Cubist Says Adolor Deal Offers “Free Option on Billion-Dollar Program”
Lexington, MA-based Cubist Pharmaceuticals (NASDAQ: CBST) had its eye on Adolor (NASDAQ: ADLR) long before it announced it would acquire the Exton, PA-based company on Monday. But it wasn’t until drug giant GlaxoSmithKline (NYSE: GSK) pulled out of a co-promotion deal with Adolor in June that Cubist could finally pounce.
Glaxo and Adolor were partnered on a drug called alvimopan (Entereg), which was launched in 2008 to accelerate healing after bowel surgery. Glaxo’s developers had hoped the product would be approved for chronic use, but it ran into safety issues and was cleared only for short-term use. “What was intended to be an outpatient product became an inpatient product,” says Michael Bonney, CEO of Cubist. The hospital market might seem too small for a Big Pharma player, he says, but it looked just right to Cubist. “Inpatient is the piece that’s always been interesting to us,” Bonney says. “That’s our world.”
Cubist investors have yet to be convinced, though. Cubist will acquire Adolor for $190 million in cash, or $4.25 a share, plus milestones that are achieved with one of Adolor’s experimental drugs, ADL5945 to treat chronic opioid-induced constipation. The total value of the deal is $415 million. After the acquisition was announced, Adolor’s shares shot up from $1.92 to $4.67 on roughly seven times its previous trading volume. Cubist shareholders, on the other hand, pushed the acquirer’s stock down about 2 percent to $39. But Bonney isn’t worried. “As people start processing this, I think you’ll see more enthusiasm from our shareholders,” he says.
The company currently markets two antibiotics: daptomycin (Cubicin) and fidaxomicin (Dificid), which it co-promotes with Optimer Pharmaceuticals (NASDAQ: OPTR). Cubist’s salesforce calls mostly on hospitals and long-term care facilities—a “sweet spot,” Bonney says, that he believes will make for an ideal fit with Adolor. Cubist met with Xconomy in New York on Tuesday after ringing the opening bell on NASDAQ to celebrate its 15 years as a publicly traded company.
Cubist’s most immediate opportunity from the Adolor deal is alvimopan, a drug that Bonney believes has been underperforming against its potential. Adolor sold $25 million worth of the drug in 2010. “They increased their salesforce from 20 to 50″ after regaining the rights from Glaxo, Bonney says. “But we have 200 salespeople. Given our broader footprint, we think we can add additional hospitals to the customer list,” in addition to expanding the drug’s use in facilities that are already buying alvimopan, he predicts. “Something like 83 percent of [bowel surgeries] are being done in the hospitals we’re in every day.”
Bonney predicts Cubist will push annual sales of alvimopan to $100 million—a figure that some Wall Street analysts confirm. “We believe [Cubist] is more than capable of accelerating the sales trajectory of [alvimopan] given … Next Page »