CODEXIS, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following management's discussion and analysis of our financial condition
and results of operations should be read in conjunction with the unaudited
condensed consolidated financial statements and the related notes thereto
included elsewhere in this Quarterly Report on Form 10-Q and the audited
consolidated financial statements and notes thereto and management's discussion
and analysis of financial condition and results of operations for the year ended
December 31, 2021 included in our Annual Report on Form 10-K for the year ended
December 31, 2021, as filed with the SEC on February 28, 2022 (the "Annual
Report"). This Quarterly Report on Form 10-Q 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 II,
Item 1A: "Risk Factors" of this Quarterly Report on Form 10-Q and Part I, Item
1A: "Risk Factors" of our Annual Report, as incorporated herein and referenced
in Part II, Item 1A: "Risk Factors" of this Quarterly Report on Form 10-Q and
elsewhere in this report. The forward-looking statements in this Quarterly
Report on Form 10-Q represent our views as of the date of this Quarterly Report
on Form 10-Q. 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 Quarterly Report on Form 10-Q.

COMPANY OVERVIEW

We discover, develop and sell enzymes and other proteins that deliver value to
our clients in a growing set of industries. We view proteins as a vast, largely
untapped source of value-creating products, and we are using our proven
technologies, which we have been continuously improving since our inception in
2002, to commercialize an increasing number of novel enzymes, both as
proprietary Codexis products and in partnership with our customers.

We are a pioneer in harnessing computational technologies to drive biology
advancements. Since 2002, we have made substantial investments in the
development of our CodeEvolver® protein engineering technology platform, the
primary source of our competitive advantage. Our technology platform is powered
by proprietary, artificial intelligence-based, computational algorithms that
rapidly mine the structural and performance attributes of our large and
continuously growing library of protein variants. These computational outputs
enable increasingly reliable predictions for next generation protein variants to
be engineered, enabling time- and cost-efficient delivery of the targeted
performance enhancements. In addition to its computational prowess, our
CodeEvolver® protein engineering technology platform integrates additional
modular competencies, including robotic high-throughput screening and genomic
sequencing, organic chemistry and bioprocess development which are all
coordinated to rapidly innovate novel, fit-for-purpose products.

The core historical application of the technology has been in developing
commercially viable biocatalytic manufacturing processes for more sustainable
production of complex chemicals. It begins by conceptually designing the most
cost-effective and practical process for a targeted product. We then develop
optimized biocatalysts to enable the designed process, using our CodeEvolver®
platform. Engineered biocatalyst candidates, numbering many thousands for each
project, are then rapidly screened and validated using high throughput methods
under process-relevant operating conditions. This approach results in an
optimized biocatalyst that enables cost-efficient processes that are relatively
simple to run in conventional manufacturing equipment allowing for efficient
technical transfer of our processes to our manufacturing partners. This also
allows for efficient technical transfer of our processes to our manufacturing
partners.

We initially commercialized our CodeEvolver® protein engineering technology
platform and products in the manufacture of small molecule pharmaceuticals,
which remains a primary business focus. Our customers, which include many large,
global pharmaceutical companies, use our technology, products and services in
their process development and in manufacturing. Additionally, we have licensed
our proprietary CodeEvolver® protein engineering technology platform to global
pharmaceutical companies enabling them to use this technology, in house, to
engineer enzymes for their own businesses. In May 2019, we entered into a
Platform Technology Transfer and License Agreement (the "Novartis CodeEvolver®
Agreement") with Novartis Pharma AG ("Novartis"). The Novartis CodeEvolver®
Agreement (Codexis' third such agreement with large pharmaceutical companies)
allows Novartis to use our proprietary CodeEvolver® protein engineering platform
technology in the field of human healthcare.

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As evidence of our strategy to extend our technology beyond pharmaceutical
manufacturing, we have also used the technology to develop biocatalysts and
enzyme products for use in a broader set of industrial markets, including
several large verticals, such as food, feed, consumer care and fine chemicals.
In addition, we are using our technology to develop enzymes for various life
science related applications, such as next generation sequencing ("NGS"), and
polymerase chain reaction ("PCR/qPCR") for in vitro molecular diagnostics and
genomic research applications. In December 2019, we entered into a license
agreement to provide Roche Sequencing Solutions, Inc. with our first enzyme for
this target market: the Company's EvoT4™ DNA ligase. In June 2020, we also
entered into the MAI Agreement pursuant to which we are leveraging our
CodeEvolver® platform technology to improve the DNA polymerase enzymes that are
critical for enzymatic DNA synthesis.

We have been using the CodeEvolver® protein engineering technology platform to
develop early stage, novel biotherapeutic product candidates, both in
partnership with customers and for our own proprietary Codexis drug candidates.
Our first program was for the potential treatment of phenylketonuria ("PKU") in
humans. PKU is an inherited metabolic disorder in which the enzyme that converts
the essential amino acid phenylalanine into tyrosine is deficient. In October
2017, we entered into a Global Development, Option and License Agreement (the
"Nestlé License Agreement") with Societé des Produits Nestlé S.A., formerly
known as Nestec Ltd. ("Nestlé Health Science") to advance CDX-6114, our enzyme
biotherapeutic product candidate for the potential treatment of PKU. In February
2019, Nestlé Health Science exercised its option to obtain an exclusive license
to develop and commercialize CDX-6114. Also in October 2017, we entered into a
strategic collaboration agreement with Nestle Health Science ("Nestlé SCA")
pursuant to which we and Nestlé Health Science are collaborating to leverage the
CodeEvolver® platform technology to develop other novel enzymes for Nestlé
Health Science's established Consumer Care and Medical Nutrition business areas.
In March 2020, we entered into a Strategic Collaboration and License Agreement
("Takeda Agreement") with Shire Human Genetic Therapies, Inc., a wholly-owned
subsidiary of Takeda Pharmaceutical Company Limited ("Takeda") for the research
and development of novel gene therapies for certain disease indications,
including the treatment of lysosomal storage disorders and a blood factor
deficiency.

