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Cubist Misses Q2 Earnings Estimates on Weak Cubicin Sales

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Cubist Pharmaceuticals’ ( CBST) second quarter 2014 earnings (excluding special items) of 23 cents per share fell well short of the Zacks Consensus Estimate of 37 cents due to lower-than-expected revenues. Moreover, earnings were short of the year-ago figure by 45.2%.


Including one-time items, Cubist Pharma reported earnings of 30 cents per share as compared to 23 cents a year ago. Revenues in the second quarter of 2014 climbed 14% to $294.4 million. Revenues fell well short of the Zacks Consensus Estimate of $299 million. The top line was hurt by weak Cubicin (daptomycin) sales. We expect the company’s shares to be negatively impacted by the weak earnings report.



Cubist Pharmaceuticals, Inc - Earnings Surprise | FindTheBest

The Second Quarter in Details

Net product sales in the U.S. climbed 10.8% year over year to $265.3 million. Most of the U.S. sales came from Cubicin. Net sales of the product in the U.S. climbed a mere 3.3% to $234.7 million. Apart from revenues from Cubicin sales, total product revenues at Cubist Pharma comprised Entereg (up 17.9% to $14.6 million) and Dificid ($15.9 million, up 10.4% sequentially) sales in the U.S. and international markets (up 16.9% to $17.5 million).


Cubist Pharma gained full control of Dificid (fidaxomicin), an antibiotic for treating patients suffering from clostridium difficile-associated diarrhea (:CDAD), following the completion of its acquisition of Optimer Pharmaceuticals in Oct 2013. This has strengthened the company’s antibiotics portfolio. Dificid was relaunched earlier in the year.


Both research and development (R&D) and selling, general and administrative (SG&A) expenses rose during the second quarter of 2014. Adjusted SG&A expenses were up 57.5% to $78.6 million. Adjusted R&D expenses during the quarter were up only 2.8% primarily due to lower-than-expected pre-launch expenses related to the manufacturing of ceftolozane/tazobactam. We note that ceftolozane/tazobactam is under priority review in the U.S. with a decision expected by Dec 21, 2014.


Cubist Pharma is looking to get the candidate approved for treating complicated urinary tract and intra-abdominal infections. EU approval of ceftolozane/tazobactam will be sought by Dec 31, 2014. Furthermore, Cubist Pharma intends to initiate a phase III study on ceftolozane/tazobactam in patients suffering from hospital-acquired bacterial pneumonia (:HABP)/ventilator-associated bacterial pneumonia (:VABP) by Dec 31, 2014.


Sivextro – the Third Cubist Antibiotic


In Jun 2014, the FDA approved Sivextro (200 mg: once daily for six days). Sivextro, cleared by the FDA for treating adults suffering from acute bacterial skin and skin structure infections (:ABSSSI), becomes the third approved antibiotic in Cubist Pharma’s portfolio, after Cubicin and Dificid. 


The FDA has approved both intravenous as well as oral versions of the drug which can be used for treating serious skin infections, including those caused by methicillin-resistant staphylococcus aureus (:MRSA). The favorable decision was based on encouraging safety and efficacy data from two global phase III studies (ESTABLISH 1 and ESTABLISH 2). Data revealed that Sivextro was non-inferior to Pfizer’s ( PFE) Zyvox, requiring less frequent dosing and a shorter treatment period.


Sivextro is under review in the EU for treating complicated skin and soft tissue infections (cSSTI). Sivextro was added to Cubist Pharma’s pipeline following its acquisition of Trius Therapeutics last year.


Surotomycin is another interesting phase III candidate in the company’s pipeline. It is being developed for treating CDAD. 


2014 Outlook 


Apart from announcing its earnings results, Cubist Pharma reiterated the guidance for 2014 provided by it while releasing its fourth quarter and full year 2013 results in January. The company still expects revenues in the range of $1.19 billion to $1.275 billion. The Zacks Consensus Estimate of $1.2 billion is near the high end of the guidance range. Net U.S. sales of Cubicin are expected on the lower end of the previous guidance range of $0.97 billion to $1.02 billion. All other product revenues are still projected in the range of $205 million to $235 million. Guidance for service and other revenues are maintained in the range of $15 million to $20 million. Gross margin (on an adjusted basis) is still expected in the range of 77%–78%.


The company expects R&D costs (inclusive of milestone payments) for 2014 on the lower end of the previously guided range of $460 million to $480 million. Selling, general and administrative expenses in 2014 are still expected in the range of $310 million to $320 million.


Cubist Pharma currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the healthcare space include BioMarin Pharmaceutical ( BMRN) and The Medicines Company ( MDCO). Both stocks sport a Zacks Rank # 1 (Strong Buy).

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