also granted to Takeda a limited non-exclusive, worldwide, sublicensable license (a) to research the protein sequences within or outside the applicable Fields and (b) to research the products outside of the applicable Fields, which such rights exclude Takeda's right to perform any Investigational New Drug-enabling activities.

The licenses to research the Protein Sequences expire after a pre-determined period of time.

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Pursuant to the Takeda Agreement, we are eligible to receive other payments that include (i) clinical development and commercialization-based milestones, per target gene, of up to $104.0 million and (ii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits.

Fine Chemicals and Industrial Enzyme Markets

Beyond the pharmaceutical industry, our CodeEvolver ® protein engineering platform technology has enabled cost-savings for our partners in the fine chemicals markets, and the food industry in particular.

In November 2016, we entered into an exclusive agreement with Tate & Lyle, a market-leading food ingredients company, to supply a proprietary enzyme for use in Tate & Lyle’s food ingredient production.

In March 2017, we entered into a multi-year research and development agreement with Tate & Lyle for the development of a second ingredient for the food ingredient industry.

We engineered a suite of enzymes that enable Tate & Lyle’s novel bioconversion route for the manufacture of their newly-launched zero-calorie TASTEVA ® M Stevia sweetener.

In July 2021, we entered into a multi-year supply agreement with Kalsec to supply an enzyme product for

use in the production of Kalsec's newest natural hop acid.

We are seeking to expand our enzyme offerings in the fine chemical and industrial enzyme markets within and beyond the food industry, including, for example, to the animal feed, agricultural chemicals, consumer care, flavors and fragrances markets.

Molecular Biology and In Vitro Diagnostic Enzymes

We believe that our protein engineering capability can also be deployed to commercialize novel enzymes as improvements to enzymes consumed by customers in many industrial sectors.

As our first effort in this strategy, we have developed enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications.

In December 2019, we entered into a license agreement to provide Roche with our EvoT4™ DNA ligase high-performance molecular diagnostic enzyme.

This enzyme was developed using our proprietary CodeEvolver ® protein engineering platform and is expected to be incorporated into Roche’s NGS library preparation kits and other sequencing product s.

During 2021, we commercialized three additional enzymes, our Codex ® HiFi DNA Polymerase for use in next generation sequencing, our Codex ® HiTemp Reverse Transcriptase for use in molecular diagnostic applications, and our Codex ® HiCap RNA Polymerase for use in RNA synthesis applications.

Biocatalyst Products and Services

Our biocatalyst products and services can deliver value to our customers in multiple potential ways:

• manufacture their products at lower cost;

• manufacture their products with lower fixed capital investment;

• reduce the cost of development of complex chemical synthesis processes;

• enable their products to achieve higher product purity;

• allow the removal of entire steps from chemical production;

• provide flexibility to apply at any point across their product’s lifecycle.

Our products include biocatalysts, chemical intermediates and Codex ® biocatalyst panels and kits.

We sell our products worldwide primarily through our direct sales and business development force in the United States and Europe.

In addition to products, we also offer research and development services to our customers.

These research and development service agreements often contain service fee payments and intellectual property provisions under which we screen and/or engineer biocatalysts for customers in connection with their process development efforts.

In these collaborations, we typically receive consideration in the form of one or more of the following:

upfront payments, milestone payments, payments for screening and engineering services, licensing fees and royalties.

We often sell biocatalysts, by the gram or kilogram, that have already been engineered, scaled up, and installed in a customer’s commercial process.

For example, we sell biocatalysts to Merck for their manufacture of Sitagliptin, the active ingredient in Januvia ® .

We also sell biocatalysts which are in developmental stages.

These are enzymes that are sold by the batch or by the gram or kilogram that are in the process of being engineered or scaled up by Codexis, or are in the process of being trialed or approved for use in the customer’s process.

We may sell batches of specific biocatalysts that are in the midst of protein engineering efforts, in order to test their performance at a larger scale or to accelerate a customer’s process development.

