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Analyst Blog

Cubist Pharmaceuticals Inc. (CBST - Analyst Report) expanded its portfolio by completing the purchase of biopharmaceutical company Adolor Corporation at $4.25 per share as an upfront cash payment ($221 million).

Moreover, shareholders of Adolor are eligible to receive a contingent payment right per share. This provision makes the shareholder eligible for additional cash payments from Cubist Pharma of up to $4.50 per share in the event of chronic opioid induced constipation candidate ADL5945 achieving certain milestones. The deal was announced in October 2011.

As a result of the completion of the deal, Cubist Pharma gets access to Entereg (alvimopan). The drug is marketed in the US to expedite the time needed for upper and lower gastrointestinal recovery following partial large or small bowel resection surgery with primary anastomosis.

The addition of Entereg to the portfolio will bring in additional revenues for Cubist Pharma. Prior to the acquisition, Cubist Pharma had two products in its product portfolio, Cubicin and Dificid.

Cubist Pharma’s primary growth driver is its antibiotic injection, Cubicin (daptomycin). Cubicin is marketed in the US and several other markets for the treatment of severe bacterial infections of the skin and bloodstream.

Another marketed product at Cubist Pharma is Dificid (fidaxomicin) for treating patients suffering from clostridium difficile-associated diarrhea. Cubist Pharma has a two-year agreement with Optimer Pharmaceuticals Inc. for the co-promotion of Dificid in the US. We note that Optimer has developed Dificid.

Our Recommendation

Even though we are positive on the purchase of Adolor, we prefer to remain on the sidelines until the benefits of the acquisition start flowing in at Cubist Pharma. Consequently, we have a Neutral recommendation on Cubist Pharma which is in line with the Zacks #3 Rank (Hold rating) carried by the stock in the short-run.

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