Cubist Pharmaceuticals Inc. has a market cap of $1.32 billion; its shares were traded at around $22.67 with a P/E ratio of 14.1 and P/S ratio of 2.3. CBST is in the portfolios of Edward Owens of Vanguard Health Care Fund, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:We had a total of $506.1 million in cash, cash equivalents and investments as of March 31, 2010, as compared to $496.2 million in cash, cash equivalents and investments as of December 31, 2009. Our net income for the three months ended March 31, 2010, was $20.4 million, or $0.35 and $0.34 per basic and diluted share, respectively. Our net income for the three months ended March 31, 2009, was $7.8 million, or $0.14 and $0.13 per basic and diluted share, respectively. As of March 31, 2010, we had an accumulated deficit of $218.5 million.
For 2009, the agreement established a baseline annual payment by AstraZeneca to us of $20.0 million, received in quarterly increments, to be adjusted up or down by a true-up payment or refund at the end of the year based on actual U.S. sales of MERREM I.V. exceeding or falling short of an established annual baseline sales amount, subject to a minimum annual payment of $6.0 million. For 2009, we could also have earned a percentage of the gross profit on sales exceeding the annual baseline sales amount. The payments for any such sales over the baseline amount would have been recognized in the quarter in which AstraZeneca provided us with its annual sales report. Service revenues of $6.1 million for the three months ended March 31, 2009, include a $4.6 million payment received in 2009 for exceeding the 2008 annual baseline sales amount. The 2009 actual U.S. sales were below the established annual baseline sales amount. As such we did not receive a gross profit percentage payment for 2009 sales in the first quarter of 2010.
Cubists net revenues from sales of CUBICIN, which consists of U.S. product revenues, net, and international product revenues, were $141.6 million in the three months ended March 31, 2010, and $114.6 million in the three months ended March 31, 2009, an increase of $27.0 million, or 24%. Gross U.S. revenues from sales of CUBICIN totaled $146.9 million and $120.9 million for the three months ended March 31, 2010 and 2009, respectively. The $26.0 million increase in gross U.S. revenues was primarily due to increased vial sales of CUBICIN in the U.S., which resulted in higher gross revenues of $16.4 million, as well as a 7.0% price increase for CUBICIN in June 2009, which resulted in $9.6 million of additional gross U.S. product revenues. Gross U.S. product revenues are offset by allowances for sales returns, Medicaid rebates, chargebacks, discounts and wholesaler management fees of $11.6 million and $8.5 million, for the three months ended March 31, 2010 and 2009, respectively, an increase of $3.1 million or 36%. The increase in allowances against gross product revenue was primarily driven by increases in Medicaid rebates, chargebacks and pricing discounts due to increased U.S. sales of CUBICIN, and the price increases described above, as well as an increase in Medicaid rebates due to the increase in the scope and amount of Medicaid rebates established by U.S. healthcare reform legislation that was enacted in March 2010. As a result of the U.S. healthcare reform legislation, provisions for Medicaid rebates are expected to increase at a greater rate than in prior periods. International product revenues of $6.4 million and $2.2 million for the three months ended March 31, 2010 and 2009, respectively, consisted primarily of CUBICIN product sales to, and royalty payments based on CUBICIN net sales in the EU from, Novartis AG, or Novartis, our EU partner for CUBICIN.
Cost of product revenues were $31.8 million and $24.4 million for the three months ended March 31, 2010 and 2009, respectively, an increase of $7.4 million, or 30%. Included in our cost of product revenues are royalties owed on worldwide net sales of CUBICIN under our license agreement with Eli Lilly & Co., or Eli Lilly, costs to
Total research and development expense was $38.9 million in the three months ended March 31, 2010, as compared to $50.5 million in the three months ended March 31, 2009, a decrease of $11.7 million, or 23%. The decrease in research and development expenses was due primarily to a $20.0 million upfront payment made to Alnylam in the three months ended March 31, 2009, and no similar payment made in the three months ended March 31, 2010. This decrease was partially offset by increases of (i) $2.9 million in process development expenses related to our clinical stage compounds, including the CXA program, which was not in our pipeline during the three months ended March 31, 2009; (ii) $2.7 million in employee-related expenses due to an increase in headcount needed to support the increased research and development efforts; and (iii) $1.8 million in clinical trial expenses resulting from the increase in the number of ongoing clinical studies underway.
General and administrative expense was $14.7 million in the three months ended March 31, 2010, as compared to $10.9 million in the three months ended March 31, 2009, an increase of $3.8 million, or 35%. This increase is primarily due to an increase of $2.1 million in employee-related expenses, as well as an increase of $1.0 million in professional services and consulting charges, including legal costs associated with the patent infringement litigation with Teva and its affiliates.
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