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Fair value measurement and Other non-operating (losses) / gains

12 Months Ended

Dec. 31, 2022

Fair value measurement and Other non-operating (losses) / gains

Fair value measurement and Other non-operating (losses) / gains

7. Fair value measurement and Other non-operating (losses) / gains

The Company measures certain financial assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting.

The carrying amount of cash and cash equivalents, accounts receivable from licensing and collaboration partners, prepaid expenses, other assets, accounts payable, accrued expenses and other current liabilities reflected in the consolidated balance sheets approximate their fair values due to their short-term maturities.

The Company’s material financial assets include cash and cash equivalents, restricted cash and investment securities. Cash and cash equivalents and restricted cash are measured at fair value using Level 1 inputs. Restricted cash is included within “Other non-current assets” within the consolidated balance sheets. Investment securities are measured at amortized cost.

The following table sets forth the balances and changes in fair values of liabilities that are measured at fair value using Level 3 inputs:


					Derivative
		Contingent			financial
		consideration			instruments			Total

		(in thousands)
Balance at December 31, 2019		$	—		$	3,075		$	3,075
Net gains recognized in profit or loss			—			(2,300)			(2,300)
Derecognition of BMS warrants			—			(796)			(796)
Recognition of derivative financial liability of CoC-payment			—			2,613			2,613
Currency translation effects			—			53			53
Balance at December 31, 2020		$	—		$	2,645		$	2,645
Amount recorded for contingent consideration on Acquisition Date of Corlieve			23,950			—			23,950
Net losses recognized in profit or loss			6,683			160			6,843
Currency translation effects			(1,091)			—			(1,091)
Balance at December 31, 2021		$	29,542		$	2,805		$	32,347
Net losses recognized in profit or loss			7,080			(2,760)			4,320
Currency translation effects			(1,306)			(45)			(1,351)
Balance at December 31, 2022		$	35,316		$	—		$	35,316

Contingent consideration

The Company is required to pay up to EUR 178.8 million ($191.4 million at the December 31, 2022 foreign exchange rate) to the former shareholders of Corlieve upon the achievement of contractually defined milestones in connection with the Company’s acquisition of Corlieve (refer to Note 3 “Corlieve transaction”). The Company recorded a liability for the fair market value of the contingent consideration of EUR 20.2 million ($24.0 million) at the Acquisition Date. The fair market value was determined using unobservable initial inputs with respect to (i) the probability of achieving the relevant milestones, or POS, (ii) the estimated timing of achieving such milestones, and (iii) the interest rate used to discount the payments. The Company determined the fair market value of the contingent consideration by calculating the probability-adjusted payments based on each milestone’s probability of achievement. The probability-adjusted payments were then discounted to present value using a discount rate representing the Company’s credit risk. This discount rate was determined using the effective interest rate of the Company’s existing debt facility adjusted for difference in maturity dates based on market data on effective yields for U.S. bonds with a CCC credit rating.

The fair value of the contingent consideration as of December 31, 2022 was $35.3 million (2021: $29.5 million) using discount rates ranging from 14.0% to 14.4% (December 31, 2021: 10.9% to 11.9%) as well as a 66.0% (December 31, 2021: 55.0%) likelihood of AMT-260 advancing into clinical development by no later than late 2023. If as of December 31, 2022 the Company had assumed a 100% likelihood of AMT-260 advancing into clinical development, then the fair value of the contingent consideration would have increased to $48.8 million. If as of December 31, 2022 the Company assumed that it would discontinue development of the AMT-260 program, then the contingent consideration would be released to income. Changes in fair value of the contingent liability are recognized within research and development expenses in the consolidated statements of operations.

As of December 31, 2022, the Company classified $26.0 million of the total contingent consideration of $35.3 million as current liabilities. The balance sheet classification between current and non-current liabilities is based upon the Company’s best estimate of the timing of settlement of the remaining relevant milestones.

Derivative financial instruments

The Company recorded the following results in other non-operating (losses) / gains related to the changes in the fair value of derivative financial instruments.


