Annual report pursuant to Section 13 and 15(d)

Segment, Geographical and Other Revenue Information

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Segment, Geographical and Other Revenue Information
12 Months Ended
Dec. 31, 2019
Segment Reporting Information, Operating Income (Loss) [Abstract]  
Segment, Geographical and Other Revenue Information Segment, Geographical and Other Revenue Information
Segment Information
We manage our business as two business segments: Performance Enzymes and Novel Biotherapeutics.
We report corporate-related expenses such as legal, accounting, information technology, and other costs that are not otherwise included in our reportable business segments as "Corporate costs." All items not included in income (loss) from operations are excluded from the business segments.
We manage our assets on a total company basis, not by business segment, as the majority of our operating assets are shared or commingled. Our CODM does not review asset information by business segment in assessing performance or allocating resources, and accordingly, we do not report asset information by business segment.
Performance Enzymes
We initially commercialized our CodeEvolver® protein engineering technology platform and products in the pharmaceuticals market, 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 and food ingredients, animal feed, flavors, fragrances, and agricultural chemicals. We also use our technology to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications.
Novel Biotherapeutics
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. Most notable is our lead program for the potential treatment of PKU in humans. PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.
We have also developed a pipeline of other biotherapeutic drug candidates, which are in preclinical development, and in which we expect to continue to make additional investments with the aim of advancing additional product candidates targeting other therapeutic areas.
Factors considered in determining the two reportable segments of the Company include the nature of business activities, the management structure directly accountable to our CODM for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors. Our CODM regularly reviews our segments and the approach provided by management for performance evaluation and resource allocation.
Operating expenses that directly support the segment activity are allocated based on segment headcount, revenue contribution or activity of the business units within the segments, based on the corporate activity type provided to the segment. The expense allocation excludes certain corporate costs that are separately managed from the segments. This provides the CODM with more meaningful segment profitability reporting to support operating decisions and allocate resources.
The following table provides financial information by our reportable business segments along with a reconciliation to consolidated loss before income taxes (in thousands):

Year Ended December 31, 2019 Year Ended December 31, 2018
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Revenues:
Product revenue $ 29,465    $ —    $ 29,465    $ 25,590    $ —    $ 25,590   
Research and development revenue 28,691    10,302    38,993    21,483    13,521    35,004   
Total revenues 58,156    10,302    68,458    47,073    13,521    60,594   
Costs and operating expenses:
Cost of product revenue 15,632    —    15,632    12,620    —    12,620   
Research and development (1)
19,380    13,278    32,658    18,924    10,185    29,109   
Selling, general and administrative(1)
8,462    2,222    10,684    7,538    771    8,309   
Total segment costs and operating expenses 43,474    15,500    58,974    39,082    10,956    50,038   
Income (loss) from operations $ 14,682    $ (5,198)   9,484    $ 7,991    $ 2,565    10,556   
Corporate costs (2)
(19,624)   (20,324)  
Depreciation and amortization (1,778)   (1,147)  
Loss before income taxes $ (11,918)   $ (10,915)  
(1) Research and development expenses and Selling, general and administrative expenses exclude depreciation and amortization of finance leases.
(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.
Year Ended December 31, 2018 Year Ended December 31, 2017
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Revenues:
Product revenue $ 25,590    $ —    $ 25,590    $ 26,685    $ —    $ 26,685   
Research and development revenue 21,483    13,521    35,004    15,648    7,691    23,339   
Total revenues 47,073    13,521    60,594    42,333    7,691    50,024   
Costs and operating expenses:
Cost of product revenue 12,620    —    12,620    14,327    —    14,327   
Research and development (1)
18,924    10,185    29,109    16,847    12,107    28,954   
Selling, general and administrative(1)
7,538    771    8,309    7,371    —    7,371   
Total segment costs and operating expenses 39,082    10,956    50,038    38,545    12,107    50,652   
Income (loss) from operations $ 7,991    $ 2,565    10,556    $ 3,788    $ (4,416)   (628)  
Corporate costs (2)
(20,324)   (21,245)  
Depreciation (1,147)   (1,042)  
Loss before income taxes $ (10,915)   $ (22,915)  
(1) Research and development expenses and Selling, general and administrative expenses exclude depreciation.
(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.
The following table provides stock-based compensation expense included in income (loss) from operations by segment (in thousands):

Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Stock-based compensation $ 2,303    $ 695    $ 2,998    $ 2,591    $ 338    $ 2,929    $ 2,306    $ 208    $ 2,514   


Stock-based compensation expense included in corporate services were $3.9 million, $5.0 million and $4.6 million for the years ended December 31, 2019, December 31, 2018 and December 31, 2017, respectively.

Significant Customers
Customers that each contributed 10% or more of our total revenues were as follows:
 
Percentage of Total Revenues
For The Years Ended December 31,
  2019 2018 2017
Merck 28  % 29  % 28  %
Novartis 23  %   14  %
Nestlé Health Science 15  % 22  % 15  %
Tate & Lyle   13  % 11  %
* Percentage was less than 10%
Customers that each accounted for 10% or more of our accounts receivable balance for the period presented were as follows:
 
Percentage of Accounts Receivables
As Of December 31,
  2019 2018
Merck & Co. 38  % 37  %
Nestlé Health Science 10  % 17  %
Novartis   11  %
Kyorin Pharmaceutical Co Ltd   16  %
* Percentage was less than 10%

Geographic Information
Geographic revenues are identified by the location of the customer and consist of the following (in thousands):
  Year Ended December 31,
2019 2018 2017
Revenues
Americas $ 13,039    $ 15,370    $ 15,575   
EMEA 37,133    22,361    19,610   
APAC 18,286    22,863    14,839   
Total revenues $ 68,458    $ 60,594    $ 50,024   

Identifiable long-lived assets by location and goodwill by reporting unit as of year-end were as follows (in thousands):
  December 31,
  2019 2018
Long-lived assets
United States $ 6,282    $ 4,759   

Year Ended December 31, 2019 Year Ended December 31, 2018
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Goodwill $ 2,463    $ 778    $ 3,241    $ 2,463    $ 778    $ 3,241