Zymergen Inc. (ZY) Q3 2021 Earnings Call Transcript

Zymergen Inc. (ZY)
Q3 2021 Earnings Call
Nov 03, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the Zymergen third quarter 2021 financial results conference call. [Operator instructions] I will now turn the call over to Mr. Mike Dulin. Please begin.

Mike Dulin -- Chief Operating Officer

Thank you all for joining. Earlier today, Zymergen released preliminary financial results for the quarter ended September 30, 2021. If you haven't received this news release, or if you'd like to be added to the company's distribution list, please send an email to [email protected]. Joining me today from Zymergen are Jay Flatley, acting chief executive officer and Ena Singh, chief financial officer.

Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the Federal Securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Zymergen issued today. For a more complete list and description, please see the risk factors section of the company's latest 10-Q and other filings with the Securities and Exchange Commission, including the when filed the Form 10-Q for this quarter.

Except as required by law; Zymergen disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 30, 2021. In addition, please note that the third quarter financial results discussed today are preliminary and estimated and are subject to the completion and finalization of Zymergen's financial and accounting closing procedures. With that, I would like to turn the call over to Jay.

Jay Flatley -- Acting Chief Executive Officer

Thanks, Mike. And thank you all for joining us this afternoon. On today's call, I'll begin with an update on our progress against the objectives we set in August. I'll then turn the call over to Ena for a more detailed review of our financials, including our preliminary third quarter results and our forecasted cash burn.

In addition to the summary of the work we've done to date, I'll share a high-level overview of our forward-looking portfolio. This will provide a general sense of our direction, but is not intended to provide full details as our work is ongoing. We expect to complete our strategic plan around year-end, and we'll be in a position to provide more detailed plans once that work is complete. In our business update in August, we committed to complete a number of key deliverables over the several subsequent quarters, including a full reexamination of the company's target markets confirming our past use or altering them if the data indicate a shift in market focus is appropriate, including exploring potential new markets.

A plan to reduce the company's burn rate to extend our operating runway, a deep dive into the process by which we prepare and launch products to be sure they are market-ready and can be easily integrated into our customers' workflows. A plan to strengthen our commercial team and ensure the reliability and robustness of both our sales pipeline and forecast processes. And lastly, a multiyear plan with clear milestones and goals that the company can be held accountable to achieving. Over the last 90 days, we've made significant progress toward these goals.

Working with top-tier consultants, we've done a deep dive on our market opportunities and our portfolio using a standardized process to assess our investments. This included overall market size, our addressable market, competitive profiles, product development costs, cost of goods of the ultimate product, cost of customer acquisition, time to market, margin profile and development risk. All the factors you'd expect to consider in building an optimized pipeline. We stopped work on a number of programs and promoted several others.

These changes allowed us to implement a reduction in force of approximately 220 positions across a variety of levels and functions. We believe these tough decisions, along with the reduction in related overhead spending will lower our burn rate sufficiently to operate to mid 2023 with the cash we have on hand. We've established a rigorous product development process to move products from concept to launch in a consistent and systematic way, which will ultimately help ensure greater confidence in product success. We've also restructured our commercial team with a more customer-centric orientation, integrating the formerly separate marketing function to drive a holistic lead to revenue process.

In addition, we have more clearly defined our sales operations function to increase discipline in how we engage customers. With our portfolio in cost reduction work largely in place, we've kicked off our process to develop a comprehensive strategic plan that maps the business through 2024. Let me now share some additional details. Our portfolio review indicated that we are working -- we were working on at least 30 different programs, far too many to adequately resource.

It was imperative that we narrow our focus to a smaller number that we believe capitalize on our strengths and provide clear commercial opportunities. That resulted in decisions to pause or eliminate several programs while promoting others to a higher level of investment. A critical highlight is the cancellation of two programs that were prominent in our public plans, Hyaline, known as ZYM102, and our direct-to-consumer insect repellent referred to as ZYM201. In the case of Hyaline films, we no longer have conviction in the market opportunity.

To be clear and contrary to many published reports, the product worked as designed, the underlying technology and science are sound. The technical issues that I discussed on our August call caused delays but were quickly resolved by our teams, and we're not a factor in our decision to halt the project. In fact, at the time we canceled the program, we have made tens of thousands of square meters of Hyaline. The issues we uncovered were commercial.

