Breaking: Kenilworth Takes A Pre-Tax $2.9 Billion Charge — On HCV Prodrug Candidate Acquired From Idenix…

untitled Ouch. Even though it is only $1.9 billion on an after tax basis, this is a profound disappointment. Coupled to the loss in California’s USDC, of last summer, this acquisition looks entirely. . . “-vincible“. And yes, that will leave a mark — as there may still be additional write downs in the Idenix acquired-asset base.

More in a moment, including graphics [now done baking, at right!] — but here is the just filed SEC Form 8-K text:

. . . .On February 17, 2017, Merck determined that it will record an intangible asset impairment charge related to the research program for MK-3682, uprifosbuvir, a nucleotide prodrug in clinical development that is being evaluated for the treatment of hepatitis C virus (HCV) infection. Uprifosbuvir was obtained in connection with the 2014 acquisition of Idenix Pharmaceuticals, Inc.

The Company determined that recent changes to the product profile, as well as changes to its expectations for pricing and the market opportunity, taken together constituted a triggering event that required the Company to evaluate the uprifosbuvir intangible asset for impairment. Utilizing market participant assumptions, and considering different scenarios, the Company concluded that its best estimate of the current fair value of the intangible asset related to uprifosbuvir was $240 million, resulting in the recognition of a pre-tax impairment charge of $2.9 billion ($1.9 billion after taxes), which will be reflected in the Company’s 2016 results. 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. The Company’s previously reported fourth quarter and full year non-GAAP EPS remain unchanged.

The Company continues to evaluate options with respect to the uprifosbuvir clinical development program and will monitor the remaining $240 million intangible asset for further impairment. . . .

Now you know. Try to slow down, and breathe a bit — it will pass. . . . I promise it will — smile. Onward, on a rainy, cold evening.

नमस्ते

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