We may also sell batches of specific biocatalysts for use in a customer’s developmental products (for example, for use in the manufacture of a customer’s Phase 2 drug candidate).

Finally, we may sell batches of specific biocatalysts as a customer performs trials for approval in their commercial manufacturing operations.

Chemical Intermediates

In some cases, we sell intermediate chemicals products that are produced in a process that uses our biocatalysts.

These chemical intermediates are then used by our customer for further chemical processing.

Codex ® Biocatalyst Panels and Kits

We sell kits and panels of our biocatalysts.

These kits and panels assemble a relevant subset of our engineered enzymes to enable customers to perform chemistry screening on their own.

These kits and panels are organized by specific types of chemical reactions that are widely applicable in the pharmaceutical and fine chemical markets.

Biocatalyst Screening Services

If a customer prefers, rather than purchasing our Codex ® Biocatalyst Panels or Kits to use for its own screening, it may send us its starting materials and desired chemical reaction, and we will test against our existing libraries of enzymes on a research and development service fee basis.

If we detect desired activity in a specific enzyme, we can supply the customer with this enzyme or perform engineering services to improve the performance of the enzyme.

Protein Engineering Services

We work with our customers throughout their product development lifecycle to optimize enzymes that have been engineered specifically to perform a desired process according to a highly selective set of specifications.

We typically charge customers for research and development services by project or project-month.

These are typically larger research and development service fees than screening services.

The protein engineering process starts by identifying genes that code for enzymes known to have the general type of catalytic reactivity for a desired chemical reaction.

Typically, we identify gene sequences from our extensive in-house collection or from published databases and then synthesize candidate genes having those sequences.

Using a variety of biotechnology tools, we diversify these genes by introducing mutations, giving rise to changes in the enzymes for which they encode.

The methods for diversifying these genes, and types of diversity being tested, often vary over the course of a protein engineering program.

For finding initial diversity, methods typically include random mutagenesis and site-directed (included computational structure-guided) mutagenesis.

We also test mutational variations from related enzymes found in different organisms.

Once we have identified potentially beneficial mutations, we create libraries of thousands of variants with combinations of these mutations.

With our proprietary genetic manipulation tools, we generate libraries of genes that have programmed and random combinations of mutations for testing.

The pool of genes is used to transform host cells, which entails introducing the various genes into host cells.

These cells are then grown into colonies.

Cells from individual colonies are cultured in high throughput to produce the enzyme encoded by the genetic variant in those cells.

The enzymes expressed by these cells are then screened in high throughput using test conditions relevant to the desired application.

The screening results allow us to identify and catalog individual genes that produce improved enzymes with beneficial mutations as well as enzymes having detrimental ones.

Using specifically developed test conditions and analytical methods, we can identify variant enzymes that exhibit various improved performance characteristics, such as stability, activity and selectivity, under conditions relevant to the desired chemical process.

In the next step in our optimization process, we use our proprietary bioinformatics software to analyze protein sequence-activity relationships.

Our software and algorithms relate the screening results to the mutations and rank the individual and interacting protein sequence mutations with regard to their degree of benefit or detriment, relative to the process parameter(s) tested.

Using this information, we can create a select pool of mutational diversity in the next iteration to further the accumulation of beneficial diversity and cancel out detrimental diversity in the individual genes in the resulting library.

The gene that codes for the best performing enzyme in one iteration is used as the starting gene for the next iteration of recombination and screening.

As the enzymes improve over these iterations, the screening conditions are made increasingly more stringent.

In this way, the biocatalyst is rapidly optimized until all in-process performance requirements have been achieved and the economic objectives for the desired process have been met.

Licensing Our CodeEvolver ® Enzyme Engineering Technology Platform

GlaxoSmithKline

We entered into our first CodeEvolver ® enzyme engineering Platform Technology Transfer, Collaboration and License Agreement (“GSK CodeEvolver ® Agreement”) in July 2014 with GlaxoSmithKline Intellectual Property Development Limited, a subsidiary of GSK, pursuant to which we granted GSK a non-exclusive, worldwide license to use our CodeEvolver ® enzyme engineering technology platform in the field of human healthcare for its internal development purposes.

