Nov 8, 2020
Operator
Good day, and welcome to Codexis Third Quarter Financial Results Conference Call. [Operator Instructions] Please note that today's event is being recorded.
At this time, I would like to turn the conference over to Jody Cain. Please go ahead.
Jody Cain
This is Jody Cain with LHA. Thank you for participating in today's Codexis call to discuss the company's third quarter financial results and recent business progress.
Joining me from Codexis are John Nicols, President and Chief Executive Officer; and Ross Taylor, the company's Chief Financial Officer. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
To the extent that statements made by management are not descriptions of historical facts regarding Codexis, they are forward-looking statements reflecting beliefs and expectations of management as of - the statement as of November 5, 2020. You should not place undue reliance on the forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the company's control and could materially affect actual results.
In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means that results could change at any time and the currently contemplated impact of the virus on the company's operations, financial results and outlook is the best estimate based on available information.
For details about these risks, please see the quarterly news release that accompanies this call as well as the company's SEC filings. Codexis expressly disclaims any intent or obligation to update forward-looking statements, except as required by law.
Today's conference call remarks will include both GAAP and non-GAAP financial results. Codexis believes the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of its business, enable the comparison of financial results between periods where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management and operating the business.
These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliations between GAAP and non-GAAP financial measures can be found at the end of the financial results news release that was issued earlier today.
Now I'd like to turn the call over to John Nicols. John?
John Nicols
Thanks, Jody. Good afternoon, everyone, and thank you for joining us.
We are very pleased to report another quarter of exceptional execution. We delivered strong sequential growth with revenues of $18.4 million and solid progress across all growth verticals.
Product revenue for the quarter, again, exceeded our pre COVID expectations. In Q3, sales to 3 customers topped the $1 million mark with Merck's Januvia active ingredient, sitagliptin, continuing as the leader.
Allergan, another top 20 global pharma company, was the next leading contributor, followed by Urovant Sciences for vibegron, its product candidate for overactive bladder. Sales of vibegron to Urovant and pharma have been very strong so far this year, and we expect another strong quarter from Urovant in Q4.
The FDA's determination on Urovant NDA for vibegron is rapidly approaching with an assigned PDUFA date of December 26, and a positive outcome bodes well for future sales of this product for Codexis. Additional momentum during the quarter came from another top 20 pharma customer, who needed a significant batch of our enzymes to make their drug substance for Phase 3 trials.
As anticipated, our larger volume manufacturing partners have remained consistently operational to date with minimal impact from the pandemic. This is allowing for the continued production of critical materials from them.
Our supply chain team continues to successfully manage the logistics on schedule. Given our strong execution to date and our outlook for the fourth quarter, we expect full year product revenue to be nicely above our pre-COVID-19 guidance range and very close to what we delivered in 2019.
A favorable mix in product sales led to another quarter of strong product gross margin. At 57% in 3Q and 56% year-to-date, 2020 is tracking well above historical product gross margin averages.
In the fourth quarter, we expect more than half of our product sales will be for the manufacturer of Merck's Januvia active ingredient, which will likely bring 4Q product margins down sequentially. Nonetheless, we expect 2020 product gross margin to be at or near the high end of our pre-COVID-19 gross margin outlook range of 43% to 47%.
All around, 2020 has shaped up as an excellent year for our product sales. R&D revenue for the quarter was also strong at $8.5 million.
We recorded revenues greater than $1 million each from Nestlé Health Science, Takeda, Novartis and Merck. Importantly, our lab is now running at nearly 100% of pre-pandemic levels with safety measures in place to protect our scientists.
With our R&D operations and nearly full capacity, we expect the effect of COVID-19 on revenue to be minimal in the fourth quarter and future quarters. We will remain agile in the event the pandemic changes our circumstances, which, of course, remains a possibility.
Let me now share details on the significant progress we are making across each of our growth verticals, starting first with our Novel Biotherapeutics segment. First, we are pleased to report on clinical progress and the path forward for CDX-6114 for Feno or PKU.
Here, Nestlé Health Sciences recently completed a safety, tolerability and PK/PD Study of CDX-6114 for the first time in PKU patients. Consistent with past clinical results, CDX-6114 was, again, well tolerated and safe at all doses tested.
