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Acquisitions | 12 Months Ended
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Dec. 31, 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 December 2022, January 2021, and February 2020, we completed the acquisitions of Akouos, Inc. (Akouos), Prevail Therapeutics Inc. (Prevail), and Dermira, Inc. (Dermira), respectively. These transactions, as further discussed 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 2022, 2021, and 2020, which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D was 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 $908.5 million, $970.1 million, and $769.8 million for the years ended December 31, 2022, 2021, and 2020, respectively. Acquisitions of Businesses Akouos Acquisition Overview of Transaction In December 2022, we acquired all shares of Akouos for a purchase price that included $12.50 per share in cash (or an aggregate of $327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles the Akouos shareholders up to an additional $3.00 per share in cash (or an aggregate of approximately $122 million) payable, subject to certain terms and conditions, upon the achievement of certain specified milestones. Under the terms of the agreement, we acquired potential gene therapy treatments for hearing loss and other inner ear conditions. The lead gene therapies in clinical development that we acquired included GJB2 (which encodes connexin 26) for a common form of monogenic deafness and hearing loss; AK-OTOF for hearing loss due to mutations in the otoferlin gene; AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; and AK-antiVEGF for vestibular schwannoma. Assets Acquired and Liabilities Assumed Our access to Akouos 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 December 1, 2022 |
Cash | $ | 153.2 |
Acquired IPR&D(1) | 184.0
Goodwill(2) | 181.2
Other assets and liabilities, net | 28.9 |
Acquisition date fair value of consideration transferred | 547.3
Less: |
Cash acquired | (153.2) |
Fair value of CVR liability(3) | (66.9) |
Cash paid, net of cash acquired | $ | 327.2 |
(1) Acquired IPR&D intangibles primarily relate to GJB2. (2) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax purposes. (3) See Note 7 for a discussion on the estimation of the CVR liability. The results of operations attributable to Akouos for the year ended December 31, 2022 were immaterial. Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 2022 and 2021. 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 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 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. In the third quarter of 2022, we impaired the intangible asset related to PR001. See Note 5 for additional information. (2) The goodwill recognized from this acquisition is not deductible for tax purposes. (3) See Note 7 for a discussion on the estimation of the CVR liability. The results of operations attributable to Prevail for the years ended December 31, 2022 and 2021 were immaterial. Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 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 terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. 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 year ended December 31, 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. Revenue attributable to assets acquired in the Dermira acquisition did not have a material impact on our consolidated statement of operations for the years ended December 31, 2022, 2021, and 2020. We are unable to provide the results of operations for the years ended December 31, 2022, 2021, and 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 consolidated statements of operations for the year ended December 31, 2020. Asset Acquisitions The following table summarizes our significant asset acquisitions during 2022, 2021, and 2020.
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 |  |  |
Foghorn Therapeutics Inc. | Pre-clinical targets that could lead to potential new oncology medicines | December 2021 |  | Pre-clinical |  | 316.6 |  |  |
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 |  |  |
Innovent Biologics, Inc. (Innovent) | Sintilimab injection, an anti-PD-1 monoclonal antibody immuno-oncology medicine, for geographies outside of China(2) | October 2020 |  | Phase III |  | 200.0 |  |  |
Petra Pharma Corporation (Petra) | Mutant-selective PI3K α inhibitor that could lead to potential new medicine | May 2020 |  | Pre-clinical |  | 174.8 |  |  |
Disarm Therapeutics, Inc. | Disease-modifying therapeutics program for patients with axonal degeneration | October 2020 |  | Pre-clinical |  | 126.3 |  |  |
(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) In 2022, we terminated our license for sintilimab injection for geographies outside of China and reverted rights to Innovent. In connection with our acquisition of 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 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 in 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα are not expected to be material. We did not recognize other significant development milestones during the years ended December 31, 2022, 2021, and 2020.
