Try saying this three times, as fast as you can: Staphylococcus aureus endocarditis. This tongue twister is a bacterial infection of the lining of the heart and its valves that strikes when bacteria floating around the bloodstream lodge in and take up residence. As you may imagine, it's not a particularly pleasant malady, and it is quite serious. The infection can damage heart valves, eventually requiring valve-replacement surgery.

Treating endocarditis and bacteremia -- bacteria in the blood -- often requires a period of hospitalization and long-term antibiotic therapy to eradicate the bugs. ("Bug" is the, um, highly scientific nickname given to bacteria.) Antibiotic treatment to knock out the bugs -- using powerful drugs such as vancomycin -- can last as long as six weeks because the bugs are buried deep in the tissue and can be evasive.

That's fine as long as the drugs actually work, but the efficacy of existing antibiotics is decreasing because the bacteria are building resistance. Let's not forget that bacteria have been on the earth for a very long time, a longevity gained by constantly adapting to threats like antibiotics.

Resistance is a big reason we need new antibiotic drugs. One such drug on the block is Cubicin, from Cubist Pharmaceuticals (NASDAQ:CBST). Cubicin was initially approved in September 2003 for the treatment of complicated skin and skin structure infections, which involve deep wounds such as surgical incisions, bites, or skin ulcers.

Cubicin has been very successful in this market. The drug had sales of $58.6 million in 2004, and the company has guided for sales of $110 to $120 million for 2005.

While sales growth in these initial markets has been outstanding, Cubist is looking to expand usage from skin infections to the treatment of bacteremia and endocarditis.

Yesterday, the company announced results from a phase 3 trial assessing the efficacy of Cubicin in patients with these infections. According to the company, the drug met the primary endpoint of non-inferiority to other antibiotics. (Translation: Cubicin is not worse than the drugs that are currently used to treat these infections, which is exactly what Cubist set out to prove in this particular study.)

Management said that Cubicin had slightly higher success rates than older antibiotics, although this result was not statistically significant because the study was not designed with the statistical power to show that one drug was superior to another.

For now, exact details on the results are scarce, and we have to take the company's word for it that Cubicin came through successfully. The nitty-gritty scientific details won't be released until later this year at a medical conference. That's standard procedure and usually nothing to worry about.

Based on this data, Cubist is filing a supplementary NDA by the end of 2005 to get Cubicin approved for use in patients that have bacteremia or endocarditis. Expansion of the drug's label would be a boon to Cubist's already-strong sales growth. This additional growth would not kick in until next year at the earliest, because the company cannot promote Cubicin's use in these patients until the FDA grants approval. I expect this will occur around the middle of next year.

Driving Cubicin sales growth is crucial for Cubist, because the company is not yet profitable. It pays a royalty on Cubicin sales to Eli Lilly (NYSE:LLY) and has significant R&D expenses. This combination keeps Cubist in the red. I expect this to change in the next year or two as Cubicin sales continue to ramp up and the top line outpaces expenses.

The Foolish bottom line
Even after this morning's 18% jump in price, Cubist still has a market cap of less than $700 million. I think Cubicin can reach peak sales of several hundred million dollars, and in that light, I think Cubist is a fairly attractive biotech to consider owning. Because it already has an approved drug that is doing well, Cubist is certainly a lower risk than many companies in the industry.

The main knock I have on Cubist is its thin pipeline. It has a drug called Hepex-B in phase 2 for the prevention of hepatitis B infection in liver transplant patients, and it is also working on a second-generation version of Cubicin. But that's it. The cupboard is essentially bare, so I'm not convinced there's the capability to drive growth once Cubicin sales inevitably slow down.

This is a common problem for small drug companies. Success comes with one good product, and it's tough to follow that up. The usual options are to in-license drugs or acquire companies to keep growing. The alternative is to admit that staying independent may not be the best strategy and get acquired by a larger drug company that has a broad portfolio.

Cubist has done well so far on the back of Cubicin. Before too long, though, it will have to look at what's ahead and decide what direction its future will take.

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Motley Fool Rule Breakers biotech analyst Charly Travers does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.