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Additional Reading from MarketBeat.com
Merck Just Made a Big Bet on a New Cancer Growth EngineBy Jessica Mitacek. 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.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
While the health care sector has struggled this year, not all Big Pharma has followed that trend. 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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The drugmaker’s stock recently got a boost after it announced plans to acquire Terns Pharmaceuticals—a move that strengthens its oncology pipeline and underscores Merck’s role as a prolific acquirer. This type of mergers and acquisitions (M&A) activity has helped Merck sustain steady growth and expand its market capitalization, which is now more than $296 billion—behind 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 said it reached an agreement to acquire Terns Pharmaceuticals, 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, further building its hematology franchise with a “potential best-in-class candidate” for certain patients with chronic myeloid leukemia. The definitive agreement marks Merck’s third multi-billion-dollar acquisition in the past year. Although still clinical-stage, TERN-701 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 close deals such as the Terns transaction highlights 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 (since Q2 2021). When Merck reported Q4 2025 financials on Feb. 3, it posted earnings per share (EPS) of $2.04 versus $2.01 expected and revenue of $16.40 billion versus $16.19 billion expected. With a forward price-to-earnings ratio of 16.45, EPS is forecast to rise 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. Those revenue projections are attractive to shareholders, but the more important takeaway is how rapidly the company has scaled through its acquisition strategy. That M&A strategy—now including Terns—has become a hallmark for Merck. The Verona Pharma and Cidara Therapeutics deals, valued at approximately $10 billion and $9.2 billion respectively, were followed by the $6.7 billion Terns agreement. Merck continues to pursue bolt-on acquisitions to diversify its oncology, immunology, and infectious disease pipeline. Integrating these biotech companies into its portfolio accelerates growth and expands 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 healthy and expanding margins reflect strong pricing power and operational efficiency, enabling Merck to sustain and grow its dividend, which yields 2.84% and amounts to $3.40 per share annually. Dividends are common among mature health care firms—especially large pharmaceutical and established managed-care companies—but Merck 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 MerckAmong 18 analysts covering the stock, Merck has a consensus Moderate Buy rating, with 11 analysts recommending Buy. The average one-year price target of $127.13 implies potential upside of more than 7%. Institutional ownership remains above average at over 76%, with inflows of nearly $37 billion outpacing outflows of roughly $19 billion over the past 12 months. Current short interest is just 1.18% of the float—about 29 million of 2.47 billion shares outstanding—suggesting limited bearish sentiment. 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. |
