Cubist Pharmaceuticals Reports Second Quarter 2013 Financial Results

  Cubist Pharmaceuticals Reports Second Quarter 2013 Financial Results

  *Total Net Revenues of $258.8 Million, Up 12.2% Over Q2 2012; U.S. CUBICIN
    Net Revenues of $227.1 Million, Up 13.5% Over Q2 2012
  *Non-GAAP Diluted EPS of $0.42; GAAP Diluted EPS of $0.23
  *Non-GAAP Adjusted Operating Income of $51.3 Million; GAAP Operating Income
    of $28.1 Million

Business Wire

LEXINGTON, Mass. -- July 18, 2013

Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) today announced results for the
second quarter ended June 30, 2013. The Company will host a conference call
and webcast today at 5:00 p.m. ET (details below).

Financial Highlights for the Second Quarter of 2013 (unaudited)

  *Total net revenues were up 12.2% over the same period in 2012. Q2 2013
    total net revenues were $258.8 million compared to $230.6 million in Q2
    2012.
  *U.S. CUBICIN® (daptomycin for injection) net product revenues increased
    13.5% to $227.1 million from $200.2 million in Q2 2012. CUBICIN
    international revenues were $15.0 million compared to $11.4 million in Q2
    2012.
  *Non-GAAP adjusted operating income was $51.3 million compared to $71.1
    million in the second quarter of 2012. GAAP operating income was $28.1
    million compared to $61.5 million in the second quarter of 2012.
  *Non-GAAP diluted earnings per share (EPS) was $0.42 compared to $0.56 in
    the second quarter of 2012. GAAP diluted EPS was $0.23 compared to $0.58
    in the second quarter of 2012.

“We made important progress across the company this quarter, highlighted by
continued strong top-line growth and advancement of our exciting late-stage
pipeline,” said Michael Bonney, CEO of Cubist. “We are pleased to have now
secured Fast-Track status from the FDA for ceftolozane/tazobactam in all three
of its potential indications, and we look forward to reporting top-line Phase
3 data from the cUTI and cIAI trials later this year. We are making progress
against our Building Blocks of Growth goals  and continue to enhance our
leadership in the acute care environment.”

Second quarter ENTEREG® (alvimopan) net product revenues were $12.4 million,
up 27.6% compared to $9.7 million in the second quarter of 2012. Service
revenues for the Company’s co-promote of DIFICID® (fidaxomicin) for the second
quarter were $3.7 million. This will be the final quarter reflecting the full
service fee from Cubist’s agreement with Optimer, which concludes in July.

As of June 30, 2013, Cubist had $1.0 billion in cash, cash equivalents and
investments. The total number of Cubist’s common shares outstanding as of June
30, 2013, was 66,013,909.

Pipeline Update

Cubist also announced the initiation of a randomized, open-label study
evaluating the efficacy and safety of ceftolozane/tazobactam (formerly
CXA-201) in patients with ventilator-associated bacterial pneumonia (VABP).
Ceftolozane/tazobactam is an antibacterial consisting of a novel
anti-pseudomonal cephalosporin, with tazobactam, a well-established
β-lactamase inhibitor. The primary endpoint of this study is to compare the
clinical cure rates of ceftolozane/tazobactam to piperacillin/tazobactam.

The Company will provide an update on all of its pipeline activity, including
its Phase 3 program for ceftolozane/tazobactam, on today’s second quarter
earnings call.

Recent Company Highlights

  *In May, the FDA granted the Company’s late-stage antibiotic candidate,
    ceftolozane/tazobactam, Fast Track status in the previously granted
    Qualified Infectious Disease Product (QIDP) indications, hospital-acquired
    bacterial pneumonia (HABP)/VABP and complicated urinary tract infections
    (cUTI). The FDA previously granted Fast Track status for
    ceftolozane/tazobactam in complicated intra-abdominal infections (cIAI) in
    February 2013.
  *Dr. Lorianne Masuoka joined Cubist as Chief Medical Officer and Senior
    Vice President, Clinical Development and Medical Affairs. She was
    previously Senior Vice President/Chief Medical Officer at Nektar
    Therapeutics.
  *For the fifth consecutive year, Cubist was named to the Globe 100, the
    Boston Globe’s annual ranking of the 100 top-performing public companies
    headquartered in Massachusetts. Cubist was ranked number six overall and
    was named the top performing biotech company.

