Cubist Pharmaceuticals Inc’s (CBST) third quarter 2010 earnings (excluding special items but including stock-based compensation expense) of 39 cents per share surpassed the year-ago earnings by 21.9%. On a reported basis (including special items) the company earned 50 cents per share as against 42 cents in the year-ago quarter. The Zacks Consensus Estimate for the reported quarter was 41 cents per share. Results in the quarter were helped by strong US sales of its antibiotic injection, Cubicin (daptomycin).
Revenue in the reported quarter climbed 13% year-over-year to $162.1 million. However, revenue was short of the Zacks Consensus Revenue Estimate of $169 million.
Cubicin, which is approved in the United States and several other markets for the treatment of severe bacterial infections of the skin and bloodstream, accounted for over 90% of the company’s total revenue in the quarter. Net sales of the product in the US climbed 12% year-over-year to $154.5 million in the reported quarter. Net product revenues from international sales of the product jumped 53% year-over-year to $6.0 million in the third quarter of 2010.
Cubist did not recognize any service revenues in the reported quarter pertaining to its marketing agreement with AstraZeneca (AZN) involving AstraZeneca’s antibiotic Merrem. The deal came to an end in June this year. Operating income during the quarter increased approximately 14.6% to $52.1 million. The company expects to end 2010 with total revenues in the range of $645 million-$650 million. The Zacks Consensus Revenue Estimate for 2010 is $652 million.
Pipeline Update
In addition to posting financial results, Cubist presented an update on its pipeline. Following the acquisition of Calixa in 2009, Cubist gained rights to Calixa’s lead compound CXA-201 (containing CXA-101).
In Sept. 2010, Cubist presented encouraging data from a mid-stage study for CXA-101 alone, which is being developed to treat patients suffering from complicated urinary tract infection. A mid-stage study with CXA-201 for complicated intra-abdominal infections (cIAI) is currently underway. The company intends to file a New Drug Application (NDA) for both the indications by 2013.
During the reported quarter, Cubist presented encouraging preclinical data on with its antibacterial candidate CB-183,315 which is being developed for treating patients suffering from severe C.difficile-associated diarrhea. A mid-stage study for CB-183,315 is underway. The company expects to report data from the study in the second half of next year.
Our Recommendation
Currently we are Neutral on Cubist which is supported by the Zacks #3 Rank (short-term Hold recommendation). We are pleased to see that Cubist is working on expanding its pipeline through partnerships and acquisitions.
The acquisition of Calixa Therapeutics is an example of the company’s efforts to expand its pipeline. Consequently, the stable long-term outlook for the company prompts our Neutral stance on the stock in the long-term.
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