Merck & Co. Inc.

08/07/2026 | Press release | Distributed by Public on 08/07/2026 14:12

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Development Transactions
Below is a summary of significant business development activity thus far in 2026.
In July 2026, Merck acquired TARGAN, a privately held company developing and commercializing biodevice solutions to improve performance outcomes for the poultry industry, for approximately $650 million. The acquisition is expected to broaden Merck Animal Health's portfolio in commercial poultry operations with WingScan, an automated solution that uses vision technology for gender identification. This acquisition also brings the capability for a high-speed precision ocular spray technology, which administers respiratory and coccidiosis vaccines, among others, to day-old chicks. In addition, TARGAN has the potential to develop additional biodevices within poultry and other livestock species. Merck recorded an unrealized gain of $71 million to Other (income) expense, net in the second quarter and first six months of 2026 related to an existing investment that Merck held in TARGAN. The Company expects to account for the transaction as a business combination. There are no future contingent payments associated with the acquisition.
In May 2026, Merck acquired Terns Pharmaceuticals, Inc. (Terns), a clinical-stage oncology company, for $6.8 billion (including $606 million of payments to settle share-based equity awards of which $433 million related to unvested equity awards). Through this acquisition, Merck acquired Terns' lead candidate, MK-4208 (formerly TERN-701), a novel investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently being evaluated in a Phase 1/2 trial for patients with Philadelphia chromosome-positive, chronic phase chronic myeloid leukemia previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response or treatment intolerance. The transaction was accounted for as an asset acquisition because MK-4208 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded a charge of $5.7 billion to Research and development expenses (which primarily represented acquired in-process research and development [IPR&D] with no alternative future use), or $2.31 per share, in the second quarter and first six months of 2026, as well as net assets of $1.1 billion, including cash of $505 million, investments of $487 million, deferred tax assets of $190 million, and other net liabilities of $105 million. There are no future contingent payments associated with the acquisition.
In January 2026, Merck acquired Cidara Therapeutics, Inc. (Cidara), a biotechnology company developing drug-Fc conjugate (DFC) therapeutics, for $9.2 billion (including $570 million of payments to settle share-based equity awards of which $406 million related to unvested equity awards). Cidara's lead DFC candidate, MK-1406 (formerly CD388), is a long-acting antiviral designed to prevent seasonal and pandemic influenza. MK-1406 is currently being evaluated in a Phase 3 trial among adult and adolescent participants who are at higher risk of developing complications from influenza. The transaction was accounted for as an asset acquisition because MK-1406 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). Merck recorded a charge of $9.0 billion to Research and development expenses (which primarily represented acquired IPR&D with no alternative future use), or $3.62 per share, in the first six months of 2026, as well as net assets of $332 million. Under a previous license agreement between Cidara and J&J Innovative Medicine (a Johnson & Johnson company, previously Janssen Pharmaceuticals, Inc.), which was assumed by Merck, J&J Innovative Medicine is eligible to receive regulatory and sales-based milestones related to MK-1406.
Pricing
Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure.
In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024.
In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which went into effect in 2025), and government price-setting for certain Medicare Part D drugs (which went into effect in 2026) and Medicare Part B drugs (starting in 2028). The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia (sitagliptin) in 2023 for the first year of the IRA's "Drug Price Negotiation Program" (Program), and selected Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2025 for the second year of the IRA's Program. Pursuant to the IRA's Program, the government set a price for Januvia, which became effective on January 1, 2026, and set a price for Janumet and Janumet XR, which will become effective on January 1, 2027. In addition, in January 2026, HHS announced that Lenvima (lenvatinib) has been selected for government price setting, the set price for which will become effective on January 1, 2028. Furthermore, the Company expects that Keytruda (pembrolizumab) will be selected in 2027 for government price setting, which would become effective on January 1, 2029; a pending CMS proposed rule may subject Keytruda Qlex (pembrolizumab and berahyaluronidase alfa) to price setting at the same time. Government price setting may also impact pricing in the private market negatively affecting the Company's performance. The Company has sued the U.S. government regarding the IRA's Program.
Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company's ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.
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In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company's sales performance in the first six months of 2026 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. In July 2026, the German parliament approved the Statutory Health Insurance Contribution Rate Stabilization Act (GKV-BStabG), a comprehensive health care reform law designed to reduce health insurance expenditures. The legislation introduces significant cost-containment measures that directly impact the pharmaceutical industry, with the majority of the provisions taking effect on January 1, 2027. The Company is currently evaluating the implications of the GKV-BStabG on its business; however, the provisions of this law will exert significant downward pressure on sales in Germany.
The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits.
In May 2025, the U.S. presidential administration issued an executive order intended to encourage or impose the use of "most-favored-nation" pricing to tie U.S. prescription drug prices to prices in selected comparably developed nations. In July 2025, the Company and other pharmaceutical companies received letters from the U.S. presidential administration with a request to agree to the administration's "most-favored-nation" drug pricing goals by September 29, 2025. Further to the letter received from the administration, in December 2025, the Company announced that it had entered into a three-year agreement (MFN Agreement) with the U.S government that addressed the four policy goals of the administration's July letter. The Company is providing Januvia, Janumet and Janumet XR through a direct-to-patient program at affordable prices for eligible patients in the U.S., and will be expanding the program in the future to include Lipfendra (enlicitide). The Company also agreed to offer its existing medicines at discounted prices to Medicaid (excluding certain products) and in June 2026 signed an agreement with CMS to participate in the GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model, a voluntary program through which participating state Medicaid agencies receive pricing for certain medications aligned to prices paid in select countries. Additionally, the Company agreed that products launched during the term of the MFN Agreement (with certain exceptions) will be subject to "most-favored-nation" pricing in reference to prices for such products in a specified group of countries (MFN Countries). Finally, the Company agreed to repatriate and share with the Federal government a portion of foreign revenue received by the Company as a result of the government's successful trade policy efforts. Additionally, the Company reached an agreement with the U.S. Department of Commerce to delay Section 232 tariffs for three years, enabling the Company to make investments in the U.S. to reshore manufacturing for American patients.
Operating Results
Sales
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
U.S. $ 9,367 $ 8,836 6 % 6 % $ 18,532 $ 17,359 7 % 7 %
International 7,240 6,969 4 % 2 % 14,361 13,977 3 % (1) %
Total $ 16,607 $ 15,806 5 % 4 % $ 32,893 $ 31,335 5 % 3 %
U.S. plus international may not equal due to rounding.
Worldwide sales were $16.6 billion and $32.9 billion in the second quarter and first six months of 2026, respectively, representing increases of 5% compared with the same periods of 2025, reflecting growth in oncology, cardiometabolic and respiratory, and animal health, partially offset by declines in diabetes and infectious diseases. Lower sales in vaccines also partially offset revenue growth in the year-to-date period.
Growth in the oncology franchise in the second quarter and first six months of 2026 was largely due to the performance of Keytruda/Keytruda Qlex and Welireg (belzutifan). Higher alliance revenue from Koselugo (selumetinib) resulting from an amendment to the collaboration agreement also contributed to oncology sales growth in the year-to-date period. Sales growth in the cardiometabolic and respiratory franchise was largely attributable to the continued uptake of Winrevair (sotatercept-csrk), as well as the inclusion of sales of Ohtuvayre (ensifentrine) (which was obtained as part of the October 2025 acquisition of Verona Pharma plc [Verona Pharma]). Animal health sales growth was due to the performance of both livestock and companion animal products. The decline in diabetes was primarily due to lower sales of Januvia and Janumet, and the decline in infectious diseases was largely due to lower sales of Lagevrio (molnupiravir) and Dificid (fidaxomicin). The vaccines revenue decline in the year-to-date period was primarily due to lower combined sales of Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). Additionally, the overall U.S. vaccines market has experienced a contraction negatively affecting sales.
