Business acquisition

6 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

On December 1, 2021, the Company acquired all of the outstanding stock of AbX Biologics, Inc. (“Abveris”), a privately-held company providing in vivo antibody discovery services. Abveris offers animal-based antibody discovery and screening services for its customers using the Berkeley Lights Beacon Platform and its proprietary DiversimAb and DivergimAb mouse models, which the Company can humanize using its antibody optimization solution.

The acquisition date fair value of the consideration transferred for Abveris was $102.6 million, consisting of cash totaling $9.5 million, 759,601 shares of the Company’s common stock valued at $66.1 million based on the Company’s closing stock price on December 1, 2021, employee stock awards issued to certain Abveris employees valued at $6.4 million, contingent consideration of $8.5 million, holdbacks of $12.8 million, and an estimated net working capital adjustment of $0.7 million.

The contingent consideration is subject to the attainment of the calendar year 2022 revenue target. The contingent consideration becomes payable after December 31, 2022 and will be settled in a combination of cash and up to 334,939 shares of the Company’s common stock. The acquisition date fair value of the contingent consideration was based on forecasted revenue of Abveris relative to the 2022 revenue target as well as the Company’s stock price as of December 1, 2021.

The Company maintains an indemnity and adjustment holdback for the purposes of providing security against any adjustment to the amounts at closing. The indemnity holdback period extends for 18 months from the anniversary of the closing date. The indemnity holdback will be settled by transferring up to 128,351 shares of the Company’s stock, 15,304 options of the Company’s common stock and an immaterial amount of cash. The fair value of the indemnity holdback was $12.5 million as of the acquisition date. The adjustment holdback will be settled by transferring up to 3,416 shares of the Company’s stock, 408 options of the Company’s common stock and an immaterial amount of cash. The holdback adjustment liability was $0.3 million as of the acquisition date.

Additionally, a working capital adjustment of $0.7 million decreased the total purchase price. The purchase price continues to be subject to adjustment for working capital adjustments as allowed under terms of the agreement.

Post-combination compensation expense excluded from the purchase price includes employee stock awards issued to certain Abveris employees valued at $41.0 million. This includes awards valued at $17.7 million which vest over a two years service period following the acquisition date and awards valued at $3.2 million with no future vesting requirements, which were deemed accelerated by the Company at the acquisition date and expensed within the three months ended December 31, 2021. Finally, post-combination expense includes awards valued at approximately $20.1 million which vest based on achievement of the calendar year 2022 revenue target and continuing employment through the payout date, and for certain employees, additional continuing employment through the two years anniversary of the acquisition date.

This acquisition was accounted for using the acquisition method of accounting in accordance with the business combination guidance in ASC 805. Under the acquisition accounting method, the total estimated purchase price was allocated to the identifiable assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed has been recorded as goodwill. Management’s estimate of the fair values of the acquired intangible assets at December 1, 2021 is preliminary and subject to change and is based on established and accepted valuation techniques performed with the assistance of third-party valuation specialists. Additional information, which existed as of the acquisition date but is yet unknown to the Company, may become known to the Company during the remainder of the measurement period, which will not exceed twelve months from the acquisition date. Changes to amounts will be recorded as adjustments to the provisional amounts recognized as of the acquisition date and may result in a corresponding adjustment to goodwill in the period in which new information becomes available. The goodwill that arose from the acquisition consists of synergies expected from integrating Abveris into the Company’s operations and customer base. The goodwill recognized is not expected to be deductible for income tax purposes.

