A Pre-Earnings Look at Cubist Pharma

| About: Merck & (MRK)

Cubist Pharma (CBST) will report its second quarter results after the market closes on Thursday July 14th, with the conference call scheduled for 5:00pm ET. Analysts expect the company to report a -8.9% decline in earnings to $0.41 per share, on a +3.7% growth in revenue to $174.8 mln.

Last quarter, shares of CBST traded more than 5% higher after it beat both top and bottom line estimates. The company reported first quarter GAAP earnings of $0.34 per share, flat year-over-year and revenue growth of 12.8% to $162.5 mln. The company also reported first quarter sales of Cubicin were $153.7 mln. Following the company's first quarter results on 4/14, shares of CBST are up roughly 20.6% as of 7/8.

For some background - Cubicin is the company's only product to market and is approved as therapy for bacteremia, including right-sided endocarditis, caused by methicillin-resistant S. aureus (MRSA) and methicillin-susceptable S. aureus (MSSA) and complicated skin infections caused by certain Gram-positive bacteria, including MRSA. CBST expects Cubicin to achieve $1 bln in U.S. revenues before the anticipated entry of Teva’s (NASDAQ:TEVA) generic version in 6.5-7 years. CBST and TEVA announced exclusivity terms for Cubicin on 4/4, with CBST shares subsequently jumping 14%. The company sees $645-665 mln in 2011 revenues from Cubicin in the U.S.

On 4/6, CBST and Optimer Pharmaceuticals (NASDAQ:OPTR) announced a co-promote agreement for Optimer’s drug, Dificid, which was approved on 5/27 and has an anticipated late August launch.

Dificid is indicated for the treatment of Clostridium difficile-associated diarrhea (CDAD) in adults 18 years of age and older. Under the terms of the agreement, OPTR and CBST will co-promote Dificid to physicians, hospitals, long-term care facilities and other healthcare institutions in the U.S. CBST will receive quarterly service fees of $3.75 mln over the two years beginning with the first commercial sale of Dificid. CBST is also eligible to receive an additional $5 mln in the first year after first commercial sale and $12.5 mln in the second year of the agreement if mutually agreed upon annual sales targets are achieved, as well as a portion of OPTR’s gross profits from any sales above the specified annual sales target levels. The agreement expires two years from the first commercial sale of Dificid. CBST has characterized the deal as very accretive to the company as the costs associated with the deal will be immaterial.

CBST's clinical product pipeline currently consists of a Phase 2 program for CXA-201 focused on the development of a novel cephalosporin to address certain serious infections caused by multi-drug resistant (MDR) Gram-negative organisms and CB-183,315 in a Phase 2 program for the treatment of CDAD.

On 6/16, the company announced clinical data on both of its drug candidates, where CXA-201 met its objectives of assessing safety and efficacy in the Phase 2 study and CB-183,315 demonstrated a high clinical cure rate, comparable to Vancocin. Following the results of the study, CBST noted that it planned to initiate Phase 3 studies with CXA-201 for indications in both cIAI and complicated urinary tract infections (cUTI) by year-end 2011 and that it remained on track to make a formal decision of whether to initiate Phase 3 studies with CB-183,315 by year-end 2011.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.