See Note 15 to the condensed consolidated financial statements for details on sales of the Company's products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or service marks are those of their respective owners.
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Pharmaceutical Segment
Oncology
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Keytruda/Keytruda Qlex
$ 8,366 $ 7,956 5 % 4 % $ 16,400 $ 15,161 8 % 6 %
Alliance Revenue - Lynparza (1)
365 370 (1) % (2) % 706 682 4 % 2 %
Welireg 271 162 67 % 67 % 470 300 57 % 56 %
Alliance Revenue - Reblozyl (2)
122 107 15 % 15 % 270 226 20 % 20 %
Alliance Revenue - Koselugo (3)
10 43 (76) % (76) % 171 87 96 % 96 %
* > 100%
(1) Alliance revenue for Lynparza represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements).
(2) Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements).
(3) Alliance revenue for Koselugo in the first six months of 2026 primarily includes a $150 million payment received in connection with an amendment to the collaboration agreement with AstraZeneca in August 2025, which revised the payment structure. Alliance revenue for Koselugo in the second quarter and first six months of 2025 represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs. (See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.)
Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 45 indications in the U.S., including 19 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications. Keytruda Qlex is a subcutaneously-administered fixed combination of pembrolizumab and berahyaluronidase alfa, which enhances dispersion and permeability to enable subcutaneous administration of pembrolizumab. Keytruda Qlex, which was initially approved by the FDA in September 2025, is approved in the U.S. in solid tumor indications approved for Keytruda. In November 2025, the European Commission (EC) approved a new subcutaneous (SC) route of administration and a new pharmaceutical form (solution for injection) of Keytruda (to be marketed as Keytruda SC) for use across Keytruda indications for adults in Europe. Timing for commercial availability of Keytruda SC in individual European Union (EU) countries for approved indications will vary by country and depend on multiple factors, including the completion of reimbursement procedures and the outcome of litigation with Halozyme, Inc. as discussed in Note 8 to the condensed consolidated financial statements. The Keytruda and Keytruda Qlex clinical development programs include studies across a broad range of cancer types. See "Research and Development Update" below.
Combined global sales of Keytruda/Keytruda Qlex grew 5% and 8% in the second quarter and first six months of 2026, respectively. Sales growth in the U.S. in both periods reflects higher net pricing and increased demand. Additionally, the year-to-date period in 2026 reflects an approximate $250 million favorable impact due to the timing of wholesaler purchases. Demand in the U.S. was driven by higher utilization across earlier-stage indications, including in certain types of triple-negative breast cancer (TNBC), bladder cancer, head and neck squamous cell carcinoma, and cervical cancer, as well as higher demand across multiple metastatic indications, in particular for the treatment of certain types of urothelial cancer. Sales growth in international markets reflects higher demand in urothelial and endometrial cancer metastatic indications, as well as increased uptake in earlier-stage indications, predominately for TNBC, cervical, non-small cell lung cancer (NSCLC), and renal cell carcinoma (RCC). The launch and reimbursement of new indications for Keytruda in the EU continues to have a negative impact on pricing in those markets. In addition, a biosimilar of Keytruda launched in Argentina in 2025 and the Company expects further launches in smaller international markets during 2026. The Company anticipates the impact of biosimilar erosion to Keytruda sales will be immaterial in 2026.
Keytruda has received the following regulatory approvals thus far in 2026.
Date Approval
February 2026
China's National Medical Products Administration (NMPA) approval for the first-line treatment of certain patients with primary advanced or recurrent endometrial cancer, based on the KEYNOTE-868 (NRG-GY018) trial.
February 2026
U.S. Food and Drug Administration (FDA) approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma whose tumors express programmed death-ligand (PD-L1) Combined Positive Score (CPS) ≥ 1 as determined by an FDA-authorized test, and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.
February 2026 Japan's Ministry of Health, Labor and Welfare (MHLW) approval as part of a neoadjuvant and adjuvant treatment regimen with radiotherapy with or without chemotherapy for certain patients with resectable locally advanced head and neck squamous cell carcinoma, based on the KEYNOTE-689 trial.
March 2026
EC approval in combination with paclitaxel, with or without bevacizumab, for the treatment of platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma in adults whose tumors express PD-L1 (CPS ≥1) and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.
June 2026
FDA approval in combination with Welireg for the adjuvant treatment of adult patients with RCC with a clear cell component at intermediate-high or high risk of recurrence following nephrectomy, or following nephrectomy and resection of metastatic lesions, based on the LITESPARK-022 trial.
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June 2026 EC approval in combination with Padcev (enfortumab vedotin), an antibody-drug conjugate (ADC), as neoadjuvant treatment and then continued after radical cystectomy as adjuvant treatment, for adults with resectable muscle-invasive bladder cancer (MIBC) who are ineligible for cisplatin-containing chemotherapy, based on the KEYNOTE-905 trial.
June 2026 FDA approval in combination with Trodelvy (sacituzumab govitecan-hziy), a trophoblast cell-surface antigen 2 (TROP2)-directed ADC, for the first-line treatment of adult patients with unresectable locally advanced or TNBC whose tumors express PD-L1 (CPS ≥10), based on the KEYNOTE-D19 trial.
June 2026 China's NMPA approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal cancer whose tumors express PD-L1 (CPS ≥1) and who have received prior first- or second-line systemic therapy, based on the KEYNOTE-B96 trial.
July 2026 FDA approval in combination with Padcev for expanded use as neoadjuvant treatment and then continued after cystectomy as adjuvant treatment for adults with MIBC, including those eligible for cisplatin-containing chemotherapy, based on the KEYNOTE-B15 trial.
Keytruda Qlex (available in some markets as Keytruda SC) received the following regulatory approvals thus far in 2026.
Date Approval
February 2026
FDA approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma whose tumors express PD-L1 (CPS ≥ 1) as determined by an FDA-authorized test, and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.
March 2026
EC approval in combination with paclitaxel, with or without bevacizumab, for the treatment of platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma in adults whose tumors express PD-L1 (CPS ≥1) and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.
April 2026
FDA approval of a label update based on results from the MK-3475A-F11 trial, which evaluated patient reported preference for subcutaneous administration of Keytruda Qlex over intravenous administration of Keytruda in participants with multiple tumor types.
June 2026
FDA approval in combination with Welireg for the adjuvant treatment of adult patients with RCC with a clear cell component at intermediate-high or high risk of recurrence following nephrectomy, or following nephrectomy and resection of metastatic lesions, based on the LITESPARK-022 trial.
June 2026 EC approval in combination with Padcev, an ADC, as neoadjuvant treatment and then continued after radical cystectomy as adjuvant treatment, for adults with resectable MIBC who are ineligible for cisplatin-containing chemotherapy, based on the KEYNOTE-905 trial.
June 2026 FDA approval in combination with Trodelvy (sacituzumab govitecan-hziy), a TROP2-directed ADC, for the first-line treatment of adult patients with unresectable locally advanced or TNBC whose tumors express PD-L1 (CPS ≥10), based on the KEYNOTE-D19 trial.
July 2026 FDA approval in combination with Padcev for expanded use as neoadjuvant treatment and then continued after cystectomy as adjuvant treatment for adults with MIBC, including those eligible for cisplatin-containing chemotherapy, based on the KEYNOTE-B15 trial.
The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Keytruda. Under the terms of the more significant of these agreements, Merck pays a royalty of 2.5% on worldwide net sales of Keytruda; this royalty (which also applies to net sales of Keytruda Qlex) will continue through 2026, terminating thereafter. The Company pays an additional 2% royalty on worldwide net sales of Keytruda (and on Keytruda Qlex following regulatory approval) to another third party; this royalty expired in the U.S. in 2024, expired in major European markets in the second half of 2025, but will continue to be paid on net sales of Keytruda and Keytruda Qlex in certain other international markets expiring at various dates through 2035. The royalty expenses are included in Cost of sales. The Company may be subject to additional royalties on net sales of Keytruda Qlex in the future under certain circumstances.
Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza grew 4% in the first six months of 2026 largely due to higher demand in the U.S. and many international markets, partially offset by lower net pricing.
Welireg is approved for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma. Welireg is also approved in combination with Keytruda or Keytruda Qlex for the adjuvant treatment of certain adult patients with clear cell RCC following nephrectomy. Sales of Welireg rose 67% and 57% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S. for the advanced RCC indication and continued launch uptake in several international markets, particularly in Japan. Favorable wholesaler purchasing patterns in the U.S. also contributed to sales growth in the second quarter of 2026.
Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance
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revenue related to this collaboration (consisting of royalties) increased 15% and 20% in the second quarter and first six months of 2026, respectively, primarily due to strong underlying sales performance.
Koselugo is an oral, selective MEK inhibitor approved for the treatment of patients with neurofibromatosis type 1 who have symptomatic inoperable plexiform neurofibromas. Koselugo is part of a collaboration with AstraZeneca. Alliance revenue related to Koselugo declined 76% in the second quarter of 2026 due to an amendment to the collaboration agreement with AstraZeneca in August 2025 that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and revised the payment structure. The increase in alliance revenue in the first six months of 2026 was due to a $150 million payment received in the first quarter of 2026 in connection with the above reference amendment to the collaboration agreement, partially offset by the related discontinuation of the profit sharing. See Note 3 to the condensed consolidated financial statements for additional information.
Vaccines
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Gardasil/Gardasil 9
$ 1,169 $ 1,126 4 % 3 % $ 2,238 $ 2,453 (9) % (10) %
ProQuad 235 273 (14) % (15) % 434 395 10 % 8 %
M-M-R II
96 95 1 % 1 % 201 264 (24) % (25) %
Varivax 260 240 8 % 8 % 495 489 1 % - %
Vaxneuvance 148 229 (35) % (36) % 350 459 (24) % (26) %
Capvaxive 184 129 42 % 40 % 325 236 38 % 36 %
In January 2026, the acting director of the U.S. Centers for Disease Control and Prevention (CDC) announced changes to the child and adolescent immunization schedule (January announcement), reducing the number of routinely recommended vaccinations and creating three new categories: immunizations recommended for all children; immunizations recommended for certain high-risk groups or populations; and immunizations based on shared clinical decision-making. Immunizations recommended for all children include vaccines for measles, mumps, rubella, polio, pertussis, tetanus, diphtheria, Haemophilus influenzae type B (Hib), pneumococcal disease, human papillomavirus (HPV), and chickenpox (varicella). Immunizations recommended for certain high-risk groups or populations include respiratory syncytial virus (RSV), hepatitis A, hepatitis B, and dengue. Immunizations recommended based on shared clinical decision-making include rotavirus, hepatitis A, and hepatitis B. HHS has stated that immunizations for all of the diseases covered by the previous immunization schedule will still be available to anyone who wants them through Affordable Care Act insurance plans and federal insurance programs, including Medicaid, the Children's Health Insurance Program, and the Vaccines For Children (VFC) program. Additionally, the trade association representing U.S. health insurers (AHIP) announced that its member health plans would continue to cover all immunizations that had been recommended by the CDC's Advisory Committee on Immunization Practices (ACIP) as of September 1, 2025, with no cost-sharing for patients through the end of 2027. On March 16, 2026, a federal district court in Massachusetts issued a preliminary injunction staying, among other things, the immunization schedule changes in the CDC's January announcement. The government is appealing the district court ruling to the U.S. Court of Appeals for the First Circuit.
Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, grew 4% in the second quarter of 2026 due to higher demand in Asia Pacific and Europe, as well as favorable timing of tenders in Europe, partially offset by lower demand in certain other international markets. Combined worldwide sales of Gardasil and Gardasil 9 declined 9% in the first six months of 2026 primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan's national immunization program catch-up cohort was in March 2025. The year-to-date sales decline also reflects lower sales in the U.S. primarily due to unfavorable CDC purchasing patterns and lower demand, partially offset by higher net pricing. The sales decline in the first six months of 2026 was partially offset by higher demand in Europe and other markets in the Asia Pacific region. As previously disclosed, the Company suspended shipments to China in February 2025 given lower demand and elevated channel inventory levels in China. In April 2026, the Company entered into a revised supply contract with its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd. In the second quarter of 2026, the Company began making limited shipments to China; however, revenue associated with the revised supply contract is expected to be immaterial in 2026.
Among the changes in the CDC's now-stayed January announcement referenced above was a reduction of the recommended doses for HPV vaccination of adolescents to a single dose. Gardasil 9 is currently indicated in the U.S. for a two-dose regimen in adolescents aged 9-14 and a three-dose regimen for those aged 15-45. Previous CDC recommendations for adolescents followed FDA-approved dosing. Many countries outside the U.S. have implemented a reduced dosing schedule for HPV vaccination in certain age groups. The Company anticipates that any negative effect of these recommendations or reduced dosing schedules on sales of Gardasil/Gardasil 9 will not be material.
The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Gardasil/Gardasil 9. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S. to one third party (this royalty expires in December 2028). The royalty expenses are included in Cost of sales.
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Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, decreased 14% in the second quarter of 2026 and increased 10% in the first six months of 2026. As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile. The Company partially replenished the borrowing in the second quarter of 2025 resulting in a benefit to U.S. ProQuad sales of $24 million in that period; the net effect of the borrowing and partial replenishment resulted in a net reduction to U.S. ProQuad sales of $49 million for the first six months of 2025. The Company replenished the remainder of the borrowing later in 2025. Additionally, lower demand in the U.S. in the second quarter and first six months of 2026 was partially offset by higher demand in certain European markets. Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella declined 24% in the first six months of 2026 primarily due to lower demand in the U.S. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), increased 8% and 1% in the second quarter and first six months of 2026, respectively, primarily due to unfavorable CDC stockpile activity in the prior year as noted below, higher net pricing in the U.S., and higher demand in several international markets, partially offset by lower demand in the U.S. and Latin America.
In September 2025, the ACIP voted to recommend that children under the age of four years receive protection from chickenpox (varicella) as a standalone immunization rather than in combination with measles, mumps, and rubella (MMR) vaccination, eliminating a previous shared clinical decision-making recommendation that allowed parents to choose combined MMR and varicella vaccine first-dose administration. The ACIP also voted to align the VFC program with this change. The acting CDC Director adopted the recommendation in October 2025. These ACIP recommendations are subject to the federal district court's March 16, 2026 preliminary injunction, as described above. MMR and varicella vaccines remain recommended and funded through the VFC program for both the first and second doses. The Company is the only manufacturer in the U.S. of MMRV vaccine (ProQuad) and varicella vaccine (Varivax). The Company anticipates that any negative effect of these recommendations on sales of ProQuad will not be material.
Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease (IPD) caused by certain serotypes, declined 35% and 24% in the second quarter and first six months of 2026, respectively, primarily due to $60 million of favorable CDC stockpile activity in the U.S. in the prior year. The impact to Vaxneuvance sales from CDC stockpile activity in 2025 was offset by a drawdown of CDC stockpile inventory for Varivax (noted above) and RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), which resulted in a net neutral transaction. Lower demand in the U.S. and the Asia Pacific region due to competition also contributed to the sales declines in the second quarter and first six months of 2026. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Vaxneuvance. Under the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.