We look more closely at the foldable display market and the emerging data on the market segment that we targeted with Hyaline and other electronic films indicated a smaller near-term opportunity than we initially expected. As a result, we stopped work on our electronic films programs but are continuing work on our ZYM101 film in partnership with Sumitomo. We will also continue to explore and develop bio-based polyimides in several different form factors, which we expect will add value to potential future products, not just in electronics, but other markets as well. In the case of our insect repellent and other consumer care programs, our reviews show that the cost of customer acquisition with a direct-to-consumer model would have been prohibited for Zymergen.

While the product performance was satisfactory, it could not be produced and distributed at a price point competitive with the incumbent products. With this assessment, we've decided to park all our efforts in consumer care. We have, however, developed strong IP and technology around bioactives and remain open to potential future partnerships in clean consumer care. Turning now to the forward-looking portfolio.

We continue to see success with our work in agriculture, particularly with a flagship program on nitrogen fixation, where we're working with an important partner. We expect to have data later this year on the performance of our microbes in both corn and wheat field trials across over 50 sites in North America. We're also accelerating work on two programs in the healthcare market, one for development of key enzymes using vaccine production and a second in drug discovery. Our enzyme work is focused on improving both supply and performance for next-generation vaccines, and our team's deep enzymology experience is enabling us to quickly develop several enzymes for a potential use in vaccine manufacturing.

In drug discovery, the size and diversity of our metagenomic libraries provide the raw materials to discover molecules that can modulate important oncology and other validated targets. We believe we have a powerful methodology to discover and unlock the potential of millions of natural products that are currently considered unreachable using traditional drug discovery techniques. We expect to be in a position to share data on this program in the coming months. Additionally, we have programs that are in the early concept stage being evaluated for market size, product development costs, time to market, development risk and the other criteria that I described earlier.

In some cases, these programs may be funded to move into full development or they might be parked and protected for potential development in the future when resources are available to commit to them. Lastly, we've reorganized our research group around what we call leads and seeds. Leads are the potential drug targets that I just spoke of and seeds are the early exploratory ideas that, if viable, will be funded to fuel our future development pipeline. The key takeaway is that we focused our investments, restructured our development and research processes and now we're a pipeline of products that we believe capitalize on our capabilities and provide clear commercial opportunities.

As you would expect, these portfolio updates have resulted in a number of changes to our organization and leadership structures, which I'd like to take you through now. A key element to ensuring that we're set up for long-term success is to have the best possible leadership. We're laser-focused on ensuring that we have the right team to execute our product development and operation plans, efficiently bringing products to market and positioning Zymergen as a stronger company with a compelling operating plan. As I mentioned in our last call, we've added several key executives who have been instrumental in our recent work.

In addition, we've made some key changes to our structure that streamline our organization with a clear focus on accelerating product development and commercialization. Notably, we centralized our strategy, business development and portfolio management into a single organization to drive rigor in our product development process, combining groups that had previously been spread across the company. In addition to these changes, Jed Dean, one of Zymergen's co-founders, has decided to move on from the company after completing a smooth transition of his responsibilities to Subodh Deshmukh, who joined us in July. Jed's last day with us was October 31st.

We're all grateful for Jed's vision and his work in advancing the Zymergen mission and thank him for his many contributions. Before I turn the call over to Ena, I want to reemphasize the key point. The technology platform at Zymergen works as advertised. We believe we have the world's largest metagenomics library, a library which has potential applications in agriculture, healthcare and consumer care.

We've begun to explore these capabilities through partnerships in the agriculture space, and are excited to pursue further applications. Our proprietary early discovery and screening capabilities allow us to identify relevant biomolecules for a variety of use cases, such as novel therapeutics for challenging targets and agricultural applications. As an example, just last week, a paper was published in Nature Communications that highlighted the work we performed with Synlogic to improve their synthetic biotic medicine using our biosensor enabled enzyme engineering. We've continued to review our technology platform, external experts and scientists and remain confident in the capabilities of our platform.

With that, I'll turn the call now over to Ena for more details on our financials. Ena?

Ena Singh -- Chief Financial Officer

Thanks, Jay. I will now take you through our preliminary third quarter results and our forecasted cash burn. Total revenue for the third quarter of 2021 was $4.1 million, all relating to R&D service agreements and collaboration revenue. This represents a 27% increase over the same quarter in 2020 and was primarily driven by the timing of deliverables under fixed fee contracts and additional revenue recognized due to contract milestones.

