Summary
Johnson & Johnson (JNJ) filed an 8-K on October 16, 2018, primarily to announce its third-quarter 2018 results and a significant intangible asset impairment. The company reported sales and earnings for the quarter ended September 30, 2018, details of which are provided in an accompanying press release. Importantly for investors, JNJ determined it will record a non-cash after-tax impairment charge of approximately $630 million related to its in-process research and development asset, AL-8176. This asset, acquired in 2014 for the treatment of RSV and hMPV, had a carrying value of $1.7 billion. The impairment is a result of further information becoming available following the suspension of Phase 2B trials in the second quarter, as previously disclosed. The impairment charge, while impacting reported net income, is expected to be excluded from adjusted earnings, which is a key metric many investors use to assess operational performance. The company will continue to evaluate the development program and monitor the remaining $900 million of the intangible asset for potential further impairment. Investors should pay close attention to the full financial results in the press release and accompanying supplementary data for a comprehensive understanding of the quarter's performance and the impact of this non-recurring charge.
Key Highlights
- 1Johnson & Johnson announced third-quarter 2018 sales and earnings in an 8-K filing on October 16, 2018.
- 2The company recorded a non-cash after-tax impairment charge of approximately $630 million in Q3 2018.
- 3The impairment relates to an in-process R&D asset, AL-8176, associated with a drug for Respiratory Syncytial Virus (RSV) and human metapneumovirus (hMPV).
- 4The AL-8176 asset had a carrying value of $1.7 billion, acquired in 2014 from the Alios Biopharma acquisition.
- 5The impairment follows the suspension of Phase 2B trials for AL-8176 announced in the second quarter of 2018.
- 6The impairment charge is expected to be excluded from adjusted earnings, indicating it's treated as a non-recurring item.
- 7The company continues to monitor the remaining $900 million intangible asset for potential future impairment.