Just prior to last week's takeover news, Cidara Therapeutics (CDTX +0.33%) was already one of the year's top-performing stocks. Trading in the mid-$20s at the start of 2025, by mid-November, this highflier among biotech stocks had surged more than fivefold, to around $106 per share.
But then came news of Merck's (MRK 0.47%) plans to acquire Cidara for $221.50 per share, or a 109% premium to its prior trading price. As a result of the takeover news, shares surged by over 100% on Nov. 14, the day of the deal announcement.
Why is Merck willing to pony up for Cidara? Could other bidders emerge? If this is a done deal, are there any takeaways for investors? Let's explore each question and see how this news could help identify similar such opportunities.
Merck's offer is all about Cidara's promising flu therapy candidate
For several years, Cidara Therapeutics has been developing CD388, a non-vaccine alternative for flu prevention. Interestingly enough, until 2024, Cidara partnered with Johnson & Johnson's Janssen division on the development of this candidate. Janssen backed out last year, following its decision to get out of infectious disease drug and vaccine development.
Janssen may be regretting this decision now. Throughout 2025, Cidara has made rapid clinical trial progress with CD388, and is currently at the phase 3 trial stage. In turn, the specter of Cidara's commercialization has been key to the stock's above-mentioned outsized price performance. After this big run-up, at first it may seem surprising that Merck is not only willing to buy the company, but at more than double the stock's prior all-time high.
However, to say that CD388 has blockbuster drug potential is an understatement. In the United States, as many as 81 million people get the flu each season. These infections lead to as many as 1.3 million hospitalizations. As many as 10% of these hospitalization cases end up fatal.
NASDAQ: CDTX
Key Data Points
Given the dangers of influenza, especially among at-risk populations like the elderly, a high-efficacy non-vaccine alternative offering protection against all flu strains would undoubtedly be in high demand. Cidara believes that if the treatment makes it to market, it could become available to more than 100 million Americans. The biotech company has also noted that peak sales could hit $3.1 billion by 2040.
Image source: Getty Images.
Likely a done deal, but two takeaways for investors
Currently, the spread between Cidara's stock price and the takeover bid is around 1.75%. This is a very thin merger arbitrage spread, suggesting not only a high likelihood of this deal closing, but a low likelihood that another bidder will emerge for the company. If Wall Street were betting on a mergers and acquisitions battle, the stock would likely be trading at a premium to Merck's offer.
Yet while there may be limited opportunity to profit from Cidara Therapeutics, if you've yet to buy it, there could be some other profitable takeaways from this news. For one, this offer may help to strengthen the bull case for Merck. Like other big pharma stocks, Merck shares have struggled, due to patent cliff concerns. However, with its plans to buy Cidara, not to mention other pending biotech acquisition deals, Merck could replenish its pipeline well before Keytruda, the company's flagship drug, goes generic.
Alongside this, the Cidara deal may highlight the opportunity of investing in biotech companies that have made significant commercialization progress. Two such examples are BioMarin Pharmaceutical (BMRN +1.65%) and Nektar Therapeutics (NKTR 1.99%).
Is Cidara a buy?
Admittedly, buying a biotech just on takeover potential alone may not necessarily be a viable investing strategy. It may be best to view such a potential catalyst as "icing on the cake," alongside other catalysts.
However, if you are a seasoned investor in biotech and healthcare stocks, well aware of the risk and volatility inherent when investing in this space, you may just well be able to find other potential plays in the making, with the high potential of surging on commercialization progress, or from a deep-pocketed big pharma buyer stepping in with a takeover bid.
