8-KEarnings & ResultsFinancial EventsExhibits & Filings

Merck & Co., Inc. 8-K Report, Financial Results (Feb 3, 2011)

Filed February 3, 2011For Securities:MRK

Summary

Merck & Co., Inc. filed an 8-K on February 3, 2011, primarily to report on the results of operations and financial condition for the fourth quarter of 2010 and a material impairment charge. The company incorporated by reference a press release and supplemental information detailing its Q4 2010 earnings. The key financial impact disclosed in this filing relates to a significant impairment charge of $1.7 billion in the fourth quarter of 2010. This impairment charge is directly linked to the investigational drug vorapaxar, a thrombin receptor antagonist. Following recommendations from the Data and Safety Monitoring Board (DSMB) for the TRACER and TRA-2P clinical trials, Merck decided to discontinue the TRACER study and modify the TRA-2P study. Specifically, patients with a history of stroke in the TRA-2P study will no longer receive vorapaxar due to an observed increase in intracranial hemorrhage that outweighs potential benefits. This development necessitated the write-down of the vorapaxar in-process research and development intangible asset, which was established as part of the Schering-Plough acquisition.

Key Highlights

  • 1Merck reported Q4 2010 earnings, with details provided in an incorporated press release (Exhibit 99.1) and supplemental information (Exhibit 99.2).
  • 2A significant pre-tax impairment charge of $1.7 billion was recognized in Q4 2010.
  • 3The impairment charge relates to the in-process research and development intangible asset for vorapaxar.
  • 4Clinical trials for vorapaxar (TRACER and TRA-2P) have undergone significant changes based on DSMB recommendations.
  • 5The TRACER study has been discontinued.
  • 6In the TRA-2P study, vorapaxar will be discontinued for patients with a history of stroke due to increased intracranial hemorrhage risk.
  • 7The impairment charge is a direct consequence of the adverse findings and study modifications for vorapaxar.

Frequently Asked Questions

The primary financial event reported is a pre-tax impairment charge of $1.7 billion recognized in the fourth quarter of 2010, related to the vorapaxar in-process research and development intangible asset.

The impairment charge was incurred because the investigational drug vorapaxar showed an increased risk of intracranial hemorrhage in patients with a history of stroke during clinical trials. This led to modifications in ongoing studies and the conclusion that the intangible asset related to vorapaxar was no longer worth its previously recorded value.

The findings suggest a significant setback for vorapaxar as a potential treatment, particularly for patients with a history of stroke. This impacts Merck's future revenue potential from this drug candidate and highlights the inherent risks in pharmaceutical R&D. The discontinuation of one trial and modification of another indicate a reduced probability of successful market approval for vorapaxar.

More detailed financial information for the fourth quarter of 2010 is available in the press release (Exhibit 99.1) and the supplemental information (Exhibit 99.2) that are incorporated by reference into this 8-K filing.