Source: Cubist

Demand growth tied to an expanding product lineup and rising inpatient volume at hospitals helped Cubist (CBST.DL) report third quarter results that mostly impressed investors this week.

Cubist's total third quarter sales improved by 16% year-over-year to $309.2 million, allowing the company to deliver non-GAAP EPS of $0.58, up from $0.41 a year ago. Those results outpaced analyst forecasts for sales of $306.8 million and EPS of $0.40.

Growing across indications
Cubist's top selling drug is Cubicin, which is used to treat skin infections including abscesses, post-surgical skin wound infections, and infected ulcers. Sales of Cubicin reached $256.7 million in the quarter, up from $229.9 million last year; giving Cubicin, which won FDA approval back in 2003, a billion dollar annualized sales rate for the first time.

Cubist's Dificid, a treatment for clostridium difficile, also enjoyed a solid quarter. Last year, Cubist acquired Dificid when it bought Optimer Pharmaceuticals for $551 million, and Dificid's sales total $47.7 million through the first nine months of 2014. The company expects Dificid to remain an important revenue contributor given that there are over 700,000 cases of clostridium difficile in the U.S. every year.

Cubist's Entereg, which speeds gastrointestinal recovery following bowel resection, also saw its sales climb. Entereg revenue was $15.3 million in the quarter, up from $13.7 million last year. Cubist acquired Adolor for $190 million shortly after GlaxoSmithKline (GSK 0.22%) sold its rights to Entereg back to Adolor for just $25 million in 2011. Since Entereg's sales total $43.8 through the first nine months, Cubist's acquisition continues to pay-off handsomely.

Source: Cubist

Expanding into new markets
Cubist's international sales grew from $13 million a year ago to $16.6 million in the third quarter, bringing Cubist's sales outside the U.S. to $51.1 million through the first three quarters, up from $40.3 million last year.

However, Cubist isn't relying solely on overseas sales to boost results. 

In August, Cubist launched Sivextro, a treatment for adult acute bacterial skin and skin structure infection caused by staphylococcus aureus, and despite only being on the market for a few weeks, Cubist recorded $2.4 million in sales for Sivextro during the quarter.

Sivextro's sales momentum should pick up in the fourth quarter, but it may not be the only new drug that can help support Cubist's sales in 2015. The FDA is slated to make a decision on Cubist's Zerbaxa, a treatment for complicated urinary tract infections, on December 21st. If the FDA gives Zerbaxa a green light, the company believes the drug could have blockbuster potential. Cubist also filed for EU approval this past summer, which suggests that EU regulators could make a decision on the drug early next year.

Strengthening core
Solid sales growth and non-GAAP gross margin of 78% are helping Cubist strengthen its balance sheet. Cubist's cash climbed to $687 million in the third quarter, up nicely from the $578 million it had on the books a year ago.

Since Cubist's products address tough-to-treat infections, many of which are tied to hospitalization, its sales growth is likely to continue to benefit from rising hospital admissions. If so, then Cubist should be able to leverage that growth for its Zerbaxa product launch, further supporting shareholder friendly cash flow in 2015.