Merck Bolsters Cancer Pipeline with $6.7B Terns Buyout

Merck & Co. has agreed to acquire Terns Pharmaceuticals for approximately $6.7 billion, the companies said today, in a deal designed to bolster the buyer’s cancer pipeline with that of Terns—led by an oral tyrosine kinase inhibitor (TKI) in an early-phase clinical trial for a form of chronic myeloid leukemia (CML). Terns’ lead and sole clinical candidate, TERN-701, is an allosteric break point cluster region–Abelson murine leukemia viral oncogene homolog 1 tyrosine kinase inhibitor (BCR::ABL1 TKI) designed to target the ABL myristoyl pocket, a mechanism of action that differs from that of traditional TKIs. TERN-701 is being assessed in the Phase I/II CARDINAL trial (NCT06163430) for patients with Philadelphia chromosome-positive (Ph+), chronic phase chronic myeloid leukemia (CML) previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response, or treatment intolerance. TERN-701 was granted the FDA’s Orphan Drug Designation for the treatment of CML in 2024. “The acquisition of Terns builds on our growing presence in hematology with TERN-701, a potential best-in-class candidate for the treatment of certain patients with chronic myeloid leukemia,” Merck chairman and CEO Robert M. Davis said in a statement. “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.” Like other pharma giants, Merck is scrambling to recoup the billions of dollars in revenue it will lose as three of its aging blockbusters lose patent exclusivity over the next three years—the multi-indication cancer immunotherapy blockbuster Keytruda® (pembrolizumab), the human papillomavirus vaccine Gardasil®, and Lynparza® (olaparib), co-marketed with AstraZeneca for some forms of ovarian, breast, pancreatic, and prostate cancer. “In addition to meaningfully closing the gap left by Keytruda’s upcoming loss of exclusivity (LoE), we believe TERN-701 could be an important anchor for Merck’s growing hematology-oncology portfolio,” commented Andrew Berens, MD, senior managing director, targeted oncology and a senior research analyst with Leerink Partners, in a research note this morning. “This potential for broader value increases our confidence the deal will materialize, as we do believe Merck will buy near-term commercial revenues alone.” The Terns buyout is a little less expensive than the “multi tens of billions of dollars” level of merger-and-acquisition (M&A) deals that Davis said were of interest to Merck during his appearance at the J.P. Morgan 44th Annual Healthcare Conference in January. Analysts question deal price At $6.7 billion, Berens added, the price was too low since Leerink’s model projects ~$6.2 billion in peak-year revenue for TERN-701: “While the news validates TERN’s significant strategic value and has implications for other CML companies like Enliven [Therapeutics], we do not believe that the price fully reflects our assessment of the full value of TERN-701.” Enliven’s pipeline includes a clinical-phase BCR:ABL TKI candidate also being developed for CML, ELVN-001, which the company expects to advance into Phase III studies later this year. Andy T. Hsieh, PhD, a partner and biotechnology analyst with William Blair, also said Tern was priced too low given its potential to challenge the sales of a leading marketed CML treatment, Novartis’ Scemblix® (asciminib), whose indications include newly diagnosed and previously treated Ph+ CML in chronic phase (CP), as well as Ph+ CML in CP with the T315I mutation. Hsieh noted that in November, Novartis raised its global peak sales guidance for Scemblix from at least $3 billion to at least $4 billion. Scemblix finished 2025 with $1.285 billion in net sales. That’s more than double the $561 million racked up last year by Novartis’ Gleevec®/Glivec® (imatinib), which in 2001 became the first BCR::ABL1 TKI to win FDA approval as a treatment for Ph+ CML. Generic versions of Gleevec have been marketed since 2016. “Given what we view as unprecedented data in chronic myeloid leukemia (CML), we believe Merck’s (MRK $116.37) offer does not fully capture the potential of TERN-701,” Hsieh wrote this morning in a research note that maintained the firm’s “Outperform” rating on Terns shares. “Following this acquisition proposal by Merck, which in our view does not account for the full potential of TERN-701 given the best-in-disease profile, we believe another bidder could emerge with a more attractive offer.” Investors appeared to agree with Hsieh and Berens, as Terns shares traded on NASDAQ rose only 5.7% to $52.83 in early afternoon trading as of 1:20 p.m. ET, much lower than usual for a company being acquired. Merck shares traded on the New York Stock Exchange rose 3% to $119.70 from $116.37 at yesterday’s close. However, Merck would have to pay Terns a $270 million “reverse termination fee” should their agreement be ended by either company in certain circumstances specified in a regulatory filing. Positive early data Merck’s appetite for Terns was whetted by the positive early data generated by TERN-701. In December at the 67th American Society of Hematology (ASH) Annual Meeting and Exposition in Orlando, FL, Terns presented positive oral abstract results showing that in 32 efficacy-evaluable patients, TERN-701 showed a major molecular response (MMR) rate of 75% (24 of 32 patients) by 24 weeks, with 64% (14 of 22 patients) achieving MMR, and all 10 patients (100%) studied maintaining MMR. Within difficult to treat patient subgroups, TERN-701 showed an overall (cumulative) MMR by 24 weeks of 69% (11 of 16 patients) among patients with lack of efficacy to their last TKI; and 60% (6 of 10) among patients who had prior treatment with Scemblix. Also, TERN-701 achieved 67% (8 of 12 patients) MMR among patients with prior treatment with asciminib and Takeda Pharmaceutical’s Iclusig® (ponatinib), plus investigational TKI. “These data further validate the potential of TERN-701 to be a new, game-changing therapy for CM, Terns CEO Amy Burroughs stated at the time. “These emerging data strongly reinforce our conviction that TERN-701 has the potential to be a best-in-disease therapy, with broad opportunity across all CML treatment lines.” In announcing the deal, Terns and Merck also said that most treatment-emergent adverse events were reported as low grade with a low incidence of severe adverse events and discontinuations. No clinically meaningful changes in blood pressure have been seen, and rates of lipase elevation have been low, the companies added. ‘Significant need’ “The first approval of a BCR::ABL1 tyrosine kinase inhibitor 25 years ago transformed the prognosis for many patients with chronic myeloid leukemia,” recalled Dean Y. Li, MD, PhD, president, Merck Research Laboratories, in the company’s statement on agreeing to acquire Terns. “Despite new therapeutic options, there is significant need for innovative, well-tolerated therapies with faster time to onset of molecular response leading to deeper responses and better disease control.” Beyond TERN-701, Terns’ pipeline consists of an undisclosed number of discovery-phase preclinical oncology programs, all with mechanisms of action and indications that have also not been disclosed. At $53 a share cash, Merck’s offer for Terns represents a 6% premium over Tuesday’s closing price of $50 per share. When considered net of cash, the Terns deal value translates to $5.7 billion, equating to a 31% and 42% premium over the 60-day and 90-day volume weighted trading averages for Terns shares, respectively. The acquisition deal has been approved by the boards of Merck and Terns. Through a subsidiary, Merck plans to acquire all of Terns’ outstanding shares through a tender offer, subject to approval by a majority of Terns’ stockholders. The deal is subject to customary conditions that include the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is expected to be accounted for as an asset acquisition and close in the second quarter of 2026. Merck will incur a charge of approximately $5.8 billion, or approximately $2.35 per share, reflecting the terns deal, to be included in both second quarter and full year 2026 GAAP and non-GAAP results. “This acquisition reflects our team’s deep commitment to innovation in oncology and developing high impact medicines,” Burroughs stated today. “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. I am immensely proud of the Terns team and our work towards making a difference for people living with CML.”