What I will say is that it is good news that Merck is writing off programs of impaired value. It frees up the balance sheet for other leverage. So -- from lemons -- lemonade. Per pages 15 and 16 of the SEC Form 10-Q, then:
. . . .In connection with mergers and acquisitions, the Company measures the fair value of marketed products and research and development pipeline programs and capitalizes these amounts. During the second quarter and first six months of 2014, the Company recorded intangible asset impairment charges of $660 million within Materials and production costs related to certain products marketed by the Company for the treatment of chronic HCV. Of this amount, $523 million related to PegIntron and $137 million related to Victrelis. Sales of PegIntron and Victrelis are being adversely affected by loss of market share or patient treatment delays in markets anticipating the availability of new therapeutic options. During the second quarter, these trends accelerated more rapidly than previously anticipated by the Company, which led to changes in the cash flow assumptions for both PegIntron and Victrelis. These revisions to cash flows indicated that the PegIntron and Victrelis intangible asset values were not recoverable on an undiscounted cash flows basis. The Company utilized market participant assumptions to determine its best estimate of the fair values of the intangible assets related to PegIntron and Victrelis that, when compared with their related carrying values, resulted in impairment charges noted above.
During the second quarter and first six months of 2013, the Company recorded an intangible asset impairment charge of $330 million within Materials and production costs resulting from lower cash flow projections for Saphris/Sycrest due to reduced expectations in international markets and in the United States. These revisions to cash flows indicated that the Saphris/Sycrest intangible asset value was not recoverable on an undiscounted cash flows basis. The Company utilized market participant assumptions and considered several different scenarios to determine its best estimate of the fair value of the intangible asset related to Saphris/Sycrest that, when compared with its related carrying values, resulted in the impairment charge noted above.
In addition, during the second quarter and first six months of 2013, the Company recorded $234 million and $264 million of IPR&D impairment charges within Research and development expenses. Of these amounts, $181 million related to the write-off of the intangible asset associated with preladenant as a result of the discontinuation of the clinical development program for this compound. In addition, the Company recorded impairment charges resulting from changes in cash flow assumptions for certain compounds. The remaining impairment charges for the first six months of 2013 related to pipeline programs that had previously been deprioritized and were subsequently deemed to have no alternative use in the period. . . .
To be sure, Mr. Frazier is reaching the end of his clearing the decks sweepup. . . and positioning Merck for a solid new run -- as a leaner, more tightly focused ocean-liner. But it takes perhaps two years to pivot an ocean liner of this girth.
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