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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Trapelo Health On April 7, 2021 (the “Trapelo Acquisition Date”), the Company completed the acquisition of a 100% ownership interest in Intervention Insights, Inc. d/b/a Trapelo Health (“Trapelo”), an information technology company focused on precision oncology. The purchase price consisted of (i) cash consideration of $35.6 million, which included a net adjustment of $0.6 million for estimated cash on hand of Trapelo and estimated working capital adjustments on the Trapelo Acquisition Date, and (ii) equity consideration of $29.2 million, consisting of 597,712 shares of the Company’s common stock, par value $0.001 per share, valued at $48.81 per share. The Company acquired control of Trapelo on the Trapelo Acquisition Date; therefore, the fair value of the common stock issued as part of consideration was determined on the basis of the closing market price of the Company’s common stock immediately prior to the Trapelo Acquisition Date. The Trapelo acquisition enhances the Company’s ability to provide customers clinical decision support to help answer complex questions related to precision oncology biomarker testing and treatment options as part of the Company’s comprehensive oncology offerings. The acquisition of Trapelo was determined to be a business combination and has been accounted for using the acquisition method. The purchase price and purchase price allocation are preliminary, are based upon management’s best estimates and assumptions, and are subject to future revision. The following table summarizes the estimated purchase consideration recorded for the acquisition of Trapelo, the estimated fair value of the net assets acquired and liabilities assumed, and the preliminary calculation of goodwill based on the excess of the estimated consideration transferred over the estimated fair value of the net assets acquired and liabilities assumed at the Trapelo Acquisition Date (in thousands, except per share data):
|  | Amount
Purchase consideration: |  |
Shares of common stock issued as consideration |  | 597,712 |
Per share value of common stock issued as consideration |  | $ | 48.81 |
Fair value of common stock at Trapelo Acquisition Date |  | $ | 29,174 |
Plus: Cash paid at closing |  | 35,591 |
Total purchase consideration |  | $ | 64,765 |
Allocation of the purchase consideration: |  |
Cash |  | $ | 713 |
Other current assets |  | 282 |
Identifiable intangible asset - marketing assets |  | 549 |
Identifiable intangible asset - developed technology |  | 19,040 |
Other long-term assets |  | 268 |
Total identifiable assets acquired |  | 20,852 |
Current liabilities |  | (751) |
Net identifiable assets acquired |  | 20,101 |
Goodwill |  | 44,664 |
Total purchase consideration |  | $ | 64,765 |
Due to the timing of the acquisition, the following are considered preliminary and are subject to change: •amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and •amount of goodwill pending the completion of the amounts for income tax assets and liabilities. The Company will finalize these amounts no later than one year from the acquisition date once it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified. There have been no such adjustments to the preliminary amounts disclosed above subsequent to the Trapelo Acquisition Date through December 31, 2021. The identified developed technology and marketing intangible assets are being amortized over ten years and four years, respectively, based on their estimated useful lives. The weighted-average amortization period in total for all classes of intangible assets from the Trapelo acquisition is 9.8 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The marketing intangible assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the marketing intangible assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the marketing intangible assets had the intangible assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation. The goodwill recognized, all of which is assigned to the Clinical Services segment, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. None of the goodwill resulting from the acquisition of Trapelo is expected to be deductible for income tax purposes. Acquisition and integration costs related to Trapelo were approximately $1.8 million for the year ended December 31, 2021 and are reported as general and administrative expenses in the Company’s Consolidated Statements of Operations. There were no such amounts recorded for the years ended December 31, 2020 and 2019. The results of operations of Trapelo are included in the Company’s Consolidated Financial Statements beginning on the Trapelo Acquisition Date. Revenue and net (loss) income of Trapelo included in the Consolidated Statements of Operations was not material for the period from the Trapelo Acquisition Date to December 31, 2021. No pro forma information has been included relating to the Trapelo acquisition, as this acquisition was not deemed to be material to the Company’s revenue or net (loss) income on a pro forma basis for the period from the Trapelo Acquisition Date to December 31, 2021. Inivata Limited On June 18, 2021 (the “Inivata Acquisition Date”), the Company completed the acquisition of the remaining equity interests in Inivata Limited, a private limited company incorporated in England and Wales (“Inivata”). Inivata is a global, commercial stage, liquid biopsy platform