Revenue was down compared to the prior quarter due to certain milestone payments in Q2 and the normal end of contract phases early in Q3. Total operating expenses for the third quarter of 2021 were $99.3 million, a 61% increase from $61.5 million in the third quarter of 2020. Operating expenses were driven by increased resources allocated to product development, expenses incurred post-acquisition of Lodo therapeutics, restructuring charges, as well as the costs associated with being a public company. Operating expenses decreased 4% from $103.5 million in the second quarter of 2021.

The decrease was driven by lower spending on programs as we evaluated our portfolio and the reversal of accrued performance bonuses from the first half of the year. This was offset by total restructuring charges of $21.2 million. In the third quarter of 2021, total operating expenses, excluding the $21.2 million of restructuring charges were $78.1 million. R&D expenses for the third quarter of 2021 was $39.1 million, up 80% from prior year, primarily related to work on Hyaline and our insect repellent ZYM0201, prior to our decision to discontinue those products, as well as personnel and consumables expenses related to our acquisition of Lodo therapeutics.

When compared to the prior quarter, R&D was down 22%, driven by the slowdown in program spending and the bonus accrual reversal. Sales and marketing expenses for the third quarter of 2021 were $4.0 million, down 9%, compared to $4.4 million in the third quarter of 2020 and down 50% compared to the second quarter of this year. The decrease quarter-on-quarter resulted from reductions in our marketing and public relations spending and the bonus accrual reversal. General and administrative expenses for the third quarter of 2021 were $17.9 million, compared to $14.4 million in the third quarter of 2020 and $23.7 million in the second quarter of this year.

Compared to the prior year, the 24% increase was driven by the cost of being a public company and real estate costs associated with the development of our new company headquarters. The 24% reduction compared to the prior quarter was related to the reversal of the bonus accrual and other adjustments. Net loss in the third quarter of 2021 was $98.2 million, compared to $61.8 million in the third quarter of 2020 and $100.8 million in the second quarter of 2021. The net loss of $98.2 million in the third quarter of 2021 included $21.2 million of restructuring charges related to our portfolio review in cost reduction work.

Offsetting this, Q3 benefited from the reversal of accrued performance bonuses by approximately $9.4 million. We ended the third quarter of 2021 with $496.2 million in cash and cash equivalents and $10.8 million in restricted cash. Looking ahead, we do not expect product revenue in 2021 and expect product revenue to be immaterial in 2022. Without visibility to near-term product revenue, one of our top priorities is to closely manage expenses.

In September and October, we implemented a workforce reduction and have since narrowed our focus to a smaller number of programs that capitalize on our capabilities and present clear commercial opportunities. Additionally, as part of the restructuring, we began a reduction in our cost structure with the goal of extending our cash runway. Third quarter restructuring activities resulted in total pre-tax charges of $21.2 million. These restructuring charges include $4.2 million related to our workforce reduction in September, $3.7 million due to contract terminations and contractual commitments, $11.2 million of fixed asset impairments and $2.2 million due to consulting fees related to our restructuring activities.

We expect expenses in Q4 to be roughly flat as our spending reductions will be offset by lack of the accrued bonus reversal, which took place in Q3. We expect to realize the full effect of our restructuring efforts in 2022. These activities began in the third quarter of 2021, and I expect it to be substantially completed by the end of the year. However, certain activities, such as lease restructuring may extend into the first quarter of 2022.

As a result, we believe that we have sufficient cash to fund operations to mid-2023. Subsequently to the end of the quarter, on October 20th, we entered into an amendment of our debt agreement with perceptive. As a part of the amendment, we paid $41 million, which included $35 million in principal and $6 million of accrued interest and prepayment premiums. We also modified the final maturity to June 30, 2022, and eliminated the minimum revenue covenant.

With that, I would like to turn the call back over to Jay for closing comments. Jay?

Jay Flatley -- Acting Chief Executive Officer

Thank you, Ena. I hope it's clear that over the last 90 days, we've made considerable progress on the commitments we made in August. At the same time, we realize that we have work ahead to accelerate revenue generation while rebuilding stakeholder confidence. Despite our near-term challenges, we remain focused on our strategy of pursuing continuous launches of breakthrough products and I'm proud of the work that our teams are doing across the organization.

We have a clear vision to partner with Nature to make superior products in the superior way. Our goals will remain ambitious and we're confident in the long-term prospects for the company. The overall TAM for our technology is enormous. We have a strong platform, to create novel products and the markets are hungry for a new generation of technology that will transform the way materials are manufactured.

