D. INVESTMENTS

Marketable Securities

The following table summarizes the amortized cost and estimated fair value of the Company’s marketable securities, which are considered to be available-for-sale investments and were included in short-term and long-term investments on the condensed consolidated balance sheets:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Balance as of September 30, 2013
Bank deposits	$	20,000	$	—	$	—		$	20,000
U.S. Treasury securities	75,021		18		—			75,039
Corporate and municipal notes	352,099		86		(55		)	352,130
Total	$	447,120	$	104	$	(55	)	$	447,169

Balance as of December 31, 2012
Bank deposits	$	61,000	$	—	$	—		$	61,000
U.S. Treasury securities	114,041		4		(3		)	114,042
Corporate and municipal notes	640,234		158		(215		)	640,177
Total	$	815,275	$	162	$	(218	)	$	815,219

The following table contains information regarding the range of contractual maturities of the Company’s marketable securities:

	September 30, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in thousands)
Within 1 year	$	370,450	$	370,530	$	812,104	$	812,052
1-2 years	76,670		76,639		3,171		3,167
Total	$	447,120	$	447,169	$	815,275	$	815,219

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets and are not included in the tables above. In addition, certificates of deposit of $12.2 million and $60.1 million as of September 30, 2013 and December 31, 2012, respectively, were included within short-term investments in the condensed consolidated balance sheets but are excluded from the tables above as they were not deemed to be securities.

Adynxx Option Agreement

In February 2013, Cubist entered into an option agreement with Adynxx, Inc., or Adynxx. Under the agreement, Cubist made a $20.0 million payment to Adynxx, which is non-refundable except in limited circumstances, and obtained an exclusive option to acquire 100% of the outstanding shares of Adynxx. The option is exercisable any time prior to sixty days following Cubist’s receipt of the data from a Phase 2 clinical trial for Adynxx’s lead product candidate, AYX1, subject to extension in certain limited circumstances. Adynxx is studying AYX1 as a potential treatment for the reduction of acute pain and prevention of persistent and chronic pain following surgery. If Cubist exercises the option, Cubist would make an additional payment of $40.0 million to acquire Adynxx, net of any cash acquired and liabilities assumed, and would be obligated to make certain additional payments to the stockholders of Adynxx that are contingent upon the achievement of certain development, regulatory and sales milestones.

The Company has concluded that Adynxx is a variable interest entity, or VIE, in which Cubist is not the primary beneficiary. Cubist does not have power, through its variable interest, to direct the activities that most significantly impact the economic performance of Adynxx. Specifically, Cubist does not have any voting rights or other decision-making authority over Adynxx’s operational or financial activities, and it does not participate on any joint steering or oversight committees of Adynxx. Accordingly, the Company did not consolidate Adynxx as of September 30, 2013. Cubist accounted for the $20.0 million payment, which represents the maximum exposure to any potential losses associated with this VIE, at cost, subject to impairment testing. The $20.0 million was included in prepaid expenses and other current assets within the condensed consolidated balance sheet as of September 30, 2013.

Optimer Preferred Stock

In connection with the merger agreement between Cubist and Optimer, Cubist agreed to provide Optimer with $25.0 million per quarter, up to $75.0 million in aggregate funding, to fund Optimer’s operations in the ordinary course of business through the completion of the merger in exchange for non-voting senior preferred stock of Optimer. Accordingly, on September 16, 2013, Cubist and Optimer entered into a Series A Convertible Preferred Stock Purchase Agreement, pursuant to which Optimer issued to Cubist a total of $25.0 million of non-voting senior preferred stock. On October 24, 2013, Cubist completed its acquisition of Optimer. See Note O., “Subsequent Events,” for additional information. The non-voting senior preferred stock owned by Cubist at the completion of the merger was extinguished for no consideration and will be treated as consideration transferred at its fair value under the acquisition method of accounting for business combinations. As of September 30, 2013, the non-voting senior preferred stock was accounted for as a cost method investment and was included in prepaid expenses and other current assets within the condensed consolidated balance sheet.