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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-34705
___________________________
Codexis, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware 71-0872999
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
200 Penobscot Drive, Redwood City, California
 94063
(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTradingName of Each Exchange on Which Registered
Symbol(s)
Common Stock, par value $0.0001 per shareCDXSThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 1, 2021, there were 64,875,278 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.
1





Codexis, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2021


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

2



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands, Except Per Share Amounts)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$119,189 $149,117 
Restricted cash, current581 638 
Investment in non-marketable debt security 1,000 
Financial assets:
Accounts receivable25,084 13,894 
Contract assets12,701 4,526 
Unbilled receivables10,760 10,942 
   Total financial assets48,545 29,362 
        Less: allowances(74)(74)
        Total financial assets, net48,471 29,288 
Inventories1,084 964 
Prepaid expenses and other current assets4,787 3,416 
Total current assets174,112 184,423 
Restricted cash1,519 1,062 
Investment in non-marketable equity securities12,763 1,450 
Right-of-use assets - Operating leases, net19,478 21,382 
Right-of-use assets - Finance leases, net43 119 
Property and equipment, net16,124 9,675 
Goodwill3,241 3,241 
Other non-current assets271 294 
Total assets$227,551 $221,646 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$3,281 $2,970 
Accrued compensation9,041 7,288 
Other accrued liabilities15,927 10,272 
Current portion of lease obligations - Operating leases2,782 2,627 
Deferred revenue2,449 1,824 
Total current liabilities33,480 24,981 
Deferred revenue, net of current portion3,747 2,967 
Long-term lease obligations - Operating leases20,218 22,324 
Other long-term liabilities1,051 1,271 
Total liabilities58,496 51,543 
Commitments and Contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value per share; 5,000 shares authorized, none issued and outstanding
  
Common stock, $0.0001 par value per share; 100,000 shares authorized;
64,833 and 64,283 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
6 6 
Additional paid-in capital546,557 536,516 
Accumulated deficit(377,508)(366,419)
Total stockholders' equity169,055 170,103 
Total liabilities and stockholders' equity$227,551 $221,646 
See accompanying notes to the unaudited condensed consolidated financial statements.
3



Codexis, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues:
Product revenue$28,731 $8,401 $53,674 $18,005 
Research and development revenue8,038 9,984 26,579 30,018 
Total revenues36,769 18,385 80,253 48,023 
Costs and operating expenses:
Cost of product revenue6,867 3,642 15,403 7,882 
Research and development15,165 12,010 39,562 33,830 
Selling, general and administrative13,407 8,797 37,600 26,307 
Total costs and operating expenses35,439 24,449 92,565 68,019 
Income (loss) from operations1,330 (6,064)(12,312)(19,996)
Interest income41 39 424 362 
Other income (expense), net983 (50)920 (125)
Income (loss) before income taxes2,354 (6,075)(10,968)(19,759)
Provision for income taxes110 19 121 331 
Net income (loss)$2,244 $(6,094)$(11,089)$(20,090)
Net income (loss) per share, basic$0.03 $(0.10)$(0.17)$(0.34)
Net income (loss) per share, diluted$0.03 $(0.10)$(0.17)$(0.34)
Weighted average common stock shares used in computing net income (loss) per share, basic64,628 59,061 64,452 58,984 
Weighted average common stock shares used in computing net income (loss) per share, diluted67,741 59,061 64,452 58,984 
See accompanying notes to the unaudited condensed consolidated financial statements
4



