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Endo International discloses expected impairment charges for Q1

Endo International PLC said its serelaxin in-process research and development intangible asset is fully impaired resulting in a $45 million impairment charge after Novartis AG announced that a phase 3 study of serelaxin in patients with acute heart failure did not meet its primary endpoints.

The company's unit Paladin Labs Inc. licensed the Canadian rights to commercialize serelaxin under an existing agreement with a subsidiary of Novartis.

Endo is in the process of assessing the recoverability of its Paladin goodwill balance. Based on the work completed to date, Endo has determined that the estimated fair value of Paladin's goodwill is below its book value resulting in a goodwill impairment charge. The current estimate of the goodwill impairment charge is about $90 million.

The company expects these impairments will be recorded in the first quarter.

Endo has also identified certain market conditions impacting the recoverability of a developed technology intangible asset in its U.S. generic pharmaceuticals segment. As a result, it has determined that the intangible asset is impaired.

Based on the work completed to date, the current estimate of the non-cash impairment charge related to this intangible asset is about $50 million, which is expected to be recorded in the first quarter.

In addition, the company is assessing strategic alternatives for its Grupo Farmacéutico Somar, Sociedad Anónima Promotora de Inversión de Capital Variable business. If this strategic process continues to advance successfully, the assets and liabilities of the business may eventually be classified as held-for-sale in Endo's consolidated balance sheets.

Although Endo cannot predict the ultimate timing or outcome of the strategic process, held-for-sale accounting will trigger an additional impairment review that could lead to material impairment charges. Based on progress to date and preliminary indications of interest from potential buyers, it is possible that certain Somar assets could become impaired, including intangible assets and goodwill.

Endo estimates total first-quarter revenues to be between $1.02 billion and $1.04 billion. It expects its adjusted EBITDA from continuing operations to be between $440 million and $460 million.