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What's happening: Shares of Cubist Pharmaceuticals (NASDAQ:CBST), a biopharmaceutical company best known for making antibiotics used in the hospital setting, soared as much as 23% in after-hours trading on Friday after The New York Times reported that Merck (NYSE:MRK) may be interested in buying the company.
Why it's happening: According to The New York Times, which cited sources familiar with the matter, Merck would be willing to pay up to $100 per share for Cubist, or more than $8 billion. For added context, Cubist shares closed on Friday at $74.36.
Merck has made it abundantly clear during its quarterly conference calls that its acquisition strategy would entail smaller transactions that would help it focus on its core indications. Included in those indications are acute hospital care medicines, which is what Cubist specializes in. If a deal were reached -- remember this is merely in the rumor stage at the moment -- Merck would gain access to Cubist's lead drug, Cubicin, which is used to treat complicated skin and skin structure infections, as well as to treat bloodstream infections such as those caused by MRSA. Based on Cubist's most recent quarterly report, Cubicin has an annual run rate of a hair over $1 billion in sales per year.
The remainder of Cubist's product portfolio consists of clostiridium difficile-associated diarrhea drug Dificid; Entereg, which helps restore proper bowel function following surgery; and acute bacterial skin and skin structure infection drug Sivextro. Combined, these three drugs have accounted for nearly $94 million in sales through the first nine months of fiscal 2014.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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