Merck & Co, the big US drugmaker, is in talks to acquire the biopharmaceuticals company Cubist Pharmaceuticals Inc for more than US$7 billion, according to people briefed on the matter.
The deal, if announced, would represent another multibillion-US dollar healthcare transaction in a banner year for mergers and acquisitions in the industry.
It would also fit into the strategy by Merck’s chief executive, Kenneth Frazier, of buying successful midsize drugmakers that complement his company’s existing stable of drugs.
Merck is expected to pay roughly US$100 a share for Cubist, valuing the company in the range of US$7.5 billion, these people said.
A deal could be announced as early as next week.
Cubist makes drugs that treat dangerous bacteria and superbugs.
Shares in Cubist are trading near a high, nearly doubling in value over the past two years, making it an ideal time for the company’s board to approve a sale.
Unlike many pharmaceutical companies, Cubist focuses on developing drugs that address “significant unmet medical needs,” like diseases that could cause pandemics in the developing world.
Last month, Cubist, which is based in Lexington, Massachusetts, reported third-quarter sales of US$309 million, a 16 percent increase from the same period a year earlier.
Shares of Cubist closed at US$74.36 a share on Friday, with a market value of less than US$6 billion.
Merck appears to be willing to pay about a 33 percent premium for the company, according to the people briefed on the matter.
It was not immediately clear if Merck would pay for Cubist shares with cash, stock or a mix of the two.
Merck, the second-largest US drugmaker behind Pfizer Inc, makes vaccines, prescription products and oncology treatments, and has a market value of more than US$174 billion.
In the third quarter, Merck, based in New Jersey, reported sales of US$10.56 billion and earnings of nearly US$900 million.
Though that was on the low end of analyst expectations, the company’s stock has performed well over the past month and is also trading at highs.
Its shares closed at US$61.49 on Friday.
Part of the cause for Merck’s sales slump, particularly in its vaccine for cervical cancer, is increased competition from generic drugmakers.
However, sales of Merck’s diabetes drugs — its largest line of pharmaceuticals — continues to grow.
Its cash reserves were further bolstered this year when Merck sold its consumer business to Bayer for US$14.2 billion. That deal closed in October.
In June, Merck agreed to buy Idenix Pharmaceuticals for US$3.85 billion, continuing its strategy of pursuing small bolt-on acquisitions rather than megadeals.
Last month, Merck increased its quarterly dividend by a cent, to US$0.44 a share.
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