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Plug-and-play deal
December 2011
by Amy Swinderman  |  Email the author


LEXINGTON, Mass.—Expanding its commercial acute-care assets, biopharmaceutical company Cubist Pharmaceuticals Inc. last month initiated a cash-tender offer to purchase all outstanding shares of Adolor Corp., an Exton, Pa.- based developer of prescription pain management products.
Under the tender offer—made by FRD Acquisition Corp., a wholly owned subsidiary of Cubist—Cubist will acquire Adolor's shares for $4.25 in cash, or approximately $190 million up front. The agreement also entitles Adolor stockholders to receive additional contingent payment rights (CPRs) of up to $4.50 for each share they own if certain regulatory approvals and/or commercialization milestones are achieved for ADL5945, a treatment for chronic opioid induced constipation that is set to enter Phase III trials next year.
"The way this deal is structured, we have a good risk- sharing way to move the ADL5945 program forward," says Steve Gilman, Cubist's chief scientific officer. "This is a plug-and-play kind of addition to our sales and marketing organization in the United States, and presents the opportunity for significant revenues in the next few years."
In total, the transaction is valued at up to $415 million. The deal has been unanimously approved by both companies' boards of directors of both companies and is expected to close in the fourth quarter.  
Cubist calls the acquisition a "strategic fit … and the latest milestone in what has been a transformational year for the company." Since its founding 1992, Cubist has been focused on the development and marketing of novel acute-care therapies for use in hospitals and other acute-care environments—for conditions like skin and bloodstream infections and endocarditis—an area of discovery and development that most pharmaceutical companies have abandoned.  
That unique market position has generated nearly $700 million in sales in the United States for Cubicin, a only once-daily intravenous bactericidal antibiotic for the treatment of complicated skin and skin structure infections caused by susceptible strains of Gram-positive microorganisms like Staphylococcus aureus (including methicillin-resistant strains, also known as MRSA), Streptococcus pyogenes, S. agalactiae, S. dysgalactiae subsp. equisimilis and Enterococcus faecalis.
In addition, Cubist is working on several preclinical programs to treat various serious bacterial infections as well as agents that treat acute pain. Notably, the company has two programs at or near Phase III trials in its pipeline: One that focuses on the development of a novel cephalosporin to address certain serious infections caused by multidrug resistant, Gram-negative organisms; and a second program for the treatment of C. difficile-associated diarrhea.  
"Cubist's strategic intent is to become a global leader in the discovery, development and commercialization of therapies that affect people with acute-care illnesses, for whom prescription decisions are made within the walls of a hospital or hospital-allied building," says Gilman. "Our national hospital sales force is focused on getting to the right patients at the right time, and providing a good therapeutic benefit. That has been a hallmark of Cubist for the past seven years, but in the last three to four years, we have started to take a serious look at the next wave of products in the acute-care space and adding them to both our existing sales force and our clinical development efforts."   
Adolor's ADL5945 adds to Cubist's late-stage pipeline, giving it three strong candidates addressing significant markets. The compound is a small-molecule, potent, peripherally acting mu opioid receptor antagonist intended to block the adverse effects of opioid analgesics on the gastrointestinal tract without affecting analgesia.  
Adolor also has a product approved in the United States called ENTEREG (alvimopan), which is indicated to accelerate the time to upper and lower gastrointestinal recovery following partial large- or small-bowel resection surgery with primary anastomosis. The company also has several earlier-stage compounds under development for the management of pain and central nervous system disorders.
Cubist employs about 650 people, approximately 370 of who work in Massachusetts. Adolor's 100 employees will be folded into the company, with sales representatives remaining where they are, but the organizational staff moving to Lexington.  
Adolor did not respond to requests for comment. In a statement announcing the deal, Michael Dougherty, the company's president and CEO, stated, "This transaction delivers significant immediate value to Adolor stockholders, as well as potential future value through the CPRs. Cubist shares our commitment to patients and their health care providers, and we expect that ENTEREG and ADL5945 will benefit from Cubist's proven track record and larger platform in development and commercialization."
Code: E121101



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