Quarterly report pursuant to Section 13 or 15(d)

Segment, Geographical and Other Revenue Information

v3.19.3
Segment, Geographical and Other Revenue Information
9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Segment, Geographical and Other Revenue Information Segment, Geographical and Other Revenue Information
Segment Information

As discussed in Note 2, "Basis of Presentation and Summary of Significant Accounting Policies," beginning in 2018, we identified our biotherapeutics business as a standalone business segment. Our two reportable business segments as of January 1, 2018, consisted of 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. In October 2017, we announced a strategic collaboration with Nestlé Health Science to advance CDX-6114, our own novel orally administrable enzyme therapeutic candidate for the potential treatment of PKU. In July 2018, we announced that we had dosed the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, which was conducted in Australia. In November 2018, we announced top-line results from the Phase 1a study in healthy volunteers with CDX-6114. In December 2018, Nestlé Health Science became obligated to pay us an additional $1.0 million within 60 days after the achievement of a milestone relating to formulation of CDX-6114. In January 2019, we received notice from the U.S. Food and Drug Administration (the “FDA”) that it had completed its review of our investigational new drug application (“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 license for the global development and commercialization of CDX-6114 for the management of PKU. The option payment of $3 million was recognized as revenue in the first quarter of 2019 as research and development fees. Upon exercising its option, Nestlé Health Science has assumed all responsibilities for future clinical development and commercialization of CDX-6114, with the exception of the completion of an extension study, CDX-6114-004, which was substantially completed in the second quarter of 2019. For the three and nine months ended September 30, 2019 and 2018, all revenues related to the Novel Biotherapeutics segment were generated from our collaborations with Nestlé Health Science.
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.
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):
 
 
Three months ended September 30, 2019
 
Three months ended September 30, 2018
 
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Product revenue
 
$
10,351

 
$

 
$
10,351

 
$
8,405

 
$

 
$
8,405

Research and development revenue
 
10,073

 
1,482

 
11,555

 
3,720

 
4,821

 
8,541

Total revenues
 
20,424

 
1,482

 
21,906

 
12,125

 
4,821

 
16,946

Costs and operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of product revenue
 
5,067



 
5,067

 
3,791

 

 
3,791

Research and development(1)
 
5,313


3,080

 
8,393

 
4,758

 
2,920

 
7,678

Selling, general and administrative(1)
 
2,037


690

 
2,727

 
1,870

 
165

 
2,035

Total segment costs and operating expenses
 
12,417

 
3,770

 
16,187

 
10,419

 
3,085

 
13,504

Income (loss) from operations
 
$
8,007

 
$
(2,288
)
 
$
5,719

 
$
1,706

 
$
1,736

 
$
3,442

Corporate costs (2)
 
 
 
 
 
(4,912
)
 
 
 
 
 
(5,120
)
Depreciation and amortization
 
 
 
 
 
(471
)
 
 
 
 
 
(309
)
Income (loss) before income taxes
 
 
 
 
 
$
336

 
 
 
 
 
$
(1,987
)
(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.
 
 
Nine months ended September 30, 2019
 
Nine months ended September 30, 2018
 
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Product revenue
 
$
24,588

 
$

 
$
24,588

 
$
18,291

 
$

 
$
18,291

Research and development revenue
 
16,512

 
8,708

 
25,220

 
15,728

 
10,507

 
26,235

Total revenues
 
41,100

 
8,708

 
49,808

 
34,019

 
10,507

 
44,526

Costs and operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of product revenue
 
12,230

 

 
12,230

 
10,228

 

 
10,228

Research and development(1)
 
14,889

 
9,252

 
24,141

 
14,548

 
7,294

 
21,842

Selling, general and administrative(1)
 
6,499

 
1,768

 
8,267

 
5,695

 
615

 
6,310

Total segment costs and operating expenses
 
33,618

 
11,020

 
44,638

 
30,471

 
7,909

 
38,380

Income (loss) from operations
 
$
7,482

 
$
(2,312
)
 
$
5,170

 
$
3,548

 
$
2,598

 
$
6,146

Corporate costs (2)
 
 
 
 
 
(15,185
)
 
 
 
 
 
(15,762
)
Depreciation and amortization
 
 
 
 
 
(1,273
)
 
 
 
 
 
(812
)
Loss before income taxes
 
 
 
 
 
$
(11,288
)
 
 
 
 
 
$
(10,428
)
(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.


The following table provides stock-based compensation expense included in income (loss) from operations by segment (in thousands):
 
 
Three months ended September 30, 2019
 
Three months ended September 30, 2018
 
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Stock-based compensation
 
$
736

 
$
225

 
$
961

 
$
354

 
$
97

 
$
451


 
 
Nine months ended September 30, 2019
 
Nine months ended September 30, 2018
 
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Stock-based compensation
 
$
1,973

 
$
563

 
$
2,536

 
$
2,005

 
$
243

 
$
2,248



Significant Customers
Customers that each contributed 10% or more of our total revenues were as follows:
 
Percentage of Total Revenues for the
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Customer A
21%
 
27%
 
31%
 
33%
Customer B
*
 
28%
 
17%
 
24%
Customer C
*
 
10%
 
*
 
17%
Customer D
29%
 
15%
 
15%
 
11%

Customers that each contributed 10% or more of our total accounts receivable had the following balances as of the periods presented:
 
Percentage of Accounts Receivables as of
 
September 30, 2019
 
December 31, 2018
Customer A
20%
 
37%
Customer B
*
 
17%
Customer D
*
 
11%
Customer E
14%
 
*
Customer F
15%
 
*
Customer G
*
 
16%
Customer H
16%
 
*
* Less than 10% of the period presented
Geographical Information
Geographic revenues are identified by the location of the customer and consist of the following (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
Americas
$
2,706

 
$
4,315

 
$
9,620

 
$
13,968

EMEA
12,205

 
6,274

 
24,672

 
15,075

APAC
6,995

 
6,357

 
15,516

 
15,483

Total revenues
$
21,906

 
$
16,946

 
$
49,808

 
$
44,526


Identifiable long-lived assets by location and goodwill by reporting unit were as follows:
Long-lived assets:
September 30, 2019
 
December 31, 2018
United States
$
31,104

 
$
4,759

 
 
As of September 30, 2019 and December 31, 2018
 
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Goodwill
 
$
2,463

 
$
778

 
$
3,241