Codexis Morphs From Big Science Project Into $100M Business

10/27/10Follow @xconomy

Enzymes make the world go around, if you spend much time listening to biochemists. Now one of the emerging players in the business of engineering industrial enzymes, Redwood City, CA-based Codexis, is starting to show it can make those biological workhorse proteins into something else important—money.

Codexis (NASDAQ: CDXS) made headlines back in April when it went public at $13 a share, as investors bought in to its story about enzyme technology and its potential use for the future of renewable biofuels. What fewer people realize is that while this is largely about technology, Codexis is on pace to generate almost $100 million in sales this year and to turn an operating profit, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA). Tomorrow, the company will provide more color on where it stands in its third-quarter financial report.

The Codexis story is one of those rare tales in which a big science project finds its legs as a business. The company was founded in 2002 as a spinoff from Maxygen, which itself spun off from Affymax. The underlying technology is all about what’s known as “directed evolution,” in which scientists take an existing enzyme, or stretch of DNA to make an enzyme, and tweak properties here and there in a way that Mother Nature never intended, to get a useful product. Scientific imaginations can run wild with ideas of enzymes to run nifty processes that make active pharmaceutical ingredient for drugmakers; new catalysts that break down cellulosic biomass sugarcane into renewable fuel; or concentrate carbon dioxide so it can be stashed underground to limit the pollution from coal-fired power plants.

More than $400 million of investment has gone into the technology by Codexis and its two predecessors over the past two decades, and only now can Codexis say with confidence that it is off and running as a sustainable business with potential to really go after its biggest commercial ambitions.

“In the last two years we have been able to put hand on our hearts and say we now have a platform that works,” says Codexis CEO Alan Shaw. “It works in a time frame that matters in the real world.”

Alan Shaw

Alan Shaw

Enzymes can be finicky things in which seemingly small differences end up counting for a lot, so the key for a company like Codexis is to find the right combination and make it consistently and profitably. Without going too deep into the science, it starts with a template of DNA, and the company does high-powered screening of different mutations to see if it can get the properties of an enzyme it wants. What might take Mother Nature a millennium to evolve can be done in a matter of months through the high-speed screening technique, Shaw says.

The big question was always where this technology would be useful in a commercial setting. Codexis started with the pharmaceutical industry.

“When you try to deploy a new technology in a market, usually the best place to go is to look for natural innovators, you have to look for early adopters, and you find them in the life sciences industry,” Shaw says.

One of the important test cases for Codexis came through a contract it earned with the world’s largest drugmaker, Pfizer. The company makes the world’s best-selling … Next Page »

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