During its Q1 2026 earnings call, Merck & Co. executives detailed the strategic rationale behind the acquisition of Terns Pharmaceuticals, highlighting a disciplined approach to oncology and hematology business development.
1. A Disciplined M&A Approach
Merck acquired Terns for $53 per share ($6.7 billion) in March 2026, following a competitive bidding war. Filings reveal the final price dropped after Merck’s scientific team conducted a deep dive into the latest clinical data for TERN-701.
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The Valuation Shift: While initial data suggested a 74% Major Molecular Response (MMR) rate for the CML treatment, Merck’s internal analysis predicted a more conservative rate above 50% when aligned with regulatory standards.
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Strategic Saving: This data-driven reassessment allowed Merck to secure the deal at a price approximately $1 billion lower than earlier unsolicited offers.
2. TERN-701: A “Compelling” Clinical Advancement
Despite the more conservative analysis, Merck research chief Dean Li maintains that TERN-701 remains a significant leap forward:
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Outperforming Competitors: An MMR rate north of 50% is highly competitive compared to the 25% rate seen with Novartis’ Scemblix in similar patient populations at 24 weeks.
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Clinical Utility: Merck views TERN-701 as a potential “step change” in chronic myeloid leukemia care, offering patients a more effective therapeutic option.
3. Diversifying the Post-Keytruda Portfolio
As Keytruda nears its patent cliff, Merck is pivoting away from reliance on a single blockbuster toward a multi-product growth strategy. Key pillars of this transition include:
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Winrevair: A fast-growing therapy for pulmonary arterial hypertension.
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Welireg: Expanding Merck’s footprint in specialized oncology.
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Idvynso: A newly approved oral HIV medication.
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Enlicitide: An experimental cholesterol-lowering drug.
Conclusion
The Terns acquisition demonstrates Merck’s commitment to “disciplined business development” where compelling science and shareholder value align. By prioritizing patient-level data over trial abstracts, Merck has bolstered its hematology pipeline with a high-potential asset while maintaining financial rigor in an increasingly competitive M&A landscape.