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Special Report Merck Just Made a Big Bet on a New Cancer Growth Engine Author: Jessica Mitacek. First 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 the case for all of Big Pharma. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed the sector and the broad market, rising more than 12%. The drugmaker's stock recently got a shot in the arm with the announcement that it will acquire Terns Pharmaceuticals—a move that will bolster its cancer-treatment pipeline and reinforce Merck's reputation as a top-tier serial acquirer. Mergers and acquisitions have been a major driver of Merck's steady growth and market-cap expansion. Merck's market capitalization is currently more than $296 billion, trailing only 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 it had reached an agreement to acquire Terns, a clinical-stage oncology company developing therapies that include TERN-701, an oral allosteric BCR–ABL1 inhibitor for the treatment of chronic myeloid leukemia. According to the press release, Merck will acquire Terns for $53 per share in cash, implying an equity value of about $6.7 billion. Merck said TERN-701 could be a "potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia." The Terns deal marks Merck's third multi-billion-dollar acquisition in the past year. Though still clinical-stage, TERN-701 has shown promising activity, with "encouraging rates of molecular response and deep molecular response," including responses in patients with high disease burden who had received multiple prior lines of therapy. M&A Activity Has Helped Support Merck's Earnings and Dividend Profile Merck's dealmaking underscores its central role in the pharmaceutical industry and contributes to a strong 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, above estimates of $16.19 billion. With a forward price-to-earnings multiple of 16.45, Merck's EPS is forecast to grow by nearly 10% over the next year, from $9.01 to $9.90. In his earnings call, CEO Rob Davis attributed the company's steady growth to new product launches, progress in key clinical programs, and added scale in respiratory and infectious diseases following 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. Beyond headline revenue projections, the noteworthy takeaway is how rapidly Merck has scaled through acquisitions. That M&A strategy—highlighted by deals for Verona Pharma and Cidara Therapeutics (valued at roughly $10 billion and $9.2 billion, respectively) and now Terns ($6.7 billion)—has become a defining part of the company's playbook. Merck continues to emphasize bolt-on acquisitions to diversify its oncology, immunology, and infectious-disease pipelines. Seamless integration of these biotech companies into Merck's portfolio accelerates growth, expands market share, and lowers barriers as the company enters new markets. As a result, the firm has maintained a five-year average gross margin above 73%. Those high and expanding margins reflect pricing power and operational efficiency, which help Merck sustain and grow its dividend—currently yielding 2.84%, or $3.40 per share annually. Dividends are common among mature health-care companies, but Merck stands out. The company has increased its payout for 14 consecutive years and has a five-year dividend growth rate of 5.75%. How Wall Street Feels About Merck Among the 18 analysts covering the stock, Merck carries a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. The average one-year price target of $127.13 implies upside of more than 7%. Institutional ownership remains above average at more than 76%, with inflows of nearly $37 billion outpacing outflows of about $19 billion over the past 12 months. Current short interest of just 1.18% of the float—roughly 29 million of the 2.47 billion shares outstanding—suggests limited bearish positioning. Merck has been in the green zone on TradeSmith's financial-health indicator for more than six months, and the company scores higher than 93% of peers evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. | 