ACTIVITY AREA

We manage our business in two business segments: Performance Enzymes and Novel Biotherapeutics. See Note 12, “Segment, Geographic and Other Revenue Information” in the Notes to the Unaudited Condensed Consolidated Financial Statements included with this Quarterly Report on Form 10-Q.

High-performance enzymes

We initially commercialized our CodeEvolver® protein engineering technology
platform and products in the manufacture of small molecule pharmaceuticals and,
to date, this continues to be our largest market served. Our customers, which
include many large global pharmaceutical companies, use our technology, products
and services in their manufacturing processes and process development. We have
also used the technology to develop customized enzymes for use in other
industrial markets. These markets consist of several large industrial verticals,
including food, feed, consumer care, and fine chemicals. We also use our
technology in the life sciences markets to develop enzymes for customers using
NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology
research applications, as well DNA/RNA synthesis and health monitoring
applications.

New biotherapies

We are also targeting new opportunities in the pharmaceutical industry to
discover, improve, and/or develop biotherapeutic drug candidates. We believe
that our CodeEvolver® protein engineering platform technology can be used to
discover novel biotherapeutic drug candidates that will target human diseases
that are in need of improved therapeutic interventions. Similarly, we believe
that we can deploy our platform technology to improve specific characteristics
of a customer's pre-existing biotherapeutic drug candidate, such as its
activity, stability or immunogenicity.

COMMERCIAL UPDATE REGARDING COVID-19

We are subject to risks and uncertainties as a result of the current COVID-19
pandemic. The COVID-19 pandemic has presented a substantial public health and
economic challenge around the world and is affecting our employees, communities
and business operations, as well as the U.S. economy and other economies
worldwide. The full extent to which the COVID-19 pandemic will directly or
indirectly impact our business, results of operations and financial condition
will depend on future developments that are highly uncertain and may not be
accurately predicted, including the duration and severity of the pandemic, the
prevalence of more contagious and or virulent variants, and the extent and
severity of the impact on our customers, new information that may emerge
concerning COVID-19, the actions taken to contain it or treat its impact and the
economic impact on local, regional, national and international markets.

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To date, we and our collaboration partners have been able to continue to supply
our enzymes to our customers worldwide, however, there can be no guarantee this
will continue. Furthermore, our ability to provide future R&D services will
continue to be impacted by any disruptions in operations of our customers with
whom we collaborate. We believe that these disruptions have had minimal impact
on our revenue for the three and nine months ended September 30, 2022. The
extent to which the pandemic may impact our business operations and operating
results will continue to remain highly dependent on future developments, which
are uncertain and cannot be predicted with confidence. Should these disruptions
escalate in the future, they may negatively and materially impact our business.
results of operations and financial condition.

As a result of the COVID-19 pandemic, we have received purchase orders from
Pfizer Inc. ("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 API, nirmatrelvir, used by Pfizer in combination with the API
ritonavir, as its PAXLOVID™ (nirmatrelvir tablets; ritonavir tablets) product
for the treatment of COVID-19 infections in humans. In July 2022, we entered
into an Enzyme Supply Agreement, effective as of October 30, 2021, 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. In addition to defining terms under
which Pfizer has and will continue to purchase quantities of CDX-616 from us,
pursuant to the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of
$25.9 million in August 2022 which is creditable against future orders of
CDX-616 used to manufacture its PAXLOVID™. The sale of CDX-616 to Pfizer have
had substantial impact on our revenue for the three and nine months ended
September 30, 2022 and for the year ended December 31, 2021.

Our future results of operations and liquidity could be adversely impacted by
delays in payments of outstanding receivable amounts beyond normal payment
terms, supply chain disruptions and uncertain demand, and the impact of any
initiatives or programs that we may undertake to address financial and
operations challenges faced by our customers. The near-and-long term impact of
COVID-19 to our financial condition, liquidity, or results of operations remains
uncertain. Although some of the government orders that were enacted to control
the spread of COVID-19 have been scaled back and the vaccine rollout has
expanded, surges in the spread of COVID-19 due to the emergence of new more
contagious or virulent variants or the ineffectiveness of the vaccines against
such strains, may result in the reimplementation of certain government orders,
which could adversely impact our business. The extent to which the COVID-19
pandemic may materially impact our financial condition, liquidity, or results of
operations in the future is uncertain.

Overview of operating results

The revenues were $34.5 million in the third quarter of 2022, a decrease of 6% compared to
$36.8 million in the third quarter of 2021.

Product revenue, which consists primarily of sales of biocatalysts,
pharmaceutical intermediates, and Codex® biocatalyst panels and kits, was $28.0
million in the third quarter of 2022, a decrease of 2% from $28.7 million in the
third quarter of 2021. The decrease was primarily due to $6.0 million lower
revenue from Pfizer related to their decreased purchases of CDX-616 during the
third quarter of 2022, but was partially offset by $5.3 million higher revenue
from the sales of other enzyme products used in the manufacture of branded
pharmaceutical products. We expect the sale of CDX-616 to Pfizer under the
Pfizer Supply Agreement to remain a significant component of our product revenue
in 2022.

