There's something in the air – and I'm not talking about the holidays.

In recent months, four companies in the coverage ecosystem – AVITA Medical, Certara, Codexis, and Recursion Pharma – have changed CEOs. All transitions had the same intent: doubling down on strategic shifts.

The most important "under new management" sign is hanging at Codexis.

The enzyme manufacturer began the year with a low-risk commercial strategy for ECO Synthesis. It had hoped to sign a contract manufacturing and development organization (CDMO) partner to de-risk scale up of the ECO Synthesis platform and serve the larger-volume needs of customers in the future, which Codexis didn't want to provide in-house.

That strategy hit some snags.

Codexis has announced technical collaborations with two CDMOs, but apparently neither wanted to start the relationship at the "let's build a new facility together" stage. The company ended 2025 partnerless and smacked by the realization that a facility is more important than ever, and it has to build one alone. That suggests the former commercial strategy made some poor assumptions about timing. Management tried to argue this was the plan all along, but it previously didn't think building a facility alone was required to land a CDMO partner.

The former business-minded CEO stepped into the Executive Chairman role, while the COO position was eliminated. Former CTO Dr. Alison Moore will become CEO and rejoin the board. Meanwhile, the former SVP of Research will become the new CSO, cementing engineering expertise in perhaps the two most important positions on the company's depth chart.

Moore spent 20 years as the SVP of Process Development at Amgen. Prior to that, she was a Director of Chemistry, Manufacturing, and Controls (CMC) at Genentech. CMC is the most important component of a new drug application or biologics license application, which is exactly the high standard ECO Synthesis will need to meet.

Codexis will begin retooling a newly leased good manufacturing practices (GMP) facility for ECO Synthesis and ligation services in early 2026. Where it saw risk before, the business now sees directly serving drug developers as commercially viable. The 34,000 square foot facility will have the capacity to supply purified oligos to support customers through early clinical trials. It will also be used to demonstrate real-world value for a new process analytics tool the company is expected to debut in early 2026.

If anyone can guide ECO Synthesis through scale up to commercial viability, then Dr. Moore could end up being the best choice possible. The one question investors have going into 2026: Okay, maybe the business suits didn't understand process development. But can the nerds run a business?

By the Numbers

In Q3 2025, the heritage business of supplying custom enzymes for pharmaceutical manufacturing generated only $6.8 million in revenue. That's not much different from the $7.4 million the prior quarter or $6.1 million in the opening quarter of the year. Through the first nine months of 2025, the business coughed up just $31.5 million in total revenue, including licensing.

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Management reiterated full-year 2025 revenue guidance expecting at least $64 million. The business closed a "supply assurance agreement" with Merck that will generate $37.8 million in revenue, which will be mostly recognized in Q4 2025 with some trickling into the new year.

Forget about revenue guidance though. The business ended September 2025 with roughly $58.7 million in cash. The cash received from the supply assurance agreement, plus the layoffs expected to reduce operating expenses by 25%, give the business a cash runway through the end of 2027.

This is likely an existential period for Codexis. It needs to quickly retool the newly leased GMP facility and convert customers from its smaller innovation lab and prospects in the pipeline. Investors certainly shouldn't expect ECO Synthesis to deliver the business to profitability in the next 24 months (it won't come close!), but the ability to raise capital again likely depends on demonstrating meaningful traction.

Management will provide full-year 2026 guidance during the next earnings conference call in February 2026.

Heritage Business Didn't Hear No Bell

The decision to go all-in on ECO Synthesis means the company will no longer advertise or seek new customers for the heritage business, but it still has meaningful growth potential this decade. Walking through the mechanics is worthwhile, especially since the business model will be similar for ECO Synthesis.

So, how are enzymes used in API manufacturing?

Let's say there's a manufacturing facility for a small molecule drug. The entire end-to-end synthesis process might have 10 steps. Think of each step like a standalone chemistry experiment, where mixing the right chemicals at the right temperature and pressure triggers chemical reactions. The outputs of each step are new chemicals, which become the inputs for the next step. The tenth and final output is the active pharmaceutical ingredient (API) that gets a brand name and endless commercials of senior citizens riding bicycles. The API semaglutide is sold as the brand Ozempic.

The heritage business of Codexis looked to replace steps in manufacturing processes. A custom enzyme could allow a customer to replace steps 3, 4, and 5 with a single new enzymatic step. That means it's a new chemical reaction that acts like a shortcut, taking the output from step 2 and directly changing it into the input needed for step 6. This can increase yields, reduce power consumption, eliminate waste streams, and shrink physical footprints.

ECO Synthesis is similar, except Codexis is looking to replace the entire manufacturing process, not just single steps. That means it could supply multiple enzymes for a single process. Additionally, learnings from one project will be directly applicable to most others, since the platform focuses on RNA drugs. The heritage business is more bespoke, which contributes to its lengthy timelines and small opportunities. The process development required to add enzymatic steps to manufacture an antiviral may have no overlap to that for a peptide, because these small molecules belong to different classes of chemicals.

Whether the heritage business or ECO Synthesis, Codexis cannot just waltz in once a drug candidate earns approval and start slinging enzymes around. It must work with a drug developer for many years to generate consistent revenue streams. Most often this means starting relationships from the time a customer's drug candidate enters early clinical trials, then hoping it earns approval years later.

