Merck (NYSE:MRK) is currently considering major acquisitions of biotech companies to diversify its drug portfolio, according to research chief Roger Perlmutter's statement at the annual Goldman Sachs health care conference earlier this month.  

This means that Merck's planned $3.85 acquisition of Idenix Pharmaceuticals for its pipeline of hepatitis C treatments could just be the start of a series of acquisitions aimed to strengthen its portfolio and help it drive revenue.

Merck's diabetes drug Januvia was originally expected to hit peak sales of nearly $10 billion by 2018, but estimates have since fallen to around $6.7 billion. That estimate could still be too high -- in 2013, sales of Januvia slid 2% year-over-year to $4 billion. Meanwhile, sales of Singulair, Merck's blockbuster asthma drug which went off patent in 2012, plunged 69% to $1.2 billion.

Looking ahead, let's check out three potential acquisitions which might make good sense for Merck, which finished last quarter with $20.5 billion in cash and equivalents.

Inovio's immunotherapy pipeline
With a market cap of around $600 million, Inovio Pharmaceuticals (NASDAQ:INO) would be an affordable acquisition that could quickly boost Merck's pipeline of immunotherapy drugs. Perlmutter has repeatedly emphasized how important immunotherapy drugs, such as the skin cancer treatment MK-3475, are to Merck's future.

Inovio's immunotherapy treatments are unique in two ways: they use synthetic DNA (which cannot replicate or spread within host cells) and are delivered via electroporation (brief electrical pulses) to boost cellular intake.

Inovio's pipeline consists of therapeutic vaccines for a wide variety of cancers, hepatitis B and C, influenza, and even HIV. The company's most prolific partner is Roche, which signed a deal with Inovio worth up to $412.5 million last year to co-develop two vaccines for prostate cancer and hepatitis B. Inovio's most advanced treatment, VGX-3100, is currently in phase 2 trials for cervical dysplasia, a common cause of cervical cancer. Top-line data from the trial is expected later this year.

While it's an early stage pipeline, there are a lot of opportunities in it, and I think that Merck would benefit from some additional oncology assets.

Seattle Genetics' antibody-drug conjugates
If Merck wants to strengthen its oncology pipeline, it could acquire Seattle Genetics (NASDAQ:SGEN), the maker of Adcetris, one of only two FDA-approved antibody-drug conjugates (ADCs) on the market.

ADCs are monoclonal antibodies, loaded with chemotoxins, which seek out specific cancerous cells. The ADC injects the toxins into the infected cell upon contact, killing it while sparing healthy cells nearby. This has led to speculation that ADCs could eventually render traditional chemotherapy obsolete.

Adcetris, which is approved for two types of lymphoma, is marketed in the U.S. and Canada by Seattle Genetics and worldwide by Takeda Pharmaceuticals. Seattle Genetics reported $145 million in Adcetris sales in 2013. That might not seem like much for a company worth $4.8 billion, but Seattle Genetics has a pipeline of several more ADCs for various cancers, one of which has already reached phase 3 trials. It also holds ADC collaborations with 12 other companies, which contributed to 40% of its revenue last year.

Two years ago, Merck was rumored to be interested in acquiring Seattle Genetics for $35 to $50 per share, which means the company could still be on its shopping list.

MannKind's inhalable insulin
MannKind (NASDAQ: MNKD), the maker of the experimental inhalable insulin Afrezza, would be an interesting acquisition for Merck, strengthening its diabetes franchise (which includes blockbuster Januvia, a $4 billion drug last year).

MannKind's $4 billion market cap, however, makes it a pricey bet. Even though Afrezza was recently approved by the FDA, there's no guarantee that inhaled insulin will achieve widespread use. Afrezza's Dreamboat inhaler is certainly smaller than the one Pfizer used with Exubera, but it could still be a tough sell for some diabetes patients.

Nonetheless, investors shouldn't rule out Merck acquiring MannKind. If Afrezza wins widespread adoption (and Merck, with its deep pockets, could make that more likely for a cash-strapped MannKind), it could have a huge affect on the insulin market.

The Foolish takeaway
In conclusion, investors should not buy shares of these three companies simply expecting Merck to make a premium offer. But they should be aware that Inovio, Seattle Genetics, and MannKind could all help Merck in the long run by respectively boosting its presence in immunotherapy, ADCs, and diabetes care.