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Big pharma's debt-funded biotech buying spree

Big pharma's debt-funded biotech buying spree

Money Moves

Merck, Pfizer, and rivals tap bond markets to refill pipelines as major patents expire

May 18th, 2026: Merck launches seven-tranche bond sale

Overview

Updated May 18

Merck borrowed billions in the investment-grade bond market on Monday. The cash refinances its $6.7 billion all-cash purchase of Terns Pharmaceuticals, a small California biotech the company closed on two weeks ago.

The deal fits a larger pattern. Big pharma is racing to replace blockbusters about to lose patent protection, and bond markets are bankrolling the shopping list.

Why it matters

Big pharma is buying biotechs to replace expiring blockbusters, with bond markets funding the bill so long as borrowing stays cheap.

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Key Indicators

$6.7B
Terns acquisition price
All-cash deal Merck closed via tender offer on May 4, 2026.
7
Bond tranches in sale
Maturities laddered across short, intermediate, and 30-year debt.
+105 bps
30-year spread over Treasuries
Roughly 1.05 percentage points above the comparable U.S. Treasury yield at launch.
$29.5B
Keytruda 2024 revenue
Merck's cancer drug accounts for nearly half of company sales and loses U.S. exclusivity in 2028.
Breakthrough
FDA designation for TERN-701
Status that lets the FDA fast-track review based on early-stage efficacy data.

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People Involved

Robert M. Davis
Robert M. Davis
Chairman and Chief Executive, Merck & Co.
Executing pipeline strategy to offset Keytruda's 2028 U.S. patent loss
 Amy Burroughs
Amy Burroughs
Former Chief Executive, Terns Pharmaceuticals
Departed after acquisition closed May 4, 2026
 Caroline Litchfield
Caroline Litchfield
Chief Financial Officer, Merck & Co.
Oversaw seven-tranche bond sale

Organizations Involved

Merck & Co.
Merck & Co.
Pharmaceutical company
Active acquirer, refinancing biotech purchases in debt markets

American drugmaker whose business depends on cancer immunotherapy Keytruda, which loses U.S. patent exclusivity in 2028.
Terns Pharmaceuticals, Inc.
Terns Pharmaceuticals, Inc.
Clinical-stage biotech
Acquired by Merck on May 4, 2026

Foster City, California biotech developing oral small-molecule drugs, most notably TERN-701 for chronic myeloid leukemia.
U.S. Food and Drug Administration
U.S. Food and Drug Administration
Federal regulatory agency
Granted Breakthrough Therapy Designation to TERN-701

U.S. agency that approves drugs for sale and assigns Breakthrough Therapy Designation, a status that speeds review for drugs showing strong early-stage results.

Timeline

March 2023 May 2026

9 events Latest: May 18th, 2026 · 4 months ago
Tap a bar to jump to that date

  1. Merck launches seven-tranche bond sale

    Latest Financing

    Merck markets investment-grade bonds across seven maturities, with the 30-year tranche priced around 105 basis points over Treasuries.

  2. Terns tender offer closes

    Acquisition

    Merck completes the cash tender offer and Terns becomes a wholly owned subsidiary.

  3. Merck announces Terns acquisition

    Acquisition

    Merck agrees to buy Terns Pharmaceuticals for $6.7 billion in cash, citing TERN-701's Breakthrough Therapy Designation.

  4. TERN-701 mid-stage data released

    Clinical

    Terns reports positive Phase 1 data for its oral BCR-ABL inhibitor in chronic myeloid leukemia patients.

  5. Merck closes $1.3B Eyebiotech deal

    Acquisition

    Merck adds an experimental retinal disease platform through a small bolt-on purchase.

  6. Bristol-Myers buys Karuna for $14B

    Acquisition

    Bristol-Myers Squibb agrees to acquire Karuna Therapeutics, gaining a novel schizophrenia drug.

  7. AbbVie agrees to buy ImmunoGen for $10.1B

    Acquisition

    AbbVie acquires ImmunoGen to add an approved ovarian cancer drug to its pipeline.

  8. Merck closes $10.8B Prometheus deal

    Acquisition

    Merck completes its tender offer for Prometheus Biosciences, gaining an experimental drug for inflammatory bowel disease.

