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SEC Filings

10-Q
SERES THERAPEUTICS, INC. filed this Form 10-Q on 05/09/2018
Entire Document
 

performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.  The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments:  At the inception of each arrangement that includes developmental and regulatory milestone payments, the Company evaluates whether the achievement of each milestone specifically relates to the Company’s efforts to satisfy a performance obligation or transfer a distinct good or service within a performance obligation. If the achievement of a milestone is considered a direct result of the Company’s efforts to satisfy a performance obligation or transfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associate milestone value is allocated to that distinct good or service and revenue is recognized in the period in which the milestone is achieved. If the milestone payment is not specifically related to the Company’s effort to satisfy a performance obligation or transfer a distinct good or service, the Company evaluates the milestone to determine whether the milestone is considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price to be allocated.  At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall allocation.  Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).  

Transaction Price Allocated to Future Performance Obligations

Remaining performance obligations represents the transaction price of contracts for which work has not been performed (or has been partially performed) and excludes unexercised contract options.  As of March 31, 2018, the aggregate amount of the transaction price allocated to the remaining performance obligation was approximately $151,000.

Contract Balances from Contracts with Customers

The following table presents changes in the Company’s contract assets and contract liabilities during the three months ended March 31, 2018 and 2017 (in thousands):

 

 

 

Balance as of January 1, 2018

 

 

Additions

 

 

Deductions

 

 

Balance as of

March 31, 2018

 

Three months ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract assets

 

 

510

 

 

 

175

 

 

 

(510

)

 

 

175

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

123,783

 

 

 

175

 

 

 

(3,766

)

 

 

120,192

 

 

 

 

Balance as of January 1, 2017

 

 

Additions

 

 

Deductions

 

 

Balance as of

March 31, 2017

 

Three months ended March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract assets

 

 

306

 

 

 

 

 

 

(8

)

 

 

298

 

Contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

108,814

 

 

 

 

 

 

(3,015

)

 

 

105,799

 

 

During the three months ended March 31, 2018 and 2017, we recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Revenue recognized in the period from:

 

 

 

 

 

 

 

 

Amounts included in the contract liability at the beginning

   of the period

 

 

3,766

 

 

 

3,015

 

The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities on the consolidated balance sheets.

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