Sales of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine), a vaccine for the prevention of IPD and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older, and for the prevention of IPD caused by those serotypes in certain children and adolescents 2 to 17 years of age at increased risk, grew 42% and 38% in the second quarter and first six months of 2026, respectively. Sales growth was largely due to launch uptake in certain international markets, particularly in Europe and the Asia Pacific region, as well as continued uptake in the U.S. Sales growth in the U.S. in the year-to-date period was negatively impacted by a reduction in wholesaler inventory. Capvaxive was approved in the U.S. in June 2024, in the EU in March 2025 and in Japan in August 2025 for use in adults. In June 2026, the FDA approved an expanded IPD indication for Capvaxive to include children and adolescents aged 2 through 17 years who have completed a primary pediatric pneumococcal vaccination series and have one or more chronic medical conditions that put them at an increased risk for pneumococcal disease. The EC approved a similar indication expansion in April 2026. The expanded approvals were based on data from the STRIDE-13 trial. Merck is a party to license agreements pursuant to which the Company pays royalties on net sales of Capvaxive. Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales.
Enflonsia (clesrovimab-cfor) is a preventive, long-acting monoclonal antibody, for the prevention of RSV lower respiratory tract disease in neonates (newborns) and infants who are born during or entering their first RSV season. Enflonsia was approved in the U.S. in June 2025, in the EU in April 2026, and in Japan and China in June 2026, based on results from the CLEVER and SMART clinical trials. The timing for availability of Enflonsia in individual EU countries will vary by country and depend on multiple factors, including the completion of reimbursement procedures. Sales of Enflonsia were $2 million and $3 million in the second quarter and first six months of 2026, respectively, reflecting the seasonal nature of the product and continued high levels of RSV monoclonal antibody inventory in the market; however, the Company anticipates that shipments will increase in the second half of 2026.
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Cardiometabolic and Respiratory
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Winrevair
$ 588 $ 336 75 % 75 % $ 1,114 $ 615 81 % 81 %
Ohtuvayre
204 - - - 335 - - -
Alliance Revenue - Adempas/Verquvo (1)
126 123 3 % 3 % 235 229 3 % 3 %
Adempas 78 80 (2) % (4) % 156 147 6 % 1 %
(1) Alliance revenue for Adempas and Verquvo represents Merck's share of profits from sales in Bayer AG's marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements).
Winrevair is an activin signaling inhibitor indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1 pulmonary hypertension) to improve exercise capacity and WHO functional class, and reduce the risk of clinical worsening events including hospitalization for PAH, lung transplantation and death. Sales of Winrevair rose 75% and 81% in the second quarter and first six months of 2026, respectively, largely due to continued uptake in the U.S. and early launch uptake in certain international markets, particularly in Japan and Europe. Winrevair was originally approved in the U.S. in March 2024, in the EU in August 2024, and in Japan in June 2025 (where it is being marketed as Airwin). Winrevair was approved for expanded indications in PAH based on the ZENITH trial in the U.S. in October 2025 and in the EU in January 2026. Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on net sales of Winrevair to BMS. The royalty expenses are included in Cost of sales.
Ohtuvayre is an inhaled phosphodiesterases 3 and 4 (PDE3 and PDE4) inhibitor, which was approved in the U.S. in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adults. Ohtuvayre was obtained in conjunction with Merck's October 2025 acquisition of Verona Pharma. Sales in the second quarter of 2026 reflect a benefit from the timing of specialty pharmacy purchases in the U.S., which is expected to unwind in the third quarter of 2026.
Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Alliance revenue from the collaboration grew 3% in the first six months of 2026 primarily reflecting higher demand in Bayer's marketing territories. The Company expects alliance revenue to decline for the full year of 2026 reflecting the loss of market exclusivity for Adempas in the U.S. Revenue also includes sales of Adempas and Verquvo in Merck's marketing territories. Sales of Adempas in Merck's marketing territories increased 6% in the first six months of 2026 largely due to higher demand.
In July 2026, the FDA approved Lipfendra tablets as an adjunct to diet and exercise to reduce low-density lipoprotein cholesterol (LDL-C) in adults with hypercholesterolemia, including heterozygous familial hypercholesterolemia (HeFH). Lipfendra is a novel macrocyclic peptide and is the first FDA-approved oral PCSK9 inhibitor shown to lower LDL-C, also known as bad cholesterol. The approval was based on the CORALreef Lipids and CORALreef HeFH clinical trials.
Infectious Diseases
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Bridion $ 497 $ 461 8 % 8 % $ 969 $ 902 7 % 7 %
Prevymis 295 228 29 % 28 % 568 436 30 % 27 %
Dificid
22 96 (77) % (77) % 56 179 (69) % (69) %
Lagevrio 5 83 (95) % (95) % 32 185 (82) % (83) %
Global sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 8% and 7% in the second quarter and first six months of 2026, respectively, as higher demand and pricing in the U.S. was partially offset by lower demand in most international markets due to generic competition. Bridion lost market exclusivity in the U.S. in July 2026. The Company anticipates U.S. sales of Bridion to decline in future periods, depending upon the availability of generic supply. The Company expects to discontinue U.S. sales of Bridion in 2027 as generic market supply stabilizes.
Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 29% and 30% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S. and certain European markets, reflecting in part the launch of new indications.
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Worldwide sales of Dificid, a medicine for the treatment of C. difficile-associated diarrhea, declined 77% and 69% in the second quarter and first six months of 2026, respectively, due to generic competition in the U.S. Dificid lost market exclusivity in the U.S. in July 2025; accordingly, the Company is experiencing a significant decline in U.S. sales of Dificid and expects the decline to continue.
Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio decreased 95% and 82% in the second quarter and first six months of 2026, respectively, largely due to lower demand in Japan and the U.S. driven primarily by declining COVID-19 cases. The Company expects the Lagevrio sales decline to continue during 2026. In the U.S., where Lagevrio remains in Phase 3 development and is marketed under an Emergency Use Authorization (EUA), the Secretary of HHS provided advance notice on June 29, 2026 that the declaration supporting the EUAs pursuant to which Lagevrio and certain other COVID-19 drug and biologic products are marketed will terminate, effective June 29, 2027. Based on the Secretary's June 2026 determination and advance notice of termination, the Company is working with the FDA to develop a plan for disposition of Lagevrio in the U.S. by June 29, 2027. U.S. sales of Lagevrio were $18 million in the first six months of 2026.
In April 2026, the FDA approved Idvynso, a once-daily, two-drug single-tablet regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of HIV-1 infection in adults to replace the current antiretroviral regimen in those who are virologically suppressed (HIV-1 RNA less than 50 copies per mL) on a stable antiretroviral regimen with no history of virologic treatment failure and no known substitutions associated with resistance to doravirine. Idvynso was also approved in Japan for these patients in March 2026. The approvals were based on the MK-8591A-051 and MK-8591A-052 clinical trials.
Diabetes
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Januvia/Janumet $ 429 $ 623 (31) % (31) % $ 1,003 $ 1,419 (29) % (30) %
Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 31% and 29% in the second quarter and first six months of 2026, respectively, primarily due to lower sales in the U.S. reflecting ongoing volume declines due to competitive pressure and lower net pricing. The sales declines were also attributable to lower demand in China and ongoing generic competition in most other international markets. Januvia and Janumet lost market exclusivity in the U.S. in May 2026 and Janumet XR lost market exclusivity in the U.S. in July 2026. The Company expects that it will lose a substantial portion of U.S. sales of Januvia, Janumet and Janumet XR sales in future periods due to generic competition.
Animal Health Segment
Three Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange 		Six Months Ended
June 30, 		% Change
Excluding
Foreign
Exchange
($ in millions) 2026 2025 % Change 2026 2025 % Change
Livestock $ 1,041 $ 961 8 % 6 % $ 2,105 $ 1,885 12 % 7 %
Companion Animal 734 685 7 % 5 % 1,461 1,349 8 % 4 %
$ 1,775 $ 1,646 8 % 5 % $ 3,566 $ 3,234 10 % 6 %
Sales of livestock products grew 8% and 12% in the second quarter and first six months of 2026, respectively, primarily due to higher demand for ruminant and poultry products.