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 December 2022, January 2021, and February 2020, we completed the acquisitions of Akouos, Inc. (Akouos), Prevail Therapeutics Inc. (Prevail), and Dermira, Inc. (Dermira), respectively. These transactions, as further discussed 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 2022, 2021, and 2020, which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D was 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 $908.5 million, $970.1 million, and $769.8 million for the years ended December 31, 2022, 2021, and 2020, respectively. Acquisitions of Businesses Akouos Acquisition Overview of Transaction In December 2022, we acquired all shares of Akouos for a purchase price that included $12.50 per share in cash (or an aggregate of $327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles the Akouos shareholders up to an additional $3.00 per share in cash (or an aggregate of approximately $122 million) payable, subject to certain terms and conditions, upon the achievement of certain specified milestones. Under the terms of the agreement, we acquired potential gene therapy treatments for hearing loss and other inner ear conditions. The lead gene therapies in clinical development that we acquired included GJB2 (which encodes connexin 26) for a common form of monogenic deafness and hearing loss; AK-OTOF for hearing loss due to mutations in the otoferlin gene; AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; and AK-antiVEGF for vestibular schwannoma. Assets Acquired and Liabilities Assumed Our access to Akouos 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 December 1, 2022 |
Cash | $ | 153.2 |
Acquired IPR&D(1) | 184.0
Goodwill(2) | 181.2
Other assets and liabilities, net | 28.9 |
Acquisition date fair value of consideration transferred | 547.3
Less: |
Cash acquired | (153.2) |
Fair value of CVR liability(3) | (66.9) |
Cash paid, net of cash acquired | $ | 327.2 |
(1) Acquired IPR&D intangibles primarily relate to GJB2. (2) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax purposes. (3) See Note 7 for a discussion on the estimation of the CVR liability. The results of operations attributable to Akouos for the year ended December 31, 2022 were immaterial. Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 2022 and 2021. 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 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 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. In the third quarter of 2022, we impaired the intangible asset related to PR001. See Note 5 for additional information. (2) The goodwill recognized from this acquisition is not deductible for tax purposes. (3) See Note 7 for a discussion on the estimation of the CVR liability. The results of operations attributable to Prevail for the years ended December 31, 2022 and 2021 were immaterial. Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 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 terms of the agreement, we acquired lebrikizumab, a novel, investigational, monoclonal antibody being evaluated for the treatment of moderate-to-severe atopic dermatitis. 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 year ended December 31, 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. Revenue attributable to assets acquired in the Dermira acquisition did not have a material impact on our consolidated statement of operations for the years ended December 31, 2022, 2021, and 2020. We are unable to provide the results of operations for the years ended December 31, 2022, 2021, and 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 consolidated statements of operations for the year ended December 31, 2020. Asset Acquisitions The following table summarizes our significant asset acquisitions during 2022, 2021, and 2020.
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 |  |  |
Foghorn Therapeutics Inc. | Pre-clinical targets that could lead to potential new oncology medicines | December 2021 |  | Pre-clinical |  | 316.6 |  |  |
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 |  |  |
Innovent Biologics, Inc. (Innovent) | Sintilimab injection, an anti-PD-1 monoclonal antibody immuno-oncology medicine, for geographies outside of China(2) | October 2020 |  | Phase III |  | 200.0 |  |  |
Petra Pharma Corporation (Petra) | Mutant-selective PI3K α inhibitor that could lead to potential new medicine | May 2020 |  | Pre-clinical |  | 174.8 |  |  |
Disarm Therapeutics, Inc. | Disease-modifying therapeutics program for patients with axonal degeneration | October 2020 |  | Pre-clinical |  | 126.3 |  |  |
(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) In 2022, we terminated our license for sintilimab injection for geographies outside of China and reverted rights to Innovent. In connection with our acquisition of 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 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 in 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα are not expected to be material. We did not recognize other significant development milestones during the years ended December 31, 2022, 2021, and 2020.

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