Why Cubist Pharmaceuticals' Shares Shot Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cubist Pharmaceuticals (NASDAQ: CBST  ) , a biopharmaceutical company devoted to developing acute care therapies, added 12% following the announcement of its second-quarter earnings results.

So what: For the quarter, Cubist reported 12.2% revenue growth over the year-ago period, to $258.8 million, as its lead product Cubicin saw revenue jump 13.5%, to $227.1 million. Profit for the quarter decreased to $0.42 per share, from $0.56 per share last year. Still, this was certainly more than enough to excite investors, because Wall Street had been expecting just $254 million in sales and a profit of $0.40 per share. Also fueling today's gains was an update on the advancement of ceftolozane/tazobactam (previously CXA-201) in late-stage trials.

Now what: This was another solid quarter for Cubist. As always, I'm a bit leery when a biotech stock gets a massive chunk of revenue from just a single drug -- in this case, Cubicin is responsible for nearly 88% of total revenue -- as it leaves the company exposed should a sales or safety problem arise with that drug. However, I'm also seeing the beginnings of a diverse pipeline. Ceftolozane/tazobactam, should it be approved for all three tested indications, including the treatment of ventilator-associated bacterial pneumonia, could have peak sales potential of anywhere from $1 billion to $1.3 billion according to varying estimates. If I were you, I'd be adding Cubist Pharmaceuticals to your Watchlist.

It's no secret that biotech stocks like Cubist have been soaring recently, but the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2546639, ~/Articles/ArticleHandler.aspx, 12/19/2014 11:30:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement