Pharmaceutical Giant Merck Acquires Cancer Drug Company for $6.7 Billion

Merck has announced plans to purchase Terns Pharmaceuticals for approximately $6.7 billion in cash as the company strengthens its cancer treatment offerings. The acquisition comes as Merck faces the upcoming expiration of patent protection for its blockbuster cancer drug Keytruda in two years.

Pharmaceutical giant Merck has announced its intention to acquire Terns Pharmaceuticals for roughly $6.7 billion as the company strengthens its oncology division ahead of losing patent protection on its major cancer treatment Keytruda within the next two years.

The Food and Drug Administration granted accelerated approval to Keytruda in September 2014 for treating advanced melanoma that cannot be surgically removed. Since then, the medication has received approval for treating over 15 different cancer types and has become a major revenue source for Merck.

The California-based Terns, headquartered in Foster City, is working on developing a treatment for specific patients diagnosed with chronic myeloid leukemia. This particular blood cancer grows slowly and causes excessive white blood cell production that builds up in blood and bone marrow, interfering with normal blood cell creation.

Under the agreement, a Merck subsidiary will purchase each Terns share for $53 in cash.

Trading on Wednesday morning showed Terns stock climbing more than 5%, while Merck shares increased by less than 1%.

The boards of both companies have given their approval to the transaction, with completion anticipated during the second quarter. Final approval requires a majority of Terns shareholders to accept the tender offer that will be launched by Merck’s subsidiary.

The New Jersey-based Merck, located in Rahway, announced it will record a charge of roughly $5.8 billion, equivalent to about $2.35 per share, in connection with this purchase in both its second-quarter and annual financial reports.

This acquisition follows Merck’s announcement last year of its plan to purchase respiratory disease specialist Verona Pharma in a deal worth approximately $10 billion.