What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 288 added, 630 removed, 403 unchanged (69% of the section changed)

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(In Thousands, Except Per Share Amounts)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

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Restricted cash, current 594 638

Investment in non-marketable debt security 1,067 1,000

Financial assets:

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Restricted cash 1,519 1,062

Investment in Equity Securities 1,000 —

Investment in non-marketable equity securities 2,350 1,450

Right-of-use assets - Operating leases, net 20,758 21,382

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Current portion of lease obligations - Operating leases 2,618 2,627

Current portion of lease obligations - Finance leases — 60

Deferred revenue 1,897 1,824

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100,000 shares authorized;

59,232 shares and 58,877 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

64,488 shares and 64,283 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 539,220 536,516

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(In Thousands, Except Per Share Amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Product revenue $ 10,226 $ 5,100

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Total costs and operating expenses 27,187 22,497

Income (loss) from operations ( 6,064 ) 259 ( 19,996 ) ( 11,602 )

Loss from operations ( 9,155 ) ( 7,827 )

Interest income 177 266

Other expenses, net ( 88 ) ( 86 )

Income (loss) before income taxes ( 6,075 ) 336 ( 19,759 ) ( 11,288 )

Provision for (benefit from) income taxes 19 ( 7 ) 331 12

Net income (loss) $ ( 6,094 ) $ 343 $ ( 20,090 ) $ ( 11,300 )

Net income (loss) per share, basic $ ( 0.10 ) $ 0.01 $ ( 0.34 ) $ ( 0.20 )

Net income (loss) per share, diluted $ ( 0.10 ) $ 0.01 $ ( 0.34 ) $ ( 0.20 )

Weighted average common stock shares used in computing net income (loss) per share, basic 59,061 58,287 58,984 55,818

Weighted average common stock shares used in computing net income (loss) per share, diluted 59,061 61,412 58,984 55,818

Loss before income taxes ( 9,066 ) ( 7,647 )

Provision for income taxes 2 5

Net loss $ ( 9,068 ) $ ( 7,652 )

Net loss per share, basic and diluted $ ( 0.14 ) $ ( 0.13 )

Weighted average common stock shares used in computing net loss per share, basic and diluted 64,290 58,888

See accompanying notes to the unaudited condensed consolidated financial statements

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Capital Accumulated Deficit Total Stockholders' Equity

Three months ended September 30, 2020 Shares Amount

Balance as of July 1, 2020 59,125 $ 6 $ 451,185 $ ( 356,405 ) $ 94,786

Three months ended March 31, 2021 Shares Amount

Balance as of January 1, 2021 64,283 $ 6 $ 536,516 $ ( 366,419 ) $ 170,103

Exercise of stock options 118 — 1,223 — 1,223

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Net loss — — — ( 9,068 ) ( 9,068 )

Balance as of September 30, 2020 59,232 $ 6 $ 453,294 $ ( 362,499 ) $ 90,801

Balance as of March 31, 2021 64,488 $ 6 $ 539,220 $ ( 375,487 ) $ 163,739

Common Stock Additional

Capital Accumulated Deficit Total Stockholders' Equity

Three months ended September 30, 2019 Shares Amount

Balance as of July 1, 2019 57,940 $ 6 $ 440,795 $ ( 342,117 ) $ 98,684

Exercise of stock options 441 — 1,778 — 1,778

Release of stock awards 8 — — — —

Employee stock-based compensation — — 1,732 — 1,732

Taxes paid related to net share settlement of equity awards ( 3 ) — ( 51 ) — ( 51 )

Issuance of common stock, issuance costs — — ( 55 ) — ( 55 )

Short swing profit settlement — — 77 — 77

Net income — — — 343 343

Balance as of September 30, 2019 58,386 $ 6 $ 444,276 $ ( 341,774 ) $ 102,508

See accompanying notes to the unaudited condensed consolidated financial statements

Codexis, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(In Thousands)

Common Stock Additional paid-in Capital Accumulated Deficit Total Stockholders' Equity

Nine months ended September 30, 2020 Shares Amount

Balance as of January 1, 2020 58,877 $ 6 $ 447,920 $ ( 342,409 ) $ 105,517

Exercise of stock options 87 — 539 — 539

Release of stock awards 370 — — — —

Employee stock-based compensation — — 6,045 — 6,045

Non-employee stock-based compensation — — 47 — 47

Taxes paid related to net share settlement of equity awards ( 102 ) — ( 1,257 ) — ( 1,257 )

Net loss — — — ( 20,090 ) ( 20,090 )

Balance as of September 30, 2020 59,232 $ 6 $ 453,294 $ ( 362,499 ) $ 90,801

Common Stock Additional paid-in Capital Accumulated Deficit Total Stockholders' Equity

Nine months ended September 30, 2019 Shares Amount

Three months ended March 31, 2020 Shares Amount

Balance as of January 1, 2020 58,877 $ 6 $ 447,920 $ ( 342,409 ) $ 105,517

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Taxes paid related to net share settlement of equity awards ( 84 ) — ( 1,007 ) — ( 1,007 )

Issuance of common stock, net of issuance costs of $ 129

3,049 1 49,870 — 49,871

Short swing profit settlement — — 77 — 77

Net loss — — — ( 7,652 ) ( 7,652 )

Balance as of September 30, 2019 58,386 $ 6 $ 444,276 $ ( 341,774 ) $ 102,508

Balance as of March 31, 2020 59,017 $ 6 $ 449,121 $ ( 350,061 ) $ 99,066

See accompanying notes to the unaudited condensed consolidated financial statements

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(Unaudited, in Thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities:

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Amortization expense - right-of-use assets - operating and finance leases 649 692

Gain on disposal of property and equipment — ( 2 )

Stock-based compensation 2,687 2,169

Allowance for credit losses 40 —

Loss on investment in equity securities — 526

Equity securities earned from research and development activities ( 132 ) —

Other non-cash items ( 84 ) —

Changes in operating assets and liabilities:

Accounts receivable, net ( 1,648 ) ( 776 )

Contract assets 52 ( 1,158 )

Unbilled receivables ( 4,886 ) 385

Financial assets, net 1,103 ( 2,763 )

Inventories ( 65 ) ( 330 )

Prepaid expenses and other current assets ( 930 ) ( 485 )

Other non-current assets ( 175 ) 74

Prepaid expenses and other assets 70 ( 838 )

Accounts payable 400 ( 246 )

Accrued compensation 1,274 ( 577 )

Other accrued liabilities 2,307 2,687

Accrued compensation and other accrued liabilities ( 1,731 ) 1,237

Other long-term liabilities ( 617 ) ( 624 )

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Purchase of property and equipment ( 2,550 ) ( 761 )

Proceeds from disposal of property and equipment — 2

Investment in equity securities ( 1,000 ) —

Proceeds from the sale of investment securities — 62

Proceeds from sale of property and equipment 17 —

Net cash used in investing activities ( 2,533 ) ( 761 )

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Proceeds from exercises of stock options 1,223 39

Proceeds from issuance of common stock in connection with private placement — 50,000

Costs incurred in connection with private placement — ( 129 )

Payments of lease obligations - Finance leases — ( 51 )

Recovery of short swing profit — 77

Taxes paid related to net share settlement of equity awards ( 1,206 ) ( 1,007 )

Net cash provided by (used in) financing activities 17 ( 1,019 )

Net increase (decrease) in cash, cash equivalents and restricted cash ( 19,010 ) 39,389

Net decrease in cash, cash equivalents and restricted cash ( 8,956 ) ( 3,205 )

Cash, cash equivalents and restricted cash at the beginning of the period 150,817 92,221

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Interest paid $ 3 $ 4

Income taxes paid $ 312 $ 5

Purchase of property and equipment recorded in accounts payable and accrued expenses $ 289 $ 536

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of September 30, 2020 and 2019 to the total of the same such amounts shown above:

September 30,

Supplemental non-cash investing and financing activities:

Capital expenditures incurred but not yet paid $ 579 $ 182

Assets received for research and development revenue earned $ 900 $ —

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of March 31, 2021 and 2020 to the total of the same such amounts shown above:

Cash and cash equivalents $ 139,748 $ 87,327

Restricted cash, current and non-current 2,113 1,689

Total cash, cash equivalents and restricted cash at the end of the period $ 73,211 $ 93,874

Total cash, cash equivalents and restricted cash $ 141,861 $ 89,016

See accompanying notes to the unaudited condensed consolidated financial statements

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and its subsidiaries on a consolidated basis.

We discover, develop and sell proteins that deliver value to our clients in a growing set of industries.

We view proteins as a vast untapped source of value-creating materials, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel proteins, both as proprietary Codexis products and in partnership with our customers.

We are a pioneer in the harnessing of computational technologies to drive biology advancements.

We discover, develop and sell enzymes and other proteins that deliver value to our clients in a growing set of industries.

We view proteins as a vast, largely untapped source of value-creating products, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel enzymes, both as proprietary Codexis products and in partnership with our customers.

We are a pioneer in harnessing computational technologies to drive biology advancements.

Since 2002, we have made substantial investments in the development of our CodeEvolver ® protein engineering technology platform, the primary source of our competitive advantage.

Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine our large and continuously growing library of protein variants’ performance attributes.

These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling delivery of targeted performance enhancements in a time-efficient manner.

In addition to its computational prowess, our CodeEvolver ® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and process development which are all coordinated to create our novel protein innovations.

Our approach to developing commercially viable biocatalytic manufacturing processes begins by conceptually designing the most cost-effective and practical process for a targeted product.

We then develop optimized protein catalysts to enable that process design, using our CodeEvolver ® protein engineering platform technology.

Engineered protein catalyst candidates - many thousands for each protein engineering project - are then rapidly screened and validated in high throughput screening under relevant manufacturing operating conditions.

This approach results in an optimized protein catalyst enabling cost-efficient processes that typically are relatively simple to run in conventional manufacturing equipment.

This also allows for the efficient technical transfer of our process to our manufacturing partners.

Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine the structural and performance attributes of our large and continuously growing library of protein variants.

These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling time- and cost-efficient delivery of the targeted performance enhancements.

In addition to its computational prowess, our CodeEvolver ® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and bioprocess development which are all coordinated to rapidly innovate novel, fit-for-purpose products.

The core historical application of the technology has been in developing commercially viable biocatalytic manufacturing processes for more sustainable production of complex chemicals.

This begins by conceptually designing the most cost-effective and practical process for a targeted product.

We then develop optimized biocatalysts to enable the designed process, using our CodeEvolver ® platform.

Engineered biocatalyst candidates, numbering many thousands for each project, are then rapidly screened and validated using high throughput methods under process-relevant operating conditions.

This approach results in an optimized biocatalyst that enables cost-efficient processes that are relatively simple to run in conventional manufacturing equipment.

This also allows for efficient technical transfer of our processes to our manufacturing partners.