Use of Non-GAAP Financial Measures

Cubist uses non-GAAP financial measures, such as non-GAAP net income, non-GAAP
adjusted operating income and non-GAAP diluted EPS, to assess and analyze its
operational results and trends and to make financial and operational
decisions. Cubist believes these non-GAAP financial measures are also useful
to investors because they provide greater transparency regarding Cubist’s
operating performance. These non-GAAP financial measures should not be
considered an alternative to measurements required by GAAP, such as net
income, operating income and earnings per share, and should not be considered
measures of Cubist’s liquidity. In addition, these non-GAAP financial measures
are unlikely to be comparable with non-GAAP information provided by other
companies. Reconciliations between non-GAAP financial measures and GAAP
financial measures are included in the tables accompanying this press release
after the unaudited condensed consolidated financial statements.

               ***********************CONFERENCE CALL & WEBCAST
                      INFORMATION***********************

                       CUBIST Q2 2013 FINANCIAL RESULTS
                    Thursday, July 18, 2013 at 5:00 pm ET

                 U.S./Canada Attendee Dial-in: (855) 319-7654
                International Attendee Dial-in: (484) 756-4327
                         Attendee Passcode: 96695003

                  24-HOUR REPLAY U.S./CANADA: (855) 859-2056
                 24-HOUR REPLAY INTERNATIONAL: (404) 537-3406
                           Conference ID: 96695003

        CALL WILL ALSO BE BROADCAST LIVE, LISTEN ONLY, VIA THE WEB AT:
        https://cubist.webex.com/cubist/onstage/g.php?t=a&d=625133922
                          Attendee Password: 071813

            Replay will be available for 90 days at www.cubist.com

*********************************************************************************

About Cubist

Cubist Pharmaceuticals, Inc. is a biopharmaceutical company focused on the
research, development, and commercialization of pharmaceutical products that
address significant unmet medical needs in the acute care environment. Cubist
is headquartered in Lexington, Mass. Additional information can be found at
Cubist’s web site at www.cubist.com.

Cubist Safe Harbor Statement

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and other federal
securities laws. Any statements contained herein which do not describe
historical facts, including but not limited to, statements regarding our
unaudited second quarter financial results; the expected timing of clinical
trial data readouts for ceftolozane/tazobactam; and our Building Blocks of
Growth, are forward-looking statements which involve risks and uncertainties
that could cause actual results to differ materially from those discussed in
such forward-looking statements. Such risks and uncertainties include: the
risk that our final second quarter financial results will differ materially
from our expected results disclosed in this release; our ability to continue
to grow revenues from the sale of CUBICIN and ENTEREG; the ability of our
third-party suppliers to produce and deliver adequate amounts of our products
and product candidates; the strength of, and our ability to successfully
enforce, our intellectual property portfolio protecting our products and
product candidates; competition from generic drug companies such as Teva and
Hospira; our ability to successfully develop, gain marketing approval for and
commercially launch ceftolozane/tazobactam and our other product candidates
for their planned indications and on the timelines that we expect; our ability
to discover, in-license or acquire new products and product candidates; our
ability to achieve and manage our growth in our business; and those additional
factors discussed in our most recent Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission. We caution investors not to place
considerable reliance on the forward-looking statements contained in this
press release. These forward-looking statements speak only as of the date of
this document, and we undertake no obligation to update or revise any of these
statements.

                                                            
                                                                  
CUBIST PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

(in thousands)
                                                                  
                                                  June 30,        December 31,
                                                  2013            2012
ASSETS
Cash, cash equivalents and investments            $ 1,000,599     $  979,396
Accounts receivable, net                          101,609         93,467
Inventory                                         86,177          79,440
Property and equipment, net                       168,404         166,465
Deferred tax assets, net                          18,343          14,190
In-process research and development               272,700         272,700
Other assets                                      334,362        326,727
                                                                  
Total assets                                      $ 1,982,194    $  1,932,385
                                                                  
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses             $ 188,030       $  209,236
Deferred tax liabilities, net                     94,486          103,081
Deferred revenue                                  38,225          40,875
Contingent consideration                          193,852         189,213
Debt and other liabilities, net                   408,213        399,232
Total liabilities                                 922,806        941,637
                                                                  