I want to thank you all for your continued support and your patience as we work to strengthen our business and move forward toward a more successful future. With that, we'll now open it up to questions. Operator?

Questions & Answers:

Operator

[Operator instructions] The first question is from Derik De Bruin with Bank of America.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Thanks for taking my questions. I'm hoping that you can just give us some perspective as why investors should remain confident in the agriculture programs after you posted the rest of the pipeline? Is there something different about this market or the customers that you're talking team that we should be considering?

Jay Flatley -- Acting Chief Executive Officer

There's a couple of distinctions, one is that it's a, what we supply in the agricultural market is a microbe rather than a molecule, so the product itself is quite different. So, there is no scale up required of manufacturing a particular molecule. The second is that we're working through a partner on distribution and field testing. So, the actual customer interface is held by a very prominent company in this space.

And so, that responsibility is not really being executed by Zymergen. And I'd say the third factor is that we've already undergone field trials in a preliminary way and those results have been positive to date.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Wonderful. And then just one more from me. As you were previously kind of somewhat opposed to going into developing products for healthcare. And now it seems like you're developing enzymes to be used in vaccines.

Can you talk about the strategic rationale here? There may be more color on the end use of these enzymes?

Jay Flatley -- Acting Chief Executive Officer

I don't think the company was resistant to that market really in any way. It was just the fact that the two lead products happen to be in the material science and consumer care areas. In fact, historically, the company actually had some R&D partnerships in the healthcare space, which were successfully executed but we're ultimately completed. In the programs at least the drug discovery program that I mentioned is something the company has been working on for over a year.

And it really resulted from the realization of the power of the underlying metagenomic libraries that we had and our ability to use a novel methodology to determine unique drug targets in the natural product space. So, I wouldn't say the company in any way was adverse to this market. It's just that we've promoted those two programs initially, we still have many programs in the material science area in the pipeline.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

I appreciate it, thanks.

Operator

Your next question is from Tom Stevens with Cowen and Company.

Tom Stevens -- Cowen and Company -- Analyst

I want to ask a question on component of kind of how you approach the customer base now post Hyaline, I mean why would customer choose to work with Zymergen? And how can you define your value proposition in lot of the kind of pipeline changes and changed to your sales force?

Jay Flatley -- Acting Chief Executive Officer

I'm sorry that you were a little you were breaking up a little bit. Could you restate the question again.

Tom Stevens -- Cowen and Company -- Analyst

Sure. More on like why would customer choose to work with Zymergen now in a post Hyaline? And how are you redefining your value proposition when you going to customers? And why are the changes with Hyaline given the reduced sales force and all the changes you made?

Ena Singh -- Chief Financial Officer

Can I repeat the question, just to make sure we got it right, Tom. Are you asking why would customers choose to work with us? And what is our value proposition to them?

Tom Stevens -- Cowen and Company -- Analyst

Yeah. Exactly. Yeah.

Jay Flatley -- Acting Chief Executive Officer

Yeah, well we enter the products that we've talked about going to slightly different markets and the value proposition of each of those are somewhat different. Clearly, what we're doing a partnership with Sumitomo still address one aspect of the film market but there again, we have a strong partner who is responsible for both the customer contact in the manufacturing of the product. The value proposition there is that the Z1 material has a unique set of capabilities and we believe that that program should progress. What we're doing in the the enzyme space and the drug discovery space has very different value propositions.

In drug discovery, we're creating unique molecules to address particular targets. In the case of enzymes, we're going after an existing market, but a relatively new one that has requirements for improved performance and improved costs and improve supply. So, that of course in that market would be the value proposition. So, each market is somewhat different.

What happened in Hyaline was really a misjudgment of the rate of growth of the market in the degree of differentiation of the segments we are going after. And so, I think what we have in the pipeline now is distinctly different from the experience we have with Hyaline.

Tom Stevens -- Cowen and Company -- Analyst

And if I could brief follow up. I mean given that, how do you view your revenue ramp into '22 and '23? Is that kind of the same as it was in Q2? Or do you see something more in near term?

Jay Flatley -- Acting Chief Executive Officer

No, we haven't changed anything on our forward projections for the revenue ramp. As we complete our strategic plan, we'll probably lay that out a little more bit more clearly. But what we said, Ena reinforced in her comments is that we don't expect any material revenue in 2022.

Operator

Your next question is from Tycho Peterson with J.P. Morgan.

