CDTX: $90M Merger Arb Unwind Detected (Sept 22)

💊 CDTX $90M Bull Call Spread - Merck Buyout Arb Play Before Deal Close! 💰

📅 November 14, 2025 | 🔥 Unusual Activity Detected

🎯 The Quick Take

Someone just executed a $90 MILLION bull call spread on CDTX at 10:01:40 AM today! This sophisticated trade bought 5,600 contracts of $110 calls and sold 5,000 contracts of $145 calls, both expiring November 21st - just days before Merck's $9.2 billion acquisition closes in Q1 2026. With CDTX trading at $217.50 against Merck's $221.50 cash offer, smart money is playing merger arbitrage to capture the spread. Translation: Institutional traders are positioning for the deal to close smoothly while protecting against downside risk!

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📊 Company Overview

Cidara Therapeutics Inc (CDTX) is a clinical-stage biopharmaceutical company developing immunotherapeutics for serious diseases:
- Market Cap: $9.2 Billion (acquisition value)
- Industry: Biological Products (No Diagnostic Substances)
- Current Price: $217.50 (deal price: $221.50)
- Primary Business: CD388 (long-acting influenza prevention), oncologic, viral, and autoimmune therapeutics via proprietary Cloudbreak platform
- Major Catalyst: Merck acquisition agreement announced November 14, 2025 at $221.50/share

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💰 The Option Flow Breakdown

The Tape (November 14, 2025 @ 10:01:40):

Date	Time	Symbol	Buy/Sell	Type	Expiration	Premium	Strike	Volume	OI	Size	Spot Price	Option Price
2025-11-14	10:01:40	CDTX	BUY	CALL	2025-11-21	$54M	$110	5,600	-	5,600	$217.50	-
2025-11-14	10:01:40	CDTX	SELL	CALL	2025-11-21	$36M	$145	5,000	-	5,000	$217.50	-

Option Symbols:
- Long leg: CDTX20251121C110
- Short leg: CDTX20251121C145

🤓 What This Actually Means

This is a merger arbitrage strategy disguised as a bull call spread! Here's what went down:

• 💸 Net premium outflow: $18M ($54M paid - $36M collected)
• 🎯 Long position: $110 strike calls deep in-the-money (ITM) with stock at $217.50
• 🛡️ Short position: $145 strike calls far ITM, capping max profit
• ⏰ Expiration: November 21st - 7 days away (before Q1 2026 deal close)
• 📊 Size matters: 5,600/5,000 contracts represents ~560,000 shares worth ~$122M
• 🏦 Institutional arb: This is sophisticated merger arbitrage, not directional speculation

What's really happening here:
This trader is NOT betting on CDTX's business fundamentals - they're playing the merger spread. With CDTX trading at $217.50 and Merck's cash offer at $221.50, there's a $4.00 spread (1.8% return in ~90 days until deal close). The deep ITM calls essentially replicate stock ownership with leverage, while the short calls cap upside since the deal price is fixed. This structure profits if the stock stays above $110 (99.9% probability given deal terms) but gives up gains above $145 (irrelevant since deal caps at $221.50).

Unusual Score: 🔥 EXTREME (5.64 Z-score for long leg, 4.34 Z-score for short leg) - This happens a few times per year! The premium size and simultaneous execution of both legs screams institutional merger arbitrage desk.

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📈 Technical Setup / Chart Check-Up

YTD Performance Chart

CDTX has delivered an extraordinary return in 2025. The chart tells a clinical trial success story that culminated in a massive acquisition:

Key observations:
- 🚀 Phase 2b catalyst: Stock jumped from ~$13 in late June to $30+ in July after positive NAVIGATE trial results showing 76% efficacy
- 📈 Phase 3 momentum: Gradual climb from $30 to $48 through August-September on ANCHOR trial initiation
- 🎯 FDA designation: Pop to $60-80 range in October after Breakthrough Therapy designation
- 💥 Acquisition announcement: Explosive move from $106 to $217.50 on November 14 (Merck's $9.2B buyout at $221.50)
- 📊 Current trade: Stock now trading 1.8% below deal price - classic merger arb spread

