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Acquisitions and Divestiture | 12 Months Ended
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Dec. 31, 2020
Business Combinations [Abstract] |
Acquisitions and Divestiture | Acquisitions and Divestiture In February 2020 and 2019, we completed the acquisitions of Dermira, Inc. (Dermira) and Loxo Oncology, Inc. (Loxo), 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 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 have been included in our consolidated financial statements from the date of acquisition. We also acquired assets in development in 2020, 2019, and 2018, which are further discussed in this note below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D was immediately expensed because the compound acquired had no alternative future use. For the years ended December 31, 2020, 2019, and 2018, we recorded acquired IPR&D charges of $660.4 million, $239.6 million, and $1.98 billion, respectively. Acquisitions of Businesses 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 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 U.S. Food and Drug Administration (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). 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. Revenue attributable to assets acquired in the Dermira acquisition did not have a material impact on our consolidated statement of operations for the year ended December 31, 2020. We are unable to provide the results of operations for the year ended December 31, 2020 attributable to Dermira as those operations were substantially integrated into our legacy business. Pro forma information has not been included because this acquisition did not have a material impact on our results of operations for the years ended December 31, 2020 and 2019. Loxo Acquisition Overview of Transaction In February 2019, we acquired all shares of Loxo for a purchase price of $6.92 billion, net of cash acquired. The accelerated vesting of Loxo employee equity awards was recognized as transaction expense included in asset impairment, restructuring, and other special charges during the year ended December 31, 2019 (see Note 5). Under the terms of the agreement, we acquired a pipeline of investigational medicines, including selpercatinib (LOXO-292), an oral RET inhibitor, and LOXO-305, an oral BTK inhibitor. In the second quarter of 2020, the FDA approved selpercatinib (Retevmo®) under its Accelerated Approval regulations and continued approval may be contingent upon verification and description of clinical benefit in confirmatory trials. At the time of approval, we reclassified our $4.60 billion intangible asset for selpercatinib (Retevmo) from indefinite-lived intangible assets to finite-lived intangible assets and began amortizing straight line over its estimated useful life. Assets Acquired and Liabilities Assumed The following table summarizes the amounts recognized for assets acquired and liabilities assumed in the acquisition of Loxo as of the acquisition date:
Estimated Fair Value at February 15, 2019
Acquired IPR&D(1) | $ | 4,670.0 |
Finite-lived intangibles(2) | 980.0 |
Deferred income taxes | (1,032.8) |
Other assets and liabilities - net | (26.4) |
Total identifiable net assets | 4,590.8 |
Goodwill(3) | 2,326.9 |
Total consideration transferred - net of cash acquired | $ | 6,917.7 |
(1) $4.60 billion of the acquired IPR&D relates to selpercatinib (LOXO-292). (2) Contract-based intangibles (primarily related to Vitrakvi) which are being amortized to cost of sales on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of approximately 12 years from the acquisition date. (3) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Loxo and is not deductible for tax purposes. Our consolidated statement of operations for the year ended December 31, 2019 includes revenue attributable to assets acquired in the Loxo acquisition of $136.7 million, primarily due to regulatory approval and sales milestones received. We are unable to provide the results of operations for the year ended December 31, 2019 attributable to Loxo as those operations were substantially integrated into our legacy business. Pro forma information has not been included because this acquisition did not have a material impact on our results of operations for the years ended December 31, 2019 and 2018. Asset Acquisitions The following table and narrative summarize our asset acquisitions during 2020, 2019, and 2018.
Counterparty | Compound(s),Therapy, or Asset | Acquisition Month |  | Phase of Development(1) |  | Acquired IPR&D Expense
Sitryx Therapeutics Limited | Pre-clinical targets that could lead to potential new medicines for autoimmune diseases | March 2020 |  | Pre-clinical |  | $ | 52.3 |
AbCellera Biologics Inc. (AbCellera)(2) | Neutralizing antibodies for the treatement and prevention of COVID-19 | March 2020 |  | Pre-clinical |  | 25.0 |
Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences) | Neutralizing antibodies for the treatment and prevention of COVID-19 | May 2020 |  | Pre-clinical |  | 20.0 |
Undisclosed | Pre-clinical target that could lead to potential new medicine | May 2020 |  | Pre-clinical |  | 174.8 |
Evox Therapeutics Ltd | Pre-clinical research collaboration for the potential treatment of neurological disorders | June 2020 |  | Pre-clinical |  | 22.0 |
Innovent Biologics, Inc. (Innovent) | Sintilimab injection, an anti-PD-1 monoclonal antibody immuno-oncology medicine, for geographies outside of China | October 2020 |  | Phase III |  | 200.0 |
Disarm Therapeutics, Inc. (Disarm) | Disease-modifying therapeutics program for patients with axonal degeneration | October 2020 |  | Pre-clinical |  | 126.3 |
