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This Month's Exclusive Story
Merck Just Made a Big Bet on a New Cancer Growth EngineSubmitted by 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 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 gains of more than 12%.
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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. This type of mergers and acquisitions (M&A) activity has helped the company sustain steady growth and expand its market cap, now more than $296 billion—behind 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 PlayOn March 25, Merck announced it had agreed to acquire Terns, a clinical-stage oncology company developing therapies that include 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. Merck described TERN-701 as a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The Terns agreement marks Merck’s third multibillion-dollar acquisition in the past year. Although TERN-701 is still in clinical stages, 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 secure deals like Terns underscores its central role in the pharmaceutical industry and has translated into an exceptional 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 the $16.19 billion consensus. 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 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. The bigger takeaway is the rapid scale Merck has routinely achieved through its acquisitions strategy. That M&A activity—including the Verona Pharma and Cidara Therapeutics deals, valued at about $10 billion and $9.2 billion respectively, followed by the Terns announcement valued at $6.7 billion—has become a hallmark for the company. Merck continues to pursue a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious-disease pipeline. Seamlessly integrating those biotech targets into its portfolio is accelerating growth and expanding Merck’s market share while minimizing hurdles as it enters new markets. As a result, the company has maintained a five-year average gross margin of more than 73%. Those high and expanding margins indicate strong pricing power and operational efficiency, which help Merck sustain and grow its dividend, currently yielding 2.84% (about $3.40 per share annually). Dividends are common among mature health care companies—particularly large pharmaceutical and established managed care firms—but 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 MerckAmong the 18 analysts covering the stock, Merck holds a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. 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. Current short interest of just 1.18% of the float—about 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 the firms evaluated by MarketBeat, ranking 39th out of 858 medical-sector stocks. |
