ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, expectations regarding our strategy, business plans, financial performance and developments relating to our industry. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item IA: "Risk Factors," of this Annual Report on Form 10-K and elsewhere in this report. The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.

Business Overview

We are a leading provider of enzymatic solutions for efficient and scalable therapeutics manufacturing, and we leverage our proprietary CodeEvolver directed evolution technology platform to discover, develop, enhance, and commercialize novel, high-performance enzymes and other classes of proteins. Enzymes are naturally occurring biological molecules critical to almost all biochemical reactions that sustain life. They can be precisely engineered and optimized for specific functions, and to have particular characteristics, such as an ability to survive environments in which natural enzymes cannot, or to perform (bio)chemical transformations different than those for which they naturally evolved. We focus on leveraging our technology and capacity to enhance the properties and performance of enzymes to drive pivotal improvements in manufacturing of complex therapeutics across two key focus areas: our foundational, revenue-generating pharma biocatalysis business and our Enzyme-Catalyzed Oligonucleotide (ECO) Synthesis (“ECO Synthesis”) manufacturing platform, which is comprised of enzymatic tools and processes, designed to enable large-scale manufacture of RNA interference (“RNAi”) therapeutics. In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment. As part of this strategic prioritization, during 2024, we completed the divestiture and monetization of certain biotherapeutics assets as well as certain non-core life science assets, including in genomics and next generation sequencing applications.

In our revenue-generating pharma biocatalysis business (formerly our pharmaceuticals manufacturing business), we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics. Our unique enzymes drive improvements such as higher yields, increased purity, reduced energy usage and waste generation, all of which lead to improved efficiency and reduced costs in small-molecule manufacturing.

We also use the CodeEvolver platform technology to develop enzymes for the synthesis of RNAi therapeutics through our ECO Synthesis manufacturing platform, where our enzymes are poised to deliver many of the same benefits we offer in pharma biocatalysis across purity, yield, and improved manufacturing efficiency. In November 2024, we presented data at the TIDES EU conference demonstrating the successful end-to-end enzymatic synthesis of an entire commercially approved siRNA therapeutic asset with the ECO Synthesis manufacturing platform. In addition to using full enzymatic sequential synthesis, adding one nucleotide at time to synthesize the two strands from beginning to end, we demonstrated synthesis of the same siRNA asset using three other routes utilizing enzymatic ligation with our double-stranded RNA (“dsRNA”) ligase, which can stitch together fragments of chemically and/or enzymatically synthesized RNA to form the full siRNA drug structure. For the three other routes, our data highlighted that full-length oligos of equal quality and yields were obtained whether the fragments were made with enzymes or by traditional phosphoramidite chemistry. At the end of 2024, we completed the build-out of our ECO Synthesis Innovation Lab, a facility that uses our ECO Synthesis manufacturing platform to synthesize gram-scale quantities of a customer’s desired siRNA construct suitable for pre-clinical testing. In 2025, we expect to manufacture good laboratory practice (“GLP”)-grade siRNA for customers in our Innovation Lab under development services contracts model, and we anticipate entering a partnership with a large-scale contract development and manufacturing organization (“CDMO”) to use our ECO Synthesis platform of enzymatic tools and processes to synthesize good manufacturing practices (“GMP”)-grade siRNA drug substance for our customers. We expect to expand our enzymatic tools and process offering as further enhance the ECO Synthesis manufacturing platform to address the overall market needs for scalable and sustainable RNAi manufacturing.

Recent Developments

Finalized Acquisition and License Agreement for certain non-core Life Sciences assets

In line with our strategy relating to non-core Life Sciences assets, in January 2025 we sold assets that were developed under the seqWell Agreement to seqWell in exchange for the right to receive a cash payment upon future events and a warrant to purchase seqWell’s common stock exercisable upon future events, and terminated the seqWell Agreement.

Strengthened Board of Directors with new appointments

We announced the appointment of Raymond De Vré, PhD, to our Board of Directors on November 12, 2024, followed by the appointment of Christos Richards on January 16, 2025.

Financing Activities

In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, under which we may sell common stock, preferred stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings. On February 27, 2023, we filed a post-effective amendment to that Registration Statement on Form S-3. Pursuant to that post-effective amendment, we registered an aggregate $200.0 million of securities. In May 2021, we entered into an Equity Distribution Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we determined from time to time, may have sold over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock. Under the terms of the EDA, PSC was permitted to sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). We were not required to sell any shares at any time during the term of the EDA. On April 24, 2024, we terminated the EDA. No shares of our common stock were issued and sold pursuant to the EDA during the year ended December 31, 2024. During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA for gross proceeds of $8.7 million, or $7.9 million in net proceeds after PSC's commissions and direct offering expenses of $0.7 million.

On May 2, 2024, we entered into a Controlled Equity OfferingSM Sales Agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor”), under which Cantor, at our discretion and at such times that we may determine from time to time, may sell up to a maximum of $75.0 million of shares of our common stock. Under the terms of the Cantor Sales Agreement, Cantor may sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. On May 2, 2024, we filed a registration statement on Form S-3 registering the offer and sale of these shares under the Securities Act which became effective on May 14, 2024. We will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the Cantor Sales Agreement. During the year ended December 31, 2024, 10,440,000 shares of our common stock were issued and sold pursuant to the Cantor Sales Agreement and we received gross proceeds of $31.3 million, or $29.7 million in net proceeds after Cantor’s commissions and direct offering expenses of $1.6 million. As of December 31, 2024, $43.7 million remained available for sale under the Cantor Sales Agreement.

On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of up to two tranches, of which the first tranche of $30.0 million was disbursed upon execution of the Loan Agreement. We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds and subject to payment of a facility fee equal to 1.00% of the amount of such term loan. The Term Loan carries an interest-only period of 36 months (with the possibility to extend up to 48 months upon achievement of certain pre-specified financial milestones) and will bear interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50%, plus (b) 3.25%.

RESULTS OF OPERATIONS

The following table shows the amounts from our consolidated statements of operations for the periods presented (in thousands, except percentages):

Year Ended December 31, % of Total Revenues

Revenues:

Costs and operating expenses:

Asset impairment and other charges 165 9,984 — — % 14 % — %

Provision for income taxes 34 69 276 — % — % — %

Revenues

Our revenues consist of product revenue and research and development revenue as follows:

•Product revenue consist of sales of biocatalysts, pharmaceutical intermediates, and Codex biocatalyst panels and kits.

•Research and development revenue include license, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and screening fees.

Revenues are as follows (in thousands, except percentages):

Change

Revenues typically fluctuate on a quarterly basis due to the variability in our customers' manufacturing schedules and the timing of our customers' clinical trials. In addition, we have limited internal capacity to manufacture enzymes. As a result, we are dependent upon the performance and capacity of third party manufacturers for the commercial scale manufacturing of the enzymes used in our pharmaceutical and fine chemicals business.

We accept purchase orders for deliveries covering periods from one day up to 14 months from the date on which the order is placed. However, some of our purchase orders can be revised or cancelled by the customer without penalty. Considering these industry practices and our experience, we do not believe the total of customer purchase orders outstanding (backlog) provides meaningful information that can be relied on to predict actual sales for future periods.

2024 compared to 2023

Total revenues decreased by $10.8 million in 2024 to $59.3 million, as compared to 2023. The decrease was driven by lower product revenue and lower research and development revenue as compared to the prior year.

Product revenue was $36.8 million in 2024, a decrease of 14% compared with $42.9 million in 2023. The decrease in product revenue was primarily due to one-time revenue recognition of $8.2 million in 2023 related to Pfizer's fee previously received under the Enzyme Supply Agreement with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer, Inc., a $2.9 million decrease due to the early termination of an enzyme supply agreement with a customer in 2023, and the one-time recognition of a $1.3 million settlement fee in 2023 under the same enzyme supply agreement. This decrease was partially offset with higher sales of branded pharmaceutical products in 2024.

Research and development revenue decreased by $4.7 million in 2024 to $22.6 million, or 17% compared with $27.2 million in 2023. The decrease was primarily due to $9.1 million lower research and development fees from Nestlé Health Science (“Nestlé”), the one-time recognition of $5.0 million revenue related to a license agreement in 2023 and $2.0 million lower revenue from our master service agreements with Pfizer Inc. (“Pfizer”), $1.2 million lower revenue from Takeda Pharmaceutical Co. Ltd. under a Strategic Collaboration and License Agreement, and $4.3 million lower revenue from other legacy collaboration agreements. This decrease was offset by $6.0 million higher revenue from our licensing agreement with Roche Sequencing Solutions, Inc. (“Roche”) entered into in February 2024, recognition of $9.5 million revenue related to a license agreement with Pfizer entered into in December 2024, and $1.9 million higher revenue from existing collaboration agreements.

2023 compared to 2022

Total revenues decreased by $68.4 million in 2023 to $70.1 million, as compared to 2022. The decrease was driven by lower product revenue as compared to the prior year.

Product revenue was $42.9 million in 2023, a decrease of 63% compared with $116.7 million in 2022. The decrease in product revenue was primarily due to decreased sales of CDX-616 to Pfizer. This decrease was partially offset by $8.2 million release of prior year's deferrals related to Pfizer's fee, $3.2 million release of prior periods' product revenue deferrals due to early termination of the enzyme supply obligations to a customer and $1.3 million of product revenue recognized as settlement fee pursuant to the enzyme supply agreement with the same customer.

Research and development revenue increased by $5.3 million in 2023 to $27.2 million, or 24% compared with $21.9 million in 2022, primarily due to higher revenue from a 2023 Pfizer license agreement and from Nestlé Health Science under a Strategic Collaboration Agreement with Nestlé (the “Nestlé SCA”) and development agreement and an acquisition agreement with Nestlé (the “Acquisition Agreement”), which was partially offset by lower research and development fees from existing collaboration agreements being recognized in 2023 as compared to the prior year.

Costs and Operating Expenses (in thousands, except percentages):

Change

Costs of Product Revenue and Product Gross Margin

The following table shows the amounts of our product revenue, cost of product revenue, product gross profit and product gross margin from our consolidated statements of operations (in thousands, except percentages):

Year EndedDecember 31, Change Year EndedDecember 31, Change

Product gross margin (%)(2) 56 % 70 % 70 % 67 %

(1) Cost of product revenue comprises both internal and third-party fixed and variable costs, including materials and supplies, labor, facilities and other overhead costs associated with our product revenue.

(2) Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis.

2024 compared to 2023

Cost of product revenue increased by $3.5 million in 2024 to $16.3 million, as compared to 2023. The increase was primarily due to the combination of increased sales of certain enzyme product and higher costs. Product gross margins decreased to 56% in 2024 as compared to 70% in 2023, primarily due to variability in the product mix and with 2023 benefiting from product revenue recognized with no related cost in 2023 related to the utilization of Pfizer’s fee and to the early termination of an enzyme supply agreement with a customer.

2023 compared to 2022

Cost of product revenue decreased by $25.2 million in 2023 to $12.8 million, as compared to 2022. The decrease was primarily due to lower volume of product sales as compared to the prior year. Product gross margins increased to 70% in 2023 as compared to 67% in 2022, primarily due to product revenue recognized with no related costs in 2023 related to the utilization of Pfizer's fee and early termination of an enzyme supply agreement with a customer, and was partially offset by variability in the product mix.

Research and Development Expenses

Research and development expenses consist of costs incurred for internal projects as well as collaborative research and development activities. These costs primarily consist of (i) employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), (ii) various allocable expenses, which include occupancy-related costs, supplies, depreciation of facilities and laboratory equipment, and (iii) external costs. Research and development expenses are expensed when incurred.

2024 compared to 2023

Research and development expenses were $46.3 million in 2024 compared to $58.9 million in 2023, a decrease of $12.6 million, or 21%. This decrease was primarily due to a $4.4 million decrease from lower use of outside services related to Chemistry, Manufacturing and Controls procedures (“CMC”) and lower regulatory expense, $4.3 million decrease in costs associated with lower headcount, $3.8 million decrease from lower lease and facilities costs due to the assignment of our San Carlos facility lease during the fourth quarter of 2023, and $0.3 million in lower depreciation expenses. These were partially offset by $0.4 million in higher allocable costs.

2023 compared to 2022

Research and development expenses were $58.9 million in 2023 compared to $80.1 million in 2022, a decrease of $21.2 million, or 26%. This decrease was primarily due to a $10.0 million decrease in costs associated with lower headcount, $6.4 million decrease in outside services and CMC and regulatory expense, $4.1 million in lower lab supplies expense, $1.3 million in lower stock comp expense, and a $1.0 million decrease in lease costs due to the assignment of our San Carlos facility lease. These were partially offset by $1.7 million in higher allocable costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), hiring and training costs, consulting and outside services expenses (including audit and legal counsel related costs), marketing costs, building lease costs, and depreciation expenses and amortization expenses.

2024 compared to 2023

Selling, general and administrative expenses were $55.1 million in 2024 compared to $53.3 million in 2023, an increase of $1.9 million, or 4%. This increase was primarily due to $2.9 million in higher stock-based compensation expense, $0.9 million in higher consulting and outside services, and $0.7 million in higher legal fees. This was partially offset by a $1.9 million in lower payroll-based expenses and $0.7 million in lower allocable expenses.

2023 compared to 2022

Selling, general and administrative expenses were $53.3 million in 2023 compared to $52.2 million in 2022, an increase of $1.1 million, or 2%. This increase was primarily due to $3.6 million in higher payroll-based expenses, $0.6 million in higher legal expense, $0.4 million in higher repairs and maintenance expense, and $0.3 million in higher consulting and outside services. This was partially offset by $3.2 million in lower stock-based compensation expense and $0.4 million in lower allocable expenses.

Restructuring Charges

Restructuring charges consist of employee severance and other termination benefits due to workforce reduction plans that were initiated in the prior years. There were no restructuring charges recognized for the year ended December 31, 2024. Restructuring charges were $3.3 million and $3.2 million for the years ended December 31, 2023, and 2022, respectively.

Asset Impairment and Other Charges

Asset impairment and other charges for the year ended December 31, 2024 were $0.2 million related to a long-lived asset impairment charge in the second quarter of 2024. Asset impairment and other charges for the year ended December 31, 2023 were $10.0 million, consisting of a $9.2 million long-lived asset impairment charge and a $0.8 million goodwill impairment charge, all of which are non-cash charges. No asset impairment charges were recorded for the year ended December 31, 2022.

Interest Income and Interest and Other Expense, net (in thousands, except percentages):

Change

Interest Income

Interest income decreased by $0.5 million in 2024 compared to 2023, primarily due to lower average cash balances. Interest income increased by $2.7 million in 2023 compared to 2022, primarily due to higher average interest rates on cash balances.

Interest and Other Expense, net

Interest and other expense, net, decreased by $1.9 million in 2024 compared to 2023, primarily due to the higher impairment charges recognized in 2023 related to our investments in Molecular Assemblies, Inc. (“MAI”), seqWell Inc. (“seqWell”) and Arzeda Corp. (“Arzeda”), offset by $3.5 million in interest related to the long-term debt in the current year.

Interest and other expense, net, increased by $12.4 million in 2023 compared to 2022, primarily due to impairment of our investments in MAI, seqWell and Arzeda.

Provision for Income Taxes (in thousands, except percentages):

Change

The provision for income taxes in 2024 was primarily due to the accrual of interest and penalties on historic uncertain tax positions.

The provision for income taxes in 2023 was primarily for fiscal year 2023 state income taxes and the accrual of interest and penalties on historic uncertain tax positions.

The provision for income taxes in 2022 was primarily due to the income tax withholding imposed by foreign taxing authorities on income earned in certain countries outside of the Unites Stated and remitted to the United States and the accrual of interest and penalties on historic uncertain tax positions, as well as current year state income taxes.

Net Loss

Net loss for 2024 was $65.3 million, or a net loss per basic and diluted share of $0.89. This compared to a net loss of $76.2 million, or $1.12 per basic and diluted share, for 2023. The decrease in net loss was primarily related to lower operating expenses in 2024.

Net loss for 2023 was $76.2 million, or a net loss per basic and diluted share of $1.12. This compared to a net loss of $33.6 million, or $0.51 per basic and diluted share, for 2022. The increase in net loss was primarily related to lower product revenues from CDX-616 and one-time charges recognized during 2023 related to asset impairment, including impairment in our investments in non-marketable equity securities, and restructuring charges, which was partially offset by lower operating expenses in 2023.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the measurement of our ability to meet working capital needs and to fund capital expenditures. We have historically funded our operations primarily through cash generated from operations, stock option exercises and public and private offerings of our common stock. In addition, pursuant to our Loan Agreement with Innovatus, an affiliate of Innovatus Capital Partners, LLC, we borrowed $30.0 million from Innovatus, as Lender, on February 13, 2024 and may become eligible to borrow up to an additional $10.0 million upon the achievement of certain financial milestones. The Loan Agreement provides for an aggregate principal amount of up to $40.0 million and with a maturity date of February 13, 2029 (the “Innovatus Loan”). We actively manage our cash usage and investment of liquid cash to ensure the maintenance of sufficient funds to meet our working capital needs. Our cash and cash equivalents are held in U.S. banks.

Our primary uses of capital for the foreseeable future, including the next 12 months, are for compensation and related expenses, research and development expenses including manufacturing costs, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs.

The following summarizes our cash and cash equivalents and short-term investments balances and working capital as of December 31, 2024, 2023 and 2022 (in thousands):

December 31,

Short-term investments $ 54,194 $ — $ —

Sources of Capital

In addition to our existing cash and cash equivalents, short-term investments and revenue generated through our existing operations, we are eligible to earn milestone and other contingent payments for the achievement of defined collaboration objectives under our collaboration agreements. Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and development activities and is uncertain at this time.

We have historically experienced negative cash flows from operations as we continue to invest in key technology development projects and improvements to our CodeEvolver technology platform, develop and commercialize new and existing products including our ECO Synthesis manufacturing platform and expand our business development and collaboration with new customers. Our cash flows from operations will continue to be affected principally by product sales and product gross margins, sales from licensing our technology to major pharmaceutical companies, and collaborative research and development services provided to customers, as well as our headcount costs. Our primary source of cash flows from operating activities is cash receipts from our customers for purchases of products, collaborative research and development services, and licensing our technology to major pharmaceutical companies. Our largest uses of cash from operating activities are for employee-related expenditures, rent payments, inventory purchases to support our product sales and non-payroll research and development costs.

Loan Agreement and Term Loans

Sales Agreements

In May 2021, we entered into an Equity Distribution Agreement (“EDA”) with Piper Sandler & Co (“PSC”), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock. In 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA, all during the first half of 2023, and we received net proceeds of $7.9 million. On April 24, 2024, we terminated the EDA.

On May 2, 2024, we entered into the Cantor Sales Agreement with Cantor, under which Cantor, at our discretion and at such times that we may determine from time to time, may sell up to a maximum of $75.0 million of shares of our common stock. Under the terms of the Cantor Sales Agreement, Cantor may sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. On May 2, 2024, we filed a registration statement on Form S-3 registering the offer and sale of these shares under the Securities Act which became effective on May 14, 2024. We will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the Cantor Sales Agreement. During the year ended December 31, 2024, 10,440,000 shares of our common stock were issued and sold pursuant to the Cantor Sales Agreement and we received gross proceeds of $31.3 million, or $29.7 million in net proceeds after Cantor’s commissions and direct offering expenses of $1.6 million. As of December 31, 2024, $43.7 million of shares remained available for sale under the Cantor Sales Agreement.

Sales of our common stock under the Cantor Sales Agreement could be subject to business, economic or competitive uncertainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.

Liquidity

We believe that our existing cash and cash equivalents, combined with our future expectations for product revenues, research and development revenue, and expense management will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our capital resources sooner than we expect.

However, we may need additional capital if our current plans and assumptions change. In addition, we may choose to seek sources of capital, which may arise through a combination of equity offerings, debt financings, other third-party funding and other collaborations, strategic alliances and partnering arrangements, even if we believe we have generated sufficient cash flows to support our operating needs. Our need for additional capital will depend on many factors, including the financial success of our business, the spending required to develop and commercialize new and existing products including our ECO Synthesis manufacturing platform, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, and the potential costs for the filing, prosecution, enforcement and defense of patent claims, if necessary. If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies. If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution. In addition, under our Loan Agreement, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to additional covenants to the extent we seek other debt financing in the future. We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all. If we fail to raise sufficient funds and fail to generate sufficient revenues to achieve planned gross margins and to control operating costs, our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly limited. If this happens, we may be forced to delay or terminate development of new products or services, such as our ECO Synthesis manufacturing platform, or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us. If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

Cash Flows

The following is a summary of cash flows for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Year Ended December 31,

Net cash provided by (used in) financing activities 60,522 8,167 (575)

Cash Flows from Operating Activities

The $3.2 million decrease in net cash used in operating activities in 2024 as compared to 2023 was primarily due to the net effect of decreases in cash paid from operating expenses, primarily driven by the restructuring of our business in 2023 which included the assignment of our previous San Carlos facility lease in the fourth quarter of 2023, and changes in operating assets and liabilities.

