BofA Securities on Merck (MRK): Terns adds to 2025 deals for de-risked drugs 'with growth expected during Keytrude LOE period'

BofA Securities analyst Jason M. Gerberry reiterated a Buy rating and $132.00 price target on Merck (NYSE: MRK)

The analyst commented, "This morning, MRK announced a definite agreement to acquire Terns Pharmaceuticals (TERN) for a total transaction value of ~$6.7bn ($5.7bn net of cash). MRK will take a ($5.8bn)/($2.35 per share) IPR&D charge in 2Q. The lead product is TERN-701 (Ph3 nearly ready), an allosteric modulator (myristate pocket) of BCR-ABL for CML. Merck sees ‘701 as a drug with multi-bn peak sales potential. In our view, the TERN deal adds to a string of 2025 deals (Cidara, Verona) that provide highly de-risked drugs with multi- $bn peak sales, with growth expected sometime during the Keytruda LOE period (2029- 31 range). Consistent with our thesis, MRK looks well positioned to mitigate the Keytruda LOE and potentially even grow through that event based on pending 2026-27 portfolio developments (data catalysts, launches, and M&A) – this is important because the LOE is the primary reason for MRK’s discounted stock multiple. We maintain our Buy rating on commercial and pipeline diversification catalysts a driving re-rating. We do not include the TERN deal in our model, pending 2Q26 deal close."

For an analyst ratings summary and ratings history on Merck click here. For more ratings news on Merck click here.

Shares of Merck closed at $116.37 yesterday.

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