A maker of prescription medicines and animal health products, Merck produces well-known drugs like the cancer treatment Keytruda and the HPV vaccine Gardasil, along with livestock and pet-care vaccines used by doctors, veterinarians, and farmers. Founded in 1891 as the American branch of a German family firm, the company was seized during World War I and later bought back, becoming an independent U.S. company that today goes by the name MSD outside North America. A fun quirk: its blockbuster Keytruda nearly got shelved — researchers originally set out to calm the immune system, not fight cancer.
A $5.7B Terns acquisition charge drove a Q2 GAAP net loss of $1.3B, while Keytruda sales rose 5% to $8.4B.
A second straight quarter of multibillion-dollar acquisition charges pushed Merck to a net loss. rose 5% to $16.6B as grew 5% to $8.4B and more than doubled, but R&D expense of $9.7B—driven by a $5.7B charge for the Terns Pharmaceuticals acquisition—produced a net loss of $1.3B and a diluted loss per share of $0.54. The underlying business grew, but the cost of reshaping the pipeline ahead of Keytruda's 2028 patent cliff is dominating reported results.
Key takeaways
Worldwide sales rose 5% to $16.6B, led by up 5% to $8.4B and up 75% to $525M, while / fell 19% and / fell 31%.
results swung to a net loss of $1.3B from a $4.4B profit a year ago, entirely because R&D expense rose to $9.7B from $4.0B, primarily from a $5.7B in-process R&D charge for the Terns Pharmaceuticals acquisition.
fell 4.0 percentage points to 73.5%, weighed down by higher , vaccine write-downs, restructuring costs, and from the Verona Pharma acquisition.
Section summaries
Management's Discussion and Analysis
Q2 2026 sales rose 5% to $16.6B driven by oncology and cardiometabolic, while GAAP net loss reflected $5.7B in Terns IPR&D charges.
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Worldwide sales grew 5% to $16.6B in Q2 and $32.9B in H1 2026, led by / (up 5%/8%), (up 75%/81%), and (up 67%/57%), partially offset by declines in / (down 31%/29%) and Gardasil/ (down 9% in H1).
rose 63% to $5.4B, and H1 2026 cash from operations was $9.3B, up from $5.8B a year ago, as the company issued $6.0B in senior notes and drew a $6.0B term loan to fund the Terns acquisition, which has since been repaid.
The 2025 Restructuring Program recorded $195M in costs this quarter, part of a $3.0B cumulative pretax plan targeting $1.7B in annual net savings by the end of 2027.
rose 50% to $51.1B, reflecting the debt issued to fund the Verona Pharma and Terns acquisitions, while fell 14% to $42.0B.
What changed
The $5.7B Terns IPR&D charge flagged in Q1 2026 materialized this quarter, following the $9.0B Cidara charge in Q1, bringing H1 2026 total IPR&D charges to $14.7B and driving a second consecutive quarterly net loss.
/ sales fell 19% to $1.3B, a shallower decline than the 41% drop in Q1 2026, but the China shipment pause that began in February 2025 continued with no announced end date.
sales growth slowed to 5% from 12% in Q1 2026, reaching $8.4B, as the subcutaneous Qlex formulation launch scales up ahead of the December 2028 U.S. loss of exclusivity.
declined further to 73.5% from 74.2% in Q1 2026 and 77.5% a year ago, as Verona Pharma acquisition costs and vaccine write-downs compounded the ongoing .
/ sales fell 31% as U.S. loss of exclusivity and IRA Medicare price negotiation took effect in 2026, consistent with the trajectory flagged in prior filings.
What to watch
/ Q3 2026 sales and any announcement on when the China shipment pause will end, against the $1.3B Q2 base.
Q3 2026 sales progression from the $8.4B Q2 base as the subcutaneous Qlex formulation launch scales up ahead of the December 2028 U.S. loss of exclusivity.
Any further IPR&D or acquisition charges beyond the $14.7B already recorded in H1 2026, and the impact on R&D expense and profitability.
Cumulative charges and realized savings under the 2025 Restructuring Program against the $1.7B annual savings target by end-2027.
fell to 73.5% in Q2 from 77.5% a year ago, primarily due to higher intangible , vaccine write-downs, restructuring costs, and from the Verona Pharma acquisition.
R&D expenses surged to $9.7B in Q2 and $22.3B in H1, mainly from $5.7B and $14.7B in charges for the Terns and Cidara asset acquisitions, respectively, which drove a net loss.
The 2025 Restructuring Program is expected to incur ~$3.0B in cumulative pretax costs and deliver ~$1.7B in annual savings by end of 2027, as part of a broader $3.0B annual cost-savings initiative.
Liquidity remains strong with $9.3B in in H1 2026; the company issued $6.0B in senior notes and drew a $6.0B term loan to fund the Terns acquisition, which has since been repaid.
Pricing pressure is intensifying from IRA Medicare drug price negotiations ( effective 2026, /Janumet XR 2027, Lenvima 2028), the MFN Agreement, and international cost-containment laws like Germany's GKV-BStabG.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2025 Form 10-K filed on February 24, 2026.
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There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2025 Form 10-K filed on February 24, 2026.
The information called for by this Item is incorporated herein by reference to Note 8 included in Part I, Item 1, Financial Statements (unaudited) — Notes to Condensed Consolidated Financial Statements.
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The information called for by this Item is incorporated herein by reference to Note 8 included in Part I, Item 1, Financial Statements (unaudited) — Notes to Condensed Consolidated Financial Statements.