Cubist Pharmaceuticals Inc. and Gilead Sciences Inc. terminated their licensing agreement for the commercialization of Cidecin, leaving Cubist without a partner in the European market.

Cubist, of Lexington, Mass., and Gilead, of Foster City, Calif., could not agree on whether to pursue European approval for Cidecin (daptomycin for injection), in the single indication of skin and soft-tissue infections or for a broader label, Cubist CEO Scott Rocklage said in a conference call Monday. So Cubist now regains European rights to both Cidecin and an oral formulation of daptomycin.

"Over the past six months, we've continued to investigate our filing options for Cidecin in Europe and have come to potentially different conclusions than Gilead," Rocklage said.

The news drove Cubist's stock (NASDAQ:CBST) down $2.24 Tuesday, or 30.3 percent, to close at $5.16. Gilead's stock (NASDAQ:GILD) rose 49 cents to close at $33.13.

In a prepared statement, Gilead President and CEO John Martin said, "Given the potential for a more focused Cidecin label in Europe, we have chosen to direct our resources toward our other key products, including the continued multinational rollout of Viread for HIV and preparations for the launch of Hepsera for chronic hepatitis B."

The European partnership with Gilead was forged in January 1991 and included a $13 million up-front payment to Cubist. However, Rocklage emphasized that Cubist always has borne the full responsibility of development costs for Cidecin. What will be missing going forward, he said, are milestones that might have come to Cubist in 2003 and 2004.

Rocklage said that the company is evaluating all options on how to proceed in Europe, but no money will be paid by either Cubist or Gilead in light of the termination.

"Our plan to move forward in Europe begins with step one of face-to-face discussions with additional European authorities beyond the early stage discussions that occurred in January of this year," he said.

Mike Bonney, Cubist's president and chief operating officer, told BioWorld Today that in terms of next steps, "It is for us to confirm the regulatory strategy in Europe and to evaluate the range of options for commercialization and make a decision on how we're going to proceed.

"We're approaching this from a clean-slate standpoint," Bonney said, noting that Cubist is looking at all the options ranging from building its own sales force to partnering.

Cubist is scheduled to file a new drug application in the U.S. during the fourth quarter for Cidecin in skin and soft-tissue infections. It also has a Phase III trial of Cidecin ongoing in vancomycin-resistant Enterococcal infections.

Cubist could use that filing package scheduled for the fourth quarter as a basis for filing in Europe; however, Rocklage said his company would be submitting not only Phase III data in skin and soft-tissue infections, first reported in March 2001, but also data gathered from a study of Cidecin in bacteremia, or bloodstream infections. (See BioWorld Today, March 15, 2001.)

Rocklage said during the call that the challenge is "really about providing the information that allows regulatory authorities to believe that the benefit/risk ratio is appropriately balanced."

Minneapolis, Minn-based RBC Capital Markets analyst Todd Nelson wrote in a research note that he reduced Cubist's 12-month price objective to $16, which is contingent upon the new drug application filing for Cidecin in the fourth quarter followed by a 2004 U.S. launch and a rest-of-world commercialization partnership.

RBC's model has previously assumed a 2004 launch in Europe, but that has been pushed out to 2005 in light of Monday's news. Nelson also wrote that he believes Cubist will likely partner in Europe with a "larger biotech or pharmaceutical company."

Bonney said Cubist "will proceed to market in the U.S. with a Cubist hired and dedicated sales organization," and toward that end, the company already has hired a sales director.

"We will target top vancomycin-prescribing hospitals, and that represents a universe of between 1,000 and 1,200 hospitals, which account for 75 percent to 80 percent of the vancomycin business," he said. "It will be a very focused, targeted infrastructure." Cubist will hire additional sales staff as seems prudent for them to be trained and in the territories at the time of product launch, if approved, Bonney said.

As of the end of the second quarter, Cubist reported a cash position of $195 million, and Rocklage said that any additional costs incurred to support the European filing would be "incremental."

Most of Cubist's revenues, he said, are derived from Small Business Innovation Research grants and via its partnership with Novartis AG, of Basel, Switzerland, for the discovery and development of anti-infectives using Cubist's VITA (validation in vivo of targets and assays for anti-infectives) functional genomics technology. That original deal was valued at $33 million. (See BioWorld Today, Feb. 10, 1999.)

With European rights returned, Cubist now controls Cidecin globally and what happens next is its decision.

"We believe that the return of the European Cidecin commercialization rights to Cubist represents an interesting strategic opportunity, given that we now control both the timing as well as the content of the Cidecin European regulatory filings," Rocklage said in the call.