Merck & Co. Touts $6.7B Terns Deal, Highlights TERN-701 “Best-in-Class” CML Potential

Merck agreed to buy Terns for $53 per share, valuing the deal at about $6.7 billion (~$5.7 billion net of cash); the transaction, financed mainly with new debt, is expected to close in the second quarter of 2026 pending tender and regulatory approvals.
The acquisition is built around lead candidate TERN-701, an oral allosteric ABL inhibitor Merck calls potentially “best-in-class” after Phase 1/2 CARDINAL data showed encouraging MMR/DMR rates, faster kinetics and generally low-grade adverse events versus approved TKIs.
Merck expects the deal to be accounted as an asset acquisition and to record an approximately $5.8 billion R&D charge in 2026 with a roughly $0.17 negative EPS impact in the first 12 months, while forecasting multibillion-dollar commercial potential and IP protection into the 2040s.
Merck & Co., Inc. (NYSE:MRK) held an investor event to discuss its planned acquisition of Terns Pharmaceuticals, emphasizing the strategic rationale, clinical data to date for Terns’ lead asset, and the financial terms of the deal.
Deal rationale centers on TERN-701 and Merck’s hematology ambitions
Chief Executive Officer Rob Davis said Merck’s “science-led strategy” includes business development aimed at expanding and diversifying its pipeline, including in oncology. Davis highlighted that Merck has more than 20 anticipated new growth drivers “almost all of which have blockbuster potential,” representing a combined non-risk-adjusted commercial opportunity of more than $70 billion by the mid-2030s.
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Merck’s proposed acquisition of Terns is anchored on Terns’ lead program, TERN-701, an orally available next-generation allosteric tyrosine kinase inhibitor (TKI) being studied in certain patients with chronic myeloid leukemia (CML). Davis and other executives described TERN-701 as potentially “best-in-class,” citing its selectivity and an expected improved therapeutic index compared with currently approved TKIs. Davis also pointed to durability and tolerability limitations with existing CML therapies that can lead to frequent switching, arguing TERN-701 is designed to address remaining unmet needs.
Merck outlines CML landscape and TERN-701’s mechanism
Dean Li, president of Merck Research Laboratories, reviewed the disease and treatment context. He noted that while TKIs have transformed CML into a generally chronic condition, long-term exposure to existing therapies can lead to relapse driven by resistant mutations and increased cumulative intolerance over time. Li cited that as many as 40% of patients treated with active-site TKIs switched therapies within five years, and said that in second-line and later settings the majority of patients do not achieve a deep molecular response.
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Li said TERN-701 is designed to target an allosteric site on the ABL protein—distinct from the active site targeted by traditional TKIs—with the goal of overcoming mutations that occur in the kinase active site and minimizing off-target effects. He said the selectivity observed with TERN-701 could support higher dosing and more complete inhibition, and that the drug has demonstrated preclinical activity against multiple resistance mutations.
Early clinical read-through highlights efficacy signals and tolerability
Merck leaders pointed to results from TERN-701’s ongoing Phase 1/2 CARDINAL study in Philadelphia chromosome-positive CML patients previously treated with at least one TKI. Li said the study has shown “promising activity” with encouraging rates of major molecular response (MMR) and deep molecular response (DMR) observed by week 24, including in patients with high disease burden and those previously treated with multiple TKIs.
Li told investors Merck reviewed “the totality of data” and estimated that, using a more conservative intent-to-treat population, final MMR achievement could be approximately double that of approved TKIs, and DMR could be double to triple that of approved TKIs, including dasatinib. He also said TERN-701 has shown a faster kinetic response to achieving MMR and DMR than approved treatments, which Merck believes supports its potential best-in-class profile.
On safety, Li said no dose-limiting toxicities have been observed to date and that most treatment-emergent adverse events have been low-grade, with a low incidence of serious adverse events based on available data. Merck noted that dose expansion is ongoing to further characterize safety and inform phase III dose selection. In response to a question about lipase elevations, Merck’s Marjorie Green said low-grade lipase elevations have been observed and are consistent with the class, adding that many adverse event signals for TKIs typically emerge in the first six months of exposure.
Li and Green were cautious about providing specific details on future phase III trial design and timelines before Merck closes the transaction, noting any program would be developed in coordination with regulators.
Commercial opportunity and positioning
Jannie Oosthuizen, who leads Merck’s oncology and international business, said CML is a chronic disease often requiring long-term or lifelong treatment and that prevalence has increased as outcomes have improved. Oosthuizen said that across the U.S., key European markets, and Japan, there are estimated to be 18,000 new patients diagnosed with CML each year.
Executives reiterated that Merck believes TERN-701 has multibillion-dollar revenue potential. Oosthuizen said Merck expects the asset could be a meaningful growth driver beginning in the early 2030s and continuing through that decade. When asked about how TERN-701 could take share, Oosthuizen said Merck’s valuation approach primarily assumes new patients starting therapy, with potential for switching opportunities over time depending on data. Executives said depth of response, speed of response, durability, and tolerability would be central to differentiation in the market.
Merck also addressed questions about market access amid generic competition in earlier-generation TKIs. Oosthuizen said Merck does not currently see utilization management affecting access to a product like TERN-701 and expects that differentiated data would support uptake. The company also indicated it expects orphan drug designation for TERN-701 to limit exposure to certain U.S. pricing provisions, based on “current rules.”
Transaction terms, accounting, and expected financial impact
Chief Financial Officer Caroline Litchfield detailed the acquisition terms and expected accounting treatment:
Merck agreed to acquire all outstanding shares of Terns for $53 per share.
Total equity value is approximately $6.7 billion, or about $5.7 billion net of acquired cash, cash equivalents, and marketable securities.
Merck intends to finance the deal primarily through new debt and said it does not expect an impact to its credit rating.
The transaction is expected to close in the second quarter of 2026, subject to tender of a majority of Terns’ shares and regulatory approvals.
Merck expects the transaction to be accounted for as an asset acquisition.
Merck expects to record an approximately $5.8 billion research and development charge in 2026 (about $2.35 per share).
Merck expects a negative EPS impact of approximately $0.17 in the first 12 months, reflecting development investment and assumed financing costs, and said the impact will be reflected in both GAAP and non-GAAP results.
In Q&A, Merck said its valuation was based on TERN-701 and that it expects intellectual property protection to extend into the 2040s.
About Merck & Co., Inc. (NYSE:MRK)
Merck & Co, Inc is a global biopharmaceutical company engaged in the discovery, development, manufacture and marketing of prescription medicines, vaccines, biologic therapies and animal health products. Its portfolio spans multiple therapeutic areas with a particular emphasis on oncology, vaccines and infectious disease, as well as therapies for metabolic and chronic conditions. Among its well-known products are the cancer immunotherapy Keytruda (pembrolizumab) and the human papillomavirus vaccine Gardasil; the company also markets a range of medicines and vaccines for veterinary use through Merck Animal Health.