Acquisition of Bellwether Bio

In April 2019, the Company purchased of all of the outstanding shares of Bellwether Bio, Inc. (“Bellwether Bio”), a privately-held company developing a method for early blood-based cancer detection. The Company accounted for the acquisition as a business combination. The total consideration was $11.4 million, which consisted of i) $10.3 million in cash paid upon closing; and ii) future contingent consideration liability with a fair value of $1.1 million on the acquisition date. The contingent consideration is subject to the achievement of certain commercialization milestones with a maximum payout amount of $10.0 million. The Company will also pay additional earn-out consideration of up to $10.0 million subject to the achievement of certain commercialization milestones and the continued provision of services to the Company by certain former employees and consultants of Bellwether Bio. The contingent consideration and earn-out consideration may be paid, at the Company’s election, in cash or in the Company’s common stock. As of June 30, 2019, the Company did not believe the earn-out consideration is probable to be achieved, and therefore, did not record any compensation expense.

The excess purchase consideration over the fair value of assets acquired and liabilities assumed was recorded as goodwill. Goodwill is attributable to future revenue opportunities that we expect to achieve from leveraging Bellwether Bio’s existing license and IPR&D, as well as the assembled workforce. The valuation of the intangible assets acquired was determined using currently available information and reasonable assumptions. The purchase price allocation is preliminary as the Company is still in the process of collecting additional information for the valuation of intangible assets, contingent consideration and unrecognized tax benefits. The following table summarizes the preliminary allocation of the total consideration to the estimated fair values of assets acquired and liabilities assumed:



	Amount
	(unaudited)
	(in thousands)
Cash	$	521
Identified intangible assets	9,200
Goodwill	2,935
Net liabilities assumed	(1,235		)
Total	$	11,421

The following table presents details of the identified intangible assets acquired:



	Fair Value		Estimated Useful Life
	(in thousands)
Acquired license	$	5,100	10 years
Covenants not to compete	2,500		6 years
IPR&D	1,600		*
Total	$	9,200


*	IPR&D assets are not subject to amortization.

Acquisition-related contingent consideration is measured at fair value on a quarterly basis based on additional information as it becomes available, and change in estimated contingent consideration to be paid will be included in other income (expense), net in the consolidated statements of operations. The fair value of acquisition-related contingent consideration is estimated using a multiple-outcome discounted cash flow valuation technique. Contingent consideration is classified within Level 3 of the fair value hierarchy, as it is based on a probability that includes significant unobservable inputs. The significant unobservable inputs include a probability-weighted estimate of achievement of certain commercialization milestones, continued services from certain former employees and consultants, resulting contingent payments, and discount rate to present value the expected payments. A significant change in any of these input factors in isolation could have a material impact to fair value measurement. For the three months ended June 30, 2019, no change in estimated contingent consideration liability was recorded as the information available at period end is similar to those used to estimate the fair value of contingent consideration on the acquisition date. As of June 30, 2019, the acquisition-related contingent consideration liability of $1.1 million was recorded within other long-term liabilities on the condensed consolidated balance sheet.