Merck & Co. Agrees to Acquire Cubist Pharmaceuticals for $9.5 Billion

Merck & Co. has agreed to acquire Cubist Pharmaceuticals, Inc. for $9.5 billion, which includes an equity valuation of $8.4 billion (based on an offer of $102 per share in cash) and the assumption of $1.1 billion in net debt (based on projected cash balances) and other considerations The boards of directors of both companies have approved the transaction.

Cubist is focused on the discovery, development, and supply of antibiotics to treat serious and potentially life-threatening infections caused by a broad range of increasingly drug-resistant bacteria, and the deal is intended to strengthen Merck’s position in anti-infectives, specifically its hospital acute-care business in a variety of therapeutic areas, including Gram-positive and Gram-negative multi-drug-resistant infections. Cubist's lead antibiotic is Cubicin, a once-a-day therapy for both S. aureus bacteremia and complicated skin and skin structure infections. Cubist's in-line and late-stage pipeline of anti-infective medicines include Zerbaxa, which is pending approval from the US Food and Drug Administration.

In a press statement, Merck says it has identified acute care within the larger hospital setting as a top priority because of a unmet need in this area, and the growing importance of hospitals as a point for healthcare delivery. The company estimates that hospitals currently represent 25% of overall healthcare spend. “Merck believes now is an optimal time to significantly grow its hospital acute-care presence because of the positive regulatory and reimbursement trends in the hospital setting and the increasingly important role that hospitals are expected to provide in healthcare overall,” said Merck in its statement.

For the first three quarters of 2014 compared to 2013, Merck's hospital acute-care portfolio grew by more than 10%, excluding the impact of foreign exchange. Key products in Merck's hospital acute-care portfolio include several antibiotics and antifungals, as well as Bridion (sugammadex), which is marketed outside the United States and is currently under regulatory review in the United States. In addition, Merck has continued to invest in its hospital acute-care pipeline and has several candidates, including actoxumab/bezlotoxumab (MK-3415A), an investigational combination of therapeutic antibodies targeting two C.difficile pathogenic toxins (A and B), which is being evaluated in clinical trials for the prevention of recurrence of C.difficile infection; and relebactam (MK-7655), an investigational class A and C beta-lactamase inhibitor being evaluated in clinical trials for the treatment of severe bacterial infections.

Merck expects the acquisition to add more than $1 billion of revenue to its 2015 base. Under the terms of the agreement, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Cubist Pharmaceuticals, Inc. The closing of the tender offer will be subject to certain conditions, including the tender of shares representing at least a majority of the total number of Cubist's outstanding shares (assuming the exercise of all options), the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Upon the completion of the tender offer, Merck will acquire all remaining shares 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.

Source: Merck & Co.

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