Merck takes $170M charge on abandoned COVID-19 drug

Merck
Merck’s late entries and early exits from COVID-19 drug and vaccine R&D have proven costly. (Merck)

Merck has recorded a $170 million charge related to the discontinuation of the COVID-19 candidate it acquired in the takeover of OncoImmune. The action means Merck has taken hundreds of millions of dollars in charges on failed COVID-19 bets in recent months.

Late last year, Merck paid $423 million upfront for OncoImmune, giving it control of a fusion protein that had shown promise in severe and critical COVID-19 patients in a phase 3 trial. Merck scrapped its plans to win approval for the biological immunomodulator in COVID-19 just a few months later in response to the FDA’s demand for additional data on the therapy.

Merck set out the financial implications of the discontinuation in its first-quarter results. The $170 million charge reflected fixed-asset and materials write-offs related to the discontinuation decision. Overall, Merck took a $188 million charge related to the discontinuation of COVID-19 programs in the quarter. 

The charge means Merck has now taken a hit on its failed COVID-19 efforts for two quarters in a row. In its fourth-quarter filing, Merck revealed a $90 million R&D impairment charge related to the decision to discontinue development of V591, a COVID-19 vaccine candidate it acquired in its $366 million takeover of Themis Bioscience. 

Adding the $90 million to other charges, including the discontinuation of another COVID-19 vaccine V590, brings the hit from abandoned COVID-19 vaccine programs in 2020 up to $305 million. With the OncoImmune deal having further financial implications, the charges from Merck’s discontinued COVID-19 projects now stand at $493 million.   

Merck’s late entries and early exits from COVID-19 drug and vaccine R&D have proven costly but the company still has a shot at making an impact on the pandemic through its work with Ridgeback Bio. The partners stopped developing oral antiviral molnupiravir in hospitalized patients after getting a look at midstage clinical data but have pushed on into phase 3 in the outpatient setting.

If the phase 3 trial is successful, the financial and public health implications of the oral antiviral could more than offset the other failed efforts. Equally, if things had played out differently the bets on Themis and OncoImmune could have made an impact on the pandemic.