The successful embodiment of our CodeEvolver ® protein engineering technology platform in commercial manufacturing processes requires well-integrated expertise in a number of technical disciplines.

In addition to those directly involved in practicing our CodeEvolver ® protein engineering platform technology, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, fermentation process development and fermentation engineering.

Our integrated, multi-disciplinary approach to biocatalyst and process development is a critical success factor for the Company.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the pharmaceuticals market, which remains a primary business focus.

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 licensed our proprietary CodeEvolver ® protein engineering technology platform to global pharmaceutical companies so that they may in turn use this technology to engineer enzymes for their own businesses.

Most recently, in May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis Pharma AG (“Novartis”).

The Novartis CodeEvolver ® Agreement allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

As evidence of our strategy to extend our technology beyond pharmaceutical manufacturing, we have also used the technology to develop protein catalysts and industrial enzymes for use in a wider set of industrial markets.

These target industries consist of several large market verticals, including food and food ingredients, animal feed, consumer care, flavors, fragrances and agricultural chemicals.

In addition, we are using our technology to develop enzymes for customers using next generation sequencing ("NGS") and polymerase chain reaction ("PCR/qPCR") for in vitro molecular diagnostic and genomic research applications.

In addition to those competencies directly integrated in our CodeEvolver ® protein engineering platform, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, bioprocess development and fermentation engineering.

Our integrated, multi-disciplinary approach to product and process development is a critical success factor for the Company.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.

Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing.

Additionally, we have licensed our proprietary CodeEvolver ® protein engineering technology platform to global pharmaceutical companies enabling them to use this technology, in house, to engineer enzymes for their own businesses.

Most recently, in May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.

The Novartis CodeEvolver ® Agreement (our third such agreement with large pharma companies) allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

As evidence of our strategy to extend our technology beyond pharmaceutical manufacturing, we have also used the technology to develop biocatalysts and enzyme products for use in a broader set of industrial markets, including several large verticals, such as food, feed, consumer care and fine chemicals.

In addition, we are using our technology to develop enzymes for various life science related applications, such as next generation sequencing (“NGS”) and polymerase chain reaction (“PCR/qPCR”) for in vitro molecular diagnostic and genomic research applications.

In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc.

(“Roche”) with our first enzyme for this target market, the Company's EvoT4™ DNA ligase.

with our first enzyme for this target market:

the Company’s EvoT4™ DNA ligase.

In June 2020, we entered into a co-marketing and enzyme supply collaboration agreement with Alphazyme LLC for the production and co-marketing of enzymes for life science applications including, initially, high-fidelity DNA polymerase, T7 RNA polymerase and reverse transcriptase enzymes.

We have also begun using the CodeEvolver ® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both for our customers and for our own business.

In October 2017, we entered into the "Nestlé Agreement” with Nestlé Health Science to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of phenylketonuria ("PKU").

We have been using the CodeEvolver ® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both in partnership with customers and for our own proprietary Codexis drug candidates.

Our first program was for the potential treatment of phenylketonuria ("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 entered into a Global Development, Option and License Agreement (the “Nestlé License Agreement”) with Societé des Produits Nestlé S.A., formerly known as Nestec Ltd.

(“Nestlé Health Science”) to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive license to develop and commercialize CDX-6114.

In March 2020, we entered into a Strategic Collaboration and License Agreement (“Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”), for the research and development of novel gene therapies for certain disease indications, including the treatment of lysosomal storage disorders and blood factor deficiencies.

Also in October 2017, we entered into a strategic collaboration agreement with Nestlé Health Science (“Nestlé SCA”) pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

In January 2020, we entered into a development agreement with Nestlé Health Science to advance a new lead candidate discovered under the Nestlé SCA, CDX-7108, into preclinical development and early clinical studies as a potential treatment for a gastro-intestinal disorder.

In parallel, the Nestlé SCA was extended through December 2021 to support the discovery of therapeutic candidates for additional disorders.

In June 2020, we also entered into a Master Collaboration and Research Agreement (the “MAI Agreement”) with Molecular Assemblies, Inc ("MAI") pursuant to which we are leveraging our CodeEvolver ® platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

Concurrently with the MAI Agreement, we entered into a Stock Purchase Agreement with MAI pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million and, in connection with the transaction, John Nicols, our President and Chief Executive Officer, also joined MAI’s board of directors.

See Note 14, "Subsequent Event" for additional information.

Below are brief descriptions of our business segments:

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.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals 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, consumer care, 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.

These markets consist of several large industrial verticals, including food, feed, consumer care, and fine chemicals.

We also use our technology in the life sciences markets to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well DNA/RNA synthesis and health monitoring applications.

Novel Biotherapeutics

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In October 2017, we announced a global development, option and license agreement 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 that it had completed its review of our investigational drug application 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, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU.

In January 2020, we and Nestlé Health Science entered into a development agreement pursuant to which we and Nestlé Health Science are collaborating to advance a lead candidate targeting a gastro-intestinal disorder discovered through our Strategic Collaboration Agreement into pre-clinical and early clinical studies.

The Strategic Collaboration Agreement was extended through December 2021.

Using our CodeEvolver ® protein engineering platform technology, we have also developed a pipeline of other biotherapeutic drug candidates, all of which are in preclinical development.

Our most recent achievement in novel biotherapeutics came in March 2020, when we announced a strategic collaboration and license agreement with Takeda in which we will collaborate with Takeda to research and develop protein sequences for use in gene therapy products for certain disease indications.

Under the terms of the Takeda Agreement, we will generate novel gene sequences encoding protein variants tailored to enhance efficacy as a result of increased activity, stability, and cellular uptake using our CodeEvolver ® protein engineering platform.

Takeda will combine these improved transgenes with its gene therapy capabilities to generate novel candidates for the treatment of rare genetic disorders.

We are currently collaborating on three initial programs for the treatment of Fabry disease, Pompe disease, and an unnamed blood factor deficiency.

The Company is responsible for the creation of novel enzyme sequences for advancement as gene therapies into pre-clinical development.

Takeda is responsible for the pre-clinical and clinical development and commercialization of gene therapy products resulting from the collaboration programs.

Under the terms of the agreement, in addition to the three initial programs, Takeda may initiate up to four additional programs for separate target indications.

In March 2020, we began research and development activities under the program plans and received a $ 8.5 million one-time, non-refundable cash payment.

We expect to continue to make additional investments in our pipeline with the aim of advancing additional product candidates targeting other therapeutic areas.

For additional discussion of our business segments, see Note 13, "Segment, Geographical and Other Revenue Information."

As a result of the option exercise, we earned a milestone and recognized $ 3.0 million in revenues in the first quarter of 2019.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

In January 2020, we and Nestlé Health Science entered into a development agreement pursuant to which we and Nestlé Health Science are collaborating to advance into pre-clinical and early

clinical studies a lead candidate targeting a gastro-intestinal disorder, CDX-7108, discovered through the Nestlé SCA.

The Nestlé SCA was extended through December 2021.

During 2020, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial which we anticipate will begin in 2021.

Additionally, the parties initiated two new programs under the Nestlé SCA targeting a gastro-intestinal disorder.

In March 2020, we entered into the Takeda Agreement pursuant to which we are collaborating to research and develop protein sequences for use in gene therapy products for certain disease indications in accordance with the respective program plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency.

In March 2020, we received a one-time, non-refundable cash payment of $ 8.5 million.

Of these programs, the Fabry disease program is the most advanced, with multiple sequences, including CDX-6311, having been provided to Takeda.

Business Update Regarding COVID-19

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Furthermore, our ability to provide future research and development ("R&D") services will continue to be impacted as a result of governmental orders and any disruptions in operations of our customers with whom we collaborate.

We believe that these disruptions have had a negative impact on revenue for the nine months ending September 30, 2020, although we are unable to fully determine and quantify the extent to which this pandemic has affected the amount and timing of our total revenues.

We believe that these disruptions have had a minimal impact on revenue for the three months ended March 31, 2021.

The extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are uncertain and cannot be predicted with confidence.

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R&D operations for several projects were temporarily suspended from mid-March 2020 through the end of April 2020 in accordance with these Orders.

In May 2020, we initiated limited R&D operations and have gradually ramped up operations such that we are currently utilizing the majority of our normal R&D capacity.

Additionally, we have resumed small scale manufacturing at our Redwood City pilot plant in May 2020.

In May 2020, we initiated limited R&D operations and have ramped up operations such that we are currently utilizing the majority of our normal R&D capacity while following county, state and federal COVID-19 guidance for the protection of our employees.

Additionally, we resumed small scale manufacturing at our Redwood City pilot plant in May 2020.

Our future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges faced by our customers.

As of the date of issuance of the unaudited condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

The extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A.

Risk Factors included in this Quarterly Report on Form 10-Q.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information.

Accordingly, they do not include all the information and notes required by GAAP for complete financial statements.

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information and include all the information and notes required by GAAP for complete financial statements.

These interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2020 are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2019 Annual Report on Form 10-K and are updated below as necessary.

Certain prior year amounts have been reclassified to conform to 2020 presentation.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance requiring implementation of a new impairment model applicable to financial assets measured at amortized cost which, among other things required that accounts receivable, contract assets, unbilled receivables and related allowances be reclassified as financial assets.

Except as noted above, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of September 30, 2020, results of our operations for the three and nine months ended September 30, 2020 and 2019, changes in stockholders' equity for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

The significant accounting policies used in preparation of the Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2021 and 2020, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary.

There have been no significant changes in our significant accounting policies or

critical accounting estimates since December 31, 2020.

The Unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of March 31, 2021, results of our operations for the three months ended March 31, 2021 and 2020, changes in stockholders' equity for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020.

The interim results are not necessarily indicative of the results for any future interim period or for the entire year.

The results of the nine months ended September 30, 2020 reflect the adoption of certain accounting standards including:

Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments which added a new impairment model applicable to our financial assets measured at amortized cost, and (ii) ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which adjusts testing for goodwill impairment.

See "Recently adopted accounting pronouncements" for details regarding the adoption of these standards.

The unaudited interim condensed consolidated financial statements include the accounts of Codexis, Inc.

The Unaudited Condensed Consolidated Financial Statements include the accounts of Codexis, Inc.

and its wholly owned subsidiaries.

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The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.

We regularly assess these estimates which primarily affect revenue recognition, the interest rate used to adjust the promised amount of consideration for the effects of significant financial assets (comprised of accounts receivable, contract assets, and unbilled receivables), inventories, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets.

Actual results could differ from those estimates and such differences may be material to the unaudited condensed consolidated financial statements.

We regularly assess these estimates which primarily affect revenue recognition, inventories, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets.

Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, and may not be accurately predicted, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers, markets and economies.

Financial assets and Allowances

We currently sell enzymes primarily to pharmaceutical and fine chemicals companies throughout the world by the extension of trade credit terms based on an assessment of each customer's financial condition.

Trade credit terms are generally offered without collateral and may include an insignificant discount for prompt payment for specific customers.

