Quarterly report pursuant to Section 13 or 15(d)

Segment, Geographical and Other Revenue Information

v3.20.1
Segment, Geographical and Other Revenue Information
3 Months Ended
Mar. 31, 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 our 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 table provides financial information by our reportable business segments along with a reconciliation to consolidated loss before income taxes (in thousands):
Three months ended March 31, 2020 Three months ended March 31, 2019
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Revenues:
Product revenue $ 5,100    $ —    $ 5,100    $ 7,988    $ —    $ 7,988   
Research and development revenue 5,774    3,796    9,570    2,099    5,496    7,595   
Total revenues 10,874    3,796    14,670    10,087    5,496    15,583   
Costs and operating expenses:
Cost of product revenue 2,541    —    2,541    4,391    —    4,391   
Research and development(1)
5,696    4,925    10,621    4,442    3,317    7,759   
Selling, general and administrative(1)
2,345    591    2,936    2,101    517    2,618   
Total segment costs and operating expenses 10,582    5,516    16,098    10,934    3,834    14,768   
Income (loss) from operations $ 292    $ (1,720)   (1,428)   $ (847)   $ 1,662    815   
Corporate costs (2)
(5,727)   (5,575)  
Depreciation and amortization (492)   (373)  
Loss before income taxes $ (7,647)   $ (5,133)  
(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 loss from operations (in thousands):
Three months ended March 31,
2020 2019
Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total
Stock-based compensation $ 756    $ 241    $ 1,172    $ 2,169    $ 636    $ 141    $ 1,286    $ 2,063   
Significant Customers
Customers that each accounted for 10% or more of our total revenues were as follows:
Three Months Ended March 31,
2020 2019
Customer A 24  % 41  %
Customer B 19  % —  %
Customer C 15  % —  %
Customer D 11  % 35  %
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
March 31, 2020 December 31, 2019
Customer A 47  % 38  %
Customer D —  % 10  %
* 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 March 31,
2020 2019
Revenues
Americas $ 5,225    $ 2,838   
EMEA 5,971    7,726   
APAC 3,474    5,019   
Total revenues $ 14,670    $ 15,583   

Identifiable long-lived assets by location was as follows (in thousands):
Long-lived assets March 31, 2020 December 31, 2019
United States    $ 6,647    $ 6,282   


Identifiable goodwill was as follows (in thousands):
March 31, 2020 December 31, 2019
Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total
Goodwill    $ 2,463    $ 778    $ 3,241    $ 2,463    $ 778    $ 3,241