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Additional 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: Have $500? Invest in Elon’s AI Masterplan
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, rising more than 12%.
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The drugmaker’s stock recently got a boost 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 mergers and acquisitions (M&A) activity has helped drive the company’s steady growth and market-cap expansion. Merck’s market value is currently more than $296 billion, making it the third-largest in its peer group after Eli Lilly (NYSE: LLY) and AbbVie (NYSE: ABBV), which sit at roughly $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, valuing the company’s equity at approximately $6.7 billion. Merck described TERN-701 as a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” This definitive agreement marks Merck’s third multibillion-dollar acquisition in the past year. Although TERN-701 is still in clinical development, it has shown promising activity with “encouraging rates of molecular response and deep molecular response,” including in patients with high disease burden who had received multiple prior 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 supports 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, beating estimates of $2.01, and revenue of $16.40 billion, topping expectations of $16.19 billion. 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. Beyond those forecasts, the larger takeaway is how rapidly Merck has scaled through acquisition. 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 transaction valued at roughly $6.7 billion—has become a hallmark of the company’s growth strategy. Merck continues to pursue a bolt-on acquisition approach to broaden its oncology, immunology, and infectious-disease pipelines. Seamless integration of these biotech acquisitions accelerates growth and expands Merck’s market share while reducing hurdles as it enters new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those high margins reflect 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, but Merck 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 carries a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. The average one-year price target of $127.13 implies more than 7% upside. Institutional ownership remains elevated at over 76%, with inflows near $37 billion outpacing outflows of roughly $19 billion over the past 12 months. Current short interest of just 1.18% of the float—about 29 million shares of 2.47 billion outstanding—suggests limited bearish positioning. Merck has been in TradeSmith’s “green zone” for more than six months, and the company scores higher than 93% of firms tracked by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
