Equity Method Investments

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

In July 2019, the Company and Bayer CropScience LP (“Bayer LP”) formed Oerth Bio, a joint venture to research, develop and commercialize PROTAC targeted protein degraders for applications in the field of agriculture. The Company and Bayer LP each held an initial ownership interest in Oerth Bio of 50%. A 15% ownership interest of Oerth Bio was reserved for the future grants of incentive units to employees and service providers and, as a result, the Company's ownership interest totaled 46.0% and 47.7% as of March 31, 2023 and 2022, respectively, as a result of vested incentive units.

In connection with the preparation of the Company's consolidated financial statements for the year ended December 31, 2022, the Company identified a prior period error related to the accounting of its investment in Oerth Bio in 2019. Previously, the Company disclosed that revenue of $24.7 million was deferred and would be recognized if and when Oerth Bio recognized revenue associated with the license. The Company has determined that the consideration received for the amounts associated with the deferred revenue should have been constrained, because at the time Bayer LP had contributed only a portion of its full cash commitment to Oerth Bio, and Bayer LP had the right to all the cash contributed, but not yet spent, upon liquidation of Oerth Bio. The constrained revenue should have been recognized upon both cash being contributed by Bayer LP and the related cash spent by Oerth Bio on research and development activities. As such, for each period presented, the revenue recognized is accompanied by corresponding equity method losses of the same amount.

The Company evaluated the error and determined that the related impact did not materially misstate the previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2022. Although the Company concluded that the error was not material to its previously issued unaudited condensed consolidated financial statements, the Company has determined it is appropriate to adjust its previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2022 to correct the error and improve comparability.

The following illustrates the effect of the correction of the immaterial error for the period presented. There was no impact to the balance sheets, net loss per common share, statements of cash flows or changes in stockholders’ equity.


	Three Months Ended March 31, 2022
(dollars in millions, except per share amounts)	as previously reported		adjustments		as adjusted
Revenue	$	24.2	$	2.3	$	26.5
Loss from operations	$	(60.0)	$	2.3	$	(57.7)
Loss from equity method investment	$	—	$	(2.3)	$	(2.3)
Net loss	$	(63.4)	$	—	$	(63.4)
Net loss per common share - basic and diluted	$	(1.20)	$	—	$	(1.20)
Comprehensive loss	$	77.5	$	—	$	77.5

Net loss of Oerth Bio for the three months ended March 31, 2023 and 2022 totaled $2.4 million and $4.9 million, respectively. The Company recognized equity method losses of $1.1 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and 2022, the Company’s carrying value of the investment was zero.

The Company also provides Oerth Bio with compensated research, development and administrative services through a separate agreement. The services rendered by the Company during the three months ended March 31, 2023 and 2022 were immaterial.