So, here's a classic pharmaceutical industry story: a giant with a cash cow sees the patent cliff on the horizon and starts shopping for its next big thing. This time, it's Merck & Co. Inc. (MRK) reportedly nearing a deal to buy Terns Pharmaceuticals, Inc. (TERN) for about $6 billion in cash, according to a report from the Financial Times. The deal could be wrapped up in a matter of days.
Why the rush? Well, it's all about the money. Merck's blockbuster cancer immunotherapy, Keytruda, is a financial juggernaut, pulling in roughly $30 billion a year and accounting for nearly half of the company's revenue. But that gravy train has a scheduled stop: its U.S. patent protection could start running out as early as 2028. When that happens, cheaper biosimilar competitors can enter the market, and those astronomical sales figures are almost certainly going to take a hit. It's the kind of problem every successful drug company eventually faces, and it explains why Merck's checkbook is out.
Enter Terns Pharma. What does $6 billion buy you these days? In this case, it gets Merck an early-stage treatment for a rare blood cancer called chronic myeloid leukemia, or CML. The drug is still in development, with late-stage trials expected by late 2026 or early 2027. If it succeeds, it could help fill the revenue hole left by Keytruda's decline. There's also a potential competitive angle here: the therapy could one day go up against Scemblix, a leading CML drug from Novartis AG (NVS).
This isn't just a one-off deal for Merck; it's part of a much bigger industry-wide scramble. The pharmaceutical sector is staring down an estimated $320 billion in revenue losses from patent expirations through the end of this decade. Companies are on the hunt for new products to secure future growth, and Merck has been active in that hunt. Its recent shopping list includes acquisitions of Verona Pharma and Cidara Therapeutics, though earlier talks with Revolution Medicines didn't pan out.
Beyond writing checks for other companies, Merck is also trying to get smarter about how it finds new drugs. The company has a partnership with the Mayo Clinic focused on using artificial intelligence to improve drug discovery. It's a two-pronged strategy: buy promising late-stage assets now and invest in tech to find the next generation of therapies.
The market's initial reaction? Terns Pharma's stock jumped over 12% in pre-market trading on the news, while Merck's shares saw a modest uptick. The companies did not immediately respond to requests for comment on the report.
