MRK Merck & Co. 10-Q 2026-09-30 section summaries

Merck — Q3 and first nine months of 2026

Consolidated results

Q3 sales grew 4.7%, but net income fell 12.4%. Nine-month sales increased 4.9%, while the period swung to a loss, primarily because R&D included $14.7B of acquired in-process R&D charges for Cidara and Terns. Merck also recorded $400M of R&D expense for the MK-2690 license. The 9M tax provision was $1.9B on $1.3B of pretax income (a 138.2% effective rate), largely because the acquisition-related charges received no tax benefit; Q3’s effective rate was 8.9%.

Reportable segments and key products

Segment profit excludes significant corporate and R&D costs; certain costs, including IT-related costs, were shifted from Pharmaceutical to unallocated corporate expenses, with prior-period Pharmaceutical profit recast.

Keytruda Q3 sales declined despite 9M growth to $23.581B from $23.303B. Gardasil Q3 sales rose, but 9M sales were nearly flat at $4.232B versus $4.202B. Winrevair continued strong growth; Ohtuvayre, launched after the prior-year comparison period, generated $184M in Q3.

Segment-profit reconciliation to pretax income

Higher unallocated R&D, financing costs and amortization were major pressures. Nine-month interest expense rose to $1.550B from $946M; amortization rose to $2.972B from $1.820B, and unallocated R&D to $26.347B from $11.159B.

Cash flow, liquidity and balance sheet

Operating cash flow included $13.811B of R&D asset-acquisition charges and $2.972B of amortization. Investing cash outflow was $17.131B, including $8.779B paid net of cash acquired for Cidara, $5.842B for Terns and $630M for TARGAN. Cash, cash equivalents and restricted cash were $9.652B at September 30, down from $14.690B at year-end. Merck drew and repaid a $6.0B term loan to help fund Terns, issuing $6.0B principal of senior unsecured notes in May to refinance it.

Merck stockholders’ equity was $44.893B; after deducting goodwill and other intangible assets, approximate tangible common equity was negative $21.534B. Debt carrying value, including current debt, was $53.8B versus estimated fair value of $47.0B. Average diluted shares were 2.478B in Q3 versus 2.498B a year earlier.

Portfolio, restructuring and principal risks

Merck acquired Cidara for $9.2B and Terns for $6.8B, primarily for clinical-stage pipeline assets; their influenza-prevention and CML candidates remain in clinical development. TARGAN added poultry-focused technology to Animal Health. FDA approvals for Welireg combinations triggered a $50M milestone payment and recognition of $300M in probable future sales-based milestone liabilities; related catch-up amortization was $123M in Q3. Merck licensed MK-2690 for $400M upfront, with up to $1.73B of potential milestones. Blackstone provided $600M of sac-TMT development funding recognized as a reduction in 9M R&D expense; a further $700M was expected in Q4, with royalties potentially payable upon specified U.S. approval.

Collaboration revenue was mixed: Q3 AstraZeneca alliance revenue was $365M versus $593M, Lenvima $287M versus $258M, Bayer alliance revenue $118M versus $112M, and Reblozyl royalties $177M versus $136M. Lagevrio sales fell sharply; U.S. sales face a regulatory-transition deadline in June 2027. Merck has substantial potential future partner milestone obligations, including up to $2.3B tied to Lenvima and up to $5.5B per Daiichi Sankyo DXd ADC upon sales milestones.

Combined restructuring charges were $581M in Q3 versus $390M and $1.381B in 9M versus $1.274B. The 2025 program is estimated at $3.0B pretax and the 2024 manufacturing-network program at $4.0B; cumulative costs through September reached $2.8B and $2.2B, respectively.

