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In a bid to strengthen its antibiotics portfolio, Cubist Pharmaceuticals, Inc. announced its intention to acquire a couple of companies operating in the field. The first deal involves Optimer Pharmaceuticals, Inc. .

As per the terms of the deal, Optimer shareholders will receive $10.75 per share in cash (or $535 million) in addition to a contingent value right (CVR) for each share. The CVR will allow each shareholder to receive additional one-time cash payments of up to $5 per share in the event of certain sales milestones being achieved with respect to antibiotic Dificid. The CVRs are expected to be listed on the Nasdaq.

Cubist’s offer price of $15.75 per share (including the contingent payment) represents a premium of 18.5% to Optimer’s closing price on July 30. The deal, cleared by the boards of directors of both companies, is expected to close by Dec 31, 2013 and boost Cubist’s earnings in the first year following closure.

We note that Cubist and Optimer are no strangers to each other. The two companies co-promote Dificid in the U.S. treating patients suffering from clostridium difficile-associated diarrhea. Dificid is available in the U.S. since Jul 2011. The duration of the deal was initially two years and was consequently scheduled to expire at the end of this month. The companies have, however, extended the co-promotion deal by up to a year.

Cubist would gain full control of Dificid in the event of the merger materializing. Cubist has sufficient experience in marketing antibiotics. Cubicin, an antibiotic injection, is the growth engine at Cubist. Net sales of the product in the U.S. climbed 13.4% to $227.1 million in the second quarter of 2013. Cubicin performed well in international markets with sales of the drug climbing 31.6% to $15 million. The antibiotics pipeline at Cubist Pharma is also encouraging.

Cubist also announced its intention to purchase another antibiotics maker, Trius Therapeutics, for approximately $707 million. Including a contingent payment of $2.00 per share, the value of the deal, which is expected to close later in the year, can increase up to $818 million.

Cubist, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). Companies such as Gilead Sciences Inc. and Medivation, Inc. appear to be more attractive in the biopharma space. While Medivation carries a Zacks Rank #2 (Buy), Gilead is a Zacks Rank #1 (Strong Buy) stock.

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