The nerds took over Codexis last year. Against the odds, they won the hearts and minds of investors on their first earnings conference call. Pocket protectors and everything.

The stock sold off when the management change was first announced on the third-quarter 2025 earnings conference call. In the ensuing months, an information vacuum triggered even deeper declines with shares briefly dipping below $1.00 apiece. While the stock has bounced off those lows, it would need to increase over 50% from the closing level on March 13 ($1.61 per share) to reclaim pre-pivot levels ($2.50 per share).

Is that realistic?

On the one hand, pre-pivot levels represent a valuation of $275 million. That's not obscene. Codexis expects full-year 2026 revenue of $72 million to $76 million, representing growth of 2% to 11%. It claims to have a cash runway through the end of 2027 and is making progress commercializing its ECO Synthesis platform. Meanwhile, the field of RNA interference (RNAi) is moving into ever-larger indications that seem to require new production technologies.

On the other hand, the Heritage Business coughed up its lowest level of product revenue since 2018. If you subtract a $6.3 million payment from the technology transfer agreement with Merck that trickled into Q1 2026, then revenue guidance expects flat growth at best. For $78 million in cash to support operations through the end of 2027 as claimed, the business would need to average just $10 million in quarterly cash burn for the next eight quarters – something it hasn't done since before the pandemic.

Oh, did you forget this was biotech investing? Low valuations and high uncertainty often go hand-in-hand.

Codexis can earn a higher valuation by removing uncertainty. Uncertainty is removed with execution. Near-term execution could include landing more preclinical supply deals for ECO Synthesis, better communicating the value proposition of ligation services to investors and potential customers, or accelerating adoption of ECO Synthesis by securing buy-in from CDMO licensees.

By the Numbers

At the end of 2025, Codexis signed a technology transfer agreement with Merck that gave the long-time customer fuller access to its enzyme engineering platform. The deal essentially pulled forward a few years of expected revenue in a one-time payment of $37.8 million. That's a nice cash injection, but it also represents the last penny of revenue investors can expect from an important customer.

The business realized $31.5 million of the one-time payment in Q4 2025 and expects to realize the final $6.3 million in Q1 2026. That pushed total quarterly revenue to $38.9 million – more than the first three quarters of 2025 combined.

Management intends to use the Heritage Business (the CodeEvolver technology platform for small molecule drugs) to help fund the commercialization of ECO Synthesis. There's merit to that idea.

The legacy business provided $61 million in gross profit last year, or $29.5 million when the Merck transaction is excluded, which offset a meaningful amount of operating expenses. The company reported full-year 2025 operating cash outflow of just $19.4 million as a result. Unfortunately, investors will need to stomach choppy performance for the foreseeable future.

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The relationship between Merck and Codexis has spanned two decades, generated over $200 million in enzyme supply revenue, and earned an EPA Green Chemistry Award. It perfectly illustrates both the difficulty in scaling enzyme supply deals and the long tail of revenue that can be generated from successful projects. Investors hope ECO Synthesis replicates similar success, but with many customers and projects instead of one high-impact supply deal here and there.

The pair developed an enzyme to more efficiently manufacture sitagliptin, the active pharmaceutical ingredient (API) in type 2 diabetes medication Januvia. The asset was Merck's bestseller until Keytruda took the crown in 2018. In recent years, GLP-1 agonists have introduced fierce competition, but the Januvia franchise still generated $2.5 billion in revenue last year and has notched lifetime sales of more than $83 billion since launching in 2007.

That serves as a reminder that although enzymes are important, they capture only a fraction of the value created for customers.

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ECO Synthesis will be a more critical component in the manufacturing of oligonucleotides for RNA medicines than the prior CodeEvolver technology platform was for small molecule APIs. That should translate into more revenue per customer asset. It will still take time to ramp up.

In early March 2026, Codexis announced the first ECO Synthesis supply agreement for a drug candidate, meaning an asset in preclinical or later development. All prior work was earned from customers kicking the tires with discovery-stage development candidates.

The historic deal requires 50 grams of short-interfering RNA (siRNA) for a customer's preclinical RNAi drug candidate. The asset is being developed for a cardiovascular indication, which generally represents a large patient population.

Analysts on the Q4 2025 earnings conference call were curious how the deal value might ramp, but management struggled to communicate the nuances involved aside from saying the deal value is in the "low seven-digits" range (strike 1 for the nerds). It seems the customer is exploring both ECO Synthesis and traditional manufacturing methods, which means the agreement may not lead to future work. If it does advance, then how much product is represented by 50 grams of siRNA?

Well, it depends. And this is what management struggled to communicate.

RNAi technology platforms are protected by intellectual property covering the specific sequence structure of siRNA molecules. Each is unique. That means each platform creates molecules with slightly different potency and durability, which impacts dosing levels.

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Every disease is unique, too. That means the amount of siRNA required to have a therapeutic effect might be different from one indication to the next.

For example, Leqvio from Novartis is a cardiovascular asset taking aim at PCSK9 to lower cholesterol levels. It has a relatively high dose with twice-yearly dosing. Redemplo from Arrowhead Pharma is a cardiovascular asset taking aim at ApoC3 to lower triglycerides. It has a relatively low dose with quarterly dosing. Fifty grams of Leqvio could supply 88 patients for one year, while the same amount of Redemplo could supply 500 patients for the same length of time.

In other words, investors can't analyze supply deals by looking at the mass alone.

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News Flow & Modeling Insights

(Refined.)

To reiterate, Codexis will be a lousy investment if ECO Synthesis doesn't work. It could be a rough next couple years if the platform ramps slowly.

The current model estimates a fair valuation of $336 million through the end of 2026, revised from a previous estimate of $319 million. The revision more accurately values the Heritage Business (outperforming prior assumptions) and ECO Synthesis (ramping more slowly than prior assumptions).

The current model is based on 2026 operations:

• The Heritage Business has an estimated value of $124.58 million, revised from a previous estimate of $85.8 million. The change reflects full-year 2026 revenue that's much higher than prior estimates. As ECO Synthesis begins contributing meaningful revenue this year, it will be more difficult to gauge the health of the legacy segment unless the company provides detailed financials.
• The Heritage Business can return to growth beginning in 2028 if customer assets in pivotal studies earn approvals. Three such assets had data readouts in recent months with two claiming success, which leaves the pipeline with 11 more customer assets. Every approval represents a multi-year revenue stream.
• The ECO Synthesis platform is valued at $197 million, revised from a previous estimate of $233 million. The revision more accurately reflects guidance for the GMP facility to be fully operational by the end of 2027 (later than expected). This component can become more valuable if ligation services ramp in 2026.

Margin of Safety & Conviction

(No change.)

Codexis is considered a Future Compounder position with the following Conviction rating.

• 1 = High
• 2 = Above Average
• 3 = Average
• 4 = Below Average

The estimated fair valuation based on my current model is below:

• Market close March 13: $1.61 per share
• Modeled Fair Valuation: $3.21 per share
• Allocation Range: Up to 5%

Codexis reported 90.869 million shares outstanding as of March 5, 2026. The modeled fair valuation above assumes 104.500 million shares outstanding, which is equivalent to 15% dilution. I don't necessarily expect a full public offering of common stock in 2026, but a large dilution event is required before the end of 2027.

Further Reading

• March 2026 press release announcing Q4 2025 operating results
• March 2026 regulatory filing (10-K) detailing Q4 2025 operating results
• March 2026 press release announcing a 50 g siRNA supply deal for ECO Synthesis
• February 2026 quarterly earnings preview for the Solt DB coverage ecosystem