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Cubist Pharmaceuticals, Inc. (NASDAQ:CBST)

Q1 2010 Earnings Call Transcript

April 15, 2010 5:00 pm ET

Executives

Eileen McIntyre – Senior Director, Corporate Communications

David McGirr – SVP & CFO

Rob Perez – EVP & COO

Steve Gilman – SVP, Discovery & Nonclinical Development and Chief Scientific Officer

Mike Bonney – President & CEO

Analysts

Eun Yang – Jefferies & Company

Jason Kantor – RBC Capital

Alan Carr – Needham & Company

John Newman – Oppenheimer

Matt Duffy – BDR Research

Tom Russo – Robert W. Baird

Operator

Greetings, ladies and gentlemen, and thank you for holding. I would like to welcome you to the Cubist Pharmaceuticals first quarter 2010 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Eileen McIntyre for Cubist Pharmaceuticals. Thank you. You may begin.

Eileen McIntyre

Good afternoon, and thank you for joining us for the first quarter 2010 earnings call for Cubist Pharmaceuticals. Before introducing our speakers, I will read the Safe Harbor statement and describe the context for use of non-GAAP financial measures.

This presentation includes forward-looking statements relating to, among other things, projected revenues, company financial performance and tax rate, the ANDA litigation with Teva, our intellectual property protecting CUBICIN, our products in pipeline, our business development efforts, our commercialization and manufacturing of CUBICIN, and our long term goals for the company and for our shareholders. These statements are neither promises nor guarantees and are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ materially from those projected or suggested in any of these forward-looking statements.

These and other factors are contained in the company's filings with the SEC, including our most recent Annual Report on Form 10-K. Cubist is providing this information as of the date of this presentation and does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise.

Within this presentation, in order to provide greater transparency regarding Cubist’s operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP figure. In particular, this presentation contains information on non-GAAP net income and net income per share. Any non-GAAP financial measures presented should not be considered an alternative to measures required by GAAP and are unlikely to be comparable to non-GAAP information provided by other companies.

Any non-GAAP financial measures presented are reconciled to the most directly comparable GAAP financial measures in a table included in our news release issued today and available in the News section of our Website. A further discussion of why we feel these measures are important to investors and the reasons for which our management uses these measures is also included in the news release.

Speakers on today's call will include Cubist’s President and CEO, Mike Bonney; Chief Operating Officer, Rob Perez; Chief Scientific Officer, Steve Gilman; and Chief Financial Officer, David McGirr. You will first hear from David McGirr who will review financial results for the quarter. David?

David McGirr

Thanks, Eileen. As you have seen in our release this afternoon we have reported solid results for Q1 2010. Our total net revenues for the first quarter of 2010 at $144 million are up $23 million, or 19%, from Q1 2009. This result is right on top of our internal forecast for Q1 and the model we use to develop our revenue guidance for the year.

Our U.S. net product revenues at $135 million are up 23% – are up $23 million, I am sorry, or 20%, from the first quarter of 2009. Gross margin of 77.6% is right where we expected it to be.

Operating expenses are lower by $6 million compared with the first quarter a year ago. R&D expense for Q1 was $38.9 million. The year-ago quarter was noticeably higher, reflecting an upfront payment of $20 million paid at that time under our agreement with Alnylam. Our core R&D expense through 2010 will have some variability reflecting the progression of our clinical pipeline with two programs now in Phase 2.

Sales and marketing expense was $19.9 million, up a few hundred thousand from the first quarter of last year. Q1 expense for G&A was $14.7 million, up almost $4 million from the first quarter of last year. This difference primarily reflects the needs of a growing business, which has involved additional full-time employee and temporary contractor headcount for last year. We remain disciplined as we scale the business up so that we can differentially fund R&D.

Total operating income was $37.3 million, which is up $21.5 million from Q1 2009. The key factor in this difference was the Alnylam upfront payment in Q1 2009 that we already mentioned.

