Almost $1.7bn charges before taxes were due to a setback for its experimental blood clot preventer vorapaxar.
However, Merck beat forecasts on strong sales growth from its key drugs and ones acquired along with Schering-Plough, nearly one and half years ago.
Schering’s products helped boost revenue 20%, to $12.1bn from $10.1bn.
Citing pricing pressures, greater austerity measures in the European Union and the "additional impact" of the US health-care overhaul, Merck pulled long-term forecast.
Merck CEO Kenneth Frazier said looking ahead, our focus will be on delivering sustainable, profitable top-line growth and to do that, Merck will continue to innovate, make disciplined investments in our business and continue to drive out inefficiencies in our operations, foxbusiness.com reported.