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This Month's Exclusive Article
Merck Just Made a Big Bet on a New Cancer Growth EngineBy 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, not all of Big Pharma has followed suit. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed both the sector and the broader market, gaining more than 12%.
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The drugmaker’s stock recently got a boost after news it will acquire Terns Pharmaceuticals—a deal that bolsters its cancer pipeline and underscores Merck’s role as a top-tier serial acquirer. Such mergers and acquisitions have helped fuel the firm’s steady growth and market-cap expansion. Merck’s market value currently exceeds $296 billion, placing it third behind 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 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 approximately $6.7 billion. The deal expands Merck’s hematology portfolio with what the company calls a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The definitive agreement marks Merck’s third multi-billion-dollar acquisition over the past year. Although TERN-701 is still in clinical development, it has shown promising activity, including “encouraging rates of molecular response and deep molecular response,” notably 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 highlights its industry clout and contributes to an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters (since Q2 2021), according to MarketBeat. When Merck reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04 versus expectations of $2.01, and revenue of $16.40 billion compared with expected $16.19 billion. 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 projections are attractive to shareholders and prospective investors, the larger takeaway is how quickly Merck has scaled through its acquisition strategy. That M&A approach has become a hallmark of the company. The Verona Pharma and Cidara Therapeutics transactions—valued at roughly $10 billion and $9.2 billion, respectively—were followed by the Terns announcement, 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 accelerates growth and expands Merck’s market share while smoothing entry into new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those strong and expanding margins point to superior pricing power and operational efficiency, enabling Merck to sustain and grow its dividend, which yields 2.84% (about $3.40 per share annually). While dividends are common among mature health-care firms—especially large pharmaceutical and well-established managed-care companies—Merck still stands out. The company has increased its payout for 14 consecutive years and has a five-year dividend-growth rate of 5.75%. How Wall Street Feels About MerckBased on 18 analysts covering the stock, Merck carries a consensus Moderate Buy rating, with 11 analysts recommending Buy. The average one-year price target of $127.13 implies more than 7% upside from current levels. Institutional ownership remains above average at over 76%, with inflows of nearly $37 billion exceeding outflows of about $19 billion over the past 12 months. Current short interest is just 1.18% of the float—roughly 29 million of 2.47 billion shares outstanding—suggesting limited bearish conviction. Merck has been in the "green zone" on TradeSmith’s financial-health indicator for more than six months. The company scores higher than 93% of peers evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
