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This Week's Bonus News
Merck Just Made a Big Bet on a New Cancer Growth EngineAuthored by Jessica Mitacek. 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.
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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%.
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The drugmaker’s stock recently rallied after news it will acquire Terns Pharmaceuticals—a deal that strengthens its cancer-treatment pipeline and underscores Merck’s reputation as a serial acquirer. This M&A activity has helped drive Merck’s steady growth and market-cap expansion: its market value now tops $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 announced it had reached an agreement to acquire Terns, a clinical-stage oncology company developing therapies including TERN-701, an oral allosteric BCR–ABL1 inhibitor for chronic myeloid leukemia (CML). According to the press release, Merck will acquire Terns for $53 per share in cash, valuing the company at about $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 definitive agreement marks Merck’s third multi-billion-dollar acquisition in the past year. Though still clinical-stage, TERN-701 has shown “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 ProfileSecuring the Terns deal highlights Merck’s central role in the pharmaceutical industry, which has translated into a 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, 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 about 16.45, Merck’s EPS is forecast to grow 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 projections are attractive to shareholders and potential investors, the key takeaway is the rapid scale Merck routinely achieves through its acquisition strategy. That M&A activity—including the Verona Pharma and Cidara Therapeutics deals, valued at $10 billion and $9.2 billion respectively—was followed by the Terns announcement, valued at about $6.7 billion. Merck continues to emphasize a bolt-on acquisition strategy to diversify its oncology, immunology, and infectious-disease pipeline. Seamlessly integrating these biotech companies into its portfolio accelerates growth and expands Merck’s market share while limiting hurdles as it enters new markets. As a result, the Big Pharma mainstay has maintained a five-year average gross margin above 73%. Those high and expanding margins indicate pricing power and operational efficiency that allow Merck to sustain and grow its dividend, which yields 2.84% (about $3.40 per share annually). While dividends are common among mature health care companies—particularly large pharmaceutical firms and established managed-care companies—Merck stands out. The company has raised its payout for 14 consecutive years and posts a five-year dividend growth rate of 5.75%. How Wall Street Feels About MerckBased on 18 analysts covering the stock, Merck has 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 largely keeping their distance. Merck has been in the green zone on TradeSmith’s financial health indicator for more than six months and scores higher than 93% of the companies evaluated by MarketBeat, ranking 39th out of 858 stocks in the medical sector. |
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