MRK GAAP Loss on $5.7B Terns Charge, 2026 Guidance Cut 47%

Merck (MRK) reported Q2 2026 revenue of $16.6 billion on August 4, up 5% year over year, but swung to a GAAP net loss of $(1,335) million, or $(0.54) per share. The culprit was a $5.7 billion charge for the Terns Pharmaceuticals acquisition, which more than doubled R&D expense to $9.7 billion for the quarter. Merck slashed its full-year 2026 non-GAAP EPS guidance to $2.66-$2.76, down from $5.04-$5.16. The $2.31 per share in combined Terns and Cidara acquisition costs explains the entire reduction. Shares closed at $128.00.

The numbers

• Ticker: MRK
• Stock price: $128.00 (close August 4)
• Q2 revenue: $16.6 billion (+5% YoY)
• GAAP EPS: $(0.54)
• Non-GAAP EPS: $(0.13)
• New 2026 guidance: $2.66-$2.76 (down from $5.04-$5.16)
• Keytruda: $8.37 billion (+5%)
• Winrevair: $588 million (+75%)
• Ohtuvayre: $204 million (new, from Verona Pharma acquisition)

The cost of transformation

The Terns acquisition closed in early 2026, adding TERN-701, a novel allosteric BCR-ABL inhibitor for chronic myeloid leukemia. The Cidara deal added another $9.0 billion in one-time R&D charges. Together these transactions produced $2.31 per share in acquisition-related costs this quarter.

R&D expense hit $9.7 billion, compared with roughly $4 billion in the prior-year quarter. The spending reflects Merck’s pivot away from Keytruda dependence. Keytruda’s $8.37 billion in Q2 sales still represents roughly 50% of total revenue, and the drug loses US patent protection in 2028. With biosimilar competition expected soon after, Merck is racing to build new revenue streams that can replace a product generating over $30 billion annually.

Winrevair (sotatercept), Merck’s pulmonary arterial hypertension drug approved in March 2024, grew 75% to $588 million. PAH affects an estimated 30,000 to 50,000 US patients, and Winrevair now holds a dominant position as the first activin signaling inhibitor in the class. Ohtuvayre (ensifentrine), a first-in-class PDE3/PDE4 inhibitor for COPD obtained through the $10.4 billion Verona Pharma acquisition, contributed $204 million in its second full quarter. COPD affects roughly 16 million diagnosed US adults.

What to watch

The near-term risk is execution. Merck is simultaneously integrating two multi-billion-dollar acquisitions while advancing registrational programs for several acquired assets. If Winrevair’s growth stalls or Ohtuvayre’s COPD launch underwhelms, the post-Keytruda math gets harder. On the upside, Merck’s I-DXd B7-H3 ADC faces an October 10 PDUFA date in small cell lung cancer, a near-term catalyst that could add another growth-product arrow.

Merck Q2 2026 press release