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10-K
SERES THERAPEUTICS, INC. filed this Form 10-K on 03/06/2019
Entire Document
 

 

SERES THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

 

 

constrained. During the year ended December 31, 2016, the Company received $10,000 from NHS in connection with the initiation of the Phase 1b study for SER-262 in CDI. During the year ended December 31, 2017, the Company received $20,000 from NHS in connection with the initiation of the Phase 3 study for SER-109.  Therefore, as of January 1, 2018, the aggregate amount of the transaction price allocated to the remaining performance obligation of the License Agreement was approximately $150,000.  

During the year ended December 31, 2018, the Company received $40,000 from NHS in connection with the initiation of the Phase 2b study for SER-287.  In the third quarter of 2018, the Company increased the transaction price by $20,000 associated with the Phase 2 milestone for SER-287.  The Company estimated the $20,000 of variable consideration by using the most likely amount method which best predicts the amount of consideration to which the Company will be entitled. The Company included the $20,000 in the transaction price because it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

In the fourth quarter of 2018, the Company entered into a letter agreement with NHS which modified the License Agreement to address the current clinical plans for SER-287. As a result of this modification, the Company and NHS agreed that the $20,000 milestone payment due to the Company from NHS following the initiation of a Phase 3 study for SER-287 would now be due to the Company upon initiation of the SER-287 Phase 2b study. The Letter Agreement constituted a contract modification under ASC 606. The Company accounted for the contract modification through a cumulative catch-up adjustment because the contract modification did not add any additional goods or services and the remaining goods and services are not distinct. The SER-287 Phase 2b study was initiated in December 2018 and the Company included the $20,000 in the transaction price as of December 31, 2018. The transaction price as of December 31, 2018 was approximately $190,000.

During the twelve months ended December 31, 2018, using the cost-to-cost method, which best depicts the transfer of control to the customer, the Company recognized $26,917 of Collaboration revenue – related party. Included in the revenue recognized during the twelve months ended December 31, 2018 were cumulative catch-up adjustments of approximately $5,020 and $5,517, related to including the $20,000 Phase 2 milestone for SER-287 in the transaction in the third quarter of 2018 and the $20,000 Phase 3 milestone for SER-287 in the transaction price in the fourth quarter of 2018.

For the twelve months ended December 31, 2017, the Company recognized $32,100 of Collaboration revenue – related party under ASC 605 which comprised (i) a $20,000 milestone for the initiation of the Phase 3 study for SER-109, recognized in accordance with the milestone method of revenue recognition (ASC 605-28) and (ii) $12,100 of revenue from the upfront license fee. For the twelve months ended December 31, 2016, the Company recognized $21,766 of Collaboration revenue – related party under ASC 605 which comprised (i) a $10,000 milestone for the initiation of the Phase 3 study for SER-109, recorded in accordance with the milestone method of revenue recognition (ASC 605-28) and (ii) $11,766 of revenue from the upfront license fee.

As of December 31, 2018 and 2017, there was $137,259, and $96,926 of deferred revenue related to the unsatisfied portion of the performance obligation under the License Agreement. As of December 31, 2018, the deferred revenue is classified as current or non-current in the consolidated balance sheets based on the Company’s estimate of revenue that will be recognized within the next twelve months which is determined by the cost-to-cost method which measures the extent of progress towards completion based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the performance obligation.  All costs associated with the License Agreement are recorded in research and development expense in the consolidated statements of operations and comprehensive loss.

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