Cubist Pharma Misses on Earnings and Revenues in Q3 - Analyst Blog

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Cubist Pharmaceuticals Inc. 's ( CBST ) third quarter 2013 earnings (excluding special items) of 41 cents per share fell well short of the Zacks Consensus Estimate of 55 cents. Earnings were short of the year-ago figure by approximately 34% due to higher expenses.

Revenues in the third quarter of 2013 climbed 12% to $266 million. The year-over-year rise was attributable to strong sales of antibiotic injection, Cubicin (daptomycin). Cubicin accounted for the bulk of the revenues reported in the quarter. Revenues fell short of the Zacks Consensus Estimate of $270 million.

Net product sales in the U.S. climbed 11.6% to $243.6 million. Most of the U.S. sales came from Cubicin. Net sales of the product in the U.S. climbed 10.4% to $229.9 million in the third quarter of 2013. Cubicin performed decently in international markets with sales of the drug climbing 8.6% to $13 million. Apart from revenues from Cubicin sales, total revenue at Cubist Pharma primarily includes Entereg sales and service revenues pertaining to the company's agreement with Optimer Pharmaceuticals, Inc. ( OPTR ) to co-promote Dificid in the U.S. for C. difficile acquired diarrhea.

We note that in Jul 2013, Cubist Pharma had announced its intention to acquire Optimer Pharma. The acquisition is expected to be completed shortly. Following the completion of the deal, Cubist Pharma will gain full control of Dificid, thus strengthening its antibiotics portfolio. Moreover, Cubist Pharma had acquired another antibiotics maker, Trius Therapeutics, in the third quarter of 2013.

Entereg delivered revenues of $13.7 million in the third quarter of 2013, up 35.6%. During the quarter, Cubist Pharma recognized $3.8 million as service revenues pertaining to Dificid. Revenues in the third quarter also included a milestone payment of $5 million from Novartis ( NVS ).

We note that earlier in the month, Entereg's label was successfully expanded in the U.S. The U.S. Food and Drug Administration cleared the drug for expediting gastrointestinal recovery following any surgery that includes a bowel resection with primary anastomosis. Prior to the label expansion, Entereg was approved only in patients who needed surgery for colorectal disease.

Total operating expenses (on a reported basis) at Cubist Pharma came in at approximately $262 million, up 56.1% due to higher research and development (R&D) and selling, general and administrative (SG&A) expenses. An increase of 85% in SG&A costs in the third quarter of 2013 was due to the merger & acquisition activity of Cubist Pharma. R&D expenses during the quarter climbed approximately 76% primarily due to costs related to the acquisition of Trius Therapeutics. R&D expenses also surged due to the development costs related to Cubist Pharma's pipeline candidate ceftolozane/tazobactam.

Apart from ceftolozane/tazobactam, important phase III candidates at Cubist Pharma include Surotomycin (CB-315) and Bevenopran (CB-5945). In another significant move, Cubist Pharma filed a new drug application with the FDA seeking approval for its antibiotic candidate tedizolid phosphate for treating acute bacterial skin and skin structure infections. Tedizolid phosphate was added to Cubist Pharma's pipeline following its acquisition of Trius Therapeutics.

2013 Guidance Adjusted

Apart from announcing its earnings results, Cubist Pharma made adjustments to its 2013 guidance provided earlier in the year. The company now expects R&D costs (inclusive of milestone payments) for 2013 in the range of $465 million to $485 million (old guidance: $415 million to $435 million). The guidance was increased primarily due to costs related to the Trius acquisition and expenses on ceftolozane/tazobactam and tedizolid phosphate. Selling, general and administrative expenses in 2013 are now expected in the range of $235-$250 million (old guidance: $180-$195 million). Cubist Pharma increased the guidance primarily due to costs associated with the acquisitions of Trius Therapeutics (already completed) and Optimer Pharma (expected to close shortly). Adjusted operating income is now expected in the range $175-$195 million (old guidance: $230-$250 million).

Cubist Pharma also tweaked its revenue guidance for 2013. The company now expects to end 2013 with revenues in the range of $1.010-$1.035 billion (old guidance: $1-$1.045 billion). Net U.S. sales of Cubicin are now expected in the range of $885-$900 million (old guidance: $900-$925 million). The reduction in guidance is primarily due to the increased visibility as 3 out of the 4 quarters have already passed.

International Cubicin sales for 2013 are now projected in the range of $56-$58 million (old guidance: $53-$58 million). Net sales of Entereg in the U.S. are now expected to be $50 million (old guidance: $45-$50 million). Gross margin (on total product revenue) is still expected in the range of 74%-75%. Service and other revenues are expected to be $24 million, up $9 million from the earlier projection.

Cubist Pharma, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). Alexion Pharmaceuticals, Inc. ( ALXN ) appears to be more attractive in the biopharma space with a Zacks Rank #2 (Buy).



ALEXION PHARMA (ALXN): Free Stock Analysis Report

CUBIST PHARM (CBST): Free Stock Analysis Report

NOVARTIS AG-ADR (NVS): Free Stock Analysis Report

OPTIMER PHARMAC (OPTR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ALXN , CBST , NVS , OPTR

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