Merck just closed on Terns Pharmaceuticals.
It's paying for the deal with debt.
The bond sale is split into seven pieces, with the longest one running 30 years.
The Terns deal totaled $6.7 billion at $53 a share and closed earlier this month. Now Merck is going back to investors to help cover the bill with a bond sale.
The longest piece is a 30-year note. It could pay about 1.05 percentage points more than U.S. Treasury bonds.
That gap is the extra rate investors want to lend to Merck instead of the U.S. government.
Merck also used a short-term loan to bridge the deal. The bond sale pushes that short-term debt out into longer terms while rates are still high.
For Merck, this is the kind of debt big pharma uses to refill its pipeline without touching cash on hand. Investors care less about the size of the loan and more about what Terns brings home.
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Terns came with one main asset, a drug called TERN-701.
TERN-701 is in testing for chronic myeloid leukemia. That's a slow-growing blood cancer.
The drug is built to work where current drugs lose their punch.
The FDA gave it Breakthrough Therapy status. That label speeds up the review timeline.
The drug is still in mid-stage testing in the CARDINAL trial, so a full green light is years out.
Merck closed the tender offer on May 4.
About 9,650 new cases of this cancer turn up each year in the U.S. But patients live with it for decades, which makes the market for these drugs sticky.
The full Terns cost will show up as a $5.8 billion R&D charge in Merck's second-quarter results.
For Merck, this is a piece of insurance.
Keytruda, the firm's biggest cash cow, loses patent shield in 2028. Anything that spreads out the revenue base before that cliff is worth paying for.
The Terns charge will hit earnings per share, the profit Merck makes per share of stock, by about $2.35 in 2026 alone.
The bond sale is also a signal. Big pharma is willing to borrow heavy right now to lock in growth.
That's the case even with rates still well above where they were two years ago.
It tells you how worried the trade is about losing top-line cash once the next round of patents fall.
The bond pricing will show how much hunger there is for long pharma debt. If the 30-year piece comes in tight, Merck saved money.
If the spread widens, the market is pushing back on big pharma's debt load.
The pipeline pivot has a price tag. Merck just put it in writing.
Final pricing on the notes is expected this week.
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