To manage our credit exposure, we perform ongoing evaluations of our customers' financial conditions.

In addition, accounts receivable include amounts owed to us under our collaborative research and development agreements.

We recognize accounts receivable at invoiced amounts and we maintain a valuation allowance as follows:

Allowance for credit losses from January 1, 2020

On and subsequent to January 1, 2020, our financial results reflect an impairment model (known as the “current expected credit loss model” or “CECL”) based on estimates and forecasts of future conditions requiring recognition of a lifetime of expected credit losses at inception on our financial assets measured at amortized costs which is comprised of accounts receivable, contract assets, and unbilled receivables.

We have determined that our financial assets share similar risk characteristics including:

(i) customer origination in the pharmaceutical and fine chemicals industry, (ii) similar historical credit loss pattern of customers (iii) no meaningful trade receivable differences in terms, (iv) similar historical credit loss experience and (v) our belief that the composition of certain assets are comparable to our historical portfolio used to develop loss history.

As a result, we measured the allowance for credit loss (“ACL”) on a collective basis.

Our ACL methodology considers how long the asset has been past due, the financial condition of the customers, which includes ongoing quarterly evaluations and assessments of changes in customer credit ratings, and other market data that we believe are relevant to the collectability of the assets.

Nearly all financial assets are due from customers that are highly rated by major rating agencies and have a long history of no credit loss.

We derive our ACL by establishing an impairment rate attributable to assets not yet identified as impaired.

We derive our ACL by initially relying on our historical financial asset loss rate which contemplates the full contractual life of the assets sharing similar risk characteristics, adjusted to reflect (i) the extent to which we have determined current conditions differ from the conditions that existed for the period over which historical loss information was evaluated and (ii) by taking into consideration the changes in certain macroeconomic historical and forecasted information.

We apply the ACL to past due financial assets and record charges to the ACL as a provision to credit loss expense in the Statement of Operations.

Financial assets we identify as uncollectible are also charged against the ACL.

We adjust the impairment rate to reflect the extent to which we have determined current conditions differ from the conditions that existed for the period over which historical loss information was evaluated.

Adjustments to historical loss information may be qualitative or quantitative in nature and reflect changes related to relevant data.

In the three and nine months ended September 30, 2020, inputs to our CECL forecast incorporated forward-looking adjustments associated with the COVID-19 pandemic which we believe are appropriate to incorporate due to the uncertainty of the economic impact on cash flows from our financial assets.

Allowance for credit losses before January 1, 2020

Prior to January 1, 2020, the allowances for doubtful accounts reflected our best estimates of probable losses inherent in our accounts receivable and contract assets balances.

The allowance determination was based on known troubled accounts, historical experience, and other currently available evidence.

Uncollectible accounts receivable were written off against the allowance for doubtful accounts when all efforts to collect them have been exhausted.

Recoveries were recognized when they were received.

Investment in Equity Securities

We own an equity investment in Molecular Assemblies, Inc.

(“MAI”) which is a privately held company.

Concurrently with our initial equity investment, John Nicols, our chief executive officer, joined MAI’s board of directors, and we entered into the MAI Agreement pursuant to which we will provide technical services and expertise in exchange for compensation in the form of additional shares of voting preferred stock.

We and MAI envision entering into an arrangement to commercialize products developed under the MAI Agreement.

To analyze the fair value measurement of our equity investment in MAI, we perform a qualitative analysis using significant unobservable inputs.

Significant changes to the unobservable inputs may result in a significantly higher or lower fair value estimate.

We may value our equity investment based on significant recent arms-length equity transactions with sophisticated non-strategic unrelated new investors, providing the terms of these equity transactions are substantially similar to the equity transactions terms between the company and us.

The impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.

We evaluate our investment for impairment when circumstances indicate that we may not be able to recover the carrying value.

We impair our investment when we determine that there has been an “other-than-temporary” decline in MAI's estimated fair value compared to its carrying value.

We calculate the estimated fair value of the investment using information from the company, which may include:

• Audited and unaudited financial statements;

• Projected technological developments of the company;

• Projected ability of the company to service its debt obligations;

• If a deemed liquidation event were to occur;

• Current fundraising transactions;

• Current ability of the company to raise additional financing if needed;

• Changes in the economic environment which may have a material impact on the operating results of the company;

• Qualitative assessment of key management;

• Contractual rights, obligations or restrictions associated with the investment;

• Other factors deemed relevant by our management to assess valuation.

• The valuation may be reduced if the company's potential has deteriorated significantly.

If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.

Goodwill represents the excess of consideration transferred over the fair value of net assets of businesses acquired and is assigned to reporting units.

We test goodwill for impairment considering amongst other things, whether there have been sustained declines in the trading price of our stock on the Nasdaq Global Select Market.

If we conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed.

We manage our business as two reporting units and we test goodwill for impairment at the reporting unit level.

We allocated goodwill to the two reporting units using a relative fair value allocation methodology that primarily relied on our estimates of revenue and future earnings for each reporting unit.

Using the relative fair value allocation methodology, we have determined that approximately 76 % of goodwill was to be allocated to the Performance Enzymes segment and 24 % allocated to the Novel

Biotherapeutics segment.

As a result of the calculation, $ 2.4 million of the goodwill is assigned to the Performance Enzymes segment and $ 0.8 million is assigned to the Novel Biotherapeutics segment.

We test goodwill for impairment on an annual basis on the last day of the fourth fiscal quarter and, when specific circumstances dictate, between annual tests, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

During 2020 and 2019, we did not record impairment charges related to goodwill.

We test for goodwill impairment is as follows:

Goodwill impairment testing from January 1, 2020

Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired and is assigned to reporting units.

We test goodwill for impairment considering amongst other things, whether there have been sustained declines in our share price.

If we conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed.

We test for impairment annually on a reporting unit basis, on the last day of the fourth fiscal quarter, and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The annual impairment test is completed using either:

a qualitative “Step 0” assessment based on reviewing relevant events and circumstances;

or a quantitative “Step 1” assessment, which determines the fair value of the reporting unit.

To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.

Using the relative fair value allocation methodology for assets and liabilities used in both of our reporting units, we compare the allocated carrying amount of each reporting unit’s net assets and the assigned goodwill to its fair value.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

Any excess of the reporting unit’s carrying amount of goodwill over its fair value is recognized as an impairment.

Goodwill impairment testing before January 1, 2020

Prior to January 1, 2020, the goodwill impairment test consisted of a two-step process.

The first step of the goodwill impairment test, used to identify potential impairment, compared the fair value of each reporting unit to its carrying value.

Using the relative fair value allocation methodology for assets and liabilities used in both of our reporting units, we compared the allocated carrying amount of each reporting unit’s net assets and the assigned goodwill to its fair value.

If the fair value of the reporting unit exceeded its carrying amount, goodwill of the reporting unit was considered not impaired, and the second step of the impairment test was not required.

The second step, if required, compared the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

Implied fair value was the excess of the fair value of the reporting unit over the fair value of all identified or allocated assets and liabilities.

Any excess of the reporting unit’s carrying amount goodwill over the respective implied fair value was recognized as an impairment.

Interim Goodwill Impairment Testing

We tested goodwill for impairment in the quarter ended September 30, 2020.

Since late 2019, the COVID-19 pandemic has spread worldwide.

The COVID-19 pandemic has caused a decline in global and domestic macroeconomic conditions, the general deterioration of the U.S.

economy and other economies worldwide, all of which may negatively impact our overall financial performance, driving a reduction in our cash flows.

We believe that the impact of the COVID-19 pandemic was a triggering event that gave rise to the need to perform a goodwill impairment test.

We conducted a qualitative interim impairment assessment as of September 30, 2020, which included an evaluation of our cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing, and extent of the impact of the pandemic in operating our business.

We also considered the results of the prior quarters’ impairment test performed which reflected a significant cushion between the fair value and the carrying value for both of our reporting units.

We determined that it was more likely than not that the fair value of each of the reporting units exceeded its respective carrying amount as of September 30, 2020.

Therefore, an interim quantitative impairment test of our goodwill at the reporting unit level was not required to be performed.

Segment Reporting

We report 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 chief operating decision maker ("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 do not allocate or evaluate assets by segment.

The Novel Biotherapeutics segment focuses on new opportunities in the pharmaceutical industry to dis cover or improve novel biotherapeutic drug candidates that will target human diseases that are in need of improved therapeutic interventions.

Performance Enzymes segment consists of protein catalyst products and services with focus on pharmaceutical, food, molecular diagnostics, and other industrial markets.

Changes to Tax Law

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), P.L.

116-136,was passed into law, amending portions of certain relevant US tax laws.

The CARES Act includes a number of federal income tax law changes, including, but not limited to:

(i) permitting net operating loss carrybacks to offset 100% of taxable income for taxable years beginning before 2021, (ii) accelerating alternative minimum tax credit refunds, (iii) temporarily increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income, and (iv) providing a technical correction for depreciation related to qualified improvement property.

The CARES Act had no impact on our unaudited condensed consolidated financial statements.

Financial Statement Exclusion

The total net loss in the Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, is not different from the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the same periods.

Accordingly, the Unaudited Condensed Consolidated Financial Statements exclude the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020.

Accounting Pronouncements

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which amends the FASB's guidance on the impairment of financial instruments.

The standard adds a new impairment model, known as CECL, which replaces the probable loss model.

The CECL impairment model is based on estimates and forecasts of future conditions which requires recognition of a lifetime of expected credit losses at inception on financial assets measured at amortized costs.

Our financial assets measured at amortized cost are comprised of accounts receivable, contract assets, and unbilled receivables.

We adopted the new standard in the first quarter of 2020 using a modified retrospective approach requiring a cumulative-effect adjustment to the opening accumulated deficit as of the date of adoption.

The ASU establishes a new valuation account “allowance for credit losses” replacing the “allowance for doubtful accounts” in the consolidated balance sheet, which is used to adjust the amortized cost basis of assets in presentation of the net amount expected to be collected.

The adoption required certain additional disclosures but had no other impact on our unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

The amendments eliminate Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit to its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

The amendments eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment, and if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

We adopted the standard in the first quarter of 2020 using a prospective approach.

The adoption required certain additional disclosures but had no impact on our unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.

The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements.

The changes affect all companies that are required to include fair value measurement disclosures.

The standard requires the use of the prospective method of transition for disclosures related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop fair value measurements categorized within Level 3 of the fair value hierarchy, and narrative description of measurement uncertainty.

All other amendments in the standard are required to be adopted retrospectively.

We adopted the standard in the first quarter of 2020 and the adoption had no impact on our unaudited condensed consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606.

ASU 2018-18 provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The standard also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants.

The standard is to be applied retrospectively to the date of the initial application of Topic 606 which also requires recognition of the cumulative effect of applying the amendments as an adjustment to the opening balance of retained earnings

of the later or the earliest annual period presented and the annual period inclusive of the initial application of Topic 606.

