NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, December 9, 2014

Merck & Co. is paying $8.4 billion in cash and assume $1.1 billion in net debt to acquire Cubist Pharmaceuticals Inc. and join the fight against drug-resistant bacteria — a growing global threat that’s slowly fueling a lucrative pharma business.

On Monday, the New Jersey-based pharma giant announced plans to buy the biotech company, which has been developing medicines to fight so-called superbugs, or diseases that no longer respond to traditional antibiotics. Lexington, Mass.-based Cubist’s chosen area of research was once deemed unprofitable, but in recent years the spread of drug-resistant bacteria has become a significant focus for health officials and economists around the world.

In a report earlier this year, the World Health Organization (WHO) called drug-resistant bacteria “a problem so serious that it threatens the achievements of modern medicine.” The WHO warned that in many parts of the world certain strains of bacteria are developing a resistance to common medicines used against them, rendering the drugs useless.

“In some settings, few if any of the available treatment options remain effective for common infections,” the WHO stated.

A recent Princeton study noted that between 2000 and 2010, consumption of antibiotic drugs increased 36 percent, with Brazil, Russia, India, China and South Africa accounting for 76 percent of the increase. Some research shows the rising demand could be due to fewer restrictions on antibiotic use. A study in China found, for instance, that 98 percent of patients in a Beijing children’s hospital were given antibiotics for a common cold. In India, where antibiotics do not require a prescription, pharmacy sales of the drugs increased six times between 2005 and 2010.