Sales of companion animal products grew 7% and 8% in the second quarter and first six months of 2026, respectively, primarily due to new product launches, partially offset by lower demand for other products in the portfolio. Sales of the Bravecto (fluralaner) line of products were $359 million in the second quarter of 2026, representing growth of 7%, or 4% excluding the effect of foreign exchange, compared with the second quarter of 2025. Sales of the Bravecto line of products were $738 million in the first six months of 2026, representing growth of 11%, or 7% excluding the effect of foreign exchange, compared with the same period of 2025.
In July 2026, Merck acquired TARGAN, a privately held company developing and commercializing biodevice solutions to improve performance outcomes for the poultry industry. See Note 2 to the condensed consolidated financial statements for more information.
In February 2026, the FDA approved Numelvi (atinvicitinib tablets), the first and only second-generation Janus kinase (JAK) inhibitor indicated for the control of pruritus associated with allergic dermatitis in dogs six months of age and older.
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Costs, Expenses and Other
Three Months Ended
June 30, 		Six Months Ended
June 30,
($ in millions) 2026 2025 % Change 2026 2025 % Change
Cost of sales $ 4,395 $ 3,557 24 % $ 8,590 $ 6,976 23 %
Selling, general and administrative 2,904 2,649 10 % 5,604 5,202 8 %
Research and development 9,741 4,048 * 22,333 7,669 *
Restructuring costs 151 560 (73) % 346 629 (45) %
Other (income) expense, net 99 (7) * 237 (43) *
$ 17,290 $ 10,807 60 % $ 37,110 $ 20,433 82 %
* > 100%
Cost of Sales
Cost of sales increased 24% and 23% in the second quarter and first six months of 2026, respectively. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $984 million and $599 million in the second quarter of 2026 and 2025, respectively, and $1.9 billion and $1.2 billion in the first six months of 2026 and 2025, respectively. Additionally, cost of sales in the second quarter and first six months of 2026 include an $83 million and $166 million impact, respectively, for the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma. Also included in cost of sales are expenses associated with restructuring activities, which amounted to $184 million and $165 million in the second quarter of 2026 and 2025, respectively, and $421 million and $201 million in the first six months of 2026 and 2025, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.
Gross margin was 73.5% in the second quarter of 2026 compared with 77.5% in the second quarter of 2025. Gross margin was 73.9% in the first six months of 2026 compared with 77.7% in the first six months of 2025. The gross margin decline in both periods was primarily due to higher amortization of intangible assets, higher inventory write-downs (primarily vaccines), increased restructuring costs, and the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma, partially offset by the favorable effect of product mix.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses increased 10% and 8% in the second quarter and first six months of 2026, respectively, primarily due to higher administrative costs (including investments in IT), higher promotional and selling costs in support of product launches, and the unfavorable impact of foreign exchange.
Research and Development
Research and development (R&D) expenses increased to $9.7 billion and $22.3 billion in the second quarter and first six months of 2026, respectively, compared with $4.0 billion and $7.7 billion in the second quarter and first six months of 2025, respectively. The increase in both periods was primarily due to higher charges for business development activity.
Significant charges for business development activity in 2026 include:
•$5.7 billion for the acquisition of Terns (second quarter and first six months of 2026)
•$9.0 billion for the acquisition of Cidara (first six months of 2026)
Significant charges for business development activity in 2025 include:
•$200 million for a license agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd. (Hengrui Pharma) (second quarter and first six months of 2025)
•$100 million for the achievement of a developmental milestone related to the 2024 EyeBiotech Limited (EyeBio) acquisition (first six months of 2025)
The increase in R&D expenses in both the second quarter and first six months of 2026 was also attributable to higher clinical development spending and the unfavorable effect of foreign exchange. The increases were partially offset by a $200 million and $400 million reduction in R&D expenses in the second quarter and first six months of 2026, respectively, as part of the funding agreement with Blackstone Life Sciences (Blackstone). See Note 2 to the condensed consolidated financial statements for more information on the acquisitions of Terns and Cidara, the license agreement with Hengrui Pharma, as well as the Blackstone funding agreement.
R&D expenses consist of the costs directly incurred by Merck Research Laboratories (MRL), the Company's research and development division that focuses on human health-related activities, which were $2.8 billion and $5.3 billion in the second quarter and first six months of 2026, respectively, (inclusive of a $200 million and $400 million benefit, respectively, from the Blackstone funding agreement noted above) and $2.8 billion and $5.3 billion for the second quarter and first six months of 2025, respectively. Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charges related to Hengrui Pharma and EyeBio noted above), charges for transactions
- 39 -
accounted for as asset acquisitions (including the charges for the acquisitions of Terns and Cidara noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production, and general and administrative, which in the aggregate were $7.0 billion and $1.2 billion for the second quarter of 2026 and 2025, respectively, and $17.0 billion and $2.3 billion for the first six months of 2026 and 2025, respectively.
Restructuring Costs
In July 2025, the Company approved a restructuring program (2025 Restructuring Program) designed to position the Company for its next chapter of growth and to successfully advance its pipeline and launch new products across multiple therapeutic areas. As part of this program, the Company expects to eliminate certain positions in sales and administrative organizations, as well as research and development. The Company will, however, continue to hire employees into new roles across all strategic growth areas of the business. In addition, the Company will reduce its global real estate footprint and continue to optimize its manufacturing network, aligning the geography of its global manufacturing footprint to its customers and reflecting changes in the Company's business. Most actions contemplated under the 2025 Restructuring Program are expected to be largely completed by the end of 2027, with the exception of certain manufacturing actions, which are expected to be substantially completed by the end of 2029. The cumulative pretax costs to be incurred by the Company to implement the program are estimated to be approximately $3.0 billion, of which approximately 60% will be cash, relating primarily to employee separation expense and contractual termination costs. The remainder of the costs will be non-cash, relating primarily to the accelerated depreciation of facilities. The Company expects the actions under the 2025 Restructuring Program to result in annual cost savings of approximately $1.7 billion, which will be substantially realized by the end of 2027. The 2025 Restructuring Program is part of the Company's multiyear optimization initiative anticipated to achieve $3.0 billion in annual cost savings by the end of 2027, which will be fully reinvested into strategic growth areas of the business.
In January 2024, the Company approved a restructuring program (2024 Restructuring Program) intended to continue the optimization of the Company's Human Health global manufacturing network as the future pipeline shifts to new modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion. Approximately 50% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company anticipates the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.
Restructuring costs of $151 million and $560 million for the second quarter of 2026 and 2025, respectively, and $346 million and $629 million in the first six months of 2026 and 2025, respectively, primarily include separation and other costs associated with these restructuring activities. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.
Additional costs associated with the Company's restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $334 million and $779 million in the second quarter of 2026 and 2025, respectively, and $800 million and $884 million in the first six months of 2026 and 2025, respectively, related to restructuring program activities. See Note 4 to the condensed consolidated financial statements for additional details.
Other (Income) Expense, Net
Other (income) expense, net, was $99 million of expense in the second quarter of 2026 compared with $7 million of income in the second quarter of 2025. Other (income) expense, net, was $237 million of expense in the first six months of 2026 compared with $43 million of income in the first six months of 2025. The unfavorable period-over-period changes were primarily due to higher net interest expense, partially offset by higher net income from investments in equity securities.
For details on the components of Other (income) expense, net see Note 11 to the condensed consolidated financial statements.
Segment Profits
Three Months Ended
June 30, 		Six Months Ended
June 30,
($ in millions) 2026 2025 2026 2025
Pharmaceutical segment profits $ 11,612 $ 11,103 $ 23,151 21,973
Animal Health segment profits 636 593 1,359 1,226
Non-segment activity
(12,931) (6,697) (28,727) (12,297)
(Loss) Income Before Taxes
$ (683) $ 4,999 $ (4,217) $ 10,902
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Pharmaceutical segment profits consist of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits consist of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, R&D expenses incurred by MRL, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and acquisition- and divestiture-related costs, including the amortization of intangible assets and the recognition of fair value step-up of inventories, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items are reflected in "Non-segment activity" in the above table. Also included in "Non-segment activity" are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing arrangements.
