Wall Street's recent roller-coaster ride has made it clear to investors that
not all biotechnology companies are created equal. The share prices of most of
the firms that have products, sales and earnings have suffered far less than its
industry counterparts who still are betting on the come. One of the former that
has held its ground remarkably well, relatively speaking, is Lexington,
Mass.-based Cubist Pharmaceuticals (NASDAQ: CBST ). While the Nasdaq
Biotechnology Index has retreated by more than 20% in the past month, Cubist is
down only about 12%. With a nearly $2 billion market cap, Cubist still sells for
a hefty P/E of 43 based on trailing earnings, so investors thinking about buying
the stock on the dip might want to factor that into their evaluation. The big
question facing the company is whether it can ever return to its glory days of
yesteryear. That occurred in early 2000 when Cubist shares nearly hit $66, more
than twice what the stock trades for these days. If the company and its
investors are going to ever again enjoy those salad days, Cubist is going to
have to become more than a one-trick pony. The company has been riding its core
drug Cubicin since 2003, when it created a buzz by becoming one of the first
really new antibiotics to hit the market in years. It also had a very different
mechanism of action than the standard therapies. To this day, Eli Lilly (NYSE:
LLY ) probably regrets giving up on the drug and selling it to Cubist. Cubicin
clearly is the company's workhorse. During the second quarter of the year,
sales of the drug accounted for almost all the company's revenue. Sales of the
product in the U.S. climbed 9% to more than $168 million; internationally, they
rose 17% to nearly $8 million. The company had other positive developments
during the quarter. For one, Cubist entered into a two-year agreement with
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