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This Month's Exclusive Content Merck Just Made a Big Bet on a New Cancer Growth Engine Written by Jessica Mitacek. Article 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's $1 Quadrillion AI IPO
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 broader market, rising more than 12%. Brand-new data centers in Silicon Valley are finished, wired, and loaded with hardware - but they can't turn on. The grid equipment needed to connect them doesn't exist yet, and the waitlist runs past 2028. With $969 billion in AI spending in motion, this infrastructure bottleneck is already pressuring timelines. One company is positioned to solve it - and a June IPO could force a repricing before most investors take notice. See the full story on the company solving the AI power crisis The drugmaker's stock recently got a boost on news it would acquire Terns Pharmaceuticals—a move that will not only bolster its cancer treatment pipeline but also reinforce Merck's reputation as a top-tier serial acquirer. That kind of mergers and acquisitions (M&A) activity has helped drive the company's steady growth and market-cap expansion. Merck's market value is currently about $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 Play On March 25, Merck announced it had agreed to acquire Terns Pharmaceuticals, a clinical-stage oncology company developing therapies including TERN-701, an oral allosteric BCR–ABL1 inhibitor for the treatment of 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. The deal further builds Merck's hematology franchise with what the company calls a "potential best-in-class candidate" for certain patients with chronic myeloid leukemia. The agreement marks Merck's third multi-billion-dollar acquisition in the past year. While 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 Profile Securing the Terns Pharmaceuticals deal underscores Merck's central role in the pharmaceutical industry and its 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 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 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 appealing to current shareholders and prospective investors, the key takeaway is the rapid scale Merck routinely achieves through its acquisitions strategy. That M&A activity—including the recent Terns Pharmaceuticals announcement—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 deal at $6.7 billion. Merck continues to pursue a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious disease pipeline. Seamlessly integrating these biotech companies into its portfolio is accelerating growth and expanding Merck's market share while minimizing hurdles as it enters new markets. As a result, the company has maintained a five-year average gross margin of more than 73%. Those high and expanding margins indicate strong pricing power and operational efficiency, which together allow Merck to sustain and grow its dividend, yielding 2.84% (about $3.40 per share annually). While dividends are common among mature health care companies—especially large pharmaceutical and established managed care firms—Merck still 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 Based on the 18 analysts currently covering the stock, Merck receives 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 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 the firms evaluated by MarketBeat, ranking 39th out of 858 medical sector stocks. | 
