On the heels of several big buys, Merck still has eyes for M&A—particularly in the oncology, immunology and cardiometabolic spaces—as the quest continues for a candidate that can top Keytruda.
Merck’s price tag “sweet spot” for potential deals reaches up to $15 billion, CEO Robert Davis said Thursday, as the company digests recent Terns and Cidara buyouts. But he’s not ruling out even bigger buys.
“From a size perspective, we continue to look anywhere in the $1 [billion] to $15 billion range, with that kind of being the sweet spot,” Davis said on the pharma’s quarterly earnings call on Thursday. “But as we’ve consistently said, we have the capacity to go beyond that for the right strategic deal and we will if and when we see that.”
As for the most likely areas of therapeutic interest, the chief executive highlighted the oncology, immunology and cardiometabolic spaces, but said Merck was “willing to be opportunistic beyond that.”
“We can always grow stronger, and if we have the capacity, we will continue to invest,” Davis added.
Merck remains focused on developing its PD1/VEGF bispecific antibody. All eyes have been on MK-2010, which the New Jersey pharma licensed from LaNova Medicines as part of a $588 million bet to succeed Keytruda as the cancer blockbuster’s patent expiration looms ever closer.
“We’re very interested in the space,” Dean Li, Merck’s executive vice president and president of Merck Research Laboratories, said of PD1/VEGF on the call.
Merck has plenty of reason to be interested. In September 2024, a MK-2010 competitor in development by Summit Therapeutics bested its blockbuster in a Phase 3 trial, appearing to be 49% better at reducing the risk of disease progression or death.
“If [MK-2010] should be better than Keytruda, we have a plethora of agents that would benefit from a combination with either Keytruda or a Keytruda plus or PD1/VEGF, so we’re advancing that,” Li said.
When asked if there was any possibility of combining MK-2010 with the Kelun-licensed TROP-2 antibody-drug conjugate sacituzumab tirumotecan (Sac-TMT), Li said “absolutely yes” and “we’re developing that information.”
Merck licensed Sac-TMT via a deal with China’s Kelun-Biotech worth up to $9.3 billion. The phase 3 candidate’s development is funded in part by Blackstone Life Sciences.
On the topic of other pipeline programs, Li shared that Merck has ended development of MK-6837-001, a TROP2-directed ADC being studied in an early-stage trial for advanced solid tumors.
While MK-6837 “had a unique payload,” Merck made the choice to discontinue the program, “especially when you see the profound impact of Sac-TMT,” Li said.
Merck’s 2022 pact with Kelun also included seven other earlier-stage ADCs. It’s unclear if MK-6837 was one of those ADCs.
A Merck spokesperson declined further comment on the culled asset.
The financials, plus Terns buy details
As for the hard numbers, Merck’s total global sales were $16.4 billion—a 5% uptick when compared to the same time last year. The Big Pharma also slightly raised its yearly profit outlook, while narrowing its 2026 estimated revenue range to between $65.8 billion and $67 billion, compared to the previously stated $65.5 billion at the low end.
That guidance doesn’t configure expenses tied to the proposed $6.7 billion buyout of Terns Pharmaceuticals. Merck struck the deal last month, with the prize piece a mid-stage leukemia drug that could offer a multibillion revenue opportunity, according to analysts.
The oral tyrosine kinase inhibitor TERN-701 is designed to treat chronic myeloid leukemia (CML) and is expected to elicit robust major molecular responses (MMR) in a highly refractory patient population.
Previously, Terns had reported a cumulative MMR of 74% among 38 patients at 24 weeks. After the Merck deal announcement was made, word broke that the Big Pharma had initially offered $1 billion more but shaved down its proposal after seeing updated data, prompting the industry to believe the MMR dropped significantly.
Thursday, Merck said it believes TERN-701’s MMR “will be north of 50%,” a high-level statement that supports the degradation theory, Mizuho Securities analysts wrote in a Thursday afternoon note.
The Terns buyout will be felt across the company, taking a large chunk out of R&D spend.
Merck expects the transaction to result in a one-time charge that will increase research and development expense by approximately $5.8 billion, or about $2.35 per share, Chief Financial Officer Caroline Litchfield said on the call. She added that ongoing investment to advance TERN-701 and the assumed cost of financing would negatively impact earnings-per-share by approximately 12 cents this year.
While the Terns impact has yet to be realized, Merck still recorded a swing to the loss column for the quarter, posting a $4.24 billion drop. The company pointed to its $9.2 billion acquisition of antiviral biotech Cidara Therapeutics as the reason for the net loss.
Despite this smudge, it was a strong quarter for Merck, with revenue growing 3% in constant currency, RBC Capital Markets analysts wrote in a Thursday note. Integral to that growth was cancer blockbuster Keytruda and the newer noncancer product Winrevair for pulmonary arterial hypertension. Both meds beat expectations, bringing in $8 billion and $525 million, respectively.
Meanwhile, the newly approved subcutaneous version of Keytruda topped expectations by 28%, bringing in $128 million. Other strong performers were diabetes meds Januvia and Janumet, beating consensus estimates by 16.8% and 19.8%, respectively.
RBC analysts highlighted the fact that Keytruda sales remained resilient and that the predicted downside scenario didn’t materialize.
Even the HPV vaccine Gardasil beat expectations by 2%. That’s after Gardasil sales dropped 35% globally in 2025, a decline Merck said was primarily due to lower demand in China.
The “beats for the quarter underscore commercial execution despite appreciated headwinds to the company’s vaccines business,” BMO analysts summarized.
One of last quarter’s weakest performances came from Ohtuvayre, Merck’s inhaled treatment for chronic obstructive pulmonary disease gained in last year’s $10 billion acquisition of Verona Pharmaceuticals. Ohtuvayre brought in $131 million in Q1—$29 million less than expected. But BMO analysts “expect investors to be less surprised” by the miss, citing “telegraphed expectations of challenges with coverage to start the year.”
Finally, Merck announced a slew of leadership changes, including the retirements of Sanat Chattopadhyay, head of Merck’s manufacturing unit, and Joseph Romanelli, president of human health international markets at Merck. The pharma also highlighted the appointments of Brian Foard, Jannie Oosthuizen and Chirfi Guindo, which were previously announced.
