CDXS - Should Codexis Investors Prepare for Slower Growth?
Many synthetic biology companies have gone all in on business models that prioritize research and development (R&D) revenue. On one hand, collaboration deals grab headlines and create hype, which can be cashed in for venture capital or goodwill with investors. On the other hand, collaboration deals only lead to sustainable business success if they result in commercialized products that can be sold at a profit. The bill always comes due, as they say, and the field has paid a hefty price in credibility for relying too much on hype.
Codexis (NASDAQ: CDXS) hasn't exactly gone all in on the business model, but the company expects stagnant product revenue for the fourth consecutive year in 2020. Management has also devoted an increasing amount of bandwidth to drug development deals, which will force investors to rely on R&D revenue for growth for the foreseeable future.
The strategy could work better for Codexis than other synthetic biology companies chasing R&D deals in flavors, cannabinoids, and other trendy dead ends. But the coronavirus pandemic is expected to have a significant impact on the company's collaboration revenue. How should investors think about the small-cap stock in light of current events?