The following table summarizes the preliminary fair value amounts of the assets acquired and liabilities assumed as of the acquisition date, as well as the purchase consideration:


(in thousands)	December 1, 2021
Assets acquired
Cash and cash equivalents	$	1,306
Accounts receivable	2,309
Other current assets and prepaid expenses	1,654
Property, plant and equipment	1,078
Other non-current assets	2,970
Intangible assets	46,500
Liabilities assumed
Current liabilities	3,549
Non-current liabilities	846
Deferred tax liability	10,545
Fair value of assets acquired and liabilities assumed	$	40,877
Goodwill	61,768
Total purchase price	$	102,645
Consideration transferred
Cash	$	9,467
Company common stock	72,514
Contingent consideration	8,500
Holdback liabilities	12,838
Net working capital adjustment	(674)
Fair value of purchase consideration	$	102,645

The following table summarizes the preliminary estimate of the intangible assets as of the acquisition date:


(in thousands except for years)	Estimated Weighted Average Useful Lives in Years	Estimated Fair Value
Developed technology	14	$	30,900
Customer relationships	10	14,700
Trade name	3	900
Estimated fair value of acquired intangible assets		$	46,500

The Company estimated the fair value of the developed technology intangible asset and a portion of the customer relationships intangible assets using an excess earnings model. An additional portion of the customer relationships intangible assets was valued using the with and without method. The Company estimated the fair value of the trade name intangible asset using a relief from royalty approach. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future revenue, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates the Company believes to be consistent with the inherent risks associated with each type of asset, which was approximately 9.6%. The fair value of these intangible assets is primarily affected by the projected revenues, gross margins, operating expenses, the technology obsolescence curve, and the anticipated timing of the projected income associated with each intangible asset coupled with the discount rates used to derive their estimated present values. The Company believes the level and timing of expected future cash flows appropriately reflects market participant assumptions.

The Company included the financial results of Abveris in its condensed consolidated financial statements from the date of acquisition. The Company incurred transaction costs related to the acquisition of $1.5 million, which were recorded as an operating expense on the condensed consolidated statements of operations and comprehensive loss for the six months ended March 31, 2022.

The following table provides a reconciliation of contingent consideration and holdbacks balances from acquisition date to March 31, 2022:


(in thousands)	Contingent consideration		Holdbacks		Total
Balance at December 1, 2021 – acquisition date	$	8,500	$	12,164	$	20,664
Change in fair value during the period	(2,800)		(5,266)		(8,066)
Balance at March 31, 2022	$	5,700	$	6,898	$	12,598

The estimated fair value of the contingent consideration liability decreased as a result of the change in the Company’s stock price from December 31, 2021, and the probability of the attainment of the calendar year 2022 revenue target as calculated using the Monte Carlo simulation model. The estimated fair value of the holdback liability decreased as a result of the change in the Company’s stock price as of December 31, 2021. For the six months ended March 31, 2022, the Company recognized a gain of $8.1 million relating to the change in fair value of acquisition consideration in its condensed consolidated statement of operations.

The post-combination effect from net deferred tax liability assumed from the Abveris acquisition also caused a release of the Company’s deferred income tax valuation allowance. The release resulted in an income tax benefit of $10.5 million.

The following unaudited pro forma financial information presents the combined results of operations for the Company and Abveris as if the Abveris acquisition had occurred on October 1, 2020. The pro forma information contains the actual operating results of the Company Abveris, adjusted to include the pro forma impact of acquisition, which is primarily additional expense as a result of the amortization of identifiable intangible assets. The unaudited pro forma financial information is prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the Abveris acquisition actually taken place on October 1, 2020 and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the Abveris acquisition.


	Three months ended March 31,				Six months ended March 31,
(in thousands)	2022		2021		2022		2021
Revenues	$	48,127	$	34,211	$	92,591	$	65,113
Net loss attributable to common stockholders	$	(60,668)	$	(36,129)	$	(105,097)	$	(67,608)

Issuance of contingent consideration for iGenomX acquisition

During December 2021, the Company determined that the transition milestones specified in the iGenomX acquisition agreement were completed, and the Company became obligated to issue 59,190 shares of its common stock to satisfy the contingent consideration. The shares of common stock, valued at $4.6 million, were subsequently issued by the Company during January 2022 along with an immaterial cash payment for fractional shares.