In addition, an increase in acid levels, a biomarker of enzyme activity, was observed, which is consistent with the intended mode of action for CDX-6114. Based on the results of the study, Nestlé Health Science has decided to undertake additional solid dose formulation development prior to initiating its next clinical trial, which will be a multiple ascending dose Phase 1b study.
Accordingly, results from the Phase 1b study are now expected to read out in 2022. We are also collaborating with Nestlé Health Science on 3 other disease targeted programs.
The lead program CDX-7108 for an undisclosed gastrointestinal disorder is making solid progress towards its first clinical trial, which is expected to commence by the middle of 2021. GMP batches of CDX-7108 have been manufactured by our CMO Partner, and preclinical toxicology studies have been completed with audited reports expected to be ready around year-end.
The other 2 programs are in earlier discovery stages and are also progressing well. One of these discovery projects was just added significantly increasing the funded R&D revenue we are generating from the Nestlé Health Science discovery partnership for the foreseeable future.
Each of these 3 assets are co-owned between Nestlé Health Science and Codexis. It's exciting to see the list grow and the programs advancing.
Once again, our new gene therapy partnership with Takeda led to strong results for the quarter. We continue to execute well against all 3 of the different disease targets we are pursuing together, allowing us to generate significant revenues in Q3.
The Fabry Program is the most advanced in our Takeda partnership. Here, the joint team is undergoing final stages of in-vitro and in-vivo characterization of Codexis-generated transgenes with improved stability and activity against the target substrate.
Accordingly, the Fabry joint team - sorry, the joint Fabry team is well positioned to make a recommendation by the beginning of next year concerning which transgene will progress for packaging into Takeda's viral vector. The Pompe program continues to favorably progress as well albeit from a less advanced starting point than Fabry when we initiated the Takeda deal.
We have submitted an abstract and expect to present transgene improvement data from our Pompe program for the first time at the World Symposia in February of next year. In food and other industrial applications, we also had a good quarter.
We are starting to see enzyme sales for Tate & Miles, better-tasting Stevia sweetener, TASTEVA M, generate meaningful revenue. We generated a few hundred thousand dollars in sales for those enzymes in the third quarter stepping up the slope nicely on a sequential basis.
We also generated 6-digit food sales in another food application in the quarter and generated early development stage sales for 3 additional projects in other industrial verticals. Switching to life sciences.
We continue to see good progress in that arena, moving all 5 of our disclosed enzyme programs forward in the quarter. We are advancing nicely in the installation of our improved DNA ligase with Roche.
Despite COVID, the technology transfer has proceeded well during 2020 and is now tracking according to expectations, following a pause of 1 to 2 months at the start of the outbreak. Tech transfer was completed in October, triggering the first milestone payment under the licensing agreement.
The 3 new enzyme products targeting the life science space in collaboration with have all progressed well during the quarter and support our expectations for strong growth in this segment in 2021 and beyond. Our high fidelity DNA polymerase is undergoing final formulation following extensive beta testing with select partners, we expect to record first commercial product sales around the end of the year.
Our T7 RNA polymerase is undergoing extensive evaluation of commercial-ready material with multiple partners and the feedback is good. It is unlikely that we will achieve installation into first wave vaccine manufacturing processes due to the speed of implementation required and the significant safety-related change control procedures that make it hard for manufacturers to switch away from incumbent processing aids.
However, we remain confident based on the feedback received to date that the enzyme is sufficiently differentiated to achieve penetration into mRNA vaccine manufacturing processes during the course of 2021. We are entering early stage testing of our improved reverse transcript days enzyme, having successfully manufactured trial batches of an early variant.
It's still early days for the program, but the engineered enzyme is performing well in initial trials, and we expect customer feedback in the fourth quarter, which will guide our ongoing optimization of the product, ahead of a planned launch in the beginning of 2021. As I described last quarter, our partnership with molecular assemblies is focused on a disruptive enzyme-based approach to synthesizing DNA, with the potential to significantly impact a wide range of high-value markets from drug discovery and manufacturing through synthetic biology and longer term, to compete with silicon for data storage.
