US HEALTHCARE: Merck: Buying Cidara Therapeutics

(MRK; Aa3/A+/NR)

#MNI #Healthcare

Another Acquisition to Bolster MRK's Pipeline. Credit Neutral

• Merck has agreed to buy Cidara Therapeutics (CDTX) for $221.50/share or a total transaction value of ~$9.2bn.  Cidara's lead drug candidate is CD388 which is a novel treatment that helps prevent the flu in people who are at higher risk of complications.  The drug is not a vaccine but given MRK's specialty in vaccines, this type of product would fit in well.
• MRK expects to close the deal in 1Q26 and we note that MRK just closed the $9bn acquisition of Verona Pharma in October '25.
• We note that MRK ended 3Q25 with $18bn of cash on hand and issued $6bn of bonds in September '25 to help fund the Verona Pharma deal.      We expect MRK to end FY25 with ~$13bn of cash on hand (after paying for Verona) and we expect gross leverage to be ~1.6x which compares to 1.5x at FYE24.  If we assume a similar financing arrangement for Cidara as MRK used for Verona (i.e. ~$6bn of new debt) we see leverage in FY26 increasing to ~1.8x.
• We still expect very strong FCF of $12.5bn in FY26 and don't believe this acquisition will have any material impact on MRK's current Aa3/A+ ratings.