Publicly traded equity-security gains contributed $381M in Q3 and $656M in 9M; 9M net income from equity-security investments was $811M. Merck faces ongoing product-liability, antitrust, patent and government investigations. Notable exposures include roughly 830 pending U.S. Dr. Scholl’s talc cases, DOJ investigations, and the IRS’s proposed $1.3B increase to 2017–18 transition-tax liability plus $260M in penalties. European injunctions affecting subcutaneous Keytruda could delay or restrict commercialization. Merck warns that adverse outcomes or increased legal accruals could materially affect results or cash flows.

Merck (MRK) — Q3 and first nine months of 2026

Merck’s sales grew, led by Keytruda, newer products and Animal Health, but reported earnings fell sharply in the first nine months. Results reflect approximately $550 million of U.S. purchase-timing benefits in both Q3 and 9M, substantial acquired R&D charges, higher product costs, and continuing pricing and access pressures.

Sales and consolidated results

Worldwide sales increased 5% in both periods (4% excluding FX). U.S. sales rose 6%; international sales rose 3% (Q3 growth was 2% excluding FX, while 9M was flat excluding FX). U.S. purchase timing benefited both periods by about $550 million. The 9M GAAP loss made potential dilutive shares antidilutive and therefore excluded from diluted EPS.

Gross-margin pressure reflected higher acquired-intangible amortization, restructuring, Verona inventory fair-value step-up and production costs, partly offset in 9M by favorable product mix. Acquired-intangible amortization was $1.1 billion in Q3 versus $621 million, and $3.0 billion in 9M versus $1.8 billion; Verona inventory step-up was $83 million in Q3 and $249 million in 9M. Restructuring costs across expense lines were $581 million versus $390 million in Q3 and $1.381 billion versus $1.274 billion in 9M. SG&A growth mainly reflected administrative and launch-promotion spending.

Products and business lines

Keytruda’s growth reflected demand across earlier-stage and metastatic indications, although Q3 U.S. wholesaler purchase timing was unfavorable and channel inventory is expected to unwind in Q4. International uptake benefited from earlier-stage indications; EU pricing faces reimbursement pressure. Keytruda biosimilar erosion is expected to be immaterial in 2026. Welireg advanced on U.S. renal-cell carcinoma use and international uptake; Winrevair’s growth reflected demand and launches, as well as U.S. wholesaler and specialty-pharmacy timing that Merck expects to unwind in Q4. Merck pays BMS a 22% royalty on Winrevair net sales, recorded in cost of sales.

Januvia/Janumet declines reflect U.S. generic competition following loss of exclusivity in May 2026 for Januvia and Janumet and in July for Janumet XR; Merck expects continued significant U.S. declines. Ohtuvayre was acquired with Verona Pharma in October 2025. Animal Health growth was supported by poultry and ruminant demand and new companion-animal launches; lower vaccine pricing and demand for some other products partly offset it.

Vaccine performance was mixed. Gardasil’s Q3 growth reflected U.S. pricing and public-sector purchasing, while 9M growth was nearly flat amid weakness in China and Japan. Merck suspended China shipments in February 2025 because of low demand and high channel inventory, then resumed limited shipments in Q2 and Q3 2026; 2026 revenue under the revised contract is expected to be immaterial. The U.S. public-sector purchasing benefit is expected to unwind in 2027. Bridion lost U.S. exclusivity in July 2026; Dificid’s ongoing decline follows its July 2025 U.S. exclusivity loss, while Lagevrio weakness reflects lower COVID-19 cases. U.S. vaccine-market contraction also pressured sales. Prevymis grew on global demand; Enflonsia’s sales reflected seasonal demand and inventory builds.

Segment results and reconciliation

Non-segment activity includes unallocated R&D, corporate and manufacturing costs, restructuring and acquisition-related items, among other items. For 9M, pharmaceutical segment profit was $36.262 billion versus $34.660 billion; Animal Health segment profit was $1.900 billion versus $1.737 billion; non-segment activity was a loss of $36.820 billion versus $18.750 billion.

