Cubist Pharmaceuticals, Inc. is a biopharmaceutical company focused on the research, development and commercialization of pharmaceutical products that address unmet medical needs in the acute care environment. Such products are used, or are being developed to be used, primarily in hospitals but also may be used in acute care settings, including home infusion and hospital outpatient clinics. We were incorporated as a Delaware corporation in 1992. We completed our initial public offering in 1996 and our shares are listed on the NASDAQ Global Select Market, where our symbol is CBST. Our principal offices are located at 65 Hayden Avenue, Lexington, Massachusetts 02421. Our telephone number is 781-860-8660, and our website address is www.cubist.com.
We had a total of $496.2 million in cash and cash equivalents and investments as of December 31, 2009, as compared to $417.9 million as of December 31, 2008. Our 2009 net income was $79.6 million, or $1.38 and $1.36 per basic and diluted share, respectively, as compared to 2008 net income of $127.9 million, or $2.26 and $2.07 per basic and diluted share, respectively, and 2007 net income of $35.6 million, or $0.64 and $0.62 per basic and diluted share, respectively. 2008 net income includes an income tax benefit of $102.2 million related to the reversal of a significant portion of the valuation allowance on our deferred tax assets. Our 2009 total net revenues were $562.1 million, as compared to 2008 total net revenues of $433.6 million, and 2007 total net revenues of $294.6 million. As of December 31, 2009, we had an accumulated deficit of $239.0 million.
We currently derive substantially all of our revenues from CUBICIN® (daptomycin for injection), which we launched in the U.S. in November 2003 and commercialize on our own in the U.S. CUBICIN is a once-daily, bactericidal, intravenous, or I.V., antibiotic with activity against certain Gram-positive organisms, including methicillin-resistant Staphylococcus aureus (S. aureus), or MRSA, and, as of December 31, 2009, has been used in the treatment of more than an estimated 880,000 patients. CUBICIN is approved in the U.S. for the treatment of complicated skin and skin structure infections, or cSSSI, caused by S. aureus, and certain other Gram-positive bacteria, and for S. aureus bloodstream infections (bacteremia), including those with right-sided infective endocarditis, or RIE, caused by methicillin-susceptible and methicillin-resistant isolates. In the European Union, or EU, CUBICIN is approved for the treatment of complicated skin and soft tissue infections, or cSSTI, where the presence of susceptible Gram-positive bacteria is confirmed or suspected and for RIE due to S. aureus bacteremia and S. aureus bacteremia associated with RIE or cSSTI. The following is a breakdown of our revenues from CUBICIN.
Our net worldwide revenues for CUBICIN represent net U.S. revenues and international revenues, which represent the payments we receive from international distributors in connection with their commercialization of CUBICIN. Our total international revenues are primarily based on sales of CUBICIN by Novartis AG, or Novartis (which sells CUBICIN through a subsidiary), our distribution partner in the EU.
On February 9, 2009, we received a Paragraph IV Certification Notice Letter from Teva Parenteral Medicines, Inc., or Teva, notifying us that Teva had submitted an Abbreviated New Drug Application, or ANDA, to the U.S. Food and Drug Administration, or FDA, for approval to market a generic version of CUBICIN. Teva's notice letter advised that it is seeking FDA approval to market daptomycin for injection, the active ingredient in CUBICIN, prior to the expiration of U.S. Patent Nos. 6,468,967 and 6,852,689, which expire on September 24, 2019, and U.S. Patent No. RE39,071, which expires on June 15, 2016. Each of these patents is listed in the FDA's list of "Approved Drug Products with Therapeutic Equivalence Evaluations," also known as the Orange Book. The notice letter further stated that Teva is asserting that claims in the referenced patents are not infringed and/or invalid. On March 23, 2009, we filed a patent infringement lawsuit against Teva, Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. in response to the ANDA filing. The complaint, which was filed in the U.S. District Court for the District of Delaware, alleges infringement of the referenced patents. Under current U.S. law, the filing of the lawsuit automatically prevents the FDA from approving the ANDA for 30 months from our receipt of Teva's Paragraph IV notification letter on February 9, 2009, unless the court enters judgment in favor of Teva in less than 30 months, or finds that a party has failed to cooperate reasonably to expedite the lawsuit. The court has set a date for trial beginning on April 25, 2011. The court also scheduled a claim construction hearing (a.k.a. a Markman hearing) for June 2, 2010. The court indicated that summary judgment motions will not be permitted in this lawsuit. It is possible that additional third parties may seek to market generic versions of CUBICIN in the U.S. by filing an ANDA. We are confident in our intellectual property portfolio protecting CUBICIN, including the patents listed in the Orange Book. Our ability to continue to generate significant revenues from CUBICIN is dependent upon our ability to prevail in the litigation with Teva or to otherwise resolve the litigation on favorable terms.
