TENAX THERAPEUTICS, INC. Goodwill & Intangibles Disclosure
In Process Research and Development—The levosimendan product in Phase 3 clinical trial represents an IPR&D asset. The IPR&D asset is a research and development project rather than a product or processes already in service or being sold. Research and development intangible assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts. If abandoned, the assets would be impaired. Research and development expenditures that are incurred after the acquisition, including those for completing the research and development activities related to the acquired intangible research and development assets, are generally expensed as incurred.
During the year ended December 31, 2016, the Company recognized an impairment charge of $33.3 million related to our levosimendan product in Phase 3 clinical trial, which represents approximately $22 million for IPR&D assets and approximately $11.3 million for goodwill.
The LEVO-CTS trial was completed in December of 2016. Based on the data from the trial, levosimendan, given prophylactically prior to cardiac surgery to patients with reduced left ventricular function, had no effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days. Based on the results of the LEVO-CTS trial and subsequent FDA feedback, the Company does not anticipate additional development of levosimendan for the treatment of LCOS in patients undergoing cardiac surgery. As of December 31, 2016, the Company determined the IPR&D asset, and corresponding Goodwill, was more than temporarily impaired.
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.