Merck adds heft to hospital biz with $9.5B Cubist buyout

Merck CEO Ken Frazier

Merck & Co. is betting almost $10 billion on beefing up its antibiotics business. The U.S. drugmaker said it agreed to buy Cubist Pharmaceuticals for $102 per share, or about $8.4 billion, plus $1.1 billion in net debt, for a total transaction value of $9.5 billion. The buyout is part of Merck's plan to zero in on its most promising businesses and scale back the rest.

Cubist ($CBST), often bandied about as a takeover option for Big Pharma, was most recently rumored to be a target for Shire, the Irish drugmaker collecting a $1.6 billion-or-so breakup fee from AbbVie ($ABBV) after their canceled merger. Pfizer ($PFE), which is also shopping for deals, had also been tagged as a potential buyer.

For Merck ($MRK), the deal brings a portfolio of marketed meds--including its top performer Cubicin and newly approved Sivextro--and a pipeline of other treatments aimed at drug-resistant infections. Cubicin itself targets S. aureus infections that are treatment-resistant. Sivextro is a head-to-head rival for Pfizer's Zyvox and also treats resistant staph. Another drug, Zerbaxa, is now awaiting approval from the FDA.

Merck CEO Kenneth Frazier said the deal will build up the company's hospital-oriented business, one of the areas the company has pegged for growth. Plus, it puts Merck's global Big Pharma heft behind Cubist's products.

"Cubist ... has built a strong portfolio of both marketed and late-stage pipeline medicines," 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."

The deal will also add at least $1 billion in sales to next year's tally, Merck said in its statement, adding to earnings beginning in 2016.

- read Merck's release

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