It's been a rocky year for Cubist Pharmaceuticals (NASDAQ:CBST), but yesterday's earnings release triggered an upswing in trading that may indicate a smooth road ahead. The stock was up nearly 10% yesterday and is up again today.

The FDA approved Cubist's drug Cubicin -- a strong antibiotic for the treatment of severe and complicated bacterial skin and skin-structure infections -- on Sept. 12, 2003. Cubist's stock closed at $13.34 a share that day. As recently as Monday, the stock closed at $10, for a decline of 25% in a little over a year -- a dismal stock performance after having a promising drug approved.

So why has the market's sentiment shifted, casting Cubist in a more favorable light? I see two factors at work here.

In the past, I discussed that the company's balance sheet and massive losses were keeping the stock down. Seeing the 2004 results and the company's expectations for 2005, I believe that both of these areas are moving strongly in the right direction.

At the end of 2004, the balance sheet was in better shape than it was at the end of 2003. Because of a public offering this past November, the company was able to retire some debt and end the year with $128 million in the bank.

Over on the income statement, sales of Cubicin came in at $58.5 million last year. The big news is that sales are expected to double in 2005, reaching $110 million to $120 million. That is some serious growth, but I expect that the company will deliver. Demand for Cubicin appears high because of the medical need for the product.

This dramatic improvement in the top line is pushing the company toward breakeven, which it expects will occur when annual revenues hit $180 million. Having profits within reach is a welcome change given the magnitude of the losses the company has been running.

It is possible that 2006 will be the year that Cubist breaks into the black. If the company continues moving in that direction, I expect that the stock will follow.

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Fool contributor Charly Travers is the biotech analyst for Motley Fool Rule Breakers. He does not own shares of any company mentioned in this article.