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Cubist Tops, Guides up

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Cubist Pharmaceuticals Inc.’s third quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 76 cents per share raced past the Zacks Consensus Estimate by 44 cents. Results in the quarter were helped by strong sales of antibiotic injection, Cubicin (daptomycin). Earnings surpassed the year-ago adjusted earnings by 6 cents.

Revenue in the reported quarter climbed 24% to $201.7 million. Revenues handsomely beat the Zacks Consensus Estimate of $183 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 21% to $186.4 million in the reported quarter. Net product revenues from international sales of the product jumped 63% to $9.8 million in the third quarter of 2011.

During the quarter, Cubist Pharma recognized $3.0 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. The drug is approved for treating patients suffering from clostridium difficile-associated diarrhea (CDAD). Dificid is available in US markets since July 2011.

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 25% to $46.2 million due to the company’s efforts to develop its pipeline, SG&A expenses climbed 3.1% to approximately $36 million.

Encouraged by the impressive performance delivered in the third quarter, Cubist Pharma raised its revenue guidance for 2011. The biopharmaceutical company now expects to end 2011 with revenues in the range of $740 million-$745 million driven by strong sales in the US as opposed to the previously forecasted range of $700 million-$715 million.

The Zacks Consensus Estimate is within the guidance range provided by the company and currently stands at $712 million. The guidance for revenues through product sales in the US has been raised to $695 million-$700 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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