Cubist Maintains Growth Streak, As Investors Fear Generic Threat, Thin Pipeline

1/25/10

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Onyx Pharmaceuticals (NASDAQ:ONXX), which has an anti-tumor drug called sorafenib (Nexavar) that it develops and markets with the help of Bayer .

Though Cubist may not have another drug in its pipeline to bring to the market within the next two years, the company completed several deals in 2009 to broaden its portfolio of drug candidates. Last month, the firm bought San Diego-based Calixa Therapeutics for $92.5 million up front and an additional $310 million in potential payments. The buyout gave Cubist most of the commercial rights to Calixa’slead antibiotic treatment, a combination of anti-bacterial agents, that has the potential of being a top seller on par with daptomycin. That’s because it may be able about to treat a life-threatening bug called P. aeruginosa better than existing antibiotics on the market, Bonney says. That promising treatment is in mid-stage clinical trials, and Cubist predicts that it could be seeking U.S. approval for the product in 2013.

Cubist also revealed separate deals last year with a trio of Massachusetts-based biotechs with products in various stages of development: Alnylam Pharmaceuticals, Forma Therapeutics, and Hydra Biosciences. Perhaps the most high profile of those deals was with the RNA-interference (RNAi) drug developer Alnylam (NASDAQ:ALNY), from which Cubist licensed rights to Alnylam’s gene-silencing technology for treating respiratory syncytial virus (RSV), which sends about 125,000 children to the hospital in the U.S. every year, according to Alnylam. Alnylam is in mid-stage clinical development of a first-generation RNAi therapy for RSV. Bonney told me that his company is keenly interested in a newer version of the treatment specifically for children. Yet the therapy hasn’t reached human clinical trials, meaning that its potential commercial impact on the firm is both many years away and highly uncertain.

Another big question mark in Cubist’s pipeline is the future of its experimental drug ecallantide. The company put the brakes on a mid-stage clinical trial of the drug, which it is developing as an anti-bleeding agent for heart surgeries, after more patients who were treated with the drug died compared with those who didn’t take it. (Ecallantide is a protein drug that was discovered by Cambridge, MA-based Dyax (NASDAQ:DYAX), which has licensed the drug to Cubist for use in heart surgeries.) Cubist is expected to provide an update on what happened in its trial with ecallantide sometime in the first half of this year.

Still, what perhaps keeps the company’s stockholders up at night is the near-term challenge Teva has brought to the daptomycin patents. Cubist mounted a lawsuit against Teva early last year in response to Teva’s notice that it planned to start seek FDA approval of generic version of the antibiotic, before the expiration of Cubist’s patents on the treatment between 2016 and 2019. Bonney said that his company had been ready for such a case since 2007, expecting that Teva or another generic drug-maker would challenge its patents.

Cubist filed two of the three patents in question in the case, Bonney said, after the company acquired rights to daptomycin from the company that discovered the molecule, Indianapolis-based drug giant Eli Lilly (NYSE:LLY). Daptomycin is used in hospitals mostly to treat infections in the skin and tissue just beneath the skin. Cubist is credited with discovering how best to administer the antibiotic to patients at certain dose levels, something that Eli Lilly wasn’t able to figure out. (In fact, Bonney told me that the agreement that brought daptomycin to Cubist required the company to pay Eli Lilly an upfront fee of about $1 million and royalty payments to Lilly—an amazingly small amount considering that the antibiotic now generates more than half a billion dollars in annual revenue.)

Despite the rapid growth in Cubist’s sales of daptomycin, the price of the company’s common stock has been lingering in the $15 to $25 range since … Next Page »

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