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Cubist Pharmaceuticals Inc.’s (CBST - Analyst Report) third quarter 2012 adjusted earnings of 68 cents per share breezed past the Zacks Consensus Estimate of 46 cents. Results in the quarter were helped by strong sales of antibiotic injection, Cubicin (daptomycin). Adjusted earnings were short of the year-ago adjusted earnings by 10 cents.

The Third Quarter in Details

Revenue in the reported quarter climbed 18% to $238.2 million. Revenues were short of the Zacks Consensus Estimate of $242 million. Cubicin, which is approved in the US and several other markets for the treatment of severe bacterial infections of the skin and bloodstream, accounted for the bulk of the revenues reported in the quarter. Net sales of the product in the US climbed 12% to $208.3 million in the reported quarter.

We note that Cubicin’s quarterly sales crossed the $200 million mark in the US for the second successive quarter.Net product revenues from international sales of the product jumped 22% to $12 million in the third quarter of 2012.

Entereg, which became a part of Cubist Pharma’s portfolio following the December 2011 acquisition of Adolor Corporation, delivered revenues of $10.1 million in the quarter, up 4.1% sequentially. Entereg is currently marketed to expedite gastrointestinal recovery following bowel resection surgery.

During the quarter, Cubist Pharma recognized $7.2 million as service revenues pertaining to the two-year agreement with Optimer Pharmaceuticals Inc. for the co-promotion of Optimer’s Dificid (fidaxomicin) in the US. Dificid is approved for treating patients suffering from clostridium difficile-associated diarrhea (CDAD). Dificid is available in the US since July 2011. Cubist Pharma also recorded $0.65 million as other revenues in the third quarter of 2012.

Both research and development (R&D) expenses and selling, general & administrative expenses (SG&A) were on the upswing during the reported quarter. While R&D expenses climbed 52% to $70.2 million due to the company’s efforts to develop its pipeline, SG&A expenses climbed 12.4% to $40.4 million.

2012 Projection Tweaked

Cubist Pharma now expects revenues for 2012 in the range of $915-$930 million (previous guidance: $900–$930 million). The Zacks Consensus Estimate is at the highest end of the guidance range provided by the company and currently stands at $930 million.  Net US sales of Cubicin are expected in the range of $800- $815 million (previous guidance: $790–$850 million). International Cubicin sales for 2012 are projected in the range of $45-50 million (previous guidance: approximately $45 million). Net sales of Entereg in the US are expected to be around $40 million (previous guidance: $40 - $45 million). Service revenues and other revenues are still expected to add up to $25 million in 2012.

Cubist Pharma lowered its 2012 research and development guidance. R&D expenses for 2012 are now expected in the range of $265-$275 million (old guidance: $275–$285 million). Selling, general and administrative expenses in 2012 are expected to be around $170 million (previous guidance: $165-$175 million). Adjusted operating income is forecasted in the range of $270 - $285 million for 2012 (previous guidance: $265-$275 million).

Our Recommendation

Currently, we have a Neutral recommendation on Cubist Pharma. The stock carries a Zacks #3 Rank (short-term “Hold” rating).

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