Merck & Co (MRK) Q1 2026 earnings summary

Executive summary

• Achieved Q1 2026 revenue of $16.3 billion, up 5% year-over-year (3% ex-FX), driven by oncology, animal health, and new product launches, with oncology sales (KEYTRUDA/KEYTRUDA QLEX) reaching $8.0 billion and animal health up 13% to $1.8 billion.

• Net loss attributable to shareholders was $4.2 billion, or $(1.72) per share (GAAP), primarily due to a $9.0 billion R&D charge for the Cidara acquisition; non-GAAP loss per share was $(1.28).

• Announced and/or closed major acquisitions: Cidara Therapeutics ($9.2B charge) and pending Terns Pharmaceuticals ($5.8B–$6.7B charge), expanding the hematology pipeline with TERN-701.

• Achieved significant regulatory milestones, including FDA approval for IDVYNSO (HIV-1), NUMELVI (canine dermatitis), and new oncology indications.

• Advanced AI initiatives and announced new commercial operating structure and leadership appointments.

Financial highlights

• Q1 2026 sales: $16.3B, up 5% year-over-year; GAAP net loss: $(4.2)B, non-GAAP net loss: $(3.2)B.

• Gross margin: 74.2% (GAAP, down from 78.0%), 81.9% (non-GAAP, down 0.3 pts); decline due to higher amortization, restructuring, and acquisition charges.

• Operating expenses: $15.2B (non-GAAP), including a $9.0B one-time charge for Cidara.

• Operating cash flow was $3.9B, up from $2.5B in Q1 2025.

• Effective tax rate: (20.1)% (GAAP), (43.5)% (non-GAAP), both impacted by the Cidara charge.

Outlook and guidance

• Raised 2026 revenue guidance to $65.8–$67.0B (1–3% growth, ~1% FX tailwind); non-GAAP EPS guidance: $5.04–$5.16, including a $3.62 per share Cidara charge.

• Guidance excludes the impact of the pending Terns Pharmaceuticals acquisition, expected to result in a $5.8B–$6.7B one-time charge ($2.35/share) and $0.12/share ongoing EPS headwind in 2026.

• Expects continued pricing and volume pressures from U.S. and international healthcare reforms, including the Inflation Reduction Act and most-favored-nation pricing agreements.

• Key products like Januvia and Janumet will lose U.S. exclusivity in May 2026, with significant sales declines expected.

• SG&A expenses expected to rise as investments in launches increase through the year.