Merck has announced a deal to acquire cancer-focused biotech company Terns Pharmaceuticals in an all-cash transaction valued at approximately $5.7 billion, a move the pharmaceutical giant is making as it races to secure new revenue sources ahead of a looming patent expiration on its most important drug.
Under the terms of the agreement, Merck will pay $53 per share for Terns — a price that reflects both the perceived promise of the biotech’s experimental treatments and the urgency driving Merck’s search for the next pillar of its business.
The patent cliff that is pushing Merck to act
At the center of this deal is a ticking clock. Keytruda, Merck’s blockbuster cancer immunotherapy, is one of the best-selling drugs in the world, generating approximately $31.7 billion in sales last year alone and accounting for a substantial portion of the company’s overall revenue. But that dominance has a defined endpoint — Keytruda is set to lose patent protection in 2028, opening the door to cheaper biosimilar competition that could dramatically reduce the drug’s sales.
That reality has placed considerable pressure on Merck’s leadership to identify and acquire new treatments capable of filling the gap. The Terns deal is the company’s clearest signal yet of how seriously it is taking that challenge.
What Merck is getting with Terns
Terns Pharmaceuticals brings several assets to the table, but the centerpiece of the acquisition is an experimental pill designed to treat chronic myeloid leukemia, a type of blood cancer. The drug has shown encouraging results in early-stage clinical trials, and analysts have taken notice — projections suggest the treatment could reach peak annual sales of up to $2.3 billion if it clears regulatory hurdles and reaches the market successfully.
Beyond the leukemia program, Terns has been developing treatments in two additional areas: 1) obesity and 2) metabolic liver diseases, both of which represent large and growing patient populations. Those programs add further depth to the pipeline Merck is acquiring, giving the company potential upside across multiple therapeutic categories rather than depending entirely on a single drug candidate.
A calculated move in a competitive landscape
The decision to pursue Terns fits a broader pattern in the pharmaceutical industry, where large companies with aging portfolios are increasingly turning to acquisitions as the most efficient path to restoring pipeline strength. For Merck, the math is straightforward — the revenue at risk from Keytruda’s patent expiration is too significant to address through internal research and development alone, particularly within the timeframe available.
Chairman and Chief Executive Officer Robert M. Davis has been vocal about the company’s commitment to business development as a core part of Merck’s strategy going forward. The Terns acquisition represents one of the more significant expressions of that commitment, combining a near-term leukemia catalyst with longer-range opportunities in metabolic disease.
What comes next
The deal still requires regulatory approval and the satisfaction of other standard closing conditions before it is finalized. In the meantime, Terns will continue advancing its clinical programs, with the leukemia drug serving as the most closely watched asset for investors and analysts tracking the transaction.
If the leukemia treatment performs as hoped in later-stage trials, it could give Merck a meaningful new revenue contributor well before the Keytruda patent window fully closes — a timeline that makes the $5.7 billion price tag look far more manageable against the backdrop of what is at stake.
Source: citybiz