We have required radical improvements to make enzymatic DNA synthesis competitive with traditional chemical synthesis that underpins the $1 billion-plus synthetic DNA market today. The program has started well, and the teams are collaborating to drive the initial concept proving improvements to validate the approach.
We are very encouraged by early progress, and we continue to expect completion of the enzyme improvement program in the second half of 2021, enabling early commercialization efforts to begin soon thereafter. I'd like to thank the Codexis' team for the outstanding job in bringing us back on to our growth - strong growth trajectory as we close out 2020.
With that, let me turn the call over to Ross for a review of our financial performance. Ross?
Ross Taylor
Thanks, John, and good afternoon, everyone. Starting with the Q3 top line, total revenues for the third quarter of 2020 were $18.4 million compared with $21.9 million for Q3 of 2019.
Revenues for Q3 of 2020 included $13.0 million from the Performance Enzymes segment and $5.4 million from the Novel Biotherapeutics segment. Product revenues for the third quarter of 2020 were $8.4 million compared with $10.4 million for the prior year period, with the decrease due to the timing of demand for various enzymes.
Within product sales, Merck, once again, had the strongest showing during Q3, while Allergan and Urovant also had strong showings with each of these contributing more than $1 million in revenue in the quarter. R&D revenue for the 2020 third quarter was $10.0 million, primarily due to contributions from our Nestlé Health Science, Takeda, Novartis and Merck collaborations.
R&D revenue for the third quarter of 2020, included $4.6 million from the Performance Enzymes segment and $5.4 million from the Novel Biotherapeutics segment. Gross margin on product revenue for the third quarter of 2020 was 57%, up from 51% a year ago, with the increase due to the change in product mix.
Turning to operating expenses. R&D expenses for the third quarter of 2020 were $12.0 million.
This included $5.2 million from the Performance Enzymes segment and $6.4 million from the Novel Biotherapeutics segment. The increase in R&D expenses from $8.7 million a year ago was primarily due to higher regulatory expenses, higher headcount, higher allocable expenses and outside services.
SG&A expenses in Q3 of 2020 were $8.8 million, which included $2.7 million from the Performance Enzymes segment and $0.5 million from the Novel Biotherapeutics segment. The remaining $6.0 million is included in corporate overhead and depreciation.
The increase in SG&A expenses from $7.9 million a year ago was primarily due to costs associated with higher headcount, consultants, facilities, outside services and insurance, partially offset by lower recruiting costs and lower allocable expenses. The net loss for the third quarter of 2020 was $6.1 million or a loss of $0.10 per share, and this compares with net income for the third quarter of 2019 of $0.3 million or $0.01 per share.
Turning to the year-to-date financial results. Total revenues for the first 9 months of 2020 were $48 million.
Product revenue was $18 million. R&D revenue was $30 million and consisted of $13 million from the Performance Enzymes segment and $16.6 million from the Novel Biotherapeutics segment.
Gross margin on product revenue for the first 9 months of 2019 was 56%, up from 50% for the prior year period. The improvement in the product gross margin was driven by mix.
R&D expenses for the first 9 months of 2020 were $33.8 million, and SG&A expenses were $26.3 million. We reported a net loss for the first 9 months of 2020 of $20.1 million or $0.34 per share, which compares with a year ago net loss of $11.3 million or $0.20 per share.
Cash and cash equivalents as of September 30, were $71.5 million. With that, I'll turn the call back to John.
John Nicols
Thanks Ross. I'd like to close out our prepared remarks by focusing on the momentum we are building as a company.
In our Novel Biotherapeutics segment, we are creating significant value and substantial pipeline opportunity through our partnership with Takeda, leveraging CodeEvolver to validate a novel approach to enable differentiated gene therapy candidate design. In parallel, our partnership with Nestlé Health Science, now with 4 programs advancing, also continues to build momentum, leveraging CodeEvolver to validate new approaches to address gastrointestinal disorders.
