Cubist

CBST is my biggest single investment. Partly, this was an exuberence purchase, and that is completely a mistake. However, I do think that it is on its way up. It's product, cubicin, was approved by the FDA for sale in the US. Q2 revenue increased $7M from last quarter, and 68% from Q2 last year as the company began to sell the product. Overall, they posted a Q2 net loss of $0.09 per share, when analysts were predicting -$0.05. The market reacted poorly. However, I don't understand the nature of this sell-off. 5 cents of this loss was due to stock compensation. My understanding is that this has to do with new laws regarding how companies account for stock and stock options granted employees. Discounting this loss, the income statement is slightly better than expected by analysts. Another 10 cents of this loss has to do with early debt repayment. While I would normally expect this to be good news for the street, in this case, I agree with notching it in the con column. CBST took on more debt, which was partly used to repay this old debt. So its a net even as far as total debt goes. The point is, though, that revenues are increasing by quarter and year-over-year. This is lesson number one of Investor's Business Daily - follow the earnings.