Research and development revenues, which include license, technology access and
exclusivity fees, research service fees, milestone payments, royalties, and
optimization and screening fees, totaled $6.4 million in the third quarter of
2022, a 20% decrease compared with $8.0 million in the third quarter of 2021.
The decrease in research and development revenue was primarily due to lower
research and development fees from Takeda under the Takeda Agreement and lower
research and development fees from other existing collaboration agreements being
recognized in the third quarter of 2022 as compared to the same period in the
prior year.

Our products' profitability is affected by many factors including the average
profit margin on the products we sell. Our profit margins are affected by many
factors including the costs of internal and third-party fixed and variable
costs, including materials and supplies, labor, facilities and other overhead
costs. Profit margin data is used as a management performance measure to provide
additional information regarding our results of operations on a consolidated
basis. Product gross margins were 65% in the third quarter of 2022, compared to
76% in the third quarter of 2021, due to a less favorable product mix, variation
in prices per volume sold and higher shipping costs.

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Research and development expenses were $21.8 million in the third quarter of
2022, an increase of 44% from $15.2 million in the third quarter of 2021. The
increase was primarily due to increases in costs associated with higher
headcount, higher facilities cost and lab supplies, increase in outside services
costs related to Chemistry, Manufacturing and Controls ("CMC") and regulatory
expenses, higher stock-based compensation and higher depreciation expense and
other outside services. We expect research and development expenses for the rest
of the year to be higher than the comparative prior year periods mainly due to
increases in headcount, higher allocation of facilities cost due to the
additional research and development laboratory space in which we commenced
occupancy in December 2021, and other external costs as we continue our efforts
on advancing our internal and collaborative programs.

Selling, general and administrative expenses have been $13.5 million in the third quarter of 2022 and remained unchanged compared to the same period in 2021.

Net loss was $10.0 million, or a net loss of $0.15 per basic and diluted share
in the third quarter of 2022 compared to a net income of $2.2 million, or a net
income of $0.03 per basic and diluted share for the third quarter of 2021. The
increase in net loss is primarily related to lower product revenue, lower
research and development revenues and higher operating expenses.

Cash and cash equivalents decreased to $108.7 million as of September 30, 2022
compared to $116.8 million as of December 31, 2021. In addition, net cash
inflows from operations was $6.4 million in the nine months ended September 30,
2022 compared to $14.9 million net cash outflows in the nine months ended
September 30, 2021. We believe that our existing cash and cash equivalents,
combined with our future expectations for product revenues, research and
development revenues, and expense management will provide adequate funds for
ongoing operations, planned capital expenditures and working capital
requirements through at least the end of 2024.

In June 2017, we entered into a loan and security agreement with Western
Alliance Bank that allows us to borrow up to $10.0 million under a term loan,
and up to $5.0 million under a revolving credit facility with 80% of certain
eligible accounts receivable as a borrowing base (the "Credit Facility").
Obligations under the Credit Facility are secured by a lien on substantially all
of our personal property other than our intellectual property. Draws on the term
debt are subject to customary conditions for funding. Our ability to take draws
on the term debt expired on December 31, 2021. As of September 30, 2022, no
amounts were borrowed under the Credit Facility and we were in compliance with
the covenants for the Credit Facility. See Note 10, "Commitments and
Contingencies" in the Notes to Unaudited Condensed Consolidated Financial
Statements included in this Quarterly Report on Form 10-Q.

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 option under the terms of the Sitagliptin Catalyst Supply Agreement to
extend the agreement for an additional five years through February 2022. In
September 2021, the Sitagliptin Catalyst 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 product revenue of $2.4 million and $5.1 million under this
agreement for the three and nine months ended September 30, 2022, respectively,
compared to $1.9 million and $7.3 million for the three and nine months ended
September 30, 2021, respectively. Revenues recognized by us under the
Sitagliptin Catalyst Supply Agreement comprised 7% and 5% of our total revenues
for the three and nine months ended September 30, 2022, respectively, compared
to 5% and 9% for the three and nine months ended September 30, 2021,
respectively.

From September 30, 2022we recorded a turnover of $2.0 million from sitagliptin enzyme sales that have been recognized over time based on the progress of the manufacturing process. These products will ship within six months of the end of Q3 2022.

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Global developmentOption and License Agreement and Strategic Collaboration Agreement

In October 2017, we entered into the Nestlé License Agreement with Nestlé Health
Science and, solely for the purpose of the integration and the dispute
resolution clauses of the Nestlé License Agreement, Nestlé Health Science S.A.,
to advance CDX-6114, our enzyme biotherapeutic product candidate for the
potential treatment of PKU.

In January 2019, we received notice from the U.S. Food and Drug Administration
("FDA") that it had completed its review of our IND for CDX-6114 and concluded
that we may proceed with the proposed Phase 1b multiple ascending dose study in
healthy volunteers in the United States. In February 2019, Nestlé Health Science
exercised its option to obtain an exclusive, worldwide, royalty-bearing,
sub-licensable license for the global development and commercialization of
CDX-6114 for the management of PKU. Upon exercising its option, Nestlé Health
Science made an option payment and assumed all responsibilities for future
clinical development and commercialization of CDX-6114. We are also eligible to
receive payments from Nestlé Health Science under the Nestlé License Agreement
that include (i) development and approval milestones of up to $85.0 million,
(ii) sales-based milestones of up to $250.0 million in the aggregate, which
aggregate amount is achievable if net sales exceed $1.0 billion in a single
year, and (iii) tiered royalties, at percentages ranging from the mid-single
digits to low double-digits of net sales of product.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé
Health Science are collaborating to leverage the CodeEvolver® protein
engineering technology platform to develop novel enzymes for Nestlé Health
Science's established Consumer Care and Medical Nutrition business areas. The
term of the Nestlé SCA has been extended through December 2022.

