Merck Spends $6.7 Billion on Leukemia Drug in Latest Acquisition Spree
Finn's Take· TL;DR- Merck acquires Terns Pharmaceuticals for $6.7 billion to secure TERN-701, an oral leukemia drug positioned to challenge Novartis' market dominance.
- Third major acquisition in a year reflects urgent need to replace Keytruda revenue ($30B annually) before its 2028 patent expiration.
- Analysts view deal as attractive, with TERN-701 projected to generate $6.2 billion peak annual sales, potentially exceeding acquisition cost.
Pharma Giant Makes Third Massive Deal
Pharmaceutical powerhouse Merck has struck another multibillion-dollar deal, agreeing to acquire biotech firm Terns Pharmaceuticals for $6.7 billion in cash . The acquisition centers on TERN-701, an oral treatment targeting specific mutations linked to chronic myeloid leukemia , positioning Merck to challenge established players in the blood cancer market.
This marks the third multibillion-dollar acquisition for Merck over the past year , following its $9.2 billion purchase of Cidara Therapeutics and $10 billion acquisition of Verona Pharma . The buying spree reflects urgent preparations for the patent expiration of Keytruda in 2028, which generates more than $30 billion in annual sales and accounts for nearly half of Merck's revenue .
Investors responded favorably to the news, with Terns stock trading over 4% higher in premarket trading . The deal values Terns at $53 per share, representing a 6% premium to its Tuesday closing price .
Targeting a Lucrative Leukemia Market
The centerpiece of this acquisition is TERN-701, which could disrupt the chronic myeloid leukemia treatment landscape currently dominated by Novartis with its drugs Scemblix and Gleevec . Results from early-stage trials presented at the American Society of Hematology meeting suggested TERN-701 could threaten Novartis' Scemblix, a medicine expected to generate more than $4 billion in peak yearly sales .
Since the early 2000s, new drugs have turned chronic myeloid leukemia into a condition that can be managed over time . However, as many as 40% of patients treated with current tyrosine kinase inhibitors switch within five years , creating opportunities for more effective treatments.
Some analysts believe Merck secured an attractive price. One analyst described the low purchase premium as a "steal" , while Leerink's model projects approximately $6.2 billion in peak-year revenue for TERN-701 , suggesting the drug's full value may exceed the acquisition cost.
Strategic Pipeline Expansion
Merck CEO Robert Davis emphasized the strategic importance of the deal, stating that Terns' experimental pill will be a "significant driver of growth in the next decade" . These acquisitions have given Merck what Davis recently called the "broadest and widest pipeline" the company has had in years, supporting the goal of reaching $70 billion in annual sales next decade .
Merck remains "opportunistic" in its deal-making approach, with continued interest in oncology, immunology, cardiometabolic health, vaccines and ophthalmology . The company faces the challenge of replacing massive revenue streams as multiple blockbuster drugs lose patent protection over the coming years.
While TERN-701 remains under evaluation in mid-stage clinical trials , Merck's aggressive investment signals confidence in the drug's potential to capture significant market share in the competitive leukemia treatment space. The deal is expected to close in the second quarter , subject to regulatory approvals and shareholder consent.