Sale of Business to Veracyte (Notes)

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Sale of Business to Veracyte

Sale of Business to Veracyte

In December 2019, the Company entered into a License and Asset Purchase Agreement (“LAPA”) and Service and Supply Agreements (“SSAs”), with Veracyte, Inc. (“Veracyte”). Pursuant to the LAPA, the Company completed a license of intellectual property and a sale of certain assets relating to the Company’s nCounter FLEX platform for use in clinical diagnostic applications, including Prosigna distribution rights to Veracyte. Additionally, the Company provided Veracyte a worldwide exclusive license to market and sell clinical diagnostic tests developed for the Company’s nCounter FLEX platform, including worldwide rights to Prosigna. Veracyte also acquired certain intellectual property rights from the Company relating to Prosigna and the Company’s proprietary LymphMark assay.

Pursuant to the terms of the LAPA, Veracyte paid the Company total consideration of $50.0 million, consisting of $40.0 million in cash paid in connection with the entry into the LAPA, and 376,732 shares of Veracyte common stock valued at $10.0 million, which shares were issued in connection with the entry into the LAPA. Additionally, the Company may receive future potential milestone payments of up to $10.0 million in the aggregate, to be paid upon the launch of additional clinical diagnostic tests by Veracyte for the Company’s nCounter FLEX platform. In addition, Veracyte has agreed to assume the obligation to pay specified royalties under the Company’s existing agreement with Bioclassifier, LLC, which was assigned to Veracyte in connection with the transaction. Pursuant to the LAPA, Veracyte offered certain of the Company’s employees employment with Veracyte.

Pursuant to the SSAs, the Company agreed to supply to Veracyte nCounter FLEX systems, and also agreed to manufacture and supply Prosigna kits, LymphMark kits and any additional clinical diagnostic tests that Veracyte may develop in the future for nCounter, for a period of at least four years subsequent to the transaction date. Pursuant to these SSAs, Veracyte will pay the designated transfer prices for nCounter FLEX systems, Prosigna kits, LymphMark kits and any other nCounter-based diagnostic tests developed by Veracyte.

The sale of assets and license pursuant to the LAPA was considered the disposition of a business and, accordingly, the Company has included a gain on sale of business, net of $48.9 million as non-operating income in the consolidated statements of operations as of December 31, 2019, net of transaction costs of $1.1 million. The disposition did not represent a strategic shift that will have a major effect on the Company’s operations and financial results. The cash consideration received at closing, as well as any future cash payments received pursuant to the future milestones will be recognized as an investing cash in-flow in the consolidated statements of cash flows. Substantially all of the intangible assets sold had no book value for the Company. The Company has not recognized any gain related to the future milestone payments as these are considered contingent consideration for which a gain will be recognized in the future when the milestones are achieved and the gain is realizable. The Company has accounted for the Veracyte common stock in accordance with ASC 321, Investments - Equity Securities.  At December 31, 2019, the Company had included the shares of Veracyte common stock, at fair value, within short-term investments. Subsequently, and during the first half of 2020, the Company disposed of all shares of Veracyte common stock received as part of the initial transaction consideration. All gains or losses related to the disposition of these securities has been included within other income (loss) in the consolidated statements of operations. The $40.0 million of cash received on the closing date was included in cash and cash equivalents on the consoli