Gamma-Based Support & Resistance Analysis

Current Price: $217.77

The gamma exposure map shows where options activity creates price magnets and barriers:

🔵 Support Levels (Put Gamma Below Price):
Given the merger agreement at $221.50, traditional gamma support is less relevant. However, downside protection clusters around:
- $215 - Minor support if deal concerns emerge
- $200 - Psychological level where arb spreads widen materially
- $180 - Deep support if deal breaks (unlikely scenario)

🟠 Resistance Levels (Call Gamma Above Price):
- $220-$222 - Merger price ceiling (natural resistance as stock can't trade significantly above deal price)
- $225 - Unlikely breakout level (would require competing bid)
- $230+ - Not realistic given signed definitive agreement

What this means for traders:
CDTX is now a rate-of-return play, not a momentum trade. The stock will gravitate toward $221.50 as deal close approaches (expected Q1 2026). Current $217.50 price implies ~1.8% spread capturing time value and minimal deal risk premium. The gamma data is less predictive than usual because fundamentals are irrelevant - only deal mechanics matter now.

Net GEX Bias: Merger arb dynamics override typical gamma positioning. Stock price anchored to $221.50 deal value.

Implied Move Analysis

Options market pricing for upcoming expirations:

• 📅 Weekly (Nov 21 - 7 days): ±$50.43 (±23.16%) → Range: $167.34 - $268.20
• 📅 Monthly OPEX (Nov 21 - 7 days): ±$50.43 (±23.16%) → Range: $167.34 - $268.20
• 📅 Quarterly Triple Witch (Dec 19 - 35 days): ±$47.07 (±21.61%) → Range: $170.70 - $264.84
• 📅 Yearly LEAPS (Dec 18, 2026 - 399 days): ±$26.21 (±12.03%) → Range: $191.56 - $243.98

Translation for regular folks:
The options market is pricing in HUGE volatility - 23% implied move for the weekly expiration! This seems extreme for a merger arb situation, but it reflects residual uncertainty about:
- Deal close timing and regulatory approval
- Potential competing bid (unlikely but possible)
- Material adverse change risk in ANCHOR trial

The upper range of $268.20 is well above the $221.50 deal price, suggesting the market is pricing in a small probability of a higher competing offer. The lower range of $167.34 reflects catastrophic deal break risk (very low probability <5%).

Merger arb context: The wide implied moves are typical for pre-close acquisitions. As deal milestones pass (HSR clearance, shareholder tender), implied volatility will collapse and the spread will narrow toward zero.

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🎪 Catalysts

🔥 Already Happened (Past Catalysts)

Merck Acquisition Agreement - November 14, 2025 ✅

The ultimate positive catalyst occurred today! Merck announced a definitive $9.2 billion acquisition at $221.50 per share in cash - a 109% premium to the previous close:

• 💰 Transaction details: All-cash tender offer at $221.50/share
• 📊 Enterprise value: ~$9.2 billion total
• ⏰ Expected close: Q1 2026 (January-March)
• 🎯 Strategic rationale: CD388's $3-4B peak sales potential addresses Merck's $29.5B Keytruda patent cliff in 2028
• 🏆 Market validation: Premium valuation validates CD388's blockbuster potential

FDA Breakthrough Therapy Designation - October 9, 2025 ✅

FDA granted Breakthrough Therapy designation for CD388 for influenza prevention in high-risk populations:
- 🎯 Provides accelerated development pathways and priority review
- 💪 Based on Phase 2b data showing 76% prevention efficacy
- 📈 Stock surged 9.37% on announcement

Phase 3 ANCHOR Trial Initiation - September 25, 2025 ✅

Cidara dosed first participants in pivotal Phase 3 ANCHOR trial:
- 📊 Target enrollment: 6,000 participants across 150+ global sites
- 💉 Single 450mg subcutaneous injection at flu season start
- 🎯 Primary endpoint: Prevention of laboratory-confirmed symptomatic influenza over 24 weeks
- 💰 Triggered $45 million milestone payment to former partner Janssen