Under the GSK CodeEvolver ® Agreement, we licensed and transferred our certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering technology platform to GSK, completing the transfer in April 2016.

Under this agreement, we have the potential to receive contingent payments that range from $5.75 million to $38.5 million per project based on GSK's successful application of the licensed technology.

We are also eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using our CodeEvolver ® enzyme engineering technology platform.

The term of the GSK CodeEvolver ® Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the GSK CodeEvolver ® Agreement.

GSK can terminate the GSK CodeEvolver ® Agreement by providing 90 days written notice to us.

In 2019, we received a $2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® enzyme engineering platform technology.

In 2021, we received two additional milestone payments from GSK under the GSK CodeEvolver ® Agreement .

In August 2015, we entered into a CodeEvolver ® Platform Technology Transfer and License Agreement (the “Merck CodeEvolver ® Agreement”) with Merck.

The Merck CodeEvolver ® Agreement allows Merck to use our proprietary CodeEvolver ® enzyme engineering platform technology in the field of human and animal healthcare.

Under the terms of the Merck CodeEvolver ® Agreement, we granted to Merck an exclusive license under certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering technology platform for the research, development and manufacture of novel enzymes for use by Merck in the chemical synthesis of therapeutic products owned or controlled by Merck ("Merck Exclusive Field") and a non-exclusive worldwide license to use the CodeEvolver ® enzyme engineering technology platform to research, develop and manufacture novel enzymes for use by Merck in its internal research programs (“Merck Non-Exclusive Field”).

We also have the potential to receive product-related payments of up to $15.0 million for each active pharmaceutical ingredient (“API”) that is manufactured by Merck using one or more enzymes that have been developed or are in development using the CodeEvolver ® enzyme engineering technology platform during the 10-year period that begins on the conclusion of the 15-month technology transfer period.

These product-related payments, if any, will be paid by Merck to us for each quarter that Merck manufactures API using a CodeEvolver ® -developed enzyme.

The payments will be based on the total volume of API produced using the CodeEvolver ® -developed enzyme.

In September 2016, we completed the full transfer of the engineering platform technology.

In October 2018, we entered into an amendment to the Merck CodeEvolver ® Agreement whereby we amended certain licensing provisions and one exhibit.

In January 2019, we entered in to an amendment to the Merck CodeEvolver ® Agreement whereby we installed certain CodeEvolver ® enzyme engineering technology upgrades into Merck’s platform license installation.

We maintained those upgrades for a multi-year term that expired in January 2022.

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.

The Novartis CodeEvolver ® Agreement allows Novartis to use our proprietary CodeEvolver ® enzyme engineering platform technology in the field of human healthcare.

Under the terms of the Novartis CodeEvolver ® Agreement, Codexis granted to Novartis a worldwide license to use certain patents, patent applications and know-how from our CodeEvolver ® enzyme engineering technology platform to research, develop and manufacture novel enzymes for use by or on behalf of Novartis as biocatalysts in the chemical synthesis of small molecule and bioconjugate APIs.

The license is exclusive for the research, development and manufacture of novel enzymes for use by Novartis as biocatalysts in the chemical synthesis of API owned or controlled by Novartis (“Novartis Exclusive Field”) and non-exclusive license for the research, development and manufacture of novel enzymes for use by Novartis in the chemical synthesis of API not owned or controlled by Novartis or any third party (“Novartis Non-Exclusive Field”).

Pursuant to the Novartis CodeEvolver ® Agreement , we received an upfront payment of $5.0 million shortly after the effective date.

We completed the second technology milestone transfer under the agreement and received a milestone payment of $4.0 million in 2020.

We have also received an aggregate of $5.0 million for the completion of the third technology transfer milestone in 2021.

These product-related usage payments, if any, will be paid by Novartis to Codexis for each quarter that Novartis manufactures API using a CodeEvolver ® -developed enzyme.

