Merck hasn’t exactly made a fortune on its $9.5 billion Cubist Pharmaceuticals buyout, but now, a next-generation antibiotic it acquired in that deal has a brand-new indication that could help jump-start sales.

Monday, the FDA approved that drug, Zerbaxa, to treat adults with hospital-acquired and ventilator-associated pneumonia. It's an add-on to Zerbaxa's original approvals—to treat complicated urinary tract infections and abdominal infections, in combination with metronidazole—which so far haven't lived up to early sales expectations.

Back in 2014 when it was first approved, analysts expected the drug to grow to $560 million by 2018. Contrast that with last year’s actual results: Merck didn’t even specify Zerbaxa sales in its annual report, meaning that dollar amount wasn't material to the company.  

But with Monday's new approval, Merck has a label expansion in an area where patients need new options. In an interview, Merck’s Joan Butterton, associate vice president in infectious disease clinical research, said the new indication is "really what Zerbaxa was designed to do." 

Merck scored the expansion based on a study of 726 patients with hospital-acquired pneumonia who were on mechanical ventilation. The patients were seriously or critically ill, and investigators found Zerbaxa could match up with a current treatment, meropenem.

While many drugmakers have abandoned antibiotics R&D, Merck has not, Butterton said. Anti-infective drug development has been a "core mission" at the company, Butterton said, and the company's work spans antibiotics, antifungals, antiparasitics, vaccines and monoclonal antibodies, she said.  

Zerbaxa's label expansion comes as analysts and market watchers push for the company to expand its business beyond the mega-successful cancer drug Keytruda. Though Merck has several successful drug franchises, including the diabetes drugs Januvia and Janumet, Keytruda has been its primary growth engine over the past two years.

Some are pushing Merck to do some deals, but the Cubist buyout highlights the risks of that strategy. Merck inked the deal back in 2014, but soon after a court nixed all but one patent for Cubicin, the centerpiece of the buyout. Last year, after losing patent protection in 2016, the antibiotic generated $367 million in sales. Before generics launched, the antibiotic was a blockbuster.

Merck is hoping that's not the last antibiotic blockbuster in its portfolio. Next month, the drugmaker is hoping to score an approval for a combo of relebactam, imipenem and cilastatin to treat complicated urinary tract infections and complicated intra-abdominal infections for patients with few or no other options. 

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