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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 10-Q
________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 000-30171
________________________________________________
SANGAMO THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________
Delaware68-0359556
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
  
7000 Marina Blvd., Brisbane, California, 94005
(Address of principal executive offices) (Zip Code)
(510) 970-6000
(Registrant’s telephone number, including area code)
________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSGMONasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes        No   ☒
As of August 3, 2020, 140,988,008 shares of the issuer’s common stock, par value $0.01 per share, were outstanding.



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INDEX
SANGAMO THERAPEUTICS, INC.
Unless otherwise indicated or the context suggests otherwise, references in this Quarterly Report on Form 10-Q, or Quarterly Report, to “Sangamo,” “the Company,” “we,” “us,” and “our” refer to Sangamo Therapeutics, Inc. and our subsidiaries, including Sangamo Therapeutics France S.A.S. (formerly TxCell S.A.) and Sangamo Therapeutics UK Ltd.
Any third-party trade names, trademarks and service marks appearing in this Quarterly Report are the property of their respective holders.
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Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this report are forward-looking with respect to our operations, research, development and commercialization activities, clinical trials, operating results and financial condition. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements about:
our strategy;
anticipated product candidate development and potential commercialization of any resulting products;
the initiation, scope, rate of progress, enrollment, anticipated results and timing of our preclinical studies and clinical trials and those of our collaborators or strategic partners;
the therapeutic and commercial potential of, technologies used by us in our product candidates, including our zinc finger protein, or ZFP, technology platform, zinc finger nucleases, or ZFNs, and ZFP transcription factors, or ZFP-TFs;
the expected benefits of the acquisition of Sangamo Therapeutics France S.A.S., or Sangamo France;
our ability to establish and maintain collaborations and strategic partnerships and realize the expected benefits of such arrangements;
anticipated revenues from existing and new collaborations and the timing thereof;
our estimates regarding the impact of the evolving COVID-19 pandemic on our business and operations and the business and operations of our collaborators, including clinical trials and manufacturing, and our ability to manage such impacts;
our research and development and other expenses;
our ability to obtain adequate preclinical and clinical supplies of our product candidates from current and potential new suppliers and manufacturers;
the ability of Sangamo and our collaborators and strategic partners to obtain and maintain regulatory approvals for product candidates;
our ability to comply with, and the impact of, regulatory requirements, obligations and restrictions on our business and operations;
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, including our ability to obtain rights to the gene transfer technologies required to develop and commercialize our product candidates;
our estimates regarding the sufficiency of our cash resources and our expenses, capital requirements and need for additional financing, and our ability to obtain additional financing;
our ability to manage the growth of our business;
our projected operating and financial performance;
our operational and legal risks; and
our plans, objectives, expectations and intentions and any other statements that are not historical facts.
In some cases, you can identify forward-looking statements by terms such as: “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should” and “will” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q.
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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
June 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents$467,443  $80,428  
Marketable securities197,410  282,046  
Interest receivable534  682  
Accounts receivable5,618  36,909  
Prepaid expenses and other current assets8,395  5,408  
Total current assets679,400  405,473  
Marketable securities, non-current  21,832  
Property and equipment, net33,907  29,926  
Intangible assets53,219  53,156  
Goodwill39,318  39,273  
Operating lease right-of-use assets73,501  77,289  
Other non-current assets13,814  9,067  
Non-current restricted cash1,500  1,500  
Total assets$894,659  $637,516  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities$19,221  $17,556  
Accrued compensation and employee benefits13,332  13,605  
Deferred revenues61,389  38,711  
