Can MRK's Ongoing M&A Push Aid Long-Term Growth Ahead of Keytruda LOE?

Merck MRK has been actively pursuing mergers and acquisitions (M&A) to strengthen its pipeline and sustain long-term growth, particularly in oncology and immunology. The company’s recent deals reflect a strategy to diversify its broader portfolio and secure next-generation therapies, while maintaining competitive leadership.

Earlier this week, Merck announced a definitive agreement to acquire California-based cancer biotech, Terns Pharmaceuticals TERN, for $53.00 per share in cash, a total estimated equity value of $6.7 billion.

The acquisition is expected to be closed in the second quarter of 2026, subject to customary closing conditions.

The deal is likely to expand and diversify Merck’s hematology/cancer pipeline by adding Terns’ lead candidate, TERN-701, which is being evaluated in a phase I/II study for treating certain patients with chronic myeloid leukemia (CML).

TERN-701, an investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor, previously received the Orphan Drug designation from the FDA for treating CML. Based on the clinical early data, management believes that, if successfully developed, TERN-701 could offer a differentiated treatment option for certain patients with CML.

The proposed acquisition of Terns underscores Merck’s continued focus on maintaining competitive leadership through external innovation and disciplined capital management. Earlier this year, Merck acquired Cidara Therapeutics for $9.2 billion. The deal added Cidara’s lead pipeline candidate, CD388, a first-in-class long-acting, strain-agnostic antiviral agent, currently being evaluated in late-stage studies for the prevention of seasonal influenza in individuals at higher risk of complications.

Last October, Merck acquired Verona Pharma for around $10 billion, which added the latter’s lead drug Ohtuvayre, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. Ohtuvayre sales are off to a strong start.

Also, in January 2026, Merck was in talks to acquire clinical-stage cancer biotech, Revolution Medicines, but the deal did not materialize.

Merck has struck multi-billion-dollar deals with Chinese biotechs like Hansoh Pharma, LaNova Medicines and Hengrui Pharma in recent times to expand its broader pipeline. Management previously noted that strategic business development remains a key priority for the company.

Importantly, these acquisitions reflect Merck’s ongoing efforts to diversify its business and expand its revenue base, which remains heavily dependent on its blockbuster PD-1 inhibitor, Keytruda. The company expects newer products, such as Ohtuvayre, to support long-term growth and help offset the anticipated revenue gap from Keytruda’s upcoming loss of exclusivity in 2028.

Keytruda, which currently contributes more than half of Merck’s pharmaceutical sales, is expected to face significant biosimilar competition around 2028-2029. Once biosimilars enter, Keytruda’s sales are likely to decline sharply.

Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda.

PD-L1 Inhibitors Competing With Keytruda

Keytruda faces competition from other PD-L1 inhibitors, including Bristol Myers’ BMY Opdivo and AstraZeneca’s AZN Imfinzi.

BMY’s Opdivo, like Keytruda, is approved across multiple cancer types, including lung, melanoma and kidney cancers. Bristol Myers recorded $10.05 billion in Opdivo sales in 2025, up 8% year over year.

AZN’s Imfinzi generated sales of $6.06 billion in 2025, up 28%, driven by demand growth in bladder and liver cancer indications. Imfinzi has strategically expanded its use across multiple cancer indications, strengthening AstraZeneca’s oncology portfolio.

MRK's Price Performance, Valuation and Estimates

Year to date, shares of Merck have increased 13% against the industry’s decline of 3.4%. The stock has also outperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

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From a valuation standpoint, Merck is trading at a premium compared with the industry. Going by the price/earnings ratio, the company’s shares currently trade at 18.27 forward earnings, higher than 16.99 for the industry and its 5-year mean of 12.61.

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The Zacks Consensus Estimate for 2026 earnings per share has decreased from $6.55 to $5.47, while the same for 2027 has declined from $10.07 to $9.89 over the past 60 days.

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MRK’s Zacks Rank

Merck currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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AstraZeneca PLC (AZN): Free Stock Analysis Report

Bristol Myers Squibb Company (BMY): Free Stock Analysis Report

Merck & Co., Inc. (MRK): Free Stock Analysis Report

Terns Pharmaceuticals, Inc. (TERN): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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