We adopted the standard in the first quarter of 2020 and the adoption had no impact on our unaudited condensed consolidated financial statements and related disclosures.

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes.

We adopted the standard on January 1, 2021 on a modified retrospective basis.

The adoption of this standard had no impact on our Unaudited Condensed Consolidated Financial Statements.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvement s.

ASU 2020-10 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance.

We adopted the standard on January 1, 2021 on a retrospective basis.

The adoption of this standard had no impact on our Unaudited Condensed Consolidated Financial Statements

Recently issued accounting pronouncements not yet adopted

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Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our Unaudited Condensed Consolidated Financial Statements upon adoption.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes .

The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted.

The standard will be adopted upon the effective date for us beginning January 1, 2021.

We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

In August 2020, FASB issued ASU No 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) No.

2020-06 August 2020 Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , to reduce the complexity and to simplify the accounting for convertible debt instruments and convertible preferred stock, and the derivatives scope exception for contracts in an entity's own equity.

In addition, the guidance on calculating diluted earnings per share has been simplified and made more internally consistent.

The standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years with early adoption permitted for fiscal years beginning December 15, 2020.

The standard may be adopted on a

modified retrospective or fully retrospective method of transition and on adoption, entities may irrevocably elect the fair value option in accordance with Subtopic 825-10, Financial Instruments—Overall, for any financial instrument that is a convertible security.

We believe that the effect of the adoption of ASU 2020-06 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions in which the reference LIBOR or another reference rate are expected to be discontinued as a result of the Reference Rate Reform.

The standard is effective for all entities.

The standard may be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022.

We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.

The standard is effective for all entities and can be adopted no later than December 1, 2022, with early adoption permitted.

The standard may be adopted on a prospective basis.

We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to elect optional expedients for contract modification;

however, we believe that effects of the adoption of ASU 2020-04 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2021, as compared to the recent accounting pronouncements described in herein, that are of significance or potential significance to us.

Revenue Recognition

3 unchanged sentences

Segment information is as follows (in thousands):

Three months ended September 30, 2020 Three months ended September 30, 2019

Three months ended March 31, 2021 Three months ended March 31, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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Total revenues $ 14,229 $ 3,803 $ 18,032 $ 10,874 $ 3,796 $ 14,670

Nine months ended September 30, 2020 Nine months ended September 30, 2019

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Major products and service:

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

Primary geographical markets:

Americas $ 7,381 $ 10,591 $ 17,972 $ 9,620 $ — $ 9,620

EMEA 8,128 6,047 14,175 15,964 8,708 24,672

APAC 15,876 — 15,876 15,516 — 15,516

Total revenues $ 31,385 $ 16,638 $ 48,023 $ 41,100 $ 8,708 $ 49,808

Contract Balances

The following table presents balances of contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Contract assets $ 5,143 $ 4,526

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deferred revenue $ 4,797 $ 4,791

We had no asset impairment charges related to contract assets in the three and nine months ended September 30, 2020 and 2019.

During the nine months ended September 30, 2020, decreases in contract assets were primarily due to contract assets that were subsequently invoiced as our right to consideration for goods and services became unconditional.

We had no asset impairment charges related to contract assets in the three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2021, the increase in contract assets was primarily due to increases in product revenue from contracts subject to over time revenue recognition.

The increase in unbilled receivables were primarily due to the timing of billings.

The increase in deferred revenue was nominal compared to prior period.

During the three months ended March 31, 2020, decreases in contract assets were primarily due to contract assets that were subsequently invoiced as our right to consideration for goods and services became unconditional.

Increases in unbilled receivables were primarily due to the timing of billings.

The increase in deferred revenue were primarily due to cash advances received in excess of revenue recognized.

During the three and nine months ended September 30, 2020 and 2019, we recognized the following revenues (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

We recognized the following revenues (in thousands):

Three months ended March 31,

Revenue recognized in the period for:

Amounts included in contract liabilities at the beginning of the period:

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Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations

that are unsatisfied or partially unsatisfied at the end of the reporting periods.

The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of September 30, 2020.

The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts (in thousands):

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting periods.

Remainder of 2021 2022 2023 2024 and Thereafter Total

2 unchanged sentences

Total revenues $ 1,830 $ 67 $ 977 $ 1,923 $ 4,797

Net income (loss) per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding, less restricted stock awards ("RSAs") subject to forfeiture.

Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding, less RSAs subject to forfeiture, plus all additional common stock shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities.

For periods of net loss, diluted and basic net loss per share are identical since potential common stock shares are excluded from the calculation, as their effect was anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share during the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share amounts):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Net income (loss) ( 6,094 ) 343 ( 20,090 ) ( 11,300 )

Weighted average common stock shares used in computing net income (loss) per share, basic 59,061 58,287 58,984 55,818

Effect of dilutive shares — 3,125 — —

Weighted average common stock shares used in computing net income (loss) per share, diluted 59,061 61,412 58,984 55,818

Net income (loss) per share, basic $ ( 0.10 ) $ 0.01 $ ( 0.34 ) $ ( 0.20 )

Net income (loss) per share, diluted $ ( 0.10 ) $ 0.01 $ ( 0.34 ) $ ( 0.20 )

N et Loss per S hare

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject to forfeiture.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities.

Anti-Dilutive Securities

The following shares were not considered in the computation of diluted net income (loss) per share because their effect was anti-dilutive (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.

The following shares were not considered in the computation of diluted net loss per share because their effect was anti-dilutive (in thousands):

Three months ended March 31,

Shares issuable under the Equity Incentive Plan 5,497 5,071

Collaborative Arrangements

GSK Platform Technology Transfer, Collaboration and License Agreement

In July 2014, we entered into a CodeEvolver ® protein engineering platform technology transfer collaboration and license agreement (the "GSK CodeEvolver ® Agreement") with GlaxoSmithKline ("GSK").

Pursuant to the terms of the agreement, we granted GSK a non-exclusive license to use the CodeEvolver ® protein engineering platform technology to develop novel enzymes for use in the manufacture of GSK's pharmaceutical and health care products.

We received an upfront fee upon the execution of the agreement in July 2014 and milestone payments in each of the years from 2014 through April 2016.

We completed the transfer of the CodeEvolver ® protein engineering platform technology to GSK in April 2016 and all revenues relating to the technology transfer have been recognized as of April 2016.

We have the potential to receive additional cumulative contingent payments that range from $ 5.75 million to $ 38.5 million per project based on GSK’s successful application of the licensed technology.

We are also eligible to receive royalties based on net sales of GSK's sales of licensed enzyme products that are currently not being recognized.

In 2019, we received a $ 2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® protein engineering platform technology.

We recognized no research and development revenue for the three and nine months ended September 30, 2020 compared to $ 2.0 million for the three and nine months ended September 30, 2019.

Merck Platform Technology Transfer and License Agreement

In August 2015, we entered into a CodeEvolver ® platform technology transfer collaboration and license agreement (the "Merck CodeEvolver ® Agreement") with Merck, Sharp & Dohme ("Merck") which allows Merck to use the CodeEvolver ® protein engineering technology platform in the field of human and animal healthcare.

We received an up-front license fee upon execution of the Merck CodeEvolver ® Agreement, and milestone payments in September 2015 and in September 2016, when we completed the transfer of the engineering platform technology.

We have the potential to receive payments of up to a maximum of $ 15.0 million for each commercial active pharmaceutical ingredient ("API") that is manufactured by Merck using one or more novel enzymes developed by Merck using the CodeEvolver ® protein engineering technology platform.

The API payments, which are currently not recognized in revenue, are based on the quantity of API developed and manufactured by Merck and will be recognized as usage-based royalties.

In January 2019, we entered into an amendment to the Merck CodeEvolver ® Agreement to install certain CodeEvolver ® protein engineering technology upgrades into Merck’s platform license installation and maintain those upgrades for a multi-year term.

The license installation was completed in 2019 and we recognized $ 0.1 million and $ 1.0 million in the three and nine months ended September 30, 2019 as a license fee revenue accordingly under the amendment.

Pursuant to the agreement, Merck has options to future technology enhancements for a specified fee.

As of September 30, 2020, Merck has not exercised its option for technology enhancements.

We recognized research and development revenues of $ 1.1 million and $ 2.1 million for the three and nine months ended September 30, 2020, respectively, compared to $ 1.1 million and $ 4.0 million for the three and nine months ended September 30, 2019, respectively, under the Merck CodeEvolver ® Agreement.

Merck Sitagliptin Catalyst Supply Agreement

In February 2012, we entered into a five-year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Catalyst Supply Agreement”) with Merck whereby Merck may obtain commercial scale enzyme for use in the manufacture of Januvia ® , its product based on the active ingredient sitagliptin.

In December 2015, Merck exercised its option under the terms of the sitagliptin Catalyst Supply Agreement to extend the agreement for an additional five years through February 2022.

Effective as of January 2016, we and Merck amended the Sitagliptin Catalyst Supply Agreement to prospectively provide for variable pricing based on the cumulative volume of sitagliptin catalyst purchased by Merck and to allow Merck to purchase a percentage of its requirements for sitagliptin catalyst from a specified third-party supplier.

Merck received a distinct, functional license to manufacture a portion of its demand beginning January 1, 2018, which we recognized as research and development revenue.

We have determined that the variable pricing, which provides a discount based on the cumulative volume of sitagliptin catalyst purchased by Merck, provides Merck material rights and we are recognizing product revenues using the alternative

Under the alternative approach, we estimate the total expected consideration and allocate it proportionately with the expected sales.

The Sitagliptin Catalyst Supply Agreement requires Merck to pay an annual fee for the rights to the sitagliptin technology each year for the term of the Sitagliptin Catalyst Supply Agreement.

Amounts of annual license fees are based on contractually agreed prices and are on a declining scale over the term of the contract.

Pursuant to the terms of the Sitagliptin Catalyst Supply Agreement, Merck may purchase supply from us for a fee based on contractually stated prices.

We recognized revenue of $ 3.2 million and $ 7.0 million for the three and nine months ended September 30, 2020, respectively, compared to $ 3.6 million and $ 11.4 million in the three and nine months ended September 30, 2019, respectively, in product revenue under this agreement.

Enzyme Supply Agreement

In November 2016, we entered into a supply agreement whereby our customer may purchase quantities of one of our proprietary enzymes for use in its commercial manufacture of a product.

Pursuant to the supply agreement, we received an upfront payment in December 2016 which was recorded as deferred revenues.

Such upfront payment will be recognized over the period of the supply agreement as the customer purchases our proprietary enzyme.

We additionally have determined that the volume discounts under the supply agreement provides the customer material rights and we are recognizing revenues using the alternative method.

As of September 30, 2020 and December 31, 2019, we had deferred revenue balances from the supply agreement of $ 2.0 million.

