Redwood City-based Codexis (NASDAQ: CDXS) is currently priced around $11.15 per share, but this could radically change in the near future.
If you are like most investors, you have not heard of Codexis. This small biotech company has become a trailblazer in enzyme engineering in a relatively short period of time. The company’s platform is centered on machine learning along with its signature design, create and test pathway.
So far, Codexis has produced some highly effective enzymes for an array of applications. Codexis employs 116 people. The company’s stock has a 52-week high of $13.60 and a 52-week low of $3.95. Beta is -1.40, meaning it has low volatility compared to the overarching sector and market as a whole.
Let’s take a closer look at the company, and determine whether or not it’s worth your investment.
Codexis’ Core Business
Codexis’ primary focus has been the generation of highly specialized enzymes that add value to the pharmaceutical industry. In particular, these enzymes add to manufacturing operations in a way that boosts yield, decreases energy consumption and prevents the generation of potentially harmful byproducts. Enzymes that are biologically produced are also used in the creation of food ingredients along with textile production, metalworking and health care diagnostics.
Codexis really started expanding its reach in 2017, providing a year-over-year revenue jump of nearly 75 percent. The company’s gross margin for product was nearly 50 percent. The company has obtained high-paying licensing agreements that provide the world’s top pharmaceutical businesses with its platform for enzyme engineering. These relationships served as the foundation for the stock’s climb throughout the past year. All in all, Codexis increased by about 80 percent across ’17. The stock is up more than 350 percent across the past half-decade.
How to Interpret Codexis’ Hot End to 2017
Codexis garnered attention this past year thanks to its sterling fourth quarter results. The protein engineering company closed out the fourth quarter of 2017 with revenue in excess of $21 million. This figure represents a doubling of revenues for the third quarter. Total revenue exceeded that earned in the year prior. All in all, the company’s product sales jumped 74 percent to $27 million, hitting the upper portion of guidance range.
The company’s net income for the final quarter of ’17 was a mere million dollars. Though this is not a gigantic figure for a business with more than 100 employees, it represents progress. Codexis lost $5.3 million in the final quarter of the year prior. The company’s non-GAAP net income for the quarter increased by nearly six million dollars compared to the same quarter in ’16.
Codexis established inroads with the likes of Nestle Health Science and Tate & Lyle this past year. The company also pulled in revenue through an agreement with Exela PharmSci. Sales of Exela’s argatroban injectable drug nearly hit the two million dollar mark in the final quarter of the year. This is quite the increase from the same quarter in the prior year in which sales were a mere $0.4 million. The increase is mainly attributable to the partnership between Codexis and Exela. Codexis provided Exela with an exclusive license that clearly paid considerable dividends.
What is Ahead for Codexis in 2018?
Codexis management has forecasted flat revenue growth stemming from product sales in the year ahead. This is quite disappointing, considering the company’s rapid growth across the past year. The hope is the recent influx of licensing agreements will provide an aggregate revenue bounce of 20 percent by year’s end. This year’s revenue could be between $60 and $63 million.
Codexis has a number of new products launching for food ingredients and sequencing applications. Analysts believe the company’s advancements in this space will spur product revenue growth across posterity. Investors are also excited about the company’s upcoming clinical trials for its engineered enzyme that is a therapeutic candidate for the treatment of phenylketonuria. This unheralded company is an up-and-coming superstar growth stock every investor should consider for his or her portfolio.
Buy, Sell or Hold?
Codexis has been on a tear across the past year or so. If the rising tide lifted your boat, consider offloading some of your stake in Codexis. If you do not currently own Codexis, pay close attention to this growth stock and pounce if a buying opportunity arises.
Regards,
Ethan Warrick
Editor
Wealth Authority
