Merck buys Cubist Pharma for $9.5bn

<p> The increasing threat from deadly superbugs prompted Merck to buy Cubist.</p>

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.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.