In January 2020, we entered into a development agreement with Nestlé Health
Science pursuant to which we and Nestlé Health Science are collaborating 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, are continuing to advance CDX-7108 and
initiated a Phase 1 clinical trial with the first subject being dosed in the
fourth quarter of 2021.

Under the Nestlé SCA and the development agreement, we recognized $2.2 million
and $3.8 million in research and development fees for the three and nine months
ended September 30, 2022, respectively, compared to $2.4 million and $5.8
million for the three and nine months ended September 30, 2021, respectively.

Platform Technology Transfer and License Agreement

In May 2019, we entered into the Novartis CodeEvolver® Agreement with Novartis.
The Agreement allows Novartis to use our proprietary CodeEvolver® protein
engineering platform technology 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® protein engineering platform technology
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® protein engineering platform
technology 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 ("Improvements Term"),
Novartis will pay Codexis annual payments over four years which amount to an
additional $8.0 million in aggregate. We expect to receive the first annual
payment of $2.0 million in the fourth quarter of 2022. 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 CodeEvolver® protein engineering platform
technology during the period that began on the conclusion of the Technology
Transfer Period and ends on the expiration date of the last to expire licensed
patent. Revenue for the combined initial license and technology transfer
performance obligation was recognized using a single measure of progress that
depicted our performance in transferring control of the services. Revenue
allocated to improvements made during the Improvements Term are being recognized
during the Improvements Term.

We recognized $0.2 million and $0.7 million in research and development revenue
for the three and nine months ended September 30, 2022, respectively, compared
to $0.2 million and $1.4 million for the three and nine months ended September
30, 2021, respectively.

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Strategic collaboration and license agreement

In March 2020, we entered into the Takeda Agreement with Shire Human Genetic
Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Co. Ltd.
("Takeda"), under which we are collaborating 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. Pursuant to the Takeda Agreement, we are eligible to
receive other payments that include (i) reimbursement of research and
development fees and preclinical development milestones for the Initial Programs
of $10.5 million, in aggregate, and $4.7 million for the fourth program, (ii)
clinical development and commercialization-based milestones, per target gene, of
up to $100.0 million and (iii) tiered royalty payments based on net sales of
applicable products at percentages ranging from the mid-single digits to low
single-digits.

Revenue recognized 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 $1.2 million and $3.7 million for the three and nine months ended
September 30, 2022, respectively, compared to $1.8 million and $6.0 million for
the three and nine months ended September 30, 2021, respectively.

Enzyme Supply Agreement
In July 2022, we entered into the Pfizer Supply Agreement covering the
manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture
of nirmatrelvir. Pfizer markets, sells and distributes nirmatrelvir, in
combination with the active pharmaceutical ingredient ritonavir, as its
PAXLOVID™ (nirmatrelvir tablets; ritonavir tablets) product. In addition to
defining terms under which Pfizer has and will continue to purchase quantities
of CDX-616 from us, pursuant to 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. The fee is creditable against future orders of CDX-616 used to
manufacture PAXLOVID™ with shipment dates prior to December 31, 2023 and for
fees associated with any new development and licensing agreements with Pfizer
entered into prior to December 31, 2022 that are invoiced prior to December 31,
2023. Up to 50% of any portion of the fee which has not been credited pursuant
to credits granted under the preceding sentence is creditable against future
orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates prior to
December 31, 2024.

We recognized product revenue of $12.9 million and $58.0 million for the three
and nine months ended September 30, 2022, respectively, compared to $18.9
million and $23.2 million for the three and nine months ended September 30,
2021, respectively, from the sale of quantities of CDX-616 to Pfizer. Revenues
recognized by us from sales of CDX-616 to Pfizer comprised 38% and 54% of our
total revenues for the three and nine months ended September 30, 2022,
respectively, and 51% and 29% for the three and nine months ended September 30,
2021, respectively. As of September 30, 2022, we recorded revenue of $19.4
million from the sale of certain quantities of CDX-616 that were recognized over
time based on the progress of the manufacturing process. These quantities will
be shipped within the four month period following the end of the third quarter
of 2022.

As of September 30, 2022, we had $5.2 million in deferred revenue related to the
$25.9 million fee received from Pfizer, net of $19.4 million in contract assets
that was offset against deferred revenue as it relates to the same performance
obligation within the same agreement and net of $1.3 million of product revenue
recognized from the fee during the three months ended September 30, 2022. We had
nil in contract assets as of September 30, 2022.

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RESULTS OF OPERATIONS

The following table shows the amounts from our unaudited condensed consolidated
statements of operations for the periods presented (in thousands, except
percentages):
                                    Three Months Ended September
                                                30,                                Change                   Nine Months Ended September 30,                  Change
                                       2022              2021                $                 %                2022                2021                $               %
Revenues:
Product revenue                    $  28,042          $ 28,731          $    (689)              (2) %       $   93,376          $  53,674          $ 39,702             74  %
Research and development revenue       6,428             8,038             (1,610)             (20) %           14,839             26,579           (11,740)           (44) %
Total revenues                        34,470            36,769             (2,299)              (6) %          108,215             80,253            27,962             35  %
Costs and operating expenses:
Cost of product revenue                9,786             6,867              2,919               43  %           29,577             15,403            14,174             92  %
Research and development              21,821            15,165              6,656               44  %           60,410             39,562            20,848             53  %
Selling, general and
administrative                        13,499            13,407                 92                1  %           39,859             37,600             2,259              6  %
Total costs and operating expenses    45,106            35,439              9,667               27  %          129,846             92,565            37,281             40  %
Income (loss) from operations        (10,636)            1,330            (11,966)            (900) %          (21,631)           (12,312)           (9,319)            76  %
Interest income                          436                41                395              963  %              618                424               194             46  %
Other income, net                        216               983               (767)             (78) %              150                920              (770)           (84) %
Income (loss) before income taxes     (9,984)            2,354            (12,338)            (524) %          (20,863)           (10,968)           (9,895)            90  %
Provision for income taxes                 8               110               (102)             (93) %              125                121                 4              3  %
Net income (loss)                  $  (9,992)         $  2,244          $ (12,236)            (545) %       $  (20,988)         $ (11,089)         $ (9,899)            89  %


Revenues

Our revenues consisted of product revenues and research and development revenues as follows:

•Product sales include sales of biocatalysts, pharmaceutical intermediates and Codex® biocatalyst panels and kits.

