Merck & Co. Takes $2.9-Billion Write-Down on Hep C Drug Candidate
Merck & Co. has reported that it is taking a $2.9-billion impairment charge on a hepatitis C drug candidate that the company gained through its $3.85-billion acquisition of Idenix Pharmaceuticals in 2014 based on a lower than expected valuation of the drug, according to a company filing with the US Securities and Exchange Commission (SEC).
The charge, which will come to $1.9 billion after taxes, is related to a research program for uprifosbuvir, a nucleotide prodrug in clinical development that is being evaluated for treating hepatitis C virus (HCV) infection. Merck took the write-down following a market evaluation that put the drug’s value at only $240 million. Recent changes to the product profile and changes to Merck’s expectations for pricing and market opportunity constituted “a triggering event that required the company to evaluate the uprifosbuvir intangible asset for impairment,” the company stated in its SEC filing.
As a result, Merck’s previously reported fourth quarter 2016 generally accepted accounting principles (GAAP) diluted earnings per share (EPS) were reduced from $0.42 to a loss of $0.22, and full-year 2016 GAAP EPS were reduced from $2.04 to $1.41, reflecting the impact of the impairment charge, partially offset by other adjustments which increased GAAP EPS for both the fourth and full year of 2016 by $0.04. Merck’s previously reported fourth quarter and full year 2016 non-GAAP EPS remain unchanged.
Merck is evaluating options for the uprifosbuvir clinical development program and will monitor the remaining $240 million intangible asset for further impairment.
In January 2016, the company received US Food and Drug Administration approval for Zepatier (elbasvir and grazoprevir), a combination HCV regimen for genotype 1 or genotype 4 patients. Zepatier had 2016 sales of $555 million.
Merck hepatitis C franchise also includes: PegIntron (peginterferon alfa-2b) and Victrelis (boceprevir) with 2016 of $182 million and sales of Viictrelis were characterized as de minimus (too trivial for consideration) in 2016 by Merck.