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Acquisitions | 3 Months Ended
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Mar. 31, 2025
Business Combinations [Abstract] |
Acquisitions |
Note 2: | Acquisitions
Human Immunology Biosciences On July 2, 2024, we completed the acquisition of all of the issued and outstanding shares of HI-Bio, a privately-held clinical-stage biotechnology company focused on targeted therapies for patients with severe immune-mediated diseases. HI-Bio's lead asset, felzartamab, an anti-CD38 antibody, is currently being evaluated for three leading indications, AMR, PMN and IgAN. Felzartamab has received Breakthrough Therapy Designation and ODD from the FDA for development in the treatment of PMN and AMR. Subsequent to our acquisition, felzartamab received ODD in the E.U. in IgAN and solid organ transplantation. The acquisition of HI-Bio is expected to augment our pipeline and build on our expertise in immunology. Under the terms of this acquisition, we paid shareholders of HI-Bio approximately $1.15 billion at closing and may pay up to an additional $650.0 million in potential development and regulatory milestone payments. The $1.15 billion paid includes approximately $74.5 million related to HI-Bio's outstanding, non-vested equity awards, inclusive of employer taxes, of which $56.4 million was recognized as share-based compensation payments to settle non-vested equity awards attributable to the post-acquisition service period and therefore not reflected as a component of total purchase price paid. Of the total $56.4 million, we recognized approximately $42.5 million as a charge to research and development expense with the remaining $13.9 million as a charge to selling, general and administrative expense within our consolidated statements of income for the year ended December 31, 2024, included in our 2024 Form 10-K. These amounts were associated with the accelerated vesting of stock options and RSUs previously granted to HI-Bio employees and required no future services to vest. Upon closing we also paid an additional $43.7 million related to working capital adjustments as of the transaction close date, which was included as a component of total purchase price paid. We funded this acquisition through available cash on hand and accounted for this acquisition as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, and recorded assets acquired and liabilities assumed at their respective fair values as of the acquisition date. In addition to the lead program felzartamab, the HI-Bio pipeline acquired includes izastobart/HIB210, an anti-C5aR1 antibody, and the potential for continued development in a range of complement-mediated diseases. Purchase Price Consideration Total consideration transferred for the acquisition of HI-Bio is summarized as follows:
(In millions) |  | As of July 2, 2024
Cash consideration paid to HI-Bio shareholders(1) |  | $ | 1,137.3 |
Contingent consideration |  | 485.1 |
Total consideration |  | $ | 1,622.4 |
(1) Represents total consideration paid to shareholders of HI-Bio of $1.15 billion, plus an additional $43.7 million related to working capital adjustments as of the transaction close date, less $56.4 million of cash paid for HI-Bio's outstanding, non-vested equity awards, inclusive of employer taxes, which were recognized as compensation attributable to the post-acquisition service period and therefore not reflected as a component of total consideration. Contingent Consideration: We may make certain contingent payments to the former shareholders of HI-Bio upon the achievement of certain development and regulatory milestones. As of the acquisition date, the maximum aggregate amount payable for these potential milestones was $650.0 million. The acquisition-date fair value of these milestones was approximately $485.1 million and was estimated utilizing a probability-adjusted discounted cash flow calculation using an appropriate discount rate dependent on the nature and timing of the milestone payments, which ranged from 6.2% to 7.0%, and probabilities of technological and regulatory success ranging from 67.0% to near-certain probability. Of the total contingent consideration, approximately $279.3 million related to milestones classified as short-term and reflected as a component of accrued expense and other with the remaining $205.8 million reflected as a component of other long-term liabilities within our condensed consolidated balance sheets. The short-term liability related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab in a first and s econd indication, which would trigger milestone payments of $150.0 million each. Subsequent changes in the fair value of the contingent consideration obligation are being recognized as (gain) loss on fair value remeasurement of contingent consideration within our condensed consolidated statements of income. This fair value measurement is based on significant inputs that are not observable in the market and thus