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Expert Financial Analysis and Reporting

Possible Impact of Merck Acqusition of Cubist on the Trius CVR

I was just asked about the potential impact on the value of the Trius CVR of the Merck acquisition of Cubist. You may recall that when Trius was acquired, Trius shareholders received $1.00 for each share that they tendered. If Syvestro (tedizolid) sales in the US, Europe and Canada reach $125 million in 2016  we get $1.00 and we get $2.00 if they meet or exceed $135 million. In between the payment is pro rata for each $1 million of sales so that at $126 million we will get $1.10, at 127 million $1.20 and so on. The CVRs are non-tradable following the acquisition. This feature means that they will be subject to the capital gains rate rather than ordinary income if and when they are paid.

Whatever Trius could have done on its own, there is no question that the already in place robust sales and marketing infrastructures of Cubist will bolster sales. The same could be said in regard to the impact that Merck will have relative to Cubist. Merck has a powerful marketing organization outside of the US while Cubist gets almost all of its sales in the US. Merck also has long experience in hospital infectious disease marketing through marketing the carbipenem antibiotic Primaxin and the anti-fungal agent Cancidas.

My estimate for 2016 sales was $137 million as of my last report on Trius. I have not been following Cubist closely. However, I note that one Wall Street analyst whom I respect recently put out a note with estimates for Syvextro (tedizolid) of $12 million in 2014, $67 million in 2015 and $122 million in 2016. Let's hope that Merck can nudge Syvextro over the $135 million milestone in 2016. Aaaah, the good old days.

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