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Acquisitions

12 Months Ended

Dec. 31, 2020

3. Acquisitions

Censa Asset Acquisition

On May 29, 2020, the Company acquired Censa, pursuant to the Censa Merger Agreement. Upon the closing of the Censa Merger, the Company paid to the Censa securityholders (i) cash consideration of $15.0 million, which consisted of an upfront payment of $10.4 million and an additional $4.6 million for the net assets on Censa’s opening balance sheet as of the date of the acquisition, and (ii) 845,364 shares of the Company’s common stock, which were valued at $42.9 million based on the closing stock price on the acquisition date. The number of shares issued was determined using a 30-day volume weighted average price (“VWAP”) pursuant to the Censa Merger Agreement.

The Company determined that substantially all of the fair value is concentrated in PTC923 and accounted for the transaction as an asset acquisition under ASC 805-50. The purchase price consisted of the cash consideration of $15.0 million and $42.9 million in the Company’s common stock, in addition to $0.7 million of acquisition costs. As such, the total consideration transferred was determined to be $58.6 million. The opening balance sheet net assets of $4.6 million, which consisted of cash of $3.8 million and other current assets of $0.8 million, were determined to be non-qualifying assets and recorded at their fair values, respectively. The remaining consideration of $54.0 million was allocated to PTC923. As PTC923 is an IPR&D asset, the Company concluded that it did not have any alternative future use, and accordingly, the fair value amount allocated to the IPR&D was expensed. Of the $54.0 million, $53.3 million is included in research and development expense and the $0.7 million related to the acquisition costs, is included in selling, general, and administrative expense within the Company’s statement of operations for the twelve month period ended December 31, 2020.

Subject to the terms and conditions of the Censa Merger Agreement, Censa securityholders may become entitled to receive contingent payments from the Company based on (i) the achievement of certain development and regulatory milestones up to an aggregate maximum amount of $217.5 million for PTC923’s two most advanced programs and receipt of a priority review voucher from the FDA as set forth in the Censa Merger Agreement, (ii) $109.0 million in development and regulatory milestones for each additional indication of PTC923, (iii) the achievement of certain net sales milestones up to an aggregate maximum amount of $160.0 million, (iv) a percentage of annual net sales during specified terms, ranging from single to low double digits of the applicable net sales threshold amount, and (v) any sublicense fees paid to the Company in consideration of any sublicense of Censa’s intellectual property to commercialize PTC923, on a country-by-country basis, which contingent payment shall equal to a mid-double digit percentage of any such sublicense fees. Pursuant to the Censa Merger Agreement, the Company has the option to pay the initial $30.0 million development milestone, for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU, if achieved, in cash or shares of the Company’s common stock. The Company will record the milestone and royalty payments when they become payable. Milestone payments prior to FDA approval of PTC923 for PKU (or other indications) will be expensed accordingly and milestone payments that will only occur after PTC923 for PKU (or other indications) is FDA approved, will be capitalized and amortized over their expected useful lives.

BioElectron Asset Acquisition

On October 25, 2019, the Company completed the acquisition of substantially all of the assets of BioElectron Technology Corporation (“BioElectron”), a Delaware corporation, including certain compounds that the Company has begun to develop as part of its Bio-e platform, (the “Asset Acquisition”) pursuant to an asset purchase agreement by and between the Company and BioElectron, dated October 1, 2019 (the “BioElectron Asset Purchase Agreement”). BioElectron was a private company with a pipeline focused on inflammatory and central nervous system (CNS) disorders. The lead program, vatiquinone, is in late stage development for CNS disorders with substantial unmet need and significant commercial opportunity that are complementary to PTC’s existing pipeline.

Upon the closing of the Asset Acquisition, the Company paid to BioElectron total upfront consideration of $10.0 million, funded with cash on hand, less (i) transaction expenses incurred by BioElectron, (ii) the amount of outstanding indebtedness of BioElectron including a $4.0 million loan advance to BioElectron plus accrued and unpaid interest thereon and (iii) $1.5 million held in an escrow account to secure potential indemnification obligations owed to the Company. Subject to the terms and conditions of the BioElectron Asset Purchase Agreement, BioElectron may become entitled to receive contingent milestone payments of up to $200.0 million (in cash or in shares of the Company’s common stock, as determined by the Company) from the Company based on the achievement of certain regulatory and net sales milestones. Subject to the terms and conditions of the BioElectron Asset Purchase Agreement, BioElectron may also become entitled to contingent payments based on a percentage of net sales of certain products.

The Company concluded that the transaction included inputs and processes that did not constitute a business under the revised guidance of ASU 2017-01, which allows for a screen to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. The Company determined that substantially all of the fair value is concentrated in vatiquinone and accounted for the transaction as an asset acquisition under ASC 805-50.

The purchase price consisted of upfront consideration of $10.0 million in cash and approximately $0.5 million of acquisition costs, resulting in $10.5 million of total consideration transferred. As vatiquinone is an IPR&D asset, the Company concluded that it did not have any alternative future use, and accordingly, the fair value amount allocated to the IPR&D asset of $10.0 million was expensed to research and development during the twelve month period ended December 31, 2019 and included within operating activities in the statement of cash flows. The remaining assets acquired and liabilities assumed were immaterial. Additionally, as noted above, BioElectron may be entitled to receive contingent milestone payment and contingent royalty payments. The Company will record the milestone and royalty payments if and when they become payable, in accordance with the applicable guidance. These payments will be capitalized and amortized over their expected useful lives.

Agilis Acquisition

On August 23, 2018, the Company completed its acquisition of Agilis pursuant to the Agilis Merger Agreement. Agilis was a privately-held biotechnology company advancing an innovative gene therapy platform for rare monogenic diseases that affect the central nervous system. Upon completion of the Agilis Merger, the Company acquired Agilis’s lead product candidate, PTC-AADC, for the treatment of AADC deficiency, as well as three other gene therapies.

