Company: PACB
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001299130-25-000102
Chunk: 214

Company: PACIFIC BIOSCIENCES OF CALIFORNIA, INC.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 8
Chunk 214
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 combination of an income approach and a market approach to determine the fair value of the reporting unit. The income approach utilized estimated discounted cash flows, while the market approach utilized comparable company information. Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0%. The discount rate was based on the weighted average cost of capital, determined using market, industry data, and related risk factors. The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and significant management judgment. The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value. An increase of 100 basis points to the discount rate used in our assessment would have resulted in a change in the fair value of the reporting unit of approximately $75 million. The assessed fair value was deemed reasonable based on a market capitalization reconciliation and a supportable control premium.Changes in our future operating results, cash flows, share price, market capitalization or discount rates used when conducting future goodwill impairment tests could affect the implied fair value of goodwill and may result in additional impairment charges in the future.Intangible AssetsIntangible assets include developed technology, customer relationships, and acquired in-process research and development ("IPR&D"). In connection with the Apton acquisition in August 2023, we allocated $55.0 million of the purchase price to IPR&D. This asset is considered indefinite-lived until the associated research and development activities are either completed or abandoned, and is tested for impairment annually and more 

Q1 Fiscal 2025 Form 10-Q13

frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.We recognized a $40.0 million impairment charge in the fourth quarter of 2024 as a result of a quantitative interim impairment test.Based on our decision to cease development of the high-throughput short-read sequencing platform, which would utilize the IPR&D, and the resulting changes to the expected future cash flows, among other factors, we concluded  that it was more likely than not that the fair value of the IPR&D was less than its carrying amount, requiring an interim impairment assessment. Using a discounted cash flow model under the income approach, we determined the fair value was below carrying value and recorded a $15.0 million impairment charge. The decline in the fair value of the IPR&D below its carrying amount as of March 31, 2025 resulted primarily from changes in the timing of