NEW YORK (TheStreet) -- Shares of Cubist Pharmaceuticals (CBST) are up 36.01% to $101.14 in pre-market trade after it was reported that Merck & Co. (MRK) agreed to buy the company for $8.4 billion in cash to add products to help fight the growing threat of drug-resistant bacteria, Bloomberg reports.
Merck will begin a $102-a-share tender offer for Cubist, the companies said in a statement today. The price is 37% above Cubist's closing share level on Dec. 5. Including $1.1 billion of net debt, the deal is valued at about $9.5 billion.
Cubist has said it plans to introduce four new drugs by 2020 to combat bacterial infections that are resistant to other treatments because of overuse. The rising threat of drug-resistant bugs has spurred public health authorities to urge companies to invest in new antibiotics, a field drugmakers had largely abandoned to focus on more profitable therapeutic areas such as cancer or hepatitis C, Bloomberg said.
TheStreet Ratings team rates CUBIST PHARMACEUTICALS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CUBIST PHARMACEUTICALS INC (CBST) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth, good cash flow from operations, increase in stock price during the past year and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Biotechnology industry. The net income increased by 167.3% when compared to the same quarter one year prior, rising from -$33.90 million to $22.83 million.
- CBST's revenue growth trails the industry average of 40.7%. Since the same quarter one year prior, revenues rose by 16.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has significantly increased by 174.27% to $43.25 million when compared to the same quarter last year. In addition, CUBIST PHARMACEUTICALS INC has also vastly surpassed the industry average cash flow growth rate of 116.43%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- CUBIST PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CUBIST PHARMACEUTICALS INC swung to a loss, reporting -$0.26 versus $2.09 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus -$0.26).
- You can view the full analysis from the report here: CBST Ratings Report