Merck's $53.00 Tender Offer for Terns Pharmaceuticals (TERN): What Investors Need to Know

Deal Overview

Merck Sharp & Dohme LLC, through its wholly owned subsidiary Thailand Merger Sub, Inc., has agreed to acquire all outstanding shares of Terns Pharmaceuticals (NASDAQ: TERN) at $53.00 per share in cash. The total equity value is approximately $6.7 billion, or roughly $5.7 billion net of acquired cash.

The deal centers on TERN-701, an investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor in Phase 1/2 development for chronic myeloid leukemia (CML). For Merck, this is the third multibillion-dollar acquisition in the past year as the company builds out its pipeline ahead of Keytruda's patent cliff in 2028.

The tender offer has not yet formally commenced. All four SEC filings to date — two SC 14D-9C filings from Terns and two SC TO-C filings from the Merck side — are preliminary communications only.

Key Terms

Premium and Market Context

The $53.00 offer price represents a 31% premium to Terns' 60-day volume-weighted average stock price and a 42% premium to the 90-day VWAP, both measured as of March 24, 2026. Terns' 52-week range spans from $2.00 to $53.17, reflecting the stock's dramatic run-up over the past year as TERN-701 clinical data emerged.

At the current price of $53.01, the stock is trading marginally above the offer price. The spread is functionally zero, meaning the market has almost fully priced in deal completion. Investors buying at current levels are not capturing arbitrage upside — they are simply holding for the closing payment.

What Is TERN-701?

TERN-701 is a highly selective, oral, allosteric inhibitor of the BCR::ABL1 fusion protein that drives CML. Unlike existing tyrosine kinase inhibitors (TKIs) that target the active site, TERN-701 binds to an allosteric pocket, potentially overcoming resistance mutations that limit current therapies.

The Phase 1/2 CARDINAL trial has shown encouraging rates of major molecular response and deep molecular response by week 24, with a favorable safety profile — low-grade adverse events, minimal blood pressure changes, and no dose-limiting toxicities up to the maximum 500mg daily dose. The FDA granted Orphan Drug Designation in March 2024.

For Merck, this fills a gap in hematology-oncology at a time when the company needs new growth drivers. Keytruda generated over $25 billion in 2025 revenue, and its core U.S. patent protections begin expiring in 2028.

Timeline

Deal Structure: Tender Offer Plus Short-Form Merger

This is a two-step acquisition. First, Merck's subsidiary (Thailand Merger Sub) will launch a tender offer for all outstanding Terns shares. If enough shares are tendered to satisfy the minimum condition — a majority of all outstanding shares — Merck will accept them and proceed to the second step.

The second step is a back-end merger under Section 251(h) of the Delaware General Corporation Law. This provision allows Merck to complete the merger without a separate shareholder vote, provided the tender offer results in Merck holding enough shares to approve the merger. After the merger, any shares not tendered will be automatically converted into the right to receive $53.00 per share in cash.

The practical takeaway: if you hold TERN shares and do not tender, you will still receive the same $53.00 per share through the merger. There is no penalty for not tendering, though tendering gets you paid sooner.

Risks

• Regulatory risk. The deal requires HSR antitrust clearance. Because Terns is a clinical-stage company with no commercial products competing with Merck's portfolio, antitrust risk appears low — but clearance is still a gating condition.
• Minimum tender condition. If fewer than a majority of outstanding shares are tendered, Merck is not obligated to complete the offer. Given the stock is trading at the offer price, this risk is minimal.
• Deal termination. Either party could terminate the agreement under certain conditions, including a superior proposal, a change in board recommendation, or failure to satisfy closing conditions. Competing offers could emerge, though the filings note this as a generic risk factor rather than an imminent concern.
• Timeline uncertainty. The formal tender offer has not yet commenced. Until the Schedule TO is filed, there is no firm expiration date. Delays in regulatory clearance could push the closing beyond Q2 2026.

Tax Treatment

This is an all-cash acquisition, making it a fully taxable event for U.S. shareholders. When you receive the $53.00 per share — whether through the tender offer or the back-end merger — you will generally recognize a capital gain or loss equal to the difference between $53.00 and your adjusted cost basis.

Shares held for more than one year qualify for long-term capital gains rates (0%, 15%, or 20% depending on income, plus the 3.8% net investment income tax if applicable). Shares held for one year or less are taxed at ordinary income rates. Non-U.S. shareholders should review withholding tax implications. Consult a tax advisor for guidance specific to your situation.

What Investors Should Do

With the stock at $53.01 and the offer at $53.00, there is no arbitrage spread to capture. The market has priced in completion.

If you already own TERN shares, the decision is straightforward: hold for the tender offer or the back-end merger, and collect your $53.00 per share. Tendering when the formal offer launches will get you paid faster than waiting for the merger.

If you do not own shares, there is no spread-driven reason to buy at current levels. The only scenario where buying makes sense is if you believe a competing bid could emerge above $53.00 — and there is no indication of that in the filings.

The key document to watch is the Schedule TO filing, which will officially commence the tender offer, set the expiration date, and contain the definitive terms. Until then, this is a signed deal awaiting formal launch.

This analysis is based on SEC filings and the joint press release dated March 25, 2026. It is for informational purposes only and does not constitute investment advice.