M. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

CUBICIN Patent Infringement Litigation

In February 2012, the Company received a Paragraph IV Certification Notice Letter from Hospira, notifying Cubist that it had submitted an ANDA to the FDA, seeking approval to market a generic version of CUBICIN. Hospira's notice letter advised that it is seeking FDA approval to market daptomycin for injection, 500 mg/vial, prior to the expiration of U.S. Patent Nos. 6,468,967 and 6,852,689, which expire on September 24, 2019, U.S. Patent No. RE39,071, which expires on June 15, 2016, U.S. Patent No. 8,058,238, which expires on November 28, 2020, and U.S. Patent No. 8,003,673, which expires on September 4, 2028. In May 2012, the Company received a second Paragraph IV Certification Notice Letter from Hospira notifying Cubist that it had submitted to the FDA an amendment to its ANDA. Hospira's second notice letter advised that it is seeking FDA approval to market daptomycin for injection, 500 mg/vial, prior to the expiration of U.S. Patent No. 8,129,342, which expires on November 28, 2020. In August 2012, the Company received a third Paragraph IV Certification Notice Letter from Hospira notifying Cubist that it had submitted to the FDA an NDA, under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act seeking approval to market a generic version of CUBICIN. Hospira's third notice letter advised that it is seeking FDA approval to market daptomycin for injection, 350 mg/vial, prior to the expiration of U.S. Patent Nos. 6,468,967, 6,852,689, RE39,071, 8,058,238, 8,003,673 and 8,129,342. Each of these patents is listed in the Orange Book. Each of the notice letters further stated that Hospira is asserting that each claim in the respectively referenced patents is invalid, and/or unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the drug product respectively described by Hospira's ANDA, as amended, and NDA. In March 2012, Cubist filed a patent infringement lawsuit against Hospira in response to its initial ANDA filing. In July 2012, Cubist filed a new complaint against Hospira to allege infringement of U.S. Patent No. 8,129,342 in response to Hospira's amendment to its ANDA. In September 2012, Cubist filed a patent infringement lawsuit against Hospira in response to its NDA filing. The complaints, which were each filed in the U.S. District Court for the District of Delaware, respectively allege infringement of U.S. Patent Nos. 6,468,967; 6,852,689; RE39,071; 8,058,238; and 8,129,342. The complaints seek: (i) an order preventing the effective date of the FDA's approval of Hospira's ANDA and NDA until the expiration of the patents in the respective lawsuits; (ii) an order preventing Hospira from making, using, selling, offering for sale, marketing, distributing or importing Hospira's generic versions of CUBICIN until the expiration of the patents in the respective lawsuits; and (iii) an award of attorney's fees. By statute, the FDA is automatically prohibited from approving Hospira's ANDA for 30 months from Cubist's receipt of Hospira's first Paragraph IV notification letter for such ANDA and from finally approving Hospira's NDA for 30 months from Cubist's receipt of Hospira's first Paragraph IV notification letter for such NDA, as respectively applicable, unless the court enters a judgment finding the patents invalid, unenforceable or not infringed before the expiration of the respective 30-month period or otherwise shortens the respective 30-month period. In July 2013, the court endorsed the parties' stipulation that Hospira's ANDA and NDA products infringed certain claims of each the asserted patents. The trial in these related actions began on February 18, 2014. The Company cannot predict the outcome of these litigations. Any final, unappealable adverse result in these litigations would likely have a material adverse effect on the Company's results of operations and financial condition.

