Merck & Co has snapped up antibiotics developer Cubist Pharmaceuticals in a deal valued at a total of $9.5 billion.
As PharmaTimes Digital reported earlier, rumours of a tie-up between the firms had been gathering force over the weekend – details have now been confirmed.
Merck (known as MSD outside of the US and Canada) will acquire Cubist and with it its blockbuser antibiotic Cubicin for $102 per share in cash, marking a 35% premium to Cubist’s average stock price for the most recent five trading days.
The equity part transaction is valued at $8.4 billion, but Merck is also taking on $1.1 billion in net debt (based on projected cash balances) and other considerations pushing up the deal’s total value to $9.5 billion.
Combining Cubist’s expertise in antibiotics with Merck’s capabilities and global reach will “create a stronger position in hospital acute care while addressing critical areas of unmet medical need, such as antibiotic resistance,” said the drug giant’s chief Kenneth Frazier, explaining the motivation for the move.
Merck expects the acquisition to add more than $1 billion in sales to its 2015 base. While the transaction will be neutral to (non-GAAP) earnings next 2015, Merck expects it to be “significantly accretive” in 2016 and beyond, it said.
However, a fly in the ointment may be a US court ruling invalidating four patents on Cubicin, leaving the drug in danger of losing patent protection as early as 2016, and the launch of a competitor generic product by Hospira.
Cubist said it intends to appeal the court’s decision and is confident of success, and was also quick to stress that its deal with Merck is unaffected by the ruling and is on track to complete in the first quarter of next year.