•Research and development revenues include licensing, technology access and exclusivity fees, research services fees, milestone payments, royalties, optimization and breeding fees.

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

                            Three Months Ended September
                                        30,                               Change                 Nine Months Ended September 30,                 Change
                               2022              2021                $               %               2022               2021                $               %
Product revenue            $  28,042          $ 28,731          $   (689)            (2) %       $   93,376          $ 53,674          $ 39,702             74  %
Research and development
revenue                        6,428             8,038            (1,610)           (20) %           14,839            26,579           (11,740)           (44) %
Total revenues             $  34,470          $ 36,769          $ (2,299)            (6) %       $  108,215          $ 80,253          $ 27,962             35  %


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.

Total revenues decreased by $2.3 million in the three months ended September 30,
2022, compared to the same period in 2021, primarily due to lower product
revenue and lower research and development revenue. The increase of $28.0
million in the nine months ended September 30, 2022, compared to the same period
in 2021, was primarily due to higher product revenue, which was partially offset
by lower research and development revenue.

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Product revenue, decreased by $0.7 million in the three months ended September
30, 2022, compared to the same period in 2021, primarily due to $6.0 million
lower revenue from Pfizer related to their decreased purchases of CDX-616 during
the third quarter of 2022, but was partially offset by $5.3 million higher
revenue from the sales of other enzyme products used in the manufacture of
branded pharmaceutical products, The increase of $39.7 million in the nine
months ended September 30, 2022, compared to the same period in 2021, was
primarily due to 2021 revenue from Pfizer sales largely occurring in the second
half of 2021 whereas we reported $58.0 million in revenue from Pfizer related to
the purchase of CDX-616 in the nine months ended September 30, 2022.

Research and development revenue decreased by $1.6 million and $11.7 million in
the three and nine months ended September 30, 2022, respectively, compared to
the same periods in 2021, primarily due to lower research and development fees
from Takeda under the Takeda Agreement and lower research and development fees
from other existing collaboration agreements being recognized in 2022 as
compared to the same periods in the prior year.

Cost and operating expenses

Our cost and operating expenses consist of cost of product revenue, research and
development expense, and selling, general and administrative expense. The
following table shows the amounts of our cost of product revenue, research and
development expense, and selling, general and administrative expense from our
unaudited condensed consolidated statements of operations for the periods
presented (in thousands, except percentages):
                              Three Months Ended September
                                          30,                              Change                 Nine Months Ended September 30,                 Change
                                 2022              2021               $               %               2022               2021                $               %

Product revenue cost $9,786 $6,867 $2,919

43% $29,577 $15,403 $14,174

      92  %
Research and development        21,821            15,165            6,656             44  %           60,410            39,562            20,848             53  %
Selling, general and
administrative                  13,499            13,407               92              1  %           39,859            37,600             2,259              6  %
Total costs and operating
expenses                     $  45,106          $ 35,439          $ 9,667             27  %       $  129,846          $ 92,565          $ 37,281             40  %

Product Revenue Cost and Product Gross Margin

Our product revenues are derived entirely from our Performance Enzymes segment. Novel Biotherapeutics segment revenues are derived solely from collaborative research and development activities.

The following table shows the amounts of our product revenue, cost of product
revenue, product gross profit and product gross margin from our unaudited
condensed consolidated statements of operations for the periods presented (in
thousands, except percentages):
                           Three Months Ended September 30,                  Change                  Nine Months Ended September 30,                   Change
                                2022                2021                $               %                 2022                2021                $               %
Product revenue           $         28,042       $    28,731       $   (689)            (2) %       $         93,376       $    53,674       $ 39,702             74  %
Cost of product revenue
(1)                                  9,786             6,867          2,919             43  %                 29,577            15,403         14,174   

92% Gross profit from proceeds $18,256 $21,864 $(3,608)

           (17) %       $         63,799       $    38,271       $ 25,528             67  %
Product gross margin (%)
(2)                                  65  %            76   %                                                   68  %            71   %


(1) Cost of product revenue consist of 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.

Cost of product revenue increased by $2.9 million in the three months ended
September 30, 2022 and by $14.2 million in the nine months ended September 30,
2022 compared to the same periods in 2021. The increase was primarily due to a
higher volume of product sales and variations in product mix. Product gross
margins were 65% and 68% in the three and nine months ended September 30, 2022,
respectively, compared to 76% and 71% in the corresponding periods in 2021 due
to variations in product mix, variation in prices per volume sold and higher
shipping costs.

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Research and development costs

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.

Research and development expenses increased by $6.7 million, or 44%, during the
three months ended September 30, 2022, and by $20.8 million, or 53%, in the nine
months ended September 30, 2022, compared to the same periods in 2021. The
increase in research and development expenses was primarily due to increases in
costs associated with higher headcount, higher facilities cost and lab supplies,
increase in outside services related to CMC and regulatory expenses, higher
stock-based compensation and higher depreciation expense and other outside
services.

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.

