Cubist Pharmaceuticals Inc. yesterday said it will acquire TerraGen Discovery Inc. for $29 million in a stock swap that will give Cubist proprietary technology for developing antibiotics using untapped microbes in the environment along with an extensive patent portfolio.
Under the agreement, Cambridge-based Cubist will exchange 608,000 shares for all the stock in TerraGen, a private company headquartered in Vancouver, British Columbia. The Cubist shares were valued at $47.6625 with the entire transaction expected to close in the third quarter of this year.
"TerraGen exploits the biological diversity that exits in nature and facilitates the discovery of pharmaceuticals from environmental sources that have been previously untapped," said Scott M. Rocklage, Cubist chairman, president, and chief executive.
He explained that less than 1 percent of plants and animals have been accessible for drug screening. However, drugs produced from naturally occurring substances, such as tree bark, soil and fungi have become a rich source of pharmaceuticals. Currently, $14 billion in annual global antibiotic drug sales start with products derived from natural resources.
TerraGen, a five-year-old venture capital backed business, has developed proprietary technology that enables the identification, production and screening for pharmaceuticals from the other 99 percent, Rocklage said.
The Canadian company, which also has research operations in Slough, England, has also developed a large patent estate to cover the methods by which environmental samples are collected along with a chemical extract library generated from a variety of microorganisms that can be used for drug development.
Rocklage said TerraGen will help Cubist expand its pursuit of antibiotic drugs that fight bacterial and fungal infections. Cubist also plans to license TerraGen's technology to another drug maker by year's end.
Cubist is in a pivotal phase 3 clinical trial with daptomycin, an antibiotic, with the branded name Cidecin, to treat complicated skin and soft tissue infections and other serious and life-threatening infections such as bacteremia. The company also has research collaborations with several major pharmaceutical companies such as Merck & Co. and Novartis AG.
"This is a nice deal because it adds a very strong dimension to Cubist's drug discovery capabilities at what looks like a very minimal cost, " said Jay B. Silverman managing director at Roberston Stephens in New York. "TerraGen is in a very hot area for screening of natural products but also needed some management guidance."
TerraGen, whose president left the company less than a year ago, is now run by Julian Davies, chief scientific officer and founder. He and the small research firm's 50 people in Vancouver and in Slough will remain. He was also the former president of the American Society of Microbiology.