Importantly, these groundbreaking partnerships and the proof-of-concept data we are generating are attracting the attention of other potential partners and setting us up to perform our own new self-funded GI and gene therapy programs. In parallel, we have continually widened our Performance Enzymes customer base and are now raising our product revenue expectations for 2020 to exceed our pre-pandemic forecast.
We have accomplished this while successfully entering new verticals in life sciences and food ingredients with more to come. Importantly, while we remain vigilant in protecting our employees against the COVID-19 virus, I'm pleased to report that the effects of the pandemic on our business, at this time, are largely behind us, noting forward uncertainty.
Our team continues to respond brilliantly and deliver exceptional progress. Our expectation is to deliver sequential revenue growth again in the fourth quarter, which is expected to result in full year revenues near or above last year, despite the impact of the COVID-19 pandemic.
Before opening the call to questions, I want to highlight our participation in this year's virtual Synbiobeta Conference, which was held just about a month ago. This conference resides on the cutting-edge of synthetic biology, and every year showcases the rapid advances in this dynamic field.
Our scientists participated in several breakout sessions, covering pioneering developments, including one session of highlighting the future of DNA reading, rating and editing with panelists from Amgen and partners, Alphason and molecular assemblies. At this year's conference, we were also rewarded with a special spotlight talk that allowed us to highlight the reality that enzymes are the key that will underpin how synthetic biology will make its real-world impact in the world.
Think about it. We know how to program DNA to code for a specific enzyme.
We know how to get that DNA into an organism and, therefore, our targeted enzyme will be expressed. But knowing how that enzyme will perform, well, there's the rub.
Get the enzymes to drive the chemistry yield and selectivities in series, and you have an engineered organism producing a fine chemical. Get the enzymes to assemble the targeted DNA sequence and you have high fidelity gene synthesis.
Get the enzymes to clip the DNA strand on target 100% of the time, and you have efficient gene editing. Synthetic Biology promises to deliver so many new world-changing benefits.
Quite simply, enzymes are the medium to affect such changes in the physical world. Our quest to synthesize new biology functionalities, therefore, will, at its core, be underpinned by new novel performing enzymes.
At Codexis, we know this. We have been focused on these challenges for nearly 20 years.
We cut our teeth and solve some of the world's hardest protein engineering problems, leading us to build and wield the most comprehensive protein engineering platform in the world today. We created, sequenced and tested nearly 1 million proteins last year alone.
We generated veritable mountains of unique protein structure activity data, feeding our ever-improving machine learning algorithms tuned to that unique big data map. And our knowledge and improvements keep compounding every step of the way.
Dramatic orders of magnitude, protein improvements are required to make a difference in the world, and those can only be found from this intense scale approach. As a final point, it's great to have an enzyme that delivers the aspired exceptional performance in the lab, but turning that into a commercial product, that's where the rubber hits the road.
Let's face it. The physical world really struggles to change.
To make a difference against this rigidity, we need to deliver enzymes with both step-out performance benefits and that are commercially scaled to ensure that they take their rightful place in our change resistant world. Commercializing is hardwired into our amino acid sequence here at Codexis.
Because for Codexis, it's all about making a meaningful impact in the world in which we live. With our flywheel and investments, we are poised to do even more to improve health of people in the planet.
I want to thank all of you for joining us today and hope you and your families remain safe and well through these very dynamic times. With that overview, I'd like to open up the call for questions.
Operator?
Operator
[Operator Instructions]
John Nicols
So while we're waiting for our first question I'd like to you upcoming virtual health care conferences. We will be participating in Stifel Healthcare Conference on Monday, November 16; the 11th Annual Craig-Hallum Alpha Select Conference on Tuesday, November 17; and the Stephens Annual Investment Conference 2020, on Wednesday, November 18.
We will post webcast of our presentations at the Stifel Healthcare Conference and Stephens Annual Investment Conference to the Investors section of our website at codexis.com. I also invite you to visit our newly redesigned website with more robust and aesthetically pleasing content and easy navigation.
Okay, operator, we're ready for the first question.
Operator
Today's first question comes from Matt Hewitt with Craig-Hallum Capital Group. Please proceed.
Matt Hewitt
Congratulations on a solid quarter of progress despite what has remained a relatively challenging environment. Maybe first up, and thank you for helping us understand the vaccine opportunity a little bit.
