Merck's $9.2B Cidara Therapeutics Acquisition: Merger Arbitrage Potential and Risks

The acquisition of Cidara Therapeutics by Merck has sparked significant investor interest, particularly given the $221.50-per-share cash offer, which represents a 109% premium over Cidara's pre-announcement stock price. As the deal nears its expected closing in Q1 2026, investors must weigh the narrow merger arbitrage spread, analyst sentiment, and Merck's strategic rationale to determine whether Cidara remains a compelling buy.

Deal Terms and Strategic Rationale

Merck's $9.2 billion acquisition targets Cidara's lead candidate, CD388, a long-acting antiviral in Phase 3 trials for preventing influenza in high-risk populations. The U.S. Federal Trade Commission granted early termination of the Hart-Scott-Rodino Act waiting period on December 19, 2025, removing a key regulatory hurdle. CD388's Fast Track and Breakthrough Therapy Designations from the FDA underscore its potential to address unmet medical needs, aligning with Merck's broader strategy to diversify its portfolio amid the anticipated patent expiry of Keytruda, its top-selling drug, in 2028 according to analysts.

Current Stock Price and Arbitrage Spread

As of December 29, 2025, Cidara's stock closed at $220.41 on the Blue Ocean ATS, just $1.09 below the $221.50 offer price. This narrow spread reflects high confidence in the deal's closure but leaves limited upside for investors. Historically, such tight spreads often indicate reduced risk of deal termination, as regulatory and shareholder approvals appear secured. However, the minimal arbitrage potential also suggests diminished returns for those seeking substantial gains.

Analyst Downgrades and Investor Sentiment

Post-announcement, major brokerages have tempered their enthusiasm. Morgan Stanley downgraded Cidara from Overweight to Equalweight in November 2025, citing the premium already priced into the stock. Similarly, Guggenheim analyst Seamus Fernandez raised his price target to $221.50 but downgraded his rating to Neutral, while JPMorgan, RBC Capital, and Needham shifted to Neutral or Sector Perform ratings. These moves highlight concerns that the stock's upside is largely captured, leaving little room for error.

Merck's Commitment and Risk Factors

Merck's aggressive pursuit of CD388 underscores its strategic value. The Phase 3 trials, combined with the drug's innovative mechanism-combining a neuraminidase inhibitor with a human antibody fragment- position it as a potential blockbuster. However, risks remain. While the FTC approval is a positive signal, unforeseen regulatory delays or shareholder resistance could disrupt the timeline. Additionally, CD388's clinical success is not guaranteed, though its advanced trial stage mitigates this risk.

Conclusion: A Buy for Conservative Arbitrageurs?

For investors focused on merger arbitrage, Cidara presents a low-risk, low-reward opportunity. The stock's proximity to the offer price and Merck's strong balance sheet suggest a high probability of closure, but the limited spread caps potential gains. Analysts' neutral stances further indicate that the market has largely priced in the deal's benefits. However, given Merck's strategic alignment with CD388 and the regulatory progress, Cidara remains a defensible buy for those prioritizing capital preservation over aggressive growth. Investors should monitor the tender offer's progress, slated to begin no later than December 4, 2025, and remain vigilant for any unexpected developments.