Selling, general and administrative expenses remained unchanged for the three
months ended September 30, 2022 as compared to the same period in 2021. The
increase of $2.3 million, or 6%, in the nine months ended September 30, 2022
compared to the same period in 2021, was primarily due to increase in costs
associated with a higher headcount and higher outside and temporary services,
and was partially offset by decrease in legal fees and lower allocable expenses.

Interest and other income, net (in thousands, except percentages):

                                Three Months Ended September                                      Nine Months Ended September
                                            30,                             Change                            30,                             Change
                                   2022              2021              $              %              2022              2021              $              %
Interest income                 $    436          $    41          $  395            963  %       $    618          $   424          $  194             46  %
Other income, net                    216              983            (767)           (78) %            150              920            (770)           (84) %
Total other income              $    652          $ 1,024          $ (372)           (36) %       $    768          $ 1,344          $ (576)           (43) %


Interest Income

Interest income increased by $0.4 million and $0.2 million in the three and nine
months ended September 30, 2022, respectively, compared to the same periods in
2021, primarily due to higher average interest rates on cash balances and was
partially offset by earned interest income and amortization of debt discount on
non-marketable debt security in the prior year.

Other income, net

Other income, net, decreased by $0.8 million and $0.8 million in the three and
nine months ended September 30, 2022, respectively, compared to the same periods
in 2021, primarily due to a higher gain recognized from remeasurement of the
carrying value of our investment in MAI in the prior year compared to this year.

Provision for income taxes (in thousands, except percentages):

                           Three Months Ended September                                          Nine Months Ended September
                                        30,                               Change                             30,                             Change
                               2022               2021              $               %                2022             2021             $               %
Provision for income
taxes                     $          8          $  110          $ (102)             (93) %       $     125          $  121          $   4               3  %


The provision for income taxes for the three and nine months ended September 30,
2022 and 2021 were primarily due to the income tax withholding imposed by
foreign taxing authorities on income earned in certain countries outside of the
United States and remitted to the United States and the accrual of interest and
penalties on historic uncertain tax positions.

The Tax Cuts and Jobs Act of 2017 provided for significant changes to the U.S
tax system including the mandatory capitalization of research and development
expenses starting in 2022. While we are still assessing the legislation's
potential impact, we do not expect it to have a material effect on our financial
statements.

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Net loss

Net loss for the three months ended September 30, 2022 was $10.0 million, or a
net loss per basic and diluted share of $0.15. This compared to a net income of
$2.2 million, or a net income per basic and diluted share of $0.03 for the three
months ended September 30, 2021. Net loss for the nine months ended September
30, 2022 was $21.0 million, or a net loss per basic and diluted share of $0.32.
This compared to a net loss of $11.1 million, or a net loss per basic and
diluted share of $0.17 for the nine months ended September 30, 2021. The
increase in net loss for both the three and nine months ended September 30, 2022
was primarily related to a decrease in product revenues with higher margins,
lower research and development revenues and higher operating expenses.

RESULTS OF OPERATIONS BY SEGMENT (in thousands, except percentages):

Revenue by segment

                                                                         Three Months Ended September 30,                                                                                               Change
                                                   2022                                                                    2021                                            Performance Enzymes                      Novel 

Biotherapeutic

                       Performance                                                             Performance
                         Enzymes             Novel Biotherapeutics            Total              Enzymes             Novel Biotherapeutics            Total                 $                  %                      $                     %
Revenues:
Product revenue      $      28,042          $                   -          $ 28,042          $      28,731          $                   -          $ 28,731          $       (689)              (2) %       $                -                -  %
Research and
development revenue          3,104                          3,324             6,428                  3,853                          4,185             8,038                  (749)             (19) %                     (861)             (21) %
Total revenues       $      31,146          $               3,324          $ 34,470          $      32,584          $               4,185          $ 36,769          $     (1,438)              (4) %       $             (861)             (21) %


                                                                            Nine Months Ended September 30,                                                                                                 Change
                                                     2022                                                                     2021                                            Performance Enzymes                       Novel 

Biotherapeutic

                        Performance                                                              Performance
                          Enzymes             Novel Biotherapeutics            Total               Enzymes              Novel Biotherapeutics            Total                 $                  %                       $                      %
Revenues:
Product revenue       $      93,376          $                   -          $  93,376          $      53,674          $                    -          $ 53,674          $     39,702               74  %       $                  -                -  %
Research and
development revenue           7,398                          7,441             14,839                 14,723                          11,856            26,579                (7,325)             (50) %                     (4,415)             (37) %
Total revenues        $     100,774          $               7,441          $ 108,215          $      68,397          $               11,856          $ 80,253          $     32,377               47  %       $             (4,415)             (37) %


Revenues from the Performance Enzymes segment decreased by $1.4 million, or 4%,
for the three months ended September 30, 2022 and increased by $32.4 million, or
47%, for the nine months ended September 30, 2022 compared to the same periods
in 2021. The decrease in product revenue of $0.7 million, or 2%, in the three
months ended September 30, 2022, compared to the same period in 2021 was
primarily due to $6.0 million lower revenue from Pfizer related to their
decreased purchases of CDX-616 during the third quarter of 2022, but was
partially offset by $5.3 million higher revenue from the sales of other enzyme
products used in the manufacture of branded pharmaceutical products. The
increase in product revenue of $39.7 million, or 74%, in the nine months ended
September 30, 2022, compared to the same period in 2021, was primarily due to
2021 product revenue from Pfizer sales largely occurring in the second half of
2021 whereas we reported $58.0 million in revenue from Pfizer for the nine
months ended September 30, 2022. The decrease in research and development
revenue of $0.7 million, or 19%, for the three months ended September 30, 2022
and of $7.3 million, or 50%, in the nine months ended September 30, 2022,
compared to the same periods in 2021 was primarily due to lower revenues from
Novartis under the Novartis CodeEvolver® Agreement as we completed the
technology transfer to Novartis during the third quarter of 2021 and lower
research and development fees from other existing collaboration agreements
compared to the same period in the prior year.

