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Just For You
Merck Just Made a Big Bet on a New Cancer Growth EngineSubmitted by 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, 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 with a gain of more than 12%.
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The drugmaker’s stock recently got a boost when Merck announced it would acquire Terns Pharmaceuticals—a deal that bolsters its oncology pipeline and reinforces Merck’s reputation as a serial acquirer. That mergers and acquisitions (M&A) activity has played a major role in the company’s steady growth and market-cap expansion, with Merck’s market value now more than $296 billion, ranking it third behind Eli Lilly (NYSE: LLY) (~$830 billion) and AbbVie (NYSE: ABBV) (~$370 billion). Merck’s Terns Acquisition Is a Pivotal Oncology PlayOn March 25, Merck announced it had reached terms to acquire Terns, a clinical-stage oncology company developing therapies including 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, giving Terns an approximate equity value of $6.7 billion. The deal further builds Merck’s presence in hematology with what the company describes as 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 in the past year. Although still in clinical stages, 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 had received multiple prior lines of therapy. M&A Activity Has Helped Support Merck’s Earnings and Dividend ProfileMerck’s ability to secure the Terns deal underscores its central role in the pharmaceutical 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 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 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 attractive to shareholders and prospective investors, the key takeaway is the rapid scale Merck has achieved through its acquisition strategy. That M&A activity has become a hallmark for the company. The Verona Pharma and Cidara Therapeutics deals—valued at $10 billion and $9.2 billion, respectively—were followed by the Terns announcement, valued at $6.7 billion. Merck continues to pursue bolt-on acquisitions to diversify and strengthen its oncology, immunology, and infectious disease pipelines. Integrating these biotech companies into its portfolio accelerates growth and expands Merck’s market share while minimizing hurdles as it enters new markets. In turn, Merck has maintained a five-year average gross margin above 73%. Those high and expanding margins indicate strong pricing power and operational efficiency, which together allow Merck to sustain and grow its dividend, currently yielding 2.84% (or $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 MerckBased on the 18 analysts currently covering the stock, Merck carries 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 potential upside of more than 7%. Institutional ownership is 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 the 2.47 billion shares outstanding—suggesting bears are largely 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 those evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
