Back in March, Merck & Co. Inc. (MRK) agreed to buy Terns Pharmaceuticals Inc. (TERN) for $53 a share in cash. That's about a $6.7 billion deal. It's a big move for Merck as it looks for new drugs to help offset the eventual decline of its blockbuster cancer drug, Keytruda.

But here's the interesting part: Merck originally offered more. According to SEC filings made public on Tuesday, the story of how they got to $53 is a classic tale of deal-making in the biotech world, where a single data point can change everything.

The Price Adjustment

It turns out Merck had submitted a non-binding proposal of $61 per share back in February. Then, they got their hands on some updated clinical data from Terns' ongoing CARDINAL trial for its lead drug, TERN-701, which is being tested for Chronic Myeloid Leukemia (CML).

The filings don't spell out every detail of the new numbers, but they do reveal one key finding: the "MMR achievement rate was lower, potentially due to more patients being pre-treated with asciminib in the evaluable population." Asciminib is a CML drug sold by Novartis AG (NVS) under the brand name Scemblix.

Seeing this, Merck decided the MMR rate for TERN-701 would likely be at the low end of the range Terns management had discussed. So, they came back to the table with a lower offer: $50 per share.

After some back-and-forth, they eventually settled on the final price of $53 per share. It's a significant haircut from the original $61, but Merck apparently still liked what it saw. The filing notes that the company viewed the data as "compelling relative to asciminib and therefore had continued enthusiasm to proceed with a transaction." In other words, the drug still looks good, just not quite as amazing—or as expensive—as it first seemed.

The Competition Walks Away

Merck wasn't the only one looking at Terns. The SEC filing mentions a mysterious "Party C," described as a large pharmaceutical company. This competitor had been in the mix since December 2025, first offering $58 per share, then upping it to $61 per share plus a $9-per-share bonus if TERN-701 won FDA approval.

But Party C got the same updated data Merck did, and they had a very different reaction. They decided the data were "more nuanced than Party C had previously understood and that Party C did not view TERN-701 as sufficiently differentiated or sufficiently de-risked to proceed." So, they pulled out entirely.

This is the gamble of drug development in a nutshell. One company sees nuance and risk and walks away. Another sees a compelling opportunity and stays in the game, just at a lower price. It's a reminder that valuation in biotech is often more art than science, heavily influenced by how each company interprets the same set of facts.

The filing also clarified that the new, lower MMR rate "stayed within Terns' disclosed confidence interval after the ASH Annual Meeting, with no overlap with the asciminib interval." So, while the rate dipped, it was still within the expected range Terns had communicated, and it remained distinct from the results for the Novartis drug.

On Tuesday, as this news broke, Merck's stock was down 2.09% at $118.33, according to market data.