The company reported a net loss of US$872mln, or 32 cents per share, in the fourth quarter compared to a loss of US$594mln, or 22 cents, in the year-ago period.
But excluding items, including the tax charge, the group earned US$2.7bn, or 98 cents per share, beating analysts’ estimates of 94 cents per share.
Revenue increased 3% to US$10.43bn, missing forecasts of US$10.5bn, with growth driven by a 4% increase in the pharmaceuticals business.
Sales of blockbuster cancer drug, Keytruda, surged 169% to US$1.3bn while Diabetes drugs Januvia and Janumet increased 1% to US$1.52bn.
Merck expects 2018 adjusted earnings of US$4.08 to US$4.23 per share and revenue of US$41.2bn to US$42.7bn.
Analysts had forecast earnings of US$4.11 per share and revenues of US$41.1bn.
The company expects to pay about US$5bn over eight years to repatriate cash held overseas and plans to spend US$12bn over five years in capital projects.
Shares were little changed ahead of the US opening bell at US$60.10 each.