Codexis, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
Common StockAdditional
paid-in
Capital
Accumulated DeficitTotal Stockholders' Equity
Three months ended September 30, 2021SharesAmount
Balance as of July 1, 202164,623 $6 $542,519 $(379,752)$162,773 
Exercise of stock options210 — 1,022 — 1,022 
Employee stock-based compensation— — 2,955 — 2,955 
Non-employee stock-based compensation— — 61 — 61 
Net income— — — 2,244 2,244 
Balance as of September 30, 202164,833 $6 $546,557 $(377,508)$169,055 
Common StockAdditional
paid-in
Capital
Accumulated DeficitTotal Stockholders' Equity
Three months ended September 30, 2020SharesAmount
Balance as of July 1, 202059,125 $6 $451,185 $(356,405)$94,786 
Exercise of stock options55 — 342 — 342 
Release of stock awards70 — — — — 
Taxes paid related to net shares settlement of equity awards(18)— (217)— (217)
Employee stock-based compensation— — 1,941 — 1,941 
Non-employee stock-based compensation— — 43 — 43 
Net loss— — — (6,094)(6,094)
Balance as of September 30, 202059,232 $6 $453,294 $(362,499)$90,801 

See accompanying notes to the
unaudited condensed consolidated financial statements
5



Codexis, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
Common StockAdditional
paid-in
Capital
Accumulated DeficitTotal Stockholders' Equity
Nine months ended September 30, 2021SharesAmount
Balance as of January 1, 202164,283 $6 $536,516 $(366,419)$170,103 
Exercise of stock options423 — 2,700 — 2,700 
Release of stock awards181 — — — — 
Taxes paid related to net shares settlement of equity awards(54)— (1,206)— (1,206)
Employee stock-based compensation— — 8,360 — 8,360 
Non-employee stock-based compensation— — 187 — 187 
Net loss— — — (11,089)(11,089)
Balance as of September 30, 202164,833 $6 $546,557 $(377,508)$169,055 


Common StockAdditional
paid-in
Capital
Accumulated DeficitTotal Stockholders' Equity
Nine months ended September 30, 2020SharesAmount
Balance as of January 1, 202058,877 $6 $447,920 $(342,409)$105,517 
Exercise of stock options87 — 539 — 539 
Release of stock awards370 — — — 
Taxes paid related to net shares settlement of equity awards(102)— (1,257)— (1,257)
Employee stock-based compensation— — 6,045 — 6,045 
Non-employee stock-based compensation— — 47 — 47 
Net loss— — — (20,090)(20,090)
Balance as of September 30, 202059,232 $6 $453,294 $(362,499)$90,801 

See accompanying notes to the unaudited condensed consolidated financial statements
6



Codexis, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in Thousands)
Nine Months Ended September 30,
 20212020
Operating activities:
Net loss$(11,089)$(20,090)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation2,143 1,403 
Amortization expense - right-of-use assets - operating and finance leases1,980 1,964 
Stock-based compensation8,547 6,092 
Allowance for credit losses 40 
Equity securities earned from research and development activities(675) 
Unrealized gain on non-marketable securities(1,033) 
Other non-cash items(19) 
Changes in operating assets and liabilities:
Financial assets, net(19,633)(6,482)
Inventories(120)(366)
Prepaid expenses and other assets(1,195)(1,105)
Accounts payable575 (101)
Accrued compensation and other accrued liabilities7,036 3,581 
Other long-term liabilities(2,324)(1,920)
Deferred revenue880 2,012 
Net cash used in operating activities(14,927)(14,972)
Investing activities:
Purchase of property and equipment(8,348)(2,260)
Proceeds from sale of property and equipment36  
Investment in equity securities(7,630)(1,000)
Net cash used in investing activities(15,942)(3,260)
Financing activities:
Proceeds from exercises of stock options2,700 539 
Costs incurred in connection with equity financing(153) 
Payments of lease obligations - Finance leases (60)
Taxes paid related to net share settlement of equity awards(1,206)(1,257)
Net cash provided by (used in) financing activities1,341 (778)
Net decrease in cash, cash equivalents and restricted cash(29,528)(19,010)
Cash, cash equivalents and restricted cash at the beginning of the period150,817 92,221 
Cash, cash equivalents and restricted cash at the end of the period$121,289 $73,211 
Supplemental disclosure of cash flow information:
Interest paid$6 $15 
Income taxes paid$101 $312 
Supplemental non-cash investing and financing activities:
Capital expenditures incurred but not yet paid$2,012 $289 