		Years ended December 31,
		2022			2021			2020

		(in thousands)
Other non-operating gains:
Derivative gains		$	2,760		$	—		$	483
Total other non-operating gains:			2,760			—			483
Other non-operating losses:
Derivative losses			—			(160)			—
Other non-operating (losses) / gains, net		$	2,760		$	(160)		$	483

Derivative financial instruments BMS

Pursuant to the BMS CLA, the Company in 2015 granted BMS two warrants that were subsequently terminated in connection with the amendment to the BMS CLA on December 1, 2020. The Company granted to BMS:

●

A warrant that allowed BMS to purchase a specific number of the Company’s ordinary shares such that its ownership would have equaled 14.9% immediately after such purchase (“1^st warrant”). The 1^st warrant could have been exercised on the later of (i) the date on which the Company received from BMS the Target Designation Fees (as defined in the BMS CLA) associated with the first six new targets (a total of seven Collaboration Targets); and (ii) the date on which BMS designated the sixth new target (the seventh Collaboration Target); and

●

A warrant that allowed BMS to purchase a specific number of the Company’s ordinary shares such that its ownership would have equaled 19.9% immediately after such purchase (“2^nd warrant” and together with 1^st warrant, the “warrants”). The warrant could have been exercised on the later of (i) the date on which the Company received from BMS the Target Designation Fees associated with the first nine new targets (a total of ten Collaboration Targets); and (ii) the date on which BMS designated the ninth new target (the tenth Collaboration Target).

On December 1, 2020, the Company derecognized the warrants when these were terminated in accordance with the amended BMS CLA. During the year ended December 31, 2020, the Company recognized a $3.1 million gain in non-operating (losses) / gains related to the fair value changes of the BMS warrants, which includes $0.8 million from the derecognition of the BMS warrants on December 1, 2020.

On December 1, 2020, as part of the amended BMS CLA, the Company and BMS agreed that upon the consummation of a change of control transaction of uniQure that occurs prior to December 1, 2026 or BMS’ delivery of a target cessation notice for all four Collaboration Targets, the Company (or its third party acquirer) shall pay to BMS a one-time, non-refundable, non-creditable cash payment of $70.0 million, provided that (x) if $70.0 million is greater than five percent (5.0%) of the net proceeds (as contractually defined) from such change of control transaction, the payment shall be an amount equal to five percent of such net proceeds, and (y) if $70.0 million is less than one percent of such net proceeds, the change of control payment shall be an amount equal to one percent of such net proceeds (“CoC-payment”).

The Company determined that the CoC-payment should be recorded as a derivative financial liability as of the December 1, 2020 initial recognition and that subsequent changes in the fair market value of this derivative financial liability should be recorded in profit and loss. The fair market value of the derivative financial liability is materially impacted by the probability that market participants assign to the likelihood of the occurrence of a change of control transaction that would give rise to a CoC-payment. This probability represents an unobservable input. The Company determined the fair market value of the derivative financial liability by using a present value model based on expected cash flow. The expected cash flows are materially impacted by the probability that market participants assign to the likelihood of the occurrence of a change of control transaction within the biotechnology industry. The Company estimated this unobservable input using the best information available as of December 2021. The Company obtained reasonably available market information that it believed market participants would use in determining the likelihood of the occurrence of a change-of control transaction within the biotechnology industry. Selecting and evaluating market information involves considerable judgment and uncertainty. Based on all such information and its judgment, the Company estimated that the fair market value of the derivative financial liability (presented within “Other non-current liabilities”) as of December 31, 2021 was $2.8 million. The Company recorded a $0.2 million loss in the year ended December 31, 2021 related to an increase in the fair market value of the derivative financial liability and a $2.6 million loss in the year ended December 31, 2020 related to the initial recognition of this derivative financial liability

The Company determined the fair market value of the derivative financial liability to be nil as of December 31, 2022 as no change of control transaction had been consummated prior to the termination of the amended BMS CLA on February 21, 2023. The Company considered the probability of a change of control transaction occurring before the Termination Date to be remote. This resulted in the derecognition of the derivative financial liability for the year ended December 31, 2022.

Accordingly, the Company recorded a $2.8 million gain within “Other non-operating (losses) / gains” in the year ended December 31, 2022

Other

As of December 31, 2022, the Company recorded $0.3 million liability related to consideration for post-acquisition services, presented within Other non-current liabilities in connection with the Company’s acquisition of Corlieve (December 31, 2021: $0.8 million).

Investment securities

Refer to Note 5 “Investment securities” for the fair value of the investment securities as of December 31, 2022.

Other

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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