Taxes on Income
The income tax provision of $654 million for the second quarter of 2026 on a pretax loss of $683 million, resulted in an effective income tax rate of (95.9)%. The second quarter 2026 effective income tax rate reflects a 108.9 percentage point unfavorable impact of the charge for the acquisition of Terns, which had no tax benefit, partially offset by the favorable impacts of jurisdictional mix of income and expense. The income tax provision of $1.4 billion for the first six months of 2026 on a pretax loss of $4.2 billion, resulted in an effective income tax rate of (32.3)%. The effective income tax rate for the first six months of 2026 reflects a 45.3 percentage point combined unfavorable impact of the charges for the acquisitions of Cidara and Terns, which had no tax benefits, partially offset by the favorable impacts of jurisdictional mix of income and expense.
The effective income tax rates of 11.4% and 12.7% for the second quarter and first six months of 2025, respectively, reflect a 2.9 percentage point favorable impact and a 1.4 percentage point favorable impact, respectively, due to $146 million of tax benefits resulting primarily from favorable audit reserve adjustments. The effective income tax rates in both the second quarter and first six months of 2025 also reflect the favorable impacts of jurisdictional mix of income and expense, as well as certain discrete items.
The Internal Revenue Service (IRS) is currently conducting examinations of the Company's tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the Tax Cuts and Jobs Act of 2017. In April 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $1.3 billion. In addition, the NOPAs included penalties of approximately $260 million. These amounts are exclusive of any interest that may be due. The Company disagrees with the proposed adjustments and is vigorously contesting the NOPAs through available administrative proceedings. However, it remains uncertain whether a resolution can be reached during this phase of the audit, and judicial proceedings may be necessary. If the Company is ultimately unsuccessful in resolving or defending its position, the impact could be material to its financial statements. The statute of limitations for assessments with respect to the 2019 and 2020 federal tax return years expired in June 2024 and October 2024, respectively. The IRS is also currently conducting examinations of the Company's tax returns for the years 2021 and 2022. In addition, various state and foreign tax examinations are in progress.
Non-GAAP (Loss) Income and Non-GAAP EPS
Non-GAAP (loss) income and non-GAAP (loss) earnings per share (EPS) are alternative views of the Company's performance that Merck is providing because management believes this information enhances investors' understanding of the Company's results since management uses non-GAAP measures to assess performance. Non-GAAP (loss) income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial performance.
Non-GAAP (loss) income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, annual employee compensation, including senior management's compensation, is derived in part using a non-GAAP pretax income metric. Since non-GAAP (loss) income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP (loss) income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net (loss) income and EPS prepared in accordance with generally accepted accounting principles in the U.S. (GAAP).
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A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
($ in millions except per share amounts) 2026 2025 2026 2025
(Loss) income before taxes as reported under GAAP
$ (683) $ 4,999 $ (4,217) $ 10,902
Increase (decrease) for excluded items:
Acquisition- and divestiture-related costs 1,090 594 2,136 1,241
Restructuring costs 334 779 800 884
Income from investments in equity securities, net
(191) (61) (371) (168)
Non-GAAP income (loss) before taxes 550 6,311 (1,652) 12,859
Income tax provision as reported under GAAP 654 571 1,363 1,388
Estimated tax benefit on excluded items (1)
228 227 476 340
Tax benefits resulting primarily from favorable audit reserve adjustments - 146 - 146
Non-GAAP income tax provision 882 944 1,839 1,874
Non-GAAP net (loss) income
(332) 5,367 (3,491) 10,985
Less: Net (loss) income attributable to noncontrolling interests as reported under GAAP
(2) 1 (5) 8
Non-GAAP net (loss) income attributable to Merck & Co., Inc.
$ (330) $ 5,366 $ (3,486) $ 10,977
EPS assuming dilution as reported under GAAP (2)(3)
$ (0.54) $ 1.76 $ (2.26) $ 3.77
EPS difference 0.41 0.37 0.85 0.58
Non-GAAP EPS assuming dilution (2)(3)
$ (0.13) $ 2.13 $ (1.41) $ 4.35
(1) The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.
(2) GAAP and non-GAAP EPS were negatively affected in the second quarter and first six months of 2026 by charges of $2.31 and $5.93 per share, respectively, for transactions accounted for as asset acquisitions. GAAP and non-GAAP EPS were negatively affected in both the second quarter and first six months of 2025 by a charge of $0.07 per share for an upfront payment related to a license agreement. See "Business Development Transactions" above for additional information.
(3) The Company recorded a net loss on both a GAAP and non-GAAP basis for both the second quarter and first six months of 2026; therefore, no potential dilutive common shares were used in the computations of loss per common share assuming dilution because the effects would have been antidilutive.
Acquisition- and Divestiture-Related Costs
Non-GAAP (loss) income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. These amounts include the amortization of intangible assets and the recognition of fair value step-up of inventories, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations, asset acquisitions, and licensing arrangements, as well as the recognition of fair value step-up of inventories related to asset acquisitions.
Restructuring Costs
Non-GAAP (loss) income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements). These amounts include employee separation costs and accelerated depreciation associated with facilities to be fully or partially closed or divested. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also include asset impairment, facility shut-down, contractual termination, and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation costs.
Income and Losses from Investments in Equity Securities
Non-GAAP (loss) income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.
Certain Other Items
Non-GAAP (loss) income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects. Typically, these items are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS in 2025 are tax benefits resulting primarily from favorable audit reserve adjustments.
Research and Development Update
The Company currently has several candidates under regulatory review in the U.S. and internationally.
Idvynso, MK-8591A, a once-daily, oral two-drug regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of certain adults with HIV-1 infection is under review in the EU. The application is based on findings from the Phase 3 MK-8591A-051 and
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MK-8591A-052 clinical trials in adults whose HIV-1 infection is virologically suppressed on antiretroviral therapy, as well as on the MK-8591A-053 clinical trial in previously untreated adults.
MK-2400, ifinatamab deruxtecan (I-DXd), an investigational, potential first-in-class B7-H3 directed DXd ADC, is under priority review in the U.S. for the treatment of adult patients with previously treated extensive-stage small cell lung cancer who experienced disease progression on or after platinum-based chemotherapy. The FDA set a Prescription Drug User Fee Act (PDUFA) target action date of October 10, 2026. The Biologics License Application is based on results from the Phase 2 IDeate-Lung01 trial. I-DXd is being developed as part of a collaboration with Daiichi Sankyo.
MK-0616, Lipfendra, a once-daily oral PCSK9 inhibitor, is under review in the EU for the treatment of adults with primary hypercholesterolemia or mixed dyslipidemia. The application is based on the Phase 3 CORALreef Lipids, CORALreef HeFH, and CORALreef AddOn studies. Lipfendra also is under review in China.
MK-3475, Keytruda, is an anti-PD-1 therapy available for intravenous administration. MK-3475A, Keytruda Qlex, combines pembrolizumab with berahyaluronidase alfa to enhance dispersion and permeability to enable subcutaneous administration. Keytruda and Keytruda Qlex each are approved for the treatment of many cancers and continue to be studied in additional Phase 3 trials. In the EU and certain other international markets, Keytruda Qlex is approved as a subcutaneous route of administration and pharmaceutical form of Keytruda. Keytruda is under review:
•In Japan, in combination with chemotherapy with or without bevacizumab for the treatment of certain patients with platinum-resistant recurrent ovarian cancer. The application is based on data from the Phase 3 KEYNOTE-B96 trial.
•In Japan, in combination with Padcev as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with MIBC who are ineligible for cisplatin-based chemotherapy. The application is based on data from the Phase 3 KEYNOTE-905 trial conducted in collaboration with Pfizer Inc. (Pfizer) and Astellas.
