Cubist Pharmaceuticals wants to become more than another biotech company with a nice little franchise built around a single drug. So today it opened up the checkbook, shelled out more than $1.24 billion, and acquired a couple more drugs that will make it a much more formidable player in the antibiotics world.
Lexington, MA-based Cubist (NASDAQ: CBST) said today it has scooped up two more antibiotics by acquiring San Diego-based Trius Therapeutics (NASDAQ: TSRX) and Jersey City, NJ-based Optimer Pharmaceuticals (NASDAQ: OPTR).
Cubist agreed to pay $707 million to get ahold of Trius, and $535 million to take over Optimer. Each deal contains provisions for bonus payments, if the products reach certain goals, which means the purchase price could swell to as much as $818 million over time to Trius shareholders, and $801 million for Optimer.
The deal represents a bold strategic move for Cubist, which gets almost 90 percent of its total revenues from a single potent antibiotic it sells to hospitals—daptomycin (Cubicin). While Cubist has invested in its own antibiotic discovery efforts, and sought other specialized drugs it can sell to hospitals, none of those efforts have yet been able to diversify the company beyond its one key asset. The company generated $258 million in revenues in the most recent quarter ended June 30, and had $1 billion of cash in the bank then, according to its quarterly report.
By acquiring Optimer, a company Cubist has partnered with, it gains an FDA-approved product for a dangerous hospital-related infection called C. difficile. By getting Trius, Cubist is gaining the rights to an antibiotic that has passed the three phases of clinical trials needed for FDA approval, and which could give Cubist a new product to sell against another hospital-based scourge, the bug known as MRSA.
“Trius is a tremendous strategic fit with Cubist that supports our Building Blocks of Growth long-range goals while extending our global leadership in the acute care environment,” said Cubist Chief Executive Officer Michael Bonney (pictured above), in a statement. As for Optimer, Bonney said similar things. “Optimer is a natural fit for Cubist given our co-promotion of Dificid and focus on the acute care and hospital environments.”
Optimer has been on the sale block since February, when its board ousted former CEO Pedro Lichtinger and brought in former Pfizer CEO Henry McKinnell to “explore a full range of strategic alternatives.” The company’s drug for C. difficile infections, fidaxomicin (Dificid), was approved by the FDA in May 2011. It got off to a slow start in the marketplace, although analysts have forecasted it could someday reach $300 million in annual sales. Cubist struck an agreement to co-market the product with Optimer in the U.S. in April 2011, just before FDA approval was granted.
Trius doesn’t have a marketing partner for its lead asset, tedizolid phosphate (TR-701) in the U.S., although it has agreed to co-market the product with Bayer outside the U.S., Canada and the European Union. That drug has been developed as an intravenous product, and an oral pill, so that patients can manage their MRSA infections in the hospital and when they go home for recovery. Trius also has a number of antibiotic programs in preclinical development.
The deals, while adding up to more than $1.2 billion upfront, are both coming at relatively modest prices. Cubist is agreeing to pay $13.50 a share upfront for Trius, or about a 15 percent premium over Trius’ closing stock price of $11.71 a share before today’s deal was announced. Trius shareholders could end up getting another $2 a share if the product reaches certain goals for Cubist, meaning the total premium could increase to 32 percent.
It’s a different story for Optimer shareholders, who will probably be grumbling for months about their deal terms. Cubist agreed to pay $10.75 a share for the company—far less than the $13.29 closing stock price that Optimer had today as investors speculated about a bigger deal in the works. Those shareholders could still end up making gains if Optimer hits the goals outlined in the merger agreement, which could tack on another $5 a share in payments from Cubist.
Cubist plans to hold a webcast conference call with investors at 6 pm Eastern/3 pm Pacific to discuss the deal in greater detail.