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Merck buys Cubist Pharma for 9 5bn

Article By: ,  Financial Analyst
December 10, 2014 5:26 PM

Merck has revealed it is to buy US firm Cubist Pharmaceuticals Inc for $9.5 billion (£6 billion), which includes an assumption of a $1.1 billion debt, in a bid to enter the market for drugs that combat superbugs.

The growing threat of superbugs – that resist even the most powerful antibiotics – has led the World Health Organization in April to say that the world risk entering "a post-antibiotic era", in which common infections would kill again.

Merck expects the deal to generate more than $1 billion of revenue for it next year, and to significantly add to corporate profits in 2016 and beyond. It will pay $102 per share for Cubist.

The company’s flagship antibiotic, Cubicin, is used to prevent bacterial skin infections and treat blood and heart infections. It accounts for annual sales of more than $1 billion globally.

"Cubist is a global leader in antibiotics and has built a strong portfolio of both marketed and late-stage pipeline medicines," Merck CEO Kenneth Frazier said in a statement.

"Combining this expertise with Merck's strong capabilities and global reach will enable us to create a stronger position in hospital acute care while addressing critical areas of unmet medical need, such as antibiotic resistance."

Cubist has about 1,000 employees worldwide, and it spent $300 million on antibiotic drug research last year.

The Cubist deal is also Merck's second big acquisition this year, with the purchase of Idenix Pharmaceuticals for $3.85 billion in June in a bid to boost its hepatitis C drug portfolio.

Shares in Cubist jumped 36 per cent to $100 in New York trading while Merck’s shares were flat.

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