  9. Pfizer announces $43B Seagen acquisition

    Acquisition

    Pfizer agrees to buy cancer biotech Seagen for $43 billion, the largest pharma deal since Bristol-Myers bought Celgene in 2019.

Scenarios

1

Pharma deal pace stays hot through 2026

Likely Resolves by End of 2026

Discussed by: Bloomberg, Evaluate Vantage, BMO Capital Markets analysts

Big pharma extends the buying spree. With borrowing rates still manageable for single-A credits and patent cliffs looming for Keytruda, Eliquis, and Stelara, Merck, Pfizer, Bristol-Myers, and AbbVie complete a string of bolt-on deals through year-end. Most are between $1B and $10B, financed in the bond market on terms similar to Merck's seven-tranche sale.

2

Antitrust enforcer challenges a major pharma deal

Possible Resolves by End of 2026

Discussed by: Reuters, STAT News, Federal Trade Commission watchers

The Federal Trade Commission or Department of Justice formally challenges a pharma acquisition valued above $5 billion. The agencies have signaled concern about consolidation in oncology, immunology, and rare disease. A formal complaint or consent decree would slow deal pace and force buyers to divest assets or pay break fees.

3

A pharma mega-deal lands above $30B

Uncertain Resolves by End of 2026

Discussed by: Wall Street Journal, Financial Times, JPMorgan healthcare M&A team

One large pharma company announces an acquisition of a biotech or mid-cap drugmaker valued above $30 billion. Candidates analysts have named include Vertex, Moderna, BioMarin, and Alnylam. A deal of that size would mark a step up from the bolt-on pattern and could trigger faster consolidation.

4

Higher rates chill the M&A wave

Unlikely Resolves by Jan 31, 2027

Discussed by: Moody's, S&P Global Ratings, Goldman Sachs healthcare desk

Yields on long-dated investment-grade debt rise enough to make the cash-and-debt acquisition model less attractive. Pharma issuers either delay deals or shift to stock-funded transactions. Total pharma M&A volume in the second half of 2026 falls below the same period in 2025.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

February 2000

Pfizer–Warner-Lambert (2000)

Pfizer paid $90 billion in stock for Warner-Lambert, primarily to take full control of Lipitor, the cholesterol drug they had been co-marketing. At the time it was the second-largest corporate merger in U.S. history.

Then

Pfizer became the largest pharmaceutical company in the world and Lipitor went on to generate more than $125 billion in lifetime sales.

Now

When Lipitor lost U.S. patent protection in 2011, Pfizer's revenue dropped sharply. The company has been buying its way back to growth ever since.

Why this matters now

The Lipitor cycle is the template for the current wave: a single blockbuster carries a company for a decade, then patent expiration forces a buying spree to replace it. Merck is now in Pfizer's 2010 position with Keytruda.

November 2009

Merck–Schering-Plough (2009)

Merck paid $41 billion for Schering-Plough in a cash-and-stock deal, motivated by the 2012 patent expiration of asthma drug Singulair and the 2011 loss of cholesterol drug Cozaar. The combined company gained Schering's biologics platform and consumer health business.

Then

Merck absorbed Schering's R&D pipeline, including the drug that would later become Keytruda.

Now

Keytruda, originally a Schering-Plough asset, became the best-selling drug in the world by 2023. The acquisition is now cited as one of the most consequential pharma deals in history.

Why this matters now

The Schering deal shows how a single acquired asset can define a buyer for decades. Merck is now hoping Terns or one of its other bolt-ons can do the same as Keytruda's patent runs out.

November 2019

Bristol-Myers Squibb–Celgene (2019)

Bristol-Myers Squibb paid $74 billion for Celgene, then the largest pharma deal of its era. The combined company took on roughly $32 billion in new debt to fund the cash portion of the transaction.

Then

Bristol-Myers gained Celgene's blockbuster Revlimid for multiple myeloma along with a deeper oncology pipeline.

Now

Revlimid lost patent exclusivity in 2022, and Bristol-Myers has struggled to replace its revenue. The company has since launched its own series of bolt-on acquisitions, including the $14 billion Karuna deal in 2023.

Why this matters now

Bristol-Myers shows that even a $74 billion deal does not necessarily solve the patent cliff problem. The lesson many pharma CFOs have drawn is to buy earlier-stage assets like Terns rather than mature ones like Celgene.

Sources

(3)
Bloomberg Merck & Co. Business Wire