Cubist Pharmaceuticals to buy Adolor Corp. in potential $415 million deal

Deal structured as $4.25 per share in cash, or approximately $190 million, plus potential milestones

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Written byJeffrey Bouley

LEXINGTON, Mass. & EXTON, Pa.—Cubist Pharmaceuticals Inc. has reported the signing of a definitive agreement under which it will acquire all of the outstandingshares of AdolorCorp. for $4.25 per share in cash, or approximately $190 million ona fully-diluted basis, net of Adolor's third quarter 2011 cash balance. Adolor is biopharmaceutical company specializing in thediscovery, development and commercialization of novel prescription pain andpain management products.

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Jeffrey Bouley
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Internal Medicine

Inaddition to the upfront cash payment, each Adolor stockholder will receive one contingent payment right (CPR), entitling the holder to receive additional cashpayments of up to $4.50 for each share they own if certain regulatory approvalsand/or commercialization milestones for Adolor's compound ADL5945 are achieved. ADL5945 is a novel mu opioid receptor antagonist being developed for chronic opioid induced constipation (OIC) thatdemonstrated positive results in Phase II trials

With the CPR factored in, the totaltransaction could end up valued at as much as $415 million, net of Adolor's third quarter 2011cash balance, and is expected to be accretive in 2012.

Under the agreement, Cubist will commence a tenderoffer to purchase all of the outstanding shares of Adolor for the upfront cashpayment and a CPR. The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close in the fourthquarter of 2011.

Adolor markets Entereg (alvimopan), the first andonly FDA-approved therapy to accelerate the time to upper and lower gastrointestinalrecovery following partial large or small bowel resection surgery with primaryanastomosis. Entereg is an oral, peripherally-acting mu opioid receptorantagonist. Cubist, with its focus on addressing acute care and hospital needs,will leverage its existing commercial operations to promote Entereg, which was launchedin 2008 and generated more than $25 million in U.S. sales in 2010 and$15.7 million through June 30, 2011. Cubist anticipates peak Entereg sales of more than $100 million annually.

ADL5945 is aimed at what Cubist considers the "growing, multi-billion dollar, currently underserved market" for treating chronic OIC. Adolor announcedpositive Phase II data for ADL5945 in August 2011 and Phase III trials areexpected to be initiated in 2012. Cubist plans to retain certain U.S. andspecialty rights while seeking a partner to assist with ex-U.S. and primarycare commercialization.

"This transaction is an excellent strategic fitfor Cubist and the latest milestone in what has been a transformational yearfor the company," said Cubist President and CEO MichaelBonney. "Entereg is a first-in-class therapy with strong growth potential, andwe believe our experienced sales force and strong commercial platform willrealize the potential of this important hospital product. With the addition ofADL5945, Cubist will have a truly outstanding late-stage pipeline with threestrong candidates addressing significant markets."

"This transaction delivers significant immediatevalue to Adolor stockholders, as well as potential future value through theCPRs," added Michael Dougherty, Adolor's president and CEO, stated. "Cubist shares our commitment to patients and their health care providers,and we expect that Entereg and ADL5945 will benefit from Cubist's proven trackrecord and larger platform in development and commercialization."

Terms of the CPR call for additional cash paymentsof as much as $4.50 per CPR. The CPR will entitle each Adolor stockholder to receive as much as $3.00 per share if ADL5945 receives regulatory approval in the United States and as much as $1.50 per share if ADL5945 receives regulatory approval in the EuropeanUnion, in both instances prior to July 1, 2019. In each case, the size of thepayment would depend on the parameters of the approval. The CPR will not bepublicly traded.

Cubist Pharmaceuticals to buy Adolor Corp. in potential $415 million deal

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Jeffrey Bouley

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