In the U.S. alone, almost 2 million people get bacterial infections every year, of which almost 5% succumb to the infections. Bacterial infections are a relatively smaller focus for biotechs and drug companies, who usually look to develop blockbusters that can rake in a few billion rather than the millions that Cubist is looking to bring in with their focus on the abandoned market of antibiotics. Cubicin is the first major antibiotic in over 13 years and is the most successful one of its kind ever, bringing in $350 million in revenue so far.
On the flip side, CBST’s earnings have not always yielded the result investors have hoped for. The last 4 quarters have seen CBST beat estimates once by a whopping 125%, and fall short 3 times. What this means is simply that analysts have not been able to get their arms around Cubist’s earnings.
With drug resistant bacterial infections on the rise, CBST is well poised to address this market with its current offerings and its pipeline of drugs due to be approved over the next couple of years. Technically, the stock has broken out of its last down-trend and looks to be on the way up. I recommend buying small positions at dips under $20, but keep in mind that the stock is going to be volatile, specially around earnings.
Full Disclosure: I don't have any position in CBST, but this might change anytime, without notice.
CBST 1-yr chart: