Merck & Co. Inc (MRK) Set to Acquire Cubist Pharmaceuticals Inc (CBST) for $7 Billion

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Merck & Co., Inc. (NYSE:MRK) is looking forward to acquiring Cubist Pharmaceuticals Inc (NASDAQ:CBST), an antibiotics maker, in a deal estimated to cost about $7 billion to $8 billion. A report by the Financial Times cited an unnamed source as saying that Merck will be paying Cubist around $102 per  share, with official announcements expected to be made early this week.

Cubist Pharmaceuticals Inc (NASDAQ:CBST) is known for its drug Cubicin, which was initially approved by the U.S. Food and Drug Administration in 2003 for use in treating serious skin infections and was later also given approval in 2006 as a drug for treating  bloodstream infections. The company is aiming to develop new antibiotics by 2020 and has set aside $400 million in funding for this goal. Currently, it gets 80 percent of sales from Cubicin, and official company estimates  figure an amount of $2 billion in sales from the drug by the year 2017.

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Acquisition of Cubist by Merck & Co., Inc. (NYSE:MRK) will be one of the biggest in the pharmaceutical industry for this year,  as Merck is eyeing for acquisitions of small and medium sized drug firms that would complement its own product line. Merck is currently the second largest pharmaceutical company based in the U.S., and its research focus is on Alzheimer’s disease, cancer, and diabetes.

Pharmaceutical companies are turning towards acquisitions to sustain growth in the face of patents’ expirations. Merck & Co., Inc. (NYSE:MRK) has recently implemented a cut in its global workforce last year at a rate of 20 percent, followed by a sale of of its consumer healthcare unit to Bayer AG (ADR) (OTCMKTS:BAYRY) for $14.2 billion earlier in May this year. Bloomberg data indicates that Merck has assets in cash and equivalents totalling $14.3 billion as of September, and a debt figure of $27.8 billion.

News of Cubist acquisition by Merck & Co., Inc. (NYSE:MRK) lead to an upward surge of Cubist share, as much as 26 percent at $93.50 before setting to $91.25 during after-hours trading on December 5. It is currently valued at $74.36 as of December 5 close.

This article has been written by Nonito Guntan.

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