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This Week's Bonus Article
Merck Just Made a Big Bet on a New Cancer Growth EngineBy 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’s $1 Quadrillion AI IPO
While the health care sector has struggled this year, not all of Big Pharma has followed suit. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed the sector and the broad market, rising more than 12%.
On May 29th, 2026, a 90-year-old federal law - 7 U.S.C. Section 13(a)(2) - hits a critical 'First Notice' deadline that could expose decades of paper gold trading by Wall Street's biggest bullion banks.
One 'Shadow Miner' sitting on a significant physical gold position could surge as the paper market faces its moment of truth. Dylan Jovine, CEO of Behind the Markets, has identified the ticker. See the 90-year-old law and the Shadow Miner ticker here
The drugmaker’s stock recently gained momentum after the company agreed to acquire Terns Pharmaceuticals—a move that should both bolster its cancer treatment pipeline and reinforce Merck’s reputation as a top-tier serial acquirer. Mergers and acquisitions (M&A) have played an important role in Merck’s steady growth and expanding market capitalization, which is currently more than $296 billion. For comparison, peers Eli Lilly and AbbVie have market caps of about $830 billion and $370 billion, respectively. Merck’s Terns Acquisition Is a Pivotal Oncology PlayOn March 25, Merck announced it had agreed 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 pay $53 per share in cash for an approximate equity value of $6.7 billion, adding what it calls a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The Terns deal is Merck’s third multi-billion-dollar acquisition in the past year. Although TERN-701 is still in clinical development, it has shown promising activity with “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 ProfileMerck’s ability to close deals like Terns underscores its prominent role in the pharmaceutical industry and contributes to 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, beating expectations 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 the earnings call, CEO Rob Davis attributed the company’s 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. Beyond the headline revenue projections, the key takeaway is how quickly the company has scaled through its acquisition strategy. That M&A activity—including the recent Terns deal—has become a hallmark of Merck. The Verona Pharma and Cidara Therapeutics agreements, valued at $10 billion and $9.2 billion respectively, were followed by the $6.7 billion Terns acquisition. Merck continues to pursue a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious disease pipeline. Seamlessly integrating these biotech companies into its portfolio is accelerating growth and expanding Merck’s market share while reducing barriers as it enters new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those strong and expanding margins indicate 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. Although dividends are common among mature health care companies—especially large pharmaceutical and managed care firms—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 MerckAmong the 18 analysts covering the stock, Merck has 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 exceeding outflows of about $19 billion over the past 12 months. Current short interest is just 1.18% of the float—approximately 29 million of the 2.47 billion shares outstanding—suggesting 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 those evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
