Merck To Buy Cubist Pharma For $8.4 Bln

(RTTNews) - Healthcare giant Merck & Co. Inc. (MRK) has agreed to acquire biotechnology company Cubist Pharmaceuticals, Inc. (CBST) for an equity value of $8.4 billion. Merck noted that the acquisition will boost its opportunity for growth in the hospital acute care market.

The transaction has been approved by the boards of directors of both the companies. Including $1.1 billion in net debt based on projected cash balances, the total transaction value is about $9.5 billion.

Under the terms of the deal, Merck will acquire Lexington, Massachusetts-based Cubist Pharma for $102 per share in cash. The per share offer price represents a 37 percent premium to Cubist's closing stock price of $74.36 on Friday.

Merck said it will initiate a tender offer through a subsidiary to acquire all outstanding shares of Cubist Pharmaceuticals.

Upon completion of the tender offer, Merck will acquire all the remaining shares of Cubist Pharma through a second-step merger without the need for a stockholder vote under Delaware law. The companies expect the transaction to close in the first quarter of 2015.

Merck noted that Cubist Pharma complements its strategy and global initiative launched in 2013, particularly to boost focus on key therapeutic areas that have the potential to deliver the greatest return on investment.

Merck has identified the hospital acute care segment as one of its key priority areas, in which it believes it can have the greatest impact in addressing significant unmet medical needs.

For the first three quarters of 2014, Merck's hospital acute care portfolio grew by more than 10 percent from the year-ago period, excluding the impact of foreign exchange.

Key products in Merck's hospital acute care portfolio include several antibiotics and antifungals, as well as Bridion or sugammadex, which is marketed outside the U.S. and is currently under regulatory review in the U.S.

Cubist Pharma is focused on the research, development, and commercialization of pharmaceutical products that address significant unmet medical needs in the acute care environment.

The company's major focus is on antibiotics, amid increasing public health concerns about drug-resistant bacteria, or superbugs.

In 2013, Cubist Pharma's total net revenues grew 14 percent from the prior year to $1.1 billion, while full-year U.S. Cubicin net product revenues for the year grew 12 percent to $908 million.

Cubist Pharma's antibiotic Cubicin, the only approved once-a-day therapy for both S. aureus bacteremia as well as complicated skin and skin structure infections or CSSSI, has been used to treat more than two million patients.

Cubist Pharma is seeking approval of Zerbaxa for the treatment of complicated urinary tract infections as well as complicated intra-abdominal infections, with a decision from the European Commission or EC expected during the second half of 2015.

Merck expects the acquisition of Cubist Pharma to add more than $1 billion of revenue to its 2015 base. The company expects the transaction to be neutral to its adjusted earnings per share in 2015, but significantly accretive to adjusted earnings per share in 2016 and beyond. The acquisition will be accretive to both Merck's sales and earnings growth.

In early October, Merck said it completed the sale of its consumer care business to German conglomerate Bayer AG (BYR.L, BAYRY.PK, BAYZF.PK) for $14.2 billion.

MRK closed Friday's trading at $61.49, up $0.57 or 0.94 percent on a volume of 11.06 million shares.

CBST closed Friday's trading at $74.36. In Monday's pre-market activity, the stock is up $26.74 or 35.96 percent to $101.10.