•In the EU and Japan, in combination with Padcev as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with MIBC who are eligible for cisplatin-based chemotherapy. The applications are based on data from the Phase 3 KEYNOTE-B15 trial conducted in collaboration with Pfizer and Astellas.
•In the EU, in combination with chemotherapy with or without radiation, for the adjuvant treatment of newly diagnosed, mismatch repair deficient endometrial cancer in adults who are at high risk of recurrence. The application is based on data from the Phase 3 KEYNOTE-B21 trial.
MK-6482, Welireg, Merck's first-in-class oral hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, is under review:
•In the EU, in combination with Keytruda for the adjuvant treatment of certain patients with clear cell RCC following nephrectomy. The application is based on data from the Phase 3 LITESPARK-022 trial.
•In the U.S. and EU, in combination with MK-7902, Lenvima, an orally available multiple receptor TKI, for the treatment of certain previously treated patients with advanced RCC. In the U.S., the FDA set a PDUFA date of October 4, 2026. The supplemental applications for Welireg and Lenvima are based on data from the Phase 3 LITESPARK-011 trial. In Japan, the combination is under review for Lenvima. Lenvima is being developed as part of a collaboration with Eisai Co., Ltd.
MK-7962, Winrevair, an activin signaling inhibitor for the treatment of adults with PAH (WHO Group 1 pulmonary hypertension), is under review by the FDA in connection with a proposed update to the U.S. product label based on the results of the Phase 3 HYPERION trial. The FDA set a PDUFA date of September 21, 2026. Additionally, in March 2026, the Company announced the presentation of positive data from the Phase 2, proof-of-concept CADENCE trial of Winrevair; the Company intends to proceed with Phase 3 development of Winrevair for the treatment of adults with the syndrome of combined post- and precapillary pulmonary hypertension and heart failure with preserved ejection fraction.
The Company announced topline results from three studies evaluating MK-7240, tulisokibart, an investigational humanized monoclonal antibody targeting tumor necrosis factor-like cytokine 1A (TL1A). The Phase 3 ATLAS-UC induction-only study (MK-7240-001, Study 2) in patients with moderately to severely active ulcerative colitis met its primary endpoint of clinical remission according to the Modified Mayo Score at week 12, as well as key secondary endpoints; a Phase 3 ATLAS-UC study evaluating induction and maintenance treatment in this population (MK-7240-001, Study 1) is ongoing and results from both studies will be presented at an upcoming scientific congress. Additionally, a Phase 2 study in hidradenitis suppurativa met its primary and key secondary endpoints. A Phase 2 study in systemic sclerosis-associated interstitial lung disease did not meet its primary endpoint, with no new safety concerns identified; the study will be discontinued and, following detailed review of these Phase 2 data, the Company will determine next steps with respect to this indication. Additional Phase 3 and Phase 2 studies of tulisokibart in immune-mediated inflammatory diseases are ongoing.
The Company is collaborating with the National Cancer Institute (NCI) of the U.S. National Institutes of Health and with Agencia Costarricense de Investigaciones Biomédicas to extend the Costa Rica ESCUDDO clinical trial evaluating efficacy of a single dose of HPV vaccine against cervical persistent infection with HPV types 16 and 18 in females ages 12-16 years at vaccination. The Company's funding and scientific contribution to this five-year extension of the study is expected to help address data gaps on longer term durability of protection and effectiveness of a single dose of HPV vaccine against cervical
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persistent infection and disease endpoints in females. As the FDA and European Medicines Agency (EMA) have identified, additional data gaps remain concerning single-dose efficacy in males and effectiveness of a single-dose HPV vaccine regimen compared with the approved three-dose regimen. The ESCUDDO extension is expected to initiate in the third quarter of 2026. Additionally, based on evaluation of feedback from the FDA and EMA on the Company's proposed single-dose prospective clinical trial designs for V503, Gardasil 9, the Company will not proceed with those trials due to the operational infeasibility of designing studies that meet rigorous evidentiary standards required to support a change to the labeled dosing regimen.
The Company, in collaboration with Gilead Sciences, Inc., is discontinuing the Phase 3 KEYNOTE-D46/EVOKE-03 study investigating Trodelvy in combination with Keytruda compared to Keytruda monotherapy in certain patients with previously untreated metastatic NSCLC whose tumors expressed PD-L1 (tumor proportion score ≥50%). The decision is based on the recommendation from the external Data Monitoring Committee following its review of the data from the pre-specified final analysis of progression-free survival and interim analysis of overall survival. The safety profile of the combination was consistent with the known safety of each agent, with no new safety signals identified, and there are no changes to ongoing Company studies.
MK-4482, Lagevrio, the Company's investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in certain adults who are at risk for progressing to severe disease, is available in the U.S. under an EUA initially granted by the FDA in December 2021 in response to the COVID-19 pandemic. On June 29, 2026, the Secretary of HHS determined that circumstances no longer exist justifying the authorization of emergency use of drugs and biological products during the COVID-19 pandemic and provided advance notice that the declaration supporting the EUA for Lagevrio will terminate, effective June 29, 2027. Lagevrio remains in Phase 3 development, and the Company does not anticipate FDA approval of a New Drug Application for Lagevrio prior to the June 29, 2027 termination date. Based on the Secretary's June 2026 determination and advance notice of termination, the Company is working with the FDA to develop a plan for disposition of Lagevrio in the U.S. by June 29, 2027.
In June 2026, the Company, along with other pharmaceutical companies, received a letter from the Chairman of the U.S. House of Representatives Select Committee on China inquiring about the Company's conduct of clinical trials and related activities in China. The Company is working with the Committee to respond to its questions.
The chart below reflects the Company's research pipeline as of August 5, 2026. Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics generally are given MK-number designations and vaccine candidates generally are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer, immunology and certain other indications) and additional claims, line extensions or formulations for in-line products are not shown.
Phase 2
Alzheimer's Disease
MK-2214
Atherosclerosis
MK-7262
Cancer
MK-1022 (patritumab deruxtecan)(1)
Bladder
Cervical
Endometrial
Esophageal
Gastric
Hepatocellular
Melanoma
Non-Small Cell Lung
Ovarian
Pancreatic
Prostate
MK-1045
Hematological Malignancies
MK-1084 (calderasib)(1)
Solid Tumors
MK-2400 (ifinatamab deruxtecan)(1)
Biliary
Bladder
Breast
Cervical
Endometrial
Head and Neck
Hepatocellular
Melanoma
Non-Small Cell Lung
Ovarian
Pancreatic
Solid Tumors
Cancer
MK-2870 (sacituzumab tirumotecan)(1)
Biliary
Esophageal
Neoplasm Malignant
MK-3120
Bladder
MK-3475 Keytruda
Prostate
MK-3475A Keytruda Qlex
Hematological Malignancies (U.S.)
