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Codexis Sees Shell Move on Research Mid-year

04.04.2012 -

Codexis expects oil company Royal Dutch Shell to make a decision around mid-year about extending or expanding a partnership to develop cellulosic ethanol, Peter Strumph, the company's interim chief executive said on Tuesday.

Codexis, which makes enzymes and microorganisms to produce ethanol from plant waste, got about half of its $123.9 million in revenues last year through a research partnership with Shell and Raizan, the Brazilian joint venture of Shell and sugar and energy producer Cosan.

The research pact expires at the end of October, which has raised fears among investors that the company could see its revenues drop if Shell pulls back, although Strumph was confident the partnership would continue.

"As much as I might have liked this issue to come to review in Shell's executive committee earlier in the year, it's not happening till the middle of the year," Strumph said.

Raizan holds a stake of about 16% in Codexis.

While ethanol output has surged in Brazil and the United States, producers have relied on sugar cane or corn to produce the fuel, raising concerns that energy demand was driving up the cost of food.

Development of cellulosic ethanol from non-food plant sources has come more slowly than expected, although several pilot projects are currently being rolled out.

Codexis and Shell's research into cellulosic ethanol is more than halfway completed, he said, and the companies are holding discussions about the development of the market, which is expected to grow from virtually no volume currently to up to 21 billion gallons in the United States alone by 2022.

Shell is expected to control about 10 % of the cellulosic ethanol market in North America, while Raizan holds a similar biofuel share in Brazil, leaving the companies a large market share to target.

"The thought has occurred to us and to Shell that there's plenty of economic opportunity in that 90 % and we should figure out how to commercialize into that 90% and then share the economics," Strumph said.

Codexis expects its first commercial production of cellulosic ethanol in 2015 and it has focused on using sugar cane waste and wheat straw as a source.

Currently, about 40% of the company's revenues come from product sales, mostly shipments to the pharmaceutical industry.

Those sales rose by nearly 50% last year from 2010, but the sharpest increases were likely to be in coming years from cellulosic ethanol and Codexis' efforts to develop products for the specialty chemicals industry.

Codexis shares have slumped more than 75% since their 2010 launch.

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Codexis

200 Penobscot Drive
Redwood City
CA 94063

+1/610/6483995
+1/610/6483996

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