Barrons had a piece today on the Cubist/Trius tieup, saying it was a good deal for Cubist (no surprise to this lurker) and that it was not assured that the contingent $2 payment would be made.
BTW, I am a long and have been since $5.45.
If you have a subscription, you can access Barrons, but here is what I could capture:
"Investors' Soapbox PM
| WEDNESDAY, JULY 31, 2013
Cubist Pharma's Buys Look Like Square Deals
Needham & Co.
Cubist Pharmaceuticals announced, after Tuesday's market close, plans to acquire two antibiotic companies, Optimer Pharmaceuticals and Trius Therapeutics.
We view both transactions as favorable to Cubist (ticker: CBST), particularly given the contingent payment structure. The Optimer (OPTR) deal calls for $10.75 cash per share up front ($535 million) and up to $5 cash upon achievement of Dificid [Clostridium difficile-associated diarrhea] sales milestones through 2015.
The Trius (TSRX) deal calls for $13.50 cash per share up front ($707 million) and up to $2 cash upon achievement of a tedizolid [gram-positive infections] sales milestone in 2016.
We note some overlap between the Cubist and Optimer/Trius pipelines. However, we believe the strategy as described by management last night properly leverages each asset's strengths under the circumstances.
We maintain our Hold rating on Cubist, but believe the company is in a stronger position overall if both deals close. We believe the $5 Dificid sales milestone is likely to be achieved, but have less confidence that the $1 or $2 tedizolid sales milestone will be reached. Dificid is a well-differentiated drug in the Clostridium difficile space and our most recent estimates would trigger the $5 payment.
Trius recently completed Phase III trials of tedizolid in skin infections. Although oral formulation is a key positive, we are concerned the drug may not be sufficiently differentiated from its relative linezolid (Zyvox from Pfizer (PFE)) in a generic linezolid environment. This may occur between 2015 and 2021, subject to a settlement agreement between Pfizer and Teva Pharmaceutical Industries (TEVA).
We agree with management assessment of combined $600 million-$1 billion peak sales for the two drugs. We believe potential is split evenly.
Trius has a Gram-negative drug discovery program targeting DNA gyrase and topoisomerase IV (GyrB/ParE), with potential entry into the clinic in 2014. Possible areas of focus include Klebsiella and Acinetobacter. Trius has been successful in drawing nondilutive financial support from biodefense agencies. There are no other drugs in development at Optimer.
-- Alan Carr
-- Mark Vignola "
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