U.S. stocks took a dive on Friday, but a few names bucked the trend in spectacular fashion. Cidara Therapeutics (NASDAQ:CDTX) was the clear standout, with shares more than doubling. The catalyst? A $9.2 billion cash acquisition offer from Merck, at $221.50 a share. A 105.6% jump to $217.87 is eye-popping, no matter how you slice it. But is this a brilliant strategic move by Merck, or just another high-stakes bet in the unpredictable world of pharmaceuticals?
Cidara is developing a universal flu therapy, aiming to protect those with weak immune responses to traditional vaccines. (Think elderly or immunocompromised patients.) Merck is clearly looking to diversify its pipeline as its blockbuster drug Keytruda approaches patent expiration. The problem is, are they overpaying?
The Financial Times reported the deal was imminent late Thursday, triggering a premarket surge in Cidara's stock. But let's be clear: the acquisition price is more than double Cidara’s closing price on Thursday. That's a massive premium. What's Merck seeing that the rest of the market missed? Merck to Acquire Cidara Therapeutics
Other companies also saw significant gains. Legence Corp (NASDAQ:LGN) rose 10.7% after its Q3 earnings report. Revenue beat expectations ($708.01 million versus an expected $639.78 million), but earnings missed (a loss of 2 cents per share versus an expected profit of 6 cents). Invivyd Inc (NASDAQ:IVVD) gained 26.5% after better-than-expected quarterly results. Scholar Rock Holding Corp (NASDAQ:SRRK) surged 22.8% after announcing a $200 million equity offering. Avadel Pharmaceuticals PLC (NASDAQ:AVDL) gained 20.1% following an unsolicited proposal from Lundbeck. Ondas Holdings Inc (NASDAQ:ONDS) rose 13% after positive Q3 results and raised FY25 sales guidance. Omeros Corp (NASDAQ:OMER) gained 11.9% after a narrower-than-expected quarterly loss. Figure Technology Solutions Inc (NASDAQ:FIGR) shares jumped 10.6% after upbeat quarterly results. Even Beyond Meat Inc (NASDAQ:BYND) saw a 9.2% bump. RLX Technology Inc – ADR (NYSE:RLX) shares jumped 8.8% following third-quarter results. PomDoctor Ltd (NASDAQ:POM) gained 7.7%. Cytek Biosciences Inc (NASDAQ:CTKB) shares rose 7.2%.
Merck's bet on Cidara hinges on the success of its experimental flu therapy. But experimental therapies are, by definition, risky. There's no guarantee it will pass clinical trials, gain regulatory approval, or even be commercially viable. The $9.2 billion price tag looks less like a calculated investment and more like a desperate attempt to fill the revenue gap left by Keytruda.
Here's the part of the analysis that I find genuinely puzzling: Merck is paying a massive premium before the therapy has proven itself. The market clearly wasn't valuing Cidara's potential at that level. It raises the question: what internal projections are Merck using to justify this acquisition? Details on their internal analysis remain scarce.
Consider Scholar Rock's surge after announcing a $200 million equity offering. That’s a fundamentally different situation. They're raising capital to fund their own growth, not being acquired at a sky-high premium. It suggests the market sees potential in their independent trajectory, which is a stronger signal than being bought out.
And while Ondas Holdings raised its FY25 sales guidance, that's still two years out. A lot can happen in two years. The market's reaction seems more speculative than based on concrete, near-term results.
Merck's acquisition of Cidara looks, at first glance, like a bold move. But digging deeper, the numbers suggest a potentially overvalued asset and a significant gamble on an unproven therapy. The market might be cheering the short-term gains, but I suspect this deal will be scrutinized for years to come.