company. The acquisition follows a $25.0 million minority equity investment by the Company in Series C1 Preference Shares (the “Preference Shares” or “previously-held equity interest”) in Inivata in May 2020, at which time the Company also acquired a fixed price option to purchase the remainder of equity interests in Inivata for $390.0 million (the “Purchase Option”). The Company and Inivata also entered into a line of credit agreement in the amount of $15.0 million (the “Line of Credit”) in May 2020. For further details regarding the previously-held equity investment in Inivata, the Purchase Option and the Line of Credit, please refer to Note 8. Investment in Non-Consolidated Affiliate. The Inivata acquisition adds liquid biopsy platform technology, including minimal residual disease testing capabilities, to the Company’s comprehensive portfolio of oncology testing solutions. The purchase price consisted of cash consideration of $398.6 million, which included a net adjustment of $8.6 million for estimated cash on hand of Inivata and other adjustments on the Inivata Acquisition Date, and was funded through cash on hand and a private placement of equity. For further information regarding the private placement of equity, please refer to Note 11. Equity Transactions. Prior to the acquisition of the remaining equity interests in Inivata, the Company accounted for its previously-held equity interest and the Purchase Option in Inivata as equity securities without a readily determinable fair value. The equity interests were recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Therefore, the Company’s acquisition of control of Inivata on the Inivata Acquisition Date was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the Company used a discounted cash flow to derive a business enterprise value of Inivata in order to determine the acquisition-date fair value of the Company’s previously-held equity interest and Purchase Option in Inivata. To determine the fair value of the previously-held equity interest, the fair value of Inivata’s total equity was allocated to its various classes of equity based on the respective rights and privileges of each class of stock in liquidation. The business enterprise value and a Black-Scholes model were then used to determine the fair value of the remaining equity acquired through the exercise of the Purchase Option. The Purchase Option was recorded at the fair value at the Inivata Acquisition Date based on its settlement value. This resulted in fair values of $64.9 million in Preference Shares and a $74.3 million Purchase Option, immediately prior to the acquisition. On the Inivata Acquisition Date, the $10.3 million outstanding under the Line of Credit extended by the Company to Inivata was effectively settled as part of the acquisition of Inivata at the $15.0 million principal amount and was recorded as part of the consideration transferred in the acquisition. The Company recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, within the Company’s Consolidated Statements of Operations of $109.3 million for the year ended December 31, 2021, including a measurement period adjustment of $17.8 million recorded for the year ended December 31, 2021, for the excess of the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and Line of Credit over their carrying values. For further details regarding the previously-held equity investment and purchase option in Inivata, please refer to Note 8. Investment in Non-Consolidated Affiliate. The fair value and allocation of the business combination are preliminary, are based upon management’s best estimates and assumptions, and are subject to future revision. The following table summarizes the preliminary calculation of goodwill based on the excess of the estimated fair value of the consideration transferred including the fair value of the Line of Credit and the estimated fair value of the previously-held equity interest and Purchase Option over the estimated fair value of the net assets acquired and liabilities assumed at the Inivata Acquisition Date and includes measurement period adjustments recorded during 2021 (in thousands):
|  | June 18, 2021 (as initially reported) |  | Measurement Period Adjustments |  | June 18, 2021 (as adjusted)
Fair value of business combination: |  |  |  |  |  |
Cash paid at closing |  | $ | 398,594 |  |  | $ | — |  |  | $ | 398,594 |
Fair value of Line of Credit |  | 15,000 |  |  | — |  |  | 15,000 |
Fair value of consideration transferred |  | $ | 413,594 |  |  | $ | — |  |  | $ | 413,594 |
Fair value of previously-held equity interest(1) |  | 62,919 |  |  | 1,987 |  |  | 64,906 |
Fair value of Purchase Option(1) |  | 58,537 |  |  | 15,763 |  |  | 74,300 |
Total fair value of business combination |  | $ | 535,050 |  |  | $ | 17,750 |  |  | $ | 552,800 |
Allocation of the fair value business combination: |  |  |  |  |  |
Cash |  | $ | 14,068 |  |  | $ | — |  |  | $ | 14,068 |
Other current assets(2) |  | 5,366 |  |  | 345 |  |  | 5,711 |
Property and equipment |  | 1,753 |  |  | — |  |  | 1,753 |
Identifiable intangible assets - developed technology(1) |  | 302,982 |  |  | (11,796) |  |  | 291,186 |
Identifiable intangible assets - trademarks(1) |  | 31,700 |  |  | (226) |  |  | 31,474 |
Identifiable intangible asset - trade name(1) |  | 2,322 |  |  | 253 |  |  | 2,575 |
Other long-term assets |  | 6,240 |  |  | — |  |  | 6,240 |
Total identifiable assets acquired |  | 364,431 |  |  | (11,424) |  |  | 353,007 |
