7 Business combination

7.1 Acquisition of Beryllium LLC

On 2 June 2017, UCB increased its 27% equity stake in Beryllium LLC to full ownership. UCB has already been successfully partnering with Beryllium LLC for several years and acquired a 27% stake in the company in 2014. UCB increased its equity stake to 100% of the issued and outstanding shares of Beryllium LLC by paying a net amount of € 7 million to Beryllium LLC’s external shareholders, after € 7 million was reimbursed to UCB as consideration for the series A preferred units held by UCB in Beryllium LLC since 2014, including accrued dividends. UCB finalized the purchase price allocation (see table below). Final goodwill represents expected synergies with UCB’s super network and core antibody and small molecule discovery approach, as well as skilled workforce. Goodwill is not expected to be tax deductible. Adjustments due to the purchase price allocation mainly relate to identification of intangible assets such as the micro RNA targeting platform, customers contracts, research knowledge and standard operating procedures as well as to the identification of deferred tax assets as part of the tax losses carried forward by Beryllium LLC that are assessed as being recoverable in future years. The fair value of acquired receivables is estimated at € 1 million. All contractual cash flows are expected to be collected. No contingent liabilities have been identified. Acquisition related costs for an amount of € 1 million have been recorded under Other Expenses in 2017. No material additional acquisition related costs have been recorded in 2018. No major gain or loss was recognized as a result of the re-measuring to fair value of the equity interest in Beryllium LLC held by UCB before the business combination.

 

 

 

 

€ million

Initial opening balance sheet

Adjustments due to purchase price allocation

Adjusted opening balance sheet

Total acquisition value

7

0

7

Cash consideration paid (net)

7

 

7

Contingent consideration

0

 

0

Settlement of receivable on Beryllium LLC at recorded amount

4

 

4

Fair value of previously held investment

4

 

4

Recognized amounts of identifiable assets acquired and liabilities assumed

-2

-4

-6

Non-current assets

-2

-5

-7

Current assets

-2

 

-2

Non-current liabilities

2

-1

1

Current liabilities

0

2

2

Goodwill

13

-4

9

 

 

 

 

7.2 Acquisition of Element Genomics Inc.

On 30 March 2018, UCB acquired Element Genomics Inc. Element Genomics Inc. is a small-size biotech spin-off from Duke University with cutting-edge expertise in the area of functional genomics. The Company that was originally incorporated on 13 August 2015, is driven by a team of 12 scientists based in downtown Durham, North Carolina, in the US. Element’s proven technologies and expertise will enhance UCB’s own research capabilities thereby bringing more value to UCB’s early pipeline. At the core of the Element Genomics platform is a suite of methods to improve the understanding of genome structure and function. This includes ‘CRISPR editing technologies’ which can be used to analyze how mutations affect key pathways and disease as well as investigate and modulate regulatory elements, chromatin structure, and epigenetics to determine effects on gene expression and disease.

UCB acquired 100% of the issued and outstanding shares of Element Genomics Inc. for a total consideration of € 24 million of which € 10 million is contingent on future milestones. The fair value of the contingent consideration is estimated at € 9 million. The estimate takes into account the assumed likelihood and timing of achieving the arrangement’s milestones. No changes were necessary to this estimate since acquisition date. The liability is presented within non-current ‘Trade and other liabilities’. Upon acquisition, an amount of € 6 million was paid by UCB to the holders of a convertible note. As this reimbursement was triggered by a change-in-control clause as foreseen in the terms of the convertible note agreement when the notes were issued by Element Genomics Inc. in 2016, this payment is not considered as being part of the consideration transferred to the sellers in exchange for control of Element in accordance with the provisions in IFRS 3 Business combinations.

UCB still needs to finalize the purchase price allocation but the table below shows the initial amounts for the net assets acquired and goodwill. The goodwill is attributable to expected synergies with UCB’s biotech research activities as well as skilled workforce. Goodwill is not expected to be tax deductible. Adjustments due to the initial purchase price allocation mainly relate to identification of intangible assets such as the technology platform, research knowledge and standard operating procedures as well as deferred tax assets resulting from tax losses carried forward by Element. No material receivables were acquired as part of the business combination. No contingent liabilities have been identified. Acquisition related costs for an amount of € 1 million have been recorded under Other Expenses in the period ending 31 December 2018. The amounts of revenue and profit or loss of Element Genomics Inc. included in the consolidated income statement for the reporting period since acquisition are not material. The amounts of revenue and profit or loss for Element Genomics Inc. assuming the acquisition date would have been 1 January 2018 are also not material.

 

 

 

 

€ million

Initial opening balance sheet

Adjustments due to initial purchase price allocation

Adjusted opening balance sheet (not final yet)

Total acquisition value

17

0

17

Cash consideration paid

13

 

13

Amount paid to holders of convertible note

-6

 

-6

Closing indemnity hold back amount

1

 

1

Contingent consideration

9

 

9

Recognized amounts of identifiable assets acquired and liabilities assumed

6

-1

5

Non-current assets

 

-1

-1

Current assets

-1

 

-1

Non-current liabilities

 

 

0

Current liabilities

1

 

1

Convertible note

6

 

6

Goodwill

23

-1

22