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Revenue and Geographic Area
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue and Geographic Area

3. Revenue and Geographic Area

Disaggregation of Revenue by Product Type and Geographic Area

The following tables present the Company's revenue for the three and nine months ended September 30, 2024 and 2023, respectively, based on product type and the geographic location of customers’ facilities (in thousands):

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Product revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Instruments

 

$

5,586

 

 

$

9,002

 

 

$

19,959

 

 

$

26,512

 

Consumables

 

 

14,007

 

 

 

9,709

 

 

 

45,389

 

 

 

31,302

 

Total product revenue

 

 

19,593

 

 

 

18,711

 

 

 

65,348

 

 

 

57,814

 

Service revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Lab services

 

 

18,247

 

 

 

114

 

 

 

40,780

 

 

 

564

 

Field services

 

 

6,191

 

 

 

6,452

 

 

 

18,738

 

 

 

18,704

 

Total service revenue

 

 

24,438

 

 

 

6,566

 

 

 

59,518

 

 

 

19,268

 

Product and service revenue

 

 

44,031

 

 

 

25,277

 

 

 

124,866

 

 

 

77,082

 

Collaboration and other revenue

 

 

938

 

 

 

90

 

 

 

2,848

 

 

 

1,070

 

Total revenue

 

$

44,969

 

 

$

25,367

 

 

$

127,714

 

 

$

78,152

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Americas

 

$

23,751

 

 

$

10,865

 

 

$

68,241

 

 

$

32,975

 

Europe, Middle East and Africa (EMEA)

 

 

16,057

 

 

 

8,162

 

 

 

39,108

 

 

 

27,435

 

Asia-Pacific

 

 

5,161

 

 

 

6,340

 

 

 

20,365

 

 

 

17,742

 

Total revenue

 

$

44,969

 

 

$

25,367

 

 

$

127,714

 

 

$

78,152

 

Illumina Cambridge, Ltd.

In connection with the Merger, the Company assumed a multi-year arrangement with Illumina Cambridge, Ltd. ("Illumina"), originally entered into by SomaLogic and Illumina in December 2021 (the "Illumina Agreement"), to jointly develop and commercialize co-branded kits that will combine Illumina's Next Generation Sequencing ("NGS") technology with SomaScan® technology (the "Co-Branded Kits"). Pursuant to the Illumina Agreement, SomaLogic received a non-refundable upfront payment of $30.0 million in January 2022. Subsequent to executing the Illumina Agreement, Illumina paid an additional $0.5 million to purchase the equipment, supplies and training necessary to run the SomaScan® assay at their facilities, representing a modification to the Illumina Agreement. As of the Closing Date, the Company determined that the transaction price of the Illumina Agreement was $30.5 million. Subsequent to commercialization of the Co-Branded Kits, the Company is entitled to receive $124.5 million of minimum guaranteed royalties through the term of the Illumina Agreement. No royalties were included in the Illumina transaction price as probability of commercialization had not been achieved as of the Closing Date.

Subsequent to commercialization of the Co-Branded Kits, Illumina has the right to purchase SOMAmer reagents below SSP through the remaining term of the Illumina Agreement, which will continue for approximately 8 years following commercialization. Illumina's option to purchase SOMAmer reagents below SSP for this period represents a significant material right (the "Material Right"). As of the Closing Date, the Company allocated $30.4 million of the Illumina transaction price to the Material Right, which will be recognized as revenue as Illumina purchases SOMAmer reagents post commercialization.

During the first quarter of 2024, the Company determined that commercialization of the Co-Branded Kits is probable due to the launch of an early-access program, and adjusted the transaction price to include $127.9 million of royalties expected to be received from 2025 through 2032. The Company allocated $0.4 million of the adjusted transaction price to satisfy performance obligations, and recognized that amount as revenue on a cumulative catch-up basis. The total transaction price of the Illumina Agreement as adjusted is $158.4 million. Substantially all of the transaction price is allocated to the Material Right, which the Company expects to recognize as revenue over an 8-year period from 2025 through 2032.

NEC Corporation

Additionally, in connection with the Merger, the Company assumed a joint development and commercialization agreement (the "JDCA") with NEC Solution Innovators, Ltd. ("NEC"), originally entered into by SomaLogic and NEC in March 2020, to develop and commercialize SomaScan® services in Japan. The JDCA is within the scope of ASC 808 as both companies are active participants and are exposed to significant rewards and risks dependent on commercial failure or success, and is accounted for by analogy to ASC 606.

In connection with the Merger, the Company assumed certain contract liabilities and recorded $1.8 million of deferred revenue as of the Closing Date. Under the JDCA, the Company was entitled to receive $2.0 million in exchange for research and development services, which was received in April 2024. As of September 30, 2024, deferred revenue related to the JDCA was $1.5 million, which is expected to be fully recognized by March 31, 2025.

New England Biolabs, Inc.

Also in connection with the Merger, the Company assumed a non-exclusive licensing agreement with New England Biolabs, Inc. ("NEB"), originally entered into by SomaLogic and NEB in September 2022 (the "License Agreement"), whereby the Company provides a license to use certain proprietary information and know-how relating to SomaLogic's aptamer technology. Under the License Agreement, the Company is guaranteed fixed minimum royalties of $8.7 million to be received through September 2025. No revenue related to the guaranteed fixed minimum royalties will be recognized, as all revenue related to the receivable was recognized by SomaLogic prior to the Merger. Any revenue above the guaranteed fixed minimum royalties will be recognized in the period in which the subsequent sale or usage has occurred. As of September 30, 2024, royalties receivable related to this agreement were $8.2 million, including a current and non-current portion of $4.8 million and $3.4 million, respectively.

Unfulfilled Performance Obligations

A summary of the change in deferred revenue is as follows (in thousands):

 

 

 

NEC

 

 

Illumina

 

 

Other

 

 

Total

 

Deferred revenue at December 31, 2023

 

$

-

 

 

$

-

 

 

$

15,127

 

 

$

15,127

 

Deferred revenue assumed in connection with merger

 

 

1,773

 

 

 

30,418

 

 

 

1,998

 

 

 

34,189

 

Recognition of revenue from beginning or assumed deferred revenue balances

 

 

(1,247

)

 

 

(406

)

 

 

(10,899

)

 

 

(12,552

)

Revenue deferred during the period, net of revenue recognized

 

 

1,000

 

 

 

—

 

 

 

8,354

 

 

 

9,354

 

Deferred revenue at September 30, 2024

 

$

1,526

 

 

$

30,012

 

 

$

14,580

 

 

$

46,118

 

The Company expects to recognize revenue from unfulfilled performance obligations associated with service contracts that were partially completed as of September 30, 2024 in the following periods (in thousands):

 

Fiscal Year

 

Expected Revenue (1)

 

2024 remainder of the year

 

$

4,321

 

2025

 

 

9,002

 

2026

 

 

3,678

 

Thereafter

 

 

1,790

 

Total

 

$

18,791

 

 

(1)
Expected revenue includes both billed amounts included in deferred revenue and unbilled amounts that are not reflected in the Company’s condensed consolidated financial statements and are subject to change if the Company’s customers decide to cancel or modify their contracts. Purchase orders for instrument service contracts can generally be canceled before the service period begins.

The Company also has unsatisfied performance obligations for service contracts with an expected term of one year or less not included in the amounts above.