Why Merck & Co Inc (MRK) Still Remains a Good Bet for Investors

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Investing in the pharmaceutical sector has always been rewarding and even though some of the companies in your portfolio, like Merck, might be old enough to be called veterans, they are still worthy enough to provide healthy returns. Merck & Co Inc (NYSE:MRK) proved the veracity of its survival skills yet again as it made known plans to acquire Cubist Pharmaceuticals, through a deal slated to be touching $8 billion.

This is in keeping with Merck & Co Inc (NYSE:MRK)’s strategy of acquiring smaller companies that would provide a boost to its product inventory as also its research and development. Diabetes, hospital care, cancer and vaccines are some of the areas on which Merck intends to focus and that is why it has disposed off its consumer healthcare segment and other related products through various deals. The company has also been indulging in cost-cutting measures by laying off thousands of employees and closing down several of its offices.

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Merck & Co Inc (NYSE:MRK)’s interest in Cubist is a result of increased focus on control and reduction of infections in hospitals, particularly owing to the growing resistance of contagions towards traditional antibiotics. Courtesy of its flagship brand, Cubicin, Cubist offers an option to provide intravenous treatment of various infections.

In the aftermath of this acquisition, Merck has agreed to pay $100 for every share of Cubit which is currently rated at $74.36 when trading session closed on Friday, 5th December, 2014. Fall-out will also be felt by Cubist’s top level management wherein the current President Robert Perez was to take over the role of CEO from Michael Bonney, who would then have moved on to occupy the Chairman’s designation.

There is no saying if this change would occur if the deal is finalized because in that case Merck & Co Inc (NYSE:MRK) would definitely have a say in the matter. However, grapevine has it that the talks could still fail and that it is too early to conjecture on any future course of action.

This article has been by Vinita Basu.

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