A $3B case of bad timing? Merck defends Cubist deal after judge invalidates patents
- On December 8, Merck agreed to buy Cubist Pharmaceuticals for roughly $9.5 billion (including $1.1 billion in assumed debt).
- On December 9, a judge in a federal court invalidated four of the five patents on Cubicin, Cubist's number one selling product. That means that Cubicin could be facing generic competition as soon as 2016, two years earlier than expected.
- Merck is attempting to reassure investors of the soundness of the acquisition decision, especially as its stock gets hammered by the news.
The implications of the patent ruling are far-eaching, because it means that Cubicin, which generates 80% of Cubist's revenues, could become generic two years earlier than expected. There is also a chance that Merck may not be able to walk away from this deal, at least without some arduous financial and legal wrangling, according to the Wall Street Journal. Doing so would most likely lead to a lawsuit.
Some analysts are saying that Merck paid $2 billion to $3 billion too much for Cubist in its efforts to shore up its infectious disease franchise, given the earlier-than-expected patent expirations. It remains to be seen just how dedicated Merck is to the deal, but executives are likely to play up the support Cubist can provide Merck on its own infectious disease products.