Quarterly report pursuant to Section 13 or 15(d)

Segment, Geographical and Other Revenue Information

v3.20.2
Segment, Geographical and Other Revenue Information
9 Months Ended
Sep. 30, 2020
Segment Reporting [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, which are based on our operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM, or decision making group, in deciding how to allocate resources, and in assessing performance. Our CODM is our Chief Executive Officer. Our business segments are primarily based on our organizational structure and our operating results as used by our CODM in assessing performance and allocating resources for the Company.
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. In March 2020 we entered into the Takeda Agreement with Takeda under which we will research and develop protein sequences for use in gene therapy products for certain diseases.
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 tables provide financial information by our reportable business segments along with a reconciliation to consolidated income (loss) before income taxes (in thousands):
Three months ended September 30, 2020 Three months ended September 30, 2019
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Revenues:
Product revenue $ 8,401  $ —  $ 8,401  $ 10,351  $ —  $ 10,351 
Research and development revenue 4,604  5,380  9,984  10,073  1,482  11,555 
Total revenues 13,005  5,380  18,385  20,424  1,482  21,906 
Costs and operating expenses:
Cost of product revenue 3,642  —  3,642  5,067  —  5,067 
Research and development(1)
5,184  6,433  11,617  5,313  3,080  8,393 
Selling, general and administrative(1)
2,675  515  3,190  2,037  690  2,727 
Total segment costs and operating expenses 11,501  6,948  18,449  12,417  3,770  16,187 
Income (loss) from operations $ 1,504  $ (1,568) (64) $ 8,007  $ (2,288) 5,719 
Corporate costs (2)
(5,483) (4,912)
Depreciation and amortization (528) (471)
Income (loss) before income taxes $ (6,075) $ 336 
(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, 2020 Nine months ended September 30, 2019
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Revenues:
Product revenue $ 18,005  $ —  $ 18,005  $ 24,588  $ —  $ 24,588 
Research and development revenue 13,380  16,638  30,018  16,512  8,708  25,220 
Total revenues 31,385  16,638  48,023  41,100  8,708  49,808 
Costs and operating expenses:
Cost of product revenue 7,882  —  7,882  12,230  —  12,230 
Research and development(1)
15,877  16,848  32,725  14,889  9,252  24,141 
Selling, general and administrative(1)
7,395  1,728  9,123  6,499  1,768  8,267 
Total segment costs and operating expenses 31,154  18,576  49,730  33,618  11,020  44,638 
Income (loss) from operations $ 231  $ (1,938) (1,707) $ 7,482  $ (2,312) 5,170 
Corporate costs (2)
(16,526) (15,185)
Depreciation and amortization (1,526) (1,273)
Loss before income taxes $ (19,759) $ (11,288)
(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 tables provides stock-based compensation expense included in income (loss) from operations (in thousands):

Three months ended September 30,
2020 2019
Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total
Stock-based compensation $ 839  $ 132  $ 1,013  $ 1,984  $ 736  $ 225  $ 771  $ 1,732 
Nine months ended September 30,
2020 2019
Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total
Stock-based compensation $ 2,335  $ 625  $ 3,132  $ 6,092  $ 1,973  $ 563  $ 3,247  $ 5,783 
Significant Customers
Customers that each accounted for 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,
2020 2019 2020 2019
Customer A 23% 21% 21% 31%
Customer B 15% * 13% 17%
Customer C * 29% 11% 15%
Customer D 14% * 22% *
Customer E 13% * * *
Customers that each accounted for 10% or more of accounts receivable had balances as of the periods presented as follows:
Percentage of Accounts Receivables as of
September 30, 2020 December 31, 2019
Customer A 36% 38%
Customer B 28% 10%
Customer D 14% *
* Percentage was less than 10%
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,
2020 2019 2020 2019
Revenues
Americas $ 5,841  $ 2,706  $ 17,972  $ 9,620 
EMEA 4,889  12,205  14,175  24,672 
APAC 7,655  6,995  15,876  15,516 
Total revenues $ 18,385  $ 21,906  $ 48,023  $ 49,808 
Identifiable long-lived assets by location was as follows (in thousands):
Long-lived assets September 30, 2020 December 31, 2019
United States $ 7,289  $ 6,282 
Identifiable goodwill was as follows (in thousands):
As of September 30, 2020 and December 31, 2019
Performance Enzymes Novel Biotherapeutics Total
Goodwill $ 2,463  $ 778  $ 3,241