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of September 30, 2021 and 2020 to the total of the same such amounts shown above in the unaudited condensed consolidated statements of cash flows:

 September 30,
 20212020
Cash and cash equivalents$119,189 $71,516 
Restricted cash, current and non-current 2,100 1,695 
Total cash, cash equivalents and restricted cash$121,289 $73,211 
See accompanying notes to the unaudited condensed consolidated financial statements
8



Codexis Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
In these notes to the unaudited condensed consolidated financial statements, the “Company,” “we,” “us,” and “our” refers to Codexis, Inc. and its subsidiaries on a consolidated basis.
We discover, develop and sell enzymes and other proteins that deliver value to our clients in a growing set of industries to commercialize an increasing number of novel enzymes, both as proprietary Codexis products and in partnership with our customers.
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. 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. Additionally, 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. This 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. This also allows for efficient technical transfer of our processes to our manufacturing partners.
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. Most recently, in May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver® Agreement”) with Novartis. The Novartis CodeEvolver® Agreement (our 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”) and polymerase chain reaction (“PCR/qPCR”) for in vitro molecular diagnostic and genomic research applications. In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc. 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.
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 Société 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.
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Also in October 2017, we entered into a strategic collaboration agreement with Nestlé 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 January 2020, we entered into a development agreement with Nestlé Health Science to advance a new lead candidate discovered under the Nestlé SCA, CDX-7108, into preclinical development and early clinical studies as a potential treatment for a gastrointestinal disorder.
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.
In June 2020, we entered into a Master Collaboration and Research Agreement (the “MAI Agreement”) with Molecular Assemblies, Inc ("MAI") pursuant to which we are leveraging our CodeEvolver® platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis. Concurrently with the MAI Agreement, we purchased 1,587,050 shares of MAI's Series A preferred stock for $1.0 million and, in connection with the transaction, John Nicols, our President and Chief Executive Officer, joined MAI’s board of directors. In April 2021, we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $0.6 million. In September 2021, we purchased 9,198,423 shares of MAI's Series B preferred stock for $7.0 million (see Note 11 "Related Party Transactions" for additional information).
See Note 12 "Segment, Geographical and Other Revenue Information" for additional information.
Below are brief descriptions of our business segments:
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.
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 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 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. Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114.
In October 2017, we entered into the 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. The Nestlé SCA was extended through December 2021. 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 into preclinical and early clinical studies a lead candidate targeting a gastrointestinal disorder, CDX-7108, discovered through the Nestlé SCA. During 2021, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial which commenced in October 2021. Additionally, the parties are progressing three programs under the Nestlé SCA targeting different gastrointestinal disorders.
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In March 2020, we entered into the Takeda Agreement 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. 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, having been provided to Takeda. In May 2021, Takeda elected to exercise their option to expand the collaboration into a fourth program for an undisclosed rare genetic disorder.
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 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.
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 revenue for the three and nine months ended September 30, 2021. The extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are uncertain and cannot be predicted with confidence.
In the U.S., 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 and disrupted our R&D operations in 2020. 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 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.
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 in the future remains uncertain. Although some of the Orders that were enacted to control the spread of COVID-19 were scaled back and the vaccine rollout has expanded, surges in the spread of COVID-19 due to the emergence of new more contagious variants or the ineffectiveness of the vaccines against such strains, may result in the reimplementation of certain Orders, which could adversely impact our business.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information but does not include all the information and notes required by GAAP for complete financial statements. These interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020. The condensed consolidated balance sheet at December 31, 2020, has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements. The significant accounting policies used in preparation of the Unaudited Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2021 and 2020, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary. There have been no significant changes in our significant accounting policies or critical accounting estimates since December 31, 2020.
11