Our book tax rate for Q1 was 36.2% and the cash tax rate was 5%. In the first quarter our tax rate was favorably impacted by a nonrecurring $1.7 million of investment tax credit and R&D tax credit awards received from The Massachusetts Life Sciences Center.

On a GAAP basis we are forecasting an effective tax rate of around 40% for 2010. This rate could come down by approximately 2.9 percentage points if the federal R&D tax credit provision is extended.

As set out on our tables in our news release today, diluted GAAP EPS for the quarter was $0.34, up $0.13 from Q1 2009. Diluted non-GAAP EPS was $0.53 compared with $0.42 for the first quarter of 2009. That is up 26%.

Our cash and investments balance at the end of the first quarter was $506 million and this is the first time since we launched CUBICIN in 2003 that we’ve had a positive cash flow quarter one. We still expect to generate around $129 million of cash in 2010 and to end the year with about $625 million of cash subject of course to business development activities.

Let me finish my final presentation with a review of 2010 guidance. We are confirming guidance for total revenue of between $627 million and $652 million and for the U.S. CUBICIN net product revenue of between $600 million and $620 million.

As you will recall, when we provided 2010 net revenue guidance in January, we cautioned that we’ve taken into account the potential impact of U.S. healthcare reform legislation. We have reviewed and we will continue to assess key provisions of the new legislation for potential impacts on our business. For components of the reform package, which take effect this year, we currently estimate that 2010 impact to our gross to net revenue calculation to be between $10 million and $15 million. This estimate does not change the net revenue guidance ranges we provided in our January call and the numbers we have just reconfirmed.

The primary driver of this 2010 impact is an increase in total Medicaid rebates that we will pay. Some of this comes from the increase in the rebate percentage from 15.1% to 23.1%, and a portion comes from the extension of the Medicaid rebate to cover Medicaid managed care organization. As you are aware, certain provisions of the legislation takes effect next year and we will incorporate those elements as we develop 2011 guidance.

Regarding cost guidance, last year, as required, we adopted new accounting standards FAS 141(NYSE:R), now known as ASC 805 regarding business combination accounting. And these come into play for us with the Calixa acquisition. While they do not change our guidance for R&D cost for this year, $170 million to $180 million, depending on the clinical success of CXA-201 they may be an important factor in our cost and tax rate guidance for next year and subsequent years. So I wanted you to be aware now. Basically, each quarter we have to update the fair value of the contingent consideration liability related to the Calixa acquisition. The Q1 2010 impact of this update was $1.5 million and you can see that we broken out separately on the face of the income statement.

The contingent consideration liability is the fair value as of the end of the period reported of the potential future milestone payment obligations to Calixa’s former shareholders based upon the then known clinical and commercial success of CXA-201. As I said, this accounting had no net impact on our R&D cost for 2010. As you can see on the slide, all the guidance numbers remain as we discussed in January.

And now Rob Perez will provide some additional comments on our results. Rob?

Rob Perez

Thanks, David. Early in Q1, I had the pleasure of spending some time at our U.S. national sales meeting with the talented, motivated, and enthusiastic professionals who represent Cubist in meetings with hospital physicians and pharmacists across the country every day. Our team is extraordinary for many reasons. However, the attribute that impresses me most is their deep and sincere concern for the patients who are candidates for treatment with CUBICIN.

During the meeting, we heard both patient and sales success stories that have resulted from the increased interactions the team has had with hospitalists, the primary care physicians of in-patient care. The commercial organization remains enthusiastic of this still new target market, which feels much like a product launch given the relatively low awareness and usage of CUBICIN in this group. By the way, we also see a long-term advantage for Cubist to gain understanding of the hospitalist specialty whose importance in managing in-patient care across the board is expected to grow significantly over time.

At the national sales meeting, we also got very positive feedback to training that was rolled out around important patient types who may benefit from empiric use of CUBICIN in both MRSA skin and blood stream infections. These are patient types where the consequences of inadequate therapy vastly outweigh concerns, if any, over the acquisition cost of appropriate therapy. Our focus on these patient groups is part of an effort to move CUBICIN earlier in the treatment paradigm in appropriate situations.