The licenses to Novartis are granted under patents, patent applications and know-how that Codexis owns or controls as of the effective date and that cover the CodeEvolver ® platform technology.

Any improvements to the CodeEvolver ® platform technology during the Technology Transfer Period will also be included in the license grants from Codexis to Novartis.

INTELLECTUAL PROPERTY

Our success depends in large part on our ability to protect our proprietary products and technology under patent, copyright, trademark and trade secret laws.

We also rely heavily on confidential disclosure agreements for further protection of our proprietary products and technologies.

Protection of our technologies is important for us to offer our customers and partners proprietary services and products that are not available from our competitors, and to exclude our competitors from practicing technology that we have developed or exclusively licensed from other parties.

For example, our ability to supply innovator pharmaceutical manufacturers depends on our ability to supply proprietary enzymes or methods for making pharmaceutical intermediates or APIs that are not available from our competitors.

Likewise, in the generic pharmaceutical area, proprietary protection, through patent, trade secret or other protection of our enzymes and methods of producing a pharmaceutical product is important for us and our customers to maintain a lower cost production advantage over competitors.

Our success depends in large part on our ability to protect our proprietary technology, products and services under patent, copyright, trademark and trade secret laws.

We also rely heavily on confidentiality and non-disclosure and other contractual agreements for further protection of our proprietary technology, products and services.

Protection of our proprietary rights, titles and interests is important for us to offer our customers and partners proprietary technology, products and services that are not available from our competitors, and to exclude our competitors from practicing technology that we have developed or exclusively licensed from other parties.

For example, our ability to successfully supply innovator pharmaceutical manufacturers as customers depends on our ability to supply proprietary enzymes or methods for making pharmaceutical intermediates or APIs that are not available from our competitors.

Likewise, in the generic pharmaceutical area, protection of our proprietary technology, products and services directed to our enzymes and methods of producing pharmaceutical products, through patent or trade secret laws or other legal protections is important for us and our customers to maintain a lower cost production advantage over competitors.

As of December 31, 2022, we owned or controlled approximately 2,090 issued patents and pending patent applications in the United States and in various foreign jurisdictions, many of which are directed to our enabling technologies and specific methods and products that support our business in the pharmaceutical markets.

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It is possible that some U.S.

patents may be entitled to patent term extensions and/or patent term adjustments, which would extend the protection beyond these expiration dates.

It is also possible that some patents in other jurisdictions will be entitled to additional patent term.

patents and patent applications (if issued) may be entitled to patent term extensions and/or patent term adjustments, which would extend the protection beyond these expiration dates.

It is also possible that some patents and patent applications (if issued) in other jurisdictions will be entitled to additional patent term.

Our current intellectual property rights also include patents, trademarks, copyrights, software and certain assumed contracts that we acquired from Maxygen, Inc.

(“Maxygen”) in October 2010, which are associated with directed evolution technology, known as the MolecularBreeding™ technology platform developed by Maxygen.

The intellectual property rights and assets that we acquired from Maxygen continue to be subject to existing exclusive and non-exclusive license rights granted by Maxygen to third parties.

The intellectual property rights and other related assets that we acquired from Maxygen continue to be subject to existing exclusive and non-exclusive license rights granted by Maxygen to third parties.

We continue to file new patent applications, for which terms generally extend 20 years from the non-provisional filing date in the United States.

As of December 31, 2021, we owned 100 trademark registrations in the United States and foreign jurisdictions, as well as many common law trademarks.

As of December 31, 2022, we owned approximately 100 trademark registrations in the United States and foreign jurisdictions, as well as many common law trademarks.

These include, but are not limited to:

Codexis ® , Codex ® , CodeEvolver ® , Mosaic ® , Sage ® , Microcyp ® , MCYP ® , ProSAR ® , Unlock the Power of Proteins ® , the Codexis Protein Engineering Experts ® logo, Strategist ® , Continuity ® , Ameli ® , Forager ® , Analogene ® , Harvester ® , Atoms ® , Riptide ® , APS ® and a Codexis design mark (i.e., the stylized Codexis logo).

