How Cubist makes Merck more valuable

A researcher works in a microbiology laboratory at the Cubist Pharmaceuticals research facility in Lexington, Massachusetts.
John Guillemin | Bloomberg | Getty Images
A researcher works in a microbiology laboratory at the Cubist Pharmaceuticals research facility in Lexington, Massachusetts.

If there is one person who couldn't be more excited by Merck's acquisition of Cubist Pharma, it's Jim Cramer.

"I think this morning's purchase of Cubist Pharma for $8.4 billion may be one of the great deals for this old line company," the "Mad Money" host said.

What makes his excitement unique is not only his savvy business sense indicating this was a good deal, but also a personal experience he recently had with his late father. In fact, if it weren't for a recent memory of being in the hospital with his father, Cramer would have no idea why Merck would pay so much for Cubist, especially since its main drug, Cubicin, is going off patent in 2018.

In the past, Cramer has always been impressed with Cubist CEO Mike Bonney. He understood the importance of going after unmet needs of patients who catch diseases after they have been admitted into the hospital.

Essentially, Cramer described hospitals as being a breeding ground for treatment resistant viruses and bacteria.

Though the "Mad Money" host was previous skeptical of Cubist because of patent issues, management has made it clear that the pipeline is filled with new drugs. They will be attacking diseases related to hospital stays and could make a real difference. The company has acquired businesses with drugs designed to stop hospital related diarrhea and hard-to-treat skin diseases.

Cramer witnessed Cubist's efforts in action when his father entered a hospital in Philadelphia with a broken hip. Cramer was shocked when a doctor explained the high mortality rates for elderly people who have this simple operation—mainly because the elderly had to stay in the hospital to recuperate while younger people would receive outpatient physical therapy.

Cramer's father made it all the way to inpatient rehab, but he caught a superbug called acute respiratory distress syndrome, a form of pneumonia that fills the lungs with liquid. Though he demanded every medicine on the planet to treat his father, sadly no such drug exists.

"Now, I don't know if Cubist has some secret weapon against this particular hospital borne disease, but it's pretty darned clear that this scourge kills a great many people and the fatality odds are directly related to it," Cramer said.

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So did Merck overpay for Cubist? Not if they have they have the ability to illnesses like the one Cramer's father had. After watching the helpless medical staff unable to treat this hospital borne disease, Cramer thinks this is a smart acquisition.

Eventually Cubist could have the cures needed to get our loved ones out of hospital beds and into a safer environment at a faster rate.

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