BUSINESS COMBINATIONS

3 Months Ended

Mar. 27, 2021

Retrogenix Limited

On March 30, 2021 (second fiscal quarter of 2021), the Company acquired Retrogenix Limited (Retrogenix) for approximately £35 million in cash (or approximately $48 million based on current exchange rates), subject to customary closing adjustments. In addition to the initial purchase price, the transaction includes a potential additional payment of up to £5 million based on future performance (or approximately $7 million based on current exchange rates). Retrogenix is an early-stage contract research organization providing specialized bioanalytical services utilizing its proprietary cell microarray technology. The acquisition of Retrogenix enhances the Company’s scientific expertise with additional large molecule and cell therapy discovery capabilities. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business will be reported as part of the Company’s DSA reportable segment. Due to the limited time between the acquisition date and the filing of this Quarterly Report on Form 10-Q, it is not practicable for the Company to disclose the preliminary allocation of the purchase price to assets acquired and liabilities assumed. The Company incurred transaction and integration costs in connection with the acquisition of $0.8 million during the three months ended March 27, 2021, which were included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

Cognate BioServices, Inc.

On March 29, 2021 (second fiscal quarter of 2021), the Company acquired Cognate BioServices, Inc. (Cognate BioServices) for approximately $875 million in cash, subject to customary closing adjustments. Cognate BioServices is a cell and gene therapy contract development and manufacturing organization (CDMO) offering comprehensive manufacturing solutions for cell therapies, as well as for the production of plasmid DNA and other inputs in the CDMO value chain. The acquisition of Cognate BioServices establishes the Company as a scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research and discovery through cGMP production. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility and recently issued Senior Notes. This business will be reported as part of the Company’s Manufacturing reportable segment. Due to the limited time between the acquisition date and the filing of this Quarterly Report on Form 10-Q, it is not practicable for the Company to disclose either the preliminary allocation of the purchase price to assets acquired and liabilities assumed or the pro forma consolidated results of operations as if the Cognate BioServices acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments. The Company incurred transaction and integration costs in connection with the acquisition of $7.2 million during the three months ended March 27, 2021, which were included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

Distributed Bio, Inc.

On December 31, 2020, the Company acquired Distributed Bio, Inc. (Distributed Bio), a next-generation antibody discovery company with technologies specializing in enhancing the probability of success for delivering high-quality, readily formattable antibody fragments to support antibody and cell and gene therapy candidates to biopharmaceutical clients. The acquisition of Distributed Bio expands the Company’s capabilities with an innovative, large-molecule discovery platform, and creates an integrated, end-to-end platform for therapeutic antibody and cell and gene therapy discovery and development. The preliminary purchase price of Distributed Bio was $97.0 million, net of $0.8 million in cash, subject to certain post-closing adjustments that may change the purchase price. The total consideration includes $80.8 million cash paid, settlement of $3.0 million in convertible promissory notes previously invested by the Company during prior fiscal years, and $14.0 million of contingent consideration, which is estimated using a Monte Carlo Simulation model (the maximum contingent contractual payments are up to $21.0 million based on future performance and milestone achievements over a one-year period). The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s DSA reportable segment.

The preliminary purchase price allocation of $97.0 million, net of $0.8 million of cash acquired was as follows:


	December 31, 2020
	(in thousands)
Trade receivables	$	2,722
Other current assets (excluding cash)	221
Property, plant and equipment	2,382
Goodwill	71,585
Definite-lived intangible assets	24,540
Other long-term assets	2,055
Current liabilities	(2,823)
Deferred tax liabilities	(2,529)
Other long-term liabilities	(1,123)
Total purchase price allocation	$	97,030

The preliminary purchase price allocation is subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed, including certain contracts and obligations. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

The breakout of definite-lived intangible assets acquired was as follows:


	Definite-Lived Intangible Assets		Weighted Average Amortization Life
	(in thousands)		(in years)
Client relationships	$	16,080	9
Developed technology	3,940		5
Other intangible assets	4,520		4
Total definite-lived intangible assets	$	24,540	7

The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s DSA business from new customers introduced to Distributed Bio and the assembled workforce of the acquired business. The goodwill attributable to Distributed Bio is not deductible for tax purposes.

The Company incurred transaction and integration costs in connection with the acquisition of $0.7 million during the three months ended March 27, 2021, which were primarily included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

Pro forma financial information as well as the disclosure of actual revenue and operating income (loss) have not been included because Distributed Bio's financial results are not significant when compared to the Company’s consolidated financial results.

Cellero, LLC

On August 6, 2020, the Company acquired Cellero, LLC (Cellero), a provider of cellular products for cell therapy developers and manufacturers worldwide. The addition of Cellero enhances the Company’s unique, comprehensive solutions for the high-growth cell therapy market, strengthening the ability to help accelerate clients’ critical programs from basic research and proof-of-concept to regulatory approval and commercialization. It also expands the Company’s access to high-quality, human-derived biomaterials with Cellero’s donor sites in the United States. The purchase price for Cellero was $37.4 million in cash. The acquisition was funded through available cash. This business is reported as part of the Company’s RMS reportable segment.

