United States securities and exchange commission logo
February 22, 2021
Josh Hoffman
Chief Executive Officer
Zymergen Inc.
5980 Horton Street, Suite 105
Emeryville, CA 94608
Re: Zymergen Inc.
Draft Registration
Statement on Form S-1
Submitted January
25, 2021
File No. 377-04089
Dear Mr. Hoffman:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted January 25, 2021
Prospectus Summary
Overview, page 1
1. Please balance the
disclosure in the prospectus summary by addressing and appropriately
highlighting challenges
that you face. In this regard, at a minimum, please address the
following items in the
summary:
your plans for
growing revenue and achieving profitability;
the extent to
which those plans are impacted by the use of non-bio produced
molecules;
Josh Hoffman
FirstName LastNameJosh Hoffman
Zymergen Inc.
Comapany22,
February NameZymergen
2021 Inc.
February
Page 2 22, 2021 Page 2
FirstName LastName
your current financial condition, including the covenant
defaults under your credit
facility and the going concern opinion issued by your auditor;
and
your outstanding debt.
Our biofacturing platform discovers biomolecules and engineers microbes that
can produce those
biomolecules at an industrial scale., page 2
2. You disclose that "DuPont spent nine years and around $400 million in
the late 1960s and
early 1970s developing Kevlar, a heat-resistant, strong fiber used in
bullet-proof vests,
tires, and many other applications." Please remove this reference from
your filing,
including where you discuss the same in your business description, as
it does not appear to
be a relevant comparison.
We have breakthrough products in the market or in development., page 2
3. We note your disclosure that "[i]n order to accelerate
commercialization and meet
customer demand, we launched Hyaline with a non-bio produced molecule
sourced from a
third party," and you have a process in place to convert to a
bio-produced molecule in
2022. Please briefly describe the process you have in place to convert
to this molecule.
Please also amend your discussion of the ten other products in
development to clarify
whether you will rely on third party suppliers to supply any molecules
to produce these
products, and convert to bio-produced molecules at a later date, as
you have done with
your Hyaline product.
4. We note your reference to market data prepared by a third party.
Please identify this third
party, and tell us whether you commissioned the preparation of this
market data. If so,
please file as an exhibit the consent required by Rule 436 and Section
7 of the Securities
Act, or tell us why you do not believe you are required to do so. As a
related matter,
please clarify whether the market data prepared by a third party and
the "consumer
survey" relate to the same data, and briefly describe the parameters
of the survey. Finally,
please disclose the market data and/or survey results that support
your statements about
your market opportunity.
Products and Pipeline, page 5
5. Please add here the product pipeline table appearing on page 61.
Risk Factors
Risks Related to Our Business
"Our existing credit facility provides our secured lender with liens . . .",
page 27
6. You disclose that "[d]uring the course of 2020, we sought and obtained
various default
waivers under this agreement due to our inability to comply with
certain of our
Josh Hoffman
Zymergen Inc.
February 22, 2021
Page 3
covenants." Please amend your risk factor disclosure to clarify
whether you are currently
in compliance with the covenants in your credit facility, and whether
you expect to seek
default waivers in the future. Please also briefly describe here the
covenants for which
you obtained waivers.
"We are party to a mitigation agreement with the Committee on Foreign
Investment . . .", page
38
7. Please disclose, if material, the estimated costs to you in
implementing and complying
with the standards imposed by the CFIUS agreement, if estimable.
Please also briefly
explain why your business is required to operate pursuant to an
agreement with CFIUS,
and whether you expect this agreement to remain in effect
indefinitely.
"Our ability to use our net operating loss carryforwards . . .", page 39
8. Please amend your filing to clarify whether this offering qualifies as
an "ownership
change," for purposes of the relevant tax law.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 59
9. We note your statements here and throughout your filing that "[o]ur
biofacturing platform
allows us to bring more products to market faster," and "[b]ased on
the development
timelines of our first products, we expect to create our materials in
about half the time and
1/10 th of the cost of what traditional chemicals and materials
companies can deliver,
which allows us to address a wide array of commercial applications."
However, you have
yet to bring a product to market with a bio-produced molecule, as your
Hyaline product
currently contains a non-bio produced molecule sourced from a third
party, and you
disclose on page 61 that, "[s]ubstantially all of our revenue to date
has been generated
from R&D service contracts and collaboration arrangements aimed at
developing, testing
and validating our biofacturing platform." Therefore, where you talk
about your business
model and your ability to create your materials and bring products to
market, please
clearly disclose that you currently and historically generate your
revenue from R&D
service contracts, and not from the sale of your products. Make
conforming changes
throughout your filing, including to your prospectus summary, where
you should clearly
disclose your current sources of revenue.
The Evolution of Our Business, page 60
10. We note the agreements referenced in this section. Please amend your
disclosure to
clarify the duration and expiration of each agreement, and, where
applicable, whether you
FirstName LastNameJosh Hoffman
expect to enter into similar agreements in the future. Please also file
the agreements
Comapany NameZymergen
referenced Inc. as exhibits to your filing, or tell us why
you do not believe you
in this section
are22,
February required to do3so. See Item 601(b)(10) of Regulation S-K.
2021 Page
FirstName LastName
Josh Hoffman
FirstName LastNameJosh Hoffman
Zymergen Inc.
Comapany22,
February NameZymergen
2021 Inc.
February
Page 4 22, 2021 Page 4
FirstName LastName
Our Product and Product Pipeline, page 61
11. Please annotate the row for the Hyaline product to indicate that it is
in the market with a
non-bio produced molecule sourced from a third party. In addition,
please delete the final
row of the table as it lacks specificity.