Our results at quarter’s end met our internal goals and we believe have provided us the momentum to deliver another strong year of commercial execution. On a vials shipped basis, the sequential quarter-over-quarter pattern looked very much like what we’ve seen in the past couple of years. There was no impact in Q1 from the 6.9% price increase we implemented on March 31st, 2010. The U.S. net revenues we reported for the quarter do however reflects some gross to net impact from healthcare reform, as David has explained.

For Q1 specifically, the impact was approximately a $1 million reduction to U.S. net product revenues. For CUBICIN results outside the U.S. we are particularly pleased with the continuing momentum in the E.U. Building on the solid momentum we saw in 2009, Novartis reported that Q1 2010 CUBICIN uptake in the Novartis licensed markets grew 91% versus the first quarter of 2009. This week, Novartis had a high-profile presence for CUBICIN at the European Infectious Disease Conference, ESCMID, and they continue to push for first-line use of CUBICIN in the E.U.

Our collaboration with Novartis remains strong and we continue to share best practices in training, market understanding and field force effectiveness to maximize the opportunity for CUBICIN.

We had a strong quarter of promoting MERREM I.V. in U.S. hospitals. We are tracking well against the revenue goal we established with AstraZeneca for the first six months of 2010. We’ve now begun discussions with AstraZeneca about the second half of the year. We’ll know more about the likelihood of continuing the relationship beyond June 2010 as we get closer to the middle of the year.

Now, Steve will provide an update on our clinical pipeline. Steve?

Steve Gilman

Thanks, Rob. It’s been an important and productive quarter for the pipeline related activities. Before I provide an update on activities relating to our Phase 2 CXA-201 Gram-negative program, I want to draw your attention to an article that appeared in The New York Times several weeks ago. Written by Andrew Pollack and drawing in part on his conversations with leaders at Cubist the article drew national attention to the growing problem of infections caused by multi-drug resistant Gram-negative pathogens such as Pseudomonas aeruginosa.

Now for an update for our Phase 2 Gram-negative program. Preparations are well underway to initiate a Phase 2 complicated intra-abdominal infection or cIAI trial for CXA-201 in the first half of this year. Our protocol has been submitted to regulatory bodies and investigators meetings have been scheduled.

The CXA complicated urinary tract infection or cUTI, a Phase 2 trial, enrollment is now complete and final data collection and analysis is underway. We continue to expect to be in a position to discuss top line results by mid-year. We have spent some time considering the next steps on cUTI for CXA-201. Our judgment today is that a Phase 2 with CXA-201 in cUTI will not be needed. We will review the CXA-101 Phase 2 cUTI data that will be available later this year and of course will also consult with the FDA before we finalize our Phase 3 plan for CXA-201 in complicated urinary tract infections. We do not believe this refinement in our clinical path plan will impact our timeline for an NDA filing.

Moving on to our newest Phase 2 program, as announced last week, we have begun patient enrollment in a comparative dosing Phase 2 trial for CB-183315, which we are developing as an oral antibiotic for the treatment of Clostridium difficile-associated diarrhea, or CDAD. A recent study presented at a 2010 conference on healthcare infections show that healthcare facility associated CDAD infections have increased in incidence and now surpass MRSA infections in community hospitals in the U.S. Of greatest concern today are the more virulent strains of CDAD that are becoming more prevalent. The unmet medical need for an agent that has initial efficacy that is at least equal to current standard of care so that improves our recurrent rate that today run from 23% to 27% and generally require possible re-hospitalization.

Lastly, an update on our Phase 1 Gram-negative program. The Phase 1 evaluation of CB-182804 is nearing completion. We decided to amend our phase I protocol and add an additional dosing cohort to confirm the expected safety margin at projected therapeutic doses. As a result, our Phase 2 go-no go decision timing on this program will now shift from the first quarter to sometime this summer.

Now, I will turn it over to Mike Bonney.

