Merck buying Terns in $6.7B deal to bolster its cancer portfolio before key Keytruda patent expires

Merck is buying oncology company Terns Pharmaceuticals in a deal valued at approximately $6.7 billion as the pharmaceutical giant works on beefing up its cancer portfolio before a key patent on its cancer drug Keytruda expires in two years.

Merck received accelerated approval for Keytruda from the Food and Drug Administration in September 2014 to treat advanced or unresectable melanoma. The drug has since been approved to treat more than 15 types of cancers and has been a key contributor to Merck's revenue.

Terns of Foster City, California, is currently developing a drug to treat certain patients with chronic myeloid leukemia, which is a slow growing type of blood cancer that leads to an overproduction of white blood cells that accumulate in the blood and bone marrow, disrupting the production of healthy blood cells.

A Merck subsidiary will pay $53 per share in cash for each Terns share.

Terns' stock rose more than 5% in early trading Wednesday. Merck shares were up less than 1%.

Both companies' boards have approved the transaction, which is expected to close in the second quarter. The deal is subject to a majority of Terns' stockholders tendering their shares in a tender offer that will be initiated by a Merck subsidiary.

Rahway, New Jersey-based Merck said it will book a charge of about $5.8 billion, or approximately $2.35 per share, related to the acquisition in its second-quarter and full-year results.

Last year Merck announced that it was buying Verona Pharma, a company that focuses on respiratory diseases, in an approximately $10 billion deal.