Cubist Pharmaceutical’s (CBST): Stock of the Day
by Matt Weinschenk, Senior Analyst, The White Cap Report
Cubist Proves Saving Lives Isn’t Good Enough
With the recent surge in cases of MSRA (methicillin-resistant staphyloccus aureus), or at least a surge in reporting, one would think it was good news for Cubist Pharmaceutical’s (Nasdaq: CBST).
It may have been, had Cubist not been blindsided by a business-rocking revelation Tuesday.
MRSA is a big problem. It’s a widely prevalent and pervasive bacteria found in hospital facilities, and it’s the most common cause of staph infections. Patients contract these infections from catheters, surgeries or I.V. drug needles.
As we use (some would say over-use) anti-biotics to treat infections, only the resistant germs remain. Each successive generation of bacteria are more resilient to treatment and we continually need stronger and stronger drugs to fight them.
They’re called “superbugs” in the press, but that’s not too far from the truth. We are running out of ways to treat these outbreaks. Current estimates put the annual cost of treating MRSA infections at over $10 billion dollars.
And it’s only going to get worse…
That’s why Cubist Pharmaceuticals had really hit a home run with its antibiotic Cubicin – one of the few ways left for hospitals and doctors to fight back.
Introduced in 2003, Cubicin was first prescribed as a treatment for serious skin infections caused by bacteria that invade the body during surgery. However, in 2006, the FDA approved Cubicin to treat bloodstream infections from blood-resistant staph bacteria. ()
Things looked good for Cubist, until this week.
Teva Pharmaceuticals Files For Generic Cubicin
An Israeli drug company, Teva Pharmaceuticals (Nasdaq: TEVA) has just filed with the FDA to start production of a generic form of Cubicin. Even though Cubist’s patents extend to 2016 and 2019.
How so? Teva contends that either Cubist’s patents were not valid in the first place, or Teva can produce a generic without infringing on those patents.Of course, Cubist intends to challenge Teva through litigation, which automatically puts Teva’s plans on hold for 30 months, according to FDA rules.
Even more of a problem, Cubicin is the one and only product that Cubist Pharmaceuticals sells. It’s all indicative of the kinds of intellectual property problems that plague pharmaceutical development.
Cubicin costs about $100 per day (depending on details), while Teva’s generic would be expected to cost much less. Of course, that’s good news for patients worried about medical bills.
But still, if Cubist, and other pharmaceuticals can’t protect the profitability of their products, then there would be no incentive to spend millions in research and development to create new products and save lives.
It’s one of those ugly problems where both sides are right… and wrong.
Using Price Controls As Alternatives
The alternatives? Price controls. Ugh. Single-payer system. Blech. Publicly-funded research. Yikes.
One of the better “outside the box” suggestions is a prize-based system. Wherein the government or well-funded charities take a necessary, but unprofitable drug needing ailment, and fund a large cash prize to be delivered to those who make the first successful cure.
By balancing the prize, the cost of R&D, and the revenues that could be made on an affordably priced drug, it could be the most cost effective means of providing incentives to provide a public good.
But somehow, I don’t see such progressive thinking passing through the U.S. legislative system.
I’d love to see comments on successful reform of the pharmaceutical industry.
In any case, investment in Cubist has now become a binary pass-or-fail proposition. If Cubist wins, shares will surge. If Teva wins, Cubist is likely a penny stock.
But at least we’ve got something to cure an infection.
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- What Investors Need To Know About Healthcare Reform
- Momenta Crashes a $100 Billion Industry… And Scores an 80% Boost
- Big Pharma Faces Major Roadblocks in India
- Patent Cliff Creates Huge M&A Demand in Little Pharma
One Response to “Cubist Pharmaceutical’s (CBST): Stock of the Day”
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its a great stock to own any day, i have it in my portfolio
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