Total current liabilities93,942  69,872  
Deferred revenues, non-current237,644  81,432  
Long-term portion of lease liabilities39,234  41,192  
Deferred income tax6,578  6,570  
Other non-current liabilities6,055  5,711  
Total liabilities383,453  204,777  
Commitments and contingencies
Stockholders' equity:
Preferred stock    
Common stock1,410  1,160  
Additional paid-in capital1,247,527  1,090,828  
Accumulated deficit(735,827) (656,985) 
Accumulated other comprehensive loss(1,653) (2,449) 
Total Sangamo Therapeutics, Inc. stockholders' equity511,457  432,554  
Non-controlling interest(251) 185  
Total stockholders' equity511,206  432,739  
Total liabilities and stockholders' equity$894,659  $637,516  
See accompanying Notes to Condensed Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Revenues$21,553  $17,548  $34,629  $25,619  
Operating expenses:
Research and development41,523  36,455  83,002  71,305  
General and administrative17,927  14,597  34,046  31,715  
Total operating expenses59,450  51,052  117,048  103,020  
Loss from operations(37,897) (33,504) (82,419) (77,401) 
Interest and other income, net1,932  3,148  3,480  4,842  
Net loss(35,965) (30,356) (78,939) (72,559) 
Net loss attributable to non-controlling interest(36) (72) (97) (125) 
Net loss attributable to Sangamo Therapeutics, Inc. stockholders$(35,929) $(30,284) $(78,842) $(72,434) 
Basic and diluted net loss per share attributable to Sangamo
   Therapeutics, Inc. stockholders
$(0.26) $(0.26) $(0.62) $(0.67) 
Shares used in computing basic and diluted net loss per share
attributable to Sangamo Therapeutics, Inc. stockholders
138,977  114,382  127,519  108,360  
See accompanying Notes to Condensed Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited; in thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net loss$(35,965) $(30,356) $(78,939) $(72,559) 
Foreign currency translation adjustment1,783  1,442  150  (62) 
Change in unrealized gain on available-for-sale securities392  484  646  737  
Comprehensive loss(33,790) (28,430) (78,143) (71,884) 
Comprehensive loss attributable to non-controlling interest(36) (72) (97) (125) 
Comprehensive loss attributable to Sangamo Therapeutics, Inc.$(33,754) $(28,358) $(78,046) $(71,759) 
See accompanying Notes to Condensed Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in thousands, except share amounts)

Three months ended June 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interest
Total
Stockholders'
Equity
SharesAmount
Balances at March 31, 2020116,278,553  $1,163  $1,096,854  $(699,898) $(3,828) $124  $394,415  
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax
103,262  1  442  —  —  —  443  
Issuance of common stock under
employee stock purchase plan
171,305  2  1,185  —  —  —  1,187  
Issuance of common stock in
connection with the Biogen
collaboration agreement, net of
issuance costs
24,420,157  244  142,282  —  —  —  142,526  
Stock-based compensation—  —  6,764  —  —  —  6,764  
Acquisition of additional shares of
Sangamo France
—  —  —  —  —  (339) (339) 
Foreign currency translation adjustment
—  —  —  —  1,783  —  1,783  
Net unrealized gain on marketable securities
—  —  —  —  392  —  392  
Net loss
—  —  —  (35,929) —  (36) (35,965) 
Balances at June 30, 2020140,973,277  $1,410  $1,247,527  $(735,827) $(1,653) $(251) $511,206  

Six months ended June 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interest
Total
Stockholders'
Equity
SharesAmount
Balance at December 31, 2019115,972,708  $1,160  $1,090,828  $(656,985) $(2,449) $185  $432,739  
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax
409,107  4  848  —  —  852  
Issuance of common stock under
employee stock purchase plan
171,305  2  1,185  —  —  —  1,187  
Issuance of common stock in
connection with the Biogen
collaboration agreement, net of
issuance costs
24,420,157  244  142,282  —  —  —  142,526  
Acquisition of additional shares of
Sangamo France
—  —  —  —  (339) (339) 
Stock-based compensation—  —  12,384  —  —  12,384  
Foreign currency translation adjustment
—  —  —  —  150  —  150  
Net unrealized gain on marketable securities
—  —  —  —  646  —  646  
Net loss
—  —  —  (78,842) —  (97) (78,939) 
Balances at June 30, 2020140,973,277  $1,410  $1,247,527  $(735,827) $(1,653) $(251) $511,206  
See accompanying Notes to Condensed Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in thousands, except share amounts)
Three months ended June 30, 2019
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interest
Total
Stockholders'
Equity
SharesAmount
Balance at March 31, 2019102,328,752  $1,023  $934,112  $(603,949) $(2,691) $686  $329,181  
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax
492,635  5  2,439  —  —  —  2,444  
Issuance of common stock under employee stock purchase plan131,709  1  1,137  —  —  —  1,138  
Issuance of common stock under public offering, net of issuance costs12,650,000  127  136,439  —  —  —  136,566  
Issuance costs related to public offering—  —  (18) —  —  —  (18) 
