Merck to buy mid-cap biotech Terns, but William Blair thinks the price tag is low

Pharmaceutical giant Merck, known outside of the U.S. and Canada as MSD, has agreed to acquire mid-cap drug developer Terns Pharmaceuticals, which focuses on treatments for cancer and obesity. Following the news, shares of the mid cap rose less than 6% on Wednesday. The price tag is low “considering the startlingly good data Terns put out for its chronic myeloid leukemia treatment,” William Blair analyst Andy Hsieh says.

Merck agreed to acquire Terns Pharmaceuticals for $6.7 billion, or $53 per share, the companies said on Wednesday. The proposed price implies a 6% premium versus Terns’ closing price on Tuesday (the day before the deal was announced).

Merck, through a subsidiary, plans to acquire all outstanding Terns shares via a tender offer. The parties expect to complete the merger, which has already been approved by the boards of both companies, in the second quarter of 2026. As a result of the deal, the mid-cap company will gain access to Merck’s resources, the companies said in a press release.

For the pharmaceutical giant, the acquisition will expand its hematology portfolio through TERN-701, a Terns-developed treatment for chronic myeloid leukemia, a slow-progressing blood cancer, according to the press release. This is particularly relevant given the upcoming patent expiration for Keytruda, which accounted for nearly 49% of Merck’s revenue in 2025, the Investor’s Business Daily notes.

On Wednesday, shares of Terns rose 5.70% to $52.90 apiece, a new all-time high. In premarket trading on Thursday, the stock has slipped 0.10% as of this writing. Shares of Merck rose 2.6% on Wednesday to $119.40 apiece.

The price tag is low “considering the startlingly good data Terns put out for its chronic myeloid leukemia treatment, TERN-701,” William Blair analyst Andy Hsieh said, as cited by the Investor’s Business Daily.

In early November, Terns published phase I clinical data for TERN-701 in patients who had previously received treatment that proved ineffective. The mid-cap company’s drug was at least twice as effective as comparable therapies, including asciminib (brand name Scemblix) from Swiss pharmaceutical giant Novartis, Freedom Broker wrote.

“The compound has demonstrated unequivocal improvement in both efficacy and safety while concurrently providing patients with better convenience of daily dosing with no food effect,” Hsieh said in a report. “As a result, it is our opinion that TERN-701 is well positioned to disrupt the treatment paradigm of CML, and challenge the dominance of Novartis' Scemblix franchise.”

Markets reacted to the phase I data as a breakthrough, Freedom Broker wrote. On the day of the publication, November 3, shares of Terns surged nearly 70%, and investment banks Mizuho, Barclays, and Truist promptly raised their target prices.

Since November 3, shares of the mid-cap company have gained 540%. As of the end of the fourth quarter, Terns ranked second among the most popular small-cap stocks held by hedge funds.

Hsieh believes Merck’s offer does not fully reflect the potential of the drug and does not rule out the emergence of another bidder with more attractive terms.

Overall, the company’s shares have seven “buy” ratings versus three “hold” ratings from Wall Street analysts. The average target price of $55.25 per share is about 5% above the last close.