Last week Codexis posted a mixed set of results for the second quarter of its financial year with revenue falling 12 per cent to $22m (EUR17.8) and operating losses increasing 1 per cent to $5.3m. The firm also revealed that it will not receive any more R&D funding from Shell for their biofuel development accord.
Revenue from customers in the pharmaceutical industry – which Codexis’ product business supplies with enzymes and chemical intermediates – was down, falling 19 per cent year-on-year as a result of delayed orders.
Spokesman Wes Bolson told in-Pharmatechnologist.com that: “Some of the shipments that we thought would come in Q2 moved more into Q3 and Q4. This is the “lumpy” nature of the business that we talked about.
“More specifically, a temporary reduction in atorvastatin orders occurred during Q2. This was due to inventory reductions by our pharmaceuticals customers when they paused production to feel out the market dynamics, as the ANDA window expired”.
He explained that sales of a key intermediate for atorvastatin – the active pharmaceutical ingredient (API) in Pfizer’s off-patent blockbuster Lipitor –slowed following the expiry of Ranbaxy's 180-day exclusivity period in May, which prompted the rest of the generics sector to pause production to assess the market.
However, while lower atorvastatin sales may have hurt Codexis’ in the quarter, since then things have improved according to Bolson who said: “The good news is that atorvastatin ordering activity picked up again in July, so we’re confident the ANDA window expiry was just a one-quarter blip.”
Pharma guidance
Despite the recovery of atorvastin-related sales Codex still cut its guidance and for the full year. The firm expects revenue for fiscal 2012 to be lower than the $124m generated in fiscal 2011 with the contribution from the pharmaceutical industry being flat at around $49m.
Bolsen said: “We revised our expectations as there are a couple of items we had originally forecast for Q4 that will almost certainly slip into 2013” without going into any specifics.
However, Bolsen was positive about Codexis pharma business going forward, revealing that: “Looking at the product portfolio longer term, we see continuing growth for on-patent product sales.”
Again he didn’t go into details, but the firm’s recent deals with Merck & Co are likely to be important revenue generators for the unit.
Cost reduction
In addition to presenting its second quarter financials and cutting its guidance Codexis also revealed it is developing a cost reduction plan that is likely to involve job losses.
Speaking at the firm’s earnings call last week CEO John Nicols said: “Given the new lower revenue expectations, we are finalizing our plans to reduce our operating expenses. We will provide further information on these cost reduction measures, when they become necessary to implement."
Nicols added that Codexis is expected to have a 'smaller headcount' as a result of the measures but did not provide further information.
We asked Bolsen if the cost reduction plan will impact Codexis’ pharma business, but he declined to comment. Instead he said that: “We are very pleased with our Pharma business, and plan to continue growing it in coming years.