We face differing forms of competition in the small molecule pharmaceuticals, biotherapeutics and fine chemicals markets, as set forth below.

Small Molecule Pharmaceuticals

We market our biocatalyst products and services to manufacturers of small molecule pharmaceutical intermediates and APIs.

Our primary competitors in that market are companies marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services.

We also sometimes face competition from 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 Inc.

("Pfizer"), Bristol-Myers Squibb Company ("Bristol-Myers"), KYORIN Pharmaceutical Co., Ltd.

("Kyorin"), Urovant Sciences GmbH ("Urovant"), and Teva Pharmaceutical Industries Limited ("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 biocatalyst based manufacturing processes must compete with these internally developed routes.

We also compete with companies developing and marketing conventional catalysts include Solvias AG, BASF, Johnson-Matthey 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 Royal DSM N.V.

(“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 believe that our principal advantage is our ability to rapidly deliver customized biocatalysts for existing and new intermediates and APIs in the pharmaceutical manufacturing market.

This capability has allowed us to create a breadth of biocatalysts with improved performance characteristics including, for example, better activity, stability, and activity on a range of substrates, compared to traditional chemistry-based manufacturing processes and naturally occurring (and thus not optimized) biocatalysts.

We believe that our CodeEvolver ® protein engineering platform technology provides substantially superior results, in shorter time frames, than companies offering competing biocatalyst development services.

We face differing forms of competition in the biotherapeutics, pharmaceutical manufacturing and life sciences markets, as set forth below.

Biotherapeutics

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

Fine Chemicals

We face similar forms of competition in this market as in the small molecule 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, s uch 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 small molecule pharmaceutical markets from emerging companies, like Zymergen and Gingko Bioworks, who offer engineered microbe metabolic pathway approaches to these markets.

There are several companies developing or marketing pancreatic enzyme replacement therapies (PERTs) for the treatment of exocrine pancreatic insufficiency (EPI).

Approved products derived from porcine pancreas and taken orally with meals include:

Creon ® (marketed by Abbvie in the US, and by Abbott in the EU, China, Taiwan, Japan, and India), Zenpep ® (marketed by Nestlé in the US and EU), Pancreaze ® (marketed by Vivus in the US), and Pertzye ® (marketed by Chiesi in the US).

There are also companies developing recombinant PERTs for treating EPI.

First Wave Biopharma is presently testing a recombinant lipase enzyme, adrulipase, in Phase 2 clinical trials.

There are also therapies in pre-clinical development for EPI treatment, including SNSP003 (developed by Synspira Therapeutics), a combination of purified lipase, amylase, and protease, in collaboration with the Cystic Fibrosis Foundation.

Current marketed PERT therapies as well as potential future PERT therapies in development could compete with CDX-7108.

Performance Enzyme

Pharmaceutical Manufacturing

We market our biocatalyst products and services to manufacturers of small molecule pharmaceutical intermediates and APIs.

Our primary competitors in that market are companies marketing either conventional, non-enzymatic catalysts or alternative biocatalyst products and services, or from full service contract development and manufacturing service providers (“CDMOs”) offering conventional chemistry approaches to the production of APIs.

We also sometimes face competition from existing in-house technologies (both biocatalysts and conventional chemistries) within our client and potential client companies.

Pharmaceutical manufacturers that use biocatalytic processes can face 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.

We also compete with companies developing and marketing conventional catalysts including, for example, Solvias AG, BASF, Johnson-Matthey 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, as well as subsidiaries of larger contract research/contract manufacturing organizations, such as Royal DSM N.V.

(“DSM”), Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd.

Some fermentation pathway design companies, such as Zymergen, which was acquired by Gingko BioWorks, and Amyris, 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 evoxx technologies GmbH.

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 Inc.

("Pfizer"), Bristol-Myers Squibb Company ("Bristol-Myers"), KYORIN Pharmaceutical Co., Ltd.

