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Today's Featured Story
Merck Just Made a Big Bet on a New Cancer Growth EngineSubmitted by Jessica Mitacek. Article Posted: 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 true for all of Big Pharma. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed the sector and the broader market, rising more than 12%.
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The drugmaker’s stock recently got a boost on news that it will acquire Terns Pharmaceuticals—a move that will strengthen its cancer-treatment pipeline and underscore Merck’s reputation as a top-tier serial acquirer. This kind of mergers and acquisitions (M&A) activity has helped fuel Merck’s steady growth and market-cap expansion. The company’s market value is currently more than $296 billion, trailing 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 reached an agreement to acquire Terns Pharmaceuticals, 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 deal is Merck’s third multi-billion-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 secure deals like Terns highlights its central role in the industry and underpins an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters (since Q2 2021). When Merck reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04 (vs. $2.01 expected) and revenue of $16.40 billion (vs. $16.19 billion expected). 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 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 shareholders and prospective investors, the key takeaway is how rapidly Merck has scaled through acquisitions. That M&A activity has become a hallmark for the company. Earlier deals—Verona Pharma (about $10 billion) and Cidara Therapeutics (about $9.2 billion)—preceded the $6.7 billion Terns announcement. Merck continues to emphasize a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious disease pipeline. Seamlessly integrating these biotech companies into its portfolio accelerates growth, expands market share, and reduces barriers as the company enters new markets. As a result, the Big Pharma mainstay has maintained a five-year average gross margin above 73%. Those strong and expanding margins signal pricing power and operational efficiency, which help Merck sustain and grow its dividend—currently yielding 2.84%, or $3.40 per share annually. Dividends are common among mature health-care companies—particularly large pharmaceutical and established managed-care firms—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 has a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. The average one-year price target is $127.13, implying more than 7% upside. Institutional ownership is above average at more than 76%, with inflows of nearly $37 billion exceeding outflows of roughly $19 billion over the past 12 months. Current short interest of just 1.18% of the float—about 29 million of the 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 it scores higher than 93% of the companies evaluated by MarketBeat—ranking 39th out of 858 medical-sector stocks. |
