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Exclusive Story Merck Just Made a Big Bet on a New Cancer Growth Engine Reported by Jessica Mitacek. Date Posted: 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, 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, rising more than 12%. The drugmaker's stock received a boost after news that it would acquire Terns Pharmaceutical—a move that bolsters its cancer-treatment pipeline and reinforces Merck's reputation as a serial acquirer. That kind of mergers and acquisitions (M&A) activity has played a major role in the company's steady growth and market-cap expansion. Merck's market cap is currently more than $296 billion, placing it behind Eli Lilly (NYSE: LLY) and AbbVie (NYSE: ABBV), which sit at roughly $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, for an approximate equity value of $6.7 billion. The deal further builds the company's presence in hematology with what Merck described as a "potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia." The Terns deal is Merck's third multibillion-dollar acquisition in the past year. Although still clinical-stage, 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 previously received multiple lines of therapy. M&A Activity Has Helped Support Merck's Earnings and Dividend Profile Merck's ability to close deals like Terns underscores its central role in the pharmaceutical industry and contributes to 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, topping expectations of $2.01, and revenue of $16.40 billion, beating 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 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 forecasts may be appealing to shareholders and prospective investors, the larger takeaway is the rapid scale Merck has consistently achieved through its acquisition strategy. That M&A activity—including the recent 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 agreement valued at $6.7 billion. Merck continues to pursue a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious-disease pipeline. Seamless integration of these biotech assets accelerates growth, expands Merck's market share, and reduces hurdles when entering new markets. In turn, 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%—or $3.40 per share annually. Dividends are common among mature health-care firms, especially large pharmaceutical and established managed-care companies, and Merck stands out among them. 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 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 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, according to TradeSmith's financial health indicator, for more than six months. The company scores higher than 93% of the stocks evaluated by MarketBeat, ranking 39th out of 858 medical-sector names. | 
