Many thanks to the New England Journal of Medicine for exposing yet another problem that is sure to keep people awake at night. The scholarly publication recently revealed that drug-resistant staph infections are cropping up more frequently in the general public. The traditional domains of these "superbugs" once were hospitals and nursing homes but now the bugs have moved on. The fact that these new breeds of staph can defy many treatments is pretty scary stuff.
One would think that intrepid companies able to develop antibiotics to zap these uber-bugs would be in for some sizable gains. That hasn't necessarily been the case so far, at least for one company. As the Fool's Charly Travers has written, Cubist Pharmaceuticals
The outlook for Cubicin seems promising. The medicine generated $58.5 million in sales in 2004 and Cubist expects sales to hit between $110 million and $120 million in 2005. What's more, Cubist's take from Cubicin should be greater in the future as the firm recently reduced the royalties it has to pay to Eli Lilly
One possible area of concern may be Cubist's research and development. It's important to note that the firm did not discover Cubicin, but rather licensed it from Eli Lilly. Further, it also in-licensed the most advanced candidate in its pipeline, HepeX-B. Of course, there is nothing wrong with licensing, especially if it leads to the kind of sales projected for Cubicin. But HepeX-B, which is being tested in phase 2 trials for prevention of re-infection by Hepatitis B in liver transplant patients, addresses a pretty small market, which Cubist estimates at $100 million. As for more next-generation antibiotics along the lines of Cubicin, the company's efforts remain at an early stage.
Given the rise of superbugs, investors should be on the lookout for companies creating new antibiotics. Cubist is off to a great a start with Cubicin, but so far a great start hasn't been enough.
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Fool contributor Brian Gorman does not own shares of any of the companies mentioned.