Phase 2b NAVIGATE Trial Results - June 23, 2025 ✅

Positive topline results demonstrated 76% prevention efficacy:
- ✅ 450mg dose: 76% efficacy vs placebo over 24 weeks
- 🛡️ Clean safety profile: No drug-related serious adverse events
- 📈 Stock exploded from ~$13 to $30+ following announcement

🚀 Upcoming Catalysts (Next 6 Months)

1. Merger Closing - Q1 2026 (CONFIRMED) 💎

Timeline: Expected closing January-March 2026

Key Milestones:
- 📋 Tender offer commencement: Expected December 2025/January 2026
- ⚖️ HSR Act waiting period: 30 days (or early termination)
- 🗳️ Shareholder tender deadline: 20-30 days after offer commencement
- ✅ Deal consummation: Upon majority tender and regulatory clearance

Probability Assessment: 95%+ likelihood. Deal already signed with definitive merger agreement. Both boards approved. No material antitrust concerns anticipated given Merck's limited infectious disease portfolio and CDTX's pre-commercial status.

Financial Impact: CDTX shareholders receive $221.50 cash per share. Current trading at $217.50 implies ~$4.00 spread (1.8%) reflecting time value and minor deal risk premium.

Risks:
- Competing bid (5-10% probability - unlikely given signed agreement)
- Material adverse change (2% probability - ANCHOR trial safety issue)
- Regulatory rejection (<5% probability - no antitrust concerns)

2. ANCHOR Trial Enrollment Completion - December 2025 (LIKELY) 📊

Target: 6,000 participants across Northern Hemisphere sites

Current Status: As of November 6, 2025 earnings call, enrollment was "ongoing" at 150 sites in US and UK. CEO previously stated trial had "surpassed 50% enrollment."

Significance: Full enrollment de-risks trial timeline and confirms patient recruitment feasibility. Triggers next phase of BARDA funding ($339M contract).

Market Impact: Under Merck ownership post-closing, this becomes less material to CDTX shareholders but validates CD388 program progression.

3. ANCHOR Interim Analysis - Q2 2026 (EXPECTED) 🔬

Timeline: March-April 2026 (following 2025-2026 Northern Hemisphere flu season)

Analysis Purpose:
- Assess trial size and powering assumptions
- Evaluate blinded safety data
- Determine need for Southern Hemisphere enrollment continuation
- Potential for efficacy signal (if unblinding occurs)

Probability: 90% interim analysis occurs as planned. Key variable: 2025-2026 flu season severity.

Commercial Impact: Interim readout could provide early validation of Phase 3 success and refine peak sales estimates. For Merck, positive interim data de-risks the $9.2 billion investment.

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🎲 Price Targets & Probabilities

IMPORTANT: Traditional price targets are largely irrelevant for CDTX now. The stock is a merger arbitrage play trading toward the $221.50 deal price. Analysis below focuses on deal scenarios rather than fundamental valuations.

✅ Base Case: Deal Closes Smoothly (85% probability)

Target: $221.50

How we get there:
- ⚖️ HSR Act clearance obtained within 30-day waiting period (no antitrust issues)
- 🗳️ Shareholders tender majority of shares (institutions hold 103%+ - already aligned)
- 📊 ANCHOR trial proceeds without safety issues or FDA clinical hold
- 🤝 No competing bid emerges (termination fees discourage opportunistic offers)
- ✅ Deal closes Q1 2026 as planned

Trading strategy: Current $217.50 price offers 1.8% return over ~90 days (7.3% annualized). Conservative arb funds will hold to capture full spread.

This trade's outcome: The bull call spread profits maximally if CDTX stays above $145 at November 21 expiration. With deal at $221.50, this is virtually guaranteed (99.9% probability).