Certain prior year amounts have been reclassified in the Unaudited Condensed Statements of Cash Flows to conform to the 2021 presentation, however these reclassifications had no effect on the reported results of operations.
The Unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of September 30, 2021, results of our operations for the three and nine months ended September 30, 2021 and 2020, changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The interim results are not necessarily indicative of the results for any future interim period or for the entire year.
The Unaudited Condensed Consolidated Financial Statements include the accounts of Codexis, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly assess these estimates which primarily affect revenue recognition, inventories, valuation of equity investments, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, and may not be accurately predicted, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers, markets and economies.
Accounting Pronouncements
Recently adopted accounting pronouncements
In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes. We adopted the standard on January 1, 2021, on a modified retrospective basis. The adoption of this standard had no impact on our Unaudited Condensed Consolidated Financial Statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements. ASU 2020-10 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. We adopted the standard on January 1, 2021 on a retrospective basis. The adoption of this standard had no impact on our Unaudited Condensed Consolidated Financial Statements.
Recently issued accounting pronouncements not yet adopted
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the recently issued standards that are not yet effective will not have a material impact on our Unaudited Condensed Consolidated Financial Statements upon adoption.
In May 2021, FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force. The standard establishes a principles-based framework in accounting for modifications of freestanding equity-classified written call options on the basis of the economic substance of the underlying transaction. The standard also requires incremental financial statement disclosures. The standard affects entities that present earnings per share in accordance with the guidance in Topic 260, Earnings Per Share. The standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years with early adoption is permitted by applying the standard as of the beginning of the fiscal year that includes that interim period. The standard may be adopted prospectively for modifications or exchanges occurring on or after the effective date. We will evaluate modifications of equity-classified written call options to determine applicability of the standard on occurrence; however, we believe that the adoption of ASU 2021-04 will have no significant impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.
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In August 2020, FASB issued ASU No. 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) No. 2020-06 August 2020 Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to reduce the complexity and to simplify the accounting for convertible debt instruments and convertible preferred stock, and the derivatives scope exception for contracts in an entity's own equity. In addition, the guidance on calculating diluted earnings per share has been simplified and made more internally consistent. The standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years with early adoption permitted for fiscal years beginning December 15, 2020. The standard may be adopted on a modified retrospective or fully retrospective method of transition and on adoption, entities may irrevocably elect the fair value option in accordance with Subtopic 825-10, Financial Instruments—Overall, for any financial instrument that is a convertible security. We believe that the adoption of ASU 2020-06 will have no significant impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions in which the reference LIBOR or another reference rate are expected to be discontinued as a result of the Reference Rate Reform. The standard is effective for all entities and can be adopted no later than December 1, 2022, with early adoption permitted. The standard may be adopted on a prospective basis. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to elect optional expedients for contract modification; however, we believe that the adoption of ASU 2020-04 will have no significant impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.
There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 2021, as compared to the recent accounting pronouncements described in herein, that are of significance or potential significance to us.
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Note 3. Revenue Recognition
Disaggregation of Revenue
The following table provides information about disaggregated revenue from contracts with customers into the nature of the products and services, and geographic regions, and includes a reconciliation of the disaggregated revenue with reportable segments. The geographic regions that are tracked are the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle East, and Africa), and APAC (Australia, New Zealand, Southeast Asia, and China).
Segment information is as follows (in thousands):
Three months ended September 30, 2021Three months ended September 30, 2020
Performance EnzymesNovel BiotherapeuticsTotalPerformance EnzymesNovel BiotherapeuticsTotal
Major products and service:
Product revenue$28,731 $ $28,731 $8,401 $ $8,401 
Research and development revenue3,853 4,185 8,038 4,604 5,380 9,984 
Total revenues$32,584 $4,185 $36,769 $13,005 $5,380 $18,385 
Primary geographical markets:
Americas
$5,999 $1,817 $7,816 $3,209 $2,632 $5,841 
EMEA
2,317 2,368 4,685 2,141 2,748 4,889 
APAC
24,268  24,268 7,655  7,655 
Total revenues$32,584 $4,185 $36,769 $13,005 $5,380 $18,385 
Nine months ended September 30, 2021Nine months ended September 30, 2020
Performance EnzymesNovel BiotherapeuticsTotalPerformance EnzymesNovel BiotherapeuticsTotal
Major products and service:
Product revenue$53,674 $ $53,674 $18,005 $ $18,005 
Research and development revenue14,723 11,856 26,579 13,380 16,638 30,018 
Total revenues$68,397 $11,856 $80,253 $31,385 $16,638 $48,023 
Primary geographical markets:
Americas
$12,573 $6,015 $18,588 $7,381 $10,591 $17,972 
EMEA
11,294 5,841 17,135 8,128 6,047 14,175 
APAC
44,530  44,530 15,876  15,876 
Total revenues$68,397 $11,856 $80,253 $31,385 $16,638 $48,023 
Contract Balances
The following table presents balances of contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):
September 30, 2021December 31, 2020
Contract assets$12,701 $4,526 
Unbilled receivables$10,760 $10,942 
Contract costs$70 $90 
Contract liabilities: deferred revenue$6,196 $4,791 
We had no asset impairment charges related to financial assets in the three and nine months ended September 30, 2021 and 2020.
The increase in contract assets was primarily due to increase in product revenue from contracts subject to over time
14