Mike Bonney

Thanks, Steve. As is apparent from the reports you’ve just heard from David, Rob, and Steve, we are continuing to execute on our strategy and have delivered in disciplined fashion. While most of the organization is fully occupied with growing revenues and advancing our clinical pipeline, a small portion of our in-house legal team, together with outside counsel are staying on track with the process leading up to the scheduled Markman hearing this June in our ANDA litigation with Teva.

I think it’s important as we look at results for a specific quarter to keep in mind the long term goals for value creation that provide the context for all of our decisions. Our intention is to be the leading company focused on discovering, developing, and commercializing therapies for acutely ill patients, those patients for whom therapies are prescribed mainly in hospitals or facilities affiliated with hospitals. Over time, we believe that this goal will deliver medicines that improve and save lives and should produce an above average return for our shareholders.

To achieve this goal, we focus each and every day on three things: optimizing results for

CUBICIN, its revenues today continue to be our engine for continued growth; advancing our clinical pipeline with acute care therapy development programs that leverage what we’ve built; and exercising financial discipline to enable continued growth in operating income while allowing for appropriate investments in value-drivers for today and for tomorrow.

With that, let’s open the line up for questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Eun Yang with Jefferies & Company. Please proceed with your question.

Eun Yang – Jefferies & Company

Hi. Thanks for taking my question. Just on this quarter’s sales, we are seeing seasonal weakness in this first quarter for the last couple of years. I was just wondering if you guys can – you know but this year it appears to be a little more significant than in years past and I just wondered if there is anything special in this quarter that happened that led to the larger-than-expected decline than the fourth quarter of last year?

David McGirr

Yes, actually the first comment I would make it wasn’t larger than expected. It’s really the quarter came in right where we thought it would and the vial difference when you compare to quarter [ph] Q1 is very consistent with the patterns we’ve seen previously in Q4s and Q1s. So, the quarter was really right where we thought it was going to come out and I wouldn’t characterize it as being softer than I was thinking. Q1s are generally soft. We did have a strong Q4 last year, but again the vial difference was really very similar to what we’ve seen previously.

Eun Yang – Jefferies & Company

And can you guys give us a little color in terms of why this seasonal decline happens? Is it fewer shipping days, fewer people getting infections in the first quarter, can you gives us a little color on that front?

David McGirr

Yes, while we have never been able to absolutely put our finger on it, we think that it’s really a combination of a few things. I think first and foremost is Q1 tends to be a kind of peak of the pneumonia season and obviously with CUBICIN not being able to be used with pneumonia it becomes more of a factor in a physician prescribing an antibiotic therapy. We tend to see a little bit of seasonal strength for Zyvox, for example, and a little bit seasonal weakness for CUBICIN, and we’ve seen that since launch. We’ve also seen some data that suggest that hospital census may be a little bit down in Q1, but haven’t really been able to absolutely confirm that. But I think it’s those couple of things, but every year, we are seeing this phenomenon since launch. So, it’s something that we forecasted for and it went into our expectations this year.

Eun Yang – Jefferies & Company

And just on the European royalties, you guys are supposed to earn a little more than $6 million. That run rate already puts you at the higher end of the guidance and I think the guidance is $20 million to $25 million for European royalty. I just wondered, did you guys see upside to the $25 million that you have guided earlier this year?

David McGirr

Well, we are pleased obviously that we are seeing the numbers go up and Rob had addressed that little bit on his thoughts. I think that you have to remember that the revenues we report from Europe are somewhat lumpy because they are composed of two components. There is a transfer price when we ship vials to Europe and then there is a true-up amount paid when Novartis actually sells the drug in the various countries and we reconcile back to the royalty that they owe us. And so those – so seeing a strong number in Q1 and just simply multiplying that by four is maybe not the most helpful thing to do. So, I think I would stick with the $20 million to $25 million for the year.

Eun Yang – Jefferies & Company

Alright. Thanks very much.

Mike Bonney

Thank you.

Operator

Thank you. Our next question comes from Jason Kantor with RBC Capital. Please proceed with your question.