Unknown speaker

Hi, this is Rachel on for Tycho. Thanks for taking the questions. So, first as a follow-up to some of the earlier questions for vaccine enzymes. Can you just give us some color on your plans for the go-to-market strategy for that program? So, are you planning a partner or do you think they are bringing to market on your own?

Jay Flatley -- Acting Chief Executive Officer

Yes, this is very likely to be partnered. So, we are in discussions with potential partners there. We have nothing to report at this point in time, but the intent is to partner that program.

Unknown speaker

Great. And then on Intechra point, you talked about how you have some IP and bioreactives. And can you talk about have you started to have any conversations with clean consumer companies about potentially licensing or partnering on this?

Jay Flatley -- Acting Chief Executive Officer

We've had some inbounds in this area. And so, we're continuing to look at those but to be honest with you in the last 90 days, we've been pretty focused on sort of paring down the pipeline, getting focus, getting our product development process really stood up, executing well and focused on the products that we're going to create. Now that we're pretty much through that initial phase reducing the cash burn as well, we're in develop the strategic plan and as part of that work we should develop a licensing strategy and decide at that point whether we want to have a more proactive sort of outbound licensing strategy as opposed to merely reacting to inbound.

Unknown speaker

Understood. And then last question from me. Can you just give us an update on where the process is at for recruiting a permanent CEO? I assume that can take six to nine months. So, have you started bringing candidates?

Jay Flatley -- Acting Chief Executive Officer

Yes. So, we have not started the process yet and that's by choice. So, the decision that that I made, along with the board of directors is that we as priority one, one and two, make sure that we right size the company, got our processes fixed, got our development teams really focused on the products, the new products in the pipeline that we write a strategic plan that we all believe in, that has credibility and is defensible. And at that point, we believe we could credibly go recruit a world-class CEO.

Prior to that, I think it would be challenging to sit across the table to try to recruit someone without a plan that you had conviction in and so our intent is to begin working on the recruiting process early in 2022.

Unknown speaker

Great. That's all for me. Thank you.

Operator

Your next question is from Matt Sykes with Goldman Sachs.

Unknown speaker

Hey guys, this is Dave on for Matt. Really glad to hear about the healthcare market focus, it sounds like the drug development could be a really great fit for you guys. Could you give us any more details about the work you're doing there?

Jay Flatley -- Acting Chief Executive Officer

Not a lot of additional detail at this point in time. I mean we expect to do that. As I mentioned in the script over the next couple of months as we sort of increase the validation level of what we're doing and begin to engage third parties in discussions about the work. What I can tell you is that the preliminary work we've done internally looks really solid and so we're very excited about the program, and I'd ask you to stay tuned for more information to come.

Unknown speaker

Got it. And with the strategic review, has that affected how you think about potential partnerships? And maybe, are you pretty more inclined now to to work with project -- with partners on projects instead of taking 100% product risk?

Jay Flatley -- Acting Chief Executive Officer

Yeah. I think it has influenced us to some extent. And the way it has is that previously, the company was focused not only on creating the product, but also manufacturing it and distributing it, in many cases, not in every case. And I think both because of cost constraints and of reasons of time to market, we decided to pull that part of the strategy in and really focus on creating the products and doing more partnering, both for the manufacturing and distribution side of this.

And so that both saves money because we don't have to build a direct sales force as we would have had to do in consumer care, as an example, or to build things like GMP manufacturing, which we might have had to do in other product areas as well. And so, we can save the money there, which is a large investment and a time delay to market. And so, we continue to develop the products largely ourselves, sometimes in partnership, but much of the manufacturing and distribution will be through partners in the near term.

Unknown speaker

Great. Thank you.

Operator

Your next question is from John Sourbeer with UBS.

John Sourbeer -- UBS -- Analyst

Thank you for taking my questions. I guess just one on the consumer care programs. You highlighted that some of the costs were prohibitive on the direct-to-consumer model. Can you just maybe elaborate a little bit there on what specific areas you saw there on the costs that you highlighted?

Jay Flatley -- Acting Chief Executive Officer

Sure. So, the history of those programs were that the company a few years back was thinking that it may want to partner those programs and -- with a big consumer company, and those partnerships didn't reach any conclusion. And so, the decision then was made to go direct-to-consumer. And as we analyze this recently over the last 30 days, particularly with only a single product in the portfolio in the near term, which would have been our insect repellent.

The cost of hiring a direct sales force supporting that and building the infrastructure was quite prohibitive. So, if you look at the profitability profile over the next three years, there was no chance that that product was going to be profitable. And so for that reason, we've parked it, and it doesn't mean that we're abandoning the consumer care market because we continue to believe that the technology has great applicability there. And we can create products in that space.