revenue recognition. The nominal decrease in unbilled receivables was primarily due to the timing of billings. The increase in deferred revenue was primarily due to cash advances received in excess of revenue recognized.
We recognized the following revenues (in thousands):
Three months ended September 30,Nine months ended September 30,
Revenue recognized in the period for:2021202020212020
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied$658 $708 $1,997 $58 
Changes in the period:
Changes in the estimated transaction price allocated to performance obligations satisfied in prior periods1,521 233 5,848 854 
Performance obligations satisfied from new activities in the period - contract revenue34,590 17,444 72,408 47,111 
Total revenues$36,769 $18,385 $80,253 $48,023 
Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting periods. The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of September 30, 2021.
The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts as of September 30, 2021 (in thousands):
Remainder of 2021202220232024 and ThereafterTotal
Product revenue$5 $67 $67 $2,700 $2,839 
Research and development revenue1,106 1,705 546  3,357 
Total revenues$1,111 $1,772 $613 $2,700 $6,196 
Note 4. Net Income (loss) per Share
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject to forfeiture. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities.
Anti-Dilutive Securities
In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.
The following table sets forth the computation of basic and diluted net income (loss) per share during the three and nine months ended September 30, 2021 and 2020 (in thousands, except per share amounts):
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Three months ended September 30,Nine months ended September 30,
2021202020212020
Numerator:
Net income (loss)$2,244 $(6,094)$(11,089)$(20,090)
Denominator:
Weighted average common stock shares used in computing net income (loss) per share, basic64,628 59,061 64,452 58,984 
Effect of dilutive shares3,113    
Weighted average common stock shares used in computing net income (loss) per share, diluted67,741 59,061 64,452 58,984 
Net income (loss) per share, basic$0.03 $(0.10)$(0.17)$(0.34)
Net income (loss) per share, diluted$0.03 $(0.10)$(0.17)$(0.34)