Global Development, Option and License Agreement;

Strategic Collaboration Agreement;

Development Agreement

In October 2017, we entered into a Global Development, Option and License Agreement (the “Nestlé Agreement”) with Société des Produits Nestlé (formerly known as Nestec Ltd.) (“Nestlé Health Science”) and, solely for the purpose of the integration and the dispute resolution clauses of the Nestlé Agreement, Nestlé Health Science S.A., to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

We received an upfront cash payment of $ 14.0 million in 2017 upon the execution of the Nestlé Agreement, a $ 4.0 million milestone payment after dosing the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, and a $ 1.0 million milestone payment upon achievement of a milestone relating to formulation of CDX-6114.

The $ 4.0 million milestone payment that was triggered by the initiation of the trial was received in 2018 and the $ 1.0 million milestone payment that was triggered by the achievement of a formulation relating to CDX-6114 was received in February 2019.

The upfront payment and the variable consideration relating to the progress payment of $ 4.0 million and milestone payment of $ 1.0 million were recognized over time as the development work was performed.

Revenue was recognized using a single measure of progress that depicted our performance in transferring control of the services, which was based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete all performance obligations under the agreement.

We recognized no minal research and development revenue for the three and nine months ended September 30, 2020, respectively, compared to $ 0.1 million and $ 1.8 million for the three and nine months ended September 30, 2019, respectively.

In January 2019, we received notice from 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.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114 was substantially completed in the fourth quarter of 2019.

Other potential payments from Nestlé Health Science to us under the Nestlé Agreement include (i) development and approval milestones of up to $ 85.0 million, (ii) sales-based milestones of up to $ 250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $ 1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of product.

In October 2017, we also entered into a Strategic Collaboration Agreement (the “Strategic Collaboration Agreement”) with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

Under the Strategic Collaboration Agreement, we received an upfront payment of $ 1.2 million in 2017 and an incremental payment of $ 0.6 million in September 2018 for additional services.

The Strategic Collaboration Agreement has been extended through December 2021.

In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance a lead candidate targeting a gastro-intestinal disorder discovered through our Strategic Collaboration Agreement into pre-clinical and early clinical studies.

Under the Strategic Collaboration Agreement and development agreement, we recognized research and development fees of $ 2.8 million and $ 6.1 million for the three and nine months ended September 30, 2020, respectively, compared to $ 1.4 million and $ 3.9 million in the three and nine months ended September 30, 2019, respectively.

Strategic Collaboration Agreement

In April 2018, we entered into the Porton Agreement with Porton to license key elements of our biocatalyst technology for use in Porton’s global custom intermediate and API development and manufacturing business.

Under the Porton Agreement, we are eligible to receive annual collaboration fees and research and development revenues.

We received an initial collaboration fee of $ 0.5 million within 30 days of the effective date of the Porton Agreement, $ 1.5 million upon the first anniversary of the effective date of the agreeme nt, and $ 1.0 million upon the second anniversary of the effective date of the agreement and we are eligible to receive $ 1.0 million on the third anniversary of the effective date of the agreement.

We completed the technica l transfer in the fourth quarter of 2018 and recognized $ 2.8 million in research and development revenue.

We recognized revenue related to the functional license provided to Porton at a point in time when control of the license was transferred to the customer.

We recognized research and development revenue related to the Porton Agreement of nil and $ 1.1 million in the three and nine months ended September 30, 2020, respectively, and no revenue in the three and nine months ended September 30, 2019.

As of September 30, 2020 and December 31, 2019, we had deferred revenue balances related to the strategic collaboration agreement of $ 0.1 million and nil , respectively.

Platform Technology Transfer and License Agreement

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis Pharma AG (“Novartis”).

The Agreement allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

Under the Novartis CodeEvolver ® Agreement, we are transferring our proprietary CodeEvolver ® protein engineering platform technology to Novartis over approximately 23 months, starting with the date on which we commenced the technology transfer (the “Technology Transfer Period”).

As a part of this technology transfer, the Company provided to Novartis our proprietary enzymes, proprietary protein engineering protocols and methods, and proprietary software algorithms.

In addition, teams of the Company and Novartis scientists participated in technology training sessions and collaborative research projects at our laboratories in Redwood City, California and at a designated Novartis laboratory in Basel, Switzerland.

Upon completion of technology transfer, Novartis will have the CodeEvolver ® protein engineering platform technology installed at its designated laboratory.

Pursuant to the agreement, we received an upfront payment of $ 5.0 million shortly after the effective date of the Novartis CodeEvolver ® Agreemen t.

In the second quarter of 2020, we completed the second technology milestone transfer under the agreement and became eligible to receive a milestone payment of $ 4.0 million, which we subsequently received in July 2020.

We are eligible to receive an additional $ 5.0 million upon satisfactory completion of the third technology transfer milestone.

In consideration for the continued disclosure and license of improvements to our technology and materials during a multi-year period that begins on the conclusion of the Technology Transfer Period, Novartis will pay us annual payments which amount to an additional $ 8.0 million.

The Company also has the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® protein engineering platform technology during the period that begins on the conclusion of the Technology Transfer Period and ends on the expiration date of the last to expire licensed patent.

These product-related usage payments, if any, will be paid by Novartis to us for each quarter that Novartis manufactures API using a CodeEvolver ® -developed enzyme.

The usage payments will be based on the total volume of API produced using the CodeEvolver ® -developed enzyme.

These usage payments can begin in the clinical stage and will extend throughout the commercial life of each API.

Revenue for the combined initial license and technology transfer performance obligation, which is expected to occur over twenty-three months , is being recognized using a single measure of progress that depicts our performance in transferring control of the services, which is based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete the performance obligation relating to the combined initial license and technology transfer.

Revenue allocated to future improvements will be recognized during the Improvement Term.

We recognized $ 0.9 million and $ 4.1 million in research and development revenue for the three and nine months ended September 30, 2020, respectively, compared to $ 3.8 million in revenue for the three and nine months ended September 30, 2019 from the Novartis CodeEvolver ® Agreement.

License Agreement

In December 2019, we entered a license agreement with Roche Sequencing Solutions, Inc.

(“Roche”) to provide Roche with our EvoT4 DNA™ ligase high-performance molecular diagnostic enzyme.

The royalty bearing license grants Roche worldwide rights to include the EvoT4 DNA™ ligase in its nucleic acid sequencing products and workflows.

Under the license agreement, we received an initial collaboration fee payment within 45 days of the effective date of the agreement and we are eligible to receive an additional milestone within 60 days after the completion of technology transfer.

The agreement also contemplates milestone payments to the Company upon the achievement of various development and commercialization events and royalty payments from commercial sales of the enzyme.

We recognized research and development fees of $ 0.1 million and $ 0.9 million for the three and nine months ended September 30, 2020, respectively.

Strategic Collaboration and License Agreement

In March 2020, we entered into a Strategic Collaboration and License Agreement (the “Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Co.

(“Takeda”) under which we will research and develop protein sequences for use in gene therapy products for certain diseases (each, a “Field”) in accordance with each applicable program plan (each, a “Program Plan”).

In March 2020, we received an up-front nonrefundable cash payment of $ 8.5 million and we initiated activities under three Program Plans for Fabry Disease, Pompe Disease, and an unnamed blood factor deficiency respectively (the “Initial Programs”).

We are primarily responsible for the research and development of protein sequences under the Program Plans (the “Protein Sequences”) and we are eligible to earn $ 18.3 million of research and development fees and pre-clinical milestone payments for the Initial Programs.

Takeda has the right, but not the obligation, to develop, manufacture and commercialize gene therapy products that include nucleic acid sequences that encode the Protein Sequences (“Products”) at their expense.

Takeda has the right to a certain number of additional disease indications (“Reserved Target Indications”) for a limited period in which Takeda may initiate a Program Plan for one or more Reserved Target Indications (“Additional/Option Program,” with Initial Programs, the “Programs”), provided, (a) if Takeda elects to initiate an Additional/Option Program while the parties are collaborating on three other Programs at the time of such election, or (b) if Takeda elects to initiate an Additional/Option Program using the last remaining Reserved Target Indication, then Takeda must pay us an option exercise fee to initiate such Additional/Option Program.

We will own all rights to the Protein Sequences and corresponding nucleic acid sequences and related intellectual property rights and Takeda will own all rights to Products and related intellectual property rights.

We granted to Takeda an exclusive, worldwide, royalty-bearing, sublicensable license to use the Protein Sequences and their corresponding nucleic acid sequences to develop, manufacture and commercialize the applicable Products in the applicable Field.

We also granted to Takeda a limited non-exclusive, worldwide, sublicensable license (a) to research the Protein Sequences within or outside the applicable Fields and (b) to research the Products outside of the applicable Fields, which such rights exclude Takeda's right to perform any Investigational New Drug-enabling activities.

The licenses to research the Protein Sequences expire after a pre-determined period of time.

The term of the Takeda Agreement begins on the Effective Date and continues on a Product-by-Product and country-by-country basis, until the expiration of Takeda’s obligation to pay royalties to the Company with respect to that Product in that country.

The Takeda Agreement expires in its entirety upon the expiration of Takeda’s obligation to pay royalties to the Company with respect to the Products in all countries worldwide.

Subject to the terms of the Takeda Agreement, and after the first anniversary of the Effective Date with respect to the Initial Programs or after the first anniversary of confirmation of the applicable Program Plan by the parties with respect to the Additional/Option Programs, Takeda may terminate a Program upon specified prior written notice to the Company.

Subject to the terms of the Takeda Agreement, Takeda may terminate the Takeda Agreement, at will, on a Product-by-Product basis upon specified prior written notice to the Company and the Takeda Agreement in its entirety upon specified prior written notice to the Company.

Subject to the terms of the Takeda Agreement, Takeda may terminate the Takeda Agreement on a Product-by-Product basis for safety reasons upon specified prior written notice to the Company.

Either party may terminate the Takeda Agreement for an uncured material breach by the other party, or the other party’s insolvency or bankruptcy.

We are eligible to receive certain development and commercialization milestone payments up to $ 100.0 million per target gene, the modulation of which would lead to the treatment of the disease indications by the applicable Product.

We are also eligible to receive tiered royalties based on net sales of Products at percentages ranging from the middle-single digits to low single-digits.

We recognized research and development revenue related to the Takeda Agreement of $ 2.6 million and $ 10.6 million in the three and nine months ended September 30, 2020, respectively.

As of September 30, 2020, we had a deferred revenue balance of $ 1.9 million from Takeda.

Master Collaboration and Research Agreement and Stock Purchase Agreement

In June 2020, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc.

("MAI") pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million in connection with the transaction, our chief executive officer, John Nicols, also joined MAI’s board of directors.

At the same time, we entered into a Master Collaboration and Research Agreement (the “MAI Agreement”) with MAI to engineer DNA polymerase enzymes to deliver differentiated and cost-effective solutions for the enzymatic synthesis of DNA.

