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Further Reading from MarketBeat Media
Merck Just Made a Big Bet on a New Cancer Growth EngineReported by Jessica Mitacek. Publication Date: 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, rising more than 12%.
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The drugmaker’s stock recently got a boost from news that it will acquire Terns Pharmaceuticals—a move that should strengthen its cancer-treatment pipeline and further cement Merck’s reputation as a prolific serial acquirer. That M&A activity has been a major contributor to Merck’s steady growth and expanding market cap, which now exceeds $296 billion, ranking the company third behind Eli Lilly (NYSE: LLY) (about $830 billion) and AbbVie (NYSE: ABBV) (about $370 billion). Merck’s Terns Acquisition Is a Pivotal Oncology PlayOn March 25, Merck announced it had reached an agreement to buy Terns, a clinical-stage oncology company that is 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 company called TERN-701 a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The Terns deal is Merck’s third multibillion-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 in patients with high disease burden who have already received multiple lines of therapy. M&A Activity Has Helped Support Merck’s Earnings and Dividend ProfileMerck’s ability to secure deals like Terns underscores its central role in the industry and is reflected in an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters (since Q2 2021). When Merck reported Q4 2025 results on Feb. 3, it posted EPS of $2.04 (vs. $2.01 expected) and revenue of $16.40 billion (vs. $16.19 billion expected). 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 steady growth to new product launches, progress in key clinical programs, and added scale in respiratory and infectious disease 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 projections are attractive to shareholders and prospective investors, the bigger takeaway is how quickly Merck has scaled through its acquisitions strategy. That M&A activity—culminating in the recent Terns announcement—has become a hallmark of 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 emphasize a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious disease pipeline. Seamless integration of these biotech businesses into Merck’s portfolio is accelerating growth and expanding market share while reducing hurdles as the company enters new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those high, expanding margins reflect strong pricing power and operational efficiency, which help Merck sustain and grow its dividend. The yield is 2.84%, or $3.40 per share annually. Dividends are a common feature among mature health care companies—especially large pharma and managed care firms—and Merck stands out among them. The company has increased its payout for 14 consecutive years and posts a five-year dividend growth rate of 5.75%. How Wall Street Feels About MerckAmong 18 analysts covering the stock, Merck has a consensus rating of Moderate Buy; 11 analysts assign a Buy rating. With an average one-year price target of $127.13, Wall Street sees roughly 7% upside. Institutional ownership is 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 of just 1.18% of the float—roughly 29 million of 2.47 billion shares outstanding—suggests limited bearish pressure. 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 the peers evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
