Annual report pursuant to Section 13 and 15(d)

Business Combinations

v3.6.0.2
Business Combinations
12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Business Combinations
Business Combinations

On January 8, 2016, the Company acquired substantially all of the assets and liabilities of OMT. OMT is a biotechnology company engaged in the genetic engineering of animals for the generation of human therapeutic antibodies through its OmniAb® technology, which currently offers three transgenic animal platforms for license, including OmniRat®, OmniMouse® and OmniFlic®. The transaction, which was accounted for as a business combination, initially added 16 partnerships to the Company's portfolio and provides the Company with opportunities for further licensing and collaborations in the area. The aggregate acquisition consideration was $173.4 million, consisting of (in thousands, except per share amounts):

Cash consideration
$
96,006

Total share consideration:
 
  Actual number of shares issued
790

  Multiplied by: Ligand closing share price on January 8, 2016
98

Total share consideration
$
77,373

Total consideration
$
173,379


The acquisition consideration was allocated to the acquisition date fair values of acquired assets and assumed liabilities as follows (in thousands):

     Cash and cash equivalents
$
3,504

     Accounts receivable
5

     Income tax receivable
136

     Prepaid expenses and other current assets
1

     Deferred tax liabilities, net
(55,708
)
     Intangible asset with finite life - core technology
167,000

     Liabilities assumed
(1,528
)
     Goodwill
59,969

Total consideration
$
173,379



The fair value of the core technology, or OMT's OmniAb technology, was based on the discounted cash flow method that estimated the present value of a hypothetical royalty stream derived from the licensing of the OmniAb technology. These projected cash flows were discounted to present value using a discount rate of 15.5%. The fair value of the core technology is being amortized on a straight-line basis over the estimated useful life of 20 years.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed was $60.0 million and was recorded as goodwill, which is not deductible for tax purposes and is primarily attributable to OMT’s potential revenue growth from combining the OMT and Ligand businesses and workforce, as well as the benefits of access to different markets and customers.

The following table presents supplemental pro forma information for the three and twelve months ended December 31, 2016 and December 31, 2015, as if the acquisition of OMT had occurred on January 1, 2015 (in thousands except for income per share):

 
Three months ended
Twelve months ended
December 31,
December 31,
2016
 
2015
2016
 
2015
Revenue
$
38,185

 
$
24,571

$
111,449

 
$
80,365

Net (loss) income
$
(3,126
)
 
5,888

$
632

 
$
222,788

 
 
 
 
 
 
 
Basic (loss) income per share:
$
(0.15
)
 
$
0.30

$
0.03

 
$
11.26

Diluted (loss) income per share:
$
(0.15
)
 
$
0.27

$
0.03

 
$
10.50



The unaudited pro forma consolidated results include pro forma adjustments that assume the acquisition occurred on January 1, 2015. The primary adjustments include: (i) the $0.3 million and $0.9 million for the three and twelve months ended December 31, 2015, respectively, for share based compensation expenses related to the stock awards issued to the retained OMT employees after the acquisition, (ii) additional intangible amortization expense of  $2.1 million and $6.3 million was included in the three and twelve months ended December 31, 2015, respectively and (iii) a platform license fee of $3.0 million paid by OMT during the twelve months ended December 31, 2015. The license agreement was terminated upon acquisition by Ligand. The adjustments also include $2.5 million license revenue recognized by OMT from January 1, 2016 to the acquisition date. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2015. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings associated with the acquisition.