Editor

Cubist Pharmaceuticals Inc.'s stock zoomed late last month on word of the label expansion for its antibiotic Cubicin, but enthusiasm is waning as observers consider the compound's chances more carefully.

"In the infectious disease community, it was impressive to see the passion of the doctors involved in the trial [that led to approval for the new indications]," Eileen McIntyre, director of corporate communications for Cubist, told BioWorld Financial Watch. But whether doctors will use Cubicin (daptomycin) over such therapies as vancomycin in those indications is unclear, and not everyone is optimistic.

In any case, Cubicin's sales have been growing. For the quarter ended March 31, revenues jumped to $37.9 million, compared to $20.9 million for the first quarter of 2005, a 79 percent increase, excluding international sales. Analyst Jason Kantor of RBC Capital Markets held his "outperform" rating on Cubist, raising the price target from $25 to $33. The company's stock late last week was trading at just above $23, after climbing as high as $25.55 on news of the widened label.

In a report, Kantor said Cubicin chalked up record sales in April. The injected therapy, first approved for complicated skin and skin-structure infections (CSSSIs), was cleared for Staphylococcus aureus bloodstream infections (also known as bacteremia), including right-sided endocarditis caused by methicillin-susceptible S. aureus (MSSA), and methicillin-resistant S. aureus (MRSA).

Just in time, some might have said. Drugs are already on the market for CSSSIs, and new competition is coming up fast, from biotech and big pharma. Theravance Inc. in May enrolled the last patient in its first Phase III program of telavancin. More than 1,800 patients have signed up. In November, Theravance entered a collaboration with Astellas Pharma Inc. for worldwide development and commercialization of telavancin, excluding Japan.

Also for CSSSIs, Pfizer Inc. has dalbavancin, gained through its $1.5 billion takeover of Vicuron Inc., disclosed last summer. Dalbavancin came from Biosearch Italia SpA, which merged in 2002 with Versicor Inc. to become Vicuron. Having proved its worth in Phase III trials when compared with the linezoid, cefazolin and vancomycin, dalbavancin is expected to win approval this year.

Are the approvals in bacteremia and endocarditis enough to let Cubicin keep its edge?

The new label notes "failure of treatment due to persisting or relapsing S. aureus infections" at a rate of 15.8 percent with Cubicin, as compared with 9.6 percent in the comparator group, given vancomycin or nafcillin (an anti-staphylococcal, semi-synthetic penicillin).

"Among all failures, six Cubicin-treated patients and one vancomycin-treated patient developed increasing MICs (reduced susceptibility) by central laboratory testing on or following therapy," according to the label, although most failures "had deep-seated infection and did not receive necessary surgical intervention."

Analyst Joel Sendek in a research note, with Lazard Capital Markets, downgraded Cubist from "hold" to "sell," and set a price target of $18.

"We believe the data included in the new section may limit the prospects for the future use of Cubicin in the treatment of bacteremia and right-sided endocarditis, and brings into question the future efficacy of Cubicin in the treatment of [CSSSIs]," he wrote.

The revised label includes the treatment of right-sided endocarditis, which he called "a victory," but that type of endocarditis represents only 5 percent to 15 percent of all endocarditis cases, and left-sided disease tends to be more severe.

An FDA advisory panel earlier this year voted unanimously to recommend Cubicin for bacteremia, but split 5-4 in favor of the endocarditis indication, with some members "a little uncomfortable" about endocarditis, especially left sided, McIntyre conceded.

Ralph Corey, of Duke University Medical Center, spoke at the meeting.

"I think the key question for me is do I feel comfortable taking a patient who comes in that I think is pretty sick and probably has complicated bacteremia, and putting him on daptomycin, knowing that I have a significant chance of him having endocarditis," Corey said. "And the answer is yes. When I find that he has left-sided endocarditis, do I want to continue him on that drug? If it is MRSA, I would say yes. If it is MSSA, I would say no, I would switch drugs."

Corey called right-sided disease (which is often the result of intravenous drug use) "endocarditis for beginners," noting "they don't die, and the left-sided die." The failure rate for vancomycin against left-sided endocarditis - afflicting the aortic and mitral valves - is "abysmal," he noted.

Frank Talley, Cubist's chief scientific officer, said at the meeting that the study on which the FDA based its new approval of Cubicin was "a tremendously difficult study to do," and told panel members that the company was still working with the FDA to answer questions.

Analyst Sendek pointed out that the incidence of infective endocarditis, left and right side combined, was 31 cases per million in an often-quoted, 2002 French study published in the Journal of the American Medical Association. For the U.S. population, that would mean 12,400 cases per year. From the same study, the right-sided rate is 5 percent, translating to 620 cases per year - which means only a "modest opportunity" for Cubicin, he wrote.

Cubist made news again last week when it priced $325 million of its 2.25 percent convertible subordinated notes due 2013, partly to boost Cubicin, beef up the pipeline and pursue other corporate goals. A portion also will be used to redeem the outstanding $165 million of the company's 5.5 percent convertible subordinated notes.

Once touted as a possible takeover candidate, Cubist is no longer at such risk, Sendek wrote, calling "an acquisition with any reasonable premium to today's stock price unpalatable to most suitors."

The company is overvalued when compared to its "emerging profitable peers," said Sendek, who cited MGI Pharma Inc., OSI Pharmaceuticals Inc., and ViroPharma Inc., all with more advanced pipelines.