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Monday's Featured Story
Merck Just Made a Big Bet on a New Cancer Growth EngineWritten 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.
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While the health care sector has struggled this year, that hasn’t been true across all of Big Pharma. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed both the sector and the broader market, rising more than 12%.
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The drugmaker’s stock recently got a lift on news it is acquiring Terns Pharmaceuticals—a move that will bolster its cancer-treatment pipeline and reinforce Merck’s reputation as a top-tier serial acquirer. That kind of mergers and acquisitions (M&A) activity has been a large part of Merck’s steady growth and market-cap expansion. Merck’s market value is currently more than $296 billion, ranking third in the sector behind Eli Lilly (NYSE: LLY) (around $830 billion) and AbbVie (NYSE: ABBV) (about $370 billion). 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 (CML). According to the press release, Merck will acquire Terns for $53 per share in cash, implying an equity value of roughly $6.7 billion and further building the company’s hematology portfolio with what it calls a “potential best-in-class candidate” for certain patients with CML. The Terns agreement is Merck’s third multi-billion-dollar acquisition in the past year. Although still at the clinical stage, TERN-701 has shown promising activity with “encouraging rates of molecular response and deep molecular response,” including responses in patients with high disease burden who have 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 is reflected in a consistently 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 EPS of $2.04 versus $2.01 expected and revenue of $16.40 billion versus $16.19 billion expected. With a forward price-to-earnings ratio 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 remarks, 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 bigger takeaway is how quickly the company has scaled through its acquisitions strategy. That M&A activity—in addition to the Terns deal—has become a hallmark for Merck. The Verona Pharma and Cidara Therapeutics transactions were valued at $10 billion and $9.2 billion, respectively, and were followed by the Terns acquisition, valued at about $6.7 billion. Merck continues to pursue a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious disease pipeline. 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 high and expanding margins indicate strong pricing power and operational efficiency, enabling Merck to sustain and grow its dividend, which yields 2.84% and amounts to $3.40 per share annually. Dividends are common among mature health care companies—especially large pharmaceutical and established managed-care firms—but Merck stands out. The company has raised 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 covering the stock, Merck holds a consensus Moderate Buy rating; 11 analysts assign MRK a Buy. The average one-year price target of $127.13 implies about 7% upside. Institutional ownership remains above average at more than 76%, with inflows of nearly $37 billion outpacing outflows of roughly $19 billion over the past 12 months. Current short interest is just 1.18% of the float—about 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 firms evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