Upon the closing of the Agilis Merger, the Company paid to Agilis equityholders total upfront consideration comprised of $49.2 million in cash and 3,500,907 shares of the Company’s common stock (the “Closing Stock Consideration”). The Closing Stock Consideration was determined by dividing $150.0 million by the volume-weighted average price per share of the Company’s common stock on Nasdaq for the 10 consecutive trading-day period ending on the second trading-day immediately preceding the closing of the Agilis Merger. The fair value of the stock on the acquisition date was determined to be $155.9 million.

Pursuant to the Agilis Merger Agreement, Agilis equityholders may become entitled to receive contingent consideration payments from the Company based on (i) the achievement of certain development milestones up to an aggregate maximum amount of $60.0 million, (ii) the achievement of certain regulatory approval milestones together with a milestone payment following the receipt of a priority review voucher up to an aggregate maximum amount of $535.0 million, (iii) the achievement of certain net sales milestones up to an aggregate maximum amount of $150.0 million, and (iv) a percentage of annual net sales for Friedreich Ataxia and Angelman Syndrome during specified terms, ranging from 2%-6%. The fair value of the contingent consideration payments at the acquisition date was estimated to be $290.5 million. Under the Agilis Merger Agreement, the Company was required to pay $40.0 million of the development milestone payments mentioned above upon the passing of the second anniversary of the closing of the Agilis Merger, regardless of whether the applicable milestones have been achieved. The fair value of the deferred consideration payments at the closing date was estimated to be $38.1 million.

On April 29, 2020, the Company entered into the Rights Exchange Agreement, pursuant to which the Company issued the Common Stock Consideration and the Cash Consideration to the Participating Rightholders in exchange for the cancellation and forfeiture by the Participating Rightholders of their rights to receive certain milestone-based contingent payments under the Agilis Merger Agreement outlined above. Refer to Note 1 for further details regarding the Rights Exchange Agreement and Note 4 for fair value considerations.

The Company evaluated the acquisition of Agilis under ASU 2017-01, Business Combinations: Clarifying the Definition of a Business. Because the business contained both inputs and processes necessary to manage products and provide economic benefits directly to its owners and substantially all the value of the acquisition did not relate to a similar group of assets, it was determined that the acquisition represents a business combination. Therefore, the transaction has been accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the date of acquisition.

The fair value of consideration totaled approximately $533.7 million summarized as follows:


	Fair Value
Cash consideration	$	49,221
Fair value of PTC common stock issued		155,860
Estimated fair value of deferred consideration payable		38,100
Estimated fair value of contingent consideration payable		290,500
Total consideration	$	533,681

The Company recorded the assets acquired and liabilities assumed as of the date of acquisition based on the information available at that time. The Company finalized its accounting for the Agilis Merger during the three month period ended December 31, 2018 and recorded measurement period adjustments related to the finalization of the fair values assigned to the intangible assets and corresponding deferred tax liability, the contingent consideration, and the deferred consideration. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date of August 23, 2018, the measurement period adjustments recorded during the period from the acquisition date through December 31, 2018, and the final allocation of the purchase price as of December 31, 2018.


	Preliminary
	Allocation as of the
	acquisition date of		Measurement Period		Final Allocation as of
	August 23, 2018		Adjustments		December 31, 2018
Cash and cash equivalents	$	328	$	—	$	328
Prepaid expenses and other current assets		181		—		181
Fixed assets		153		—		153
Other assets		38		—		38
Intangible assets - IPR&D		480,000		96,500		576,500
Accounts payable and accrued expenses		(3,828)		—		(3,828)
Deferred tax liability		(115,200)		(6,832)		(122,032)
Fair value of net assets acquired	$	361,672	$	89,668	$	451,340
Goodwill		100,309		(17,968)		82,341
Total purchase price	$	461,981	$	71,700	$	533,681

The Company incurred approximately $1.7 million in acquisition related expenses which were included in selling, general and administrative expenses in the consolidated statement of operations as of December 31, 2018 . The results of Agilis’s operations have been included in the consolidated statements of operations beginning on the acquisition date of August 23, 2018. The net loss of Agilis included in the consolidated statement of operations for the period August 23, 2018 through December 31, 2018 was $8.7 million.

The fair value of the IPR&D was capitalized as of the acquisition date and accounted for as indefinite-lived intangible assets until disposition of the assets or completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the completion of the acquisition, these assets will not be amortized into earnings; rather, these assets will be subject to periodic impairment testing. Upon successful completion of the development efforts, the useful lives of the IPR&D assets will be determined and the assets will be considered definite-lived intangible assets and amortized over their expected useful lives to cost of sales.

The goodwill recorded is the excess of the purchase price of the net assets acquired net of any deferred tax adjustments. The Company currently has a deferred tax liability for the indefinite lived IPR&D intangible assets, which have no tax basis and, therefore, will not result in a future tax deduction. The goodwill is not deductible for income tax purposes.

Pro-Forma Financial Information Associated with the Agilis Acquisition (Unaudited)

The following table summarizes certain supplemental pro forma financial information for the twelve-month periods ended December 31, 2018 and 2017 as if the Agilis Merger had occurred as of January 1, 2017. The unaudited pro-forma financial information for the twelve-month period ended December 31, 2018 reflects adjustments of $1.7 million related to acquisition fees that are non-recurring in nature. There were no adjustments related to the twelve-month period ended December 31, 2017.


	Twelve Months Ended December 31,
	2018		2017
Revenues	$	264,734	$	194,392
Net loss attributable to common stockholders	$	(138,083)	$	(93,333)