Shares of Cubist Pharmaceuticals ( CBST) were rising Tuesday, a day after a panel of medical experts recommended new uses for the company's Cubicin antibiotic.

However, the recommendation by an advisory committee of the Food and Drug Administration wasn't a clear-cut endorsement.

The panel agreed unanimously that Cubicin could be used to treat a dangerous bacterial blood infection known as bacteremia. But it only voted 5-4 to support Cubicin as a treatment for infective endocarditis, a potentially fatal disease caused by bloodstream bacteria attacking heart valves.

The FDA isn't bound by recommendations by advisory committees, but it usually agrees. The agency may act late this month. The split vote on endocarditis presents a dilemma for the FDA: Does it reject a drug for which there is limited clinical trial support? Or does it approve the drug for a disease for which there are few existing treatments?

Cubicin was approved by the FDA in September 2003 as a treatment for skin infections caused by certain bacteria, including some strains that have become resistant to a class of drugs that includes penicillin. Cubist began selling Cubicin in the U.S. in November 2003.

The European Union granted approval for Cubicin as a skin- and soft tissue-infection treatment in January. Chiron ( CHIR) has the license to market Cubicin in the EU.

Shares of Cubist rose $1.22, or 5.2%, to $24.66 Tuesday. Trading volume was nearly triple the daily average for the past three months. Shares were halted by Nasdaq on Monday while the FDA advisory panel reviewed Cubicin.

Cubist's effort to expand the scope of Cubicin represents not only a time-honored R&D strategy but also an attempt to build doctors' arsenal against bacterial infections that have few treatments.

Securing more uses of Cubicin "can offer physicians a much-needed therapeutic alternative for patients with these serious infections," Dr. Ralph Corey, a Duke University Medical Center infectious disease specialist, said Monday. Corey chaired the independent medical group that assessed the results of the Cubist-sponsored trial.

Bacteremia and infective endocarditis caused by Staphylococcus aureus "continue to remain challenging illnesses, both due to limited treatment options and their propensity to develop complications," leading to injury and death, says a report by FDA staff members issued Monday. Staff reports are routinely issued prior to meetings of FDA advisory committees. These reports analyze data and recommend questions for the panel members to ask company representatives.

The staff report notes that existing treatments for infective endocarditis "are primarily older drugs, and their approval ... was based on small numbers of patients and not on adequate and well-controlled trials." The report says Cubist is the first company to submit a well-controlled trial to support a treatment for Staphylococcus aureus-caused blood infections.

Staphlylococcus aureus is a ubiquitous bacteria that can be quite lethal. If it attacks valves on the left side of the heart, the kill rate can be 25% to 40%, says the FDA. The FDA says it now contributes to 20% of hospital-based blood infections.

As it becomes more resistant to older antibiotics, there will be more hard-to-treat cases of bacteremia and endocarditis, the FDA says. Catheters and implanted devices like pacemakers can provide a breeding ground. Intravenous drug use is another cause of endocarditis due to Staphylococcus aureus.

Advisory panel members reviewed Cubist research that compared Cubicin with several penicillin-family antibiotics or vancomycin, a powerful drug often viewed as a last resort for patients with bacterial infections that have become resistant to other antibiotics.

The main drawback in the research, says the FDA staff report, is that only 45% of the Cubicin group and 43% of the comparison group completed the study. The study enrolled 246 people in the U.S. and in Europe.

"Based on our analysis of the data and panel, we believe it is unlikely that Cubicin will be granted a broad label for infective endocarditis," says Joel Sendek of Lazard Capital Markets in a March 7 report to clients. "We believe Cubicin will continue to be used primarily as a second-line therapy for those patients who do not respond to vancomycin or high-risk populations such as infective endocarditis and bacteremia patients."

Sendek, who has a hold rating on the stock, said Cubist officials told panel members Monday that 25% of Cubicin already is used "off label" for treating bacteremia. Physicians are allowed to prescribe a drug for any use once the FDA has approved it for a single disease or condition.

"Although expansion of the label to include bacteremia and endocarditis should be an important growth driver, the current impediment to Cubicin use is its price compared to cheaper alternatives," Sendek says. He doesn't own shares, and his firm doesn't have an investment banking relationship.

Although Sendek predicts Cubicin's U.S. sales could reach $257 million by 2009, Eun K. Yang, of Jefferies & Co., forecasts sales of $442 million. "In our view, Cubicin could potentially receive FDA approval for bacteremia, not necessarily with known or suspected endocarditis," Yang said in a March 7 research note. Yang has a buy rating.

Although FDA advisers raised questions about the small number of patients in the endocarditis portion of the clinical trial, "the panel did not require additional study for this indication," says Yang, who doesn't own shares.

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