Merck nears $6B acquisition of Terns Pharma to bolster oncology pipeline
Deal would help offset 2028 Keytruda patent expiry as pharmaceutical giant seeks new growth drivers
Merck is reportedly nearing a $6 billion all-cash acquisition of Terns Pharmaceuticals, a move that would significantly strengthen the pharmaceutical giant's oncology pipeline ahead of a looming patent cliff for its blockbuster cancer immunotherapy Keytruda.
Terns shares surged approximately 12.8% to $56.38 in pre-market trading following the report, while Merck edged up 0.27% to $116.68, according to coverage of the report. The potential deal represents a substantial premium over Terns' recent trading levels and aligns with analyst targets near $58 per share, according to market data. Financial Times reporting indicated that the deal could be finalized within days, citing advanced-stage discussions.
The strategic rationale centers on Keytruda, which generates approximately $30 billion annually and accounts for nearly half of Merck's pharmaceutical revenues. The drug's primary U.S. patent is set to expire in 2028, with European exclusivity ending by 2030-2031. Merck anticipates potential revenue erosion of up to 80% for Keytruda post-patent expiry, translating to an estimated $24 billion annual loss, as noted in analyses of the patent cliff.
To mitigate this existential threat, Merck has pursued a multi-pronged strategy including pipeline acceleration, lifecycle management initiatives like the subcutaneous Keytruda formulation (Keytruda Qlex), and strategic acquisitions. The Terns deal would add TERN-701, an allosteric BCR-ABL inhibitor for chronic myeloid leukemia (CML), to Merck's oncology portfolio. The drug candidate has received U.S. FDA Fast Track designation and is currently in Phase 1/2 trials through the CARDINAL study, with dose expansion underway and updated data presented at ASH in December 2025. Milestones for 2026 include selecting a pivotal dose in mid-2026 and initiating an End of Phase 2 regulatory interaction with the FDA later in 2026, with a first pivotal trial in second-line plus CML targeted for late 2026 or early 2027, according to the company's priority and milestone disclosures.
If successful, TERN-701 could compete with Novartis's leading CML drug Scemblix. The broader pharmaceutical industry faces approximately $320 billion in revenue losses from patent expirations through 2030, heightening urgency for pipeline reinforcement across major drugmakers.
Terns' strategic pivot toward oncology has been evident in recent months, with the company announcing it would cease investing in metabolic disease clinical development beyond year-end 2025 while seeking partners for legacy programs. This shift has focused resources squarely on its oncology pipeline, positioning Terns as an attractive acquisition target. The company raised approximately $747.5 million in an upsized December 2025 offering, bringing total cash, cash equivalents and marketable securities to about $1 billion by year-end, providing a runway into 2031.
Merck's confidence in navigating the Keytruda patent cliff—characterized by leadership as "more of a hill than a cliff"—has been bolstered by recent portfolio actions including subcutaneous Keytruda's approval in 2025 and a $3 billion cost-cutting program. The company has forecast over $70 billion in annual revenue opportunities from new products by the mid-2030s, according to strategic briefings. Recent acquisitions such as Verona Pharma and Cidara Therapeutics demonstrate Merck's willingness to deploy capital strategically, with the Terns deal potentially following that playbook.
Neither Merck nor Terns has issued public statements confirming the acquisition discussions, with Morningstar/Dow Jones noting that the discussions remain subject to completion and have not been formally announced. Terns closed at $50 on March 24, 2026, giving it a market capitalization of $5.4 billion based on 108.8 million shares outstanding. Analyst consensus on Terns remains bullish, with all eleven covering analysts rating it as a buy or strong buy and an average target price of $58.11, suggesting additional upside if the acquisition were to be priced at or near the high end of analyst expectations.
The deal's timing—potentially closing within days—reflects Merck's urgency to secure oncology assets before Keytruda exclusivity begins eroding. For Terns shareholders, a sale at a premium would provide significant returns, particularly for those invested early in the company's strategic transformation. With late-stage CML trials anticipated by late 2026 or early 2027, TERN-701's value to Merck could become clearer in the near term, potentially justifying the acquisition's strategic rationale and price point.