Our Product Pipeline
We are building a pipeline of acute care therapies through licensing and collaboration agreements as well as by progressing compounds into clinical development that we have developed internally.
We obtained an exclusive license for the development and commercialization in North America and Europe of the I.V. formulation of CB-500,929 for the prevention of blood loss during surgery pursuant to a license and collaboration agreement with Dyax Corp., or Dyax. We are studying ecallantide initially in the reduction of blood loss in patients undergoing cardiac surgery using cardiopulmonary bypass, which includes coronary artery bypass graft, or CABG, and heart valve repair and replacement procedures. The prevention of blood loss during cardiac surgery using cardiopulmonary bypass is an area of significant unmet medical need, particularly since aprotinin (previously marketed as Trasylol® by Bayer Healthcare Pharmaceuticals) was withdrawn from the U.S. market in November 2007.
In March 2009, we began a Phase 2 dose-ranging trial, CONSERV™-1, assessing three different doses of ecallantide in cardiac surgery patients using cardiopulmonary bypass undergoing procedures associated with a relatively low risk of bleeding. In July 2009, we began a Phase 2 trial, CONSERV-2, assessing a high dose of ecallantide in cardiac surgery patients using cardiopulmonary bypass undergoing procedures associated with a higher risk of bleeding. In December 2009, we announced the early closing of enrollment of both Phase 2 trials based on a recommendation from the Data Safety
Monitoring Board, or DSMB, to close the CONSERV-2 trial due to the observation of a statistically significant difference in mortality between the arms of the CONSERV-2 trial that the DSMB felt needed to be assessed before the trial could be resumed. Overall mortality was consistent with expected outcomes for the patient population in the CONSERV-2 trial. However, the data for patients treated in the trial as of the closing of enrollment showed more deaths in the CB-500,929 arm. Initial review shows mortality observed in the trial was due to a variety of causes typically expected in a high-risk-for-bleed population undergoing cardiac surgery. There was no such imbalance detected by the DSMB in the CONSERV-1 trial. We expect to complete analysis of all the data from both the CONSERV-1 and CONSERV-2 trials in the first half of 2010 and subsequently determine next steps for the program.
Pursuant to the terms of our agreement with Dyax, we paid Dyax a $15.0 million upfront payment in April 2008 and an additional $2.5 million payment on December 31, 2008, both of which were included in research and development expense in 2008. We are responsible for all development costs associated with CB-500,929 in the licensed indications for our territory. If certain clinical, regulatory and sales milestones are met, we could become obligated to pay Dyax up to an additional $214.0 million in milestone payments. We also would be obligated to pay Dyax tiered royalties based on any future sales of CB-500,929 by us. The agreement provides an option for Dyax to retain certain U.S. co-promotion rights. Dyax retains exclusive rights to CB-500,929 in all other indications, including for its hereditary angioedema program. Except under certain circumstances, Dyax will supply us with CB-500,929 for our development and commercialization efforts. The agreement may be terminated by us without cause on prior notice to Dyax, and by either party in the event of a breach of specified provisions of the agreement by the other party.
We acquired Calixa Therapeutics Inc., or Calixa, in December 2009 and with it rights to CXA-201, Calixa's lead compound, an I.V. combination of a novel anti-pseudomonal cephalosporin, or CXA-101, which Calixa licensed from Astellas, and the beta-lactamase inhibitor tazobactam. CXA-101 is currently in Phase 2 clinical trials for cUTI. Cubist obtained Calixa's rights to develop and commercialize the lead compound, CXA-201, and other products that incorporate CXA-101. Under a license agreement with Astellas, as further described below, we have the exclusive rights to develop, manufacture, market and sell any eventual products which incorporate CXA-101, including CXA-201, in all territories of the world except select Asia-Pacific and Middle East territories.
