ACQUISITION OF ASTEX THERAPEUTICS LIMITED

3 Months Ended

Mar. 31, 2012

ACQUISITION OF ASTEX THERAPEUTICS LIMITED

ACQUISITION OF ASTEX THERAPEUTICS LIMITED

NOTE 5. ACQUISITION OF ASTEX THERAPEUTICS LIMITED

        On July 20, 2011, we completed the acquisition of all of the outstanding shares of ATL, a privately held UK-based biotechnology company with particular expertise in fragment-based drug discovery. Pursuant to the acquisition, we paid approximately $24.9 million in cash and issued 32.4 million shares of Astex common stock (representing approximately 35% of the issued and outstanding stock of Astex as of the closing of the transaction after giving effect to the issuance of such shares) to the securityholders of ATL.

        In addition, we agreed to pay deferred consideration of $30 million in stock, cash, or a combination of stock and cash, to be determined at the discretion of the Company. Deferred consideration is payable in semi-annual installments whose amounts will be determined based on the amounts of the contingent payments ATL has received and will receive under its collaboration arrangements during the period from January 1, 2011 through January 20, 2014. While the timing of the deferred consideration payments can vary, the aggregate amount of deferred consideration is fixed and will be paid no later than 30 months after the closing of the Transaction (January 2014), with a minimum of $15 million payable no later than the 18 month anniversary of the closing of the Transaction (January 2013). Deferred consideration is accounted for as a liability at fair value. We determine the fair value of the deferred consideration liability as the expected present value of future semi-annual installments, discounted at our incremental borrowing rate of five per cent. The amount of the future semi-annual installments reflects our best estimates of the probability and timing of collaboration payments to be received. In February 2012, we paid the initial installment of deferred consideration in the amount of $10,012,000 in cash.