Shares of Cubist Pharmaceuticals Inc. rose Thursday after an analyst upgraded the stock, saying he believes Cubist will successfully defend the patents on its antibiotic Cubicin, and expects sales will remain strong.
Jason Kantor of RBC Capital Markets upgraded the stock to "Outperform" from "Sector Perform." He said he is more confident Cubist will fend off a patent challenge to Cubicin from Teva Pharmaceutical Industries Ltd., either by winning a court case or reaching a settlement that will keep a generic version of Cubicin off the market for several more years.
Cubicin is used to treat complex skin infections that are resistant to other antibiotics. It is Cubist's only marketed product.
Teva, the world's largest generic drugmaker, asked the Food and Drug Administration to approve a low-cost generic version of Cubicin early this year. Cubist sued Teva to block the approval, saying its patents are valid and protect the drug through at least 2016.
When a generic version of a drug is introduced, sales of the more expensive brand-name version tend to drop sharply. Generic drugmakers often challenge patents and later settle with the patent holder, allowing them to begin selling a generic version before the patents have expired.
Kantor said sales of Cubicin have been stronger than expected, and there has been little competition. He added that Cubist shares are reasonably priced because their value has dropped in recent weeks. The shares reached a 2009 high of $22.39 on Sept. 11, and are down 22.8 percent since then. The stock is still well above its annual low of $13.81, which was set in March.
The analyst raised his price target to $24 per share from $21. In afternoon trading, shares of the Lexington, Mass., company rose 90 cents, or 5.2 percent, to $18.19.