Under the MAI Agreement and its related statement of work (“SOW”), we will apply our CodeEvolver ® protein engineering platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

Based on these services, the Company is eligible to earn additional shares of MAI's Series A preferred stock.

MAI will combine its advanced chemistries with our enzymes to drive the process to commercialization.

Under the MAI Agreement and its associated SOW, we will engage in research and development activities to engineer DNA polymerase enzymes for the enzymatic synthesis of DNA in exchange for monthly fees in the form of shares of Series A preferred stock in MAI.

We are eligible to earn such non-monetary payments over ten to thirteen months , and any such shares would be issued thirty days in arrears after each calendar quarter-end.

We are also eligible to receive amounts for bonuses, targets and milestones on achievement of timeline and project goals specified in the SOW.

Payments for bonuses, targets and milestones on achievement of timeline and project goals are to be issued thirty days after the Company provides notification of completion.

We did not receive any shares of MAI's Series A preferred stock based on services provided in the nine months ended September 30, 2020.

Under the MAI Agreement, we will have the right to use and sell the engineered enzymes to third parties for any purpose other than for the synthesis of native DNA.

Under the MAI Agreement, we would make a $ 0.5 million payment to MAI upon our achievement of a milestone of $ 5.0 million in aggregate commercial sales to third parties of the engineered enzymes or any product incorporating or derived from the engineered enzymes for any purpose other than the synthesis of native DNA.

The MAI Agreement contemplates that we and MAI will enter into a Commercialization and Enzyme Supply Agreement (the “CESA”) within six months following the completion of certain timelines specified in the SOW.

In addition, we and MAI have agreed pursuant to the MAI Agreement to certain terms to be contained within the CESA in the event that the CESA becomes executed in the future.

Those include:

(a) that MAI would receive an exclusive license to use the DNA polymerase enzymes engineering by us under the MAI Agreement in the synthesis of native DNA and a non-exclusive license to use these enzymes for research and development on the synthesis of non-native DNA, and (b) we would become the exclusive manufacturer of these enzymes for MAI, its affiliates and licensees.

We recognized $ 0.5 million in research and development revenue in the three and nine months ended September 30, 2020 from transactions with MAI.

At September 30, 2020, we had $ 0.5 million of financial assets due from MAI.

Payment for the services was subsequently received in form of additional Series A preferred stock of MAI in October.

Cash Equivalents and Equity Securities

Cash equivalents at September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

September 30, 2020 December 31, 2019

Adjusted Cost Estimated

Fair Value Adjusted Cost Estimated Fair Value

Money market funds (1)

$ 51,488 $ 51,488 $ 71,248 $ 71,248

(1) Money market funds are classified in cash and cash equivalents on our unaudited condensed consolidated balance sheets.

As of September 30, 2020, the total cash and cash equivalents balance of $ 71.5 million was comprised of money market funds of $ 51.5 million and cash of $ 20.0 million held with major financial institutions worldwide.

As of December 31, 2019, the total cash and cash equivalents balance of $ 90.5 million was comprised of money market funds of $ 71.2 million and cash of $ 19.3 million held with major financial institutions worldwide.

Investment in Equity Securities

No single investor in MAI holds 20% or more of the voting stock.

Our investment represented approximately 4 % of MAI's voting stock at the time of the transaction.

We recorded no impairments or upward adjustments due to observable price changes in the investment in the three and nine months ended

September 30, 2020.

The carrying amount of the investment was $ 1.0 million at September 30, 2020.

For additional information, see Note 12, "Related Party Transactions."

Investments in Non-Marketable Securities

Non-Marketable Debt Securities

We classify non-marketable debt securities, which are accounted for as available-for-sale, within Level 3 in the fair value hierarchy because we estimate the fair value based on a qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.

We determine gains or losses on the sale or extinguishment of non-marketable debt securities using a specific identification method.

Unrealized gains and losses from bifurcated embedded derivatives, which represent share-settled redemption features, are recorded as other expense, net, in the unaudited condensed consolidated statements of operations.

Unrealized gains and losses on non-marketable debt securities are recorded as a component of other comprehensive loss until realized.

Realized gains or losses are recorded as a component of other expenses, net.

In the three months ended March 31, 2021, we recognized $ 0.1 million in interest income from amortization of debt discount and interest earned on our investment in non-marketable debt security, and $ 68 thousand in other expenses, net, on the change in the fair value of an embedded bifurcated derivative.

We recognized no unrealized or realized gains or losses during the three months ended March 31, 2021.

We recognized no interest income, other expenses, and unrealized or realized gains or losses during the three months ended March 31, 2020.

The following table presents balances of the adjusted cost and carrying value and fair value of non-marketable debt security by contractual maturity (in thousands):

March 31, 2021

Adjusted Cost and Carrying Value Fair Value

Non-marketable debt security due in 1 year or less $ 1,067 $ 1,067

December 31, 2020

Adjusted Cost and Carrying Value Fair value

Non-marketable debt security due in 1 year or less $ 1,000 $ 1,000

Non-Marketable Equity Securities

Non-marketable equity securities are investments in privately held companies without readily determinable market values.

We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.

The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.

We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of other expenses, net.

We recognized no unrealized or realized gain or losses during the three months ended March 31, 2021 and 2020.

The following table presents balances of the carrying value of non-marketable equity securities (in thousands):

March 31, 2021 December 31, 2020

Non-marketable equity securities $ 2,350 $ 1,450

Fair Value Measurements

The following tables present the financial instruments that were measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019 by level within the fair value hierarchy (in thousands):

September 30, 2020

The following tables present the financial instruments that were measured at fair value on a recurring basis within the fair value hierarchy (in thousands):

March 31, 2021

Level 1 Level 2 Level 3 Total

Money market funds $ 122,075 $ — $ — $ 122,075

Non-marketable debt security — 1,067 1,067

Total $ 122,075 $ — $ 1,067 $ 123,142

December 31, 2020

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Money market funds $ 127,567 $ — $ — $ 127,567

Non-marketable debt security — — 1,000 1,000

Total $ 127,567 $ — $ 1,000 $ 128,567

The fair value of non-marketable securities remeasured due to impairment would be classified within level 3.

During the three months ended March 31, 2021 and 2020, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

The carrying value of our non-marketable securities approximated fair value.

Balance Sheets Details

Cash Equivalents

Cash equivalents as of March 31, 2021 and December 31, 2020, consisted of the following (in thousands):

March 31, 2021 December 31, 2020

Adjusted Cost Estimated Fair Value Adjusted Cost Estimated Fair Value

Money market funds (1)

$ 122,075 $ 122,075 $ 127,567 $ 127,567

(1) Money market funds are classified in cash and cash equivalents on our consolidated balance sheets.

Average Contractual Maturities (in days) is not applicable.

As of March 31, 2021, the total cash and cash equivalents balance of $ 139.7 million was comprised of money market funds of $ 122.1 million and cash of $ 17.6 million held with major financial institutions.

As of December 31, 2020, the total cash and cash equivalents balance of $ 149.1 million was comprised of money market funds of $ 127.6 million and cash of $ 21.5 million held with major financial institutions.

Inventories consisted of the following (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Raw materials $ 77 $ 77

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Property and equipment, net consisted of the following (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Laboratory equipment $ 27,491 $ 25,468

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Property and equipment, net $ 10,396 $ 9,675

Goodwill had a carrying value of approximately $ 3.2 million as of September 30, 2020 and December 31, 2019.

Depreciation expense included in the Unaudited Condensed Consolidated Statements of Operations was follows (in thousands):

Three months ended March 31,

Depreciation Expense $ 659 $ 438

Goodwill had a carrying value of $ 3.2 million as of March 31, 2021 and December 31, 2020.

Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Accrued purchases $ 5,749 $ 7,170

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Equity Incentive Plans

In June 2019, our board of directors (the "Board") and stockholders approved the 2019 Incentive Award Plan (the "2019 Plan").

In 2019, our board of directors (the "Board") and stockholders approved the 2019 Incentive Award Plan (the "2019 Plan").

The 2019 Plan superseded and replaced in its entirety our 2010 Equity Incentive Plan (the “2010 Plan”) which was effective in March 2010, and no further awards will be granted under the 2010 Plan;

however, the terms and conditions of the 2010 Plan will continue to govern any outstanding awards thereunder.

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance-contingent restricted stock units ("PSUs"), performance based options ("PBOs"), stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance-contingent restricted stock units ("PSUs"), performance based options ("PBOs"), other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The number of shares of our common stock available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares, and (ii) any shares subject to awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited;

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In June 2019, 8.1 million shares authorized for issuance under the 2019 Plan were registered under the Securities Act of 1933, as amended (the “Securities Act”).

The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, RSUs, RSAs, PSUs, PBOs, stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

Stock Options

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If, at the time of a grant, the optionee directly or by attribution owns stock possessing more than 10 % of the total combined voting power of all of our outstanding capital stock, the exercise price for these options must be at least 110 % of the fair value of the underlying common stock.

Stock options granted to employees generally have a maximum term of 10 years and vest over four years from the date of grant, of which 25 % vest at the end of one year, and 75 % vest monthly over the remaining three years.

Stock options granted to employees generally have a maximum term of ten years and vest over four years from the date of grant, of which 25 % vest at the end of one year, and 75 % vest monthly over the remaining three years.

We may grant options with different vesting terms from time to time.

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Performance-contingent Restricted Stock Units (PSUs) and Performance Based Options (PBOs)

We also grant our executives and our non-executive employees PSUs, and we grant our executives PBOs.

The compensation committee of the Board approved, solely in respect of non-executive employees, delegated to our Chief Executive Officer the authority to approve grants of PSUs.

The compensation committee of the Board also approved grants of PBOs and PSUs to our executives.

The PSUs and PBOs vest based upon both the successful achievement of certain corporate operating milestones in specified timelines and continued employment through the applicable vesting date.

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If the performance goals are achieved at the superior level, the number of shares eligible to vest in respect of the PSUs would be equal to two times the number of PSUs granted and equal to the number of PBOs granted.

The number of shares issuable upon achievement of the performance goals at the levels between the threshold and target levels for the PSUs and PBOs or between the target level and superior levels for the PSUs would be determined using linear interpolation.

determined using linear interpolation.

Achievement below the threshold level would result in no shares being eligible to vest in respect of the PSUs and PBOs.

In the first half of 2020, we awarded PSUs ("2020 PSUs") and PBOs ("2020 PBOs"), each of which commence vesting based upon the achievement of various weighted performance goals, including sustained revenue and performance enzyme growth, strategic advancements of biotherapeutics pipeline, safety and technology development.

As of September 30, 2020, we estimated that the 2020 PSUs and 2020 PBOs performance goals would be achieved at 100 % of the target level, and recognized expenses accordingly.

In 2019, we awarded PSUs ("2019 PSUs") and PBOs ("2019 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including sustained revenue and performance enzyme growth, strategic advancement of biotherapeutics, cash balance and strategic plan development.

