Terns Pharmaceuticals (NASDAQ:TERN) shares surged in premarket trading after a report indicated that Merck & Company (NYSE:MRK) is close to agreeing a deal to acquire the biotech firm for roughly $6 billion.
According to the Financial Times, the proposed all-cash transaction could be finalized within days and would value Terns at a premium to its current market capitalization of around $5.3 billion, citing people familiar with the matter.
Terns shares rose about 14% in premarket trading by 05:15 ET following the report.
The potential acquisition would represent another step by Merck to strengthen its drug pipeline ahead of the looming patent expiry of its blockbuster cancer treatment Keytruda, which generates roughly $30 billion in annual revenue and may lose exclusivity as early as 2028.
“If confirmed, potential Terns acquisition by Merck would be one of the best deals the company has made since its spree began ahead of the Keytruda LOE (loss of exclusivity),” said Evan David Seigerman, an analyst at BMO Capital Markets, in a note.
“Terns would be a natural fold in to Merck’s existing oncology portfolio, likely allowing the company to provide its expertise in oncology trial design and execution to make the most of TERN-701 in chronic myeloid leukemia (CML) while providing a potential multi-billion dollar revenue opportunity to Merck, in the back half of the decade,” he added.
Merck has stepped up its acquisition activity in recent months as it looks to offset future revenue pressure. Last year the company acquired Verona Pharma for $10 billion and Cidara Therapeutics for $9.2 billion.
Terns’ lead development candidate targets chronic myeloid leukemia (CML), a rare form of blood and bone marrow cancer. The therapy could eventually compete with Scemblix, a treatment marketed by Novartis.