Our International Operations, page 63
12. We note your disclosure on page 22 that you "currently operate [y]our
business through
various international subsidiaries," and "[y]our collaborators
currently conduct business
and market our products outside of the United States." We also note
your disclosure here
that "[r]evenue from Japan and South Korea is approximately 17% and
6%, respectively,
of [y]our total revenue in the year ended December 31, 2019." Please
clarify the
geographic market from which you derive the remainder of your revenue.
13. Please amend your disclosure to provide a timeline for the
establishment of your business
operations hubs in both Asia and Europe.
Results of Operations for the Years Ended December 31, 2019 and December 31,
2020, page 67
14. Please amend your disclosure to discuss, where relevant, the impact of
COVID-19 on your
results of operations for the periods presented.
Critical Accounting Policies
Revenue Recognition
Research and Development Service Agreement Revenue, page 72
15. In addition to the variable consideration mentioned, please tell us
and disclose the material
judgments, assumptions and uncertainties associated with recognizing
your revenue, and
the factors subject to estimation and variability. For factors that
are variable, disclose
those most subject to change and the related sensitivity to change,
along with the factors
that cause changes. Refer to Section V of Release No. 33-8350,
"Interpretation:
Commission Guidance Regarding Management's Discussion and Analysis of
Financial
Condition and Results of Operations," available on our public website.
Business
Overview
Industry Background, page 80
16. Please amend your filing to provide sources for the industry data
cited throughout this
section, and for your statements about synthetic biology. Please also
provide sources for
your statements, as appropriate, where you discuss your initial target
verticals, beginning
on page 95.
Josh Hoffman
FirstName LastNameJosh Hoffman
Zymergen Inc.
Comapany22,
February NameZymergen
2021 Inc.
February
Page 5 22, 2021 Page 5
FirstName LastName
Our Solutions, page 81
17. We note your disclosures here and in the prospectus summary that
"[u]sing our
biofacturing platform, we estimate the timelines and costs of bringing
our products to
market to be roughly five years and $50 million;" and "we plan to
develop and
commercialize product breakthroughs in about half the time and 1/10
the of the cost of
traditional processes." Please tell us the assumptions upon which you
are relying to
support these claims, and why you believe they are reliable. In doing
so, please address
the variables among the various different markets you believe you can
address. We may
have additional comments based on your response. Alternatively, please
remove these
statements from your filing.
Strengths, page 82
18. Considering your disclosure elsewhere that you currently generate
substantially all of your
revenue from your R&D service contracts and collaboration
arrangements, please amend
your description of business to clearly describe your current business
model, along with
intended future business model, including the role of your
biofacturing platform in your
research and development activities related to your R&D contracts and
arrangements.
Intellectual Property
Collaborative Research and Development, page 104
19. We note your disclosure that "[o]ur collaboration agreements also
typically include one or
more of the following: payments for the R&D services to be performed,
milestone
payments to be received upon the achievement of the milestone events
defined in the
agreements, revenue sharing and royalty payments upon the
commercialization of the
molecules in which we share in the customer s profits." In an
appropriate place in your
filing, please briefly describe the specific terms of your
collaboration agreement with
Sumitomo Chemical. Please also file this agreement as an exhibit to
your registration
statement, or tell us why you do not believe you are required to do
so. See Item
601(b)(10) of Regulation S-K.
Government Regulations, page 105
20. This section of your filing discloses the future regulations that may
affect the
development, production, and sales of your products. Please amend this
disclosure to
clearly describe the regulations that apply to your current
operations, including your
activities related to your R&D service contracts.
Certain Relationships and Related Transactions
Loan Agreement, page 127
21. Please file the relevant agreements discussed in this section as
exhibits to your registration
statement, or tell us why you are not required to do so. See Item
601(b)(10) of Regulation
Josh Hoffman
Zymergen Inc.
February 22, 2021
Page 6
S-K.
Description of Capital Stock
Preferred Stock, page 129
22. Please describe the terms of the convertible preferred stock that is
currently outstanding,
including voting rights, conversion terms, etc., or tell us why you are
not required to
include this disclosure in your filing.
Financial Statements for the year ended December 31, 2019
Summary of Accounting Policies, page F-8
23. Please tell us if there are any circumstances under which you would not
receive
consideration for efforts expended or that would preclude you from
recognizing revenue
for any efforts expended during or at the end of the contract term. In
regard to this, tell us
if there are any circumstances under which the performance obligation may
not be
satisfied at the end of the contract term that would impact the amount of
revenue
recognized.
Please explain to us how the contract term for revenue recognition
purposes is affected
based on the customer s rights to terminate the contract for
convenience and the impact on
the amount of revenue recognized or recognizable.
You disclose you measure progress using the input method of time elapsed.
Please
explain if this refers to time elapsed relative to the total term of the
contract or some other
basis. If based on the total term of the contract, tell us how the term
of the contract is
determined. Additionally, tell us if contract term completion is based on
the passage of
time or some other basis, and if some other basis, what that basis is.
You may contact Nasreen Mohammed at (202) 551-3773 or Doug Jones at
(202) 551-
3309 if you have questions regarding comments on the financial statements and
related
matters. Please contact Katherine Bagley at (202) 551-2545 or Dietrich King at
(202) 551-
8071 with any other questions.
Sincerely,
FirstName LastNameJosh Hoffman
Division of
Corporation Finance
Comapany NameZymergen Inc.
Office of Trade &
Services
February 22, 2021 Page 6
cc: Sarah Solum
FirstName LastName