The $63.9 million decrease in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to the net effect of decreases in cash received from our customers due to lower revenue in 2023 and with 2022 benefiting from the receipt of a $25.9 million fee from Pfizer that is creditable against future orders, partially offset by decreases in cash paid for cost of revenues and operating expenses.

Cash Flows from Investing Activities

The $52.1 million increase in net cash used in investing activities in 2024 as compared to 2023 was primarily due to higher cash utilized for purchases of short-term investments, partially offset by lower purchases of property and equipment in the current year.

The $8.7 million decrease in net cash used in investing activities in 2023 as compared to 2022 was primarily due to higher cash utilized for additional investments in equity securities and purchases of property and equipment in the prior year.

Cash Flows from Financing Activities

The $52.4 million increase in net cash provided by financing activities in 2024 as compared to 2023 was primarily due to proceeds from the Innovatus Loan in February 2024 and proceeds from issuance of common stock under the Cantor Sales Agreement in the third quarter of 2024, partially offset by proceeds from issuance of common stock under the EDA during the first half of 2023.

The $8.7 million increase in net cash provided by financing activities in 2023 as compared to 2022 was primarily due to proceeds from issuance of common stock under the EDA and lower cash paid on taxes related to net share settlement of equity awards.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2024, we had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K as promulgated by the SEC.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly owned subsidiaries. The preparation of our consolidated financial statements requires our management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the applicable periods. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. Our management evaluates its estimates, assumptions and judgments on an ongoing basis.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Revenue Recognition

Our revenues are derived primarily from product revenue and collaborative research and development agreements. Some of our contracts with customers contain multiple products and services.

The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others. We determine the stand-alone selling price (“SSP”) and allocate consideration to distinct performance obligations.

We measure revenue based on the consideration specified in the contract with each customer, net of any sales incentives and taxes collected on behalf of government authorities. We recognize revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer. We make significant judgments when determining the appropriate timing of revenue recognition.

Product Revenue

Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at discounted prices and an option to extend their contract, among others. In accounting for customer options, we determine whether an option is a material right and this requires us to exercise significant judgment. If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right. If the contract gives the customer the option to acquire additional goods or services at their normal SSPs, we would likely determine that the option is not a material right and, therefore, account for it as a separate performance obligation when the customer exercises the option. We primarily account for options which provide material rights using the alternative approach available under the Accounting Standards Codification (“ASC”) 606, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is calculated as the expected consideration to be received for all the goods and services we expect to provide. We update the transaction price for expected consideration, subject to constraint, each reporting period if our estimate of future goods to be ordered by customers change. Estimating expected consideration to be received under the alternative approach involves significant judgment.

Research and Development Revenue

The majority of our research and development agreements are based on a contractual rate per dedicated project team working on the project. The underlying product that we develop for customers does not create an asset with an alternative use to us and the customer receives benefits as we perform the work towards completion. Thus, our performance obligations are generally satisfied over time as the service is performed. We utilize an appropriate method of measuring progress towards the completion of our performance obligations to determine the timing of revenue recognition. For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on hours incurred or output of services provided.

Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations. If we determine that the customer cannot benefit from the license without our services, the license will be accounted for as combined with the other performance obligations. If we determine that a license is distinct, we would recognize an allocable portion of the transaction price when the license is transferred to the customer, and the customer can use and benefit from it. We estimate the SSP for license rights by using historical information if licenses have been previously sold to customers.

Our CodeEvolver platform technology transfer collaboration agreements typically include license fees, upfront fees, and variable consideration in the form of milestone payments, and sales or usage-based royalties. We have recognized revenues from our platform technology transfer agreements over time.

We also have an agreement under which we have granted a functional license to some elements of our biocatalyst technology. We will recognize revenues for the functional license at a point in time when the control of the license transfers to the customer.

For license agreements that include sales or usage-based royalty payments to us for which the license is the predominant item to which the royalty relates, we do not recognize revenue until the underlying sales of the product or usage has occurred. At the end of each reporting period, we estimate the royalty amount. We recognize revenue at the later of (i) when the related sale of the product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied.

Investment in Non-Marketable Securities

Investment in Non-Marketable Equity Securities

We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis. Gains and losses on these securities are recognized in interest and other expense, net.

We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value. We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value. We calculate the estimated fair value of these securities using information from the investee, which may include:

•Audited and unaudited financial statements;

•Projected technological developments of the company;

•Projected ability of the company to service its debt obligations;

•If a deemed liquidation event were to occur;

•Current fundraising transactions;

•Current ability of the company to raise additional financing if needed;

•Changes in the economic environment which may have a material impact on the operating results of the company;

•Contractual rights, obligations or restrictions associated with the investment; and

•Other factors deemed relevant by our management to assess valuation.

The valuation may be reduced if the company's potential has deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.

Impairment of Long-Lived Assets

We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances exist, we assess for recovery by comparing the carrying values of long-lived assets with the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Recent Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary ofSignificant Accounting Policies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K for a full description of recent accounting standards, including the respective dates of adoption and effects on our consolidated financial position, results of operations and cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

Our unrestricted cash, cash equivalents, and short-term investments in marketable securities total $73.5 million as of December 31, 2024. We primarily invest these amounts in money market funds and short-term debt which are held for working capital purposes. We do not enter into investments for trading or speculative purposes. As of December 31, 2024, the effect of a hypothetical 10% decrease in market interest rates would have an $0.3 million impact on a potential loss in future interest income and cash flows.

We are also exposed to market risk from changes in interest rates as a result of our indebtedness under the Innovatus Loan. At December 31, 2024, we had $30.0 million principal amount outstanding under the Innovatus Loan. The floating per annum interest rate of the Innovatus Loan is equal to the sum of (a) the greater of (i) prime rate published in the Money Rates section of the Wall Street Journal and (ii) 7.50%, plus (b) 3.25%; provided that, at the election of the Company, up to 2.00% of such rate shall be payable in-kind until the third anniversary of the closing date. An immediate 10% change in the prime interest rate would result in a $0.2 million impact on our results of operations over the next twelve months from December 31, 2024.

Foreign Currency Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. In periods when the United States dollar (“USD”) declines in value as compared to the foreign currencies in which we incur expenses, our foreign-currency based expenses increase when translated into USD. Although substantially all of our sales are denominated in USD, future fluctuations in the value of the USD may affect the price competitiveness of our products outside the United States. Our most significant foreign currency exposure is due to non-functional currency denominated monetary assets, primarily currencies denominated in other than their functional currency. These non-functional currency denominated monetary assets are subject to re-measurement which may create fluctuations in interest and other expense, net, a component in our consolidated statement of operations and in the fair value of the assets in the consolidated balance sheets. As of December 31, 2024, the effect of a hypothetical 10% unfavorable change in exchange rates on currencies denominated in other than their functional currency would result in a potential loss in future earnings in our consolidated statement of operations and a reduction in the fair value of the assets of approximately $40 thousand.

Investment in Non-Marketable Equity Securities

We own investments in non-marketable equity securities without readily determinable fair values. We may value these equity securities based on significant recent arms-length equity transactions with sophisticated non-strategic unrelated investors, providing the terms of these security transactions are substantially similar to the security transactions terms between the investors and us. The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Codexis, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets 66

Consolidated Statements of Operations 67

Consolidated Statements of Comprehensive Loss 68

Consolidated Statements of Stockholders' Equity 69

Consolidated Statements of Cash Flows 70

Notes to Consolidated Financial Statements 71

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Codexis, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Codexis, Inc. and subsidiaries (the Company) as of December 31, 2024, the related consolidated statement of operations, comprehensive loss, stockholders’ equity, and cash flows for the period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over revenue from contracted customers

As discussed in Note 3 to the consolidated financial statements, the Company recorded $59.3 million of total revenues for the year-ended December 31, 2024 comprised of $36.8 million of product revenue and $22.6 million of research and development revenue. As discussed in Note 2, the Company enters into contracts with customers, some of which contain multiple products and services. Further, the majority of the Company’s collaborative contracts, including research and development agreements, contain multiple revenue streams. In determining the appropriate amount of revenue to be recognized for product revenue and research and development revenue, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. Evaluating the sufficiency of audit evidence obtained required subjective auditor judgment due to the volume of revenue streams and disparate nature of contracts with customers, which involved determining the contracts and related revenue transactions to test and evaluating the recognition and measurement of revenue with respect to certain contracts with considerations around multiple elements, material rights, or timing of recognition.

The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue, including the determination of the types of contracts, transactions and measurement elements to test such as considerations of certain contracts with multiple elements, material rights, and timing of revenue recognition. We read a selection of contracts and evaluated the Company’s identification and assessment of the contract terms impacting the recognition and measurement of revenue. For certain transactions, we inspected the terms of the contract, agreed such terms to underlying documentation, such as external and internal evidence as applicable, recalculated revenue based on the underlying documentation, and compared it to the amount of revenue recognized. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

/s/ KPMG LLP

We have served as the Company’s auditor since 2024.

San Francisco, California

February 27, 2025

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Codexis, Inc.

Redwood City, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Codexis, Inc. (the “Company”) as of December 31, 2023, the related consolidated statement of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, P.C.

We served as the Company's auditor from 2013 to 2024.

San Francisco, California

February 28, 2024

Codexis, Inc.

Consolidated Balance Sheets

(In Thousands, Except Per Share Amounts)

December 31,

Assets

Current assets:

Restricted cash, current 503 519

Short-term investments 54,194 —

Financial assets:

Less: allowances (162) (65)

Prepaid expenses and other current assets 4,128 5,218

Investment in non-marketable equity securities 2,798 9,700

Right-of-use assets - Operating leases, net 28,700 13,137

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of lease obligations - Operating leases 2,827 3,781

Deferred revenue, net of current portion 100 640

Long-term lease obligations - Operating leases 28,163 12,243

Commitments and contingencies (Note 13)

Stockholders’ equity:

Accumulated other comprehensive income 52 —

Total liabilities and stockholders’ equity $ 149,011 $ 136,561

See accompanying notes to consolidated financial statements

Codexis, Inc.

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

Year Ended December 31,

Revenues:

Costs and operating expenses:

Asset impairment and other charges 165 9,984 —

Provision for income taxes 34 69 276

Net loss per share, basic and diluted $ (0.89) $ (1.12) $ (0.51)

See accompanying notes to consolidated financial statements

Codexis, Inc.

Consolidated Statements of Comprehensive Loss

(In Thousands)

Year Ended December 31,

Other comprehensive gain:

Unrealized gain on available-for-sale short-term investments, net of tax 52 — —

See accompanying notes to consolidated financial statements

Codexis, Inc.

Consolidated Statements of Stockholders’ Equity

(In Thousands)

Shares Amount

Issuance of common stock upon exercise of stock options 410 — 955 — — 955

Issuance of common stock upon release of stock awards 373 — — — — —

Issuance of common stock upon exercise of stock options 283 — 559 — — 559

Issuance of common stock upon release of stock awards 796 — — — — —

Stock-based compensation — — 9,971 — — 9,971

Issuance of common stock upon exercise of stock options 399 — 1,291 — — 1,291

Issuance of common stock upon release of stock awards 842 — — — — —

Issuance of common stock under employee stock purchase plan 264 — 563 — — 563

Other comprehensive loss — — — 52 — 52

See accompanying notes to consolidated financial statements

Codexis, Inc.

Consolidated Statements of Cash Flows

(In Thousands)

Year Ended December 31,

Operating activities:

Reduction in the carrying amount of right-of-use assets 3,184 4,405 4,849

Provision (recovery) for credit losses 97 (65) 4

Asset impairment and other charges 165 9,984 —

Impairment of investment in non-marketable securities 6,902 12,215 —

Non-cash interest expense 885 — —

Amortization of discount on short-term investments (1,380) — —

Other non-cash items (4) 4 (29)

Changes in operating assets and liabilities:

Prepaid expenses and other assets 893 (865) 181

Accrued compensation and other accrued liabilities 1,982 (14,041) 5,983

Net cash provided by (used in) operating activities (49,410) (52,638) 11,284

Investing activities:

Proceeds from sale of property and equipment 87 751 29

Purchases of short-term investments (90,235) — —

Proceeds from maturity of short-term investments 35,500 — —

Proceeds from sale of short-term investments 1,973 — —

Investment in non-marketable securities — (1,191) (5,300)

Financing activities:

Proceeds from exercises of stock options 1,384 422 955

Proceeds from issuance of stock under employee stock purchase plan 646 — —

Costs incurred in connection with equity sales agreements (1,706) (503) (42)

Proceeds from long-term debt 29,521 — —

Payment of debt issuance costs (642) — —

Taxes paid related to net share settlement of equity awards — (404) (1,488)

Net cash provided by (used in) financing activities 60,522 8,167 (575)

Supplemental disclosure of cash flow information:

Supplemental non-cash investing and financing activities:

Capital expenditures incurred but not yet paid $ 566 $ 1,068 $ 897

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above (in thousands):

Year Ended December 31,

This table excludes short-term investments of $54.2 million as of December 31, 2024. Total cash, cash equivalents, and short-term investments as of December 31, 2024 were $73.5 million.

See accompanying notes to consolidated financial statements

Codexis, Inc.

Notes to Consolidated Financial Statements

Note 1. Description of Business

In these notes to the consolidated financial statements, the “Company,” “we,” “us,” and “our” refers to Codexis, Inc. and its subsidiaries on a consolidated basis.

We discover, develop, enhance, and commercialize novel, high performance enzymes and other classes of proteins leveraging our proprietary CodeEvolverdirected evolution technology platform.

We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics. During the third and fourth quarters of 2023, we made changes to the structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction. In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”), our chief operating decision maker, assesses performance and allocates resources. As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined into a single reportable segment. Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. We believe that these changes better align internal resources to create a more efficient and effective organizational structure. Under this new organizational and reporting structure, we managed our business as one reportable segment since the fourth quarter of 2023. Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of Codexis, Inc. and its wholly-owned subsidiaries.

The consolidated financial statements include the accounts of Codexis, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly assess these estimates which primarily affect revenue recognition, deferred revenue, inventories, valuation of equity investments, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

Foreign Currency Translation

The USD is the functional currency for our operations outside the United States. Accordingly, non-monetary assets and liabilities originally acquired or assumed in other currencies are recorded in USD at the exchange rates in effect at the date they were acquired or assumed. Monetary assets and liabilities denominated in other currencies are translated into United States dollars at the exchange rates in effect at the balance sheet date. Translation adjustments are recorded in other expense in the consolidated statements of operations. Gains and losses realized from non-USD transactions, including intercompany balances not considered as permanent investments, are included in other expense in the accompanying consolidated statements of operations.

Revenue Recognition

Our revenues are derived primarily from product revenue and collaborative research and development agreements. Some of our contracts with customers contain multiple products and services. We account for individual products and services separately if they are distinct-that is, if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our product revenue and collaborative research and development agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, fees for research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others. We determine the stand-alone selling price (“SSP”) and allocate consideration to distinct performance obligations. Typically, we base our SSPs on our historical sales. If an SSP is not directly observable, then we estimate the SSP taking into consideration market conditions, forecasted sales, entity-specific factors and available information about the customer. We estimate the SSP for license rights by using historical information if licenses have been previously sold to customers.

We account for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Non-cancellable purchase orders received from customers to deliver a specific quantity of product, when combined with our order confirmation, in exchange for future consideration, create enforceable rights and obligations on both parties and constitute a contract with a customer.

The following is a description of principal activities from which we generate revenue:

Product Revenue

Product revenue consist of sales of biocatalysts, pharmaceutical intermediates and Codex biocatalyst panels and kits. A majority of our product revenue is made pursuant to purchase orders or supply agreements and is recognized either at a point in time when the control of the product has been transferred to the customer which generally aligns with shipping terms, or over time as the product is manufactured because we have a right to payment from the customer under a binding, non-cancellable purchase order, and there is no alternate use of the product for us as it is specifically made for the customer’s use.

Certain of our agreements provide options to customers which they can exercise at a future date, such as the option to purchase our product during the contract duration at discounted prices and an option to extend their contract, among others. In accounting for customer options, we determine whether an option is a material right and this requires us to exercise significant judgment. If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right. If the contract gives the customer the option to acquire additional goods or services at their normal SSPs, we would likely determine that the option is not a material right and, therefore, account for it as a separate performance obligation when the customer exercises the option. We primarily account for options which provide material rights using the alternative approach available pursuant to the applicable accounting guidance, as we concluded we meet the criteria for using the alternative approach. Therefore, the transaction price is calculated as the expected consideration to be received for all the goods and services we expect to provide under the contract. We update the transaction price for expected consideration, subject to constraint, each reporting period if our estimates of future goods to be ordered by customers change.

Research and Development Revenue

We perform research and development activities as specified in each respective customer agreement. We identify each performance obligation in our research and development agreements at contract inception. We allocate the consideration to each distinct performance obligation based on the SSP of each performance obligation. Performance obligations included in our research and services agreements typically include research and development services for a specified term, periodic reports and small samples of enzyme produced.

Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations. We must first determine whether the license is distinct from other promises, such as our promise to manufacture a product. If we determine that the customer cannot benefit from the license without our manufacturing capability, the license will be accounted for as combined with the other performance obligations. If we determine that a license is distinct and has significant standalone functionality, we recognize revenues from a functional license at a point in time when the license is transferred to the customer, and the customer can use and benefit from it. We estimate the SSP for license rights by using historical information if licenses have been previously sold to customers.

At the inception of each arrangement that includes variable consideration such as development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Our CodeEvolver technology platform transfer collaboration agreements typically include license fees, upfront fees, and variable consideration in the form of milestone payments, and sales or usage-based royalties. We have recognized revenues from our platform technology transfer agreements over time as our customer uses our technology.

For license agreements that include sales or usage-based royalty payments to us, we do not recognize revenue until the underlying sales of the product or usage has occurred. At the end of each reporting period, we estimate the royalty amount. We recognize revenue at the later of (i) when the related sale of the product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied.

Practical Expedients, Elections, and Exemptions

We apply certain practical expedients available which permit us not to adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

We perform monthly services under our research and development agreements, and we use a practical expedient permitting us to recognize revenue at the same time that we have the right to invoice our customer for monthly services completed to date.

We have elected to treat shipping and handling activities as fulfillment costs.

We have elected to record revenue net of sales and other similar taxes.

Contract Assets

Contract assets include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced. Contract assets are reclassified to receivables when the rights become unconditional.

Contract Liabilities

Contract liabilities are recorded as deferred revenues and include payments received in advance of performance under the contract. Contract liabilities are realized when the development services are provided to the customer or control of the products has been transferred to the customer. A portion of our contract liabilities relate to supply arrangements that contain material rights that are recognized using the alternative method, under which the aggregate amount invoiced to the customer for shipped products, including contractual fees, is higher than the amount of revenue recognized based on the transaction price allocated to the shipped products.

Contract Costs

We recognize a non-current asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs and if those costs would not have been incurred if the contract had not been obtained, such as commissions paid to sales personnel. We do not typically incur significant incremental costs because the compensation of our salespeople is not based on contracts closed but on a mixture of company goals, individual goals, and sales goals. If a commission paid is directly related to obtaining a specific contract, our policy is to capitalize and amortize such costs on a systematic basis, consistent with the pattern of transfer of the good or service to which the asset relates, and over a period beyond 12 months. Contract costs are reported in other non-current assets and were not significant in any of the periods presented.

Cost of Product Revenue

Cost of product revenue comprises both internal and third party fixed and variable costs including materials and supplies, labor, facilities, and other overhead costs associated with our product sales. Shipping costs are included in our cost of product revenue. Shipping costs were $1.0 million, $1.0 million, and $3.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Fulfillment costs, such as shipping and handling, are recognized at a point in time and are included in cost of product revenue.

Cost of Research and Development Services

Cost of research and development services related to services under research and development agreements approximate the research funding over the term of the respective agreements and is included in research and development expense. Costs of services provided under license and platform technology transfer agreements are included in research and development expenses and are expensed in the periods in which such costs are incurred.

