BUSINESS AGREEMENTS	9 Months Ended
Sep. 30, 2013
BUSINESS AGREEMENTS
BUSINESS AGREEMENTS	B. BUSINESS AGREEMENTS Licensing and Collaboration Agreements Dong-A ST Co., Ltd. In connection with the Company’s acquisition of Trius in September 2013, Cubist acquired the rights to tedizolid phosphate. See Note C., “Business Combinations and Acquisitions,” for additional information. Trius licensed tedizolid phosphate from Dong-A ST Co., Ltd., or Dong-A, under a January 2007 license agreement. As a result of acquiring Trius, Cubist assumed obligations under the license agreement to pay Dong-A remaining milestone payments of up to $11.5 million if certain development and regulatory approval milestones are achieved. In addition, Cubist is obligated to pay Dong-A tiered single-digit royalties on worldwide net sales of tedizolid phosphate on a country-by-country basis, excluding North and South Korea, until the later of: (i) 12 years after the date of the first commercial sale of tedizolid phosphate in such country; and (ii) the expiration of the last patent covering tedizolid phosphate in such country. The license agreement terminates upon the expiration of all of the royalty obligations under the agreement. Cubist may terminate the license agreement if Cubist decides to discontinue development or commercialization of licensed products and Dong-A may terminate the license agreement if Cubist fails to meet certain specified development and commercialization obligations within specified time periods. Hydra Biosciences, Inc. In October 2009, Cubist entered into a collaboration and license agreement with Hydra Biosciences, Inc., or Hydra, under which the Company provided funding for the research and development of potential therapeutics for the management of pain. In June 2013, the Company entered into an agreement to amend and restate the original collaboration and license agreement with Hydra. Pursuant to the terms of the restated agreement, each party granted to the other an exclusive license to research, develop, manufacture and commercialize certain Transient Receptor Potential Ankyrin repeat 1, or TRPA1, inhibitor compounds. Cubist paid Hydra an upfront, non-refundable payment of $15.0 million as consideration for the arrangement, which was recorded within research and development expense in the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2013, as it was not accounted for as a business combination and the asset has no alternative future use. All potential future milestone payments under the original agreement were eliminated, and each party agreed to pay low single-digit royalties to the other party for worldwide net sales of its respectively licensed products. The agreement expires upon the later of: (i) the expiration of the last licensed patent claim covering a licensed TRPA1 inhibitor product in any country; or (ii) the last tenth anniversary of the date of the first commercial sale of any licensed TRPA1 inhibitor product in any country, following the cessation of all research, development, manufacturing and commercialization of licensed products by or on behalf of Cubist and Hydra and their respective affiliates. Astellas Pharma Inc. In connection with the Company’s acquisition of Calixa Therapeutics Inc., or Calixa, in December 2009, Cubist acquired the rights to ceftolozane (formerly known as CXA-101), which Calixa had licensed from Astellas Pharma Inc., or Astellas. In March 2013, the license agreement with Astellas was amended to expand the territory in which Cubist holds the rights to manufacture, market and sell any eventual products that incorporate ceftolozane, including ceftolozane/tazobactam (formerly known as CXA-201), to include the Asia-Pacific and Middle East territories that Astellas had retained under the original agreement. Effective as of this amendment, Cubist owns worldwide rights to ceftolozane/tazobactam, subject to ongoing milestone and royalty obligations to Astellas. As consideration for these expanded rights, Cubist made a one-time payment of $25.0 million to Astellas in March 2013, which was recorded within research and development expense in the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2013, as the acquisition of these rights was not accounted for as a business combination and the asset has no alternative future use. Bayer Pharma AG In connection with the Company’s acquisition of Trius in September 2013, Cubist acquired a 2011 collaboration and license agreement between Trius and Bayer Pharma AG, or Bayer. See Note C., “Business Combinations and Acquisitions,” for additional information. Under the terms of the agreement, Bayer was granted exclusive rights to develop and commercialize tedizolid phosphate in China, Japan and substantially all other countries in Asia, Africa, Latin America and the Middle East, excluding North and South Korea, or the Bayer Licensed Territory. Trius retained full development and commercialization rights outside the Bayer Licensed Territory, including the U.S., Canada and the European Union, but excluding North and South Korea where Dong-A retained its rights. In exchange for development and commercialization rights in the Bayer Licensed Territory, Bayer made an upfront, non-refundable payment of $25.0 million to Trius, prior to Cubist’s acquisition of Trius, and agreed to support approximately 25% of the future development costs of tedizolid phosphate required for global approval for treatment of acute bacterial skin and skin structure infections, or ABSSSI, and pneumonia, subject to certain adjustments and limitations. In addition, Bayer agreed to support 100% of the future development costs required for local approval in the Bayer Licensed Territory. Cubist is also eligible to receive up to $69.1 million under the agreement upon the achievement of certain development, regulatory, and commercial milestones and will receive double-digit royalties on net sales of tedizolid phosphate in the Bayer Licensed Territory. Commercialization and Distribution Agreements Optimer Co-Promotion Agreement On July 30, 2013, in connection with the Optimer merger agreement, Cubist entered into an amendment to its existing co-promotion agreement with Optimer which was due to expire on July 31, 2013. The amendment extended the term of the existing co-promotion agreement in substantially its current form through the earlier of July 31, 2014, or the completion of the merger, subject to early termination by either party of the Optimer merger agreement. The co-promotion agreement was terminated upon Cubist’s completion of the acquisition of Optimer on October 24, 2013. See Note O., “Subsequent Events,” for additional information.

