In this article, I will give my observations on a company I feel has massive potential to be a solid long term winner in the future. Being currently a small cap company, it does carry the standard risks of cap investing. The trick in small cap investing is picking the one that will end up being a medium to large cap in the future. Since I have locked up most of my investing capital in Antares Pharma (AIS) for this reason, I do not have much long term capital for investment left over to make other small cap investments. The following is one company I would definitely consider for a long term investment.
Codexis (CDXS) is a unique company with multiple industry partnerships and areas of development. Their diverse areas of expertise enables for quite a range of viable opportunities in many different industries.
The diversification is what I find most promising with unique partnerships with major named monopoly companies such as energy specialist Shell (RDS.B), drug developer Pfizer (PFE), industrial cleaner company Chemtex, and one of the world's largest producer of aluminum, Alcoa (AA).
Codexis specializes in the production of Bio enzyme and microorganism technologies, an environmentally conscious and effective approach to current resources with the evolution of its multiple patented innnovations.
The CodeEvolver™ product application of CodeXol™ detergent alcohols, which is used in a variety of industry products including household and industrial strength cleaners, shampoos, toothpaste, and laundry detergents, is in development to replace the use of petroleum based dependency by utilizing Biomass, a renewable energy source comprised of biological material from living organisms.
Currently, both industrial use and household cleaning products have become less effective since the ban on cleaning products containing phosphate ingredients like tri sodium phosphate in the 1990's. The science of CodeXol™ returns effectiveness back to the consumer while having a positive impact on the environment.
Utilizing biological waste to create and maintain effective renewable energy sources, biofuels, cleaning products, and medicinal components with cost effectiveness is one of the biggest compromising factors of 'going green.' The Codexis goal in great part is to eliminate these compromising factors.
Using Codexis technologies, consumers will be able to utilize both effectiveness and environmentally friendly at an affordable price, not to mention the tax deductions awarded by the US government for using enzyme based products, making this a market that is sure to have vast growth in my opinion.
In addition to effectiveness of cleaners at a cost conscious price, Codexis is also using the science of CodeEvolver™ with its Shell and Cosan (CZZ) partnership (Brazil's largest producer of sugarcane and Shell Oil have entered into the joint venture called Raizen) to change the process of creating biofuel, making it more effective and cheaper to produce and manufacture, making biofuels more readily accessible and capable of replacing current existing dependency on current petroleum based fuel sources.
The Biomass enzymes are derived from sugarcane, a faster growing and easier to produce alternative to the current biofuel ingredient of corn, which Codexis is working on improving the performance of the yeasts currently used in ethanol production for a quicker turnaround for higher production yields.
From the Codexis website:
Cost effective biomass to sugar conversion: Codexis CodeXyme™ cellulase enzymes can convert biomass to sugar, enabling cost effective production of practical, renewable products in the fuels and chemicals markets. Through a major collaboration with Shell that began in 2006, Codexis is developing CodeXyme™ cellulases to meet the exacting technical requirements of Shell's cellulosic ethanol processes.
Codexis is also tailoring CodeXyme™ cellulases for use in other processes, including production of detergent alcohols from cellulosic feedstocks in collaboration with Chemtex. These feedstocks are difficult to convert to fermentable sugars, and Codexis has made significant progress in cellulase performance using the company's CodeEvolver™ directed evolution technology platform and has scaled up cellulase production using the CodeXporter™ enzyme production platform.
In other words from the above; cheaper, easier, faster, better, without significant infrastructure investment.
Continuing its technology platform and current research, which is funded in part by the Department of Energy, Codexis is developing the ability to effectively reduce carbon emissions from manufacturing plants which could be a game changer.
The pollution that large plants currently emit have an environmental impact that has become a concern worldwide. With the development of the carbon capture technology, the ability to not only reduce carbon dioxide emissions, but to convert those emissions into products such as fertilizer, in collaboration with Alcoa, the world's 3rd largest producer of Aluminum, could fundamentally change the way our country uses and produces energy.
Codexis technology has already improved the carbon capture 2 Million times over natural forms of the enzyme through Codexis engineering. Codexis carbon capture technology is funded in part by a grant from the U.S. Department of Energy ARPA-E program.
The diverse presentations for these enzymes, which are environmentally friendly, have already begun to show profitability for numerous applications, and there is no exception to the usefulness in the field of Bio Pharma. The ability of acceleration evolution by these microorganisms and enzymes are a catalyst for the development of medicinal compounds being researched by Bio Pharm companies.
One of the major components of research and development of products like medications is the amount of time it takes to develop a product. Time equals money which often becomes a huge obstacle, especially for small bio-pharma companies, who often have a great product, but do not have the millions of dollars to continue the time consuming research and development of a product through the phase clinical trials, and still keep their heads above the red line until the product is capable of being marketed and sold, and the return of capital investment into the research can make a profit.
Most of these companies, for lack of funding because of these time consuming operations, often fall into toxic financing, bankruptcy, or completely go out of business. The enzymes being developed by Codexis accelerates the process for chemical reaction, cutting research and manufacturing time safely and effectively, improving product purity and yields, reducing production process steps, eliminating toxins from the manufacturing process and reducing the need for capital expenditures.
Codexis bio-based products are already in use at more than 50 drug companies around the world. Some of the companies already taking full advantage of the innovative sciences created by Codexis include:
Merck (MRK) (who reported a 10-13% increase in overall yield, a 53% increase in productivity and a 19% reduction in total waste Science, June 17, 2010), Pfizer Teva (TEVA), DSM Pharmaceutical products (RDSMY.PK), and Dainippon Sumitomo Pharma (DNPUF.PK), one of the ten largest Japanese pharmaceutical manufacturers.
Diverse applications can bring what seems like unlikely alliances together to change the effects on business and environment, helping both to prosper. I don't really see a longterm downside to the potential this company has to offer at its current stock price of $3.55 a share.
Cost effective, environmentally friendly, diversified use, and everyday utilization, tells me it's only a matter of time before we see Codexis science being utilized in everyday processes, and by every industry of products that currently rely on outdated fuel sources or medicinal research development, production, and manufacturing.
The fact that this company thrives from helping others succeed, shows that it is a symbiotic partner and everybody gains from the mutual relationship. The environmentally friendly approach without the sacrifice of price will allow this company to grow and prosper, while the returns on investment will be seen in dollars and within our environment.
I gave a chart analysis opinion in my last article that included Codexis if you would like to read that over. This article is long enough as is, so I felt it better for you to refer to the link above for my technical opinion.
Codexis is a gamble as I also refer to in the prior article that the company needs an extension/expansion of its agreement with Shell. Companies like Codexis should be the wave of the future as we get closer and closer to a peek oil world wide condition. At some point, these large oil companies must realize that oil is a limited resource, and commit more money to companies like Codexis to ensure their collective financial survival, heck even our collective survival on this planet!
Personally, it is my opinion Codexis is worth the gamble for the long term. The company has an excellent IP and patent profile, and offers at the very least, an attractive buy-out opportunity for a large oil company to consider. As I mention in my prior article, I do expect a run-up to occur at some point in the near term as Codexis waits on the decision from Shell whether or not to expand, extend, or end its partnership with Codexis. My prior article linked above has my price target opinions in it i you would like to see those.
DISCLAIMER: This article is intended for informational and entertainment use only and should not be construed as professional investment advice, but rather my opinions as a writer only. Always do you own complete due diligence before buying and selling any stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.