🚀 Upside Case: Competing Bid (10% probability)

Target: $240-$260

What could drive this:
- 💰 Other Big Pharma (GSK, Pfizer, Sanofi) makes superior proposal
- 🎯 CDTX board has fiduciary duty to consider higher offers
- 📈 Bidding war pushes price above Merck's $221.50 offer
- ⚠️ Merck has matching rights and termination fee protects them (~$275-350M estimated)

Probability assessment: Low (10%). Deal premium already substantial (109%). Termination fees discourage opportunistic bids. Merck can match competing offers.

This trade's outcome: Short $145 calls cap profits, but trader would be happy to give up gains above $145 since they're capturing the arb spread efficiently.

📉 Bear Case: Deal Breaks (5% probability)

Target: $80-$120

What could go wrong:
- 😰 ANCHOR trial safety signal or FDA clinical hold prior to close
- ⚖️ Unexpected regulatory rejection (extremely unlikely)
- 💔 Material adverse change clause triggered
- 🚨 Merck walks away (would owe termination fee but possible if major issue)

Impact: Stock would revert to pre-deal fundamentals. With Phase 3 ongoing, strong FDA support, and BARDA funding, fair value might be $80-120 based on clinical-stage biotech comparables.

This trade's outcome: Long $110 calls protect against catastrophic decline. Below $110, losses accelerate but position still better than outright stock ownership. This is the KEY risk management feature of the structure.

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💡 Trading Ideas

🛡️ Conservative: Cash & Wait Strategy

Play: Stay on sidelines, wait for deal to close

Why this works:
- ⏰ Deal close in Q1 2026 (~90 days) - patient capital can wait
- 💸 1.8% spread ($4.00) over 90 days = 7.3% annualized return seems thin for deal risk
- 📊 No fundamental analysis required - pure event-driven mechanics
- 🎯 Better opportunities elsewhere with higher risk-adjusted returns
- 🛡️ Zero execution risk, zero capital deployed

Action plan:
- 👀 Monitor deal milestones (HSR filing, shareholder tender commencement)
- 📋 Watch for any competing bid announcements (low probability)
- ✅ If considering entry, wait until tender offer formally begins (further de-risks)
- 💰 Calculate whether arb spread justifies capital lockup vs other opportunities

Risk level: None (cash position) | Skill level: Beginner-friendly

⚖️ Balanced: Stock Merger Arb (Post-HSR Clearance)

Play: Buy CDTX stock after HSR clearance, hold to close

Why this works:
- 📜 HSR clearance removes major regulatory risk
- 💰 Capture remaining spread with minimal risk
- 📊 Spread typically narrows from $4 to $1-2 after HSR (3-4% return in 60 days)
- ⏰ Shorter time horizon vs buying now
- 🎯 Lower risk entry point after key milestone

Structure:
- Buy CDTX stock at market (assume ~$219 after HSR clearance)
- Hold through tender offer and deal close
- Receive $221.50 cash per share

Estimated P&L:
- 💰 Entry: $219 (post-HSR assumed price)
- 💵 Exit: $221.50 (deal price)
- 📈 Profit: $2.50 per share (1.1% return in ~60 days = 6.8% annualized)
- 📉 Risk: Deal break (5% probability) could drop stock to $80-120 (-45% to -63%)

Entry timing: Wait for HSR clearance announcement (typically 30 days post-filing)

Risk level: Moderate (deal break risk remains) | Skill level: Intermediate

🚀 Aggressive: Replicate the Bull Call Spread (ADVANCED ONLY!)

Play: Execute similar bull call spread structure on CDTX

Structure:
- Buy $110 calls (deep ITM)
- Sell $145 calls (ITM but above current price)
- Expiration: December or January (choose based on deal timeline expectations)

Why this could work:
- 💰 Leverage: Control shares with less capital than outright stock purchase
- 🛡️ Defined risk: Long call at $110 protects against catastrophic deal break
- 📊 Capped upside acceptable: Deal price fixed at $221.50, no benefit to unlimited upside
- ⚡ If deal closes as expected, collect intrinsic value spread