There is also a large network of contract (development &) manufacturing organizations (“C(D)MOs”) servicing the innovator companies with supply of APIs and/or intermediates, These C(D)MOs include Cambrex Corporation, Lonza, WuXi STA and Almac Group Ltd, among many others.

The processes used by these companies (both C(D)MOs and innovators) include classical organic chemistry reactions, chemo-catalytic reactions, biocatalytic reactions or combinations thereof.

Our biocatalyst-based manufacturing processes must compete effectively on cost and efficiency with these internally developed routes.

We believe that our principal advantage is our ability to rapidly deliver customized biocatalysts for existing and new intermediates and APIs in the pharmaceutical manufacturing market.

We believe that our CodeEvolver ® enzyme engineering platform technology provides substantially superior results, in shorter time frames, than companies offering competing biocatalyst development services.

Life Sciences

Our Life Sciences business is focused in two key areas, nucleic acid manufacturing and genomics.

We supply engineered enzymes and custom services to manufacturers of messenger RNA (“mRNA”), small interfering RNA (“RNAi”), antisense oligonucleotides (“ASOs”), and other RNA-based molecules as well as manufacturers of next generation sequencing (“NGS”) workflows and kits, in vitro diagnostics (“IVD”), and molecular diagnostic assays.

Several of our competitors, such as ThermoFisher Scientific, Roche Diagnostics (a division of Roche Holding AG), New England Biolabs (“NEB”), and QIAGEN group offer a wide diversity of products across the life sciences market, including products that support multiple applications in RNA manufacturing and genomics.

We also compete with companies that are more focused on offering products and services for RNA manufacturing, such as Aldevron (a Danaher company) as well as companies focused on providing enzymes and services to genomic sequencing applications, such as Promega Corporation and Watchmaker Genomics.

The life science industry has seen great technological leaps since the introduction of enzymes into laboratory and clinical workflows and we recognize the importance of enzymes in this market and the need for purpose-fit, robust, and highly active enzymes that are made possible with our core technology.

Core Technology

We are a leader in the field of protein engineering to create novel biocatalysts.

Both our pharmaceuticals and fine chemicals businesses rely on our core technology.

We are a leader in the field of enzyme engineering to create novel enzymes.

Each of our segments rely on our core technology.

We are aware that other companies, organizations and persons have developed technologies that appear to have some similarities to our patented proprietary technologies.

For example, we are aware that other companies, includin g Zymergen, Gingko Bioworks, Amyris, Absci and Amicus Therapeutics have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.

For example, we are aware that other companies, includin g Zymergen, which was acquired by Gingko Bioworks, Amyris, Absci and Amicus Therapeutics have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.

In addition, 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.

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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 initially commercialized our CodeEvolver ® enzyme engineering technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.

Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing.

Additionally, we have licensed our proprietary CodeEvolver ® enzyme engineering technology platform to global pharmaceutical companies enabling them to use this technology, in house, to engineer enzymes for their own businesses.

Our corporate headquarters are located in Redwood City, California and provide general administrative support to our business and are the center of our research, development and business operations.

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We expect to rely on third-party manufacturers for commercial production of our biocatalysts for the foreseeable future.

Our in-house manufacturing is dedicated to producing both Codex ® biocatalyst panels and kits and enzymes for use by our customers in pilot scale production.

Our in-house manufacturing is dedicated to producing both Codex ® biocatalyst panels and kits and enzymes for use by our customers in pilot scale and clinical production.

We also supply initial commercial quantities of biocatalysts for use by our collaborators to produce pharmaceutical intermediates and manufacture biocatalysts that we sell.

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

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

Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing and a large percentage of our production of novel enzymes to contract manufacturing organizations.

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

Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing, representing a large percentage of our production of novel enzymes, to contract manufacturing organizations.

