Zacks_Analysts' Blog : Strong Cubicin Sales Drive Cubist - Analyst Blog

Cubist Pharmaceuticals Inc.’s (CBST) first quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 47 cents per share surpassed the year-ago adjusted earnings by 2.2%. On a reported basis, (including special items) the company earned 34 cents per share, flat year over year.

The Zacks Consensus Estimate for the reported quarter was 27 cents per share. Results in the quarter were helped by strong sales of its antibiotic injection, Cubicin (daptomycin).

Revenue in the reported quarter climbed 12.8% to $162.5 million. Revenues surpassed the Zacks Consensus Estimate of $156 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 almost all the revenues reported in the quarter.

Net sales of the product in the US climbed 14% to $153.7 million in the reported quarter. Net product revenues from international sales of the product jumped 30% to $8.3 million in the first quarter of 2011.

Cubist Pharma 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 last year.

Cubist Pharma expects to receive service revenues in 2011 pertaining to its co-promotion agreement with Optimer Pharmaceuticals Inc. (OPTR) involving Optimer’s lead pipeline candidate, fidaxomicin, to be sold as Dificid in the US. Total revenues for 2011 are projected in the range of $686 million-$706 million.

Dificid is under review in the US and the EU for the treatment of Clostridium difficile infection (CDI). A decision from the US Food and Drug Administration (FDA) on Dificid is expected in May 2011. The US launch (assuming approval) is expected in August 2011.

Cubist Pharma expects Cubicin sales to maintain its growth trajectory. Cubist Pharma maintained the 2011 guidance for the drug’s sales. Sales of Cubicin in the US are forecasted in the range of $645 million-$665 million. Ex-US sales are projected at $35 million for 2011.

Our Recommendation

Currently Cubist Pharma carries a Zacks #2 Rank (short-term ‘Buy’ recommendation). We believe that the settlement of the patent dispute with Teva Pharmaceutical Industries Ltd. (TEVA) regarding Cubicin is the primary reason behind the optimism. The settlement removes a major overhang for Cubist Pharma. We are more cautious in the long run and have a Neutral view on the stock.