Merck says still plans to buy Cubist, despite patent setback
(Reuters) - Merck & Co Inc (MRK.N: Quote) said on Tuesday it will proceed with its planned $8.4 billion purchase of Cubist Pharmaceuticals Inc CBST.O and still expects the deal to boost its long-term earnings, despite a court ruling that could speed the arrival of generic forms of Cubist's top-selling product.
Merck shares fell 3.7 percent to $59.55 in early trading. Cubist slid nearly 3 percent to $97.60.
Late Friday, Merck said it planned to buy Cubist, whose flagship product is the widely used antibiotic Cubicin for skin infections. The deal would give Merck, the No. 2 U.S. drugmaker, entry into the market for drugs that fight so-called superbugs.
U.S. District Judge Gregory Sleet in Delaware invalidated four Cubicin patents on Monday and ruled that Hospira Inc HSP.N can launch a generic version of Cubicin as soon as 2016, two years sooner than Wall Street expected.
Merck, in a release on Tuesday, said it still expects to complete its purchase of Cubist in the first quarter of 2015, and noted that Sleet's decision "is subject to appeal."
"The combined strength of both companies will provide both incremental and long-term value, and Merck expects the transaction to add more than $1 billion of revenue to its 2015 base, with strong growth potential thereafter," Merck said.
Leerink Partners analyst Seamus Fernandez said late Monday he expected several less expensive generic forms of Cubicin to be introduced in the United States by late 2016, given Sleet's ruling.
Fernandez said lost Cubicin sales from the generics suggested the price Merck will pay for Cubist "looks $2 billion to $3 billion high ... This is a very tough start to a relatively sound strategic deal."
(Reporting by Ransdell Pierson; Editing by Jeffrey Benkoe)
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