7 Business combination

7 Business combination

7.1 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 U.S. 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 has finalized the purchase price allocation. The table below shows the final 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 purchase price allocation mainly relate to identification of intangible assets such as the technology platform, research knowledge, standard operating procedures, existing IP projects 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. No material acquisition related costs have been recorded in the period ending 31 December 2019.

 

 

 

 

€ million

Initial opening balance sheet

Adjustments due to initial purchase price allocation

Adjusted opening balance sheet

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

 

 

 

 

7.2 Investment in innovative technologies to treat neurodegenerative diseases

On October 4, 2019, UCB signed an option agreement for an investment in neurological diseases.

Although the option has not been exercised yet, UCB has assessed, based upon the guidance in IFRS 10, that it has control over the investment from the date of entering the option agreement through its potential voting rights. Therefore, the investment accounts have been consolidated in UCB’s consolidated financial statements as from the date of signing the option agreement.

The total consideration in case the option will be exercised by UCB, amounts to € 20 million of which € 18 million is contingent on future milestones. The fair value of the contingent consideration is estimated at € 12 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 investment date. The total liability is presented within Non-current ‘Trade and other liabilities’ for an amount of € 11 million and within Current ‘Trade and other liabilities’ for an amount of € 3 million. UCB has finalized the purchase price allocation. The table below shows the final amount for the goodwill acquired. 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. No other assets or (contingent) liabilities were identified. Investment related costs for an amount of € 1 million were recorded in the period ending 31 December 2019.

 

 

 

 

€ million

Initial opening balance sheet

Adjustments due to purchase price allocation

Adjusted opening balance sheet

Total investment value

14

0

14

Cash consideration to be paid

2

 

2

Contingent consideration

12

 

12

Recognized amounts of identifiable assets and liabilities

0

0

0

Goodwill

14

0

14