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Acquisitions
9 Months Ended
Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
In January 2021 and February 2020, we completed the acquisitions of Prevail Therapeutics Inc. (Prevail) and Dermira, Inc. (Dermira), respectively. These transactions, as further discussed in this note below in Acquisitions of Businesses, were accounted for as business combinations under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of these acquisitions are included in our consolidated condensed financial statements from the date of acquisition.
We also acquired assets in development which are further discussed in this note below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired in-process research and development (IPR&D) was immediately expensed because the compound had no alternative future use. We recognized acquired IPR&D charges of $174.0 million and $498.3 million for the three and nine months ended September 30, 2021, respectively, and $294.1 million for the nine months ended September 30, 2020. There were no acquired IPR&D charges recognized in the three months ended September 30, 2020.
Acquisitions of Businesses
Prevail Acquisition
Overview of Transaction
In January 2021, we acquired all shares of Prevail for a purchase price that included $22.50 per share in cash (or an aggregate of $747.4 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles Prevail stockholders up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy or Spain. To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire without payment.
Under the terms of the agreement, we acquired potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. The acquisition establishes a new modality for drug discovery and development, extending our research efforts through the creation of a gene therapy program that is being anchored by Prevail’s portfolio of assets. The lead gene therapies in clinical development that we acquired were PR001 for patients with Parkinson’s disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations. Both PR001 and PR006 were granted Fast Track designation from the U.S. Food and Drug Administration (FDA).
Assets Acquired and Liabilities Assumed
Our access to Prevail information was limited prior to the acquisition. As a consequence, we are in the process of determining fair values and tax bases of a significant portion of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets and tax exposures. The final determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date. The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.
The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
Estimated Fair Value at January 22, 2021
Cash$90.5 
Acquired IPR&D(1)
824.0
Goodwill(2)
118.8
Deferred tax liabilities(98.0)
Other assets and liabilities, net(31.5)
Acquisition date fair value of consideration transferred 903.8
Less:
     Cash acquired(90.5)
     Fair value of CVR liability(3)
(65.9)
Cash paid, net of cash acquired$747.4 
(1) Acquired IPR&D intangibles primarily relate to PR001.
(2) The goodwill recognized from this acquisition is not deductible for tax purposes.
(3) See Note 6 for a discussion on the estimation of the CVR liability.
Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements of operations for the three and nine months ended September 30, 2021 and 2020.
Dermira Acquisition
Overview of Transaction
In February 2020, we acquired all shares of Dermira for a purchase price of approximately $849.3 million, net of cash acquired. Under the terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the FDA. We also acquired Qbrexza® (glycopyrronium) cloth, a medicated cloth approved by the FDA for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating). During the nine months ended September 30, 2021, we sold the rights to Qbrexza. See Note 5 for additional information.
Assets Acquired and Liabilities Assumed
The fair values recognized related to the assets acquired and liabilities assumed in this acquisition included goodwill of $86.8 million, other intangibles of $1.20 billion primarily related to lebrikizumab, deferred income tax liabilities of $49.5 million, and long-term debt of $375.5 million. After the acquisition, we repaid $276.2 million of long-term debt assumed as part of our acquisition of Dermira.
Asset Acquisitions
The following table summarizes our asset acquisitions during the nine months ended September 30, 2021 and 2020:
CounterpartyCompound(s) or TherapyAcquisition Month
Phase of Development (1)
Acquired IPR&D Expense
Precision Biosciences, Inc. Potential in vivo therapies for genetic disordersJanuary 2021Pre-clinical$107.8 
Merus N.V. CD3-engaging T-cell re-directing bispecific antibodies for the potential treatment of cancerJanuary 2021Pre-clinical46.5 
Asahi Kasei Pharma CorporationAK1780, an orally bioavailable P2X7 receptor antagonist for the potential treatment of chronic pain conditionsJanuary 2021Phase I20.0 
Rigel Pharmaceuticals, Inc.R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseasesMarch 2021Phase I125.0 
MiNA Therapeutics LimitedPre-clinical targets that could lead to potential new medicinesMay 2021Pre-clinical25.0 
Protomer Technologies Inc. Glucose-sensing insulin programJuly 2021Pre-clinical57.3 
Kumquat Biosciences Inc. Pre-clinical small molecules that stimulate tumor-specific immune responsesJuly 2021Pre-clinical55.0 
Lycia Therapeutics, Inc. Several potential modalities across a spectrum of therapeutic areas and diseasesAugust 2021Pre-clinical35.0 
ProQR Therapeutics N.V.Pre-clinical targets that could lead to potential new medicines for genetic disorders in the liver and nervous systemSeptember 2021Pre-clinical26.7
Sitryx Therapeutics LimitedPre-clinical targets that could lead to potential new medicines for autoimmune diseasesMarch 2020Pre-clinical52.3 
AbCellera Biologics Inc. (AbCellera)(2)
Neutralizing antibodies for the treatment and prevention of COVID-19March 2020Pre-clinical25.0 
Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences)Neutralizing antibodies for the treatment and prevention of COVID-19May 2020Pre-clinical20.0 
Petra Pharma Corporation (Petra)
Mutant-selective PI3Kα inhibitor that could lead to potential new medicine
May 2020Pre-clinical174.8 
Evox Therapeutics Limited
Pre-clinical targets for the potential treatment of neurological disorders
June 2020Pre-clinical22.0 
(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.
(2) We recognized an acquired IPR&D expense of $25.0 million in May 2020 upon closing of the transaction.
In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the development process.