Acquisitions, pipeline and policy

Acquisition and business-development charges drove the 9M R&D surge. Merck acquired Cidara in January for $9.2 billion, including $570 million to settle equity awards, and recorded a $9.0 billion 9M acquired R&D charge, primarily for Phase 3 influenza-prevention candidate MK-1406. In May, it acquired Terns for $6.8 billion, including $606 million to settle awards, and recorded a $5.7 billion 9M R&D charge, principally for oncology candidate MK-4208. In July, Merck acquired TARGAN for $647 million for poultry biotechnology; an existing investment generated a $68 million 9M realized gain. A September SciBrunch license for preclinical KRAS G12D inhibitor MK-2690 generated a $400 million Q3/9M R&D charge, payable in Q4, plus potential milestones. Blackstone funding reduced R&D expense by $200 million in Q3 and $600 million in 9M.

Merck continued expanding Keytruda approvals and advancing subcutaneous Keytruda Qlex, while preliminary injunctions in Europe bar sales in Denmark and Italy and block launches in several other countries. Sacituzumab tirumotecan received FDA priority review for previously treated endometrial cancer, with a June 15, 2027 PDUFA date. Merck voluntarily withdrew the U.S. accelerated-approval application for ifinatamab deruxtecan in extensive-stage small-cell lung cancer after FDA discussions; its Phase 3 trial continues. Lipfendra was FDA-approved in July as an oral PCSK9 inhibitor.

Pricing and access remain significant risks. IRA drug-price provisions affect Januvia in 2026 and Janumet/Janumet XR in 2027; Lenvima is scheduled for 2028, and Keytruda is expected to be selected in 2027 for a 2029 effective price. Germany’s GKV-BStabG is expected to exert significant downward revenue pressure, particularly on Keytruda. A three-year U.S. most-favored-nation agreement includes discounted Medicaid pricing and direct-to-patient distribution of Januvia and Janumet; Merck joined the voluntary GENEROUS Medicaid model and expects exemption from mandatory GLOBE Medicare Part B through December 2030. These arrangements may mitigate some exposure but do not remove pricing uncertainty.

Cash, funding and shareholder returns

Cash and investments declined to $11.253 billion at September 30, 2026, from $15.521 billion at December 31, 2025; working capital fell to $10.140 billion from $15.189 billion. Total debt as a percentage of total liabilities and equity rose to 40.5% from 36.0%. Investing outflows primarily reflected Cidara, Terns and TARGAN acquisitions. Merck drew and repaid a $6.0 billion 364-day term loan for part of the Terns consideration, issuing $6.0 billion of senior unsecured notes in May to repay it; fixed-rate coupons ranged from 4.30% to 5.85%, with maturities from 2028 to 2056. Merck repurchased $2.3 billion of stock (19 million shares) in 9M and expected approximately $3.0 billion of full-year repurchases, with $5.1 billion remaining under its authorization. The quarterly dividend was $0.85 per share; an undrawn $6.0 billion credit facility matures in May 2031.

The 9M effective tax rate was 138.2%; Cidara and Terns charges received no tax benefit and contributed 126.6 percentage points. Merck disputes an IRS proposal for approximately $1.3 billion of additional transition tax plus $260 million of penalties for 2017–2018 returns, excluding interest; an adverse outcome could materially affect results.

Market Risk

Merck reported no material changes in its market-risk exposures from those disclosed in its 2025 Form 10-K, filed February 24, 2026. The section identifies no new market-risk developments or quantitative changes.

Disclosure Controls and Procedures

As of September 30, 2026, management, including the CEO and CFO, concluded that Merck’s disclosure controls and procedures were effective. No changes in internal control over financial reporting during Q3 2026 materially affected, or were reasonably likely to materially affect, those controls.

Forward-Looking Statements

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Merck undertakes no obligation to update them and directs investors to the risk factors in its 2025 Form 10-K, filed February 24, 2026.

For the three months ended September 30, 2026, no directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement. The section reported no financial or business developments.