Merck’s acquisition of Terns Pharmaceuticals follows other big-ticket purchases, including of Verona Pharma and Cidara Therapeutics, as the pharma prepares for the impending expiry of its blockbuster’s patents.
Continuing its campaign to grow its pipeline amid Keytruda’s looming loss of exclusivity, Merck has moved to absorb Terns Pharmaceuticals and its mid-stage leukemia drug, an asset that analysts say could offer the pharma a multi-billion revenue opportunity.
The Terns buyout is “one of the best deals [Merck] has made since its spree began ahead of the Keytruda LOE,” analysts at BMO Capital Markets wrote in a note to investors on Tuesday evening, responding to swirling reports that the pharma was in late-stage talks with the California biotech. The rumor was first broken by the Financial Times.
BMO called Terns’ lead asset, the oral tyrosine kinase inhibitor TERN-701, a “differentiated agent” in chronic myeloid leukemia (CML), adding that it has elicited robust major molecular responses in a highly refractory patient population. TERN-701, the analysts estimated, “offers an unadjusted peak sales of >$4B, meaningfully contributing to Merck’s plans to patch its Keytruda LOE hole at the end of the decade.”
Under the terms of Wednesday’s acquisition agreement, Merck will purchase all of Terns’ outstanding shares for $53 a pop—a 31% premium to the biotech’s average stock price over the preceding 60 days—resulting in a roughly $6.7 billion equity value. The deal has been approved by the boards of directors of both companies and the parties expect to complete the transaction in the second quarter.
The Terns takeover further diversifies and strengthens our position in oncology as we continue to look for opportunities to broaden our portfolio into other therapeutic areas,” Merck CEO Robert Davis said in a statement on Wednesday. In particular, the agreement “builds on our growing presence in hematology,” he added, calling TERN-701 a “potential best-in-class candidate” for CML.
Taken orally, TERN-701 is an allosteric inhibitor of BCR-ABL1, a protein that arises from an abnormal genetic fusion that is the hallmark of CML. Phase 1 data revealed last December showed an overall major molecular response rate as high as 75% at 24 weeks, with a tolerability profile that supported daily dosing.
“Unprecedented remains the only suitable adjective to describe the compound’s clinical profile,” William Blair analysts wrote in a Dec. 9 note, adding that TERN-701 “is on track to challenge Scemblix’s dominance and disrupt the treatment paradigm of CML.” Owned by Novartis, Scemblix was first approved in October 2021 for the same indication. The drug made $1.285 billion last year.
William Blair analysts value TERN-701 so highly that they questioned Merck’s offer, saying in a note Wednesday morning after the deal was announced that it “does not fully capture the potential of TERN-701.”
“We believe another bidder could emerge with a more attractive offer,” the firm added.
RBC Capital Markets agreed. “We view the decision to acquire TERN before full dose escalation as a sign of high confidence in the asset,” the analysts wrote in their own note on Wednesday. They added, however, that Merck’s price “opens the door for competing bids from other potential acquirers where the deal makes strategic sense,” such as AbbVie or Bristol Myers Squibb.
Key protections for Keytruda, Merck’s mega-blockbuster PD-1 inhibitor, are set to expire in 2028, after which the pharma can expect to cede some of the market to biosimilars. In addition to a recent spate of deals, the pharma has is also working to maintain its earnings through the reformulation of Keytruda into a subcutaneous injection, which the FDA cleared in September last year. Merck is marketing the product as Keytruda Qlex.
Still, the pharma has been an aggressive dealmaker over the past year, betting billions to enrich not only its late-stage pipeline but also its commercial portfolio. In November 2025, for instance, Merck swallowed Cidara Therapeutics for $9.2 billion, gaining a Phase 3 antiviral drug. A few months earlier, the pharma dropped $10 billion to acquire Verona Pharma and the FDA-approved Ohtuvayre for chronic obstructive pulmonary disease.
For Terns, the deal represents a triumphant exit after refocusing its attention last August on TERN-701. Once a rising star in obesity and the MASH space, Terns announced at that time that it would look to partner off a clutch of metabolic assets amid an oversaturated market in the obesity realm. Terns was one of several companies that BioSpace highlighted as likely M&A targets for Big Pharma this year.