GOVERNMENT REGULATION

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• approval by an institutional review board (“IRB”), or ethics committee at each clinical site before the trial is commenced;

• performance of adequate and well-controlled human clinical trials to establish the safety, purity, and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice (“GCP”) regulations;

• performance of adequate and well-controlled human clinical trials to establish the safety and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice (“GCP”) regulations;

• preparation and submission to the FDA of a BLA after completion of all pivotal clinical trials:

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The manufacturing process must be capable of consistently producing quality batches of the product candidate and manufacturers must develop, among other things, methods for testing the identity, strength, quality and purity of the final biological product.

Additionally,

appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

Although most clinical research performed in the United States in support of a BLA must be authorized in advance by the FDA, under the IND regulations and procedures described above, there are certain circumstances under which clinical trials can be conducted without submission of an IND.

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Expedited Development and Review Programs

The FDA maintains several programs intended to facilitate and expedite development and review of new drugs and biologics to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions.

The FDA maintains several programs intended to facilitate and expedite development and review of new drugs and biologics designed to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions.

For example, a product candidate is eligible for Fast Track designation if it is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such disease or condition.

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After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product candidate that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated.

If a product candidate that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same disease or condition for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated.

Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the disease or condition for which it received orphan designation.

In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if a second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Emergency Use Authorization

The Commissioner of the FDA, under delegated authority from the Secretary of HHS may, under certain circumstances in connection with a declared public health emergency, allow for the marketing of a product that does not otherwise comply with FDA regulations by issuing an EUA for such product.

Before an EUA may be issued by HHS, the Secretary must declare an emergency based a determination that public health emergency exists that effects or has the significant potential to affect, national security, and that involves a specified biological, chemical, radiological, or nuclear agent or agents (“CBRN”), or a specified disease or condition that may be attributable to such CBRN.

On February 4, 2020, the HHS Secretary determined that there is such a public health emergency that involves the virus now known as SARS-CoV-2, the virus that causes the COVID-19 infection.

Once the determination of the threat or emergency has been made, the Secretary of HHS must then declare that an emergency exists justifying the issuance of EUAs for certain types of products (referred to as EUA declarations).

On March 27, 2020, the Secretary of HHS declared – on the basis of his determination of a public health emergency that has the potential to affect national security or the health and security of U.S.

citizens living abroad that involves SARS-CoV-2 – that circumstances exist justifying authorization of drugs and biologics during the COVID-19 pandemic, subject to the terms of any EUA that is issued.

Once an EUA declaration has been issued, the FDA can issue EUAs for products that fall within the scope of that declaration.

To issue an EUA, the FDA Commissioner must conclude that (1) the CBRN that is referred to in the EUA declaration can cause serious or life-threatening diseases or conditions;

(2) based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing the disease or condition attributable to the CBRN and that the product’s known and potential benefits outweigh its known and potential risks;

and (3) there is no adequate, approved, and available alternative to the product.

Products subject to an EUA must still comply with the conditions of the EUA, including labeling and marketing requirements.

Moreover, the authorization to market products under an EUA is limited to the period of time the EUA declaration is in effect, and the FDA can revoke an EUA in certain circumstances.

Rare Pediatric Disease Priority Review Voucher Program

In 2012, Congress authorized the FDA to award priority review vouchers to sponsors of certain rare pediatric disease product applications.

This program is designed to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases.

Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product.

The sponsor of a rare pediatric disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor.

The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application.

The FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed in the U.S.

within one year following the date of approval.

For purposes of this program, a “rare pediatric disease” is a (a) serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents;

and (b) rare diseases or conditions within the meaning of the Orphan Drug Act.

On December 27, 2020, the Rare Pediatric Disease Priority Review Voucher Program was extended.

Under the current statutory sunset provisions, after September 30, 2024, FDA may only award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the drug, and that designation was granted by September 30, 2024.

After September 30, 2026, FDA may not award any Rare Pediatric Disease Priority Review Voucher.

Post-Approval Requirements

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Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.

Interchangeability requires that a product is biosimilar to the reference product and the product must

demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

Under the BPCIA, 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.

