Merck is wrestling with a classic big‑pharma problem: how to replace a single blockbuster that has grown into almost half of the business. Keytruda, its immunotherapy that has become the world’s top‑selling drug, generated about 31.7 billion dollars in sales in 2025 and is expected to lose US patent protection in December 2028. Without new growth drivers, the expiry could wipe out billions of dollars in annual revenue in the early 2030s, so the 6.7 billion dollar takeover of cancer specialist Terns Pharma is a direct attempt to soften that blow.
The deal is Merck’s third sizeable transaction in roughly a year and part of a broader buying spree worth more than 29 billion dollars. The company has already moved for Verona Pharma in a 10 billion dollar bet on respiratory medicine, acquired rare‑disease player SpringWorks for 3.9 billion dollars and is now adding Terns, all with the same strategic goal: building a pipeline strong enough to backfill the sales that will fade as Keytruda’s exclusivity runs out.
What Merck is actually buying for 6.7 billion
The entire transaction is based on one asset. TERN-701 is an experimental drug in clinical trials for the treatment of chronic myeloid leukemia (CML), a blood and bone marrow cancer in which leukemia cells grow uncontrollably.
The mechanism of TERN-701 differs from existing treatments. It is a highly selective allosteric inhibitor of BCR::ABL1 in oral form, i.e. in tablets. Unlike the older generation of drugs, it targets a different site of the protein that drives leukaemia, and the data from the first phase of clinical testing are exceptionally promising. At the ASH conference in December 2025, Terns reported that 64% of pretreated patients achieved a major molecular response after 24 weeks. This result was described as "unprecedented" in the oncology community for a group of patients for whom other treatments had previously failed.
$MRK is now managing the CARDINAL study, adding a new cohort in January 2026 to test the 500 mg once-daily dosing. Initial dose selection is expected in mid-2026, followed by a key interaction with the FDA regarding conditions for approval.
Is 6.7 billion too much or too little?
The view of the net price of an acquisition varies depending on how you approach the risk. Terns had about $1.4 billion in cash on the books, so the effective price for the drug and research team alone is closer to $5.3 billion. The premium over the stock's last closing price was just 6%, a very modest premium compared to standard pharma acquisitions. The market took notice: shares of Terns jumped 5.5% after the announcement, not tens of percent as is usual with large buyouts.
The problem is that TERN-701 is still in Phase 1/2 clinical testing. Historical data shows that drugs in this phase successfully make it through the entire FDA approval process less than a third of the time. Merck has paid for this drug as a future blockbuster, with years of clinical data, regulatory approval and ultimately the actual commercial launch still to come. A direct competitor in the CML market is Novartis' Scemblix $NVS, which is already approved and has shown a 67% molecular response rate in clinical testing. The difference in efficacy is minimal, the competition will be fierce.
The key question: will this save Merck from the fall of Keytruda?
The answer itself is no. No single acquisition of Merck by $MRK is enough to offset Keytruda's revenue. Keytruda's primary patent expires in the U.S. in December 2028, and in Europe in 2031. Bloomberg Intelligence estimates that the global patent is more likely to be extended to 2033, which would bring Merck extra revenue of about $22 billion.
Therefore, Merck $MRK is betting on a combination: extend the life cycle of Keytruda through new formulations and combination treatment protocols, while building a diversified oncology pipeline through acquisitions. In February 2026, the company announced the separation of its oncology business into a separate division with its own leadership and strategy. Terns Pharma fits into this plan as the hematology leg of the portfolio.
Scenarios for investors
Bullish: TERN-701 successfully passes the CARDINAL trial, the FDA approves the drug in late 2028/early 2029, and Merck launches commercial sales just as Keytruda revenues begin to decline. CML may be a rare disease, but blockbuster drugs for rare cancer diagnoses can generate billions even with a narrow patient population. In such a scenario, 6.7 billion paid today in 2030 may look like a good price tag.
Base case: TERN-701 will pass clinical trials, but commercial launch is slower than expected due to direct competition with Novartis' Scemblix. The drug will plateau at revenues in the range of $1 billion to $2 billion per year by 2031, justifying the acquisition as a reasonable diversification but not a strategic breakthrough.
Bearish: CARDINAL trial fails to show sufficient benefit over current treatment, FDA requires extensive additional studies or conditional approval with limited indication. Direct battle with Scemblix loses and Merck writes off a substantial portion of the 6.7 billion. In the context of an overall $29 billion acquisition strategy, such an outcome would increase pressure on management and MRK stock.