Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2022



On March 10, 2022, the Company completed the acquisition of all the outstanding shares of VCN Biosciences S.L. (the “VCN Shares”) from the shareholders of VCN. VCN is a private, clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. VCN’s lead product candidate, VCN-01, is being studied in clinical trials for pancreatic cancer and retinoblastoma. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment. Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. VCN has the rights to four exclusive patents for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL) and with Hospital Sant Joan de Deu (HSJD), with a number of additional patents pending. As consideration for the purchase of the VCN Shares, the Company paid $4,700,000 to Grifols Innovation and New Technologies Limited the owner of approximately 86% of the equity of VCN, and issued to the remaining sellers and certain key employees and consultants of VCN 26,395,303 shares of its common stock In addition to the consideration described above, under the terms of the Purchase Agreement, the Company assumed up to $2,400,000 of existing liabilities of VCN and has agreed to make cash payments of up to $70.25 million to Grifols upon the achievement of certain clinical and commercialization milestones.

In anticipation of the Acquisition, prior to the Closing, the Company loaned VCN $417,000 to help finance the costs of certain of VCN’s research and development activities. At the Closing, VCN and Grifols entered into a sublease agreement for the sublease by VCN of laboratory and office space as well as a transitional services agreement. As a Purchase post-Closing covenant, Synthetic has agreed to commit to fund VCN’s research and development programs, including but not limited to VCN01 in a pancreatic ductal adenocarcinoma PDAC phase 2 trial, VCN01 in a retinoblastoma (RB) phase 2/3 trial and necessary G&A within a budgetary plan of approximately $27.8 million.


As of March 31, 2022, the fair value of the contingent consideration was $12.2 million. Total consideration including cash, restricted shares and contingent consideration was valued at $23.9 million.

Purchase consideration consisted of the following:

Cash paid at Closing



Receivable from VCN "effectively settled"



FV of common shares issued



FV of contingent consideration





We acquired VCN due to its proven track record of being a research and development growth engine capable of fueling sustainable growth, to expand our research and development pipeline, and to diversify our potential future revenue opportunities.

The preliminary allocation of the fair value of the VCN acquisition is shown in the table below.


Estimated fair value

($in thousands)

Cash and cash equivalents






Property and equipment



In-process research and development intangible asset






Other assets


Deferred tax assets (liabilities), net



Accounts payable



Accrued expenses



Accrued employee benefits



Loan Payable-current



Other long-term liabilities



Total purchase consideration



The above allocation of the purchase price is based upon certain preliminary valuations and other analyses that have not been finalized as of the date of this filing. Any changes in the estimated fair values of the purchase consideration and of the net assets recorded for this business combination upon the finalization of more detailed analyses of the facts and circumstances that existed at the date of the transaction may change the amount and allocation of the purchase price. As such, the purchase price amount and allocations for this transaction are preliminary estimates including in-process research and development, goodwill and contingent consideration, which may be subject to change within the measurement period.

The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the acquisition, we recognized $21.7 million of indefinite-lived in-process research and development intangible assets.

Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities. Goodwill of $5.8 million was established as a result of the Acquisition.

VCN operations recorded a net loss of $197,000 from the date of acquisition through March 31, 2022.


Pro Forma Consolidated Financial Information (unaudited)

The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the VCN acquisition had been completed as of January 1, 2021.

Quarter Ended March 31,

(in thousands)





Net revenues



Net loss





Transaction Costs

In conjunction with the Acquisition, the Company incurred approximately $1.2 million and 0.2 million in 2021 and 2022, respectively, in transaction costs, which were expensed as general, and administrative expense in the consolidated statement of operations.