In the first quarter of 2021, we awarded PSUs ("2021 PSUs") and PBOs ("2021 PBOs"), each of which commence vesting based upon the achievement of various weighted performance goals, including corporate revenue, performance enzyme segment gross margin, major new biotherapeutics publicity events, strategic performance enzyme and biotherapeutics deliverables, safety, and technology and strategic plan development.

As of March 31, 2021, we estimated that the 2021 PSUs and 2021 PBOs performance goals would be achieved at 100 % of the target level, and recognized expenses accordingly.

In 2020, we awarded PSUs ("2020 PSUs") and PBOs ("2020 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including corporate revenue, performance enzyme segment gross margin, major new biotherapeutics publicity events, strategic performance enzyme and biotherapeutics deliverables, and strategic plan development.

In the first quarter of 2021, we determined that the 2020 PSUs and 2020 PBOs performance goals had been achieved at 88 % of the target level, and recognized expenses accordingly.

Accordingly, 50 % of the shares underlying the 2020 PSUs and PBOs vested in the first quarter of 2021 and 50 % of the shares underlying the 2020 PSUs and PBOs will vest in the first quarter of 2022, in each case subject to the recipient’s continued service on each vesting date.

In 2018, we awarded PSUs ("2018 PSUs") and PBOs ("2018 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including core business revenue growth, cash balance, new licensing collaborations, new research and development service revenue arrangements, technology advancement and novel therapeutic enzymes advancement.

In the first quarter of 2020, we determined that the 2019 PSUs and 2019 PBOs performance goals had been achieved at 84 % of the target level, and recognized expenses accordingly.

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Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):

Three Months Ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Research and development $ 477 $ 424

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Total $ 2,687 $ 2,169

The following table presents total stock-based compensation expense by security type included in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine months ended September 30,

2020 2019 2020 2019

The following table presents total stock-based compensation expense by security type included in the unaudited condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Stock options $ 665 $ 541

RSUs and RSAs 542 599

PSUs 295 368 922 1,075

PBOs 1,010 698

Total $ 2,687 $ 2,169

In June 2020, we granted an option to purchase 60,000 shares of common stock to a non-employee as compensation for services.

The estimated fair value of the grant was valued at $ 0.3 million using the Black-Scholes-Merton option pricing model with the following assumptions used to estimate the fair value of non-employee stock options:

(i) volatility rate at 51.9 %, (ii) risk-free interest rate of 0.4 % and (iii) no expected dividend yield.

The option vests over 2 years from the date of grant with 50 % vesting after one year and the remaining 50 % vesting monthly in the second year.

In August 2020, we granted an option to purchase 16,000 shares of common stock to a non-employee as compensation for services.

The estimated fair value of the grant was valued at $ 0.1 million using the Black-Scholes-Merton option pricing model with the following assumptions used to estimate the fair value of non-employee stock options:

(i) volatility rate at 50.5 %, (ii) risk-free interest rate of 0.3 % and (iii) no expected dividend yield.

The option vests over 1 year with 100 % on the first anniversary of the grant date.

We recognized stock-based compensation expense related to the non-employees of $ 43 thousand and $ 47 thousand for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2020, unrecognized stock-based compensation expense, net of expected forfeitures, was $ 4.2 million related to unvested employee stock options, $ 0.3 million related to unvested non-employee stock options, $ 2.3 million related to unvested RSUs and RSAs, $ 0.8 million related to unvested PSUs, and $ 1.3 million related to unvested PBOs based on current estimates of the level of achievement.

As of March 31, 2021, unrecognized stock-based compensation expense, net of expected forfeitures, was $ 5.3 million related to unvested stock options, $ 4.7 million related to unvested RSUs and RSAs, $ 2.0 million related to unvested PSUs, and $ 3.3 million related to unvested PBOs based on current estimates of the level of achievement.

Stock-based compensation expense for these awards will be recognized through the year of 2025.

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Exercise of Options

For the nine months ended September 30, 2020 and September 30, 2019, we issued 87,240 and 970,256 shares, respectively, upon option exercises at a weighted-average exercise price of $ 6.17 and $ 4.76 per share, respectively, with net cash proceeds of $ 0.5 million and $ 4.6 million, respectively.

Private Offering

In June 2019, we entered into a Securities Purchase Agreement with an affiliate of Casdin pursuant to which we issued and sold to Casdin 3,048,780 shares of our common stock at a purchase price of $ 16.40 per share.

After deducting legal fees of $ 74 thousand from the Private Offering, our net proceeds were $ 49.9 million.

The Private Offering was exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act, and Regulation D under the Securities Act.

For the three months ended March 31, 2021 and March 31, 2020, we issued 118,437 and 5,333 shares, respectively, upon option exercises at a weighted-average exercise price of $ 10.33 and $ 7.31 per share, respectively, with net cash proceeds of $ 1.2 million and $ 39 thousand, respectively.

Commitments and Contingencies

Operating Leases

Our headquarters are located in Redwood City, California, where we occupy approximately 77,300 square feet of office and laboratory space in four buildings within the same business park of Metropolitan Life Insurance Company ("MetLife").

Our lease (“Lease”) with MetLife includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “Penobscot Space”), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “Building 2 Space”), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”).

Until January 31, 2020, we also leased approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”).

During the period January 1, 2020 through January 31, 2020, we subleased approximately 26,500 square feet of the Saginaw Space to Minerva Surgical, Inc.

Our headquarters are located in Redwood City, California, where we occupy approximately 77,300 square feet of office and laboratory space in multiple buildings within the same business park of Metropolitan Life Insurance Company ("MetLife").

Our lease agreement with MetLife ("RWC Lease") includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “200/220 Penobscot Space”) and approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “400 Penobscot Space”) (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the “Penobscot Space”), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”).

Until the end of January 2020, we also leased approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”).

During January 2020, we subleased approximately 26,500 square feet of the Saginaw Space to Minerva Surgical, Inc.

The lease and sublease for the Saginaw Space both expired at the end of January 2020.

During the period from February 1, 2020 through April 30, 2020, we subleased approximately 3,400 square feet of the Saginaw Space from Minerva Surgical, Inc.

During the period from February 1, 2020 through April 30, 2020, we subleased approximately 3,400 square feet at 101 Saginaw Drive from Minerva Surgical, Inc.

The sublease expired at the end of April 2020.

We entered into the initial lease with MetLife for a portion of this space in 2004 and the lease has been amended multiple times since then to adjust space and terms of the lease ("Lease").

In February 2019, we entered into an Eighth Amendment to the Lease ( the “Eighth Amendment”) with MetLife with respect to the Penobscot Space, the Building 2 Space and the 501 Chesapeake Space to extend the term of the Lease for additional periods.

Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space and the Building 2 Space has been extended through May 2027.

We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC Lease has been amended multiple times since then to adjust the leased space and terms of the Lease.

In February 2019, we entered into an Eighth Amendment to the Lease (the “Eighth Amendment”) with MetLife with respect to the Penobscot Space and the 501 Chesapeake Space to extend the term of the Lease for additional periods.

Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space has been extended through May 2027.

The lease term for the 501 Chesapeake Space has been extended to May 2029.

We have two consecutive options to extend the term of the lease for the Penobscot Space, the Building 2 Space and the 501 Chesapeake Space for an additional period of five years per option.

We have one (1) option to extend the term of the lease for the Penobscot Space for five ( 5 ) years, and one (1) separate option to extend the term of the lease for the 501 Chesapeake Space for five ( 5 ) years.

We are required to restore certain areas of the Redwood City facilities that we are renting to their original form.

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We review the estimated obligation each reporting period and make adjustments if our estimates change.

We recorded asset retirement obligations of $ 0.2 million as of September 30, 2020 and December 31, 2019, which are included in other liabilities on the unaudited condensed consolidated balance sheets.

Accretion expense related to our asset retirement obligations was no minal.

Pursuant to the terms of the Lease, we exercised our right to deliver a letter of credit in lieu of a security deposit.

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of September 30, 2020 and December 31, 2019, and are recorded as non-current restricted cash on the unaudited condensed consolidated balance sheets.

We recorded asset retirement obligations of $ 0.2 million as of March 31, 2021 and December 31, 2020, which are included in other liabilities on the unaudited condensed consolidated balance sheets.

Accretion expense related to our asset retirement obligations was no minal in the three months ended March 31, 2021 and 2020.

Pursuant to the terms of the RWC Lease, we exercised our right to deliver a letter of credit in lieu of a security deposit.

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of March 31, 2021 and December 31, 2020, and are recorded as non-current restricted cash on the unaudited condensed consolidated balance sheets.

Finance Leases

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The effective term of the three-year lease was from May 2017 and expired in April 2020.

Lease Costs and other information

Lease related costs were as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

Finance lease costs:

Amortization of right-of-use assets $ 27 $ 54 $ 126 $ 163

Interest on lease obligations — 2 1 8

Finance lease costs 27 56 127 171

Lease and other information

Lease costs, amounts included in measurement of lease obligations and other information related to non-cancellable operating leases and finance leases were as follows (in thousands):

Three months ended March 31,

Finance lease amortization of right-of-use assets $ 26 $ 54

Operating lease cost 1,032 1,068

Short-term lease cost (1)

Short-term lease costs (1)

Sublease income — ( 55 )

Total lease cost (2)

$ 1,058 $ 1,098

(1) Short-term lease costs on leases with terms of over one month and less than one year.

Other information related to non-cancellable finance leases and operating leases as of September 30, 2020 was as follows:

(2) The Company had no variable lease costs.

Other information:

Operating Leases

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Weighted-average discount rate 6.6 %

Cash paid for amounts included in the measurement of lease obligations was as follows (in thousands):

Nine months ended September 30,

Three months ended March 31,

Operating cash flows from operating leases $ 1,042 $ 354

Operating cash flows from finance leases $ — $ 9

Financing cash flows from finance leases $ — $ 51

As of September 30, 2020, our maturity analysis of annual undiscounted cash flows of the non-cancellable finance and operating leases are as follows (in thousands):

As of March 31, 2021, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):

Years ending December 31, Operating Leases

2021 (remaining 9 months) $ 3,156

2025 and thereafter 13,494

Thereafter 8,627

Total minimum lease payments 30,251

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Lease obligations $ 24,319

Future Lease Commitment

In the first quarter of 2021, we entered into a lease agreement with ARE-San Francisco No.

63, LLC (“ARE”) to lease a portion of a facility comprising approximately 36,593 rentable square feet in San Carlos, California to serve as additional office and research and development laboratory space (the “San Carlos Space”).

We expect to commence occupancy of the San Carlos Space in November 2021 once tenant improvements are substantially completed by ARE in accordance with the construction plan.

The budget provides a net tenant improvement allowance of $ 6.3 million and an additional allowance of up to $ 2.7 million, which we expect to use.

ARE will have an enforceable right to payment by us in the form of equal monthly additional rent payments at a certain interest rate through the lease term for the additional allowance.