The following shares were not considered in the computation of diluted net income (loss) per share because their effect was anti-dilutive (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Shares issuable under the Equity Incentive Plan4515,1825,1485,182
Note 5. Investments in Non-Marketable Securities
Non-Marketable Debt Securities
We classify non-marketable debt securities, which are accounted for as available-for-sale, within Level 3 in the fair value hierarchy because we estimate the fair value based on a qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.
We determine gains or losses on the sale or extinguishment of non-marketable debt securities using a specific identification method. Unrealized gains and losses from bifurcated embedded derivatives, which represent share-settled redemption features, are recorded as other expense, net, in the unaudited condensed consolidated statements of operations. Unrealized gains and losses on non-marketable debt securities are recorded as a component of other comprehensive loss until realized. Realized gains or losses are recorded as a component of other income (expense), net.
In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp., an early-stage computational protein design company, for $1.0 million. The investment was classified as available-for-sale non-marketable interest-bearing debt securities with a carrying value of $1.0 million as of December 31, 2020. In July 2021, we converted the non-marketable debt security with a carrying value of $1.3 million into 207,070 shares of Series B-2 preferred stock of Arzeda Corp. In the three and nine months ended September 30, 2021, we recognized nil and $0.3 million, respectively, in interest income from amortization of debt discount and interest earned on our investment in this debt security, and nil and $10.5 thousand in other expense, respectively, in other income (expense), net, on the change in the fair value of an embedded bifurcated derivative. We recognized no unrealized or realized gains or losses during the three and nine months ended September 30, 2021. We recognized no interest income, other expenses, and unrealized or realized gains or losses during the three and nine months ended September 30, 2020.
There were no investments in non-marketable debt securities at September 30, 2021. As of December 31, 2020, the adjusted cost and carrying value and fair value of the non-marketable debt security is the following (in thousands):
December 31, 2020
Adjusted Cost and Carrying ValueFair Value
Non-marketable debt security due in 1 year or less$1,000 $1,000 
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Non-Marketable Equity Securities
Non-marketable equity securities are investments in privately held companies without readily determinable market value. We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis. We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of other income (expense), net.
We measured our equity investments in MAI and Arzeda Corp. based on the measurement alternative and adjusted the carrying values for observable price changes in orderly transactions for an identical or similar equity securities of the same issuer. We recognized a $0.7 million gain in other income (expense), net, on the change in the carrying value of our investment in MAI as a result of a recent round of financing. We recognized no unrealized or realized gain or losses during the three and nine months ended September 30, 2020. The carrying value of our investment in MAI was $11.5 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively. The carrying value of our investment in Arzeda Corp. was $1.3 million at September 30, 2021.
The following table presents balances of the carrying value of non-marketable equity securities (in thousands):
 September 30, 2021December 31, 2020
Non-marketable equity securities$12,763 $1,450 
Note 6. Fair Value Measurements
The following tables present the financial instruments that were measured at fair value on a recurring basis within the fair value hierarchy (in thousands):
 September 30, 2021
 Level 1Level 2Level 3Total
Money market funds $95,089 $— $— $95,089 
 December 31, 2020
 Level 1Level 2Level 3Total
Money market funds $127,567 $— $— $127,567 
Non-marketable debt security— — 1,000 1,000 
Total$127,567 $— $1,000 $128,567 
During the three and nine months ended September 30, 2021 and 2020, we did not recognize any significant credit losses nor other-than-temporary impairment losses on non-marketable securities.
Note 7. Balance Sheets Details
Cash Equivalents
Cash equivalents as of September 30, 2021 and December 31, 2020, consisted of the following (in thousands):
 September 30, 2021December 31, 2020
 Adjusted CostEstimated Fair ValueAdjusted CostEstimated Fair Value
Money market funds (1)
$95,089 $95,089 $127,567 $127,567 
(1) Money market funds are classified in cash and cash equivalents on our consolidated balance sheets. Average Contractual Maturities (in days) is not applicable.
As of September 30, 2021, the total cash and cash equivalents balance of $119.2 million was comprised of money market funds of $95.1 million and cash of $24.1 million held with major financial institutions. As of December 31, 2020, the total cash and cash equivalents balance of $149.1 million was comprised of money market funds of $127.6 million and cash of $21.5 million held with major financial institutions.
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Inventories
Inventories consisted of the following (in thousands):
September 30, 2021December 31, 2020
Raw materials$49 $77 
Work-in-process77 82 
Finished goods958 805 
Inventories$1,084 $964 
Inventories are recorded net of reserves of $1.5 million as of September 30, 2021 and December 31, 2020.
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
September 30, 2021December 31, 2020
Laboratory equipment$29,103 $25,468 
Leasehold improvements10,785 10,785 
Computer equipment and software3,313 3,192 
Office equipment and furniture1,247 1,246 
Construction in progress6,678 2,357 
Property and equipment51,126 43,048 
Less: accumulated depreciation and amortization(35,002)(