Merck's global revenue fell 4 percent to $10.26 billion, hurt by generic competition for its Singulair treatment for allergy and asthma. Wall Street expected $10.44 billion.
Merck said it slashed its research spending by 20 percent in the quarter to $1.5 billion, as the drugmaker scrapped work on experimental medicines no longer part of its main research focus or deemed to have limited commercial potential.
The company is expected to soon announce the sale of its consumer health-care products unit. Its sales fell 4 percent to $546 million in the quarter, hurt by a shortened allergy season in North America.
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Merck reaffirmed it expects earnings this year of $3.35 to $3.53 per share, excluding special items.
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The release comes one day after Britain's Reckitt Benckiser confirmed it was in talks to buy Merck's consumer health business, the latest asset up for grabs in a wave of pharmaceutical deals.
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The consumer products group emerged as a front runner in the auction for the unit, best known for Coppertone sunscreen and Claritin allergy medicine, at the weekend, according to Reuters.
Germany's Bayer is also vying to buy the unit, which could fetch about $13.5 billion.
—By Reuters. CNBC contributed to this report.