Research and Development Expenses

Research and development expenses consist of costs incurred for internal projects and partner-funded collaborative research and development activities, as well as license and platform technology transfer agreements, as mentioned above. These costs include our direct and research-related overhead expenses, which include salaries and other personnel-related expenses (including stock-based compensation), occupancy-related costs, supplies, and depreciation of facilities and laboratory equipment, as well as external costs, and are expensed as incurred. Costs to acquire technologies that are utilized in research and development and that have no alternative future use are expensed when incurred.

Advertising

Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations. Advertising costs were nil, $0.3 million, and $0.3 million for each of the years ended December 31, 2024, 2023 and 2022, respectively.

Stock-Based Compensation

We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted under our equity incentive plans and for our employee stock purchase plan (“ESPP”). The Black-Scholes-Merton option pricing model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. The expected term is based on historical exercise behavior for similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. We use historical volatility to estimate expected stock price volatility. The risk-free rate assumption is based on United States Treasury instruments whose terms are consistent with the expected term of the stock options. The expected dividend assumption is based on our history and expectation of dividend payouts.

Restricted Stock Units (“RSUs”), Restricted Stock Awards (“RSAs”) and performance-contingent restricted stock units (“PSUs”) are measured based on the fair market values of the underlying stock on the dates of grant. Performance based options (“PBOs”) are measured using the Black-Scholes-Merton option pricing model. The vesting of PBOs and PSUs awarded is conditioned upon the attainment of one or more performance objectives over a specified period and upon continued employment through the applicable vesting date. At the end of the performance period, shares of stock subject to the PBOs and PSUs vest based upon both the level of achievement of performance objectives within the performance period and continued employment through the applicable vesting date.

Stock-based compensation expense is calculated based on awards ultimately expected to vest and is reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The estimated annual forfeiture rates for stock options, RSUs, PSUs, PBOs, and RSAs are based on historical forfeiture experience.

The estimated fair value of stock options, RSUs, RSAs and shares to be issued under the ESPP are expensed on a straight-line basis over the vesting term of the grant and the estimated fair value of PSUs and PBOs are expensed using an accelerated method over the term of the award once management has determined that it is probable that the performance objective will be achieved. Compensation expense is recorded over the requisite service period based on management's best estimate as to whether it is probable that the shares awarded are expected to vest. Management assesses the probability of the performance milestones being met on a continuous basis.

Cash and Cash Equivalents

We consider all highly liquid investments with maturity dates of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. The majority of cash and cash equivalents is maintained with major financial institutions in the United States. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits.

Restricted Cash

We are currently in the process of liquidating our Indian subsidiary. The local legal requirements for liquidation required us to maintain our subsidiary's cash balance in an account managed by a legal trustee to satisfy our financial obligations. This balance is recorded as current restricted cash on the consolidated balance sheets of $0.5 million as of December 31, 2024 and 2023.

Pursuant to the terms of our lease agreements, we obtained letters of credit collateralized by cash deposit balances of $1.1 million as of December 31, 2024 and 2023. These cash deposits balances are recorded as non-current restricted cash on the consolidated balance sheets. For additional information, see Note 13, “Commitments and Contingencies.”

Short-term Investments

We classify all marketable debt securities that have effective maturities of three months or less from the date of purchase as cash equivalents and those with effective maturities of greater than three months as short-term investment securities in the consolidated balance sheets. We determine the appropriate classification of our short-term investments at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our short-term investments as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their effective maturities.

We carry these short-term investments at fair value, and report the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except for the changes in allowance for expected credit losses, which are included in “Interest and other expense, net” in the consolidated statements of operations. We determine any realized gains or losses on the sale of short-term investments on a specific identification method, and we record such gains and losses as a component of interest income.

Short-term investments are reviewed periodically for allowances for credit losses and impairment. When evaluating the investments, the Company reviews factors such as the extent to which the fair value of the security is less than the amortized cost basis, adverse conditions specifically related to the security, the financial condition of the issuer, the Company’s intent to sell, and whether it would be more likely than not that the Company would be required to sell the investments before the recovery of the amortized cost basis.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and we consider counterparty credit risk in our assessment of fair value. Carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate their fair values as of the balance sheet dates because of their short maturities.

The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•Level 1: Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2: Inputs that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and unbilled receivables, contract assets, non-marketable securities, and restricted cash. Cash that is not required for immediate operating needs is invested principally in money market funds. Cash and cash equivalents are invested through banks and other financial institutions in the United States and India. Such deposits in those countries may be in excess of insured limits. The Company has not experienced material losses on its deposits of cash and cash equivalents.

We perform ongoing credit evaluations of our customer's financial condition whenever deemed necessary. We maintain an allowance for doubtful accounts based on the expected collectability of all financial assets, which takes into consideration an analysis of historical bad debts, specific customer creditworthiness and current economic trends. As of December 31, 2024, we had four customers that accounted for 56% of our accounts receivable balance. As of December 31, 2023, four customers accounted for 58% of our accounts receivable balance. We believe the accounts receivable balances from our largest customers do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience.

Financial Assets and Allowances

We currently sell enzymes primarily to pharmaceutical and fine chemicals companies throughout the world by the extension of trade credit terms based on an assessment of each customer's financial condition. Trade credit terms are generally offered without collateral and may include an insignificant discount for prompt payment for specific customers. To manage our credit exposure, we perform ongoing evaluations of our customers' financial conditions. In addition, accounts receivable include amounts owed to us under our collaborative research and development agreements.

We recognize accounts receivable at invoiced amounts and we maintain a valuation allowance for credit losses using an impairment model (known as the “current expected credit loss model” or “CECL”) based on estimates and forecasts of future conditions requiring recognition of a lifetime of expected credit losses at inception on our financing receivables measured at amortized costs which consisted of accounts receivable, contract assets, and unbilled receivables. We have determined that our financing receivables share similar risk characteristics including: (i) customer origination in the pharmaceutical and fine chemicals industry, (ii) similar historical credit loss pattern of customers (iii) no meaningful trade receivable differences in terms, (iv) similar historical credit loss experience and (v) our belief that the composition of certain assets are comparable to our historical portfolio used to develop loss history. As a result, we measured the allowance for credit loss (“ACL”) on a collective basis. Our ACL methodology considers how long the asset has been past due, the financial condition of the customers, which includes ongoing quarterly evaluations and assessments of changes in customer credit ratings, and other market data that we believe are relevant to the collectability of the assets. Nearly all financing receivables are due from customers that are highly rated by major rating agencies and have a long history of no credit loss. We derive our ACL by establishing an impairment rate attributable to assets not yet identified as impaired.

Unbilled Receivable

The timing of revenue recognition may differ from the timing of invoicing to our customers. When we satisfy (or partially satisfy) a performance obligation, prior to being able to invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using a weighted-average approach, assuming full absorption of direct and indirect manufacturing costs, or based on cost of purchasing from our vendors. If inventory costs exceed expected net realizable value due to obsolescence or lack of demand, valuation adjustments are recorded for the difference between the cost and the expected net realizable value.

Concentrations of Supply Risk

We rely on a limited number of suppliers for our products. We believe that other vendors would be able to provide similar products; however, the qualification of such vendors may require substantial start-up time. In order to mitigate any adverse impacts from a disruption of supply, we attempt to maintain an adequate supply of critical single-sourced materials. For certain materials, our vendors maintain a supply for us. We outsource the large-scale manufacturing of our products to contract manufacturers with facilities in Austria and Italy.

Property and Equipment

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization calculated using the straight-line method over their estimated useful lives as follows:

Asset classification Estimated useful life

Laboratory equipment 5 years

Computer equipment and software 3 years

Office equipment and furniture 5 years

Leasehold improvements Lesser of useful life or lease term

Property and equipment classified as construction in process includes equipment that has been received but not yet placed in service. Normal repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances exist, we assess for recovery by comparing the carrying values of long-lived assets with their future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For additional information on the impairment charge recorded for the years ended December 31, 2024 and 2023, see Note 8, “Balance Sheet Details” and Note 13, “Commitments and Contingencies.”No impairment charges for long-lived assets were recorded during the year ended December 31, 2022.

Investment in Non-Marketable Equity Securities

We evaluate equity securities for impairment when circumstances indicate that we may not be able to recover the carrying value. We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in the estimated fair value of the equity security compared to its carrying value. We calculate the estimated fair value of these securities using information from the investee, which may include:

•Audited and unaudited financial statements;

•Projected technological developments of the company;

•Projected ability of the company to service its debt obligations;

•If a deemed liquidation event were to occur;

•Current fundraising transactions;

•Current ability of the company to raise additional financing if needed;

•Changes in the economic environment which may have a material impact on the operating results of the company;

•Contractual rights, obligations or restrictions associated with the investment; and

•Other factors deemed relevant by our management to assess valuation.

The valuation may be reduced if the company's potential has deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted. For additional information on the impairment charge recorded for the year ended December 31, 2024 and 2023, see Note 6, “Investments in Non-Marketable Securities.”

Goodwill

Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired and is assigned to reporting units. We test goodwill for impairment, considering, among other factors, whether there have been sustained declines in our share price. If we conclude it is more likely than not that the fair value is less than its carrying amount, a quantitative fair value test is performed. Goodwill had a carrying value of $2.5 million as of December 31, 2024 and 2023.

We test goodwill for impairment annually, on the last day of the fourth fiscal quarter, and between annual tests if events and circumstances indicate it is more likely than not that the fair value is less than its carrying amount. The annual impairment test is completed using either: a qualitative “Step 0” assessment based on reviewing relevant events and circumstances; or a quantitative “Step 1” assessment, which determines the fair value. To the extent the carrying amount is less than its estimated fair value, an impairment charge is recorded. Using a relative fair value allocation methodology for assets and liabilities, we compare the carrying amount of net assets and the goodwill to its fair value. If the fair value exceeds its carrying amount, goodwill is considered not impaired. Any excess carrying amount of goodwill over its fair value is recognized as an impairment. No impairment charges related to goodwill were recognized in 2024. We recorded impairment charges related to goodwill of $0.8 million for the year ended December 31, 2023. For additional information on the impairment charge recorded in 2023, see Note 8, “Balance Sheet Details.”

Lease Accounting

We determine if an arrangement is a lease at inception. Where an arrangement is a lease, we determine if it is an operating lease or a finance lease. At lease commencement, we record a lease liability and ROU asset. Lease liabilities represent the present value of our future lease payments over the expected lease term which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised. The present value of our lease liability is determined using our incremental collateralized borrowing rate at lease inception. ROU assets represent our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability for leases with an initial term greater than 12 months. Over the lease term, we use the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is amortized to the consolidated statement of operations in a manner that results in straight-line expense recognition. We do not apply lease recognition requirements for short-term leases. Instead, we recognize payments related to these arrangements in the consolidated statement of operations as lease costs on a straight-line basis over the lease term.

