Cubist Pharmaceuticals, Inc. (CBST)

Cubist’s spectacular growth is highlighted by its 517% revenue increase from 2004 and 253% profit increase from 2007. Their primary marketable product (CUBICIN) has proven to be a success. The Company is active with seven new drugs in the “pipeline” with the goal of final FDA approval. This could prove lucrative for stock holders. Earnings yield, return on equity, and profit margin are all well above average. The Company’s excellent cash position enables it to pay off all its creditors today or within two years on profit alone. The PE, PB, and PS ratios are all below the sector average indicating the stock to be substantially undervalued. The Company has outperformed 25% of the market in the last 12 months indicating the stock to be substantially undervalued relative to its fundamentals grade of 90%. Cubist is valued at $37.32 and is substantially undervalued at a current price of $17.34 (November 13, 2009). The technicals indicate a bullish rectangle pattern. The stock can be expected to remain flat or go higher short term. Well known institutionals such as Vanguard, Barclays, and T. Rowe Price have large stakes in Cubist. Risks include reliance on one flagship product, possible failure to obtain FDA approval, competition including patent infringement, litigation, dependence on third parties to manufacture products, etc. For more risks, see section 1A of the 2008 Annual Report.

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Initiated coverage on these guys last month. They develop drugs in the acute care environment, such as skin and blood infections. Excellent fundamentals: low P/E and PEG ratios, very healthy profit margins and ROE north of 60%. Only drawback for me is their debt load (D/E=0.55), but that's to be expected in the biopharmaceutical industry. With nearly $500 million cash, their balance sheet is in overall good shape.

wallstreetbean.com

Cubist maybe a takeover target.

The downside to Cubist Pharmaceuticals is the fact that the company is currently a one trick pony. Substantially all of its revenues and profits come from one drug - Cubicin. On the other hand, the company does have a number of promising trials in the works that could result in a significant product line expansion. Return on equity is excellent . The balance sheet is sound with $4.50 per share in net cash and the price seems right at 2.2 times book value. After subtracting $4.50 from the share price to reflect the benefit from the company's net cash on hand, I get an adjusted share price of $12.50, which is approximatley 8 times the 2010 estimated earnings per share. This company could be an attractive acquisition target.

Good indicators and they are in the right industry.

Inexpensive and managements expansion plans seem bullish.

1/161 in Biotechnology -(86.9 @ A+/A+)

A knock out drug with only a lawsuit stopping a buyout at a higher price

Boomers are getting older ,generics are cheaper and Obama"s health plan.

It seemed like a good idea at the time, but now I don't know why. Anything Cuban should do well? Right??? :)

40% profit margins, 80% ROE. Reasonable cash/debt ratio. Good pipeline, good partners, good revenue, good products.

Cubist has been rated one of the top companies to work for by the Boston Globe and happy employees produce results. All one has to do is look at the sales and income growth of the company in the past year. They are in the process of producing new pharmaceutical compounds that will enhance their already strong acute care environment. They beat the street on their last earnings report and I expect they will do it again.

1-22-2009 Earnings leading up to inauguration of President Obama on the 20th.

Quality rises to the top. You get what you pay for.
End of 2009 should be at least 40-50% higher than today!

Only one of a handful of pharma companies focused on developing treatments for infectious diseases.

Cubicin will get used earlier as number of resistant bugs increase.

Here’s another pitch I wanted to write about a smaller drug manufacturer by the name of Cubist Pharmaceuticals. I predicted Vertex Pharmaceuticals would do well back early this year and they are up almost 50% since I recommended them back in January. Now onto Cubist Pharmaceuticals. They are a smaller company with one marketable drug and another important drug (DX-88, which they say has a market potential of $500 million) going through to its 2nd phase 2 testing. This prediction is based on a few things, mostly from management’s tendency to low-ball earnings (or just do really well when they thought they wouldn’t).

The company’s big drug is Cubicin, an antibiotic for fighting MRSA, which was once solely a hospital insulated disease. Now that it has leaked out of hospitals and into the environment (epidemic is the term used by doctors), there seems to be growing demand for the number 1 drug.

Last quarter the company reported EPS .31-basic and .26-diluted on 88.3 million in revenue. Now here comes the interesting analysis. The company said that they projected revenue for the this year at 380-395 million in the U.S. and about 6.5 million abroad (Year over year (total) revenue growth of 28.48-34.1%, which in itself is strange because from 06’-07’ (total) revenue growth was 51.3%). Anyhow, the company’s 1st quarter earnings accounted for 20.2 and 20.6% in 06’ and 07’ respectively. Now, in the 1st quarter of 08’, the company’s earnings account for 22.84% of this year’s projected earnings (It accounted for 12% more revenue than it has over the past 2 1st quarters). This might get confusing but stick with it…so year over year revenue growth for the 1st quarter only from 06’-07’ was 48.4% while 07’-08’ was 47.8%. This starts to show that the company could exceed earnings this year and that the 12% more revenue than expected for the 1st quarter is actually what the company should have been predicting.

Now, if we apply that 12% premium to the low end of the year end projection, we get revenues of 432 million, completely beating the company’s estimate as well as Wall Street’s (avg. of 400.37 million). This is further solidified by the fact that MSRA is becoming an epidemic and that demand will not slow down.

If you take our new number of 432 million in revenue and get the net income by using the company’s projected COGS, SG&A and other expenses…you get a net income of 81.3 million, a close to 100% increase in net income from FY07. Using the company’s 2% increase in shares outstanding year over year (for this year it should be around 56.81 million), we come to a full year basic EPS of $1.43. Multiply that by MSN’s analysts’ forward P/E estimate of 16.20 (which even seems on the low end)…you arrive at a year end price target of $23.17 for a 21.6% return from today’s closing price. Using the current P/E would give you a price target of $27 for a return of 41.7% [these numbers are on the low end and are the safest, but I believe in a price target of over $30] ...sounds like a good deal to me…I’m setting a 1 year outperform rating and will most likely invest 20 shares now at $19.05 and another $20 on any dip below $18.75-$18.50, especially going into earnings next month…hope this helps…

This company make a drung called Daptomyocin. The drug is affective against MRSA and is used internationally for skin infections and bactermia. In many ways ths drug is a heavy hitting antiboitic used has last line of defense in the hospital setting. The drug is last line because it is theorized that gram positive bacterium like MRSA should be able to evolve quickly to be 100% drug resistant.

Further this company continues to be late with deliveries to hosptials nationwide. That combined with several recent questionable buys of small biotech firms makes this stock a underpreform for the short term and potentially the long term.

Antibiodics and new forms of them will continually be needed, especially as MRSA infections mutate and spread fruther. At the forefront of this research and production, this company will do well.

The programs offered in the US to help bring cost down for elderly and poor shall effect this stock