MK-5684 (opevesostat)
Breast
Endometrial
Ovarian
MK-5909 (raludotatug deruxtecan)(1)
Cervical
Endometrial
Gastric
Non-Small Cell Lung
Small Cell Lung
MK-6070 (gocatamig)(1)
Small Cell Lung
MK-6482 Welireg
Breast
V940 (intismeran autogene)(1)
Bladder
Renal Cell
Chronic Obstructive Pulmonary Diseases
MK-5884A (ensifentrine+glycopyrrolate)
HIV-1 Infection
MK-8591B (islatravir+ulonivirine)
Immunology
MK-7240 (tulisokibart)
Axial Spondyloarthritis
Hidradenitis Suppurativa
Psoriatic Arthritis
Rheumatoid Arthritis
Systemic Sclerosis
MK-8690
Ulcerative Colitis
Metabolic Dysfunction-Associated Steatohepatitis (MASH)
MK-6024 (efinopegdutide)
Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease
MK-5475 (frespaciguat)
Pulmonary Hypertension Due To Left Heart Disease
MK-7962 Winrevair
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Phase 3 (Phase 3 entry date) Under Review
Cancer
MK-1022 (patritumab deruxtecan)(1)
Breast (July 2025)
MK-1026 (nemtabrutinib)
Hematological Malignancies (March 2023)
MK-1084 (calderasib)(1)
Colorectal (July 2025)
Non-Small Cell Lung (May 2024)
MK-2140 (zilovertamab vedotin)
Hematological Malignancies (September 2024)
MK-2400 (ifinatamab deruxtecan)(1)
Esophageal (March 2025)
Prostate (May 2025)
Small Cell Lung (EU) (July 2024)
MK-2870 (sacituzumab tirumotecan)(1)
Bladder (April 2026)
Breast (April 2024)
Cervical (July 2024)
Endometrial (December 2023)
Gastric (May 2024)
Non-Small Cell Lung (November 2023)
Ovarian (April 2025)
MK-3475 Keytruda
Small-Cell Lung (May 2017)
MK-3543 (bomedemstat)
Myeloproliferative Disorders (December 2023)
MK-5909 (raludotatug deruxtecan)(1)
Ovarian (December 2025)
MK-5684 (opevesostat)
Prostate (December 2023)
MK-7339 Lynparza(1)
Non-Small Cell Lung (June 2019)
Small Cell Lung (December 2020)
V940 (intismeran autogene)(1)
Melanoma (July 2023)
Non-Small Cell Lung (December 2023)
COVID-19
MK-4482 Lagevrio (U.S.) (May 2021)(1)(2)
Dengue Fever Virus Vaccine
V181 (June 2025)
Diabetic Macular Edema
MK-3000 (remigromig)(3)
HIV-1 Infection
MK-8591D (islatravir+lenacapavir) (October 2024)(1)(4)
HIV-1 Pre-Exposure Prophylaxis
MK-8527 (alimatravir) (July 2025)
Immunology
MK-7240 (tulisokibart)
Crohn's Disease (June 2024)
Ulcerative Colitis (October 2023)
Influenza
MK-1406 (September 2025)
Neovascular Age-Related Macular Degeneration
MK-8748(5)
New Molecular Entities
HIV-1 Infection
MK-8591A Idvynso (EU)
Previously Treated Extensive-Stage Small Cell Lung Cancer
MK-2400 (ifinatamab deruxtecan) (U.S.)(1)
Primary Hypercholesterolemia or Mixed Dyslipidemia
MK-0616 Lipfendra (EU)
Certain Supplemental Filings
Cancer
MK-3475 Keytruda
• Platinum-Resistant Recurrent Ovarian Cancer
(KEYNOTE-B96) (JPN)
• Cisplatin-Ineligible Muscle Invasive Bladder Cancer
(KEYNOTE-905) (JPN)
• Cisplatin-Eligible Muscle Invasive Bladder Cancer
(KEYNOTE-B15) (EU) (JPN)
• Newly Diagnosed High-Risk Endometrial Cancer
(KEYNOTE-B21) (EU)
MK-6482 Welireg
• Clear Cell Renal Cell Carcinoma Following Nephrectomy
(LITESPARK-022) (EU)(6)
• Previously Treated Advanced Renal Cell Carcinoma
(LITESPARK-011) (U.S.) (EU) (JPN)(1)(7)
Pulmonary Arterial Hypertension
MK-7962 Winrevair (HYPERION) (U.S.)
Footnotes:
(1) Being developed in a collaboration.
(2) Available in the U.S. under Emergency Use Authorization, which will terminate effective June 29, 2027.
(3) Program is in Phase 2/3 studies, the first of which commenced in August 2024.
(4) On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials.
(5) Program is in Phase 2/3 studies, the first of which commenced in March 2026.
(6) Under review for combination use with Keytruda.
(7) Under review in Japan for Lenvima, used in combination with Welireg.
Analysis of Liquidity and Capital Resources
($ in millions) June 30, 2026 December 31, 2025
Cash and investments $ 8,363 $ 15,521
Working capital 8,948 15,189
Total debt to total liabilities and equity 41.5 % 36.0 %
Cash provided by operating activities was $9.3 billion in the first six months of 2026 compared with $5.8 billion in the first six months of 2025. Cash provided by operating activities continues to be the Company's primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance business development transactions, capital expenditures, dividends paid to shareholders and treasury stock purchases. Larger business development transactions may be funded with a combination of cash from operating activities and debt.
Cash used in investing activities was $15.8 billion in the first six months of 2026 compared with $2.3 billion in the first six months of 2025. The higher use of cash in investing activities was primarily due to the acquisitions of Cidara and Terns, partially offset by lower purchases of securities and other investments, higher proceeds from sales of securities and other investments, and lower capital expenditures (driven in part by the acquisition of a facility from WuXi Vaccines in 2025).
Cash used in financing activities was $1.2 billion in the first six months of 2026 compared with $9.3 billion in the first six months of 2025. The lower use of cash in financing activities was primarily due to proceeds from a term loan, proceeds from the issuance of long-term debt, lower payments on long-term debt, lower purchases of treasury stock and higher proceeds from the exercise of stock options, partially offset by the repayment of the term loan and higher dividends paid to shareholders.
In April 2026, Merck entered into a delayed draw term loan credit agreement (Credit Agreement) pursuant to which the lenders committed (subject to satisfaction of certain conditions set forth in the Credit Agreement) to provide Merck with financing under a 364-day term loan facility in an aggregate amount not to exceed $6.0 billion. The Company drew down the full
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$6.0 billion of funds under the facility to fund a portion of the approximately $6.8 billion cash consideration for the acquisition of Terns. The Company has since repaid borrowings under the Credit Agreement.
In May 2026, the Company issued $6.0 billion aggregate principal amount of senior unsecured notes consisting of $500 million of floating rate notes due 2028, $1.0 billion of 4.30% notes due 2028, $500 million of 4.65% notes due 2031, $1.0 billion of 4.95% notes due 2033, $1.5 billion of 5.20% notes due 2036, $500 million of 5.75% notes due 2046, and $1.0 billion of 5.85% notes due 2056. The Company used the net proceeds from the offering to repay borrowings under the Credit Agreement as noted above.
In January 2026 and February 2026, the Company's $135 million, 6.30% debentures, and its $1.0 billion, 0.75% notes, respectively, matured in accordance with their terms and were repaid. In February 2025, the Company's $2.5 billion, 2.75% notes matured in accordance with their terms and were repaid.
Dividends paid to stockholders were $4.2 billion and $4.1 billion in the first six months of 2026 and 2025, respectively. In January 2026, Merck's Board of Directors declared a quarterly dividend of $0.85 per share on the Company's outstanding common stock for the second quarter of 2026 that was paid in April 2026. In May 2026, Merck's Board of Directors declared a quarterly dividend of $0.85 per share on the Company's outstanding common stock for the third quarter of 2026 that was paid in July 2026.
In January 2025, Merck's Board of Directors authorized purchases of up to $10 billion of Merck's common stock for its treasury. The treasury stock purchase authorization has no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. During the first six months of 2026, the Company purchased $1.6 billion (14 million shares) of its common stock for its treasury under this program. The Company expects to repurchase approximately $3.0 billion of treasury shares under this program during 2026. As of June 30, 2026, the Company's remaining share repurchase authorization was $5.7 billion.
The Company has a $6.0 billion credit facility that matures in May 2031. The facility provides backup liquidity for the Company's commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.
Critical Accounting Estimates
The Company's significant accounting policies, which include management's best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2025 included in Merck's Form 10-K filed on February 24, 2026. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates is included in the Critical Accounting Estimates section of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Merck's Form 10-K. There have been no significant changes in the Company's critical accounting estimates since December 31, 2025.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements.
Merck & Co. Inc. published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 20:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]