Revenues from the Novel Biotherapeutics segment decreased by $0.9 million, or
21%, for the three months ended September 30, 2022 and by $4.4 million, or 37%,
for the nine months ended September 30, 2022 compared to the same periods in
2021, primarily due to lower research and development fees from Takeda under the
Takeda Agreement and lower research and development revenue from Nestlé Health
Science recognized this year compared to the prior year.

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Operating costs and expenses by segment

                                                                                Three Months Ended September 30,                                                                                               Change
                                                          2022                                                                    2021                                            Performance Enzymes                     Novel Biotherapeutics
                             Performance                                                              Performance
                               Enzymes              Novel Biotherapeutics            Total              Enzymes             Novel Biotherapeutics            Total                 $                  %                     $                      %
Cost of product revenue    $       9,786          $                    -          $  9,786          $       6,867          $                   -          $  6,867          $      2,919              43  %       $                 -               -  %
Research and development
(1)                                6,782                          13,855            20,637                  5,670                          8,850            14,520                 1,112              20  %                     5,005              57  %
Selling, general and
administrative (1)                 3,791                             888             4,679                  3,306                            831             4,137                   485              15  %                        57               7  %
Total segment costs and
operating expenses         $      20,359          $               14,743            35,102          $      15,843          $               9,681            25,524          $      4,516              29  %       $             5,062              52  %
Corporate costs (2)                                                                  8,599                                                                   9,121
Unallocated depreciation
and amortization                                                                     1,405                                                                     794
Total costs and operating
expenses                                                                          $ 45,106                                                                $ 35,439



                                                                           
     Nine Months Ended September 30,                                       
                                                         Change
                                                          2022                                                                      2021                                            Performance Enzymes                      Novel Biotherapeutics
                             Performance                                                               Performance
                               Enzymes              Novel Biotherapeutics            Total               Enzymes              Novel Biotherapeutics            Total                 $                  %                      $                      %
Cost of product revenue    $      29,577          $                    -          $  29,577          $      15,403          $                    -          $ 15,403          $     14,174              92  %       $                  -               -  %
Research and development
(1)                               19,833                          37,279             57,112                 17,172                          20,649            37,821                 2,661              15  %                     16,630              81  %
Selling, general and
administrative (1)                11,208                           2,288             13,496                  9,294                           2,052            11,346                 1,914              21  %                        236              12  %
Total segment costs and
operating expenses         $      60,618          $               39,567            100,185          $      41,869          $               22,701            64,570          $     18,749              45  %       $            
16,866              74  %
Corporate costs (2)                                                                  25,708                                                                   25,775
Unallocated depreciation
and amortization                                                                      3,953                                                                    2,220
Total costs and operating
expenses                                                                          $ 129,846                                                                 $ 92,565

(1) Research and development costs and selling, general and administrative costs do not include amortization of finance leases. (2) General expenses include unallocated selling, general and administrative expenses.

For an analysis of the product’s cost of revenue, see “Results of Operations”.

Research and development expense in the Performance Enzymes segment increased by
$1.1 million, or 20%, in the three months ended September 30, 2022 and by $2.7
million, or 15%, in the nine months ended September 30, 2022, as compared to the
same periods in 2021. The increase was primarily due to an increase in costs
associated with outside services, lab supplies and higher headcount.

Selling, general and administrative expense in the Performance Enzymes segment
increased by $0.5 million, or 15%, in the three months ended September 30, 2022,
and increased by $1.9 million, or 21%, in the nine months ended September 30,
2022, as compared to the same periods in 2021, primarily due to an increase in
costs associated with higher headcount and higher outside services expenses.

Research and development expense in the Novel Biotherapeutics segment increased
by $5.0 million, or 57%, in the three months ended September 30, 2022 and by
$16.6 million, or 81% in the nine months ended September 30, 2022, as compared
to the same periods in 2021. The increase was primarily due to increased costs
associated with higher headcount, higher facilities cost and lab supplies,
increase in outside services related to CMC and regulatory expenses and higher
allocable expenses.

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Selling, general and administrative expense in the Novel Biotherapeutics segment
increased by $0.1 million, or 7%, in the three months ended September 30, 2022
and by $0.2 million, or 12%, in the nine months ended September 30, 2022, as
compared to the same periods in 2021. The increase was primarily due to
increased costs associated with higher headcount.

CASH 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. We also have the ability to borrow up to
$5.0 million under our Credit Facility. 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.

The following table summarizes our cash and cash equivalents balance and working capital as of September 30, 2022 and December 31, 2021 (in thousands):

                                  September 30, 2022      December 31, 2021
Cash and cash equivalents        $          108,689      $          116,797
Working capital                  $          114,089      $          128,517


Sources of Capital

In addition to our existing cash and cash equivalents, we are eligible to earn
milestone and other contingent payments for the achievement of defined
collaboration objectives and certain royalty payments 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. Under the Merck CodeEvolver® Agreement, we are eligible to receive
payments of up to $15.0 million for each commercial API that is manufactured by
Merck using one or more novel enzymes developed by Merck using the CodeEvolver®
technology. In addition, under the GSK CodeEvolver® Agreement, depending upon
GSK's successful application of the licensed technology, we have the potential
to receive additional contingent payments that range from $5.8 million to
$38.5 million per project.

