Cubist Subsidiary Optimer Pharmaceuticals Inc. Facing Investigation

Optimer Pharmaceuticals Inc. (“Optimer”), which Cubist Pharmaceuticals (“Cubist”) purchased in 2013, is being investigated for a possible violation of the Foreign Corrupt Practices Act (“FCPA”). The investigation revolves around an alleged share grant payment made to a former executive and another questionable payment made to a research laboratory. In its recent filings with the Securities and Exchange Commission (“SEC”), Cubist said that it is unsure at this point whether Cubist, Optimer, and/or former or current employees will be sued. Additionally, Cubist notified shareholders that there was the possibility that civil or criminal charges might be brought.1

In 2013, Cubist acquired Optimer for $551 million. An internal investigation by Cubist led Optimer’s Board to oust former CEO, Pedro Lichtinger; former CFO, John Prunty; and former chairman and co-founder, Michael Chang. Former Pfizer CEO, Henry McKinnell, took over Optimer and orchestrated the sale of the company to Cubist. The Department of Justice (“DOJ”) and the SEC began investigating the company after “an internal company probe last April into an attempt to grant stock in a company affiliate called Optimer Biotechnology to ex-Chairman Michael Chang.”2 The suspicious payment of $300,000 to a lab researcher by someone who is linked to the share grant issue is also being investigated by the DOJ and SEC as a potential FCPA violation. The payment could be a violation of the FCPA bribery provision, which bars the use of payment of money or anything of value to a foreign official to induce that official to violate the law or provide the paying party any illegal advantage.3

Cubist acknowledged that this investigation and a possible lawsuit could “subject [the company] to a variety of risks and uncertainties that could have material adverse effects on our business, results of operations and financial condition.”4

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