Jason Kantor – RBC Capital

Great. Thanks. So twice you guys have referenced the vial count being similar in terms of the decline in Q1 for 2010 and 2009, could you give us those numbers or percent decrease on an absolute volume basis so we can–?

Mike Bonney

Yes, so, Jason, it was 92% last year’s Q1, it was 90% this year’s Q1 over Q4.

Jason Kantor – RBC Capital

Okay.

David McGirr

And it’s 92% the year before that.

Jason Kantor – RBC Capital

92% in 2008?

David McGirr

Yes.

Jason Kantor – RBC Capital

Okay. And I guess there was some court filings from both you and Teva last week. Is there anything that investors should or could glean from that, from the – how you and Teva are positioned here?

Mike Bonney

Yes, these are of course the first filings leading up to the Markman hearing in early June and what was included in those filings basically are the positions of the two parties in the litigation on the claims that are in the three patents that are under dispute here. These are publicly available, so people can take a look at them if they’d like. And you should expect to see another filing between now and June second. And that will represent each party’s response to the first filing before we get in front of the judge on the second.

Jason Kantor – RBC Capital

And then lastly on the Gram-negative from Calixa, you are saying that you think you can go straight to I guess in Phase 3 trial rather than running a Phase 2, and you also said that this doesn’t change the time line. How would that not advance your time line and – isn’t your understanding based on conversations with FDA or just internally with consultants?

Steve Gilman

Well, I think it’s because the complicated intra-abdominal trial is the rate limiting trial to get our NDA filed so that as long as we can cover it before that trial is finished, the Phase 2 and then Phase 3, and we have plenty of time to do that with a Phase 3 trial and we don’t have to worry about it and – complicated urinary tract Phase 2. Simply it’s not the rate limiting trial.

Mike Bonney

And the issue here, Jason, is that we are going – we are doing and we are in the process of initiating, as Steve said, a Phase 2 complicated intra-abdominal file which in most antibiotics there is a single dose ranging study done in a tissue driven infection, which cIAI is. And that then allows historically at least a very broad Phase 3 program if that’s what required to elucidate the safety and efficacy of the drug. So we just don’t see a need to spend the money to do a Phase 2 cUTI. cIAI will be a little bit higher hurdle since it’s tissue not urine and should put us in a strong position to justify that – the dose for Phase 3.

Jason Kantor – RBC Capital

Thank you.

Operator

Thank you. Our next question comes from the line of Alan Carr with Needham & Company. Please proceed with your question.

Alan Carr – Needham & Company

Hi, good afternoon everyone. I wondered if you can elaborate a bit more about the impact of the healthcare. Well you said it – you had factored in ahead of time a $10 million to $15 million negative impact. Do I understand that right?

Mike Bonney

No. We factored in an impact, but we didn’t really know what that impact would be until the legislation was passed. As it turns out, we weren’t far off and now that we’ve actually been able to parse through the very simple document that is in fact healthcare reform, we’ve been able to figure out that for 2010, we have two impacts. They both relate to Medicaid rebates. One, as David has said is an increase in the rebate from historically 15.1% to 23.1% and the second is an expansion of eligibility from fee for service Medicaid patients to include all Medicaid patients including those under our managed care option. And so the combination of those two elements of healthcare reform that take effect this year get us to that $10 million to $15 million number.

David McGirr

And I think, Alan, we were cautious.

Mike Bonney

Right.

David McGirr

When we gave you guidance in January and I know we had some discussion on this call back in January about that, but we felt it was appropriate to be cautious and it would appear that our caution has paid off.

Alan Carr – Needham & Company

Okay. And then you hinted that some impact for 2011, is that anything you can comment on at this point?

Mike Bonney

Well, no, we’re – there is still frankly a fair amount of rule-making that needs to be done and so that we can take the language from healthcare reform and actually plug it into models in ways that make sense. And so we will do that as the rule-making happens over the course of 2010 and we’ll talk to you when we provide our 2011 guidance in January about how that’s going to impact our business.

Alan Carr – Needham & Company

And then before I let you go 804 you all mentioned that you are taking it up to one more level, another higher dose and can you elaborate on this – this was to explore a safety signal, is that–?

Steve Gilman

Well, as you do in a Phase 1 trial, you try to push the drug to its maximum tolerated dose. We have achieved that and now we are going to study that dose level with approximately the same exact dose level in more patients to make sure we are certain of it.

Alan Carr – Needham & Company

Okay. Alright, thanks very much.

Operator

Thank you. Our next question comes from the line of John Newman with Oppenheimer. Please proceed with your question.

John Newman – Oppenheimer

Hi guys, thanks for taking the question. I just wondered if we should expect the price increases that you may take in 2010 to be similar to what you’ve taken in the past years? I know that on past calls you’ve discussed that sometimes when you are marketing a product there is a push back on pricing. Just wondering if we should just continue to expect what we are seeing over the last couple of years here.

David McGirr

Thanks, John. Well, of course, we don’t really talk about pricing going forward and what we are going to do with price in the future. I can talk to you about what we’ve done with price in the past and that is that thus far we’ve taken price increases every eight to 12 months and taken them in the ranges of 6% to 8%. And this price increase at 6.9% taken at nine months is very consistent with what we’ve done in the past. What we won't comment on is what we are going to do in the future.

John Newman – Oppenheimer

Okay. And in terms of the potential Phase 3 trial design for CXA-201 in complicated intra-abdominal infections, does the FDA’s new guidance on non-inferiority trials, does that change your thinking at all in terms of how that trial might look or is it pretty consistent with what you have been expecting?

Steve Gilman

It’s very consistent with what we’ve been expecting. Obviously, as we will go and have very serious conversations (inaudible) and clarify that, but we are – don’t expect any surprises out of the complicated intra-abdominal or UTI trials.

John Newman – Oppenheimer

Okay. And should we expect to see or could we see any additional in-licensing activity say over the next 12 months or are you at this point in time going to concentrate on pushing the assets for – that you acquired from Calixa?

Mike Bonney

I guess the issue there, John, is we would say and instead of or. We believe that we have the capacity to both focus on driving development of our three pipeline products and continuing to look. That said, we have, we think a – obviously a much more robust pipeline than we have had historically. The bar is pretty high, but we will continue to look and if we find something that we think fits the strategic parameters we’ve laid out repeatedly over the last year and a half or two, we wouldn’t be – we would not hesitate to act. But we certainly have the capacity to both advance the current pipeline and continue to look for ways to enhance that pipeline.

John Newman – Oppenheimer

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Matt Duffy with BDR Research. Please proceed with your question.

Matt Duffy – BDR Research

Hi. Thanks for taking my question. I wondered if you can talk a little bit more a big picture CXA-201 and sort of as you get through – as you are working your way through the Phase 2 program in complicated intra-abdominal, where you are thinking about in placing [ph] therapy longer term? Obviously intra-abdominal, but where do you see it in term pneumonia, skin, that sort of thing, and also if we might see combination therapies of CUBICIN for infections that involve both MRSA and Gram-negative bugs?

Rob Perez

Hey, Matt, it’s Rob. Really where we think about 201 is as a product that can potentially replace Zosyn. So Zosyn is currently used as kind of a Gram-negative empiric workhorse drug that’s used obviously in infection sites that you have mentioned and that’s the area that we think 201 can serve. We believe that with its superior pseudomonas coverage that it would have a well-differentiated positioning versus other products including Zosyn at the time. So that’s really kind of the big picture, the overall potential for this product.

Steve Gilman

We do expect, Matt, that the first NDA filing will include UTI and intra-abdominal and that we would file a supplemental NDA for hospital acquired and/or ventilator associated pneumonia following that first filing. That is a very large market for patients who have suspected Gram-negative infections as the hospital acquired pneumonia. At this point, we are not prepared to declare whether we will do any work with CUBICIN and CXA-201 together, but that clearly is something that we could think about in the future. It’s very difficult to run approval trials with two active antibacterials together. So our current thinking is it may be appropriate in certain types of mixed infections like maybe diabetic, ulcers, et cetera, but whether we could actually figure out and agree with the FDA a path forward there is still to be determined.

