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Acquisitions | 6 Months Ended
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Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions We engage in various forms of business development activities to enhance our product pipeline, including acquisitions, collaborations, investments, and licensing arrangements. 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. In January 2021, we completed the acquisition of Prevail Therapeutics Inc. (Prevail). This transaction, as further discussed below in Acquisition of a Business, was accounted for as a business combination 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 this acquisition is included in our consolidated condensed financial statements from the date of acquisition. We also acquired assets in development which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D is immediately expensed if the compound has no alternative future use. Milestone payment obligations incurred prior to regulatory approval of the compound are expensed when the event triggering an obligation to pay the milestone occurs. We recognized acquired IPR&D and development milestone charges of $440.4 million and $606.0 million for the three and six months ended June 30, 2022, respectively, and $42.8 million and $354.8 million for the three and six months ended June 30, 2021, respectively. Acquisition of a Business 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 established 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 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) | 126.8
Deferred tax liabilities | (106.0) |
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. We are unable to provide the results of operations for the three and six months ended June 30, 2022 and 2021 attributable to Prevail as those operations were substantially integrated into our legacy business. 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 six months ended June 30, 2021. Asset Acquisitions The following table summarizes our significant asset acquisitions during the six months ended June 30, 2022 and 2021:
Counterparty | Compound(s), Therapy or Asset | Acquisition Month |  | Phase of Development(1) |  | Acquired IPR&D Expense
BioMarin Pharmaceutical Inc. | Priority Review Voucher | February 2022 |  | Not applicable |  | $ | 110.0 |
Rigel Pharmaceuticals, Inc. | R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseases | March 2021 |  | Phase I |  | 125.0 |
Precision Biosciences, Inc. | Potential in vivo therapies for genetic disorders | January 2021 |  | Pre-clinical |  | 107.8 |
(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. In connection with our acquisition of Petra Pharma Corporation (Petra), we were required to make milestone payments to Petra shareholders contingent upon the occurrence of certain future events linked to the success of the mutant-selective PI3K α inhibitor. In the second quarter of 2022, we entered into agreements with substantially all Petra shareholders to acquire their rights to receive any future milestone payments in exchange for a one-time payment. As a result of these agreements, we recognized a charge of $333.8 million as a development milestone during the three and six months ended June 30, 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα are not expected to be material. We recognized no other significant development milestones during the three and six months ended June 30, 2022 and 2021.
Acquisitions | Acquisitions We engage in various forms of business development activities to enhance our product pipeline, including acquisitions, collaborations, investments, and licensing arrangements. 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. In January 2021, we completed the acquisition of Prevail Therapeutics Inc. (Prevail). This transaction, as further discussed below in Acquisition of a Business, was accounted for as a business combination 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 this acquisition is included in our consolidated condensed financial statements from the date of acquisition. We also acquired assets in development which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D is immediately expensed if the compound has no alternative future use. Milestone payment obligations incurred prior to regulatory approval of the compound are expensed when the event triggering an obligation to pay the milestone occurs. We recognized acquired IPR&D and development milestone charges of $440.4 million and $606.0 million for the three and six months ended June 30, 2022, respectively, and $42.8 million and $354.8 million for the three and six months ended June 30, 2021, respectively. Acquisition of a Business 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 established 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 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) | 126.8
Deferred tax liabilities | (106.0) |
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. We are unable to provide the results of operations for the three and six months ended June 30, 2022 and 2021 attributable to Prevail as those operations were substantially integrated into our legacy business. 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 six months ended June 30, 2021. Asset Acquisitions The following table summarizes our significant asset acquisitions during the six months ended June 30, 2022 and 2021:
Counterparty | Compound(s), Therapy or Asset | Acquisition Month |  | Phase of Development(1) |  | Acquired IPR&D Expense
BioMarin Pharmaceutical Inc. | Priority Review Voucher | February 2022 |  | Not applicable |  | $ | 110.0 |
Rigel Pharmaceuticals, Inc. | R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseases | March 2021 |  | Phase I |  | 125.0 |
Precision Biosciences, Inc. | Potential in vivo therapies for genetic disorders | January 2021 |  | Pre-clinical |  | 107.8 |
(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. In connection with our acquisition of Petra Pharma Corporation (Petra), we were required to make milestone payments to Petra shareholders contingent upon the occurrence of certain future events linked to the success of the mutant-selective PI3K α inhibitor. In the second quarter of 2022, we entered into agreements with substantially all Petra shareholders to acquire their rights to receive any future milestone payments in exchange for a one-time payment. As a result of these agreements, we recognized a charge of $333.8 million as a development milestone during the three and six months ended June 30, 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα are not expected to be material. We recognized no other significant development milestones during the three and six months ended June 30, 2022 and 2021.

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