Investment in variable interest entity

6 Months Ended

Mar. 31, 2022

Investment in variable interest entity

Investment in variable interest entity

Investment in variable interest entityOn November 1, 2021, the Company contributed certain assets and licensed certain intellectual property rights to the newly formed Revelar Biotherapeutics, Inc. (“Revelar”), an independently operated, new biotechnology company, to develop and commercialize an antibody, discovered and optimized by Twist Biopharma, a division of the Company, that neutralizes all known variants of concern of the SARS-CoV-2 virus in preclinical studies. The Company granted a license to Revelar for the exclusive development of an antibody lead along with a series of back up compounds for the potential treatment of SARS-CoV-2. The Company is eligible to receive success-based milestone payments totaling over $100.0 million for the achievement of key development, regulatory and commercial milestones, as well as mid-single digit royalties on any future net sales. The Company’s receipt of such payments, if any, will depend on Revelar’s ability to successfully develop and commercialize compounds, obtain and maintain necessary regulatory approvals, complete clinical site initiation and finalize clinical trial agreements, none of which can be assured. In addition, Revelar may license up to five additional antibody therapeutics over the next four years, each of which will be subject to additional upfront, milestone and royalty payments to the Company. The Company committed to invest up to $10.0 million in seed funding based on Revelar’s progress in the development of the lead antibody and the potential licensing of additional antibody therapeutics, of which the Company has invested $5.0 million in a simple agreement for future equity (“SAFE”) as of the date of these consolidated financial statements. In exchange for the assignment of certain contractual rights and the license to the antibody, and its back-up compounds, the Company received stock of Revelar amounting to an ownership percentage as of

the date of these financial statements of 49.80%, excluding shares and options reserved for future stock awards and further excluding shares that Revelar may issue to the Company upon conversion of its SAFEs.

The Company determined that Revelar is a VIE as the entity lacks sufficient equity to finance its activities without additional support. Additionally, the Company determined that it has (a) the power to direct the activities that significantly impact Revelar’s economic performance and (b) the obligation to absorb losses of, and the right to receive benefits from, Revelar that are potentially significant to Revelar. As a result, the Company is deemed to be the primary beneficiary of Revelar and is required to consolidate Revelar in accordance with ASC 810.

Revelar incurred a net loss of approximately $3.9 million and $7.0 million for the three and six months ended March 31, 2022, and the decrease in net assets was fully absorbed by the Company.

Total assets included on the consolidated balance sheet for Revelar as of March 31, 2022 were $6.5 million, primarily consisting of cash and cash equivalents. Total liabilities included on the consolidated balance sheet for Revelar as of December 31, 2021 were $6.0 million, primarily consisting of accounts payable and accrued expenses.

On February 3, 2022, the Company purchased an additional SAFE issued by Revelar for $2.5 million pursuant to the Asset License and Contract Assignment Agreement between the parties. In exchange for the SAFE, the Company obtained the right to receive shares of Revelar issued in a future preferred stock financing.

On April 6, 2022, the Company purchased an additional SAFE issued by Revelar for $2.5 million pursuant to the Asset License and Contract Assignment Agreement between the parties. In exchange for the SAFE, the Company obtained the right to receive shares of Revelar issued in a future preferred stock