The drop in value has prompted MorphoSys to make drastic changes, such as discontinuing its U.S. operations and abandoning several pipeline projects.
Courtesy of edi/nitpicker
MorphoSys, a German biotech company, focused on cancer therapies, announced a non-cash impairment charge of €231 million (approximately $252.88 million) on goodwill.
The drop in value has prompted the company to make drastic changes, such as discontinuing all its U.S. operations and abandoning several pipeline projects.
The non-cash impairment charge comes partially due to MorphoSys acquiring Constellation Pharmaceuticals for $1.7 billion, a move announced in June 2021. The acquisition was supposed to bolster MorphySys’ position in the hematology-oncology and solid tumor treatments spaces.
As part of the goodwill related to the acquisition, MorphoSys is now swallowing the impairment charge, and it’s making significant adjustments to compensate. The announcement said that MorphoSys would be moving all operations to its facility in Planegg, Germany.
The consolidation means all U.S.-based activity and operations will be discontinued. All products in the U.S. pipelines “cannot be realized anymore and the expected cash flows from these projects will not materialize accordingly,” MorphoSys said in the press release. The company did not state what will happen to its facility in Boston, Massachusetts.
The most surprising aspect of the sudden changes at MorphoSys is that the company had some idea of what was coming. In January 2022, in a financial guidance statement, MorphySys stated that it “does not anticipate any significant cash-accretive revenues from the achievement of milestones in 2022.”
The company also anticipated that foreign exchange would increase its operating expenses by 3%.
Clearly, MorphoSys was expecting a drop in revenue from the Constellation acquisition and several other factors. But it perhaps was not anticipating that the non-cash impairment charge would be this much, which is why it is abandoning its U.S. operations.
It’s not yet clear how this will impact the company’s finances. Non-cash impairments can take a while to show up in stockholder reports. Because there is no cash-value effect, we may need to wait until the company reports its Q4/full-year 2021 results on March 16.