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

Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

Under the BPCIA, 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 by the FDA.

In addition, the licensure 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 that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.

The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products.

At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

In addition, the period of exclusivity provided by the BPCIA only operates against third parties seeking approval via the abbreviated pathway, but would not prevent third parties from pursuing approval via the traditional BLA approval pathway.

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This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA.

Other Healthcare Laws

Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we and our partners research, sell, market and distribute any products for which we obtain marketing approval.

Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security and transparency laws regarding drug pricing and payments and other transfer of value to physicians and other healthcare providers.

Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims and transparency laws regarding drug pricing and payments and other transfer of value to physicians and other healthcare providers.

If their operations are found to be in violation of any of such laws or any other governmental regulations that apply, they may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and individual imprisonment.

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

On June 17, 2021, the U.S Supreme Court dismissed the most recent judicial challenge to the AC brought by several states without specifically ruling on the constitutionality of the ACA.

On June 17, 2021, the U.S Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Thus, the ACA will remain in effect in its current form.

Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year, which was temporarily suspended from May 1, 2020 through March 31, 2022, and reduced payments to several types of Medicare providers.

Other legislative changes have been proposed and adopted since the ACA was enacted.

In March 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory cap on the Medicaid drug rebate, currently set at 100% of a drug’s AMP, beginning January 1, 2024.

Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries, proposed and enacted legislation and executive orders issued by the President designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

Most recently, the Inflation Reduction Act of 2022, or IRA, included a number of significant drug pricing reforms, which include the establishment of a drug price negotiation program within the U.S.

Department of Health and Human Services, or HHS (beginning in 2026) that requires manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation (first due in 2023), and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs (beginning in 2025).

The IRA permits the HHS Secretary to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

Additional drug pricing proposals could appear in future legislation.

Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical 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.

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In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, and federal and state consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act) that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.

In addition, certain state and non-U.S.

laws, such as the California Consumer Privacy Act ("CCPA"), the California Privacy Rights Act ("CPRA"), and the General data Protection Regulation ("GDPR"), govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.

Failure to comply with these laws, were applicable, can result in the imposition of significant civil and /or criminal penalties and private litigation.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to make compliance efforts more challenging, and can result in investigations, proceedings, or actions that lead to significant penalties and restrictions on data processing.

We rely on a limited number of key customers for the majority of our revenues.

Customers that provided 10% or more of our total revenues in any of the past three fiscal years consist of the following:

Percentage of Total Revenues

For the Years Ended December 31.

2021 2020 2019

Customer A 33 % * *

Customer B 11 % 26 % 28 %

Customer C * 19 % *

Customer D * 11 % 15 %

Customer E * * 23 %

* Percentage was less than 10%

Cybersecurity

In the normal course of business, we may collect and store personal information and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, information regarding trial participants in connection with clinical trials, sensitive third-party information and employee information.

To protect this information, our existing cybersecurity policies require continuous monitoring and detection programs, network security precautions, and in depth security assessment of technology vendors.

We maintain various protections designed to safeguard against cyberattacks, including firewalls and virus detection software.

We have established and regularly test our disaster recovery plan and we protect against business interruption by backing up our major systems.

In addition, we periodically scan our environment for any vulnerabilities, perform penetration testing and engage third parties to assess effectiveness of our data security practices.

A third party security consultant conducts regular network security reviews, scans and audits.

In addition, we maintain insurance that includes cybersecurity coverage.

The program incorporates industry-standard frameworks, policies and practices designed to protect the privacy and security of our sensitive information.

Despite the implementation of our cybersecurity program, our security measures cannot guarantee that a significant cyberattack will not occur.

A successful attack on our information technology systems could have significant consequences to the business.

While we devote resources to our security measures to protect our systems and information, these measures cannot provide absolute security.

See “Risk Factors – General Risk Factors” for additional information about the risks to our business associated with a breach or compromise to our information technology systems.

HUMAN CAPITAL RESOURCES

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Item 1. Business