Why this could blow up:
- 💥 Deal break risk: If ANCHOR trial has safety issue, stock could gap below $110 instantly
- 😱 Time decay: Options lose value daily, stock doesn't
- 📉 Liquidity risk: CDTX options may have wide bid-ask spreads
- ⚠️ Complexity: Requires active management and understanding of merger arb dynamics
- 💸 Margin requirements: Broker may require collateral for spread

Estimated P&L (December expiration example):
- 💰 Buy $110 calls: ~$108 debit per contract (mostly intrinsic value)
- 💵 Sell $145 calls: ~$73 credit per contract (all intrinsic value)
- 📊 Net debit: ~$35 per spread
- 📈 Max profit: $35 - $0 = $35 (100% return) if CDTX above $145 at expiration
- 📉 Max loss: $35 per spread if CDTX below $110 (deal break scenario)
- 🎯 Breakeven: $110 + $35 = $145 (already met with stock at $217.50)

Risk level: HIGH (deal break = 100% loss) | Skill level: Advanced only

⚠️ WARNING: DO NOT attempt this trade unless you:
- Understand merger arbitrage mechanics thoroughly
- Can monitor deal developments daily (HSR filings, trial updates, competing bids)
- Have experience with options spreads and can handle assignment
- Accept that deal break could result in total loss of premium paid
- Are comfortable with illiquid options (CDTX options may trade wide spreads)

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⚠️ Risk Factors

Don't get caught by these potential landmines:

• ⏰ Deal timing uncertainty: Q1 2026 close is "expected" but not guaranteed. Delays push out return timeline and increase opportunity cost. HSR review could extend beyond 30 days if FTC requests additional information (Second Request). Shareholder tender process typically 20-30 days but could extend.

• 💔 Deal break risk (5% probability but catastrophic): While low probability, complete deal failure would send CDTX back to pre-announcement levels ($80-120 range based on Phase 3 stage). Potential triggers: ANCHOR trial safety signal, FDA clinical hold, material adverse change, or financing issues (unlikely given Merck's balance sheet). This represents 45-63% downside risk.

• 🧪 ANCHOR trial safety concerns: Phase 3 trial ongoing with 6,000 participants. Any serious adverse event or unexpected safety signal could trigger Material Adverse Change clause allowing Merck to walk. Phase 2b showed clean safety but larger N increases detection of rare events.

• ⚖️ Regulatory approval not guaranteed: While no antitrust concerns expected given non-overlapping portfolios, FTC could surprise with extended review. Historically similar biotech acquisitions receive HSR clearance routinely, but political environment around pharma M&A has become more skeptical.

• 💰 Competing bid unlikely but possible (10%): Other Big Pharma with respiratory portfolios (GSK, Pfizer, Sanofi) could theoretically make superior proposal. However, termination fees (~$275-350M estimated) and Merck's matching rights create significant barriers. Premium already substantial at 109%.

• 📊 Opportunity cost of capital lockup: 1.8% return over ~90 days (7.3% annualized) must be weighed against alternative investments. In a rising rate environment or strong equity market, this spread may not justify the deal risk and capital immobilization.

• 💸 Spread could widen before narrowing: If market risk-off sentiment increases or biotech volatility spikes, arb spread could widen to $5-6 temporarily before deal close. This creates mark-to-market losses even if deal ultimately closes successfully.

• 🔄 Options liquidity risk: CDTX options may have wide bid-ask spreads and limited open interest. Entering/exiting positions could involve significant slippage. The $90M institutional trade got better execution than retail traders can achieve.

• ⏱️ Expiration timing risk for options: November 21st expiration is BEFORE deal close (Q1 2026). Options will settle based on intrinsic value, but traders must understand they're not holding to actual merger consummation. December/January expirations offer more time but cost more premium.

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🎯 The Bottom Line

Real talk: This isn't your typical options analysis because CDTX fundamentals no longer matter. The company is being acquired for $221.50 cash - the business, pipeline, and clinical trials are now Merck's problem. This is pure merger arbitrage.