Income Taxes

We use the liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount that will more likely than not be realized.

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenues and expenses for tax and financial statement purposes. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized on a jurisdiction by jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income in the future. In the event that it is determined that these deferred tax assets are not more likely than not to be realized, a valuation allowance is recorded against these deferred tax assets. As of December 31, 2024 and 2023, we maintain a full valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.

We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance may be materially impacted. Any adjustment to the deferred tax asset valuation allowance would be recorded in the statements of operations for the periods in which the adjustment is determined to be required.

We account for uncertainty in income taxes as required by the provisions of Accounting Standards Update (“ASU”) 2009-06, Income Taxes (Topic 740) Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes.

The Tax Reform Act of 1986 and similar state provisions limit the use of net operating loss (“NOL”) carryforwards in certain situations where equity transactions result in a change of ownership as defined by Internal Revenue Code Section 382. In the event we should experience such a change of ownership, utilization of our federal and state NOL carryforwards could be limited.

Accounting Pronouncements

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The standard should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted ASU No. 2023-07 during the year ended December 31, 2024. For additional information, see Note 15, “Segment, Geographical and Other Revenue Information.”

Aside from those recently issued accounting pronouncements adopted and described above and not yet adopted and described below, there have not been any recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2024 that are of significance or potential significance to us.

Recently issued accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment in the ASU will require additional disclosures and disaggregation of certain costs and expenses presented on the face of the income statement. This guidance is effective for the Company for fiscal years beginning after December 15, 2026. Early adoption is permitted. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. The amendments in the ASU amends the FASB Accounting Standard Codification (the “ASC”) to remove references to various concepts statements and impacts a variety of topics in the ASC. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU require public companies, on an annual basis, to provide disclosures of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

In October 2023, FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in the ASU are intended to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, as announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

Note 3.Revenue Recognition

Disaggregation of Revenue

The following table provides information about disaggregated revenue from contracts with customers into the nature of the products and services, and geographic regions, and includes a reconciliation of the disaggregated revenue. The geographic regions that are tracked are the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle East, and Africa), and APAC (Australia, New Zealand, Southeast Asia, and China).

Disaggregated information is as follows (in thousands):

Year Ended December 31,

Major products and service:

Primary geographical markets:

For additional information regarding revenue disaggregated by geography, see Note 15, “Segment, Geographical and Other Revenue Information.”

Contract Balances

The following table presents balances of contract assets, unbilled receivables, and contract liabilities (in thousands):

Contract liabilities: deferred revenue $ 450 $ 10,761

We recognize accounts receivable when we have an unconditional right to recognize revenue and have issued an invoice to the customer. Our payment terms are generally between 30 and 90 days. We recognize unbilled receivables when we have an unconditional right to recognize revenue and have not issued an invoice to our customer. Unbilled receivables are transferred to accounts receivable on issuance of an invoice. Unbilled receivables are classified separately on the consolidated balance sheets as an asset. We maintain an allowance for credit losses on accounts receivables and unbilled receivables. As of December 31, 2024, we have $2.8 million of short-term unbilled receivables presented as unbilled receivables within current assets and $0.5 million of long-term unbilled receivables that is included within the other non-current assets line item in the consolidated balance sheets. As of December 31, 2023, we had $9.1 million of short-term unbilled receivables presented as unbilled receivables within current asset and $0.8 million of long-term unbilled receivables that is included within the other non-current assets line item in the consolidated balance sheets.

Contract assets represent our right to recognize revenue for custom products with no alternate use and under binding non-cancellable contracts and are largely related to our procurement of product. We recognize contract assets when we have a conditional right to recognize revenue. The transfer of control of certain products occurs in advance of the invoicing process, which generates contract assets. In addition, we recognize a contract asset related to milestones when we assess it is probable of being achieved and there will be no significant reversal of cumulative revenues. Contract assets are classified separately on the consolidated balance sheets as an asset and transferred to accounts receivables when our rights to payment become unconditional.

Contract liabilities, or deferred revenue, represent our obligation to transfer a product or service to the customer, and for which we have received consideration from the customer. We recognize a contract liability when we receive advance customer payments under development agreements for research and development services, upfront license payments, and from upfront customer payments received under product supply agreements. Contract liabilities are classified as a liability on the consolidated balance sheets.

During the years ended December 31, 2024, 2023 and 2022, we had no asset impairment charges related to contract assets.

We recognized the following revenues (in thousands):

Year Ended December 31,

Revenue recognized in the period for: 2024 2023

Amounts included in contract liabilities at the beginning of the period:

Performance obligations satisfied $ 10,121 $ 17,937

Changes in the period:

Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting periods. The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of December 31, 2024.

The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts (in thousands):

Note 4. Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject to forfeiture. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities. For all periods presented, diluted and basic net loss per share are identical since potential common stock shares are excluded from the calculation, as their effect was anti-dilutive.

Anti-Dilutive Securities

In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.

The following shares were not considered in the computation of diluted net loss per share because their effect was anti-dilutive (in thousands):

Year Ended December 31,

Shares issuable under the Equity Incentive Plans and ESPP(1) 13,613 9,028 7,442

(1)Included 665,160 and 568,224 of anti-dilutive potential common shares from ESPP for the years ended December 31, 2024 and 2023, respectively.

(2) Pertains to the warrants issued in connection with the Innovatus Loan. For additional information, see Note 14, “Debt.”

Note 5. Collaborative Arrangements

Merck Sitagliptin Catalyst Supply Agreement

In February 2012, we entered into a five-year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Supply Agreement”) with Merck whereby Merck may obtain commercial scale enzyme for use in the manufacture of Januvia, its product based on the active ingredient sitagliptin. In December 2015, Merck exercised its options under the terms of the Sitagliptin Supply Agreement to extend the agreement for an additional five years through February 2022. In September 2021, the Sitagliptin Supply Agreement was amended to extend the agreement through December 2026.

Effective as of January 2016, we and Merck amended the Sitagliptin Supply Agreement to prospectively provide for variable pricing based on the cumulative volume of sitagliptin enzyme purchased by Merck. We have previously determined that the variable pricing, which provides a discount based on the cumulative volume of sitagliptin enzyme purchased by Merck, provides Merck material rights and we recognized product revenues using the alternative method wherein we estimated the total expected consideration and allocated it proportionately with the expected sales. Pursuant to the latest amendment of the Sitagliptin Supply Agreement, we have determined that the latest price per volume of sitagliptin enzyme to be purchased by Merck no longer provides Merck material rights, and as such we are recognizing product revenue based on contractually stated prices effective as of February 2022.

We recognized $7.1 million, $4.4 million and $5.9 million in product revenue under this agreement in the years ended December 31, 2024, 2023 and 2022, respectively. This represented 12%, 6%, and 4% of our total revenues in the years ended December 31, 2024, 2023 and 2022, respectively.

During the year ended December 31, 2024, we recorded revenue of $2.5 million from sitagliptin enzyme sales that were recognized over time based on the progress of the manufacturing process. These products will be shipped within the three-month period following the end of 2024.

Enzyme Supply Agreement and Commercial Agreement

In November 2016, we entered into an enzyme supply agreement with a customer, receiving an upfront payment recorded as deferred revenue which was recognized as the customer purchased our enzyme. In April 2019, we entered into a multi-year commercial agreement with the same customer for the exclusive use of our enzymes in some of their products, with royalties to be earned. Both the enzyme supply agreement and commercial agreement were terminated in 2023. Due to the early termination of the enzyme supply agreement in 2023, we recognized $3.2 million of product revenue from the release of prior periods' product revenue deferrals and also recognized an additional $1.3 million of product revenue as settlement fee.

Strategic Collaboration Agreement

In October 2017, we entered into the Nestlé Strategic Collaboration Agreement (the “Nestlé SCA”) with Nestlé, pursuant to which we and Nestlé collaborated to leverage the CodeEvolver technology platform to develop novel enzymes for Nestlé’s established Consumer Care and Medical Nutrition business areas.

In January 2020, we entered into a development agreement with Nestlé pursuant to which we and Nestlé collaborated to advance a lead candidate discovered through our Nestlé SCA, CDX-7108, targeting exocrine pancreatic insufficiency, into preclinical and early clinical studies. We, together with Nestlé Health Science, initiated a Phase 1 clinical trial of CDX-7108 in the fourth quarter of 2021, and on February 23, 2023, we and Nestlé announced interim results. In July 2023, we announced plans to discontinue our development support of CDX-7108. Both the Nestlé SCA and development agreement were terminated in January 2024 under the terms of the CDX-7108 Acquisition Agreement with Nestlé.

Under the Nestlé SCA and the development agreement, we recognized nil, $4.1 million and $7.1 million in research and development revenue in the years ended December 31, 2024, 2023 and 2022, respectively.

Acquisition Agreement

In December 2023, we entered into an acquisition agreement (the “Acquisition Agreement”) with Nestlé, pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé. Under the terms of the Acquisition Agreement, Nestlé will be solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, and Codexis will receive upfront payment, future potential milestone payments and net-sales based royalties. We recognized $5.0 million in research and development revenue for the year ended December 31, 2023 related to the Acquisition Agreement, with the $5.0 million upfront fee received in January 2024.

Platform Technology Transfer and License Agreement

In May 2019, we entered into the Novartis CodeEvolver Agreement with Novartis. The Novartis CodeEvolverAgreement allows Novartis to use our proprietary CodeEvolver technology platform in the field of human healthcare. In July 2021, we announced the completion of the technology transfer period during which we transferred our proprietary CodeEvolver technology platform to Novartis (the “Technology Transfer Period”). As a part of this technology transfer, we provided to Novartis our proprietary enzymes, proprietary protein engineering protocols and methods, and proprietary software algorithms. In addition, our teams and Novartis scientists participated in technology training sessions and collaborative research projects at our laboratories in Redwood City, California and at a designated Novartis laboratory in Basel, Switzerland. Novartis has now installed the CodeEvolver technology platform at its designated laboratory.

