Merck Slides as $9B Acquisition Charge and Vaccine Slump Overshadow Earnings Beat
Merck & Co. (MRK) shares are underperforming the broad market Thursday, falling 1.55% to $109.23 despite reporting a top-line revenue beat. While the pharmaceutical giant raised its full-year guidance, investors are reacting negatively to a massive $9 billion acquisition-related charge and a significant sales decline in its key vaccine franchise.
Acquisition Charges Drive Heavy GAAP Loss
Merck reported its first-quarter 2026 financial results early Thursday, revealing a complex picture of operational growth masked by heavy one-time costs. The company posted a GAAP net loss of $4.24 billion, or $1.72 per share, a dramatic swing from the $2.01 per share profit recorded in the same period last year.
The primary catalyst for this decline is a one-time $9.0 billion charge—equivalent to $3.62 per share—stemming from the acquisition of Cidara Therapeutics. Even on a non-GAAP basis, which many analysts use to gauge core performance, Merck reported a loss of $1.28 per share. While this adjusted figure actually beat the consensus analyst estimate of a $1.52 loss, the sheer scale of the red ink appears to be weighing on sentiment as the trading day progresses.
Keytruda Strength vs. Gardasil Weakness
Operationally, Merck's results were a tale of two portfolios. Total worldwide sales rose 5% to $16.3 billion, surpassing the $15.8 billion expected by Wall Street. The company's blockbuster cancer immunotherapy, Keytruda, continued its dominance with sales reaching $8.0 billion, a 12% year-over-year increase that beat estimates of $7.6 billion.
However, these gains were offset by a troubling 19% plunge in sales for the Gardasil HPV vaccine franchise, which fell to $1.07 billion. Management attributed the slump to weaker demand in China and the conclusion of a national catch-up program in Japan. Additionally, the diabetes treatment Januvia saw a 28% revenue drop to $574 million as it continues to face stiff generic competition.
Market Divergence and Future Headwinds
The stock's 1.55% decline is particularly notable given the broader market's strength; the S&P 500 (SPY) is currently trading up 1.06%, representing a sharp 2.61% relative underperformance for MRK.
Investors are also looking ahead to further dilution and charges. Merck recently announced an agreement to acquire Terns Pharmaceuticals for $5.8 billion, a deal expected to close in May. This transaction is projected to result in another one-time charge of approximately $2.35 per share. While Merck narrowed and raised its full-year 2026 sales guidance to a range of $65.8 billion to $67.0 billion, the market remains focused on the high cost of the company's aggressive portfolio transformation and the looming 'patent cliff' for its core oncology assets.
Key Takeaways
- Merck reported a $9 billion charge for the Cidara Therapeutics acquisition, driving a quarterly GAAP loss of $1.72 per share.
- Gardasil vaccine sales plummeted 19% due to demand headwinds in China and Japan, offsetting a 12% jump in Keytruda revenue.
- The stock is sharply underperforming the S&P 500 by 2.61% as investors weigh a revenue beat against rising acquisition costs.
- Management raised the midpoint of full-year revenue guidance, now expecting $65.8B to $67.0B for 2026.