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Globe 100 | No. 1 - Cubist Pharmaceuticals

The cure no one saw

Cubist took a chance on a failed drug - and with perseverence found itself a hit

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By Todd Wallack
Globe Staff / May 19, 2009
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Several years ago, a small Cambridge biotechnology firm called Cubist Pharmaceuticals made a surprising business deal. It licensed the rights to a failed drug, called daptomycin.

Though the novel antibiotic showed promise in treating serious bacterial infections, clinical trials suggested it might also cause serious muscle damage - making it too dangerous to give to patients. Eli Lilly & Co., the pharmaceutical giant that originally developed the drug, pulled the plug on the research in the early 1990s. But Cubist executives thought there still might be hope for the compound.

Because the compound originated in soil samples collected at the base of Mount Ararat, the Turkish volcanic cone where some believe Noah's Ark landed, Cubist chief executive Michael Bonney joked, "This is an antibiotic of biblical proportions."

Today, that long shot is paying off many times over. Cubist eventually found a way to adjust the dosage so it didn't cause permanent muscle damage. The drug - now called Cubicin - also turned out to be a powerful weapon in the fight against infections caused by a stubborn form of bacteria called MRSA, for methicillin-resistant Staphylococcus aureus. MRSA has historically been found in hospitals, but has increasingly popped up in day-care centers, prisons, and other settings.

Since winning approval from the US Food and Drug Administration in 2003, Cubicin has generated hundreds of millions of dollars in annual sales and helped transform Cubist into one of the Bay State's best-performing firms. Cubist's revenue leaped 47 percent last year to $434 million. Profit more than quadrupled to $170 million. And its stock finished higher in 2008, even as the market plunged.

And the sales are translating into jobs. Cubist, which moved to Lexington in 2001, recently expanded its headquarters and plans to boost its payroll by 10 percent this year. Cubist now has 554 employees, including 380 in Massachusetts.

The Cubicin story illustrates how the biotech business can often take unpredictable turns. Most promising drugs wind up failing in clinical trials - if not earlier - because they prove to be less effective or safe than hoped. But with a stroke of insight, perseverance, or sheer luck, researchers have occasionally rescued breakthrough therapies from the scrap heap, helping patients and investors alike.

"That's what makes biotech fun," said Leerink Swann & Co. analyst Howard Liang, who has been tracking Cubist for several years. "There are ups and downs."

But Cubicin's tale is particularly dramatic, in part because of its impact on Cubist, which has yet to see another drug approved by the FDA. "There's some question about whether we would exist" without Cubicin, Bonney said.

The potential market for the Cubist product proved far greater than expected. Some analysts underestimated the size of the MRSA threat. Bonney said most predicted the drug might generate up to $250 million in US sales. But this year alone, Cubist predicts, it will take in $520 million to $540 million in the United States.

Cubist still faces challenges, of course, including its reliance on Cubicin. The company faces a potential threat from generic drug makers who hope to make their own versions of the drug. Cubist's patents aren't slated to expire until 2016 and 2019, but Teva Pharmaceuticals, the Israeli generic drug maker, is setting up a legal challenge to them. Bonney said generic drug makers have been successful in challenging patents about 25 to 40 percent of the time. "You certainly can't ignore it," Bonney said. "This is serious stuff."

To diversify its revenue base, Cubist struck an agreement with giant drug maker AstraZeneca to help market another injectable antibiotic, called Merrem IV. And it has invested some of the profits from Cubicin to research new potential drugs, including one to treat Gram-negative bacteria. It also licensed a drug to reduce blood loss during surgery from Dyax Corp. in Cambridge. And it inked a pact with Alnylam Pharmaceuticals of Cambridge in January to help develop a drug to treat a virus called respiratory syncytial.

The Alnylam compound is one of the most advanced potential drugs to use a technique called RNA interference to silence troublesome genes. It's part of the company's continuing effort to bring to market new therapies, the lifeblood and promise of any biotech.

Todd Wallack can be reached at twallack@globe.com.

Massachusetts Governor Deval Patrick celebrates Cubist Pharmaceuticals' spot atop the Globe 100 with Robert J. Perez, Cubist's executive vice president and chief operating fficer (left) and Steven C. Gilman, Cubist's senior vice president or discovery and nonclinical development and chief scientific officer. Massachusetts Governor Deval Patrick celebrates Cubist Pharmaceuticals' spot atop the Globe 100 with Robert J. Perez, Cubist's executive vice president and chief operating fficer (left) and Steven C. Gilman, Cubist's senior vice president or discovery and nonclinical development and chief scientific officer. (Photo courtesy Cubist Pharmaceuticals )

CUBIST PHARMACEUTICALS
HEADQUARTERS: Lexingtonn
CHIEF EXECUTIVE: Michael Bonney
REVENUE IN 2008: $434 million
NET INCOME IN 2008: $170 million
MARKET VALUE ON MARCH 31: $941 million
EMPLOYEES: 554