It's a question of us being -- having a financial footing where we can either take the products directly to market ourselves and afford to make that investment or in the alternative, we develop a partner that we either license the technology to or jointly develop and distribute the products.

John Sourbeer -- UBS -- Analyst

Got it. And I guess just another one just a little bit on the cash burn and cash on hand through 2023. I think in the last update, there were -- was talk is still launching Hyaline in '22 and maybe having some revenues in '23. Any additional color you can provide on that? Does that assume any meaningful revenues in 2023? Or just any way to think about follow-on product launches there?

Jay Flatley -- Acting Chief Executive Officer

Yeah. I think we've been pretty clear on Hyaline that we've really canceled that program now. And so we should expect no revenue from Hyaline coming from the company at any point in time. Now, there's theoretically a chance that if the market changed in some dramatic way that the company could reevaluate in the future.

And as I alluded to in my remarks, the underlying material that's used in Hyaline has potential other applications. And so, we're exploring those. So it's -- the R&D work that went into creating that novel material could have future value. But at this point, I'd say it's unlikely it's going to be in the films market.

John Sourbeer -- UBS -- Analyst

I guess I was more trying to get at, when you say the cash burn through 2023, does that assume product launches in revenue generation in '23, is there any revenue in that model?

Jay Flatley -- Acting Chief Executive Officer

Yeah. As I mentioned earlier, we haven't talked about '23 yet. We've really given some clarity around what we expect in '22. As we complete the plan here over the next couple of months, we'll get greater visibility on the relative ramp of the products that we now have in the pipeline and solidify our internal forecasts, probably not just '23, but all the way through '24 and we'll decide at that point what external guidance we give.

Ena Singh -- Chief Financial Officer

But we still expect product revenue to be immaterial, right, in 2022, including in the end of 2022.

John Sourbeer -- UBS -- Analyst

Thanks for taking my questions.

Jay Flatley -- Acting Chief Executive Officer

Our pleasure.

Operator

[Operator instructions] Your next question is from Matt Larew with William Blair.

Unknown speaker

Hi, this is actually Max on for Matt. I wanted to follow-up on some of your commentary around partnering. And I know you kind of shut down the idea on the previous business update call, but are you considering shifting toward developing more of a horizontal platform? I mean, it seems like you're kind of pathway there in terms of licensing out the molecules or products after they've been created. But would it not make more sense to kind of work with customers on the front end instead of trying to partner out after the molecule products have already been created?

Jay Flatley -- Acting Chief Executive Officer

Well, I mean, the company has had a history of doing R&D agreements, where there was some joint development of products in the early revenues that you've seen on our income statement were generated largely from those types of R&D partnerships. The judgment of the company back a couple of years ago and consistent with our judgment now is that the long-term economic value is going to be substantially greater by developing products ourselves in using our proprietary technology rather than relying on third parties to develop those products on our platform. So, it's a distinct way of going about this market, but one that we think in the long run, will deliver greater value.

Unknown speaker

Got it. That's very helpful, thank you. And then, I just wanted to dig in a little bit more on ZYM0101 and your decision to keep that program alive. I mean, was that decision based -- just based on your partnership with Sumitomo? Or is there something unique about that market or that product that gave you more comfort in your ability to commercialize it down the line?

Jay Flatley -- Acting Chief Executive Officer

There were two factors and at least two factors, let me say that. Clearly, the fact that it was partnered was a huge part of this so, that we didn't have the expense of distributing the product or manufacturing it. So much of the risk then of the program is taken on by Sumitomo in partnership. So, that was a very important factor.

The second factor is that if this material is successful as we hope, it has very broad applicability across all types of devices. And so it has a more general applicability than perhaps Hyaline did. And so that's the second distinguishing factor.

Unknown speaker

Got it. Thank you.

Operator

At this time, there are no further questions.

Jay Flatley -- Acting Chief Executive Officer

Great. Thank you all, and we will see you and speak to you in a couple of months.

Operator

[Operator signoff]

Duration: 38 minutes

Call participants:

Mike Dulin -- Chief Operating Officer

Jay Flatley -- Acting Chief Executive Officer

Ena Singh -- Chief Financial Officer

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Tom Stevens -- Cowen and Company -- Analyst

Unknown speaker

John Sourbeer -- UBS -- Analyst

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