March 25 (Reuters) – Merck said on Wednesday it would buy biotech Terns Pharma for $6.7 billion, as the drugmaker races to bolster its cancer pipeline ahead of the looming patent loss for blockbuster therapy Keytruda later this decade.
The deal is the latest effort by Merck to reduce reliance on the best-selling drug, which generated more than $30 billion in 2025 and accounted for nearly half of its revenue.
Since 2021, the company has expanded its late-stage pipeline through internal R&D and acquisitions including the $11.5 billion purchase of Acceleron Pharma and a string of $10 billion deals such as Cidara Therapeutics and Verona Pharma last year.
Merck has offered $53 per share for Terns, representing a premium of 6% to the stock’s last close. Terns’ shares rose 5.5% before the bell while Merck was up nearly 1%.
The deal, expected to close in the second quarter, will result in a charge of about $5.8 billion, or roughly $2.35 per share, which will be reflected in both quarterly and full-year results.
MULTI-BILLION-DOLLAR OPPORTUNITY
Merck gains control of Terns’ experimental drug, TERN-701, which is being tested to treat chronic myeloid leukemia (CML), a cancer that starts in the bone marrow and causes uncontrolled growth of leukemia cells.
In an early-stage study, TERN-701 showed a 75% major molecular response rate in previously treated leukemia patients, a result analysts signaled could position it as a potential successor to Novartis’ leukemia drug Scemblix.
RBC Capital Markets analyst Trung Huynh said if Terns delivers on efficacy and durability, multi-billion-dollar peak sales are “realistic”, as CML represents a large, durable market with a $20 billion global opportunity.
The U.S. Food and Drug Administration granted the therapy orphan drug designation in 2024.
Terns is also looking to develop therapies for obesity and metabolic liver diseases like NASH.
Merck struck a $2 billion deal in 2024 for Hansoh Pharma’s experimental obesity drug, becoming a late contender in the race to offer a weight-loss pill. The drug is currently undergoing lab studies.
PATENT CLIFF LOOMS
Merck faces intensifying pressure to diversify beyond Keytruda, as the treatment approaches U.S. loss of exclusivity in 2028.
Analysts including Scotiabank’s Louise Chen broadly viewed the deal as strategically sound, helping broaden revenue streams.
Huynh said the deal is unlikely to face antitrust scrutiny from the U.S. Federal Trade Commission due to limited portfolio overlap.
He added that the transaction “sits within management’s sub-$15 billion M&A ‘sweet spot’ signaling continued pipeline activity ahead.”
Huynh, however, noted that the relatively modest 6% premium could translate into competing bids from other strategic buyers such as AbbVie or Bristol-Myers Squibb.
(Reporting by Siddhi Mahatole in Bengaluru; Editing by Sriraj Kalluvila)
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