Merck & Co. expands hospital acute care business with deal to buy Cubist for $8.4 billion

Merck & Co. announced Monday a definitive agreement to acquire Cubist Pharmaceuticals for $102 per share in cash, or $8.4 billion, boosting its antibiotic portfolio. The drugmaker noted that the total value of the transaction, which has unanimously been approved by both boards of directors, is approximately $9.5 billion, including $1.1 billion in net debt. The purchase price represents a premium of 37 percent to Cubist’s closing stock price on December 5.

“Cubist is a global leader in antibiotics and has built a strong portfolio of both marketed and late-stage pipeline medicines,” remarked Merck CEO Kenneth C. Frazier. “Combining this expertise with Merck’s strong capabilities and global reach will enable us to create a stronger position in hospital acute care while addressing critical areas of unmet medical need, such as antibiotic resistance,” Frazier added. Sources recently indicated that Merck was in negotiations to purchase Cubist for more than $7 billion.

Cubist currently markets the antibiotic Cubicin (daptomycin), which Merck noted is the only approved once-daily therapy for both S. aureus bacteraemia and complicated skin and skin structure infections, while Zerbaxa (ceftolozane/tazobactam) is under review by the FDA. Merck said that Zerbaxa “will enhance [its] hospital acute care business in a variety of therapeutic areas, including Gram-positive and Gram-negative multi-drug resistant infections.” The drug is expected to gain FDA approval later this month, with RBC Capital Markets analyst Adnan Butt estimating sales annual sales of more than $1.5 billion.

Cubist’s third-quarter sales rose 16 percent year-over-year, driven by strong sales of Cubicin. The product generates more than 80 percent of Cubist’s sales, which the company forecast may reach $2 billion by 2017. The drugmaker is targeting the launch of four new antibiotics by 2020 and has committed $400 million in R&D spending this year.

Merck’s hospital acute care portfolio grew by more than 10 percent in the first nine months of 2014 versus the prior year. Products include several antibiotics and antifungals, as well as Bridion (sugammadex), which is marketed outside the US and is currently under regulatory review by the FDA. Merck is also developing actoxumab/bezlotoxumab, an investigational combination of therapeutic antibodies targeting two C.difficile pathogenic toxins, for the prevention of recurrence of C.difficile infection, and relebactam, an experimental class A and C beta-lactamase inhibitor for the treatment of severe bacterial infections.

According to Merck, the acquisition of Cubist will add more than $1 billion to sales in 2015. The company added that the deal will be neutral to earnings next year, and is expected to be “significantly accretive” in 2016 and beyond. The drugmakers expect the transaction to close in the first quarter of 2015.

10-December-2014