Acquisitions Acquisitions
In January 2021 and February 2020, we completed the acquisitions of Prevail Therapeutics Inc. (Prevail) and Dermira, Inc. (Dermira), respectively. These transactions, as further discussed in this note below in Acquisitions of Businesses, were accounted for as business combinations under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of these acquisitions are included in our consolidated condensed financial statements from the date of acquisition.
We also acquired assets in development which are further discussed in this note below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired in-process research and development (IPR&D) was immediately expensed because the compound had no alternative future use. We recognized acquired IPR&D charges of $174.0 million and $498.3 million for the three and nine months ended September 30, 2021, respectively, and $294.1 million for the nine months ended September 30, 2020. There were no acquired IPR&D charges recognized in the three months ended September 30, 2020.
Acquisitions of Businesses
Prevail Acquisition
Overview of Transaction
In January 2021, we acquired all shares of Prevail for a purchase price that included $22.50 per share in cash (or an aggregate of $747.4 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles Prevail stockholders up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy or Spain. To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire without payment.
Under the terms of the agreement, we acquired potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. The acquisition establishes a new modality for drug discovery and development, extending our research efforts through the creation of a gene therapy program that is being anchored by Prevail’s portfolio of assets. The lead gene therapies in clinical development that we acquired were PR001 for patients with Parkinson’s disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations. Both PR001 and PR006 were granted Fast Track designation from the U.S. Food and Drug Administration (FDA).
Assets Acquired and Liabilities Assumed
Our access to Prevail information was limited prior to the acquisition. As a consequence, we are in the process of determining fair values and tax bases of a significant portion of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets and tax exposures. The final determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date. The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.
The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
Estimated Fair Value at January 22, 2021
Cash$90.5 
Acquired IPR&D(1)
824.0
Goodwill(2)
118.8
Deferred tax liabilities(98.0)
Other assets and liabilities, net(31.5)
Acquisition date fair value of consideration transferred 903.8
Less:
     Cash acquired(90.5)
     Fair value of CVR liability(3)
(65.9)
Cash paid, net of cash acquired$747.4 
(1) Acquired IPR&D intangibles primarily relate to PR001.
(2) The goodwill recognized from this acquisition is not deductible for tax purposes.
(3) See Note 6 for a discussion on the estimation of the CVR liability.
Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements of operations for the three and nine months ended September 30, 2021 and 2020.
Dermira Acquisition
Overview of Transaction
In February 2020, we acquired all shares of Dermira for a purchase price of approximately $849.3 million, net of cash acquired. Under the terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. Lebrikizumab was granted Fast Track designation from the FDA. We also acquired Qbrexza® (glycopyrronium) cloth, a medicated cloth approved by the FDA for the topical treatment of primary axillary hyperhidrosis (uncontrolled excessive underarm sweating). During the nine months ended September 30, 2021, we sold the rights to Qbrexza. See Note 5 for additional information.
Assets Acquired and Liabilities Assumed
The fair values recognized related to the assets acquired and liabilities assumed in this acquisition included goodwill of $86.8 million, other intangibles of $1.20 billion primarily related to lebrikizumab, deferred income tax liabilities of $49.5 million, and long-term debt of $375.5 million. After the acquisition, we repaid $276.2 million of long-term debt assumed as part of our acquisition of Dermira.
Asset Acquisitions
The following table summarizes our asset acquisitions during the nine months ended September 30, 2021 and 2020:
CounterpartyCompound(s) or TherapyAcquisition Month
Phase of Development (1)
Acquired IPR&D Expense
Precision Biosciences, Inc. Potential in vivo therapies for genetic disordersJanuary 2021Pre-clinical$107.8 
Merus N.V. CD3-engaging T-cell re-directing bispecific antibodies for the potential treatment of cancerJanuary 2021Pre-clinical46.5 
Asahi Kasei Pharma CorporationAK1780, an orally bioavailable P2X7 receptor antagonist for the potential treatment of chronic pain conditionsJanuary 2021Phase I20.0 
Rigel Pharmaceuticals, Inc.R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseasesMarch 2021Phase I125.0 
MiNA Therapeutics LimitedPre-clinical targets that could lead to potential new medicinesMay 2021Pre-clinical25.0 
Protomer Technologies Inc. Glucose-sensing insulin programJuly 2021Pre-clinical57.3 
Kumquat Biosciences Inc. Pre-clinical small molecules that stimulate tumor-specific immune responsesJuly 2021Pre-clinical55.0 
Lycia Therapeutics, Inc. Several potential modalities across a spectrum of therapeutic areas and diseasesAugust 2021Pre-clinical35.0 
ProQR Therapeutics N.V.Pre-clinical targets that could lead to potential new medicines for genetic disorders in the liver and nervous systemSeptember 2021Pre-clinical26.7
Sitryx Therapeutics LimitedPre-clinical targets that could lead to potential new medicines for autoimmune diseasesMarch 2020Pre-clinical52.3 
AbCellera Biologics Inc. (AbCellera)(2)
Neutralizing antibodies for the treatment and prevention of COVID-19March 2020Pre-clinical25.0 
Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences)Neutralizing antibodies for the treatment and prevention of COVID-19May 2020Pre-clinical20.0 
Petra Pharma Corporation (Petra)
Mutant-selective PI3Kα inhibitor that could lead to potential new medicine
May 2020Pre-clinical174.8 
Evox Therapeutics Limited
Pre-clinical targets for the potential treatment of neurological disorders
June 2020Pre-clinical22.0 
(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.
(2) We recognized an acquired IPR&D expense of $25.0 million in May 2020 upon closing of the transaction.
In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the development process.