Cubist Pharmaceuticals Inc. (CBST): Poised To Pop on FDA OK

An approval from the Food and Drug Administration (FDA) usually puts a charge into the stock price of the beneficiary(s) of the thumbs up. On the other hand, the plug can be pulled and the stock price drained on a "No" from the FDA.

Any investors that's been on either side of the FDA equation understands and knows the "thrill of victory and the agony of defeat." That's why it is important for shareholders and trades to be aware of these crucial, impactful events.

Cubist Pharmaceuticals Inc. (NASDAQ:CBST) is slated to hear from the government agency before the end of June.

Cubist is engaged in the research, development, and commercialization of pharmaceutical products for medical needs in the acute care environment in the United States.

[Related -Cubist Pharmaceuticals Inc. (CBST): All-Time Highs On The Horizon?]

The FDA has accepted the Company's New Drug Application (NDA) for its investigational antibiotic tedizolid phosphate (TR-701) with Priority Review. The FDA has assigned a Prescription Drug User Fee Act (PDUFA) action date of June 20, 2014. Cubist is seeking FDA approval of tedizolid for the treatment of acute bacterial skin and skin structure infections (ABSSSI).

Tedizolid phosphate is an oxazolidinone being developed for both intravenous (I.V.) and oral administration for the treatment of serious Gram-positive infections, including those caused by methicillin-resistant Staphylococcus aureus (MRSA). The NDA submission is based on positive data from two global Phase 3 clinical studies of tedizolid in ABSSSI, which met the primary and secondary endpoints defined by the FDA and the European Medicines Agency (EMA).

[Related -Stock Upgrades And Downgrades: CBST, CCL, CMA, COH, OIS, SF, VFC, WCG]

Gram-positive bacteria include staphylococci ("staph"), streptococci ("strep"), pneumococci, and the bacterium responsible for diphtheria (Cornynebacterium diphtheriae) and anthrax (Bacillus anthracis).

Just from hospital alone, "Each year there are '-37.7 million admissions to acute-care hospitals in the United States; among these, =2.1 million patients (5.7%) develop nosocomial infections," according to paper titles, "Hospital-acquired infections: Diseases with increasingly limited therapies."

That's a fairly big audience for tedizolid.

The stock is positioned to pop if the street likes what it hears on June 20, 2014. As you'll see on the chart below, CBST's stock chart could be drawing a bullish, right angle triangle pattern. That when the top (resistance) is flat and the bottom is an ascending line from left to right.

If/when the stock price pierces the flat top; it usually makes a move equal to the short-side of the right angle – about $10 in this case. If things don't go right, the biotech should catch support at one of three places.

The 50-day average of $67.36 and rising or $65 or $62.50.

Overall: Cubist Pharmaceuticals Inc. (NASDAQ:CBST) could offer some considerable upside on a FDA approval with less downside if the support levels outlined above act as safety nets.  It's the sort of relationship that favors the bullish side of the trade.