Segment, Geographical and Other Revenue Information

6 Months Ended

Jun. 30, 2021

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. Our chief operating decision maker ("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 table provides financial information by our reportable business segments along with a reconciliation to consolidated income (loss) before income taxes (in thousands):

	Three months ended June 30, 2021						Three months ended June 30, 2020
	Performance Enzymes		Novel Biotherapeutics		Total		Performance Enzymes		Novel Biotherapeutics		Total
Revenues:
Product revenue	$	14,717	$	—	$	14,717	$	4,504	$	—	$	4,504
Research and development revenue	6,868		3,868		10,736		3,002		7,461		10,463
Total revenues	21,585		3,868		25,453		7,506		7,461		14,967
Costs and operating expenses:
Cost of product revenue	4,318		—		4,318		1,699		—		1,699
Research and development(1)	5,057		7,194		12,251		4,997		5,490		10,487
Selling, general and administrative(1)	3,170		620		3,790		2,375		621		2,996
Total segment costs and operating expenses	12,545		7,814		20,359		9,071		6,111		15,182
Income (loss) from operations	$	9,040	$	(3,946)	5,094		$	(1,565)	$	1,350	(215)
Corporate costs (2)					(8,610)						(5,316)
Unallocated depreciation and amortization					(741)						(506)
Loss before income taxes					$	(4,257)					$	(6,037)

	Six months ended June 30, 2021						Six months ended June 30, 2020
	Performance Enzymes		Novel Biotherapeutics		Total		Performance Enzymes		Novel Biotherapeutics		Total
Revenues:
Product revenue	$	24,943	$	—	$	24,943	$	9,604	$	—	$	9,604
Research and development revenue	10,872		7,670		18,542		8,775		11,258		20,033
Total revenues	35,815		7,670		43,485		18,379		11,258		29,637
Costs and operating expenses:
Cost of product revenue	8,536		—		8,536		4,240		—		4,240
Research and development(1)	11,502		11,799		23,301		10,693		10,415		21,108
Selling, general and administrative(1)	5,988		1,221		7,209		4,720		1,213		5,933
Total segment costs and operating expenses	26,026		13,020		39,046		19,653		11,628		31,281
Income (loss) from operations	$	9,789	$	(5,350)	4,439		$	(1,274)	$	(370)	(1,644)
Corporate costs (2)					(16,335)						(11,042)
Unallocated depreciation and amortization					(1,426)						(998)
Loss before income taxes					$	(13,322)					$	(13,684)

(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 expenses, interest income, and other income (expense), net.

The following table provides stock-based compensation expense included in income (loss) from operations (in thousands):

	Three months ended June 30,
	2021								2020
	Performance Enzymes		Novel Biotherapeutics		Corporate cost		Total		Performance Enzymes		Novel Biotherapeutics		Corporate cost		Total
Stock-based compensation	$	1,115	$	257	$	1,472	$	2,844	$	741	$	252	$	946	$	1,939

	Six months ended June 30,
	2021								2020
	Performance Enzymes		Novel Biotherapeutics		Corporate cost		Total		Performance Enzymes		Novel Biotherapeutics		Corporate cost		Total
Stock-based compensation	$	2,109	$	495	$	2,927	$	5,531	$	1,496	$	494	$	2,118	$	4,108

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 June 30,		Six months ended June 30,
	2021	2020	2021	2020
Customer A	15%	*	10%	*
Customer B	12%	*	*	*
Customer C	12%	*	13%	*
Customer D	*	16%	17%	20%
Customer E	*	38%	10%	27%
Customer F	*	12%	*	11%
Customer G	*	*	*	13%
* Percentage was less than 10%

Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented as follows:

	Percentage of Accounts Receivables as of
	June 30, 2021	December 31, 2020
Customer A	20%	*
Customer H	15%	*
Customer B	15%	*
Customer D	14%	32%
Customer E	10%	*
Customer G	*	25%
Customer F	*	13%
* 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
Americas	$	5,844	$	6,906	$	10,773	$	12,131
EMEA	6,169		3,314		12,450		9,285
APAC	13,440		4,747		20,262		8,221
Total revenues	$	25,453	$	14,967	$	43,485	$	29,637

Identifiable long-lived assets by location was as follows (in thousands):

	June 30, 2021		December 31, 2020
United States	$	31,424	$	31,176

Identifiable goodwill by reporting unit was as follows (in thousands):

	As of June 30, 2021 and December 31, 2020
	Performance Enzymes		Novel Biotherapeutics		Total
Goodwill	$	2,463	$	778	$	3,241