In May 2019, we entered into the Platform Technology Transfer and License
Agreement with Novartis. The Novartis CodeEvolver® Agreement allows Novartis to
use Codexis' proprietary CodeEvolver® protein engineering platform technology in
the field of human healthcare. Pursuant to the agreement, we received an upfront
payment shortly after the effective date and we also received milestone payments
upon completion of the second technology milestone transfer in 2020 and 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
("Improvements Term"), Novartis will pay an additional $8.0 million in aggregate
over four years. We expect to receive the first annual payment of $2.0 million
in the fourth quarter of 2022.

In October 2017, we entered into the Nestlé License Agreement with Nestlé Health
Science. Pursuant to the Nestlé License Agreement, Nestlé Health Science paid us
an upfront cash payment and milestone payments after dosing the first subjects
in a first-in-human Phase 1a dose-escalation trial with CDX-6114 and achievement
of a formulation relating to CDX-6114. We are also eligible to receive payments
from Nestlé Health Science under the Nestlé License Agreement that include (i)
development and approval milestones of up to $85.0 million, (ii) sales-based
milestones of up to $250.0 million in the aggregate, which aggregate amount is
achievable if net sales exceed $1.0 billion in a single year, and (iii) tiered
royalties, at percentages ranging from the mid-single digits to low
double-digits, of net sales of product.

Pursuant to the terms of the Pfizer Supply Agreement, we received a fee of $25.9
million in August 2022. The fee is creditable against future orders of CDX-616
used to manufacture PAXLOVID™ with shipment dates prior to December 31, 2023 and
for fees associated with any new development and licensing agreements with
Pfizer entered into prior to December 31, 2022 that are invoiced prior to
December 31, 2023. Up to 50% of any portion of the fee which has not been
credited pursuant to credits granted under the preceding sentence is creditable
against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment
dates prior to December 31, 2024.

We are actively collaborating with new and existing customers in the
pharmaceutical and food industries. We believe that we can utilize our current
products and services, and develop new products and services, to increase our
revenues and gross margins in future periods.

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We have historically experienced negative cash flows from operations as we
continue to invest in key technology development projects and improvements to
our CodeEvolver® protein engineering technology 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, primarily in research and development. 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.

Share distribution agreement

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. During the nine months ended September 30, 2022,
no shares of our common stock were issued pursuant to the EDA and as of
September 30, 2022, $50.0 million worth of shares remained available for sale
under the EDA. Sales of our common stock under this arrangement 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.

Credit facility

In June 30, 2017, we entered into the Credit Facility with Western Alliance Bank
consisting of term loans up to $10.0 million, and advances under a revolving
credit facility of up to $5.0 million with an accounts receivable borrowing base
of 80% of eligible accounts receivable. Our right to take draws on the term debt
expired on December 31, 2021. On October 1, 2024, loans drawn, if any, under the
Revolving Line of Credit terminate.

The Credit Facility requires us to maintain compliance with certain financial
covenants including attainment of certain lender-approved projections or
maintenance of certain minimum cash levels. Restrictive covenants in the Credit
Facility restrict the payment of dividends or other distributions. As of
September 30, 2022, no amounts were borrowed under the Credit Facility and we
were in compliance with the covenants for the Credit Facility. For additional
information about our contractual obligations, see Note 10, "Commitments and
Contingencies" in the Notes to Unaudited Condensed Consolidated Financial
Statements included in this Quarterly Report on Form 10-Q.

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 through the end of 2024. 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 other sources of capital 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, 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. If we raise debt financing or enter into
credit facilities, we may be subject to restrictive covenants that limit our
ability to conduct our business. 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
research or development programs 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.

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Cash flow

The following is a cash flow summary for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine month period ended September 30,

                                                                           2022                   2021
Net cash provided by (used in) operating activities                 $         6,367          $    (14,927)
Net cash used in investing activities                                       (13,611)              (15,942)
Net cash provided by (used in) financing activities                            (914)                1,341

Net decrease in cash, cash equivalents and restricted cash $

(8,158) ($29,528)

Cash flow from operating activities

Cash used in operating activities for the nine months ended September 30, 2022
of $6.4 million consisted of net loss adjusted for certain non-cash items and
changes in operating assets and liabilities.

The $21.3 million increase in net cash provided by operating activities for the
nine months ended September 30, 2022 as compared to the same period in 2021, was
primarily due to the receipt of $25.9 million fee from Pfizer and increases in
cash received from revenue, partially offset by increased payments associated
with higher operating costs.

Cash flow from investing activities

Cash used in investing activities for the nine months ended September 30, 2022
was primarily attributable to $5.3 million for additional new equity investments
in privately held companies and $8.3 million for purchases of property and
equipment during the period.

The $2.3 million decrease in net cash used in investing activities for the nine months ended September 30, 2022 compared to the same period in 2021, was mainly due to an increase in cash used for additional investments in equity securities and purchases of property, plant and equipment in the prior year.

Cash flow from financing activities

Cash used in financing activities for the nine months ended September 30, 2022
included $1.5 million for taxes paid related to net share settlement of equity
awards offset by $0.6 million of proceeds from exercises of stock options.

The $2.3 million decrease in net cash provided by financing activities for the
nine months ended September 30, 2022 as compared to the same period in 2021 was
primarily due to higher cash paid on taxes related to net share settlement of
equity awards and lower proceeds from exercises of stock options.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make judgments, estimates and
assumptions in the preparation of our consolidated financial statements and
accompanying notes. Actual results could differ from those estimates. There have
been no material changes to our critical accounting policies or estimates during
the three and nine months ended September 30, 2022 from those discussed in our
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the
SEC on February 28, 2022.

                                       39

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