Cubist Reports Fourth Quarter And Full Year 2012 Financial Results

Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) today announced results for the fourth quarter and year ended December 31, 2012. The Company will host a conference call and webcast today at 5:00 p.m. ET to discuss the results and other business updates (details below).

Financial highlights for the fourth quarter of 2012 (unaudited):
  • Total net revenues grew 16% to $245.9 million compared to $212.9 million in the fourth quarter of 2011.
  • GAAP operating income was $45.3 million, up from $43.3 million in the fourth quarter of 2011. Non-GAAP adjusted operating income was $54.2 million compared to $70.3 million in the fourth quarter of 2011.
  • GAAP diluted earnings per share (EPS) was $0.51 compared to $0.11 in the fourth quarter of 2011. Non-GAAP diluted EPS was $0.48 compared to $0.60 in the fourth quarter of 2011.
  • In-process research and development impairment charge of $38.7 million and contingent consideration income of $36.0 million were recorded in the fourth quarter of 2012 due to our decision to delay development of bevenopran (CB-5945) in Europe based on our current assessment of the European commercial opportunity and regulatory environment.

Financial highlights for the full year of 2012 (unaudited):
  • Total net revenues grew 23% to $926.4 million compared to $754.0 million in 2011.
  • GAAP operating income was $237.1 million, up 79% from $132.5 million in 2011. Non-GAAP adjusted operating income increased 12% to $274.5 million from $244.5 million in 2011.
  • GAAP diluted EPS increased 304% to $2.10 compared to $0.52 in 2011. Non-GAAP diluted EPS was $2.65, an increase of 8% over $2.46 in 2011.

“We continued our strong momentum in the fourth quarter of 2012, capping a significant year of growth for Cubist,” said Michael Bonney, Chief Executive Officer. “With 2012 total revenues of more than $926 million, we grew our top-line by 23%, driven largely by the continued strong performance of the U.S. and international CUBICIN business, as well as a 21% increase in ENTEREG sales. And with three exciting Phase 3 product candidates in our pipeline, including our potential blockbuster antibiotic candidate for the treatment of certain Gram negative infections, ceftolozane/tazobactam (CXA-201), we believe we are well-positioned to extend our leadership in the hospital and acute care environment for many years to come.”

As previously announced, fourth quarter 2012 total U.S. CUBICIN® (daptomycin for injection) net product revenues were $216.0 million, up 14% over fourth quarter 2011, and full year U.S. CUBICIN net product revenues were $809.2 million, up 16% over 2011. Cubist’s share of full year 2012 international CUBICIN revenues was $50.5 million, which represents a 38% increase over $36.7 million in 2011. Service revenues for our co-promote of DIFICID® (fidaxomicin) for the fourth quarter were $3.7 million and were $23.2 million for the full year of 2012, a 246% increase over full year 2011. ENTEREG® (alvimopan), acquired through our acquisition of Adolor Corporation in December 2011, net product revenues were $10.9 million in the fourth quarter of 2012 and $40.2 million for the full year, a 21% pro forma increase over the full year of 2011.

As of December 31, 2012, Cubist had $979.4 million in cash, cash equivalents and investments. The total number of Cubist’s common shares outstanding as of December 31, 2012, was 64,713,695.

Pipeline Update and Milestones

Cubist enters 2013 with a robust pipeline. Product candidate status and upcoming milestones include:

Ceftolozane/tazobactam – a potential first-line therapy being studied for the treatment of certain serious Gram-negative bacterial infections, including those caused by multi-drug resistant Pseudomonas aeruginosa.
  • Top-line data for ceftolozane/tazobactam Phase 3 trials in complicated intra-abdominal infections (cIAI) and complicated urinary tract infections (cUTI) are expected in the second half of 2013. This timing reflects a reduction of patient enrollment requirements based on Cubist’s recent consultation with the Food and Drug Administration (FDA).
  • Cubist anticipates filing a New Drug Application (NDA) for ceftolozane/tazobactam in cUTI and cIAI within approximately six months of announcing top-line results from the Phase 3 trials.
  • In December, the FDA granted ceftolozane/tazobactam a Qualified Infectious Disease Product (QIDP) designation, qualifying it for priority review and fast-track status at the FDA. If ultimately approved by the FDA, ceftolozane/tazobactam would also receive a five-year extension of Hatch-Waxman exclusivity.
  • Cubist expects to initiate the Phase 3 program in ventilator-associated bacterial pneumonia (VABP) for ceftolozane/tazobactam around mid-year 2013.

