Back to top

Analyst Blog

Cubist Pharmaceuticals Inc. (CBST - Analyst Report) announced the pricing of $700 million of convertible senior notes. The unsecured notes will be issued in two series of $300 million and $400 million (principal amount). The company has provided an over-allotment option to the underwriters for purchasing an additional $50 million worth of notes.

The $300 million notes will carry an annual interest rate of 1.125% and are set to mature on Sep 1, 2018. The $400 million notes will bear an interest rate of 1.875% and are set to mature on Sep 1, 2023. The interest amount will be payable on Sep1 and Mar 1 from Mar 1, 2014 in each case. Cubist Pharma further stated that the notes cannot be redeemed before they mature. Moreover, the notes can be converted into cash, shares of Cubist Pharma’s common stock or a combination of both in certain circumstances/time periods.

Cubist Pharma expects to raise a net amount of $679 million from this transaction. The company intends to make use of the amount primarily to finance its impending acquisition of antibiotics maker Optimer Pharmaceuticals, Inc. . The deal is expected to close by year end.

Following the deal with Optimer Pharma, Cubist Pharma extended its deal with Optimer Pharma (which was scheduled to end in Jul 2013) by up to a year. As per the deal, the companies co-promote Dificid (fidaxomicin) in the U.S. for the treatment of C. difficile acquired diarrhea. Dificid is available in the U.S. since Jul 2011.

Cubist Pharma, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). Companies such as Gilead Sciences Inc. (GILD - Analyst Report) and Actelion Ltd. (ALIOF) appear to be more attractive in the biopharma space. Both stocks carry a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.