Merck is picking up a big new piece for its cancer drug pipeline with a $6.7 billion deal to acquire Terns Pharmaceuticals, a company whose lead program could rival a blockbuster product from Novartis.
The acquisition announced Wednesday is important for Merck, which has been scooping up promising drugs with big sales potential to help offset the revenue decline coming as its top seller, the cancer immunotherapy Keytruda, drops off the patent cliff. But as lofty as the Terns purchase price is, Merck may still need to further improve the offer.
The Terns drug, TERN-701, is in clinical development for chronic myeloid leukemia (CML), a blood cancer that starts in bone marrow cells. The drug specifically addresses CML that’s Philadelphia chromosome-positive and in the chronic phase, one of three phases for the disease. Standard CML treatment includes drugs that block proteins that drive the uncontrolled white blood cell production characteristic of leukemias. But for some patients, the cancer does not respond to these older drugs, called tyrosine kinase inhibitors. In other cases, the cancer can develop resistance to these therapies.
TERN-701 was developed to overcome limitations of those older drugs. This oral small molecule is also a tyrosine kinase inhibitor, but it binds to a different site on the target protein to help avoid drug resistance. Novartis’s Scemblix, awarded accelerated FDA approval in 2021 and European Commission approval in 2022, works in a similar way. This product accounted for nearly $1.3 billion in global sales in 2025, an 87% increase compared to the prior year. Novartis attributed the increase to growth in all markets, particularly the expansion of the drug to earlier lines of treatment in the U.S. and Japan. But Terns’s drug could be better.
Scemblix is taken twice daily and patients must avoid food two hours before and one hour after dosing. The Terns drug is a once-daily pill that may be taken with or without food. The advantages go beyond patient convenience. During the annual meeting of the American Society of Hematology (ASH) in December, Terns reported Phase 1 results showing efficacy measures that had some analysts calling TERNS-701 best in class.
Updated Phase 1 results are expected in the second half of this year. In a research note, Leerink Partners analyst Andrew Berens said he believes Merck has likely seen updated data ahead of its bid for the company, suggesting that TERNS-701 is likely to maintain its best-in-class profile. Berens said that even if the efficacy measures moderate, the lower end of the disclosed results remains above the historical benchmarks for Scemblix in the second-line setting, placing some distance from the Novartis product.
The financial terms of the acquisition call for Merck to pay $53 in cash for each share of Terns. While that’s just a 6% premium to the stock’s Tuesday closing price, Terns shares had been climbing since the ASH presentation on speculation of an acquisition. The purchase price is a 31% premium to Terns’s average stock price for 60 days prior to Merck’s acquisition announcement and a 42% premium to the stock’s average price for the past 90 days. Minus the cash that Terns already has, Merck’s financial outlay will be about $5.7 billion.
In the past year, Merck has agreed to pay $9.2 billion to buy influenza drug developer Cidara Therapeutics and $10 billion to acquire respiratory drugs biotech Verona Pharma. In the Terns acquisition announcement, Merck CEO Robert Davis said this deal builds on his company’s growing presence in hematology with a potential best-in-class CML drug.
“This transaction further diversifies and strengthens our position in oncology as we continue to look for opportunities to broaden our portfolio into other therapeutic areas,” he said
In a Wednesday research note, William Blair Andy Hsieh said TERNS-701 has demonstrated unequivocal improvement in both safety and efficacy along with better dosing convenience, positioning the drug to “disrupt the treatment paradigm of CML” and challenge Scemblix’s dominance in the indication. Berens said the purchase price for Terns “vastly underestimates” the potential for TERN-701. On a per share basis, the price is still below Leerink’s $58 per share price target. The bank projects the Terns drug could achieve blockbuster sales by 2032 and reach peak sales of about $6.2 billion by 2040. Given the drug’s potential, Berens said some Terns shareholders may demand a higher price or another bidder may come in to try to top Merck’s offer.
The acquisition still requires the majority of Terns stockholders to tender their shares. The companies expect to complete the transaction in the second quarter of this year. But if another bidder steps in with a superior offer, Terns must pay Merck a $235 million termination fee, according to terms of the acquisition agreement.
Photo: Christopher Occhicone/Bloomberg, via Getty Images
