Merck & Co., Inc. MRK

Merck reported a Q1 2026 GAAP net loss of $4.24 billion (−$1.72 per share) because of a single $9 billion one-time charge — $3.62 a share — for its January acquisition of Cidara Therapeutics. Accounting rules require most of an asset acquisition's price to be expensed at once as in-process research, and because the charge wasn't tax-deductible it pushed the reported tax rate negative. Underneath it, revenue rose 5% to $16.3 billion and the result still beat what analysts expected.

Keytruda's main US patent expires in 2028 (Europe around 2031), and it was about 49% of Merck's $65 billion in 2025 sales, so its loss of exclusivity is the central risk the stock prices. Afterward, biosimilar copies from at least seven developers can take share, and comparable franchises have shed a third or more of revenue within a few years. Merck's defenses are a patent-protected subcutaneous version, Keytruda Qlex, and a wave of new drugs meant to refill the gap by the early 2030s.

On its underlying, ex-charge earnings Merck trades near 14 times, below the S&P 500 and far under Eli Lilly's roughly 29 times, though above Pfizer and Bristol-Myers Squibb at about nine. The discount reflects the 2028 Keytruda patent cliff: with one drug at roughly 49% of sales losing protection, the market prices a coming revenue hole. The debate among analysts — 12-month targets run from $100 to $150 — is simply how much of that hole the pipeline refills.

Merck pays an annual dividend of $3.40 a share, a yield of about 2.8% at a $119 price, and it raised the payout roughly 5% for 2026 — a signal of confidence rather than stress. The Q1 2026 net loss was a non-cash accounting charge, not a cash shortfall: the company still generated billions in operating cash and kept the dividend untouched. The longer-term question for the payout is the 2028 Keytruda cliff, not the next few quarters.