Surotomycin (CB-315) – a rapidly bactericidal lipopeptide being studied as a potential treatment for patients with a severe and sometimes life-threatening diarrhea caused by Clostridium difficile known as C. difficile-associated diarrhea (CDAD).
  • In December, the FDA granted surotomycin a QIDP designation, qualifying it for priority review and fast-track status at the FDA. If ultimately approved by the FDA, surotomycin would also receive a five-year extension of Hatch-Waxman exclusivity.
  • In July, Cubist enrolled its first patient in its Phase 3 trials designed to evaluate the difference in clinical response rates at the end-of-therapy in patients treated with surotomycin versus oral vancomycin, as well as the safety of surotomycin in subjects with CDAD.
  • Cubist is targeting filing an NDA for surotomycin in 2015.

Bevenopran (CB-5945) a novel mu-opioid receptor antagonist being studied as a potential treatment for chronic opioid-induced constipation (OIC).
  • In October, Cubist initiated a Phase 3 long-term safety trial of bevenopran.
  • Cubist plans to commence three Phase 3 efficacy trials in the first half of 2013.

CB-625 – this non-opioid product candidate is a novel small molecule antagonist of the human TRPA1 channel being studied as a potential treatment for post-surgical pain.
  • Phase 1 clinical trials for CB-625, discovered in a collaboration between Cubist and Hydra Biosciences, are on-going.

Recent Company Highlights
  • Announced that Thomas J. DesRosier will join Cubist as Senior Vice President, Chief Legal Officer and Secretary; Robert J. Perez was promoted to President and Chief Operating Officer (COO); Thomas Rollins was appointed Senior Vice President of Program and Portfolio Management; Michael Tomsicek was promoted to Senior Vice President and Deputy Chief Financial Officer; and Patrick Vink was appointed Senior Vice President and General Manager of International Business;
  • Announced the appointment of Alison Lawton and Jane E. Henney, M.D. to the Board of Directors;
  • Announced Cubist’s five-year goals – the Building Blocks of Growth – for top- and bottom-line growth, future pipeline developments, and cultural goals that will position Cubist to deliver long-term, sustainable growth;
  • Celebrated Cubist Pharmaceuticals’ 20 th anniversary; and
  • Opened a 104,000 square-foot expansion to Cubist’s research and development facility.

Use of Non-GAAP Financial Measures

Non-GAAP net income and adjusted operating income and non-GAAP diluted EPS exclude non-cash or non-operational activities. As a result, Cubist uses these measures to assess and analyze its operational results and trends and to make financial and operational decisions. Cubist also believes these non-GAAP financial measures are useful to investors because they provide greater transparency regarding Cubist’s operating performance. These non-GAAP financial measures should not be considered an alternative to measurements required by GAAP, such as net income, operating income and EPS, and should not be considered measures of Cubist’s liquidity. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliations between non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release after the unaudited condensed consolidated financial statements.

******************CONFERENCE CALL & WEBCAST INFORMATION******************

Cubist will host a conference call and live audio webcast to discuss both its fourth quarter and full year 2012 financial results, business activities and financial outlook.

WHEN: Wednesday, January 23, 2013, at 5:00 p.m. ETLIVE DOMESTIC & CANADA CALL-IN: (855) 319-7654LIVE INTERNATIONAL CALL-IN: (484) 756-4327Attendee Passcode: 83986357

24-HOUR REPLAY DOMESTIC & CANADA: (855) 859-205624-HOUR REPLAY INTERNATIONAL: (404) 537-3406

REPLAY PASSCODE:Conference ID: 83986357

CALL WILL ALSO BE BROADCAST LIVE, LISTEN ONLY, VIA THE WEB AT: www.cubist.comReplay will be available for 90 days via the Internet at www.cubist.com

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About Cubist

Cubist Pharmaceuticals, Inc. is a biopharmaceutical company focused on the research, development, and commercialization of pharmaceutical products that address significant unmet medical needs in the acute care environment. Cubist is headquartered in Lexington, Mass. Additional information can be found at Cubist’s web site at www.cubist.com.

