Why Cubist Pharmaceuticals' Shares Shot Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cubist Pharmaceuticals , a biopharmaceutical company devoted to developing acute care therapies, added 12% following the announcement of its second-quarter earnings results.

So what: For the quarter, Cubist reported 12.2% revenue growth over the year-ago period, to $258.8 million, as its lead product Cubicin saw revenue jump 13.5%, to $227.1 million. Profit for the quarter decreased to $0.42 per share, from $0.56 per share last year. Still, this was certainly more than enough to excite investors, because Wall Street had been expecting just $254 million in sales and a profit of $0.40 per share. Also fueling today's gains was an update on the advancement of ceftolozane/tazobactam (previously CXA-201) in late-stage trials.

Now what: This was another solid quarter for Cubist. As always, I'm a bit leery when a biotech stock gets a massive chunk of revenue from just a single drug -- in this case, Cubicin is responsible for nearly 88% of total revenue -- as it leaves the company exposed should a sales or safety problem arise with that drug. However, I'm also seeing the beginnings of a diverse pipeline. Ceftolozane/tazobactam, should it be approved for all three tested indications, including the treatment of ventilator-associated bacterial pneumonia, could have peak sales potential of anywhere from $1 billion to $1.3 billion according to varying estimates. If I were you, I'd be adding Cubist Pharmaceuticals to your Watchlist.

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The article Why Cubist Pharmaceuticals' Shares Shot Higher originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends Cubist Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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