Pursuant to the agreement, we received an upfront payment of $5.0 million shortly after the effective date of the Novartis CodeEvolver Agreement. We completed the second technology milestone transfer under the agreement in 2020 and received a milestone payment of $4.0 million. We have also received an aggregate of $5.0 million for the completion of the third technology milestone in 2021. In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the Technology Transfer Period (the “Improvements Term”), Novartis will pay Codexis annual payments over four years which amount to an additional $8.0 million in aggregate. We received an aggregate of $6.0 million for the first three annual payments in 2022 to 2024. The Company also has the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolvertechnology platform during the period beginning on the conclusion of the Technology Transfer Period and ending on the expiration date of the last to expire licensed patent. Revenue for the combined initial license and technology transfer performance obligation was recognized overtime based on hours incurred. Revenue allocated to improvements made during the Improvements Term is being recognized during the Improvements Term.

We recognized $1.0 million, $1.1 million and $1.0 million in research and development revenue in the years ended December 31, 2024, 2023 and 2022, respectively.

License Agreement

In December 2019, we entered a license agreement with Roche to provide Roche with our evolved T4 DNA ligase high-performance molecular diagnostic enzyme. The royalty bearing license grants Roche worldwide rights to include the evolved T4 DNA ligase in its nucleic acid sequencing products and workflows. Under the license agreement, we received an initial collaboration fee payment of $0.8 million within 45 days of the effective date of the agreement, and we received an additional $0.9 million milestone payment after the completion of technology transfer in October 2020. In February 2024, we entered into a new license agreement with Roche granting them rights to our newly engineered DNA ligase, superseding our prior 2019 agreement. Under the terms of the deal, we received upfront and technical milestones payments. We recognized research and development fees of $6.0 million in the year ended December 31, 2024 related to the license agreement.

Strategic Collaboration and License Agreement

In March 2020, we entered into a Strategic Collaboration and License Agreement (the “Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Co. Ltd. (“Takeda”), pursuant to which we have collaborated with Takeda to research and develop protein sequences for use in gene therapy products for certain diseases in accordance with each applicable program plan.

On execution of the Takeda Agreement, we received an upfront non-refundable cash payment of $8.5 million and we initiated activities under three program plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency, respectively (the “Initial Programs”). In May 2021, Takeda elected to exercise its option to initiate an additional program for a certain undisclosed rare genetic disorder; as a result we received the option exercise fee during the third quarter of 2021. We completed the research and development services relating to the fourth program with Takeda during the second quarter of 2023.

Pursuant to the Takeda Agreement, we were eligible to receive other payments that included (i) clinical development and commercialization-based milestones, per target gene, of up to $104.0 million and (ii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits. Takeda announced in April 2023 the discontinuation of these development programs, and in 2024 we divested our rights in some of the underlying assets to Crosswalk Therapeutics.

Revenue relating to the functional licenses provided to Takeda was recognized at a point in time when the control of the license transferred to the customer. We recognized research and development revenue related to the Takeda Agreement of $0.8 million, $2.0 million and $4.9 million in the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024 and 2023, we had deferred revenue balances of nil.

Master Collaboration and Research Agreement, Stock Purchase Agreement and Enzyme Supply Agreement

In June 2020, we entered into a Stock Purchase Agreement with MAI in which we purchased 1,587,050 shares of MAI's Series A preferred stock for $1.0 million.

Concurrently with our initial equity investment, we entered into the MAI Agreement, pursuant to which we performed services utilizing our CodeEvolver technology platform to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A and B preferred stock which are valued based on the observed transaction price of similar securities of MAI issued to third parties. Under the MAI Agreement, we will have the right to use and sell the engineered enzymes to third parties for any purpose other than for the synthesis of native DNA. Under the MAI Agreement, we would make a $0.5 million payment to MAI upon our achievement of a milestone of $5.0 million in aggregate commercial sales to third parties of the engineered enzymes or any product incorporating or derived from the engineered enzymes for any purpose other than the synthesis of native DNA. As contemplated in the MAI Agreement, we executed the Commercial License and Enzyme Supply Agreement with MAI (“MAI Supply Agreement”) in July 2022 following the completion of certain timelines specified in the SOW.

We completed the R&D service with MAI pursuant to the MAI Agreement during the first quarter of 2022. In December 2021, we received the primary milestone payment pursuant to the MAI Agreement of $1.0 million in the form of an additional 1,587,049 shares of MAI Series B preferred stock. Upon execution of the MAI Supply Agreement in July 2022, we received the commercialization and enzyme supply agreement milestone payment pursuant to the MAI Agreement of $1.0 million in the form of an additional 1,587,049 shares of MAI Series B preferred stock. Pursuant to the MAI Agreement, we recognized nil , nil, and $1.2 million in research and development revenue from transactions with MAI in the years ended December 31, 2024, 2023, and 2022, respectively. Payment for the services rendered was received in the form of additional MAI Series A and Series B preferred stock. We received an aggregate of nil, nil, and 1,587,049 shares of MAI's Series A and B preferred stock in the years ended December 31, 2024, 2023, and 2022, respectively.

In April 2022, we received a purchase order from MAI for the delivery of certain enzyme products to MAI in 2022. In July 2022, we and MAI executed the MAI Supply Agreement that will enable MAI to utilize an evolved terminal deoxynucleotidyl transferase enzyme in MAI’s Fully Enzymatic Synthesis technology. Pursuant to the MAI Supply Agreement, we recognized $0.1 million of minimum royalty as part of the research and development revenue in the year ended December 31, 2024. In January 2025, MAI assigned the MAI Supply Agreement to a third party in connection with the sale of its related assets to such third party. We recognized $0.2 million, $0.2 million, and $0.5 million in product revenue in the years ended December 31, 2024, 2023, and 2022, respectively.

MAI was considered a related party until August 2022, when the related party relationship ended following the retirement of our former President and CEO, who also served on MAI’s board of directors.

Pfizer Enzyme Supply Agreement

During 2021 and 2022, we received purchase orders from Pfizer for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir, used by Pfizer in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID (nirmatrelvir tablets; ritonavir tablets) product for the treatment of COVID-19 infections in humans.

We are a party to an Enzyme Supply Agreement with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer, Inc. (the “Pfizer Supply Agreement”), covering the manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture of nirmatrelvir. Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $25.9 million in August 2022 which was recorded as deferred revenue. Pursuant to the agreement, 90% of the fee ($23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID with shipment dates prior to December 31, 2023, and (ii) fees associated with any new development and licensing agreements with Pfizer entered into prior to April 4, 2023. On March 31, 2023, we entered into a license agreement whereby Pfizer utilized a portion of the $23.3 million credit towards a license to develop future product candidates, for which we recognized $5.0 million as non-cash research and development revenue in the second quarter of 2023. Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item (ii) above expired on April 4, 2023. We also recognized $2.0 million of non-cash research and development revenue, and credited against the $25.9 million fee, for other services provided to Pfizer during the year ended December 31, 2023. Up to 50% of any portion of the $25.9 million which has not been credited under items (i) and (ii) was creditable against future orders of CDX-616 used to manufacture PAXLOVID with shipment dates in 2024.

On December 20, 2024, we entered into a license agreement whereby Pfizer utilized the remaining credit toward the upfront fee under the license agreement, pursuant to the terms of the same-day amendment to the Pfizer Supply Agreement that allowed the product credit to be utilized for this license. We recognized $9.5 million of non-cash research and development revenue in the year ended December 31, 2024 related to the license agreement, and no further credit remains available for Pfizer.

During the fourth quarter of 2023, and pursuant to the Pfizer Supply Agreement, we released the prior year deferrals for the unused portion of the retainer fee that is not creditable beyond 2023 and we recognized product revenue of $8.2 million in the year ended December 31, 2023. We recognized product revenue of $75.4 million in the year ended December 31, 2022, from the sale of quantities of CDX-616 to Pfizer. Product revenues recognized by us from the Pfizer Supply Agreement represented 0%, 12%, and 54% of our total revenues for the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024 and 2023, we had nil and $9.5 million, respectively, in deferred revenue related to the $25.9 million fee received from Pfizer.

Note 6. Investments in Non-Marketable Securities

Non-Marketable Equity Securities

Our non-marketable equity securities are investments in privately held companies without readily determinable market value and primarily relate to our investments in MAI and seqWell. These investments are accounted for under the measurement alternative and are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer. Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within Level 2 in the fair value hierarchy when we estimate the fair value of these investments using the observable transaction price paid by third party investors for the same or similar security of the same issuers. The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using unobservable inputs such as when we remeasure due to impairment and we use discount rates, market data of comparable companies, and rights and obligations of the securities the Company holds, among others. We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component interest and other expense, net in the consolidated statements of operations.

In November 2023, the 207,070 shares of Arzeda’s Series B preferred stock were converted into 41,414 common stock pursuant to the Stock Purchase Agreement.

In March 2023, we purchased an additional985,545 shares of Series B preferred stock for $0.8 million in MAI, a privately held life sciences company. As of December 31, 2024, we held an aggregate of 19,277,914 shares of MAI's Series A and B preferred stock that we have earned or purchased from MAI.

In March 2022, we entered into a Stock Purchase Agreement with seqWell, a privately held life sciences company, pursuant to which we purchased 1,000,000 shares of seqWell's Series C preferred stock for $5.0 million. In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell Agreement”), pursuant to which we provided research and experimental screening and protein engineering activities in exchange for compensation in the form of additional shares of seqWell's common stock. In January 2025, we sold assets that were developed under the seqWell Agreement to seqWell in exchange for the right to receive a cash payment upon future events and a warrant to purchase seqWell’s common stock exercisable upon future events, and terminated the seqWell Agreement. In addition to our initial equity investment and the shares we have received under the seqWell Agreement, in September 2023, we purchased an additional 88,256 shares of seqWell's Series C-1 preferred stock and 44,128 common stock warrants for $0.4 million. We received 205,279 shares of seqWell's common stock from research and development services with seqWell and we recognized $0.2 million in research and development revenue from these services in the year ended December 31, 2023. As of December 31, 2024, we held an aggregate of 1,088,256 shares of Series C and C-1 preferred stock, 205,279 shares of common stock and 44,128 of common stock warrants that we have earned or purchased from seqWell.

