v3.26.3
Business Combination
 9 Months Ended
Sep. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combination Business Combination
Convergent Genomics, Inc.

On September 14, 2026, or the Closing Date, the Company acquired 100% of the outstanding equity interests of Convergent Genomics, Inc., or Convergent, a privately held company, through a merger under an Agreement and Plan of Merger, dated September 10, 2026, by and among the Company, Convergent, Compass Merger Sub, Inc., and Shareholder Representative Services LLC, which we refer to as the Convergent Acquisition. Convergent is a molecular diagnostics company that develops and commercializes UroAmp, a urine-based test for bladder cancers, including minimal residual disease, or MRD, monitoring in bladder cancer. The Convergent Acquisition adds Convergent’s UroAmp platform, including its proprietary urinary tumor DNA technology, to the Company’s development portfolio.

The total consideration for the Convergent Acquisition was $178.2 million, comprised of $154.7 million of cash consideration which includes amounts relating to the settlement of vested stock options of $13.1 million, amounts placed in escrow of $16.0 million, and net of cash acquired of $6.8 million. Other components of the cash consideration include $0.2 million deposited into a fund to cover the Convergent securityholders’ representative’s costs of administering post-closing matters and $1.4 million of seller transaction costs paid by the Company on behalf of Convergent. In addition to the cash consideration, the Company agreed to pay to Convergent securityholders up to $30.0 million in milestone-driven payments that are dependent on the achievement of reimbursement related milestones. The Company recognized a $23.5 million contingent consideration liability for the estimated fair value of the milestone payments which was included within within consideration transferred. The Company determined the estimated fair value of the contingent consideration based on a probability weighted expected return method. The fair value of the contingent milestone payments will be remeasured each quarter, with changes in fair value recognized within general and administrative expense.

In connection with the Convergent Acquisition, the Company deposited $16.0 million into escrow, consisting of $1.0 million to settle post-closing purchase price adjustments and $15.0 million to secure the Convergent securityholders’ indemnification obligations. The indemnification portion, net of pending claims, is released to the Convergent securityholders 12 months after the Closing Date. These escrowed amounts are included in the purchase price.

The Company also entered into retention arrangements with certain employees of Convergent, consisting of $1.6 million of cash retention and $2.7 million of restricted stock units. These arrangements are accounted for separately from the
Convergent Acquisition and recognized as post-combination compensation expense over the service period. The Company incurred $1.7 million of transaction costs related to the Convergent Acquisition during the three months ended September 30, 2026, which were recorded as general and administrative expense.

The Company included financial results of Convergent in its consolidated financial statements from the Closing Date, which contributed no revenue and $0.3 million of operating loss, including $0.2 million of intangible asset amortization during the three months ended September 30, 2026.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed in the Convergent Acquisition at the Closing Date (in thousands of dollars):

Amount
Assets acquired:
Cash and cash equivalents$6,750 
Accounts Receivable410 
Prepaid expenses and other current assets347 
Property, plant and equipment, net646 
Intangible assets, net96,880 
Total identifiable assets acquired105,033 
Accounts payable146 
Accrued Liabilities148 
Accrued employee transaction bonuses and promised option payment2,144 
Deferred revenue258 
Deferred tax liability12,569 
Net identifiable assets acquired89,768 
Goodwill88,421 
Total purchase price$178,189 

Based on the guidance provided in ASC 805, Business Combinations, the Company accounted for the Convergent Acquisition as a business combination in which the Company determined that Convergent was a business which combines inputs and processes to create outputs, and substantially all of the fair value of gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets.

The Company's purchase price allocation for the Convergent Acquisition is preliminary and subject to revision as additional information about the fair value of the assets and liabilities becomes available. The fair values assigned to tangible and intangible assets acquired, and liabilities assumed, are based on management’s estimates and assumptions and may be subject to change as additional information is received. The purchase price allocation involves significant judgment in estimating the fair values of acquired assets and liabilities, including intangible assets, goodwill and related tax impacts. As the analysis is finalized and additional information becomes available, these preliminary estimates may be revised during the measurement period, which could materially impact the Company's results of operations and financial position.

The intangible assets acquired included developed technology, trademarks and trade names and customer relationships. The preliminary fair value of the Company's intangible assets as of the acquisition date and the method used to value these assets as well as the estimated economic lives for amortizable intangible assets were as follows (in thousands of dollars, except useful life which is in years):
Fair ValueEstimated Useful LifeValuation Method
Intangible assets acquired:
Developed technology$95,900 15 yearsMulti-period excess earnings method
Trademarks and tradenames60 5 yearsRelief from royalty
Customer relationships920 5 yearsWith-and-without
Total intangible assets acquired$96,880 

The fair value of the finite-lived acquired developed technology intangible asset was determined using the multi-period excess earnings income approach. This approach determines fair value based on estimated cash flow projections which are discounted to present value using a risk-adjusted rate of return. Management’s estimated cash flow projections include significant assumptions, including forecasted revenue, the related revenue growth rates and the discount rate. The discount rate used to determine the fair value of the developed technology was 15%.

The amortization expense for all acquired intangible assets will be recognized on a straight-line basis and recorded within intangible asset amortization.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The Convergent Acquisition resulted in the recognition of $88.4 million of goodwill, which the Company believes primarily consists of expected synergies arising from the integration of the UroAmp platform with the Company's existing urologic cancer testing portfolio, anticipated future technologies and products, assembled workforce and expected growth opportunities. Goodwill created as a result of the Convergent Acquisition is not deductible for tax purposes.