Business Combinations and Asset Acquisitions

12 Months Ended

Dec. 31, 2019

Business Combinations and Asset Acquisitions

Celgene Shanghai

On August 31, 2017, BeiGene HK acquired 100% of the equity interests of Celgene Shanghai, a wholly-owned subsidiary of Celgene Holdings East Corporation established under the laws of the PRC. Celgene Shanghai was in the business of, among other things, providing marketing and promotional services in connection with certain pharmaceutical products manufactured by BMS. The name of Celgene Shanghai has been changed to BeiGene Pharmaceutical (Shanghai).

On July 5, 2017, BeiGene and a wholly-owned subsidiary of BMS entered into a license agreement pursuant to which BeiGene was granted the right to exclusively distribute and promote BMS's approved cancer therapies, ABRAXANE, REVLIMID, and VIDAZA (the “Distribution Rights”), in China excluding Hong Kong, Macau and Taiwan (the “China License Agreement”). The China License Agreement became effective on August 31, 2017, contemporaneously with the closing of the acquisition of Celgene Shanghai and the A&R PD-1 License Agreement. The Company subsequently assigned the China License Agreement to its wholly-owned subsidiary, BeiGene Switzerland.

The Company evaluated the acquisition of the Celgene Shanghai equity and the distribution rights acquired under ASU No. 2017-1, Business Combinations: Clarifying the Definition of a Business. Because substantially all of the value of the acquisition did not relate to a similar group of assets and the business contained both inputs and processes necessary to manage products and provide economic benefits directly to its owners, it was determined that the acquisition represents a business combination. Therefore, the transaction has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

Share subscription agreement

On August 31, 2017, the Company issued 32,746,416 of its ordinary shares to BMS for an aggregate purchase price of $150,000, or $4.58 per ordinary share, or $59.55 per ADS, pursuant to a subscription agreement dated July 5, 2017 by and between the Company and BMS (the “Share Subscription Agreement”). See Note 20 for further discussion of the Share Subscription Agreement.

Determination of purchase price

The purchase price of Celgene Shanghai was calculated as $28,138, and was comprised of cash consideration of $4,532 and non-cash consideration of $23,606, related to the discount on ordinary shares issued to BMS in connection with the Share Subscription Agreement. The discount was a result of the increase in fair value of the Company’s shares between the fixed price of $59.55 per ADS in the Share Subscription Agreement and the fair value per ADS as of the date of issuance, August 31, 2017. The following summarizes the purchase price in the business combination (in thousands).



	Purchase Price
Cash paid to acquire Celgene Shanghai	$	4,532
Discount on Share Subscription Agreement	23,606
Total purchase price	$	28,138

Purchase price allocation

The following table summarizes the fair values of assets acquired and liabilities assumed (in thousands):



	Amount
Cash and cash equivalents	$	24,448
Other current assets	518
Property and equipment, net	204
Intangible assets	7,500
Deferred tax asset	1,069
Total identifiable assets	33,739

Current liabilities	(5,710		)
Total liabilities assumed	(5,710		)

Goodwill	109
Total fair value of consideration transferred	$	28,138

The goodwill resulting from the business combination is primarily attributable to the assembled workforce of the acquired business. The goodwill attributable to the business combination is not deductible for tax purposes.

The following summarizes the business combination as presented on the statement of cash flows (in thousands):



Investing activities
Cash acquired	$	24,448
Cash paid to acquire Celgene Shanghai	(4,532		)
Cash acquired in business combination, net of cash paid	$	19,916

Non-cash activities
Discount provided on sale of ordinary shares for business combination	$	(23,606	)

BeiGene Pharmaceuticals (Guangzhou) Co., Ltd.

On September 21, 2018, BeiGene (Guangzhou) Co., Ltd. ("BeiGene Guangzhou") acquired 100% of the equity interests of Baiji Shenzhou (Guangzhou) Pharmaceuticals Co., Ltd. (formerly known as Huajian Pharmaceuticals Co., Ltd.), which subsequently changed its name to BeiGene Pharmaceuticals (Guangzhou) Co., Ltd., a pharmaceutical distribution company, for total cash consideration of $612, including transaction costs of $59. The acquisition was concentrated in a single identifiable asset, a drug distribution license, and thus the Company has concluded that the transaction is an asset acquisition as it does not meet the accounting definition of a business combination. The total cost was allocated to the drug distribution license and corresponding deferred tax liability, resulting in a $816 intangible asset for the license and a deferred tax liability of $204.

Beijing Innerway Bio-tech Co., Ltd.

On October 4, 2018, BeiGene HK completed the acquisition of 100% of the equity interests of Beijing Innerway Bio-tech Co., Ltd., the owner of the Company's research, development and office facility in Changping, Beijing, China, for total cash consideration of $38,654. The acquisition was concentrated in a single identifiable asset or group of assets, the building and associated land use right, and thus the Company has concluded that the transaction is an asset acquisition as it does not meet the accounting definition of a business combination. The total cost of the transaction of $38,865, which includes transaction costs

of $211, was allocated based on the relative fair values of the net assets acquired, as follows:



	Amount
Land use right	$	33,783
Building	15,874
Deferred tax liability	(11,221		)
Other	429
Total cost	38,865