In 2012, Codexis (CDXS) has fallen hard, lost its leader, and sought a bottom.
You might call it this year's version of First Solar (FSLR), the solar panel maker that fell quite hard last year. First Solar finally found a bottom, and has been bouncing around either side of $15-$20/share for months, despite the collapse of rival panel makers here and abroad.
Is Codexis now primed to survive a shakeout?
A technical analysis would indicate that's possible. Since hitting a low of $2.04/share last month, it has bounced back to $2.72 recently. But let's take a look at the fundamentals.
The company was crushed by two main events this year. It dumped founder Alan Shaw last spring and shares fell out of bed. Last month it arranged a split with Shell, a key source of both capital and enzymes, and the stock fell out of bed again.
Shell and Codexis had been working on cellulase enzymes for turning biomass into fuel, and the early take on this was that Shell was abandoning the business and returning to oil drilling.
But let's focus on Codexis. It did manage to bring in an experienced chemical industry hand, John J. Nicols, with 400,000 options at a strike price that's almost 50% higher than where the stock is trading at now, or $3.46/share, along with 750,000 shares of free stock vesting over four years. The company currently has about 37 million shares outstanding.
At his previous employer, Baton Rouge-based Albemarle (ALB), Nicols was making $1.8 million/year heading up its catalysts business. Analysts at Motley Fool said Nicols expanded the company's contacts into the pure chemical space, while Shaw's contacts had mostly been in pharmaceuticals. But as he was being hired the company did manage to renew its enzyme agreement with Merck (MRK), so that business does not disappear.
There are two ways to look at what's happening here. The bears will say Codexis is being abandoned, that Shell took a big loss on $375 million invested in cellulase enzymes, and that the drugs industry is Codexis' main hope for the future, not fuel at all. The bulls will say the company has taken the training wheels off, that it has some interesting prospects in Brazil, and that it might make a nice takeover target.
Jim Lane of BioFuelsDigest classifies companies like Shell as "strategics," big firms playing the biofuel game as much for the PR value as anything else, and notes that it may be difficult for companies like Codexis to obtain new venture rounds without them. But this could be a blessing in disguise -- Codexis shareholders are now much better leveraged on success in Brazil than before, and Brazilian sugars are a key feedstock.
So when I say Codexis could be the First Solar of biofuels, I'm offering something like praise. If your company can keep its head while all about others are losing theirs, then you're an investment, my son.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.