Cubist Pharmaceuticals’ (CBST) third-quarter 2014 earnings (excluding special items) of 58 cents per share were well ahead of the Zacks Consensus Estimate of 36 cents due to higher-than-expected revenues. Earnings were also ahead of the year-ago figure by 41.5%.
Including one-time items, Cubist Pharma reported earnings of 29 cents per share as compared to a loss of 50 cents a year ago. Revenues in the third quarter of 2014 climbed 16% to $309.2 million. Revenues were ahead of the Zacks Consensus Estimate of $304 million. The top line was primarily boosted by higher Cubicin (daptomycin) sales.
The Third Quarter in Details
Net product sales in the U.S. climbed 19.8% year over year to $291.9 million. Most of the U.S. sales came from Cubicin. Net sales of the product in the U.S. increased 12% to $256.7 million. Apart from Cubicin sales, total product revenues at Cubist Pharma comprised Entereg (up 12% to $15.3 million), Dificid ($15.9 million, up 10.4% sequentially) and Sivextro ($2.4 million) sales in the U.S. and international markets (up 28% to $16.6 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.
The company’s third antibiotic Sivextro, after Cubicin and Dificid, was approved in the U.S. in Jun 2014. The FDA approved Sivextro (200 mg: once daily for six days) for treating adults suffering from acute bacterial skin and skin structure infections (ABSSSI). 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). 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.
Adjusted selling, general and administrative (SG&A) expenses were up 65.6% to $77.8 million during the third quarter of 2014. Adjusted research and development (R&D) expenses were down 41.4% to $65.1 million during the quarter primarily due to lower pre-launch expenses related to the manufacturing of Zerbaxa.
We note that Zerbaxa is under priority review in the U.S. with a decision expected by Dec 21, 2014. The candidate is also under review in the EU with a final decision pending in the second half of 2015. Cubist Pharma is looking to get the candidate approved for treating complicated urinary tract and intra-abdominal infections.
2014 Outlook
Apart from announcing its earnings results, Cubist Pharma also updated the guidance for 2014. The company expects its revenues to be at the lower end of the previously provided guidance range of $1.19 billion to $1.275 billion. Meanwhile, the Zacks Consensus Estimate of $1.2 billion is near the high end of the guidance range. Gross margin (on an adjusted basis) is now expected in the range of 76%–77% (previous: 77%–78%).
The company lowered its guidance for R&D costs (inclusive of milestone payments) for 2014 to the range of $375 million to $400 million from the previous 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.
Our Take
We are encouraged by Cubist Pharma’s results. The addition of Sivextro has strengthened Cubist Pharma’s antibiotic portfolio. The company is expecting several regulatory decisions in the coming quarters. Positive outcomes from these events will further strengthen the company’s portfolio. We expect investor focus to remain on these results.
Some stocks that can be considered in the healthcare space include PDL BioPharma, Inc. (PDLI), Ligand Pharmaceuticals Incorporated (LGND) and Medivation, Inc. (MDVN).
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