represent Level 3 fair value measurements. For additional information related to the fair value of this obligation, please read Note 8, Fair Value Measurements, to these condensed consolidated financial statements. Other Contractual Commitments: We acquired HI-Bio's pre-existing in-license commitments under third-party agreements with MorphoSys, which include tiered royalties on potential future sales of felzartamab and izastobart/HIB210, ranging from high-single digit to mid-teen percentages, as well as potential development, regulatory and commercial milestone payments related to felzartamab and izastobart/HIB210 of up to $130.0 million, $230.0 million and $640.0 million, respectively. These contingencies were not recorded in our financial statements as of the transaction close date because the achievement of these milestones was not considered probable. Preliminary Purchase Price Allocation The following table summarizes the preliminary purchase price allocation of the separately identifiable assets acquired and liabilities assumed as of July 2, 2024:
(In millions) |  |  |  |  |  | Amounts Recognized as of Acquisition Date (as adjusted) March 31, 2025
Cash and cash equivalents |  |  |  |  |  | $ | 62.5 |
Intangible assets: |  |  |  |  |  |
IPR&D - felzartamab (IgAN) |  |  |  |  |  | 920.0 |
IPR&D - felzartamab (AMR) |  |  |  |  |  | 450.0 |
IPR&D - felzartamab (PMN) |  |  |  |  |  | 265.0 |
Other clinical programs |  |  |  |  |  | 7.9 |
Prepaid expense and other assets |  |  |  |  |  | 1.0 |
Operating lease assets |  |  |  |  |  | 1.2 |
Accounts payable |  |  |  |  |  | (1.1) |
Accrued liabilities |  |  |  |  |  | (35.0) |
Deferred tax liability(1) |  |  |  |  |  | (299.3) |
Operating lease liabilities |  |  |  |  |  | (1.2) |
Total identifiable net assets |  |  |  |  |  | 1,371.0 |
Goodwill(1) |  |  |  |  |  | 251.4 |
Total assets acquired and liabilities assumed |  |  |  |  |  | $ | 1,622.4 |
(1) Includes measurement period adjustments recorded during the first quarter of 2025 that decreased deferred tax liability and goodwill by approximately $5.1 million, as a result of certain income tax adjustments. Intang ible assets: Intangible assets comprised of $1.6 billion of IPR&D related to HI-Bio's lead asset felzartamab. This includes $920.0 million of IPR&D related to felzartamab indication for IgAN, $450.0 million of IPR&D related to felzartamab indication for AMR and $265.0 million of IPR&D related to felzartamab indication for PMN. The estimated fair values of the program related intangible assets were determined using a multi-period excess earnings method, a form of the income approach, utilizing cash flow analyses and a discount rate of 14.5%. These fair value measurements were based on significant inputs that are not observable in the market and thus represent Level 3 fair value measurements. Goodwill: Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acq uired that could not be individually identified and separately recognized. We recognized goodwill of approximately $251.4 million, which includes measurement period adjustments, and is not deductible for tax purposes. The goodwill recognized from our acquisition of HI-Bio is primarily the result of the deferred tax consequences from the transaction recorded for financial statement purposes. Acquisition-related expenses: Acquisition-related expense, primarily comprised of advisory and legal fees, and other transaction costs, totaled approximately $2.8 million and were recorded within selling, general and administrative expense within our consolidated statements of income for the year ended December 31, 2024, included in our 2024 Form 10-K. Assumptions in the Allocations of Purchase Price The results of operations of HI-Bio, along with the estimated fair values of the assets acquired and liabilities assumed in the HI-Bio acquisition, have been included in our condensed consolidated financial statements since the closing of the HI-Bio acquisition on July 2, 2024. Our preliminary estimate of the fair value of the specifically identifiable assets acquired and liabilities assumed as of the date of acquisition is subject to the finalization of management's analysis related to certain matters, such as finalizing our assessment of income taxes. The final determination of these fair values will be completed as additional information becomes available but no later than one year from the acquisition date. The final determination may result in asset and liability fair values that are different than the preliminary estimates. Subsequent to the acquisition date, our results of operations include the results of operations of HI-Bio. HI-Bio operations had an immaterial impact on our results of operations for the three months ended March 31, 2025. Due to the immateriality of HI-Bio's revenue and expense, additional pro forma information combining the results of operations of Biogen and HI-Bio have not been included.

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