Could you maybe walk us through, I understand it's not necessarily the first batch, but help us understand how this progresses with those second batches, which are ultimately the ones that are going to be distributed to the world? How does that process work?
John Nicols
Yes. Yes.
So I mean, it works in - as it traditionally does. We showcase our improved enzyme.
We showcase the data that we've generated that ascribed the benefits. In the case of the T7 RNA polymerase, we believe that our enzyme will be significantly more cost-efficient versus the incumbent RNA polymerases that are currently specked into these processes.
And we convinced that those benefits are significant enough to warrant the customer to go through a change management to: number one, validate that they see the benefits that we see in our labs and to showcase our supply chain capabilities and time lines to effectively serve their supply chains. And we've been working that process.
We worked this process since - basically, since we started the partnership with Alphason that we announced at the end of April. And we've gotten really good response from customers, and we're encouraged that customers for this particular market and other markets that require RNA polymerases, are very interested and will ultimately spec in our products, leading to our - ultimately, our product sales on our P&L.
Matt Hewitt
And then regarding the DNA polymerase you're in contracting there. Maybe what are the conversations like with those customers?
How should we be thinking about that as we get through this year and into next year? And how are those opportunities may be expanded?
John Nicols
Yes. It's going really well.
There are many users of DNA polymerase. Essentially, any company that runs a polymerase chain reaction, diagnostic workflow or an nex-gen sequencing workflow uses the DNA polymerase.
We've tuned our DNA polymerase to be effective or to be differentiated for our next-gen sequencing applications. So we've been approaching multiple companies to showcase the improved benefits that we have for our DNA polymerase versus several well entrenched incumbents in this industry.
And we're getting validation of our benefits with multiple of those companies, and we are working to, like I said in the prepared remarks, to ultimately transact our first commercial sales as we close out this year. And we still see this as a terrific product for having made the investments.
It's a large product. It's growing very quickly because of genomic diagnostics growth, particularly next-gen sequencing growth.
So we're still very confident and very - we're looking forward to penetrating this market and growing it as we close out this year. And move through next year.
Ultimately, this could be one of our largest products in our portfolio, if we continue to be successful as we project.
Matt Hewitt
That's great. And maybe one last one for me and then I'll hop back into queue.
But regarding the Urovant opportunity, another nice quarter from them over $1 million, I think you said. Now they've got a PDUFA date coming up here in the United States, how should we be thinking about that market opportunity?
Is that a similar size to the existing market? And what could that mean for your opportunity as you look at fiscal '21 and beyond?
John Nicols
Yes. Thanks.
We're really excited by the progress with Urovant and side-by-side with their - with cure and pharma, who is effectively already promoting that urinary in commence drug in the Japanese market. And so the buildup of their supply chain for Urovant up to - in advance of the PDUFA date, which clearly, they expect will be a positive result, we'll all wait and see, has been very encouraging.
I think they have - that suggests that they have a strong outlook for uptake in the market as they put the product in the market post PDUFA. This will be a very nice size enzyme catalyst product for Codexis.
It won't be as large as, say, the enzyme sales to Merck for Januvia have become because the volume of the drug substance is much lower than that. But we see this being at peak revenues, we could see this being in the low to mid single-digit million dollar revenue product sales revenue.
And our margins are above-average for this product. So it will come with an accretive gross margin.
So it's a really nice success. It's been a number of years in the making, and we're super excited to be poised for that sustained product sale, assuming they get their positive approval from the FDA.
Operator
Today's next question comes from Brandon Couillard with Jefferies. Please proceed.
Brandon Couillard
John, on the product revenue line, can you speak to what you would characterize or maybe the 1, 2 or 3 biggest drivers of your sort of renewed confidence in that line of the business and your outlook for 2020 reps to be at the top end of your previous guidance? And then if you think about 2021, do you think this segment can get back to some positive level of revenue growth, maybe north of $30 million?
What would you call out as sort of in the couple of biggest drivers of product growth in '21?
John Nicols
Yes, sure. Pleasure.
