This week Merck announced
that it will acquire Cubist for $9.5 billion at a 35% premium over the stock
price. Cubist is a mid-size pharmaceutical company with a recently diversified
portfolio of products all acquired through acquisition. They currently market
Cubicin and Dificid for Gram positive infections and C. difficile
respectively. Cubicin is already a $1
billion seller. They will soon market tedizolid and ceftolozane-tazobactam
through their acquisitions of Trius and Calixa. Merck is clearly targeting the
specialty hospital marketplace with this acquisition and may hope to complement
the Cubist products with their own imipenem-cilastatin-MK-7655. 7655 is currently in Phase II trials for
urinary tract infections where it has been for two years now.
This announcement is bittersweet for me. This clearly
continues a string of good news for antibiotics and antibiotic R&D. It is further proof that large pharmaceutical
companies now agree that antibiotics can provide a return on investment and that
they are willing to put there money where there mouths are. The acquisition of
Cubist will also bolster the appetite of investors beyond the excitement
provided by Cubists own acquisitions of Optimer and Trius last year.
On the negative side, there are always the “synergies” that
go along with these mergers. The Merck
investment in their antibiotic R&D portfolio has been exceedingly modest
over the last decade or so. Will this
change or will Merck now go about ridding itself of the Cubist R&D organization
to achieve its promised cost-savings? On
the risk side, essentially all of Cubist’s late stage antibiotics have come
from external sources. Their own
discovery organization has contributed little to the late stage pipeline. Merck’s own discovery organization has
provided only MK-7655 – a knock off or avibactam – and little else for many
years. How Merck will deal with the two
discovery groups is a matter of concern and remains a complete unknown at least
to me.
Speaking about the commercial side, Merck is selling
ertapenem, launched in 2002 where it is doing reasonably well. Cubist has done
a yeoman’s job with Cubicin bringing in $1 billion in revenues almost
exclusively from the US since its launch in 2003. Cubist has never had a real
European marketing organization and has depended on unreliable partners like
Novartis for their meager European sales. Will Merck be able to do better? One
would hope so.
Recently, Cubist lost the first round in a battle over their
more recent patents for Cubicin. The patents that
were denied by the court included methods for purification of Cubicin and for
the current dosing regime that was discovered in preclinical and later in
clinical studies to reduce muscle toxicity and at the same time maintain
antibiotic efficacy. While these patents are subject to appeal, it is not clear
the Cubist will prevail. That said,
Merck has clearly determined
that the future revenues to be gained by Cubist’s new products, tedizolid and
ceftolozane-tazobactam are worth the price they have offered even without the
additional 4-5 years of exclusivity for Cubicin that may be wiped off the map
by the courts.
With the re-entry or expansion of large pharma’s efforts in antibiotics, the deep pockets of pharma have opened once again. That means that venture capital and perhaps even private equity will now also loosen their purse strings to support new antibiotic research and development. A new golden age for antibiotics is knocking at our door. Lets be sure to welcome it with our ongoing efforts to improve the regulatory and financial climate for new antibiotics.
No comments:
Post a Comment