Stock-based compensation—  —  4,867  —  —  —  4,867  
Foreign currency translation adjustment
—  —  —  —  1,442  —  1,442  
Net unrealized gain on marketable securities
—  —  —  —  484  —  484  
Net loss
—  —  —  (30,284) —  (72) (30,356) 
Balances at June 30, 2019115,603,096  $1,156  $1,078,976  $(634,233) $(765) $614  $445,748  

Six months ended June 30, 2019
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interest
Total
Stockholders'
Equity
SharesAmount
Balances at December 31, 2018102,187,471  $1,022  $929,632  $(562,696) $(1,440) $739  $367,257  
Cumulative-effect adjustment of ASC Topic 842 on January 1, 2019
—  —  —  897  —  —  897  
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax
633,916  6  2,654  —  —  —  2,660  
Issuance of common stock under employee stock purchase plan131,709  1  1,137  —  —  —  1,138  
Issuance of common stock under public offering, net of issuance costs12,650,000  127  136,439  —  —  —  136,566  
Issuance costs related to Sangamo France Acquisition—  —  (276) —  —  —  (276) 
Stock-based compensation—  —  9,390  —  —  —  9,390  
Foreign currency translation adjustment
—  —  —  —  (62) —  (62) 
Net unrealized gain on marketable securities
—  —  —  —  737  —  737  
Net loss
—  —  —  (72,434) —  (125) (72,559) 
Balances at June 30, 2019115,603,096  $1,156  $1,078,976  $(634,233) $(765) $614  $445,748  
See accompanying Notes to Condensed Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months Ended
June 30,
20202019
Operating Activities:
Net loss$(78,939) $(72,559) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization2,639  1,583  
Amortization of discount on marketable securities(1,146) (2,455) 
Amortization and other changes in right-of-use assets3,788  1,923  
Gain on free shares(48) (551) 
Stock-based compensation12,384  9,390  
Net loss on lease termination  218  
Other  11  
Net changes in operating assets and liabilities:
Interest receivable148  (391) 
Accounts receivable31,291  (7,422) 
Prepaid expenses and other assets(7,763) (5,449) 
Accounts payable and accrued liabilities1,559  1,811  
Accrued compensation and employee benefits(248) (764) 
Deferred revenues178,890  (10,821) 
Long-term portion of lease liabilities(1,797) (563) 
Other non-current liabilities345  1,327  
Net cash provided by (used in) operating activities141,103  (84,712) 
Investing Activities:
Purchases of marketable securities(43,580) (244,306) 
Maturities of marketable securities151,839  226,884  
Purchases of property and equipment(6,694) (9,760) 
Purchase of additional shares of Sangamo France(237)   
Net cash provided by (used in) investing activities101,328  (27,182) 
Financing Activities:
Proceeds from public offering of common stock, net of issuance costs  136,308  
Proceeds from issuance of common stock in connection with the Biogen collaboration agreement, net of issuance costs142,526    
Taxes paid related to net share settlement of equity awards(455) (296) 
Proceeds from exercise of stock options and restricted stock units1,307  4,094  
  Proceeds from issuance of common stock under employee stock purchase plan1,187    
Net cash provided by financing activities144,565  140,106  
Effects of changes in foreign exchange rates19  592  
Net increase in cash, cash equivalents, and restricted cash387,015  28,804  
Cash, cash equivalents, and restricted cash, beginning of period81,928  143,918  
Cash, cash equivalents, and restricted cash, end of period$468,943  $172,722  
Supplemental disclosure of non-cash activities:
Property and equipment included in unpaid liabilities$1,977  $1,679  
Right-of-use assets obtained in exchange for lease obligations$  $29,671  
See accompanying Notes to Condensed Consolidated Financial Statements.

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SANGAMO THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(Unaudited)
NOTE 1—ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Overview
Sangamo Therapeutics, Inc. (“Sangamo” or “the Company”) was incorporated in the State of Delaware in June 1995. Sangamo is a clinical stage biotechnology company focused on translating ground-breaking science into genomic medicines with the potential to transform patients’ lives using the Company's platform technologies in gene therapy, ex vivo gene-edited cell therapy, in vivo genome editing and in vivo genome regulation.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The Condensed Consolidated Balance Sheet data at December 31, 2019 was derived from the audited Consolidated Financial Statements included in Sangamo’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) as filed with the SEC on February 28, 2020.
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements. For consolidated entities where the Company owns or are exposed to less than 100% of the economics, the Company records net loss attributable to non-controlling interests on the Company's Condensed Consolidated Statements of Operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.