CXA-201 is being developed as a first-line therapy for the treatment of certain serious Gram-negative bacterial infections in the hospital, including those caused by MDR Pseudomonas aeruginosa. Pan-resistant P. aeruginosa, or P.aeruginosa,—resistant in vitro to all groups of antibiotics—is a major cause of opportunistic infections among immunocompromised patients. Multi-drug resistance is increasingly observed in clinical isolates reflecting both their innate resistance (limited permeability of the P. aeruginosa outer membrane) along with acquisition of resistance mechanisms. It is now commonplace for a burn patient to develop an infection with a pan-resistant organism—resistant to B-lactams, fluoroquinolones, tetracyclines, chloramphenicols, macrolides, trimethoprim/sulfa, and aminoglycosides.
We anticipate advancing the clinical program for cUTI and cIAI in the first half of 2010. The next study in the cUTI program would take into consideration the results of the ongoing cUTI trial with CXA-101. In addition, we expect to begin a Phase 2 trial of CXA-201 for cIAI in the first half of 2010. In the second half of 2010, we also expect to begin lung pharmacokinetic studies of CXA-201 for HAP and VAP.
Pursuant to the terms of the merger agreement under which we acquired Calixa, we paid the Calixa stockholders $100.0 million, subject to certain adjustments and escrow provisions, and Calixa became our wholly-owned subsidiary. We are also required to make potential payments to the Calixa stockholders of up to $310.0 million in the event that certain development, regulatory, and commercial milestones related to products which incorporate CXA-101 are achieved.
Under the license agreement with Astellas, we have an obligation to make milestone payments to Astellas that could total up to $44.0 million if certain specified development and sales events are achieved. In addition, if licensed products are successfully developed and commercialized in our territories, we will be required to pay Astellas tiered single-digit royalties on net sales of such products in such territories, subject to offsets under certain circumstances. Unless terminated earlier in accordance with the agreement, the agreement expires on a country-by-country basis when we stop developing or selling licensed products in such country. We have the right to terminate the agreement without cause on prior notice to Astellas, and either party may terminate the agreement in the event of a breach of specified provisions of the agreement by the other party.
CB-182,804 is in Phase 1 clinical trials for the treatment of MDR Gram-negative infections. We plan to make a decision on whether to advance CB-182,804 into Phase 2 trials in the first quarter of 2010. CB-182,804 is a novel, proprietary, I.V. administered Gram-negative antibiotic that has demonstrated in vitro efficacy and rapid bactericidal activity against key MDR Gram-negative pathogens, including P. aeruginosa, E. coli, K. pnuemoniae, and A. baumannii. In animal models, CB-182,804 was shown to be effective against lung, kidney, bloodstream and thigh infections against all MDR Gram-negative strains tested.
CB-183,315 has completed single-and multiple-ascending dose Phase 1 clinical trials for the treatment of Clostridium CDAD. We expect to launch Phase 2 clinical trials in CDAD in the first half of 2010. The recent increase in severity of CDAD, due to newer strains that produce higher levels of toxins, has exposed shortcomings in the standard of care therapy, including reduced susceptibility and recurrence rates of greater than 20% for standard of care therapy. CB-183,315 is a potent, oral, cidal lipopeptide with rapid in vitro bactericidal activity against C. difficile, which is an opportunistic anaerobic Gram-positive bacterium which causes CDAD. Recent years have witnessed the emergence of a hypervirulent strain of C. difficile that produces much higher levels of toxins. This strain also demonstrates high level resistance to fluoroquinolones, which may have contributed to its spread throughout the U.S., Canada, the UK, the Netherlands and Belgium. Physicians have noted an increase in incidence and mortality rates as well as increases in numbers of patients requiring emergency colectomy (removal of all or part of the colon) or admission to intensive care units.
Cubist is working on several pre-clinical programs, addressing areas of significant medical needs. These include an anti-infective program for the treatment of respiratory syncytial virus, or RSV, in children, therapies to treat various serious bacterial infections, and agents to treat acute pain.
Of note, in January 2009, we entered into a collaboration agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, related to Alnylam's RNA interference, or RNAi, therapeutics as potential therapy for the treatment RSV, an area of high unmet medical need, particularly in children. Our agreement with Alnylam is structured as a 50/50 co-development and profit share arrangement in North America, and a milestone- and royalty-bearing license arrangement in the rest of the world outside of Asia, where ALN-RSV is partnered with Kyowa Hakko Kirin Co., Ltd. The agreement was amended in November 2009 to carve ALN-RSV01, which is in Phase 2 clinical trials, out of the licensed products included in the collaboration, subject to our right to opt-in to development after Alnylam completes a Phase 2b study of ALN-RSV01 for the treatment of RSV infection in adult lung transplant patients. We have a pre-IND program underway in novel treatments for RSV infections in children using Alnylam's RNAi technology.