Merck $6.7B Terns Pharma Buy & Lilly’s Loxo Oncology Success

Happy Wednesday. Today brings news of significant movement in the pharmaceutical landscape, with Merck’s acquisition of Terns Pharmaceuticals and the continued ascent of former Loxo Oncology executives within Eli Lilly. These developments signal a strategic reshaping of portfolios as companies navigate patent cliffs and seek innovative oncology treatments.

Merck’s $6.7 Billion Bet on Leukemia Drug TERN-701

Merck, known as MSD outside of the United States and Canada, has announced its intention to acquire Terns Pharmaceuticals for $6.7 billion, a deal valuing Terns at $53 per share. This acquisition is driven largely by Terns’ lead candidate, TERN-701, an investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently in Phase 1/2 development for chronic myeloid leukemia (CML). The deal represents a roughly 31% premium over Terns’ 60-day volume-weighted average stock price as of March 24, 2026, and a 42% premium over the 90-day average. Terns’ stock price has seen a six-fold increase in the past six months, reflecting the potential of TERN-701.

CML is a type of cancer that starts in blood-forming cells of the bone marrow and progresses slowly. TKIs are a mainstay of CML treatment, working by blocking the activity of the BCR-ABL1 protein, which drives the growth of leukemia cells. However, patients can develop resistance to existing TKIs, creating a need for new therapeutic options. TERN-701 is designed to overcome some of these resistance mechanisms, offering a potential “best-in-class” treatment for patients who have failed or are intolerant to prior therapies. The drug is currently being evaluated in the Phase 1/2 CARDINAL trial (NCT06163430) for patients with Philadelphia chromosome-positive (Ph+) CML.

For Merck, this acquisition is a strategic move to bolster its hematology pipeline and diversify its oncology portfolio. The company is preparing for the loss of patent protection for Keytruda, its blockbuster cancer immunotherapy drug, and is actively seeking new revenue streams. Robert M. Davis, chairman and chief executive officer of Merck, emphasized that the acquisition builds on their growing presence in hematology and strengthens their position in oncology.

Loxo Oncology’s Legacy at Eli Lilly

The impact of Eli Lilly’s 2019 acquisition of Loxo Oncology continues to unfold, with former Loxo executives now holding key leadership positions within the pharmaceutical giant. Jacob Van Naarden, formerly Loxo’s chief operating officer, now oversees all of Lilly’s oncology efforts, encompassing both research and development, as well as sales and marketing. He also served as Lilly’s head of business development as of 2025, leading dealmaking for the company, which currently boasts the highest stock market value in the pharmaceutical industry.

Other Loxo alumni in prominent roles at Lilly include Nisha Nanda, who leads the Catalyze360 effort, and David Hyman, Lilly’s chief medical officer. This influx of talent from Loxo has significantly strengthened Lilly’s oncology pipeline and strategic direction. Loxo was known for its focused approach to precision oncology, developing drugs that target specific genetic mutations driving cancer growth. This expertise has been instrumental in shaping Lilly’s oncology strategy.

The Role of Allosteric Inhibition

TERN-701’s mechanism of action – allosteric inhibition – is noteworthy. Traditional TKIs bind to the active site of the BCR-ABL1 protein, directly blocking its activity. Allosteric inhibitors, however, bind to a different site on the protein, inducing a conformational change that indirectly inhibits its function. This approach can potentially overcome resistance mechanisms that arise from mutations in the active site. The CARDINAL trial will be crucial in determining the efficacy and safety of TERN-701 in patients with CML who have developed resistance to other TKIs.

What’s Next for Merck and Lilly?

Merck’s acquisition of Terns is subject to customary closing conditions, including regulatory approvals. Following the acquisition, Merck will integrate TERN-701 into its hematology pipeline and continue the Phase 1/2 CARDINAL trial. The company will also likely explore combination therapies involving TERN-701 and other cancer treatments. For Lilly, the continued leadership of former Loxo executives suggests a sustained focus on precision oncology and innovative drug development. The company is expected to continue pursuing strategic acquisitions and partnerships to expand its oncology portfolio. The success of these strategies will be critical in maintaining their competitive edge in the rapidly evolving pharmaceutical industry.

The investor call hosted by Merck at 8 a.m. EDT today will provide further insights into the company’s plans for Terns and TERN-701. Analysts and investors will be keen to understand the potential market opportunity for the drug and the expected timeline for its approval and launch.