10-QPeriod: Q1 FY2026

Merck & Co., Inc. Quarterly Report for Q1 Ended Mar 31, 2026

Filed May 4, 2026For Securities:MRK

Summary

Merck & Co., Inc. reported a net loss of $4.24 billion ($1.72 per share) for the first quarter of 2026, a significant reversal from the $5.08 billion net income ($2.01 per share) reported in the same period of 2025. This loss was largely driven by a substantial increase in Research and Development (R&D) expenses, primarily due to the $9.2 billion acquisition of Cidara Therapeutics and an anticipated $5.8 billion charge from the pending acquisition of Terns Pharmaceuticals. Despite the reported net loss, the company's sales showed resilience, growing 5% to $16.3 billion year-over-year, supported by strong performance in oncology, particularly Keytruda, and the Animal Health segment. However, the significant R&D investments, coupled with ongoing restructuring costs and pressures on drug pricing due to regulatory changes like the Inflation Reduction Act, present a challenging near-term outlook. Investors should closely monitor the integration of recent acquisitions and the impact of evolving healthcare policies on future profitability.

Financial Highlights

54 data points
Beta

Revenue

$16.29B

74.2% Gross Margin

Net Income

-$4.24B

-26.0% Net Margin

EPS (Diluted)

$-1.72

Total Assets

$128.69B

Cash & Equivalents

$5.40B

Free Cash Flow

$2.93B

Financial Statements
Beta
Revenue$16.29B
Cost of Revenue$4.20B
Gross Profit$12.09B
R&D Expenses$12.59B
SG&A Expenses$2.70B
Net Income-$4.24B
EPS (Basic)$-1.72
EPS (Diluted)$-1.72
Shares Outstanding (Basic)2.47B
Shares Outstanding (Diluted)2.47B

Key Highlights

  • 1Merck reported a net loss of $4.24 billion ($1.72 per share) for Q1 2026, compared to a net income of $5.08 billion ($2.01 per share) in Q1 2025.
  • 2Total sales increased by 5% to $16.3 billion, driven by growth in oncology (Keytruda) and Animal Health, partially offset by declines in vaccines and diabetes.
  • 3Research and Development (R&D) expenses surged to $12.6 billion from $3.6 billion, primarily due to the $9.2 billion acquisition of Cidara Therapeutics and an expected $5.8 billion charge for the pending acquisition of Terns Pharmaceuticals.
  • 4The company announced a definitive agreement to acquire Terns Pharmaceuticals for approximately $6.7 billion, expected to close in May 2026.
  • 5Restructuring costs totaled $195 million in Q1 2026, part of ongoing programs aimed at efficiency and growth, with an estimated total cost of $3.0 billion for the 2025 Restructuring Program.
  • 6The company is facing pricing pressures due to healthcare reforms, including the Inflation Reduction Act's drug price negotiation program, which has impacted Januvia and is expected to affect Keytruda.
  • 7Cash and cash equivalents decreased significantly from $14.6 billion at the start of the year to $5.4 billion at the end of the quarter, largely due to acquisitions and cash used in investing activities.

Frequently Asked Questions

The primary reason for the substantial net loss of $4.24 billion in the first quarter of 2026 is the large Research and Development (R&D) expenses, significantly impacted by the acquisition of Cidara Therapeutics for $9.2 billion and the anticipated charge of $5.8 billion related to the pending acquisition of Terns Pharmaceuticals. These acquisition-related costs heavily weighed down the reported profitability.

Merck's recent acquisitions, particularly Cidara Therapeutics ($9.2 billion) and the pending Terns Pharmaceuticals ($6.7 billion), have significantly increased R&D expenses and reduced cash and cash equivalents. While these acquisitions are strategic for pipeline expansion, they have a substantial immediate impact on the company's reported earnings and liquidity, requiring careful management of cash flows and debt financing.

Despite the reported net loss, Merck's sales demonstrated growth, increasing 5% to $16.3 billion in the first quarter of 2026, driven by Keytruda and Animal Health. However, the company anticipates continued pressure on pricing and market access due to healthcare reforms like the Inflation Reduction Act, which has led to government price setting for certain drugs, and the ongoing generic competition for products like Januvia and Bridion. Future sales performance will depend on the successful integration of new products and the ability to navigate these market and regulatory challenges.

Merck is undertaking significant restructuring programs (2025 and 2024 Restructuring Programs) aimed at optimizing operations, reducing real estate footprint, and streamlining manufacturing. These programs are expected to result in substantial annual cost savings, which the company plans to reinvest in strategic growth areas. While these initiatives involve significant upfront costs, they are part of a long-term strategy to improve efficiency and competitiveness.