In December 2020, Merck (MRK), a global drug and therapeutics company, recalled Zerbaxa— a combination drug approved to treat hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia— over concerns it may cause patients to become sterile.

In its 2020 10-K, Merck disclosed it recorded a $1.6 billion impairment charge but indicated the drug would return to market:

“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 also disclosed it is taking an inventory charge:

“The Company also wrote-off inventory of $120 million to Cost of sales in 2020 related to the Zerbaxa recall. The remaining intangible asset balance related to Zerbaxa was $551 million at December 31, 2020.”