Good day. My name is Nicky and I will be your event manager today. At this time, I would like to welcome everyone to the Cubist Pharmaceuticals fourth quarter full-year earnings call. All lines have been placed on mute to prevent any background noise. And please note that today's web conference is being recorded. We will be taking questions over the phone at the end of today's presentation. (Operator Instructions). At this time, I would like to turn today's program over to Eileen McIntyre. Eileen, you may begin.

Good afternoon and thank you for joining us for our review of fourth quarter and full year 2012 business performance and financial results for Cubist Pharmaceuticals. Before introducing our speakers, I will read the Safe Harbor Statement and describe the context for use of non-GAAP financial measures. Today’s presentation includes forward-looking statements relating to our business, including those set forth on this slide. We may also make forward-looking statements during the Q&A session following our prepared remarks. These statements are neither promises nor guarantees, and there are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements. These and other risk factors are described in the slide shown, and the risk factors section of our most recent quarterly report on form 10-Q filed with the SEC. Forward-looking statements are made as of today’s date and we do not undertake any obligation to update any forward-looking statements. We will also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Cubist’s operating performance. Please refer to the slide being shown regarding our use of non-GAAP financial measures, as well as additional slides on the Investor Relations page of our website, which contain the reconciliations between our non-GAAP financial measures and GAAP financial measures. Speakers on today’s call will include Cubist’s CEO Mike Bonney, President and Chief Operating Officer Rob Perez, Chief Scientific Officer Steve Gilman and our CFO, David McGirr. We will first hear from Mike Bonney. Mike?

Thanks, Eileen. We’ve just completed a very important year for Cubist and in many ways 2013 represents the start of a new chapter for the company. We have begun a year in which we expect total revenues for the company will exceed $1 billion. We have invested in a compelling pipeline of well differentiated therapies three of which are now actively enrolling patients in phase 3 trials. Later this year we expect to announce initial phase 3 data from our lead development program ceftolozane/tazobactam which we believe has blockbuster potential. In 2013 we are also taking the initial steps to create a commercial presence in the European Union ahead of the anticipated launch assuming success of ceftolozane/tazobactam. Cubist’s results for 2012 are very strong. Total revenues for the year of $926.4 million represent year over year growth of 23% or $172.4 million in additional top line revenue. This revenue result came in near the top of our 2012 guidance which we had tightened in October the high end of our previously raised revenue guidance for the year. Revenues for Cubicin and Entereg as well as our service revenues for co-promoting Optimer’s Dificid were all within the guidance we updated in October. For 2012 our non-GAAP adjusted operating income grew by more than 12%, a strong result as we invest in late stage trials for our rapidly advancing pipeline. As David will explain in a few minutes, our GAAP operating income saw extraordinary growth due to the impact of contingent consideration in 2011. We ended 2012 with cash, cash equivalents and investments of $979 million and importantly we improved our net cash position by the retirement of the remainder of our 2013 convertible debt during the fourth quarter. Our 2017 converts with a $450 million phase value remain. During this call,…

Thanks Mike. As you saw two weeks ago we had strong revenue growth in Q4 and for the full year 2012. I won’t spend time reading the numbers which are reiterated in today’s release and on this slide. I’ll now draw your attention first to key parts of the 2012 P&L and balance sheet because there are some accounting points that need some explanation and then I will move quickly to the 2013 guidance as we know that is what you want to hear. Costs for 2012 came in the 25.6% giving us a gross margin of 74.4%. This reflects some challenges we had with bevenopran production earlier in the year that we discussed in Q1 and Q2. As the year progressed our margins improved. R&D costs for the year reflect the good progress being made developing our pipeline and the pick up in enrolment for ceftolozane/tazobactam in the second half of 2012. SG&A expenses are in line guidance. The numbers you see on the P&L for in process R&D and for contingent consideration needs some explanation. The numbers you see for Q4 relate to the bevenopran our phase 3 candidate in development is a potential treatment for opiod induced constipation or OIC. Our view on the significant opportunity in the U.S. is unchanged. However, we had to make some adjustments to our valuation model based on our current assessment of the European commercial opportunity and the regulatory hurdles for OIC agents there. We now will delay developing the bevenopran for the EU until and unless the market opportunity and regulatory path justify the investment requirements. This change in our expectations regarding the bevenopran opportunity in Europe impacts our Q4 and year end accounting as follows. We took a non-cash impairment charge of $38.7 million on our (inaudible) effort during…

