Cubist Pharmaceuticals Inc. (CBST) recently lowered its revenue outlook for 2010 due to continuing softness in US sales of its only marketed antibiotic Cubicin. The company now expects to generate revenue in the range of $634–$640 million in fiscal 2010, down from a previous range of $645–$650 million.
The company lowered its Cubicin US sales guidance and now expects Cubicin revenues of $598–$605 million in the US. Earlier, the company was expecting Cubicin revenues in the range of $605–$615 million in the US. International revenue expectations for 2010 remain unchanged, at around $25 million.
Management commented that sales of Cubicin have been affected by cost pressures on branded drugs in US hospitals. Based on the US sales performance of the drug in the first half of December, the company believes it will not be able to meet its previous targets.
This is the second time in a row since the end of the third quarter that the company has reduced its guidance. In October, the company had tightened its guidance for 2010 revenues in the range of $645–$650 million from an earlier forecast band of $632–$652 million.
Cubicin is approved in the US and several other markets as a once-a-day, 30-minute infusion for the treatment of severe bacterial infections of the skin and bloodstream. Cubicin is the only marketed drug at Cubist and accounts for about 95% of the company's total revenue.
We currently have a Neutral recommendation on Cubist. We are concerned about the pending litigation with Teva Pharmaceutical Industries Ltd. (TEVA), which is seeking to launch a generic version of Cubicin. The ongoing litigation poses a significant threat to the Cubicin franchise and could be a source of overhang on the company's shares in the foreseeable future. Even though our focus is on the Teva patent litigation resolution, we are concerned about the unabated cost pressure on branded drugs in hospitals and the possibility of it persisting through 2011.
Despite these overhanging concerns, we are pleased to see Cubist expanding its pipeline through partnerships and acquisitions. The recent acquisition of Calixa Therapeutics is a case in point.
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