The accompanying Condensed Consolidated Financial Statements and related financial information should be read together with the audited Consolidated Financial Statements and footnotes for the year ended December 31, 2019, included in the 2019 Annual Report.
Going Concern
Sangamo is currently working on a number of long-term development projects that will involve experimental technology. The projects may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company plans to finance operations with available cash resources, collaboration funds, research grants and from the issuance of equity or debt securities. Sangamo believes that its available cash, cash equivalents and marketable securities as of June 30, 2020, and expected revenues from collaborations, strategic partnerships and research grants, will be adequate to fund its operations at least through the next 12 months from the date the financial statements are issued. Sangamo may require additional financial resources to complete the development and commercialization of its products including zinc finger protein (“ZFP”) therapeutic products. Additional capital may not be available on terms acceptable to the Company, or at all. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, the Company’s business and ability to advance its product candidate pipeline would be harmed. Furthermore, any sales of additional equity securities may result in dilution to the Company’s stockholders, and any debt financing may include covenants that restrict the Company’s business.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of these Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying notes. On an ongoing basis, management evaluates its estimates including critical accounting policies or estimates related to revenue recognition, clinical trial accruals, fair value of assets and liabilities, including from acquisitions, and stock-based compensation. Estimates are based on historical experience and on various other market specific and other relevant assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
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In March 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the collaboration agreement with Sanofi Genzyme (“Sanofi”) as a result of a decision made by the joint steering committee of Sanofi and Sangamo to increase the project scope and related project cost, which resulted in a decrease in the measure of proportional cumulative performance. In March 2020, the Company also recorded an adjustment to revenue related to a change in estimate in connection with the hemophilia A collaboration agreement with Pfizer Inc. (“Pfizer”). This adjustment was a direct result of the decision to decrease the project scope and the corresponding costs after the successful investigational new drug (“IND”) transfer of the SB-525 product candidate to Pfizer, both of which resulted in an increase in the measure of proportional cumulative performance.
In June 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the C9ORF72 research collaboration and license agreement with Pfizer. This adjustment was a direct result of the decision to decrease the project scope and the corresponding costs due to advancement of the program, which resulted in an increase in the measure of proportional cumulative performance.
The Pfizer-related adjustment in June 2020 increased revenue by $3.0 million, decreased net loss by $3.0 million and decreased the Company’s basic net loss per share by $0.02 for the three months ended June 30, 2020.
The Pfizer and Sanofi-related adjustments in March and June 2020 increased revenue by $3.1 million, decreased net loss by $3.1 million and decreased the Company’s basic net loss per share by $0.02 for the six months ended June 30, 2020.
Revenue Recognition
The Company accounts for its revenues pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s contract revenues are derived from collaboration agreements including licensing arrangements and research activity grants. Research and licensing agreements typically include upfront signing or license fees, cost reimbursements for research services, minimum sublicense fees, milestone payments and royalties on future licensee’s product sales. The Company has agreements with both fixed and variable consideration. Non-refundable upfront fees and funding of research and development activities are considered fixed, while milestone payments are generally identified as variable consideration. Sangamo’s research grants are typically multi-year agreements and provide for the reimbursement of qualified expenses for research and development as defined under the terms of the grant agreement. Revenues under research grant agreements are generally recognized when the related qualified research expenses are incurred. Deferred revenue primarily represents the portion of research or license payments received but not earned.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The Company’s performance obligations include license rights, development services and services associated with regulatory submission and approval processes. Revenues from research services earned under collaboration agreements are generally recognized as revenue as the related services are provided. Revenues from non-refundable upfront fees are recognized over time either by measuring progress towards satisfaction of the relevant performance obligation, using the input method (i.e. cumulative actual costs incurred relative to total estimated costs) or on a straight-line basis when a performance obligation is expected to be satisfied evenly over a period of time (or when the entity has a stand-ready obligation). Significant management judgment is required to determine the level of effort required under an arrangement, and the period over which the Company expects to complete its performance obligations under the arrangement, which may include total internal personnel costs and external costs to be incurred as well as, in certain cases, the estimated stand-ready obligation period. Changes in these estimates can have a material effect on revenue recognized. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. The estimated period of performance and project costs, such as personnel and manufacturing cost, are reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverables.
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As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Related costs and expenses under these arrangements have historically approximated the revenues recognized.
Revenues from major collaboration agreements and research activity grants as a percentage of total revenues were as follows:
Three Months Ended June 30,Six Months Ended June 30,