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Today's Featured News
Merck Just Made a Big Bet on a New Cancer Growth EngineAuthored by Jessica Mitacek. Originally 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 the case for all of Big Pharma. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed both the sector and the broad market, gaining more than 12%.
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The drugmaker’s stock recently received a boost from 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. That M&A activity has been a major driver of Merck’s steady growth and market-cap expansion. Merck’s market value is 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 a deal 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, 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. Although still 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 previously received multiple lines of therapy. M&A Activity Has Helped Support Merck’s Earnings and Dividend ProfileMerck’s ability to close 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 Merck reported Q4 2025 financials on Feb. 3, it posted EPS of $2.04, topping expectations of $2.01, and revenue of $16.40 billion, ahead of projections for $16.19 billion. With a forward price-to-earnings ratio 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. Those revenue projections are compelling, but the key takeaway is the rapid scale Merck has achieved through its acquisition strategy. That M&A activity—including the Verona and Cidara agreements, valued at about $10 billion and $9.2 billion respectively—was 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. Integrating these biotech firms into its portfolio accelerates growth and expands Merck’s market share while smoothing entry into new markets. Those moves have helped the company maintain a five-year average gross margin above 73%. High and expanding margins indicate strong pricing power and operational efficiency, which in turn enable Merck to sustain and grow its dividend. The stock yields about 2.84%, or $3.40 per share annually. While dividends are common among mature health-care companies—particularly large pharmaceutical and managed-care firms—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 MerckAmong 18 analysts covering the stock, Merck holds a consensus Moderate Buy rating, with 11 analysts assigning a Buy. The average one-year price target of $127.13 implies upside of more than 7% from current levels. 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. Meanwhile, current short interest of just 1.18% of the float—roughly 29 million of the 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 ranks higher than 93% of the companies evaluated by MarketBeat, placing 39th out of 858 stocks in the medical sector. |
