Merck Acquires Terns Pharmaceuticals for $6.7 Billion to Secure Post-Keytruda Oncology Leadership

On March 25, Merck (known as MSD outside the US and Canada) announced the buying of Terns Pharmaceuticals for about $6.7 billion. Under the terms of the agreement, Merck will pay $53 per share in cash to buy all outstanding shares of the California-based biopharma company, representing a premium over the closing price of $50 per share recorded at the end of trading on the previous day. The companies expect to close the deal in 2026 Q2.

Preparing for the Looming Keytruda Patent Cliff

Industry analysts widely view this aggressive capital deployment as a vital strategic maneuver to reinforce the oncology pipeline of the New Jersey-based drugmaker before its flagship cancer immunotherapy Keytruda starts losing key patent protection and market exclusivity in 2028. As the world’s best selling drug for three years in a row (2023 to 2025), Keytruda generated $31.7 billion in annual global sales in 2025, accounting for nearly half of the Merck’s total revenue. Consequently, this impending patent cliff forces corporate strategists to hunt aggressively for promising clinical-stage assets to mitigate future revenue losses and maintain market dominance against fierce competitors.

TERN-701 Offers New Hope for Chronic Leukemia Patients

The centerpiece of this massive deal is Terns’ lead candidate TERN-701, an investigational oral allosteric BCR-ABL1 tyrosine kinase inhibitor (TKI) for treating chronic myeloid leukemia (CML). The slow-growing blood cancer causes an increased and unregulated growth of myeloid cells and ultimately disrupts the formation of healthy blood cells in the bone marrow. TERN-701 binds to the ABL myristoyl pocket in a highly selective manner, offering a novel mechanism of action to halt cancer progression in CML patients harboring the problematic Philadelphia chromosome mutation which creates the BCR-ABL1 fusion gene. Recognizing its therapeutic potential, the US FDA previously granted this small molecule asset Orphan Drug Designation in March 2024 to expedite its development.

Terns Pharmaceuticals is undergoing the Phase 1/2 CARDINAL trial to evaluate the efficacy and safety of TERN-701 in treating individuals suffering from CML. The trial focuses on patients who previously received at least one prior TKI therapy and subsequently experienced treatment failure or severe intolerance. Early clinical data shows encouraging efficacy and safety signals. Trial investigators reported major and deep molecular responses by week 24, even in patients burdened with high disease levels. Furthermore, the medical community considers the safety profile highly favorable, noting low rates of severe adverse events and minimal changes in blood pressure.

Executive Perspectives Highlight Strategic Clinical Potential

Merck’s leadership expressed strong confidence in the therapeutic potential of the newly acquired leukemia asset. Robert M. Davis, Chairman and CEO, stated that acquiring Terns builds on their growing presence in hematology and further diversifies their oncology portfolio. Dr. Dean Y. Li, president of Merck Research Laboratories, added historical context to the deal, noting that the first approval of a BCR-ABL1 inhibitor 25 years ago transformed the prognosis for many CML patients. Despite existing options, Dr. Li believes a significant medical need remains for well-tolerated therapies offering a faster onset of molecular response. He views TERN-701 as a meaningfully differentiated option for individuals living with this specific type of blood cancer. 

Terns CEO Amy Burroughs echoed this optimism, noting, “By working together, we will advance TERN-701, leveraging the deep expertise and significant resources at Merck, a global biopharmaceutical leader with a proven track record of delivering cancer breakthroughs for patients who need them most.”

Diversification Beyond Oncology Dominance

The purchase of Terns Pharmaceuticals represents the third multibillion-dollar acquisition for Merck within the past year. In July 2025, Merck acquired British respiratory disease specialist Verona Pharma for approximately $10 billion, adding Ohtuvayre, a first-in-class selective inhibitor of phosphodiesterase 3 and 4 (PDE3 and PDE4) to its growing cardio-pulmonary pipeline and portfolio. In June 2024, the FDA approved Ohtuvayre for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adult patients, making the small molecule dual PDE inhibitor the first novel inhaled mechanism for COPD treatment in more than 20 years and combines bronchodilator and non-steroidal anti-inflammatory effects. 

Later in November 2025, the pharma giant spent another $9.2 billion to acquire Cidara Therapeutics. This move secured CD388, a promising long-acting, strain-agnostic antiviral agent currently advancing through Phase 3 clinical trials. As Cidara’s lead asset, CD388 consists of a small molecule neuraminidase inhibitor stably linked to a Fc fragment of a human antibody designed to prevent influenza A and B. This proprietary drug-Fc conjugate mechanism allows the candidate to provide season-long protection regardless of patient immune status, holding promise for preventing influenza in individuals at higher risk of complications.

Taking place within less than 9 months, these three major deals illustrate a deliberate diversification strategy spanning multiple therapeutic areas. Merck clearly recognizes the impending revenue gap that the Keytruda patent expiration will inevitably create. While Terns Pharmaceuticals solidifies the core oncology business, the Verona Pharma and Cidara Therapeutics acquisitions expand the company footprint into lucrative respiratory and infectious disease markets respectively. By securing recently approved commercial assets alongside promising late-stage clinical candidates, Merck aims to build multiple reliable pillars of financial growth.

What it Means for Biopharma Business

The broader message for the industry is straightforward. Big pharma still pays for credible clinical signals, even when the target market is relatively narrow, as long as the asset can show differentiation, regulatory momentum and a believable commercial path. The Terns’ price also suggests that a clean story can move quickly from data to takeover, especially when a larger company has strategic urgency. For smaller biotechs, the lesson is equally direct: strong phase 1 or phase 2 data can still create real optionality, but only if the biology, dosing convenience and market position are coherent enough for a strategic buyer to underwrite. In this environment, asset quality matters more than pipeline breadth.

Author

Richard Chau