Biotech Values

[DewDiligence]

Re: MRK-CBST

http://www.wsj.com/articles/merck-to-buy-cubist-pharmaceuticals-for-8-4-billion-1418040814

Merck & Co. agreed to buy Cubist Pharmaceuticals Inc. for $8.4 billion… The deal, which also includes the assumption of $1.1 billion in debt, is worth $102 a share, a 37% premium to Friday’s close.

Lexington, Mass.-based Cubist is one of few companies that specializes in drugs to treat infectious diseases and other conditions, primarily in a hospital setting. Its flagship drug is Cubicin, an intravenous antibiotic used to treat serious infections that had $967 million in sales in 2013. The company has projected that sales of Cubicin, which currently accounts for more than 80% of its sales, will reach $2 billion by 2017.

Antibiotics traditionally hasn’t been considered one of the drug industry’s most lucrative areas, but some analysts believe new versions could garner higher prices as it becomes more important for hospitals to reduce infections and as resistance to traditional antibiotics grows… Cubist, meanwhile, is currently seeking approval of the antibiotic Zerbaxa to treat urinary tract infections and intra-abdominal infections.

The transaction has been unanimously approved by the boards of both companies and is expected to close in the first quarter of next year. Merck plans to initiate a tender offer for Cubist’s shares and will acquire the remaining stock through a second-step merger that won’t require a shareholder vote.