Cubist Pharmaceuticals Prices $700 Million of Convertible Senior Notes

  Cubist Pharmaceuticals Prices $700 Million of Convertible Senior Notes

Business Wire

LEXINGTON, Mass. -- September 5, 2013

Cubist Pharmaceuticals, Inc. (NASDAQ:CBST) today announced the pricing of $700
million aggregate principal amount of convertible senior unsecured notes that
will be issued in two series, with one series of $300 million aggregate
principal amount maturing on September 1, 2018 (the 2018 notes) and the other
series of $400 million aggregate principal amount maturing on September 1,
2020 (the 2020 notes and together with the 2018 notes, the Notes). The Notes
are being offered and sold to qualified institutional buyers pursuant to Rule
144A under the Securities Exchange Act of 1933, as amended. Cubist has granted
the underwriters an option to purchase up to an additional $50 million
aggregate principal amount of each series of the Notes.

The 2018 Notes will bear interest at a rate of 1.125% per year and the 2020
Notes will bear interest at a rate of 1.875%, in each case, payable on March 1
and September 1 of each year, beginning on March 1, 2014. The Notes will not
be redeemable prior to maturity. The Notes will be convertible, only during
certain periods and subject to certain circumstances, into cash, shares of
Cubist’s common stock, or a combination of cash and shares of Cubist’s common
stock, at Cubist’s election. The initial conversion rate for each series of
Notes is 12.1318 shares of Cubist’s common stock per $1,000 principal amount
of the Notes, which is equivalent to an initial conversion price of
approximately $82.43 per share of Cubist’s common stock, representing an
approximately 32.5% conversion premium based on the last reported sale price
of Cubist’s common stock of $62.21 per share on September 4, 2013.

In connection with the pricing of the Notes, Cubist also entered into
privately negotiated convertible note hedge transactions and warrant
transactions with the initial purchasers or their respective affiliates (the
option counterparties) in order to reduce the potential dilution with respect
to shares of Cubist's common stock upon any conversion of the Notes and/or
offset any cash payments Cubist is required to make in excess of the principal
amount of converted Notes. If the initial purchasers exercise their option to
purchase additional Notes, Cubist may enter into additional convertible note
hedge and warrant transactions. The warrant transactions will have a dilutive
effect with respect to Cubist's common stock to the extent that the market
price per share of Cubist's common stock, as measured under the terms of the
warrant transactions, exceeds the applicable strike price of the warrants,
which is initially 55% higher than the last reported sale price of Cubist’s
common stock on September 4, 2013.

Cubist estimates that the net proceeds of the offering will be $679 million
(or $776 million if the initial purchasers’ options to purchase additional
notes are exercised in full), after deducting the initial purchasers’
discounts and commissions, but prior to deducting estimated offering expenses.
Cubist intends to use the majority of the net proceeds of the offering to fund
its previously announced acquisition of Optimer Pharmaceuticals, Inc. (NASDAQ:
OPTR) and to pay $51 million to fund the cost of the convertible note hedge
transactions (after such cost is partially offset by proceeds from the warrant
transactions). The remaining net proceeds from the offering will be used for
general corporate purposes.

Cubist has been advised that, in connection with the convertible note hedge
and warrant transactions, the option counterparties or their respective
affiliates expect to purchase shares of Cubist’s common stock and/or enter
into various derivative transactions with respect to Cubist’s common stock
concurrently with or shortly after the pricing of the Notes. This activity
could increase (or reduce the size of any decrease in) the market price of
Cubist’s common stock or the Notes at that time. In addition, the option
counterparties or their respective affiliates may, from time to time following
the pricing of the Notes and prior to the maturity of the Notes, enter into or
unwind various derivatives with respect to Cubist’s common stock and/or
purchase or sell Cubist’s common stock in secondary market transactions (and
are likely to do so during any observation period related to a conversion of
Notes). This activity could also cause a decrease or avoid an increase in the
market price of Cubist’s common stock or the Notes.

The offer and sale of the Notes are not being registered under the Securities
Act of 1933, as amended, or any state securities laws. The Notes may not be
offered or sold in the United States except pursuant to an exemption from the
registration requirements of the Securities Act and any applicable state
securities laws.

This news release does not constitute an offer to sell or a solicitation of an
offer to buy the notes described herein, nor shall there be any sale of these
notes, in any state or jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the laws of
such jurisdiction.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including statements
regarding the estimated net proceeds of the offering and Cubist’s planned use
of the net proceeds from the sale of the Notes. Forward-looking statements are
based on current beliefs and expectations and are subject to factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements, including without limitation,
whether or not Cubist will be able to consummate the offering and the hedge
and warrant transactions on the timeline or with the terms anticipated, if at
all, and, if consummated, that Cubist will also close its recently announced
acquisition of Optimer Pharmaceuticals, Inc. on the anticipated timeline, or
at all, so that it can use the proceeds of the offering as anticipated. In
addition, management retains broad discretion with respect to the allocation
of the net proceeds of this offering. You are cautioned not to place
significant reliance on forward-looking statements. The information in this
press release speaks only as of the date of this release, and Cubist
undertakes no obligation to update or revise any forward-looking statement to
reflect events or circumstances occurring after the date of this press
release.

Contact:

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