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Additional Reading from MarketBeat Merck Just Made a Big Bet on a New Cancer Growth Engine Written 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.
- Special Report: Elon's "Hidden" Company
While the health care sector has struggled this year, not all Big Pharma companies have. Shares of New Jersey-based Merck & Co. (NYSE: MRK) have outperformed the sector and the broader market, rising more than 12%. The AI bottleneck has shifted from chips to power. Goldman Sachs projects demand growing 15% per year, with 40% of AI facilities constrained by electricity shortages by 2027. One company holds $1.5 billion in backlog orders for the exact equipment these data centers need - yet Wall Street still prices it like a sleepy industrial stock. The June SpaceX IPO could change that fast. See the math Wall Street is missing before the SpaceX IPO The drugmaker's stock recently got a boost from news that it will acquire Terns Pharmaceuticals—a move that will both strengthen its cancer-treatment pipeline and reinforce Merck's reputation as a top-tier serial acquirer. That kind of mergers and acquisitions (M&A) activity has helped drive Merck's steady growth and market-cap expansion. Its market cap is currently more than $296 billion, ranking it behind Eli Lilly (NYSE: LLY) and AbbVie (NYSE: ABBV), which sit at about $830 billion and $370 billion, respectively. Merck's Terns Acquisition Is a Pivotal Oncology Play On 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 chronic myeloid leukemia. According to the press release, Merck will acquire Terns for $53 per share in cash, representing an approximate equity value of $6.7 billion. Merck said the deal further builds its hematology franchise with a "potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia." The Terns deal marks the third multi-billion-dollar acquisition for Merck in the past year. Although TERN-701 remains in the clinic, it 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 Profile Merck's ability to close the Terns transaction underscores its central role in the 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 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, topping forecasts 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 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 projections are attractive to shareholders and prospective investors, the larger takeaway is how quickly Merck has scaled through its acquisition strategy. That M&A approach—alongside the Terns announcement—has become a hallmark for the company. The Verona Pharma and Cidara Therapeutics deals, valued at about $10 billion and $9.2 billion respectively, were followed by the Terns transaction, valued at $6.7 billion. Merck continues to emphasize bolt-on acquisitions to diversify its oncology, immunology, and infectious disease pipelines. Seamlessly integrating these biotech companies into its portfolio has accelerated growth and expanded Merck's market share while helping to minimize 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 reflect strong pricing power and operational efficiency, which together allow Merck to sustain and grow its dividend, currently yielding 2.84% (about $3.40 per share annually). Dividends are common among mature health care companies—especially large pharmaceutical firms and established managed-care businesses—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 Merck Among the 18 analysts covering the stock, Merck holds a consensus Moderate Buy rating, with 11 analysts assigning an MRK Buy rating. With an average one-year price target of $127.13, Wall Street sees potential 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 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 the firms evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. | 
