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This Month's Featured Content Merck Just Made a Big Bet on a New Cancer Growth Engine Written by Jessica Mitacek. Article Posted: 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 already made me a "wealthy man"
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 broader market, posting a gain of more than 12%. Investment researcher Andy Howard called Sui at 57 cents in August 2024 before it climbed 840% in six months. Now he's focused on what he calls 'Digital Oil' - a scarce asset he believes powers the blockchain-based financial infrastructure mandated under the Clarity Act. BlackRock, JPMorgan, Goldman Sachs, and Fidelity are all reportedly positioning in this asset ahead of a deadline that moves the $382 trillion U.S. financial system onto the new grid by April 2027. See what Wall Street is quietly accumulating before the deadline The drugmaker's stock recently got a lift on news that it would acquire Terns Pharmaceuticals—a move that will bolster its cancer treatment pipeline and reinforce Merck's reputation as a top-tier serial acquirer. That mergers and acquisitions (M&A) activity has played a big role in the company's steady growth and market-cap expansion, which is currently over $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 it had reached an agreement to acquire Terns, a clinical-stage oncology company developing therapies including TERN-701, an oral allosteric BCR–ABL1 inhibitor for chronic myeloid leukemia (CML). According to the press release, Merck will acquire Terns for $53 per share in cash, for an approximate equity value of $6.7 billion. Merck described TERN-701 as a "potential best-in-class candidate" for certain patients with CML. The Terns agreement marks the third multibillion-dollar acquisition for Merck in the past year. Though still clinical-stage, TERN-701 has shown "encouraging rates of molecular response and deep molecular response," including 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 secure the Terns deal underscores its prominent role in the pharmaceutical industry and 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 estimates 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 grow 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 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. While those revenue forecasts are attractive to shareholders and prospective investors, the key takeaway is the rapid scale Merck has achieved through its acquisitions strategy. That M&A activity—now highlighted by the Terns announcement—has become a hallmark for the company. The Verona Pharma and Cidara Therapeutics deals, valued at $10 billion and $9.2 billion respectively, were followed by the $6.7 billion Terns agreement. Merck continues to focus on bolt-on acquisitions to diversify its oncology, immunology, and infectious-disease pipeline. These acquisitions are being integrated into Merck's portfolio to accelerate growth and expand market share while minimizing hurdles as the company enters new markets. As a result, Merck has maintained a five-year average gross margin above 73%. Those high and expanding margins reflect pricing power and operational efficiency, enabling Merck to sustain and grow its dividend, which yields 2.84% (about $3.40 per share annually). Dividends are common among mature health care companies, but Merck stands out. The company has raised its payout for 14 consecutive years and shows a five-year dividend growth rate of 5.75%. How Wall Street Feels About Merck Based on the 18 analysts currently covering MRK, Merck receives a consensus Moderate Buy rating, with 11 analysts assigning a Buy. With an average one-year price target of $127.13, Wall Street implies upside of more than 7%. Institutional ownership is above average, at more than 76%, with inflows of nearly $37 billion outpacing 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 2.47 billion shares outstanding—suggests bears are keeping their distance. 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 firms evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. | 