For the year ended December 31, 2024, we recognized an impairment charge of $6.9 million which is presented within interest and other expense, net in the consolidated statements of operations. This adjustment included the write-down of our investment in MAI by $3.9 million during the third quarter of 2024 to its related fair value as determined based on valuation methods using the latest observed transaction price of MAI’s preferred stock securities anticipated to be issued during the fourth quarter of 2024 and adjusted for the rights and obligations of the preferred stock securities the Company holds, and an additional $2.8 million impairment charge during the fourth quarter of 2024 to adjust the carrying value of our investment to zero as the investee ceased its operations during the fourth quarter of 2024 due to liquidity position and lack of access to additional capital.The other $0.2 million of impairment charge on our investment in seqWell is related to the write-down to its estimated fair value using the recent transaction price of similar preferred stock securities issued by the investee and adjusted for the rights and obligations of the preferred stock securities the Company holds.

For the year ended December 31, 2023, we recognized an impairment charge of $12.2 million and included this as adjustment to the carrying value of our investments in seqWell, Arzeda and MAI. This adjustment, which is presented within other income (expense), net in the consolidated statements of operations, included the write-down of the carrying value of our investment in seqWell by $3.0 million during the third quarter of 2023 to its estimated fair value as determined based on valuation methods using the recent transaction price of similar preferred stock securities issued by seqWell and adjusted for the rights and obligations of the preferred stock securities the Company holds. The $1.2 million of impairment charge on our investment in Arzeda is related to the write-down to its estimated fair value based on the latest observed transaction price of Arzeda's preferred stock securities issued during the fourth quarter of 2023 and the subsequent conversion of our existing Series B preferred stock into Arzeda's common stock during the fourth quarter of 2023. The other $8.0 million of impairment charge represents the difference between the estimated fair value and carrying value of our investment in MAI as of December 31, 2023 based on quantitative and qualitative analysis. This analysis involved use of judgment, estimates and assumptions, such as the near-term prospects of the investee in the market in which it operates, evaluation of the investee’s financial condition in relation to its outstanding obligations, and probabilities of securing additional capital through various alternative scenarios.

For the year ended December 31, 2022, we recognized a $0.2 million unrealized gain in interest and other expense, net, and included as adjustment to the carrying value of our investment in MAI, for the remeasurement of the additional 1,587,049 shares of Series B preferred stock received as a milestone payment during the third quarter of 2022 based on the latest observed transaction price of MAI's preferred stock.

Other than as disclosed above, there were no remeasurement events for our investments in non-marketable equity securities in 2024 and 2023. We recognized no realized gains or losses during the years ended December 31, 2024 and 2023.

The following table presents the carrying value of our non-marketable equity securities (in thousands):

Other investments in non-marketable equity securities 382 382

Total non-marketable equity securities $ 2,798 $ 9,700

Note 7. Fair Value Measurements

The following tables show the Company’s cash, cash equivalents, and short-term investments by significant investment category (in thousands):

Level 1:

Level 2(1):

(1) The valuation techniques used to measure the fair values of the Company’s Level 2 financial instruments uses inputs that are either directly or indirectly observable for the asset through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 1:

We limit the credit risk associated with our cash equivalents and short-term investments by placing them with banks and institutions we believe are highly credit-worthy and investing in highly-rated investments. As of December 31, 2024, the contractual maturity of all investments held was less than one year.

During the years ended December 31, 2024 and 2023, we did not recognize any significant credit losses nor other-than-temporary impairment losses on non-marketable securities.

Note 8. Balance Sheet Details

Inventories

Inventories consisted of the following (in thousands):

December 31,

Raw materials $ — $ 108

Work in process 29 7

Prepaid expenses and other current assets

As of December 31, 2024, prepaid expenses and other current assets consists of prepaid expenses of $3.7 million and other current assets of $0.5 million. As of December 31, 2023, prepaid expenses and other current assets consists of prepaid expenses of $4.6 million and other current assets of $0.6 million.

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

December 31,

Office furniture and equipment 1,124 1,469

(1) Fully depreciated property and equipment with a cost of $2.6 million and $3.0 million were retired during the years ended December 31, 2024 and 2023, respectively.

(2) Construction in progress includes equipment received but not yet placed into service pending installation.

In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City. As part of this plan, we entered into agreements to sell certain laboratory equipment located in our San Carlos facility through an asset auction and as part of the lease assignment of the San Carlos facility to Vaxcyte (see further discussion at Note 13, “Commitments and Contingencies”). These certain items of laboratory equipment met the assets held for sale criteria and were sold during the fourth quarter of 2023. Using a fair value estimate based on Level 3 inputs in the fair value hierarchy, the Company determined that the carrying value of these assets exceeded fair value less costs to sell, which resulted in a write-down of $1.5 million, presented within the asset impairment and other charges line item in the consolidated statements of operations in the year ended December 31, 2023.

During the year ended December 31, 2023, the Company recorded a non-cash impairment charge of $4.7 million associated with the San Carlos facility leasehold improvements. For additional information, see Note 13, “Commitments and Contingencies.”

Depreciation expense included in both research and development expenses and selling, general and administrative expenses in the consolidated statements of operations was as follows (in thousands):

Year Ended December 31,

Selling, general and administrative 881 924 846

Goodwill

December 31,

Goodwill at beginning of period $ 2,463 $ 3,241

Impairment — (778)

Goodwill at end of period $ 2,463 $ 2,463

Goodwill was previously allocated to each of the Company's reporting units. In July 2023, we announced a restructuring of our business and that we are discontinuing investment in certain development programs, primarily in Novel Biotherapeutics. As a result of this plan, the Company determined that a triggering event had occurred that required an interim goodwill impairment test during the third quarter of 2023. The fair value estimate used in the interim goodwill impairment test was primarily based on Level 3 inputs in the fair value hierarchy. Based on the results of the impairment evaluation, the Company determined that the goodwill within the Novel Biotherapeutics reporting unit was impaired, which resulted in a non-cash impairment charge of $0.8 million to write off all of the associated goodwill. The impairment charge is recorded within the asset impairment and other charges in the consolidated statements of operation in the year ended December 31, 2023. Goodwill had a carrying value of $2.5 millionas of December 31, 2024 and 2023, respectively.

Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):

December 31,

Accrued professional and outside service fees $ 3,064 $ 2,330

Total other accrued liabilities $ 6,223 $ 4,735

Note 9. Stock-based Compensation

Equity Incentive Plans

In August 2024, our Board of Directors (the “Board”) approved the 2024 Employment Inducement Award Plan (the “2024 Inducement Plan”) which provides for the grant of non-qualified stock options, RSAs, restricted stock units (“RSUs”), and performance awards to eligible employees with respect to an aggregate of up to 1,000,000 shares of our common stock.

In January 2023, our Board approved the 2022 Employment Inducement Award Plan (the “2022 Inducement Plan”) which provides for the grant of non-qualified stock options, RSAs, RSUs, performance awards, other stock awards and dividend equivalents to eligible employees with respect to an aggregate of up to 2,000,000 shares of our common stock. In June 2023, the 2022 Inducement Plan was terminated upon the approval of an amendment to the Company's 2019 Incentive Award Plan (the “2019 Plan”) at the Annual Meeting of Stockholders in June 2023 (the “2023 Annual Meeting”).

In 2019, the Board and stockholders approved the 2019 Plan. The 2019 Plan superseded and replaced in its entirety our 2010 Equity Incentive Plan (the “2010 Plan”) which was effective in March 2010, and no further awards will be granted under the 2010 Plan; however, the terms and conditions of the 2010 Plan will continue to govern any outstanding awards thereunder. The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, RSUs, RSAs, PSUs, PBOs, stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants. The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, RSAs, RSUs, PSUs, PBOs, other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The number of shares of our common stock that were initially available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares, and (ii) any shares subject to awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited. In June 2019, 8.1 million shares authorized for issuance under the 2019 Plan were registered under the Securities Act. In April 2023, the Board approved an amendment to the 2019 Plan (the “2019 Amended Plan”) which became effective upon stockholders' approval at the 2023 Annual Meeting. The 2019 Amended Plan included the (i) increase in the number of shares available by 8,000,000 shares, such that an aggregate of 15,897,144 shares are reserved for issuance under the 2019 Amended Plan and any shares subject to awards granted under the 2010 Plan, and (ii) increase in the number of shares that may be granted as incentive stock options under the 2019 Amended Plan such that an aggregate of 22,000,000 shares of common stock may be granted as incentive stock options under the 2019 Amended Plan.

As of December 31, 2024, total shares remaining available for issuance under the 2019 Plan and 2024 Inducement Plan were3,937,070 shares.

Employee Stock Purchase Plan

In April 2023, the Board approved an employee stock purchase plan (as may be amended from time to time, the “ESPP”) which became effective upon approval at the 2023 Annual Meeting. The ESPP allows eligible employees of the Company to purchase shares of our common stock through payroll deductions. Offering periods are generally over a 24-month period and begin in May and November of each year. The per share purchase price will be the lower of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date. Participant purchases are limited to a maximum of $25,000 of fair value of our stock per calendar year. The Company is authorized to grant up to 2,000,000 shares of common stock under the ESPP. The first offering period of the ESPP commenced in December 2023.

For the year ended December 31, 2024, 263,157 shares of our common stock were purchased under the ESPP. As of December 31, 2024, 1,736,843 shares of common stock were available for future issuance under the ESPP. We recognized $0.3 million of stock-based compensation expenses related to the ESPP for the year ended December 31, 2024. As of December 31, 2024, the total unrecognized stock-based compensation expense, net of expected forfeitures, related to the ESPP was $0.6 million and is expected to be recognized over the remaining offering period.

Stock Options

Stock options granted to employees generally have a maximum term of ten years and vest over four years from the date of grant, of which 25% vest at the end of one year, and 75% vest monthly over the remaining three years. We may grant options with different vesting terms from time to time. In January 2024, the Board approved the grants of stock options with a vesting term over three years from the date of grant, of which 33% vest at the end of one year, and 67% vest monthly over the remaining two years.

Unless an employee's termination of service is due to disability or death, upon termination of service, any unexercised vested options will be forfeited at the end of three months or the expiration of the option, whichever is earlier.

Restricted Stock Units (“RSUs”)

We also grant employees RSUs, which generally vest over either a three-year period with 33% of the shares subject to the RSUs vesting on each yearly anniversary of the vesting commencement date or over a four-year period with 25% of the shares subject to the RSU vesting on each yearly anniversary of the vesting commencement date, in each case contingent upon such employee’s continued service on such vesting date. RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. We may grant RSUs with different vesting terms from time to time.

Performance-contingent Restricted Stock Units (“PSUs”) and Performance Based Options (“PBOs”)

CDXS US Equity

CDXS · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CDXS US Equity☆

CDXS · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CDXS US Equity