Merck Committed To Cubist Pharma Acquisition Despite Patent Ruling

(RTTNews) - Healthcare giant Merck & Co. Inc. (MRK) on Tuesday reaffirmed that its deal to acquire biotechnology company Cubist Pharmaceuticals Inc. (CBST) will proceed as planned and it expects the transaction to close in the first quarter of 2015.

This is despite a district court ruling on Monday that Hospira Inc. (HSP) could launch a generic version of Cubist Pharma's antibiotic Cubicin as soon as 2016 and the court invalidating four other Cubicin patents. The court ruled on Cubist Pharma's patent infringement lawsuit against Hospira, a provider of injectable drugs and infusion technologies.

Earlier on Monday, Merck agreed to acquire Cubist Pharma for an equity value of $8.4 billion. Merck noted that the acquisition will boost its opportunity for growth in the hospital acute care market.

Cubist Pharma's major focus is on antibiotics, amid increasing public health concerns about drug-resistant bacteria, or superbugs.

The U.S. District Court for the District of Delaware upheld the patent for Cubicin that expires on June 15, 2016 and invalidated four other Cubicin patents, subject to appeal.

However, Merck said it believes the acquisition of Cubist Pharma will create strong fundamental value for Merck's shareholders. The company expects the transaction to add more than $1 billion of revenue to its 2015 base, with strong growth potential thereafter.

Further, Merck said that the court's decision does not change its expectation that the transaction will be neutral to modestly accretive to its 2015 adjusted earnings per share. The company continues to expect that the transaction will contribute mid-single digit accretion on a percentage basis to its adjusted earnings per share in 2016, and continue to be accretive thereafter.

Meanwhile, Michael Bonney, CEO of Cubist Pharma noted on Monday that the district court's decision on its re-issue patent will prohibit Hospira from entering the market until June 15, 2016. He also said that the company disagreed with the court's decision on four other patents and plans to appeal the judgment on these patents.

Bonney added that Cubist Pharma's merger deal with Merck is unaffected.

MRK is trading at $59.57, down $2.32 or 3.75 percent on a volume of 582,307 shares.

CBST is trading at $97.26, down $3.34 or 3.32 percent on a volume of 4.8 million shares.