Fochon Pharmaceuticals, Ltd. | Pre-clinical molecule targeting hematological malignancies | November 2020 |  | Pre-clinical |  | 40.0 |
AC Immune SA | Tau aggregation inhibitor small molecules for the potential treatment of Alzheimer's disease and other neurodegenerative diseases | January 2019 & September 2019(3) |  | Pre-clinical |  | 127.1 |
ImmuNext, Inc. | Novel immunometabolism target | March 2019 |  | Pre-clinical |  | 40.0 |
Avidity Biosciences, Inc. | Potential new medicines in immunology and other select indications | April 2019 |  | Pre-clinical |  | 25.0 |
Centrexion Therapeutics Corporation | CNTX-0290, a novel, small molecule somatostatin receptor type 4 agonist | July 2019 |  | Phase I |  | 47.5 |
Sigilon Therapeutics, Inc. | Encapsulated cell therapies for the potential treatment of type 1 diabetes | April 2018 |  | Pre-clinical |  | 66.9 |
AurKa Pharma Inc. | AK-01, an Aurora kinase A inhibitor | June 2018 |  | Phase I |  | 81.8 |
ARMO BioSciences, Inc. (ARMO) | Cancer therapy - pegilodecakin | June 2018 |  | Phase III |  | 1,475.8 |
Anima Biotech Inc. | Translation inhibitors for selected neuroscience targets | July 2018 |  | Pre-clinical |  | 30.0 |
SIGA Technologies, Inc. | Priority Review Voucher | October 2018 |  | Not applicable |  | 80.0 |
Chugai Pharmaceutical Co., Ltd. | OWL833, an oral non-peptidic GLP-1 receptor agonist | October 2018 |  | Pre-clinical |  | 50.0 |
NextCure, Inc. | Immuno-oncology cancer therapies | November 2018 |  | Pre-clinical(4) |  | 28.1 |
Dicerna Pharmaceuticals Inc. | Cardio-metabolic disease, neurodegeneration, and pain | December 2018 |  | Pre-clinical |  | 148.7 |
Hydra Biosciences | TRPA1 antagonists program for the potential treatment of chronic pain syndromes | December 2018 |  | Pre-clinical |  | 22.6 |
(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 the acquired IPR&D expense of $25.0 million in May 2020 upon closing of the transaction. (3) We recognized acquired IPR&D expenses of $96.9 million in January 2019 upon entering into a license agreement and $30.2 million in September 2019 upon entering into an amendment to the license agreement. (4) This research and development collaboration agreement terminated effective March 2020. 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. Divestiture In October 2019, we completed a transaction in which we sold the rights in China for two legacy antibiotic medicines, as well as a manufacturing facility in Suzhou, China to Eddingpharm, a China-based specialty pharmaceutical company. In connection with the sale, we received net cash proceeds of $354.8 million and $40.3 million from Eddingpharm in 2019 and 2020, respectively. We accounted for the transaction as the sale of a business. We recorded a gain of $309.8 million in Other—net, (income) expense upon closing the transaction in 2019. Subsequent Events Precision BioSciences, Inc. (Precision) In January 2021, we entered into a research collaboration and exclusive license agreement with Precision to utilize Precision's proprietary ARCUS genome editing platform for the research and development of potential in vivo therapies for genetic disorders. Under terms of the agreement, we paid an upfront cash payment of $100.0 million and invested $35.0 million in Precision's common stock at a premium. As a result of the transaction, we will record an acquired IPR&D charge of $107.8 million in the first quarter of 2021. Merus N.V. (Merus) In January 2021, we entered into a research collaboration and exclusive license agreement with Merus to research and develop up to three CD3-engaging T-cell re-directing bispecific antibody therapies. Under the terms of the agreement, we paid Merus an upfront cash payment of $40.0 million and invested $20.0 million in Merus common shares at a premium. As a result of the transaction, we will record an acquired IPR&D charge of $46.5 million in the first quarter of 2021. Prevail Therapeutics Inc. (Prevail) In January 2021, we completed our acquisition of Prevail. Prevail is a biotechnology company developing 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 will be anchored by Prevail’s portfolio of clinical-stage and preclinical neuroscience assets. We acquired all shares of Prevail for $22.50 per share (approximately $880 million) in cash plus one non-tradable contingent value right (CVR). The CVR entitles Prevail stockholders to up to an additional $4.00 per share in cash (or an aggregate of approximately $160 million) payable, subject to terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries: U.S., Japan, United Kingdom (U.K.), 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. The accounting impact of this acquisition and the results of the operations for Prevail will be included in our consolidated financial statements beginning in the first quarter of 2021.The initial accounting for this acquisition is incomplete. Significant, relevant information needed to complete the initial accounting is not available because the valuation of assets acquired and liabilities assumed is not complete. As a result, determining these values is not practicable, and we are unable to disclose these values or provide other related disclosures at this time. Asahi Kasei Pharma Corporation (Asahi) In January 2021, we entered into a license agreement with Asahi to acquire the exclusive rights for AK1780, an orally bioavailable P2X7 receptor antagonist that recently completed Phase 1 single and multiple ascending dose and clinical pharmacology studies for the potential treatment of chronic pain conditions. As a result of the transaction, we will pay Asahi an upfront cash payment and record an acquired IPR&D charge of $20.0 million in the first quarter of 2021.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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