XML 40 R19.htm IDEA: XBRL DOCUMENT v3.22.0.1
Goodwill and Other Intangibles
 12 Months Ended
Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangibles Goodwill and Other Intangibles
The following table summarizes goodwill activity by segment:
 
PharmaceuticalAnimal HealthAll OtherTotal
Balance January 1, 2020
$14,825 $3,192 $52 $18,069 
Acquisitions742 105 — 847 
Divestitures— — (54)(54)
Other (1)
47 (29)2 20 
Balance December 31, 2020 (2)
15,614 3,268 — 18,882 
Acquisitions2,431 5 — 2,436 
Other (1)
(48)(6)— (54)
Balance December 31, 2021 (2)
$17,997 $3,267 $— $21,264 
(1) Includes cumulative translation adjustments on goodwill balances.
(2) Accumulated goodwill impairment losses were $531 million at both December 31, 2021 and 2020.
The additions to goodwill in the Pharmaceutical segment in 2021 were primarily related to the acquisition of Acceleron. The additions to goodwill in the Pharmaceutical segment in 2020 were primarily related to the acquisitions of ArQule and Themis. See Note 4 for more information on these acquisitions.
Other acquired intangibles at December 31 consisted of:
 20212020
  
Gross
Carrying
Amount		Accumulated
Amortization		NetGross
Carrying
Amount		Accumulated
Amortization		Net
Products and product rights$23,671 $15,776 $7,895 $20,928 $16,138 $4,790 
IPR&D9,281 — 9,281 3,228 — 3,228 
Trade names2,882 493 2,389 2,882 352 2,530 
Licenses and other6,604 3,236 3,368 6,199 2,646 3,553 
 $42,438 $19,505 $22,933 $33,237 $19,136 $14,101 
Acquired intangibles include products and product rights, IPR&D, trade names and patents, licenses and other, which are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives. Some of the more significant acquired intangibles, on a net basis, related to human health marketed products (included in products and product rights above) at December 31, 2021 include Reblozyl, $3.8 billion; Zerbaxa, $478 million; Gardasil/Gardasil 9, $191 million; Bridion, $145 million; Dificid, $145 million; Sivextro, $138 million; and Simponi, $101 million. Additionally, the Company had $5.0 billion of net acquired intangibles related to animal health marketed products at December 31, 2021, of which $2.3 billion relate primarily to trade names obtained through the 2019 acquisition of Antelliq (see Note 4). At December 31, 2021, IPR&D primarily relates to MK-7962 (sotatercept), $6.4 billion, obtained through the acquisition of Acceleron in 2021 (see Note 4); MK-1026 (nemtabrutinib), $2.0 billion, obtained through the acquisition of ArQule in 2020 (see below and Note 4); and MK-7264 (gefapixant) $832 million, obtained through the acquisition of Afferent Pharmaceuticals in 2016. Some of the more significant net intangible assets included in licenses and other above at December 31, 2021 include Lynparza, $1.1 billion, related to a collaboration with AstraZeneca; Lenvima, $1.0 billion, related to a collaboration with Eisai; Adempas, $806 million related to a collaboration with Bayer; and Verquvo, $68 million, also related to a collaboration with Bayer. See Note 5 for additional information related to the intangible assets associated with these collaborations.
In 2020, the Company recorded an impairment charge of $1.6 billion within Cost of sales related to Zerbaxa (ceftolozane and tazobactam) for injection, a combination antibacterial and beta-lactamase inhibitor for the treatment of certain bacterial infections. In December 2020, the Company temporarily suspended sales of Zerbaxa, and subsequently issued a product recall, following the identification of product sterility issues. The recall constituted a triggering event requiring the evaluation of the Zerbaxa intangible asset for impairment. The Company revised its cash flow forecasts for Zerbaxa utilizing certain assumptions around the return to market timeline and anticipated uptake in sales thereafter. These revised cash flow forecasts indicated that the Zerbaxa intangible asset value was not fully recoverable on an undiscounted cash flows basis. The Company utilized market participant assumptions to determine its best estimate of the fair value of the intangible asset related to Zerbaxa that, when compared with its related carrying value, resulted in the impairment charge noted above. The Company also wrote-off inventory of $120 million to Cost of sales in 2020 related to the Zerbaxa recall. A phased resupply of Zerbaxa was initiated in the fourth quarter of 2021.