Yes, the most positive development as 2020 has unfolded for us on the product revenue line has been indeed the uptake of product from the combination of Urovant, their sister partner Curin and for Allergan for their recently launched drug. When we finished last year, we had strong sales for all 3 of those customers last year.
And as we were building our supply chains and forecasts for those 3 products - for those 3 customers as we started this year, pre-COVID, all of them had set our expectations that their demand for our enzyme would be limited but indeed, it's been quite the contrary that their sales have been stronger - on the strong end of their outlook, and that's driven their supply chain needs to purchase materially more enzymes from us for their manufacturing campaign. So that's by far the number 1.
We've also had a nice series of clinical batch orders that have been folded this year. I highlighted in the prepared remarks that we had a significant Phase 3 - an enzyme batch for a Phase 3 manufacturing campaign for an unnamed top 20 big pharma company.
And we've had several of those this year. So I think that that's also been a contributor to a really nice year in product sales unfolding for Codexis.
And those kind of clinical batch orders are hard for us to predict because we don't have a lot of visibility into clinical time lines or they're hard for us to predict. As we look to 2021, yes, we believe long-term that we're going to be accelerating product revenues as a class over the long - over a multiyear period well above our average - total average corporate revenue growth.
And we hope and believe above our historic growth rate. Our historical growth rate of this company has been somewhere in the mid-teens.
So what gives us that confidence is fundamentally long-term is the strength and stability of the historical sales that we've developed and commercialized over the years, more these 2 Phase 3 compounds ultimately commercializing, of course, not all of them, but a new product sales on top and then finally, and this we see will unfold for us quite nicely in 2021, are the penetration of new products that we put on the market, in particular, the enzymes for the Stevia franchise of Tate & Lyle, which we had some encouraging progress in Q3, and we continue to be encouraged by Tate & Lyle. The new enzymes into the Life Sciences segment, Matt, from Craig-Hallum just asked about, several of those longer term, we are quite confident about the enzymes for the medic DNA synthesis that will be layered in on top.
So you can just see a flywheel of developmental projects that, over time, commercialize and give us sustained revenues and the outlook for 2021 is that, that we'll be nicely back on a growth track over 2020 like we've done in many of our historical years. Hopefully, that gives you some nice color, Brandon.
Brandon Couillard
Quick 1 for you, Ross. I think you indicated Januvia will be over half of product revenues in the fourth quarter.
Can you give us expectation what you expect for product gross margins in the fourth quarter? And it looks like for the year, product gross margins will top to 50% marker, is that a good barometer for us to think about as being sustainable for '21 based on where you stand today?
Ross Taylor
Let's say, a couple of components to your question there, Brandon. I'm not sure if I got into some of those specifics that you mentioned, but you can probably back into some of these numbers.
I think number 1, just related to sitagliptin. I think we communicated earlier in the year that we thought that sitagliptin would probably be - the revenues from sitagliptin in 2020 would be fairly close to where they were in 2019.
And our outlook there really has not changed, but kind of close to it, maybe a little bit below. So you can kind of back into where Q4 may be for sitagliptin and then further back into where some of the other products may be.
I think in terms of gross margin, John mentioned in his prepared remarks that we would be kind of at or near the high end of the range that we provided back with our guidance that we provided earlier in the year. And I think that still holds the shift in the mix that we've seen, the real benefits from Allergan, Urovant, KIOR are really driving that shift and driving up the gross margin.
But again, I think at or near where we - at or near the high end of that former guidance range is where we should be for the full year. And in terms of outlook for 2021, I don't want to get into much in the way of specifics, but certainly, as we continue to see a shift in the product mix towards these higher-margin products, we should continue to see the gross margin drift higher.
Operator
[Operator Instructions] The next question comes from Jacob Johnson with Stephens. Please proceed, sir.
Unidentified Analyst
Maybe one follow-up. It sounds like TASTEVA is starting to see good uptake.
Can you just give us an update on this relationship, and how we should be thinking about the potential ramp from that product?
John Nicols
Yes, it's encouraging. It takes its time.
We've been careful to make sure that the ramp is properly calibrated for our investors as they do their modeling. Tate & Lyle continues to promote TASTEVA M as one of their top new products into one of their top divisions in sweeteners.
