Merck & Co. (MRK) Q1 2026: $4.2B net loss on $9B R&D charge, FCF up 2.5x
Merck & Co., Inc. (NYSE: MRK) reported earnings on April 30, 2026, and the Q1 2026 10-Q filed shortly after looks, at first glance, like a catastrophe. Revenue of $16.29 billion grew 4.9% from $15.53 billion a year earlier, yet net income swung from a $5.09 billion profit to a $4.24 billion net loss. On a per-share basis, the result moved from +$2.01 to -$1.72. The source of the loss is unambiguous: Merck immediately expensed $9.0 billion ($3.62 per share) as R&D costs when it accounted for the January acquisition of Cidara Therapeutics — valued at $9.2 billion — as an asset acquisition rather than a business combination. The cash balance fell 63.4% in three months, from $14.57 billion to $5.33 billion, while the March announcement of a $6.7 billion acquisition of Terns Pharmaceuticals (expected to close in May, with an additional $5.8 billion R&D charge on deck) compounds the pipeline overhaul that is reshaping Merck's financial statements.
Note on currency translation: All Korean-won figures cited in this document apply the March 31, 2026 closing rate of $1 = approximately KRW 1,537 (exchange-rates.org), the highest level of the year. Given the weak-won environment in 2026, translated amounts vary materially with exchange rate assumptions; dollar figures should be treated as the primary reference.
1. Consolidated Balance Sheet Analysis
1-1. Key Asset Comparison
| Item | Dec 31, 2025 ($B) | Mar 31, 2026 ($B) | Change | Interpretation |
|---|---|---|---|---|
| Cash and cash equivalents | 14.565 | 5.327 | -63.4% | $8.779B Cidara acquisition payment was the decisive outflow |
| Accounts receivable (net) | 11.775 | 12.210 | +3.7% | In line with 4.9% revenue growth; allowance edged up from $0.097B to $0.103B |
| Inventories (current) | 6.658 | 6.479 | -2.7% | Non-current inventory rose from $5.681B to $6.195B — long-dated raw material and antibody stockpiling |
| PP&E (net) | 25.316 | 25.433 | +0.5% | Accumulated depreciation moved from $21.914B to $22.288B; net increase minimal |
| Intangible assets (net) | 26.681 | 25.745 | -3.5% | Amortization of existing licenses including Keytruda, Lynparza, and Lenvima |
Key implication: Total assets fell from $136.866 billion to $128.685 billion, a 6.0% decline. Most of the reduction came from cash outflows. The more striking accounting point is that of the $9.2 billion paid for Cidara, only $332 million was recorded as net assets on the balance sheet. The remaining $9.0 billion was expensed directly as "acquired in-process research and development with no alternative future use," leaving no trace on the balance sheet. Note that the $9.2 billion includes $570 million in share-based compensation settlements (of which $406 million was unvested), so acquisition cost, the expensed charge, and net assets recognized do not reconcile exactly.