In 2019, the Company recorded impairment charges related to marketed products and other intangibles of $705 million. Of this amount, $612 million related to Sivextro (tedizolid phosphate), a product for the treatment of acute bacterial skin and skin structure infections caused by designated susceptible Gram-positive organisms. As part of a reorganization and reprioritization of its internal sales force, the Company made the decision to cease promotion of Sivextro in the U.S. market by the end of 2019. This decision resulted in reduced cash flow projections for Sivextro, which indicated that the Sivextro intangible asset value was not fully recoverable on an undiscounted cash flows basis. The Company utilized market participant assumptions to determine its best estimate of the fair value of the intangible asset related to Sivextro that, when compared with its related carrying value, resulted in the impairment charge noted above.
IPR&D that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. Amounts capitalized as IPR&D are accounted for as indefinite-lived intangible assets, subject to impairment testing until
completion or abandonment of the projects. Upon successful completion of each IPR&D project, the Company will make a separate determination as to the then-useful life of the asset and begin amortization.
In 2021, the Company recorded a $275 million IPR&D impairment charge within Research and development expenses related to nemtabrutinib (MK-1026), a novel, oral BTK inhibitor currently being evaluated for the treatment of B-cell malignancies, obtained in connection with the acquisition of ArQule (see Note 4). As part of Merck’s annual impairment assessment of IPR&D intangible assets, the Company estimated the current fair value of nemtabrutinib utilizing projected future cash flows. The market participant assumptions used to derive the forecasted cash flows were updated to reflect the current competitive landscape for nemtabrutinib, including increased expected development costs for additional clinical trial data needed to develop nemtabrutinib, as well as a delay in the anticipated launch date for nemtabrutinib, which collectively reduced the projected future cash flows and estimated fair value. Additionally, the discount rate utilized to determine the current fair value of the asset was reduced to 8.5% to reflect the current risk profile of the asset. The revised estimated fair value of nemtabrutinib when compared with its related carrying value resulted in the IPR&D impairment charge noted above. The remaining IPR&D intangible asset related to nemtabrutinib is $2.0 billion. If the assumptions used to estimate the fair value of nemtabrutinib prove to be incorrect and the development of nemtabrutinib does not progress as anticipated thereby adversely affecting projected future cash flows, the Company may record an additional impairment charge in the future and such charge could be material.
In 2020, the Company recorded a $90 million IPR&D impairment charge related to a decision to discontinue the development program for COVID-19 vaccine candidate V591 following Merck’s review of findings from a Phase 1 clinical study for the vaccine. In the study, V591 was generally well tolerated, but the immune responses were inferior to those seen following natural infection and those reported for other SARS-CoV-2/COVID-19 vaccines. The discontinuation of this development program also resulted in a reversal of the related liability for contingent consideration of $45 million.
In 2019, the Company recorded $172 million of IPR&D impairment charges. Of this amount, $155 million relates to the write-off of the intangible asset balance for programs obtained in connection with the acquisition of IOmet Pharma Ltd following a review of clinical trial results conducted by Merck, along with external clinical trial results for similar compounds. The discontinuation of this clinical development program also resulted in a reversal of the related liability for contingent consideration of $11 million.
The IPR&D projects that remain in development are subject to the inherent risks and uncertainties in drug development and it is possible that the Company will not be able to successfully develop and complete the IPR&D programs and profitably commercialize the underlying product candidates.
The Company may recognize additional non-cash impairment charges in the future related to other marketed products or pipeline programs and such charges could be material.
Aggregate amortization expense primarily recorded within Cost of sales was $1.6 billion in 2021, $1.8 billion in 2020 and $1.7 billion in 2019. The estimated aggregate amortization expense for each of the next five years is as follows: 2022, $1.7 billion; 2023, $1.6 billion; 2024, $1.6 billion; 2025, $1.4 billion; 2026, $1.4 billion.