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Cubist Pharmaceuticals Inc.’s (CBST - Analyst Report) fourth quarter 2012 earnings (excluding special items) of 48 cents per share were in line with the Zacks Consensus Estimate and 20% below the year-ago earnings. The year-over-year decline was primarily attributable to increased costs.

Fourth Quarter in Details

Revenue in the final quarter of 2012 climbed 16% to $245.9 million. Revenues were in line with the Zacks Consensus Estimate. The year-over-year beat was attributable to strong sales of antibiotic injection, Cubicin (daptomycin). 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 product sales in the US climbed 17.8% to $227 million. Most of the US sales came from Cubicin. Net sales of the product in the US climbed 13.6% to $216 million in the final quarter of 2012. Cubicin also fared well in international markets with sales of the drug rising 34.2% to $14.5 million. Apart from revenues from Cubicin sales, total revenue at Cubist Pharma comprises primarily of Entereg sales and service revenues pertaining to the company’s agreement with Optimer Pharmaceuticals to co-promote Dificid in the US for C. difficile acquired diarrhea.

Entereg, added to Cubist Pharma’s portfolio following the acquisition of Adolor Corporation in Dec 2011, delivered revenues of $10.9 million in the final quarter of 2012, up 8% sequentially. During the quarter, Cubist Pharma recognized $3.7 million as service revenues pertaining to Dificid, flat year over year. Cubist Pharma recorded $0.75 million as other revenues in the final quarter of 2012.

Research and development (R&D) expenses climbed 59% to $89.2 million due to the company’s efforts to develop its pipeline. Selling, general and administrative (SG&A) expenses declined 3.1% to $47.3 million.

Annual Results

Full year adjusted earnings came in at $2.65 per share, well above the Zacks Consensus Estimate of $1.98 and 7.7% above the year-ago earnings. Revenues increased 23% to $926.4 million in 2012, edging past the Zacks Consensus Estimate of $926 million. Revenues in 2012 came in near the top end of the guidance range of $915-$930 million, which was provided by Cubist Pharma in Oct 2012.

2013 Projection

Apart from announcing the financial results, Cubist Pharma also gave guidance for 2013. The biopharmaceutical company expects to end 2013 with revenues in the range of $1 - $1.045 billion driven by strong sales of Cubicin in the US. The Zacks Consensus Estimate is well within the guidance range provided by the company and currently stands at $1.03 billion.

Net US sales of Cubicin are expected in the range of $900 - $925 million. International Cubicin sales for 2013 are projected in the range of $53-$58 million. Net sales of Entereg in the US are expected in the range of $45 - $50 million. Service revenues and other revenues are expected to add up to $15 million in 2013.

Research and development costs for 2013 are projected in the range of $375 and $395 million in 2012 ($277.7 million in 2012). The increase is primarily due to Cubist Pharma’s efforts to develop its pipeline. Selling, general and administrative expenses in 2013 are expected in the range of $180-$195 million ($171.8 million in 2012). Adjusted operating income is forecasted in the range of $230 - $250 million for 2013.

Cubist Pharma carries a Zacks Rank #3 (Hold) in the short run. Stocks in the pharma sector that carry Zacks Rank #1 (Strong Buy) include WuXi PharmaTech Inc. (WX - Snapshot Report) and Valeant Pharma (VRX - Snapshot Report).

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