In August 2013, the Company received a Paragraph IV Certification Notice Letter from Strides, notifying Cubist that Strides had submitted an ANDA to the FDA seeking approval to market a generic version of CUBICIN. Strides' notice letter advised that it is seeking FDA approval to market daptomycin for injection, 500 mg/vial, prior to the expiration of U.S. Patent Nos. 6,468,967; 6,852,689; 8,058,238; 8,129,342; and 8,003,673, which expire on the periods described above and are each listed in the Orange Book. The notice letter further stated that Strides is asserting that each claim in the respectively referenced patents is invalid, and/or unenforceable and/or will not be infringed by the commercial manufacture, use, sale, offer to sell in the U.S., or importation into the U.S. of the drug product described by Strides' ANDA. In response to Strides' ANDA filing, Cubist filed patent infringement lawsuits against Strides in October 2013 in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of New Jersey. Cubist later filed a notice of dismissal of its complaint filed in the District of New Jersey and the case was subsequently terminated. The remaining complaint filed in the District of Delaware alleges infringement of U.S. Patent Nos. 6,468,967; 6,852,689; 8,058,238; and 8,129,342. The complaint seeks: (i) an order preventing the effective date of the FDA's approval of Strides' ANDA until the expiration of the patents in the respective lawsuits; (ii) an order preventing Strides from making, using, selling, offering for sale, marketing, distributing or importing Strides' generic version of CUBICIN until the expiration of the patents in the respective lawsuits; and (iii) an award of attorney's fees. By statute, the FDA is automatically prohibited from approving Strides' ANDA for 30 months from Cubist's receipt of Strides' Paragraph IV notification letter, unless the court enters a judgment finding the patents invalid, unenforceable or not infringed before the expiration of the 30-month period or otherwise shortens the 30-month period. The Company cannot predict the outcome of this matter. Any final, unappealable adverse result in this litigation would likely have a material adverse effect on the Company's results of operations and financial condition.

Optimer U.S. Governmental Investigations

Prior to the Company's acquisition of Optimer, Optimer became aware of an attempted share grant by Optimer and certain related matters in 2011, including a potentially improper $0.3 million payment to a research laboratory involving an individual associated with the share grant, that may have violated certain applicable laws, including the U.S. Foreign Corrupt Practices Act. Optimer had engaged external counsel to assist it in an internal investigation to review these matters. In April 2012, Optimer self-reported the results of its preliminary findings to the SEC and the U.S. Department of Justice, and removed the Chairman of its Board of Directors. In February 2013, the independent members of Optimer's Board of Directors determined that additional remedial action should be taken in light of prior compliance, record keeping and conflict-of-interest issues surrounding the potentially improper payment to the research laboratory and certain related matters. On February 26, 2013, Optimer's then-President and Chief Executive Officer and its then-General Counsel and Chief Compliance Officer resigned at the request of the independent members of the Board of Directors.

Cubist is continuing to cooperate with the investigations by the relevant U.S. authorities in their review of these matters, and Optimer has already taken remedial steps in response to its internal investigation. Nonetheless, these events could result in lawsuits being filed against Cubist or Optimer and certain of Optimer's former employees and directors or certain of the Company's employees. Such persons could also be the subject of criminal or civil enforcement proceedings, and Cubist may be required to indemnify such persons for any costs or losses incurred in connection with such proceedings. Cubist cannot predict the ultimate resolution of these matters, whether Cubist or such persons will be charged with violations of applicable civil or criminal laws or whether the scope of the investigations will be extended to new issues. Cubist also cannot predict what potential penalties or other remedies, if any, the authorities may seek against it, any of its employees, or any of Optimer's former employees and directors, or what the collateral consequences may be of any such government actions. Cubist has not accrued any amounts related to potential penalties or other remedies related to these matters as of December 31, 2013, and cannot estimate a reasonably possible range of loss. In the event any such lawsuit is filed or enforcement proceeding is initiated, Cubist could be subject to a variety of risks and uncertainties that could have material adverse effects on its business, operating results and financial condition.

Other

Cubist has minimum volume purchase commitments with third-party contract manufacturers with scheduled payments over the next five years that total $172.9 million at December 31, 2013. Cubist has a manufacturing and supply agreement with ACS Dobfar SpA, or ACSD, under which Cubist has minimum order requirements to purchase API from ACSD.

Cubist has various operating leases, primarily for buildings, computers and equipment. Rent expense amounted to $1.0 million, $0.7 million, and $2.5 million in fiscal years ended December 31, 2013, 2012, and 2011, respectively. Future minimum payments under these non-cancelable leases as of December 31, 2013 are as follows:

	(in thousands)

2014	$	2,950
2015		2,623
2016		2,687
2017		2,686
2018		2,352
2019 and thereafter		7,116


Total	$	20,414

The Company is attempting to sublease portions of certain leased premises in New Jersey and California that were vacated in December 2013, and if successful, future operating lease commitments will be partially offset by proceeds received from the subleases.

Cubist had other purchase obligations of $8.1 million at December 31, 2013, to be paid over the next five years. Other purchase obligations primarily related to clinical trial payment obligations owed to its CROs and independent clinical investigators related to certain clinical trials of candidates in its product pipeline, as well as amounts owed to its third-party service provider for the purposes of conducting clinical trials on Cubist's behalf related to ceftolozane/tazobactam.