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This Week's Exclusive Article Merck Just Made a Big Bet on a New Cancer Growth Engine Reported by Jessica Mitacek. Published: 3/31/2026. 
Key Points - Merck is set to acquire Terns Pharmaceutical for $6.7 billion, adding its promising leukemia treatment to its growing hematology and cancer pipeline.
- This is Merck’s third multi-billion dollar deal in a year, a bolt-on strategy projected to drive a $70 billion commercial opportunity by the mid-2030s.
- With an average five-year gross margin of 73% and 14 consecutive years of dividend increases, Merck remains a top-tier performer with a Moderate Buy rating.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
While the health care sector has struggled this year, that hasn't been true for all of Big Pharma. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed the sector and the broader market, gaining more than 12%. The drugmaker's stock recently got a boost from its announced acquisition of Terns Pharmaceuticals—a move that will strengthen its cancer treatment pipeline and further cement Merck's reputation as a top-tier serial acquirer. That type of mergers and acquisitions (M&A) activity has been a key driver of the company's continued growth and market-cap expansion. Merck's market cap is currently more than $296 billion, second only to Eli Lilly (NYSE: LLY) and AbbVie (NYSE: ABBV), at roughly $830 billion and $370 billion, respectively. Merck's Terns Acquisition Is a Pivotal Oncology Play On March 25, Merck announced that it had reached a deal to acquire Terns, a clinical-stage oncology company developing therapies including TERN-701, an oral allosteric BCR–ABL1 inhibitor for chronic myeloid leukemia. According to the press release, Merck will acquire Terns for $53 per share in cash, for an approximate equity value of $6.7 billion. The deal aims to build Merck's hematology franchise with a "potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia." The definitive agreement to acquire Terns marks Merck's third multi-billion-dollar acquisition over the past year. While TERN-701 is still in clinical development, it has shown promising activity with "encouraging rates of molecular response and deep molecular response," including responses in patients with high disease burden who previously received multiple lines of therapy. M&A Activity Has Helped Support Merck's Earnings and Dividend Profile Merck's ability to close deals like Terns underscores its central role in the pharmaceutical industry and supports an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters, dating back to Q2 2021. When Merck reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04, beating expectations of $2.01, and revenue of $16.40 billion, topping estimates of $16.19 billion. With a forward price-to-earnings multiple of 16.45, Merck's EPS is forecast to rise nearly 10% over the next year, from $9.01 to $9.90. In the earnings call, CEO Rob Davis attributed the company's momentum to new product launches, progress in key clinical programs, and added scale in respiratory and infectious diseases from the Verona Pharma and Cidara Therapeutics acquisitions. "As a result of this progress, we now have line of sight to over $70 billion of potential commercial opportunity by the mid-2030s, $20 billion more than just a year ago and more than double consensus 2028 peak Keytruda revenue of $35 billion," Davis said. Those revenue projections are attractive to shareholders and prospective investors, but the larger takeaway is how quickly Merck has scaled through its acquisition strategy. That M&A activity—in addition to the recent Terns deal—has become a hallmark for the company. The Verona Pharma and Cidara Therapeutics acquisitions, valued at $10 billion and $9.2 billion respectively, were followed by the $6.7 billion Terns announcement. Merck continues to emphasize a bolt-on acquisition approach to diversify its oncology, immunology, and infectious disease pipeline. Seamlessly integrating these biotech firms into its portfolio accelerates growth and expands Merck's market share while reducing hurdles as it enters new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those high and expanding margins indicate strong pricing power and operational efficiency, which together enable Merck to sustain and grow its dividend, currently yielding 2.84%, or $3.40 per share annually. While dividends are a common feature of mature health care companies—especially large pharmaceutical firms and established managed-care companies—Merck stands out for the consistency of its payouts. The company has increased its dividend for 14 consecutive years and posts a five-year dividend growth rate of 5.75%. How Wall Street Feels About Merck Based on 18 analysts covering the stock, Merck carries a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. With an average one-year price target of $127.13, Wall Street sees potential upside of more than 7%. Institutional ownership remains above average at more than 76%, with inflows of nearly $37 billion exceeding outflows of about $19 billion over the past 12 months. Meanwhile, current short interest of just 1.18% of the float—roughly 29 million of the 2.47 billion shares outstanding—suggests Wall Street's bears are keeping their distance. Merck has been in the green zone under TradeSmith's financial health indicator for more than six months. The company also scores higher than 93% of firms evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. | 
