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This Month's Featured Story
Merck Just Made a Big Bet on a New Cancer Growth EngineWritten 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: Elon’s “Hidden” Company
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 broader market, rising more than 12%.
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Merck’s stock recently received a boost after news of its acquisition of Terns Pharmaceuticals—a move that will bolster its cancer-treatment pipeline and reinforce Merck’s reputation as a top-tier serial acquirer. This M&A activity has been central to the company’s steady growth and market-cap expansion. Merck’s market value is now 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, a clinical-stage oncology company developing therapies that include TERN-701, an oral allosteric BCR–ABL1 inhibitor for treating chronic myeloid leukemia. According to the press release, Merck will acquire Terns for $53 per share in cash, implying an approximate equity value of $6.7 billion. The deal adds to Merck’s hematology portfolio with what the company describes as a “potential best-in-class candidate” for certain patients with chronic myeloid leukemia. The Terns agreement marks Merck’s third multi-billion-dollar acquisition over the past year. Though 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 deals like Terns underscores its central role in the pharmaceutical industry and is reflected in a 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 results on Feb. 3, it posted earnings per share (EPS) of $2.04 versus expectations of $2.01, and revenue of $16.40 billion versus 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. While those revenue forecasts are compelling for current shareholders and prospective investors, the larger takeaway is the rapid scale Merck has achieved through its acquisition strategy. That M&A activity—in addition to the Terns deal—has become a hallmark of the company. The Verona Pharma and Cidara Therapeutics agreements—valued at $10 billion and $9.2 billion, respectively—were followed by the Terns announcement, valued at $6.7 billion. Merck continues to execute a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious-disease pipeline. Seamlessly integrating these biotech companies into its portfolio helps accelerate growth and expand Merck’s market share while minimizing hurdles when entering new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those high and expanding margins signal strong pricing power and operational efficiency, which together enable Merck to sustain and grow its dividend, currently yielding 2.84%, or $3.40 per share annually. Dividends are a common feature among mature health-care companies—especially large pharmaceutical firms and established managed-care companies—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 MerckAmong the 18 analysts covering the stock, Merck has a consensus Moderate Buy rating, with 11 analysts assigning MRK a Buy. With an average one-year price target of $127.13, Wall Street sees upside of more than 7%. 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 bears are keeping their distance. 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. |