Cubist Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Any statements contained herein which do not describe historical facts, including but not limited to, statements regarding (i) our unaudited fourth quarter and full-year 2012 financial results, (ii) the expected timing of our Phase 3 clinical trial data readouts and NDA filing for ceftolozane/tazobactam (CXA-201) in cUTI and cIAI, (iii) the expected timing of our NDA filing for surotomycin (CB-315) in CDAD, (iv) the expected benefits from QIDP designation for ceftolozane/tazobactam and surotomycin, (v) our belief in the blockbuster potential of ceftolozane/tazobactam, (vi) the expected timing of beginning our Phase 3 program in ventilator-associated bacterial pneumonia for ceftolozane/tazobactam and Phase 3 efficacy trials for bevenopran (CB-5945) and (vii) our Building Blocks of Growth five-year goals, are forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements.

Such risks and uncertainties include: the risk that our final fourth quarter and 2012 full year audited financial results will differ materially from our expected results disclosed in this release; our ability to continue to grow revenues from the sale of CUBICIN; the ability of our third-party suppliers to produce and deliver adequate amounts of our products and product candidates; competition from generic drug companies such as Teva and Hospira; our ability to successfully market and sell ENTEREG; our ability to successfully develop, gain marketing approval for and commercially launch ceftolozane/tazobactam and our other product candidates for their planned indications and on the timelines that we expect; our ability to in-license or acquire new products and product candidates; our ability to achieve and manage our growth in our business; and those additional factors discussed in our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission. We caution investors not to place considerable reliance on the forward-looking statements contained in this press release. These forward-looking statements speak only as of the date of this document, and we undertake no obligation to update or revise any of these statements.
 
CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in thousands)
       
December 31, December 31,
2012 2011
ASSETS
Cash, cash equivalents and investments $ 979,396 $ 867,695
Accounts receivable, net 93,467 87,800
Inventory 79,440 75,300
Property and equipment, net 166,465 168,425
Deferred tax assets, net 14,190 16,252
In-process research and development 272,700 311,400
Other assets   326,727   356,643
 
Total assets $ 1,932,385 $ 1,883,515
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses $ 209,236 $ 177,378
Deferred tax liabilities, net 103,081 139,237
Deferred revenue 40,875 31,524
Contingent consideration 189,213 248,234
Debt and other liabilities, net   399,232   487,285
Total liabilities   941,637   1,083,658
 
Total stockholders' equity   990,748   799,857
 
Total liabilities and stockholders' equity $ 1,932,385 $ 1,883,515
 
 
CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in thousands, except share and per share data)
                   
Three months ended Twelve months ended
December 31, December 31,
2012 2011 2012 2011
 
Revenues:
U.S. CUBICIN product revenues, net $ 216,041 $ 190,113 $ 809,200 $ 698,837
U.S. ENTEREG product revenues, net   10,941     2,530     40,171     2,530  
Total U.S. product revenues, net 226,982 192,643 849,371 701,367
International product revenues 14,478 10,833 50,454 36,658
Service revenues 3,705 3,705 23,249 6,725
Other revenues   754     5,724     3,285     9,222  
Total revenues, net   245,919     212,905     926,359     753,972  
 
Costs and expenses:
Cost of product revenues 61,474 48,931 230,057 172,864
Research and development 89,154 56,075 277,729 184,533
Impairment of in-process research and development 38,700 - 38,700 -
Contingent consideration (36,017 ) 6,554 (29,021 ) 91,537
Selling, general and administrative 47,333 48,774 171,788 163,228
Restructuring charges   -     9,279     -     9,279  
Total costs and expenses   200,644     169,613     689,253     621,441  
 
Operating income 45,275 43,292 237,106 132,531
 
Other income (expense), net (7,553 ) (7,161 ) (37,510 ) (27,742 )
       
Income before income taxes 37,722 36,131 199,596 104,789
 
(Benefit) provision for income taxes (115 ) 29,313 45,521 71,766
       
Net income $ 37,837   $ 6,818   $ 154,075   $ 33,023  
 
Basic earnings per share $ 0.59 $ 0.11 $ 2.42 $ 0.54
Diluted earnings per share $ 0.51

1

 
$ 0.11 $ 2.10

1

 

 
$ 0.52
 
Shares used in calculating:
Basic earnings per share 64,504,616 62,108,586 63,766,209 60,839,128
Diluted earnings per share 82,030,774 64,499,442 81,444,658 62,937,141
 

1 Includes add back of interest expense, debt issuance costs and debt discount amortization on 2.50% notes to income, net of tax effect
 
 
CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - NON-GAAP
UNAUDITED
(in thousands, except share and per share data)
                       
Three months ended Twelve months ended
Reconciliation of GAAP net income to non-GAAP proforma net income December 31, December 31,
2012 2011 2012 2011
 