Total stockholders' equity                        1,059,388      990,748
                                                                  
Total liabilities and stockholders'               $ 1,982,194    $  1,932,385
equity
                                                                     
                                                                     

CUBIST PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

(in thousands, expect share and per share data)
                  
                       Three Months Ended             Six Months Ended
                       June 30,                       June 30,
                       2013          2012            2013          2012
Revenues:
U.S. CUBICIN
product                $  227,117     $  200,180      $  429,162     $  384,887
revenues, net
U.S. ENTEREG
product                12,386        9,706          23,589        19,148     
revenues, net
Total U.S.
product                239,503        209,886         452,751        404,035
revenues, net
International
product                14,959         11,363          27,362         24,017
revenues
Service                3,665          8,665           7,289          12,329
revenues
Other revenues         652           653            1,306         1,878      
Total                  258,779       230,567        488,708       442,259    
revenues, net
                                                                                  
Costs and
expenses:
Cost of
product                63,041         58,891          118,716        112,843
revenues
Research and           115,190        67,206          229,399        118,378
development
Contingent             2,586          2,694           4,639          5,523
consideration
Selling,
general and            49,889        40,255         98,090        84,035     
administrative
Total costs            230,706       169,046        450,844       320,779    
and expenses
                                                                                  
Operating              28,073         61,521          37,864         121,480
income
                                                                                  
Other income           (6,678     )   (11,273    )    (12,880    )   (19,786    )
(expense), net
                                                                  
Income before          21,395         50,248          24,984         101,694
income taxes
                                                                                  
Provision for          6,153          7,125           3,654          25,777
income taxes
                                                                  
Net income             $  15,242     $  43,123      $  21,330     $  75,917  
                                                                                  
Basic earnings         $  0.23        $  0.68         $  0.33        $  1.20
per share
Diluted
earnings per           $  0.23        $  0.58      ^1 $  0.32        $  1.04      ^1
share
                                                                                  
Shares used in
calculating:
Basic earnings         65,558,376     63,498,953      65,248,707     63,250,165
per share
Diluted
earnings per           67,731,976     81,166,329      67,385,141     81,001,476
share

^1 Includes add back of interest expense, debt issuance costs and debt
discount amortization on 2.50% notes to income, net of tax effect

CUBIST PHARMACEUTICALS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

UNAUDITED

(in thousands, except share and per share data)
                  
Reconciliation         Three Months Ended              Six Months Ended
of GAAP net            June 30,                        June 30,
income to
non-GAAP net           2013            2012            2013            2012
income
                                                                                    
GAAP net               $  15,242       $  43,123       $  21,330       $  75,917
income
                                                                                    
Non-cash debt
discount               3,670           4,654           7,277           9,481
amortization
                                                                                    
Loss on
partial                —               3,728           —               3,728
extinguishment
of 2.25% Notes
                                                                                    
ENTEREG
intangible             4,552           4,589           8,977           9,177
asset
amortization
                                                                                    
ENTEREG
inventory              1,059           834             2,022           1,369
step-up
                                                                                    
Expenses
related to the         —               1,448           —               5,037
acquisition of
Adolor
                                                                                    
Hydra license          15,000          —               15,000          —
fee
                                                                                    
Acquisition of
rights from            —               —               25,000          —
Astellas
                                                                                    
Contingent             2,586           2,694           4,639           5,523
consideration
                                                                                    
Tax                    (9,087     )    (16,805    )    (25,051    )    (22,079    )
adjustment^1
                                                                    
Non-GAAP net           $  33,022      $  44,265      $  59,194      $  88,153  
income
                                                                                    
Non-GAAP basic
earnings per           $  0.50         $  0.70         $  0.91         $  1.39
share
Non-GAAP
diluted                $  0.42      ^2 $  0.56      ^3 $  0.77      ^2 $  1.10      ^3
earnings per
share
                                                                                    
Shares used in
calculating:
Non-GAAP basic
earnings per           65,558,376      63,498,953      65,248,707      63,250,165
share
Non-GAAP
diluted                83,156,060      84,076,268      82,809,259      84,231,134
earnings per
share

^1 The methodology used to compute the tax adjustments above was revised in Q1
2013 to reflect the tax effect of non-GAAP adjustments and to include
material, non-recurring discrete items for the period. The prior year tax
adjustment has been revised to conform to the current quarter’s presentation.