Matt Duffy – BDR Research

Okay, thanks. And would you expect to look at the hospital acquired pneumonia and begin a Phase 3 trial after an NDA either filing or approval or we do it (inaudible) given obviously we don’t know exactly what the FDA is going to come down in terms of what Phase 3 trial is going to look like and what the comparator needs to be and what the primary end point is. But at this point they sound like they are going to be quite large and probably certainly long term you are going to be able to get that going or would that be too complicating (inaudible) an NDA at the same time?

Steve Gilman

Our current deal is that we will be able to get clarity agreement from the FDA on this and be able to initiate the HAP/VAP studies before we file the NDA.

Matt Duffy – BDR Research

Okay, very good. Thank you.

Operator

Thank you. Our next question comes from the line of Tom Russo with Robert W. Baird. Please proceed with your question.

Tom Russo – Robert W. Baird

Good afternoon. I think sometimes in the past you’ve split out the in-patient versus the outpatient sales for CUBICIN dose in terms of the percent of the total and also the growth that you saw in each segment. Would you be able to do that today?

David McGirr

Yes, I can do that. So for Q1, outpatient percent was 46% and of the overall total obviously the in patient was 54%. Outpatient growth for Q1 versus Q1 in the prior year was 22% compared to 20% year-over-year in patient growth. So, pretty consistent with what we’ve seen in the past.

Tom Russo – Robert W. Baird

Okay. And then in the last few days we’ve got an update from Optimer’s compound and (inaudible) and saw some directional improvements in recurrence in the NAP1 strain though it didn’t have statistical significance. And I was just hoping maybe you could provide some perspective as you take your compound forward what you see as the opportunity for it and maybe looking further ahead how you might see your drug being positioned if it’s doing so well?

Steve Gilman

So – hi, this is Steve – we obviously follow Optimer pretty closely. This second Phase 3 reiterates what we knew from the first Phase 3 a little bit more trend in differences between NAP1 strains but no statistical difference. So, we think it’s an interesting compound. We are going to continue to make priority decisions in R&D pipeline based on both technical influence from our own molecules as well as the competitive environment. So, we’ll make those choices and decisions as we go forward. But as we sit here today, we think our molecule is a very potent and cidal drug with we hope a rapid onset of action and that will be effective and also have a chance of hitting that difference between NAP1 strains, which certainly takes a clinical trial to demonstrate and that’s what we are up to right now. So -

Mike Bonney

I would also add that as we look at the Optimer program what we’ve seen in the results so far may end up being the label that they get if they are approved, but it also may not. And when you look at Telavancin for example as a point of them announcing their results to the point of what the label actually looked at, there was quite a difference. So, we don’t know what the ultimate label or approvals for Optimer will be and so we are going to continue with our program and we’ll assess once we see what the actual competition turns out to be.

Tom Russo – Robert W. Baird

Okay. Thanks very much.

Operator

Thank you. (Operator instructions) We do have a follow-up question from the line of Eun Yang. Please proceed with your question.

Eun Yang – Jefferies & Company

Okay. Hi, can you tell us how much of CUBICIN, U.S. CUBICIN sales was coming from Medicaid?

David McGirr

We don’t have it off the top of our heads here, no. Our distribution of payers, if you will, is not unlike the national standards. So, roughly half of population are covered under some government program. And half are covered under private insurance. And that’s not hugely different from what we see in our population base who are administered CUBICIN. But I don’t remember the specific Medicaid numbers.

Eun Yang – Jefferies & Company

Okay, thanks.

David McGirr

Okay.

Operator

Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor over back to management for any closing comments.

Mike Bonney

Thanks everybody for joining us for this review of Cubist’s continued progress against our goals in the first quarter of 2010. Please mark your calendars now for our second quarter call, which is scheduled to take place at five O’clock Eastern Time on July 15th. Thanks a lot, folks, have a great evening.

Operator

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Cubist Pharmaceuticals, Inc. Q1 2010 Earnings Call Transcript
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