Merck announced on Mar. 25 that it will acquire Terns Pharmaceuticals in a deal valued at approximately $6.7 billion, aiming to strengthen its oncology pipeline as the company prepares for the loss of exclusivity on its blockbuster cancer drug Keytruda.
The acquisition is seen as a strategic move by Merck to diversify its portfolio and address future revenue challenges as patent protections for Keytruda are set to expire in 2028, potentially opening the market to biosimilars.
Under the terms of the agreement, Merck will purchase all outstanding shares of Terns at $53 per share, representing a 31% premium over Terns' average stock price in the preceding two months. The boards of both companies have approved the transaction, which is expected to close in the second quarter.
Terns’ main asset is TERN-701, an oral tyrosine kinase inhibitor targeting chronic myeloid leukemia (CML). BMO Capital Markets analysts described it as a “differentiated agent” with strong clinical results in difficult-to-treat patient populations and estimated potential peak sales exceeding $4 billion. "The Terns takeover further diversifies and strengthens our position in oncology as we continue to look for opportunities to broaden our portfolio into other therapeutic areas," said Merck CEO Robert Davis on Wednesday. He also called TERN-701 a “potential best-in-class candidate” for CML.
Phase 1 data from December showed that TERN-701 achieved major molecular response rates up to 75% at 24 weeks with daily dosing tolerability. William Blair analysts described its clinical profile as "unprecedented" and suggested it could challenge Novartis’s Scemblix, which earned $1.285 billion last year after being approved for CML in October 2021.
Some analysts questioned whether Merck's offer fully reflects TERN-701’s value, suggesting other bidders might emerge with higher offers. RBC Capital Markets said acquiring Tern before full dose escalation demonstrates high confidence but leaves room for competing bids from companies like AbbVie or Bristol Myers Squibb.
This acquisition follows several recent deals by Merck aimed at reinforcing both its late-stage pipeline and commercial offerings ahead of anticipated competition from biosimilars after Keytruda's exclusivity ends.
