Merck Preps for End of Keytruda Exclusivity with $6.7B Deal for Leukemia Treatment

One executive’s patent cliff is another executive’s lucrative exit.

German pharmaceutical giant Merck revealed Wednesday that it’s paying $6.7 billion for Terns Pharmaceuticals, as it tries to bridge a multibillion-dollar gap when its bestselling Keytruda comes off patent.

Patent Drop

The key patent protections on Keytruda, a Spielberg-level blockbuster immunotherapy treatment that outsold all other prescription drugs last year, end in 2028. As a result, some $31.7 billion in sales, or nearly half of Merck’s $65 billion total revenue in 2025, is at risk in the next few years.

That one-two punch of federal drug pricing and cheaper knockoff biosimilars defines the potential exposure. But, keen not to end up a relic on the pharmacy shelf, executives have gone on an aggressive shopping spree for new drugs. Last year, Merck earmarked $9.2 billion to acquire Cidara Therapeutics, which is developing a treatment that provides long-lasting passive immunity against the flu. In an even bigger deal, executives spent $10 billion to acquire respiratory drugmaker Verona Pharma. The deal for Terns, which is developing a best-in-class treatment for a type of leukemia in a market worth potentially billions, is seen by some analysts as too good to be true:

• Merck’s offer of $53 per share is only a 6% premium over Terns’ Tuesday closing value, which BMO analysts wrote would make it “one of the best deals the company has made since its spree began.”
• In fact, RBC Capital Markets analysts wrote that it’s such a sweet deal that competitors like AbbVie and Bristol Myers Squibb may look at it and throw their hat in the ring: “We think the premium of only 6% opens the door for competing bids from other potential acquirers.”

Doctor-Tested, Bull-Approved: Pharmatech company DeepCeutix, citing US patent data, estimates over $300 billion in prescription drug revenues will lose patent exclusivity in the run-up to 2030. That’s roughly one-sixth of the pharmaceutical industry’s total revenue. Of the 10 largest firms in the industry, half have more than 50% revenue exposure, prompting an industry-wide M&A bonanza to develop new revenue sources. Investors are so far bullish on the acquisition spree: Merck’s shares are up 35% in the past 12 months, and the State Street SPDR S&P Biotech ETF is up 42%.