Shell-Backed Codexis Expected to Price IPO This Week

Includes: CDXS, RDS.A
by: Abbi Adest

Codexis (NASDAQ:CDXS), a Shell (NYSE:RDS.A) -backed developer of biocatalysts for biofuel and pharma applications, is expected to price its IPO this week.

Business Overview (from prospectus)

Our proprietary technology platform enables the creation of optimized biocatalysts that make existing industrial processes faster, cleaner and more efficient than current methods and has the potential to make new industrial processes possible at commercial scale. We have commercialized our biocatalysts in the pharmaceutical industry and are developing biocatalysts for use in producing advanced biofuels under a multi-year research and development collaboration with Shell. We are also using our technology platform to pursue biocatalyst-enabled solutions in other bioindustrial markets, including carbon management, water treatment and chemicals.

Offering: 6 million shares at $13 - $15 per share. Net proceeds of approximately $73.6 million will be used to fund working capital and other general corporate purposes and possible unspecified acquisitions.

Lead Underwriters: Credit Suisse (NYSE:CS), Piper Jaffray (NYSE:PJC)

Financial Highlights:

Revenues increased $32.4 million, or 64%, from $50.5 million in 2008 to $82.9 million in 2009, primarily due to increases in revenues from related party collaborative research and development projects and product sales offset by reductions in revenues from other collaborative research and development projects... Cost of product revenues was $13.2 million for 2008, compared to $16.7 million in 2009, an increase of $3.5 million or 26%... Research and development expenses were $45.6 million in 2008, compared to $54.7 million in 2009, an increase of $9.2 million or 20%.


Our primary competitors in the pharmaceutical market are companies using conventional, non-biocatalytic processes to manufacture pharmaceutical intermediates and APIs that compete in the marketplace with our biocatalytically manufactured products. The principal methods of competition and competitive differentiation in this market are product quality and performance, including manufacturing yield and safety and environmental benefits, speed of delivery of product and price. The market for the manufacture and supply of APIs and intermediates is large with many established players.

These companies include many of our large innovator and generic pharmaceutical customers, such as Merck (NYSE:MRK), Pfizer (NYSE:PFE), and Teva (NYSE:TEVA), who 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 catalysis reactions catalyzed by chemical catalysts, or biocatalytic routes using commercially available enzymes, or combinations thereof. Our manufacturing processes must compete with these internally developed routes. Additionally, there are many large well-established fine chemical manufacturing companies that compete to supply pharmaceutical intermediate and APIs to our customers, such as DSM, BASF Corporation (OTCQX:BASFY) and Lonza Group Ltd. (OTCPK:LZAGF) Finally, we face increasing competition from generic pharmaceutical manufacturers in low cost centers such as India and China.

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