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Further Reading from MarketBeat
Merck Just Made a Big Bet on a New Cancer Growth EngineReported by Jessica Mitacek. Article 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 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 broad market with a gain of more than 12%.
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The drugmaker’s stock recently got a boost on news that it would acquire Terns Pharmaceuticals—a move that will not only bolster its cancer treatment pipeline but also reinforce Merck’s reputation as a top-tier serial acquirer. That type of mergers and acquisitions (M&A) activity has played a big part in the pharmaceutical firm’s steady growth and market-cap expansion. Merck’s market cap is currently about $296 billion, second only to Eli Lilly (NYSE: LLY) and AbbVie (NYSE: ABBV), at around $830 billion and $370 billion, respectively. Merck’s Terns Acquisition Is a Pivotal Oncology PlayOn 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. According to the press release, Merck will acquire Terns for $53 per share in cash, implying an equity value of about $6.7 billion and adding what the company described as a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The definitive agreement marks Merck’s third multibillion-dollar acquisition in the past year. Though still clinical-stage, TERN-701 has shown “encouraging rates of molecular response and deep molecular response,” including responses in patients with high disease burden who had received multiple prior therapies. M&A Activity Has Helped Support Merck’s Earnings and Dividend ProfileMerck’s ability to secure the Terns deal underscores its central role in the pharmaceutical industry and is reflected in an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters, dating back to Q2 2021. When the company reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04, above expectations of $2.01, and revenue of $16.40 billion, above expectations 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 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 current shareholders and prospective investors, the key takeaway is the rapid scale Merck has achieved through its acquisition strategy. That M&A activity—in addition to the recent 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 Terns agreement, valued at $6.7 billion. Merck continues to pursue bolt-on acquisitions to diversify its oncology, immunology, and infectious-disease pipeline. Seamless integration of these biotech companies into its portfolio accelerates growth and expands Merck’s market share while minimizing hurdles entering new markets. In turn, the Big Pharma mainstay has been able to maintain a five-year average gross margin of more than 73%. Those high and expanding margins indicate strong pricing power and operational efficiency, which together allow Merck to sustain and grow its dividend, yielding 2.84%, or $3.40 per share annually. While dividends are common among mature health-care companies—particularly large pharmaceutical firms and established managed-care companies—Merck still stands out. 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 MerckBased on 18 analysts currently covering the stock, Merck receives a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy rating. 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 around $19 billion over the past 12 months. Meanwhile, current short interest of just 1.18% of the float—or 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, according to TradeSmith’s financial health indicator, for more than six months and scores higher than 93% of the companies evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