Current liabilities(3) |  | (4,241) |  |  | (1,650) |  |  | (5,891) |
Deferred income tax liabilities(4) |  | (64,680) |  |  | 3,686 |  |  | (60,994) |
Other long-term liabilities |  | (4,690) |  |  | — |  |  | (4,690) |
Net identifiable assets acquired |  | 290,820 |  |  | (9,388) |  |  | 281,432 |
Goodwill |  | 244,230 |  |  | 27,138 |  |  | 271,368 |
Total fair value of business combination |  | $ | 535,050 |  |  | $ | 17,750 |  |  | $ | 552,800 |
(1) Measurement period adjustment primarily relates to a change in estimated taxes based on jurisdictions in which forecasted profits are expected to be generated. (2) Measurement period adjustment relates to the recognition of a credit which Inivata is entitled to claim for certain research and development expenditures. (3) Measurement period adjustment relates to a change in legal settlement liabilities. (4) Measurement period adjustment relates to a change in estimated deferred income tax liabilities as a result of the reduction in the amounts for intangible assets and related future amortization and the change in legal settlement liabilities. Due to the timing of the acquisition, the following are considered preliminary and are subject to change: •amounts for intangible assets, property and equipment, other current assets, current liabilities, and other long-term liabilities pending finalization of the valuation; •amounts for income tax liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; •amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed and the reporting unit allocation of the goodwill; and •the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and the Line of Credit, and the gain on investment in and loan receivable from non-consolidated affiliate. The Company will finalize these amounts no later than one year from the acquisition date, once it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified. The identified developed technology intangible assets and the trademark intangible assets are both being amortized over fifteen years, and the trade name intangible asset is being amortized over five years, based on their estimated useful lives. The weighted-average amortization period in total for all classes of intangible assets from the Inivata acquisition is 14.9 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The trademarks and trade name assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the trademarks and trade name assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the trademarks and trade name assets had the assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation. The goodwill recognized, of which $238.4 million and $33.0 million is assigned to the Clinical Services and Pharma Services segments, respectively, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of liquid biopsy technology for oncology testing. The recording of amortizable intangibles has given rise to a deferred tax liability upon the acquisition of Inivata which increased goodwill by $61.0 million. None of the goodwill resulting from the acquisition of Inivata is expected to be deductible for income tax purposes. Acquisition and integration costs related to Inivata were $-13.9 million for the year ended December 31, 2021 and are reported as general and administrative expenses in the Company’s Consolidated Statements of Operations. There were no such amounts for the years ended December 31, 2020 and 2019. The results of operations of the Company’s Inivata subsidiary are included in the Company’s Consolidated Financial Statements beginning on the Inivata Acquisition Date. For the period from the Inivata Acquisition Date to December 31, 2021, the Inivata subsidiary revenue was $1.5 million, all of which was recorded in Pharma Services revenue. The Inivata subsidiary net loss was $27.6 million for the period from the Inivata Acquisition Date to December 31, 2021. The following unaudited pro forma information has been provided for illustrative purposes only and is not necessarily indicative of results that would have occurred had the acquisition of Inivata occurred on January 1, 2020, nor are they necessarily indicative of future results (in thousands):
|  | For the year ended December 31,
|  | 2021 |  | 2020
Net revenue |  | $ | 484,231 |  |  | $ | 444,884 |
Net loss |  | $ | (129,251) |  |  | $ | (65,387) |
These unaudited pro forma results represent the combined results of operations of the Company and Inivata, on an unaudited pro forma basis, for the period in which the acquisition of Inivata occurred and the prior reporting period as though the companies had been combined as of the beginning of the earliest period presented. Therefore, the unaudited pro forma consolidated results have been prepared by adjusting the Company’s historical results to include the acquisition of Inivata as if it occurred on January 1, 2020. Acquisition-related transaction costs incurred by Inivata of $11.0 million are included in net loss as if incurred on January 1, 2020. Acquisition-related transaction and retention costs incurred by the Company of $13.9 million are included in net loss as if incurred on January 1, 2020. These unaudited pro forma consolidated historical results exclude $109.3 million and $4.0 million of gain on investment in and loan receivable from non-consolidated affiliate, net, recorded for the year ended December 31, 2021 and 2020, respectively.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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