And they've been investing in global G&A to penetrate with that new product. So all really encouraging signs.
And obviously, it's being taken up in the market albeit at a careful pace, at a moderate pace. So the signs of the uptake are encouraging.
The pace is, as we've experienced this year, takes its time. So I think all of our previous remarks about Stevia enzymes being amongst our top product revenue generators over time, say, in a 3-to 5-year time frame, still remain firmly in our expectations.
So that would put it in the range of high single-digit, low double-digit sales if we penetrate and if Tate & Lyle penetrates as we hope. And it's just going to go through a ramp as we go from modest sales, we said in the prepared remarks, a couple of hundred thousand dollars of sales in this Q3, which is better than what we've seen in the earlier quarters this year.
And it will move through that kind of a slope next year. So I think as we unfold for our investors in a more detailed outlook comments for 2021, will, I'm sure, give some color as to how we see the sales ramping in 2021.
And I think those dots then connect up to give validation to the ultimate peak revenue that we hope and aspire for this product.
Unidentified Analyst
And then just maybe a bigger picture question, John. Can you just talk about the opportunity in gene therapy for your enzymes, how your enzymes work in these applications?
And then maybe outside of the Takeda agreement, I think you're working on some things internally, but let me know if that's not the case and should we expect to see at some point an additional partnership in this space down the road?
John Nicols
Yes. Okay, great.
We're super excited about the gene therapy prospects for Codexis. And clearly, they're being validated in the partnership with Takeda.
But what we do is basically, if you understand how gene therapy products are designed. Effectively, there's a delivery vector, often referred to as viral vectors that are basically packages for nucleic acid information to be packaged within.
And that viral vector then delivers the nucleic acid information into the human biology to effect - to improve disease conditions. What we do is we use CodeEvolver to improve that nucleic acid information, this nucleic asset information inside the viral vector package.
This commonly referred to as a transgene, some companies call it as the gene therapy payload. But what we're using CodeEvolver to do is to say, what is the optimal nucleic acid information that will express the best possible enzyme to deliver it to the human biology.
So there's the word. I mean, we know how enzymes are expressed in human biology, you code DNA to express the enzyme so the nucleic acid information, i.e., DNA is then modified to express a modified, better performing protein.
And so in the Fabry program, for example, we have modified the DNA nucleic acid inflammation to express a protein that has better half-life, better serum stability. We demonstrated better uptake in critical tissue like the heart, and that now takes you right back to the core CodeEvolver technology capability, making, designing better enzymes.
And in the case of gene therapy, we design them and deliver them as nucleic acid information as a transgene or a payload in gene therapy. So hopefully, that's helpful and is understandable.
So we designed better enzymes for Fabry. We're in the process of doing that for Pompe disease, where we just started a new program and an undisclosed blood factor disorder in the Takeda partnership, all of which is encouraging us, especially based on really positive feedback so far from Takeda that this is a really great way to bring CodeEvolver into the world of drug discovery.
Most gene therapy companies, maybe all gene therapy companies, aren't really looking at improving nucleic acid information to enable a better performing enzyme to be expressed. So it's a novel approach, and that's why Takeda basically signed out for this deal.
And we see multiple other gene therapy targets beyond those few that were working with Takeda, where we can bring better transgenes into - to create better gene therapies going forward. So yes, indeed, we're showcasing this to other partners, I think, long term.
There's definitely a medium term. There's prospect for partners there, but we're going to start by doing our own internally self-funded gene therapy transgene programs so that we can develop proof of concept, that would be the raw material for us to advance towards the clinic ourselves and/or to showcase to other partners beyond Takeda.
Operator
This concludes our question-and-answer session. I would now like to turn the conference back over to John Nichols for any closing remarks.
John Nicols
Okay. Thank you, everyone, for your questions.
We've stayed very strong and navigated well through the pandemic to date while building for a much brighter future. We look forward to speaking with you again in February, when we report fourth quarter and full year 2020 results.
Thanks, again, and stay safe and well.
Operator
The conference has now concluded. Thank you for attending today's presentation.
And you may now disconnect.