The preliminary purchase price allocation of $36.9 million, net of $0.5 million of cash acquired was as follows:


	August 6, 2020
	(in thousands)
Trade receivables	$	1,500
Inventories	551
Other current assets (excluding cash)	182
Property, plant and equipment	1,648
Goodwill	19,457
Definite-lived intangible assets	16,230
Other long-term assets	849
Current liabilities	(1,360)
Deferred tax liabilities	(1,467)
Other long-term liabilities	(740)
Total purchase price allocation	$	36,850

The preliminary purchase price allocation is subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed, including certain contracts and obligations. From the date of the acquisition through March 27, 2021, the Company recorded measurement-period adjustments related to the acquisition that resulted in an immaterial change to the purchase price allocation on a consolidated basis. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

The breakout of definite-lived intangible assets acquired was as follows:


	Definite-Lived Intangible Assets		Weighted Average Amortization Life
	(in thousands)		(in years)
Client relationships	$	14,740	13
Other intangible assets	1,490		3
Total definite-lived intangible assets	$	16,230	12

The goodwill resulting from the transaction, $10.8 million of which is deductible for tax purposes due to a prior asset acquisition, is primarily attributable to the potential growth of the Company’s RMS business from customers introduced through Cellero and the assembled workforce of the acquired business.

The Company incurred integration costs in connection with the acquisition of $0.4 million for the three months ended March 27, 2021, which were primarily included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

Pro forma financial information as well as the disclosure of actual revenue and operating income (loss) have not been included because Cellero's financial results are not significant when compared to the Company’s consolidated financial results.

HemaCare Corporation

On January 3, 2020, the Company acquired HemaCare Corporation (HemaCare), a business specializing in the production of human-derived cellular products for the cell therapy market. The acquisition of HemaCare expands the Company’s comprehensive portfolio of early-stage research and manufacturing support solutions to encompass the production and customization of high-quality, human derived cellular products to better support clients’ cell therapy programs. The purchase price of HemaCare was $379.8 million in cash. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s RMS reportable segment.

The purchase price allocation of $376.7 million, net of $3.1 million of cash acquired was as follows:


	January 3, 2020
	(in thousands)
Trade receivables	$	6,451
Inventories	8,468
Other current assets (excluding cash)	3,494
Property, plant and equipment	10,033
Goodwill	210,196
Definite-lived intangible assets	183,540
Other long-term assets	5,920
Current liabilities	(5,188)
Deferred tax liabilities	(38,529)
Other long-term liabilities	(7,664)
Total purchase price allocation	$	376,721

From the date of the acquisition through December 26, 2020, the Company recorded measurement-period adjustments related to the acquisition that resulted in an immaterial change to the purchase price allocation on a consolidated basis. No further adjustments will be made to the purchase price allocation.

The breakout of definite-lived intangible assets acquired was as follows:


	Definite-Lived Intangible Assets		Weighted Average Amortization Life
	(in thousands)		(in years)
Client relationships	$	170,390	19
Trade name	7,330		10
Other intangible assets	5,820		3
Total definite-lived intangible assets	$	183,540	18

The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s RMS business from customers introduced through HemaCare and the assembled workforce of the acquired business. The goodwill attributable to HemaCare is not deductible for tax purposes.

The Company incurred transaction and integration costs in connection with the acquisition of $0.1 million and $5.7 million for the three months ended March 27, 2021 and March 28, 2020, respectively, which were primarily included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

The following selected unaudited pro forma consolidated results of operations are presented as if the HemaCare acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition, which is December 30, 2018, after giving effect to certain adjustments. For the three months ended March 28, 2020, these adjustments included additional amortization of intangible assets and depreciation of fixed assets of $0.2 million, elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments.

Three Months Ended

March 28, 2020

(in thousands)

(unaudited)

Revenue

707,077

Net income attributable to common shareholders

55,705

These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the dates indicated or that may result in the future. No effect has been given for synergies, if any, that may be realized through the acquisition.

Other Acquisition

On March 3, 2021, the Company acquired certain assets from a distributor that supports the Company’s DSA reportable segment. The preliminary purchase price was $35.6 million, which includes $19.7 million in cash paid ($5.5 million of which was paid in fiscal 2020), subject to customary closing adjustments, and $15.9 million of contingent consideration, which is

estimated using a Monte Carlo Simulation model (the maximum contingent contractual payments are up to $17.5 million based on future performance over a three-year period). The fair value of the net assets acquired included $17.3 million of goodwill, $15.2 million attributed to supplier relationships (to be amortized over a 4-year period), and $3.0 million of property, plant, and equipment. The business is reported as part of the Company’s DSA reportable segment. Pro forma information and transaction and integration costs have not been presented because such information is not material to the financial statements.