NOTE 2. BUSINESS ACQUISITIONS

Omniome, Inc.

On September 20, 2021, we completed our acquisition of Omniome, Inc. (“Omniome”), a San Diego-based company developing a highly differentiated, proprietary short-read DNA sequencing platform capable of delivering high accuracy.

In connection with the acquisition, the contingent consideration of $200 million (composed of $100 million in cash and $100 million in shares of our common stock) is due upon the achievement of a milestone, defined as the first commercial shipment to a customer of a nucleotide sequencing platform, comprising both an instrument and related consumables, that utilizes SBB technology. The number of shares of stock to be issued will be determined using the volume-weighted average of the trading prices of our common stock for the twenty trading days ending with and including the trading day that is two days immediately prior to the achievement of the milestone. Of the $100 million in shares of our common stock to be issued as part of the milestone, $4.1 million was attributable to stock options issued by PacBio in replacement of Omniome’s unvested options as part of the transaction.

The contingent consideration is accounted for as a liability at fair value, with changes during each reporting period recognized in our Consolidated Statements of Operations and Comprehensive Loss. The fair value of the contingent consideration liability is calculated, with the assistance from a third-party valuation firm, using a scenario-based method which considers a range of possible outcomes and their assigned probabilities of occurrence. The potential outcomes are discounted to present value at a discount rate equal to the sum of the term-matched risk-free-interest rate plus PacBio’s credit spread.

The acquisition was accounted for as a business combination and, accordingly, the total fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values on the acquisition date. The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):


Cash and cash equivalents	$	15,338
Property and equipment, net		6,123
Operating lease right-of-use assets, net		18,095
In-process research and development ("IPR&D")		400,000
Goodwill		390,665
Other assets		3,203
Deferred income tax liability		(91,814)
Liabilities assumed		(26,821)
Total consideration transferred	$	714,789

We expect to finalize the purchase price allocation within 12 months of the acquisition date. We will recognize adjustments to the preliminary amounts with a corresponding adjustment to goodwill in the reporting period in which the adjustments to the preliminary amounts are determined, which we expect to be primarily due to the review of certain tax attributes.

Circulomics, Inc.

On July 20, 2021, we acquired Circulomics Inc. (“Circulomics”), a Maryland-based biotechnology company focused on delivering highly differentiated sample preparation products that enable genomic workflows.

We paid $29.5 million in cash in exchange for all outstanding shares of common stock of Circulomics. We allocated the consideration transferred to the identifiable assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the acquisition. The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):


Cash and cash equivalents	$	987
Property and equipment, net		214
Intangible assets		11,360
Goodwill		19,309
Other assets		467
Deferred income tax liability		(2,672)
Liabilities assumed		(118)
Total consideration transferred	$	29,547

We expect to finalize the purchase price allocation within 12 months of the acquisition date. We will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the twelve-month measurement period, if necessary, which we expect to be primarily due to the review of certain tax attributes.