What this $90M trade tells us:
- 🎯 Sophisticated institutional desk executing textbook merger arb strategy
- 💰 Deep ITM calls replicate stock ownership with defined risk
- ⚖️ Structure captures deal spread while protecting against catastrophic deal break below $110
- 📊 Short calls above current price give up irrelevant upside (deal capped at $221.50)
- 🏦 This is NOT a bullish bet on CD388 or CDTX - it's a bet the deal closes

The merger arb thesis:
- ✅ Deal highly likely to close: 95%+ probability. Definitive agreement signed, boards approved, no antitrust concerns, strategic rationale clear (Merck needs CD388's $3-4B peak sales to offset Keytruda cliff)
- 💰 Spread reflects time value + minimal risk premium: $4.00 spread (1.8%) over ~90 days = 7.3% annualized return compensates for deal risk and capital lockup
- 📉 Downside protected by deal terms: Barring catastrophic deal break, CDTX anchored near $221.50 by arbitrageurs who will buy any dip

If you own CDTX:
- ✅ You're essentially locked into $221.50 exit - decision is whether to take $217.50 now or wait for $221.50 in Q1
- 💰 Capturing full $4 spread requires 90-day capital lockup and accepting 5% deal break risk
- 🎯 Consider trimming 25-50% to de-risk if you need liquidity or have better opportunities
- ⏰ If holding, monitor HSR filing and trial safety updates closely

If you're watching from sidelines:
- 💸 For arb traders: 7.3% annualized return with 5% tail risk - calculate whether spread compensates for risk vs your alternatives
- 🛡️ For retail investors: This is a specialized strategy requiring deal expertise and patience. Probably better opportunities elsewhere unless you understand merger arb mechanics
- 📊 Entry timing: If considering, wait for HSR clearance to de-risk, even though spread narrows post-approval
- ⚠️ Options complexity: Replicating this spread requires advanced knowledge and carries liquidity risk

If you're considering the options trade:
- 🎯 This is ADVANCED merger arb using options for leverage and defined risk
- 💥 Deal break = 100% loss of premium paid (stock could gap to $80-120)
- 📉 Wide bid-ask spreads in CDTX options = significant slippage vs institutional execution
- ⏰ November expiration is before deal close - you're betting on maintaining intrinsic value, not holding through consummation
- 🚫 Most retail traders should avoid - stick to stock arb or stay in cash

Mark your calendar - Key dates:
- 📅 Late November/December 2025 - Expected HSR Act filing and 30-day waiting period begins
- 📅 December 2025 - ANCHOR trial target enrollment completion
- 📅 December 2025/January 2026 - Tender offer commencement expected
- 📅 Q1 2026 (January-March) - Expected deal close and shareholders receive $221.50 cash
- 📅 March-April 2026 - ANCHOR interim analysis (post-acquisition under Merck ownership)

Final verdict: This is a professionally executed merger arbitrage trade, not an options speculation play. The $90M spread captures the $4 deal premium while defining maximum risk at the $110 floor. For retail investors, this situation is better approached through simple stock purchase post-HSR clearance or avoided entirely in favor of simpler opportunities. The 7.3% annualized arb return compensates sophisticated capital for deal risk and lockup, but most individual investors will find better risk-adjusted returns elsewhere. If the merger thesis excites you, just wait for the $221.50 payout in Q1 2026 - no need to get fancy with options spreads.

Disclaimer: Options trading involves substantial risk of loss and is not suitable for all investors. Merger arbitrage carries deal break risk that could result in catastrophic losses. This analysis is for educational purposes only and not financial advice. The unusual score reflects trade size relative to recent history - it does not imply the trade will be profitable or that you should follow it. Acquisition agreements can and do break, resulting in significant stock price declines. Always do your own research and consider consulting a licensed financial advisor before trading. Past success in merger arb does not guarantee future results.

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About Cidara Therapeutics Inc (CDTX): Cidara is a clinical-stage biopharmaceutical company with a $9.2 billion acquisition value (pending Merck acquisition), developing immunotherapeutics for serious diseases including CD388 for influenza prevention in the Biological Products industry.