The terms include an initial annualized base rent of approximately $ 2.5 million, subject to scheduled 3 % annual rent increases, an annualized additional allowance payment of approximately $ 0.4 million, plus certain operating expenses.

The lease has a 10 -year term with one option to extend the term for an additional period of 5 years.

We have provided ARE with an approximately $0.5 million security deposit in the form of a letter of credit.

We have the right to sublease the facility, subject to landlord consent.

determined that the lease commencement date is in November 2021 at which point we will record a right of use asset and a corresponding lease liability.

An estimated maturity analysis of the annual undiscounted cash flows of the lease is as follows (in thousands):

Years ending December 31, Operating Lease

2021 (remaining 9 months) $ 34

2026 and thereafter 19,525

Total minimum lease payments $ 31,723

Other Commitments

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Development and manufacturing services agreements September 2019 2,374

Strategic Collaboration and License Agreement March 2020 520

Total other commitments $ 2,429

Credit Facility

In June 30, 2017, we entered into a credit facility (the “Credit Facility”) consisting of term loans (“Term Debt”) up to $ 10.0 million, and advances (“Advances”) under a revolving line of credit ("Revolving Line of Credit") up to $ 5.0 million with an accounts receivable borrowing base of 80 % of eligible accounts receivable.

At September 30, 2020 and December 31, 2019, we have not drawn from the Credit Facility.

In June 30, 2017, we entered into a credit facility (the “Credit Facility”) with Western Alliance Bank consisting of term loans (“Term Debt”) up to $ 10.0 million, and advances (“Advances”) under a revolving line of credit ("Revolving Line of Credit") up to $ 5.0 million with an accounts receivable borrowing base of 80 % of eligible accounts receivable.

As of March 31, 2021 and December 31, 2020, we have not drawn from the Credit Facility.

We may draw on the Term Debt and the Revolving Line of Credit at any time prior to October 1, 2021 and October 1, 2024, respectively.

On October 1, 2024 loans drawn under the Term Debt mature and the Revolving Line of Credit terminate.

Loans made under the Term Debt bear interest through maturity equal to the greater of (i) 3.75 % and (ii) the sum of (A) Index Rate (prime rate published in the Money Rates section of the Western Edition of The Wall Street Journal plus (B) 0.50 %.

Advances made under the Revolving Line of Credit bear interest at a variable annual rate equal to the equal to the greater of (i) 4.25 % and (ii) the sum of (A) the prime rate plus (B) 1.00 %.

Loans made under the Term Debt bear interest through maturity equal to the greater of (i) 3.75 % or (ii) the sum of (A) Index Rate (prime rate published in the Money Rates section of the Western Edition of The Wall Street Journal plus (B) 0.50 %.

Advances made under the Revolving Line of Credit bear interest at a variable annual rate equal to the equal to the greater of (i) 4.25 % or (ii) the sum of (A) the prime rate plus (B) 1.00 %.

Our obligations under the Credit Facility are secured by a lien on substantially all of our personal property other than our intellectual property.

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A failure to comply with these covenants could permit the lender to exercise remedies against us and the collateral securing the Credit Facility, including foreclosure of our properties securing the Credit Facilities and our cash.

At September 30, 2020, we were in compliance with the covenants for the Credit Facility.

As of March 31, 2021, we were in compliance with the covenants for the Credit Facility.

The Credit Facility allows for interest-only payments on the Term Debt through November 1, 2022.

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There were no accruals for expenses related to indemnification issues for any periods presented.

Impact of COVID-19

We are subject to risks and uncertainties as a result of the current COVID-19 pandemic.

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the U.S.

economy and other economies worldwide.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and may not be accurately predicted, including the duration and severity of the pandemic and the extent and severity of the impact on our customers, new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide.

However, we are dependent on our manufacturing and logistics partners and consequently, disruptions in operations of our partners and customers may affect our ability to supply enzymes to our customers.

In the U.S., the impact of COVID-19, including governmental orders ("Orders") governing the operation of businesses during the pandemic, caused the temporary closure of our Redwood City, California facilities and has disrupted our R&D operations.

R&D operations for several projects were temporarily suspended from mid-March 2020 through the end of April in accordance with these Orders.

In May 2020, we initiated limited R&D operations and have gradually ramped up operations such that we are currently utilizing the majority of our normal R&D capacity.

Additionally, we have resumed small scale manufacturing at our Redwood City pilot plant in May 2020.

As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

Related Party

Related Party Transactions

Molecular Assemblies, Inc.

In June 2020, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc (“MAI”) pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

In connection with the transaction, our chief executive officer, John Nicols, also joined MAI’s board of directors.

Based on these services, we are eligible to earn additional Series A preferred stock of MAI contingent on the achievement of certain results and milestones.

MAI will combine its advanced chemistries with our enzymes to drive the process to commercialization.

Under the MAI Agreement and its associated SOW, we will engage in research and development activities to engineer DNA polymerase enzymes for the enzymatic synthesis of DNA and will receive monthly fees in the form of shares of Series A preferred stock in MAI.

Such non-monetary payments will be earned over ten to thirteen months and issued thirty days in arrears after each calendar quarter-end.

We are also eligible to receive amounts for bonuses, targets and milestones on achievement of timeline and project goals specified in the SOW.

Payments for bonuses, targets and milestones on achievement of timeline and project goals are to be issued thirty days after the Company provides notification of completion.

We did not receive any shares of MAI's Series A preferred stock based on services provided in the nine months ended September 30, 2020.

Under the MAI Agreement, we will have the right to use and sell the engineered enzymes to third parties for any purpose other than for the synthesis of native DNA.

Under the MAI Agreement, we would make a $ 0.5 million payment to MAI on meeting a milestone of $ 5.0 million in aggregate commercial sales by the Company to third parties of the engineered enzymes or any product incorporating or derived from the engineered enzymes for any purpose other than the synthesis of native DNA.

In addition, we and MAI have agreed pursuant to the MAI Agreement to certain terms to be contained within the CESA in the event that the CESA becomes executed in the future.

Those include:

(a) that MAI would receive an exclusive license to use the DNA polymerase enzymes engineering by us under the MAI Agreement in the synthesis of native DNA and a non-exclusive license to use these enzymes for research and development on the synthesis of non-native DNA, and (b) that we would become the exclusive manufacturer of these enzymes for MAI, its affiliates and licensees.

We recognized $ 0.5 million in research and development revenue in the three and nine months ended September 30, 2020 from transactions with MAI.

At September 30, 2020, we had $ 0.5 million of financial assets due from MAI.

Payment for the services was subsequently received in the form of additional Series A preferred stock of MAI in October.

In June 2020, we entered into a Stock Purchase Agreement with MAI pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

In connection with the transaction, John Nicols, our President and Chief Executive Officer, also joined MAI’s board of directors.

Concurrently with our initial equity investment, we entered into the MAI Agreement with MAI, pursuant to which we are performing services utilizing our CodeEvolver ® protein engineering platform technology to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A preferred stock.

We recognized $ 0.1 million and nil in research and development revenue from transactions with MAI in the three months ended March 31, 2021 and 2020, respectively.

We received 1,428,342 shares and nil of MAI's Series A preferred stock from research and development services we provided to MAI in the three months ended March 31, 2021 and 2020, respectively.

We have 3,729,563 shares of MAI's Series A preferred stock from the inception to date.

The carrying value of our investment in MAI Series A preferred stock was $ 2.4 million and $ 1.5 million at March 31, 2021 and December 31, 2020, respectively.

We had nil and $ 0.5 million in contract asset due from MAI for services rendered as of March 31, 2021 and December 31, 2020, respectively.

Payment for the services rendered was subsequently received in the form of additional MAI Series A preferred stock in the subsequent quarter.

AstraZeneca PLC

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We sold biocatalyst products to AstraZeneca PLC and its controlled purchasing agents and contract manufacturers.

We recognized $ 0.1 million of revenue in 2020 through the date of Ms.

Cheng’s departure from our board of directors.

We recognized $ 0.2 million and $ 0.6 million of revenue from transactions with AstraZeneca in the three and nine months ended September 30, 2019, respectively.

At September 30, 2020 and December 31, 2019, we had no receivables from AstraZeneca.

We recognized $ 0.1 million of revenue from transactions with AstraZeneca and its controlled purchasing agents and contract manufacturers for the three months ended March 31, 2020 and through the date of Ms.

Cheng’s departure from our board of director.

As of March 31, 2021 and December 31, 2020, we had nominal and no receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers from related party transactions, respectively.

Segment, Geographical and Other Revenue Information

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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.

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.

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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

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

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 March 31, 2021 Three months ended March 31, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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( 7,728 ) ( 5,727 )

Depreciation and amortization ( 1,526 ) ( 1,273 )

Unallocated depreciation and amortization ( 685 ) ( 492 )

Loss before income taxes $ ( 9,066 ) $ ( 7,647 )

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(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,

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,

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

Three months ended March 31,

Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total

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Percentage of Total Revenues for the

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Customer A 28 % 24 %

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Customer E 14 % *

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

* 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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Customer A 41 % 32 %

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Customer D 11 % 13 %

Customer F 12 % *

Customer G 11 % *

* Percentage was less than 10%

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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

Three Months Ended March 31,

Americas $ 4,929 $ 5,225

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

Long-lived assets September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

United States $ 31,248 $ 31,176

Identifiable goodwill was as follows (in thousands):

As of September 30, 2020 and December 31, 2019

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

As of March 31, 2021 and December 31, 2020

Performance Enzymes Novel Biotherapeutics Total

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Allowance for Credit Losses

An analysis of the allowance for credit losses is as follows (in thousands):

Three and nine

September 30, 2020

Beginning Balance January 1, 2020 $ 34

Current period provision 40

Write-offs charged against the allowance —

Recoveries of amounts previously written off —

Ending Balance September 30, 2020 $ 74

The following tables below summarizes accounts receivable by aging category (in thousands):

September 30, 2020

31-60 Days 61-90 Days 91 days and over Total over 31 days Current Total balance

The following table summarizes the financial assets allowance for credit losses (in thousands):

Three months ended March 31,

Allowance for credit losses $ 74 34

The following tables summarize accounts receivable by aging category (in thousands):

March 31, 2021

Current 31-60 Days 61-90 Days 91 Days and over Total balance

Accounts receivable $ 11,329 $ 35 $ — $ 4 $ 11,368

December 31, 2020

31-60 Days 61-90 Days 91 days and over Total over 31 days Current Total balance

Current 31-60 Days 61-90 Days 91 Days and over Total balance

Accounts receivable $ 13,172 $ 688 $ 7 $ 27 $ 13,894

Subsequent Event

In April 2021, we purchased an additional 1.0 million shares of MAI's Series A preferred stock for $ 0.6 million.

For additional information, Note 5, " Investments in Non-Marketable Securities" and Note 11, " Related Party Transactions."

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements