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Merck races to rebuild its drug portfolio before Keytruda's patent expires

Merck races to rebuild its drug portfolio before Keytruda's patent expires

Money Moves

Three multibillion-dollar acquisitions in under a year signal the scale of Merck's challenge — and its willingness to spend to survive it

March 25th, 2026: Merck agrees to buy Terns Pharmaceuticals for $6.7 billion

Overview

Keytruda, the world's best-selling drug, generated $31.7 billion for Merck in 2025 — roughly 40% of the company's total revenue. Its key U.S. patents expire in 2028, and when they do, cheaper copies will enter the market and that revenue will begin to evaporate. Merck has now spent over $25 billion on three acquisitions in nine months to build the portfolio that will need to replace it.

The latest move, a $6.7 billion deal for Terns Pharmaceuticals announced March 25, gives Merck an experimental leukemia pill that analysts believe could eventually rival Novartis's Scemblix, which is on track to become a multibillion-dollar franchise. Combined with a $10 billion buy for respiratory drugmaker Verona Pharma and a $9.2 billion deal for flu-drug developer Cidara Therapeutics, Merck is executing one of the most aggressive pipeline-rebuilding campaigns in pharmaceutical history — a direct response to what may be the largest single-drug patent cliff the industry has ever faced.

Why it matters

Keytruda's $31.7 billion in annual revenue disappears starting in 2028, forcing the world's largest drugmaker to essentially reinvent itself through acquisitions.

Play on this story Voices Debate Who Said What? Predict

Key Indicators

$31.7B
Keytruda 2025 revenue
The single drug that accounts for roughly 40% of Merck's total sales, all of it at risk when patents expire in 2028
$25.9B
Spent on three acquisitions since July 2025
Verona Pharma ($10B), Cidara Therapeutics ($9.2B), and now Terns Pharmaceuticals ($6.7B)
74%
TERN-701 major molecular response rate
In early clinical trials, 74% of heavily pretreated leukemia patients achieved major molecular response by 24 weeks
$300B+
Industry-wide revenue at risk by 2030
Nearly 200 drugs across the pharmaceutical industry will lose patent protection between 2025 and 2030

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People Involved

Robert M. Davis
Robert M. Davis
Leading Merck's patent-cliff strategy
 Amy Burroughs
Amy Burroughs
Leading Terns through acquisition by Merck

Organizations Involved

Merck & Co.
Merck & Co.
Pharmaceutical Company
Acquirer — executing multiyear pipeline-rebuilding strategy

One of the world's largest pharmaceutical companies, headquartered in Rahway, New Jersey, facing the industry's most consequential single-drug patent cliff.
Terns Pharmaceuticals, Inc.
Terns Pharmaceuticals, Inc.
Clinical-Stage Biopharmaceutical Company
Being acquired by Merck

A clinical-stage biotech founded in 2017 to treat liver disease, which pivoted to oncology in 2024 and developed TERN-701, an experimental leukemia drug now at the center of a $6.7 billion acquisition.
Novartis Pharmaceuticals
Novartis Pharmaceuticals
Pharmaceutical Company
Incumbent competitor in CML market with Scemblix

The Swiss pharmaceutical giant whose leukemia drug Scemblix is the current market leader that TERN-701 is designed to challenge.

Timeline

  1. Merck agrees to buy Terns Pharmaceuticals for $6.7 billion

    Acquisition

    Merck announces its third multibillion-dollar acquisition in nine months, paying $53 per share for Terns — a 31% premium to its 60-day average — to gain TERN-701 for its oncology pipeline. The deal is expected to close in the second quarter of 2026.

  2. Merck announces $3 billion cost-cutting plan

    Corporate

    Alongside its acquisition spree, Merck launches a $3 billion cost-reduction initiative to prepare for the Keytruda revenue decline.

  3. TERN-701 data impresses at ASH meeting

    Clinical

    Terns presents Phase 1 results at the American Society of Hematology annual meeting showing a 74% major molecular response rate in heavily pretreated leukemia patients, drawing significant investor and industry attention.

  4. Merck acquires Cidara Therapeutics for $9.2 billion

    Acquisition

    Merck's second major deal targets Cidara's experimental long-acting flu antiviral, paying a 109% premium over Cidara's stock price.

  5. Merck acquires Verona Pharma for $10 billion

    Acquisition

    Merck signs its first major patent-cliff deal, buying UK-based Verona Pharma and its newly approved lung disease drug Ohtuvayre for $10 billion.

  6. TERN-701 enters dose expansion

    Clinical

    Terns begins the dose expansion portion of the CARDINAL trial, randomizing patients to 320 mg or 500 mg daily dose cohorts.

  7. TERN-701 completes dose escalation with no toxicity limits

    Clinical

    The Phase 1 dose escalation portion of the CARDINAL trial finishes with no dose-limiting toxicities observed at doses up to 500 mg daily.

  8. Terns pivots to oncology under new CEO

    Corporate

    Amy Burroughs takes over as CEO and redirects Terns toward its TERN-701 leukemia program, abandoning the original liver disease focus.

  9. Terns Pharmaceuticals founded

    Corporate

    Weidong Zhong founds Terns with $30 million in Series A funding from Lilly Asia Ventures, initially focused on metabolic liver disease.

Scenarios

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1

TERN-701 succeeds in later trials, becomes a multibillion-dollar franchise

If TERN-701's strong early-stage results hold up in larger Phase 2/3 trials, it could win approval by 2029 or 2030 and become a meaningful revenue contributor as Keytruda declines. Analysts see peak sales potential in the multibillion-dollar range, especially if it demonstrates superiority over Scemblix in head-to-head comparisons. This is the scenario Merck is betting $6.7 billion on.

Discussed by: Wall Street analysts covering the CML market; STAT News and BioPharma Dive have highlighted the drug's potential to rival Novartis's Scemblix
Consensus —
2

Merck's acquisition spree successfully 'flattens the cliff'

The combined portfolio — Terns (oncology), Verona Pharma (respiratory), Cidara (antivirals), the subcutaneous Keytruda reformulation, and Merck's existing pipeline — collectively replaces enough Keytruda revenue to keep the company growing through the early 2030s. This requires multiple bets to pay off simultaneously, which is rare but not unprecedented in pharma.

Discussed by: Merck management (citing $70B in pipeline opportunities by mid-2030s); financial analysts at JP Morgan and other banks tracking Merck's diversification strategy
Consensus —
3

Clinical setbacks leave Merck exposed as Keytruda revenue falls

TERN-701 or other acquired assets fail in later-stage trials, as roughly 90% of drugs in early clinical development historically do. Merck would then face the Keytruda cliff with billions spent on acquisitions that didn't deliver, potentially forcing deeper cost cuts, further deals at less favorable terms, or a prolonged revenue decline. Bristol-Myers Squibb's post-Celgene integration struggles offer a cautionary template.

Discussed by: Bearish analysts and industry observers who note that most early-stage drugs fail; Pharmaceutical Commerce and DeepCeutix have cautioned about the risks of patent-cliff M&A strategies
Consensus —
4

Novartis defends CML dominance, limiting TERN-701's market

Even if TERN-701 wins approval, Novartis's Scemblix has a multi-year head start and established relationships with prescribing oncologists. If Scemblix continues to grow and TERN-701 shows only incremental improvements rather than clear superiority, the leukemia drug may capture a smaller market share than Merck needs to justify its $6.7 billion price tag.

Discussed by: Novartis management; oncology market analysts noting Scemblix's 87% growth rate and established physician adoption
Consensus —

Historical Context

Pfizer's acquisition of Seagen (2023)

March-December 2023

What Happened

Facing the loss of $17 billion in annual revenue from expiring patents by 2030, Pfizer paid $43 billion to acquire Seagen, an antibody-drug conjugate specialist, in the largest pharmaceutical acquisition in years. The deal doubled Pfizer's oncology pipeline to 60 programs overnight.

Outcome

Short Term

Pfizer took on significant debt and faced integration challenges, with investors initially punishing the stock over the price tag and execution risk.

Long Term

The deal reshaped Pfizer's identity from a COVID-era vaccine company back toward oncology, though the full revenue impact of the acquired pipeline won't be clear until the late 2020s.

Why It's Relevant Today

Merck's current strategy directly mirrors Pfizer's playbook: spend aggressively on acquisitions before the patent cliff hits, betting that new drug revenue will ramp up as legacy revenue declines. The question is whether Merck's more diversified approach — multiple mid-sized deals rather than one mega-deal — reduces or compounds the risk.

AbbVie's acquisition of Allergan (2019-2020)

June 2019 - May 2020

What Happened

With its $20 billion-per-year blockbuster Humira facing U.S. patent expiration in 2023 (57% of total revenue), AbbVie paid $63 billion for Allergan, gaining Botox and a broader aesthetics portfolio. At the time, it was the largest pharmaceutical deal in a decade.

Outcome

Short Term

AbbVie nearly doubled its revenue base and reduced dependence on Humira from 57% to roughly 35% of total sales.

Long Term

When Humira biosimilars launched in 2023, AbbVie weathered the decline better than many analysts expected, with Allergan-derived products and new immunology drugs partially offsetting the losses. The company's stock recovered after an initial post-cliff dip.

Why It's Relevant Today

AbbVie's experience is the closest template for what Merck is attempting. Both companies face the loss of a dominant franchise that generated an outsized share of revenue. AbbVie's relative success suggests the strategy can work — but Merck's Keytruda cliff is roughly 50% larger in absolute dollar terms.

Novartis transforms CML treatment with Gleevec (2001)

May 2001

What Happened

The Food and Drug Administration approved Gleevec (imatinib), the first targeted therapy for chronic myeloid leukemia, developed by Novartis researcher Brian Druker. The drug turned CML from a near-certain death sentence into a manageable chronic condition, achieving complete remission in the majority of patients.

Outcome

Short Term

Gleevec became a $4.7 billion-per-year blockbuster and established Novartis as the dominant player in CML treatment.

Long Term

Gleevec spawned an entire class of tyrosine kinase inhibitors, but many patients eventually developed resistance. Novartis stayed ahead with next-generation drugs, most recently Scemblix (2021), which targets resistant forms of the disease.

Why It's Relevant Today

TERN-701 is designed to challenge the treatment paradigm that Novartis has controlled for 25 years. The drug targets the same protein pocket as Scemblix but aims for better efficacy against resistant mutations — the same evolutionary dynamic that drove each previous generation of CML drugs.

Sources

(11)
+5
Merck & Co. CNBC STAT News Fierce Biotech BioSpace BioPharma Dive Blood (American Society of Hematology) PharmaVoice STAT News CNBC Merck & Co.