GAAP net income $ 37,837 $ 6,818 $ 154,075 $ 33,023
 
ENTEREG intangible asset amortization 4,565 937 18,331 937
 
ENTEREG inventory step-up 1,705 - 4,033

 
-
 
Impairment of in-process research and development 38,700 - 38,700 -
 
Contingent consideration (36,017 ) 6,554 (29,021 ) 91,537
 
Non-cash debt discount amortization 3,800 4,739 17,244 18,446
 
Loss on extinguishment of 2.25% notes 738 - 4,467 -
 
Expenses related to the acquisition of Adolor - 10,263 5,393 10,263
 
Restructuring charge - 9,279 - 9,279
 
Loss on disposal of property and equipment - - 3,248

 
-
 
Reversal of reserve for uncertain tax positions - - (10,961 ) -
 
Non-cash tax adjustment (14,090 ) 9,613 6,797 29,996
       
Non-GAAP pro forma net income $ 37,238   $ 48,203 $ 212,306   $ 193,481
 
Non-GAAP basic earnings per share $ 0.58 $ 0.78 $ 3.33 $ 3.18
Non-GAAP diluted earnings per share $ 0.48

1

 
$ 0.60

1

 
$ 2.65

1

 
$ 2.46

1

 
 
Shares used in calculating:
Non-GAAP basic earnings per share 64,504,616 62,108,586 63,766,209 60,839,128
Non-GAAP diluted earnings per share 82,326,462 83,472,974 83,406,931 81,910,673
 
¹ Includes add back of interest expense and debt issuance costs on 2.25% notes and 2.50% notes to income, net of tax effect
 
 
CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - NON-GAAP
UNAUDITED
(in thousands)
                 
Three months ended Twelve months ended
Reconciliation of GAAP operating income to non-GAAP adjusted operating income December 31, December 31,
2012 2011 2012 2011
 
Operating income $ 45,275 $ 43,292 $ 237,106

 
$ 132,531
 
ENTEREG intangible asset amortization 4,565 937 18,331 937
 
ENTEREG inventory step-up 1,705 - 4,033 -
 
Impairment of in-process research and development 38,700 - 38,700 -
 
Contingent consideration (36,017 ) 6,554 (29,021 )

 
91,537
 
Expenses related to the acquisition of Adolor - 10,263 5,393 10,263
 
Restructuring charges - 9,279 - 9,279
       
Non-GAAP adjusted operating income $ 54,228   $ 70,325 $ 274,542   $ 244,547
 
 
CUBIST PHARMACEUTICALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
UNAUDITED
(in thousands, except share and per share data)
                   
 
Three months ended Twelve months ended
December 31, December 31,
2012 2011 2012 2011
Reconciliation of GAAP basic earnings per share to non-GAAP basic earnings per share
 
Non-GAAP basic net income - from table above $ 37,238   $ 48,203 $ 212,306 $ 193,481
 
GAAP and Non-GAAP basic shares   64,504,616     62,108,586   63,766,209   60,839,128
 
GAAP basic earnings per share $ 0.59 $ 0.11 $ 2.42 $ 0.54
Non-GAAP adjustments - from table above   (0.01 )   0.67   0.91   2.64
Non-GAAP basic earnings per share $ 0.58   $ 0.78 $ 3.33 $ 3.18
 
Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share
 
Non-GAAP basic net income - from table above $ 37,238 $ 48,203 $ 212,306 $ 193,481
Non-GAAP dilutive adjustments   2,079  

1
  1,902

1
  9,039

1
  7,975

1
Non-GAAP diluted net income $ 39,317   $ 50,105 $ 221,345 $ 201,456
 
GAAP diluted shares 82,030,774 64,499,442 81,444,658 62,937,141
Non-GAAP dilutive adjustments   295,688  

2
  18,973,532

2
  1,962,273

2
  18,973,532

2
Non-GAAP diluted shares   82,326,462     83,472,974   83,406,931   81,910,673
 
GAAP diluted earnings per share $ 0.51 $ 0.11 $ 2.10 $ 0.52
Non-GAAP dilutive adjustments   (0.03 )   0.49   0.55   1.94
Non-GAAP diluted earnings per share $ 0.48   $ 0.60 $ 2.65 $ 2.46
 
 
1 Includes add back of interest expense and debt issuance costs on 2.25% notes and 2.50% notes to income, net of tax effect
2 Weighted average shares issued on full conversion
 
 

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