That's because drug manufacturing processes are just as highly regulated as clinical trials. Manufacturing processes can be refined or reworked, but it takes years and multiple regulatory approvals. Something as minor as moving a piece of equipment within a facility can trigger a reinspection – and a costly, multi-month operational delay.

Codexis generates revenue from customers with clinical-stage assets, but fixed production volumes based on a study's enrollment target aren't ringing the cash register. It sells grams to kilograms (1,000 grams) of enzymes to these customers once per clinical trial. The company generates much more revenue at a steadier pace once a customer's drug candidate earns approval, since production volumes increase significantly. It sells kilograms to metric tons (1,000 kilograms) of enzymes to these customers per year.

An added benefit: rightfully-strict regulations for drug manufacturing drive switching costs so high it essentially locks in customers to Codexis for 10 to 15 years. But nurturing a damn pipeline of customers takes years to pay off.

• Commercial Assets: Codexis's heritage business currently supplies process enzymes for 16 commercial drug brands. These are the largest and steadiest sources of revenue.
• Late-Stage Assets: Codexis's heritage business currently supplies process enzymes for 14 drug candidates in pivotal studies. These generate some revenue today, but more importantly represent potential to convert into steadier revenue if customers earn approvals.

The average probability of success for a pivotal study, regardless of therapeutic area or therapeutic modality, is about 50%. If that applies to the 14 late-stage projects in the pipeline as of the Q3 2025 update, then investors might expect seven (7) customer drug candidates to earn approval. That suggests the heritage business could enjoy meaningful revenue growth and margin expansion through 2030. Multiple of these assets have data readouts in 2026.

The revenue potential is impossible to pin down without additional details, like the type of drugs and the size of market opportunities. Would these new brands require kilograms or metric tons of enzymes per year? In a reasonable upside scenario, the heritage business could fund over $50 million of annual operating expenses in five years, up from roughly $35 million today.

What's the Timeline for ECO Synthesis?

Codexis expects to begin modifying its new GMP manufacturing facility in early 2026. Does that mean a fresh coat of paint or major upgrades, such as meeting high standards for air flow and water purity? The sooner retooling is completed, the sooner the facility can begin onboarding customers to support RNA drug candidates in phase 1/2 clinical trials.

Although these initial customers aren't the most lucrative, they're important for a few reasons.

First, these early customers still generate some revenue, and from new sources that were inaccessible to the heritage business. It will only partially offset declines in the heritage business in the next two or three years though.

Second, building a GMP facility shows some skin in the game for potential CDMO partners. Although the timing might not have worked out to date, Codexis says it's still pursuing a partner as ECO Synthesis continues to scale. Perhaps a partner will buy a stake in the new facility.

Third, it could allow the company to gain a first-mover advantage in enzymatic synthesis of RNA molecules, which is expected to develop into a lucrative market opportunity. Seizing the opportunity will require both licensing the process to third-party CDMOs to accelerate adoption and directly owning manufacturing facilities.

Competitors are in earlier development, but Codexis won't be the only commercial-stage platform forever. There's the George Church startup EnPlusOne Biosciences, which raised $10 million in February 2025. There's also a U.K.-based group led by the Centre for Process Innovation (CPI) that includes AstraZeneca, Novartis, and other companies and academic labs.

The first-mover advantage assumes either little difference between technology platforms or that Codexis maintains its technical edge over the landscape.

At the last update for the ECO Synthesis customer pipeline, management said it has signed 11 total customers and has 40 more prospects. How many of these actual and prospective customers will need GMP-quality oligos once the new facility opens its doors? Do these counts represent customers desperate for solutions or curiously poking around? The answers to these questions will determine the ramp for the technology platform and help set expectations for investors.

News Flow & Modeling Insights

(Refined lower to account for weak heritage business in 2026.)

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 $319 million through the end of 2027, revised lower from a previous estimate of $422 million. The revision lower was solely due to revaluation of the heritage business, which will see its revenue base reset sharply lower in 2026.

After factoring in 15% dilution expected by the end of 2027, that works out to roughly $3.07 per share, revised lower from a previous estimate of $4.43 per share.

• The heritage business has an estimated value of $85.8 million, revised lower from a previous estimate of $188.760 million. I expect full-year 2026 revenue from the heritage business to decline by more than 40% due to the Merck supply guarantee agreement pulling revenue forward and gradual loss of licensing revenue.
• The heritage business can grow meaningfully beginning in 2028 if customer assets in pivotal studies earn approvals. Multiple of the 14 programs have data readouts scheduled before the end of 2026, which could lead to a growth surge once commercial production begins in 2028.
• The ECO Synthesis platform is valued at $233 million. Revenue generated from the existing 10 customers is recorded as licensing revenue, since services are limited to the small-scale Innovation Lab. Will management provide guidance or outline a rough trajectory for product revenue once the new GMP facility is retooled?

Margin of Safety & Conviction

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 December 31: $1.63 per share
• Modeled Fair Valuation: $3.07 per share
• Allocation Range: Up to 5%

Codexis reported 90.324 million shares outstanding as of November 3, 2025. The modeled fair valuation above assumes 103.873 million shares outstanding by the end of 2027, which is equivalent to 15% dilution.

Further Reading

• November 2025 press release announcing signing of lease to new GMP facility
• November 2025 press release announcing Q3 2025 operating results
• November 2025 regulatory filing (10-Q) detailing Q3 2025 operating results

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