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Bonus Content from MarketBeat Media
Merck Just Made a Big Bet on a New Cancer Growth EngineAuthor: 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.
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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 both the sector and the broad market, rising more than 12%.
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The drugmaker’s stock recently got a lift when it announced plans to acquire Terns Pharmaceuticals—a move that will bolster its cancer-treatment pipeline and further cement Merck’s reputation as a top-tier serial acquirer. Mergers and acquisitions (M&A) have been a key driver of the company’s steady growth and market-cap expansion, which now exceeds $296 billion—second only to 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 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, adding what Merck called a “potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia.” The Terns agreement is Merck’s third multi-billion-dollar acquisition over 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 previously received multiple lines of therapy. M&A Activity Has Helped Support Merck’s Earnings and Dividend ProfileMerck’s ability to complete deals like Terns highlights its central role in the pharmaceutical industry and has supported an impressive earnings track record. The company has missed analyst estimates only once in the past 19 quarters, back to Q2 2021. When Merck reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04—beating expectations of $2.01—and revenue of $16.40 billion, ahead of the $16.19 billion consensus. With a forward price-to-earnings multiple of 16.45, Merck’s EPS is forecast to grow nearly 10% over the next year, from $9.01 to $9.90. In the 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-disease franchises 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 revenue projections, the larger takeaway is how quickly Merck has scaled through acquisitions. 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 $6.7 billion Terns agreement—has become a hallmark of the company. Merck continues to pursue bolt-on acquisitions to diversify its oncology, immunology and infectious-disease pipeline. Seamlessly integrating these biotech companies into its portfolio has accelerated growth and expanded Merck’s market share while reducing barriers as it enters new markets. As a result, the company has maintained a five-year average gross margin above 73%. Those high and expanding margins reflect strong pricing power and operational efficiency, which allow Merck to sustain and grow its dividend, currently yielding 2.84%—$3.40 per share annually. While dividends are common among mature health care companies—particularly large pharmaceutical firms and established managed-care companies—Merck stands out. The company has raised its payout for 14 consecutive years and has a five-year dividend growth rate of 5.75%. How Wall Street Feels About MerckAmong 18 analysts covering the stock, Merck has 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%. 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. Current short interest is only 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, and the company scores higher than 93% of the firms evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