^2 Includes add back of interest expense and debt issuance costs on 2.50%
notes to income, net of tax effect

^3 Includes add back of interest expense and debt issuance costs on 2.25%
notes and 2.50% notes to income, net of tax effect

CUBIST PHARMACEUTICALS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

UNAUDITED

(in thousands)
                                                 
Reconciliation
of GAAP                  Three Months Ended June 30,   Six Months Ended June
operating income                                       30,
to non-GAAP
adjusted                 2013            2012         2013         2012
operating income
                                                                     
Operating income         $  28,073        $ 61,521     37,864        $ 121,480
                                                                     
ENTEREG
intangible asset         4,552            4,589        8,977         9,177
amortization
                                                                     
ENTEREG
inventory                1,059            834          2,022         1,369
step-up
                                                                     
Expenses related
to the                   —                1,448        —             5,037
acquisition of
Adolor
                                                                     
Hydra license            15,000           —            15,000        —
fee
                                                                     
Acquisition of
rights from              —                —            25,000        —
Astellas
                                                                     
Contingent               2,586            2,694        4,639         5,523
consideration
                                                                  
Non-GAAP
adjusted                 $  51,270       $ 71,086    $  93,502    $ 142,586
operating income
                                                                       
                                                                       

CUBIST PHARMACEUTICALS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

UNAUDITED

(in thousands, except share and per share data)
                  
                       Three Months Ended June 30,     Six Months Ended June 30,
                       2013            2012            2013            2012
Reconciliation
of GAAP basic
earnings per
share to
non-GAAP basic                                                                      
earnings per
share
Non-GAAP basic
net income -           $  33,022      $  44,265      $  59,194      $  88,153  
from table
above
                                                                                    
GAAP and
Non-GAAP basic         65,558,376     63,498,953     65,248,707     63,250,165 
shares
                                                                                    
GAAP basic
earnings per           $  0.23         $  0.68         $  0.33         $  1.20
share
Non-GAAP
adjustments -          0.27           0.02           0.58           0.19       
from table
above
Non-GAAP basic
earnings per           $  0.50        $  0.70        $  0.91        $  1.39    
share
                                                                                    
Reconciliation
of GAAP
diluted
earnings per
share to
non-GAAP
diluted                                                                             
earnings per
share
Non-GAAP basic
net income -           $  33,022       $  44,265       $  59,194       $  88,153
from table
above
Non-GAAP
dilutive               2,138       ^1 2,417       ^2 4,275       ^1 4,906       ^2
adjustments
Non-GAAP
diluted net            $  35,160      $  46,682      $  63,469      $  93,059  
income
                                                                                    
GAAP diluted           67,731,976      81,166,329      67,385,141      81,001,476
shares
Non-GAAP
dilutive               15,424,084  ^3 2,909,939   ^3 15,424,118  ^3 3,229,658   ^3
adjustments
Non-GAAP               83,156,060     84,076,268     82,809,259     84,231,134 
diluted shares
                                                                                    
GAAP diluted
earnings per           $  0.23         $  0.58         $  0.32         $  1.04
share
Non-GAAP
dilutive               0.19           (0.02      )    0.45           0.06       
adjustments
Non-GAAP
diluted                $  0.42        $  0.56        $  0.77        $  1.10    
earnings per
share

^1 Includes add back of interest expense and debt issuance costs on 2.50%
notes to income, net of tax effect

^2 Includes add back of interest expense and debt issuance costs on 2.25%
notes and 2.50% notes to income, net of tax effect

^3 Weighted average shares issued on full conversion

Contact:

Cubist Pharmaceuticals, Inc.
INVESTORS:
Eileen C. McIntyre, 781-860-8533
Vice President, Investor Relations
eileen.mcintyre@cubist.com
or
MEDIA:
Julie DiCarlo, 781-860-8063
Senior Director, Corporate Communications
julie.dicarlo@cubist.com