Cubist Pharmaceuticals Inc (CBST), Trius Therapeutics, Inc. (TSRX): How Could This Deal Shake Up an Entire Industry?

Legal complications and other issues

With the help of two shareholder-rights law firms, a number of Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR) and Trius Therapeutics, Inc. (NASDAQ:TSRX) shareholders have filed lawsuits to halt these deals. These suits center around the means by which Cubist Pharmaceuticals Inc (NASDAQ:CBST) valued its two acquisition targets and aim to force the larger company to re-evaluate its position. Unless a judge throws out the suits, Cubist will have to respond in some fashion. Although it is impossible to predict the outcome of such ongoing legal matters, it is entirely possible that Cubist will sweeten one or both of these offers.

Long-term outlook: How the competitive landscape might change

It is telling that Cubist Pharmaceuticals Inc (NASDAQ:CBST)’s stock rose by about 10% on the back of this deal. The company already had tremendous momentum, but its decision to “go big” in the booming hospital-infection business will have important ramifications for its competitors. Since hospital-based pathogens tend to mutate rapidly, smaller firms that produce “older” antibiotics may find their competitive positions eroded. Meanwhile, Cubist will be better-positioned to compete with the larger firms that dominate the space.

Risk-hungry investors who wish to leverage Cubist Pharmaceuticals Inc (NASDAQ:CBST)’s aggressive sales targets in search of potential arbitrage premiums would do well to look closely at these two pickups. More conservative investors may wish to play the situation’s synergies with a long position in Cubist. Although the legal challenges to these deals present a potentially serious problem for rank-and-file investors, it would be risky to bet against either one. Investors who do so could miss out on potentially lucrative opportunities.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Cubist Pharmaceuticals.

The article How Could This 3-Way Deal Shake Up an Entire Industry? originally appeared on Fool.com.

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