Shares of Cubist Pharmaceuticals (CBST) rose as much as 35% after Merck (MRK) announced that it would acquire the company for approximately $9.5 billion. This translates to Merck paying $102 per share for Cubist while also covering $1.1B in debt, and will allow Merck to acquire a new set of antibacterial drugs. The deal makes sense because Merck has the sales team capable of selling these antibiotic resistant bacterial drugs to wider audience in the market.
Cubist Pharmaceuticals specializes in producing specialized drugs against drug-resistant bacteria. One of the most recent approvals was when the FDA approved Sivextro on June 20, 2014 to treat adults with severe skin infections. Therefore Sivextro had received priority review by the FDA and was expedited in the approval process. There is another antibiotic drug that Cubist is waiting for approval on and that is Ceftolozane, which is used to treat urinary tract infections and abdominal infections. The FDA is expected to reach their decision on this drug compound in a few weeks, by Dec 21, 2015.
The acquisition of Cubist is expected to add around $1 billion in revenue to Merck’s revenue stream in 2015. This acquisition fits well, since Merck already develops its own vaccines and drugs against bacteria and other infectious diseases. The boards of directors from both companies unanimously agreed to this deal. Both merged companies should do well in the future, with Cubist expecting to have developed four new drugs by the year 2020 that will be used to treat diseases that are resistant to current antibiotics.
The timing also seems to be in Cubist’s favor; later today, a court ruled against Cubist in its suit against Hospira (HSP) for patent infringement. The ruling means that Hospira can begin selling a generic version of Cubist’s lead drug Cubicin as early as 2016.