B. BUSINESS AGREEMENTS

Licensing and Collaboration Agreements

Dong-A ST Co., Ltd.

In connection with the Company’s acquisition of Trius in September 2013, Cubist acquired the rights to tedizolid phosphate. See Note C., “Business Combinations and Acquisitions,” for additional information. Trius licensed tedizolid phosphate from Dong-A ST Co., Ltd., or Dong-A, under a January 2007 license agreement. As a result of acquiring Trius, Cubist assumed obligations under the license agreement to pay Dong-A remaining milestone payments of up to $11.5 million if certain development and regulatory approval milestones are achieved. In addition, Cubist is obligated to pay Dong-A tiered single-digit royalties on worldwide net sales of tedizolid phosphate on a country-by-country basis, excluding North and South Korea, until the later of: (i) 12 years after the date of the first commercial sale of tedizolid phosphate in such country; and (ii) the expiration of the last patent covering tedizolid phosphate in such country. The license agreement terminates upon the expiration of all of the royalty obligations under the agreement. Cubist may terminate the license agreement if Cubist decides to discontinue development or commercialization of licensed products and Dong-A may terminate the license agreement if Cubist fails to meet certain specified development and commercialization obligations within specified time periods.

Hydra Biosciences, Inc.

In October 2009, Cubist entered into a collaboration and license agreement with Hydra Biosciences, Inc., or Hydra, under which the Company provided funding for the research and development of potential therapeutics for the management of pain. In June 2013, the Company entered into an agreement to amend and restate the original collaboration and license agreement with Hydra. Pursuant to the terms of the restated agreement, each party granted to the other an exclusive license to research, develop, manufacture and commercialize certain Transient Receptor Potential Ankyrin repeat 1, or TRPA1, inhibitor compounds. Cubist paid Hydra an upfront, non-refundable payment of $15.0 million as consideration for the arrangement, which was recorded within research and development expense in the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2013, as it was not accounted for as a business combination and the asset has no alternative future use. All potential future milestone payments under the original agreement were eliminated, and each party agreed to pay low single-digit royalties to the other party for worldwide net sales of its respectively licensed products. The agreement expires upon the later of: (i) the expiration of the last licensed patent claim covering a licensed TRPA1 inhibitor product in any country; or (ii) the last tenth anniversary of the date of the first commercial sale of any licensed TRPA1 inhibitor product in any country, following the cessation of all research, development, manufacturing and commercialization of licensed products by or on behalf of Cubist and Hydra and their respective affiliates.

Astellas Pharma Inc.

In connection with the Company’s acquisition of Calixa Therapeutics Inc., or Calixa, in December 2009, Cubist acquired the rights to ceftolozane (formerly known as CXA-101), which Calixa had licensed from Astellas Pharma Inc., or Astellas. In March 2013, the license agreement with Astellas was amended to expand the territory in which Cubist holds the rights to manufacture, market and sell any eventual products that incorporate ceftolozane, including ceftolozane/tazobactam (formerly known as CXA-201), to include the Asia-Pacific and Middle East territories that Astellas had retained under the original agreement. Effective as of this amendment, Cubist owns worldwide rights to ceftolozane/tazobactam, subject to ongoing milestone and royalty obligations to Astellas. As consideration for these expanded rights, Cubist made a one-time payment of $25.0 million to Astellas in March 2013, which was recorded within research and development expense in the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2013, as the acquisition of these rights was not accounted for as a business combination and the asset has no alternative future use.

Bayer Pharma AG

In connection with the Company’s acquisition of Trius in September 2013, Cubist acquired a 2011 collaboration and license agreement between Trius and Bayer Pharma AG, or Bayer. See Note C., “Business Combinations and Acquisitions,” for additional information. Under the terms of the agreement, Bayer was granted exclusive rights to develop and commercialize tedizolid phosphate in China, Japan and substantially all other countries in Asia, Africa, Latin America and the Middle East, excluding North and South Korea, or the Bayer Licensed Territory. Trius retained full development and commercialization rights outside the Bayer Licensed Territory, including the U.S., Canada and the European Union, but excluding North and South Korea where Dong-A retained its rights. In exchange for development and commercialization rights in the Bayer Licensed Territory, Bayer made an upfront, non-refundable payment of $25.0 million to Trius, prior to Cubist’s acquisition of Trius, and agreed to support approximately 25% of the future development costs of tedizolid phosphate required for global approval for treatment of acute bacterial skin and skin structure infections, or ABSSSI, and pneumonia, subject to certain adjustments and limitations. In addition, Bayer agreed to support 100% of the future development costs required for local approval in the Bayer Licensed Territory. Cubist is also eligible to receive up to $69.1 million under the agreement upon the achievement of certain development, regulatory, and commercial milestones and will receive double-digit royalties on net sales of tedizolid phosphate in the Bayer Licensed Territory.

Commercialization and Distribution Agreements

Optimer Co-Promotion Agreement

On July 30, 2013, in connection with the Optimer merger agreement, Cubist entered into an amendment to its existing co-promotion agreement with Optimer which was due to expire on July 31, 2013. The amendment extended the term of the existing co-promotion agreement in substantially its current form through the earlier of July 31, 2014, or the completion of the merger, subject to early termination by either party of the Optimer merger agreement. The co-promotion agreement was terminated upon Cubist’s completion of the acquisition of Optimer on October 24, 2013. See Note O., “Subsequent Events,” for additional information.