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Equity Method Investments
 12 Months Ended
Dec. 31, 2021
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments Equity Method Investments
In July 2019, the Company and Bayer CropScience LP ("Bayer LP") formed Oerth, a joint venture to research, develop and commercialize PROTAC targeted protein degraders for applications in the field of agriculture. Pursuant to the terms of the joint venture agreement, the Company made an in-kind intellectual property contribution to Oerth in the form of a license to certain of the Company’s proprietary technology. Bayer LP has made a $56.0 million total cash commitment to Oerth, of which $16.0 million was contributed to Oerth in 2019, and an in-kind intellectual property contribution. The Company and Bayer LP each hold an ownership interest in Oerth initially representing 50% of the ownership interests. A 15% ownership interest of Oerth is reserved for the future grants of incentive units to employees and service providers.
Under the joint venture agreement, the Company has no obligation to provide any additional funding and the Company’s ownership interest will not be diluted from future contributions from Bayer LP. The Company has no exposure to future losses of Oerth. The activities of Oerth are controlled by a management board under the joint control of the Company and Bayer LP. As Oerth is jointly controlled by the Company and Bayer LP, the Company accounts for its 50% interest using the equity method of accounting. The Company determined that Oerth is a variable interest entity and, accordingly, the Company has evaluated the significant activities of Oerth under the variable interest entity model and concluded that the significant activities consist primarily of research and development activities and, as the Company does not have the sole power to direct such activities, the Company is not the primary beneficiary.
The Company also provides to Oerth compensated research and development services and administrative services through a separate agreement. The services rendered by the Company during the years ended December 31, 2021, 2020 and 2019 were immaterial.
The Company determined that the fair value of the equity interest it received in Oerth in exchange for the license contributed totaled $49.4 million. The fair value of Oerth was determined utilizing discounted cash flows based on reasonable estimates and assumptions of cash flows expected from Oerth.
The Company recognized revenue of $24.7 million attributable to the license contributed to Oerth and eliminated the remaining $24.7 million which corresponds to the Company’s 50% ownership in Oerth. The Company determined that the amount that was eliminated represents intra-entity profit which should be deferred until realized by Oerth. The deferral will be recognized if and when Oerth recognizes revenue associated with the license. Until such time, the remaining $24.7 million of revenue is indefinitely deferred and excluded from the results of operations of the Company. The amount recognized as revenue was treated as such because the licensing of its technology in connection with the formation of a joint venture is part of the Company’s major ongoing or central operations, as evidenced by previous licensing agreements.
Operating expenses and net loss of Oerth for the years ended December 31 2021, 2020 and 2019 totaled $14.3 million, $8.3 million and $49.8 million, respectively. The net loss incurred in 2019 included research and development expenses equal to $49.4 million representing the fair value of the license acquired from Arvinas. The Company’s initial investment in Oerth was $49.4 million which represented the fair value of shares received in exchange for the contribution of the license. The elimination of the intra-entity profit component of the revenue resulted in a reduction in the balance of the investment in Oerth, bringing its initial carrying value of the investment to $24.7 million. For the year ended December 31, 2019, the Company recorded equity method losses of $24.7 million based on its proportionate share of ownership, reducing its carrying value of the investment to zero, and, as a result, no additional losses were recorded against the carrying value of the investment during the years ended December 31, 2021 and 2020.