Merck braces for Keytruda patent loss with $6.7 billion Terns bet

Merck said on Wednesday it would buy biotech firm 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 the U.S. drugmaker 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, Merck 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 5.4% while Merck was up 2.2%.

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.

Updated early-stage data for TERN-701, which has the U.S. Food and Drug Administration's orphan drug designation, is expected in the second half of this year.

Merck Chief Financial Officer Caroline Litchfield said in a call with analysts if the drug is approved "we would expect to not be included in the Inflation Reduction Act nor in the most-favored-nation pricing framework."

The Act and the pricing form a key part of ‌the Trump administration's efforts to tackle high U.S. prescription drug costs.

The company expects the drug's intellectual property to extend "into the 2040s".

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.

NO ANTITRUST ISSUES, MODEST PREMIUM
Merck faces intensifying pressure to diversify beyond Keytruda, as the treatment approaches U.S. loss of exclusivity in 2028.

Last month, the company disclosed plans to create a separate division for its cancer business, anchored by Keytruda.

Leerink Partners analyst Andrew Berens said "overall, we believe many investors were hoping for a higher price, especially with a data update anticipated this year."

Huynh said antitrust issues are unlikely due to minimal portfolio overlap and that the deal falls within Merck's sub-$15 billion M&A "sweet spot."

But he cautioned the 6% premium could invite competing offers from AbbVie or Bristol Myers Squibb.