Thanks David. My focus this evening is on the following. First, I will discuss the drivers for Cubicin’s continued growth. Then I would like to talk about our enthusiasm for Entereg and the learning we will leverage this year. I will briefly touch on our ongoing co-promote of Optimer’s Dificid antibiotic. Finally, I will provide some perspective on how we plan to build the commercial presence in the EU ahead of the expected launch of ceftolozane/tazobactam assuming positive data later this year. Cubicin performance throughout the world in 2012 was very strong with revenue growth to Cubist of 17% globally. U.S. net revenues of $809.2 million represented year-over-year net revenue growth of more than $110 million. This was the highest net revenue volume growth we’ve seen in the U.S. since 2008 and our second highest dollar volume growth ever. In international market, Cubicin revenues to Cubist grew to $50.5 million in 2012, an increase of 38% over 2011. Admittedly some of this extraordinary growth ex U.S. was driven by some inventory build for what is shaping up to be a very successful launch in Japan. That being said, we were pleased to see the health overall growth in the international Cubicin business. The growth in the Cubicin franchise reflects the benefit that our customers see in this product, a cost effective antibiotic with proven clinical success. We believe Cubicin offers tremendous value when used for appropriate patients. Generally sicker patient with MRSA skin or blood stream infection where the wrong antibiotic choice can have a quite dire consequence. We expect to continue to see growth in Cubicin U.S. revenues from a combination of vial growth in a low single-digit and pricing aligned with the value that Cubicin delivers for our customers and the patient they serve. The Cubicin guidance range…

Thanks Rob. I will begin with an update on our phase 3 trials for ceftolozane/tazobactam in CUTI and CIAI. As we announced earlier this month we now have aligned with the FDA on the plan to adjust the patient enrolment target for the CUGI and CIAI trial consistent with the agency’s recent draft guidance. We now plan to enrol only about 1000 patients in each indication, down from the original targets about 1500 in CUTI and about 1800 in CIAI. For the sake of efficiency we will maintain the original two trial structure for each indication but once the enrolment targets are achieved we will pull the data from the two trials of CUTI and the two trials in CIAI prior to analysis. This means that we will report results and file the NDA with one trial in each indication. This change will modestly increase the power of the analysis results in both indications. There are no changes to the trial protocol. The only adjustment is the number of patients. As you recall in the global phase 3 trials in CUTI and CIAI we had some lag in enrolment last year due primarily to slower than expected ex-US site initiations. I am happy to report that the litigation plans we launched last summer have been successful in both the CUTI and CIAI trials and are now enrolling at a good pace. Based on both the new enrolment numbers and the current pace of enrolment we feel quite comfortable inviting that we expect topline data in both indications in the second half of this year with an NDA filing expected to follow within six months of top line. This quarter we will be reviewing this enrolment approach with the EMA to ensure alignment with our planned EMA submission package. Given the…

Thanks Steve. You’ve just heard several clinical and regulatory milestones for the year. These are listed here along with two additional milestones. Of note in the first half of this year our internal and external legal teams will be preparing for scheduled marketing claims construction hearing on April 10 in our patent infringement litigation with Hospira. An operational goal in 2013 is to bring online the third fill/finish provider we selected for CUBICIN last year. Significant milestones to be achieved by year end include anticipated total Cubist revenues of more than $1 billion and worldwide sales of Cubicin also getting through the $1 billion mark. We had another impressive year of Cubist and we are very optimistic about our future. And in June of last year we began to more explicitly articulate our future vision by announcing our building blocks of growth. We’re pleased with our momentum as we enter 2013 and we look forward to continued progress against these aggressive but achievable targets for 2017. We appreciate the support of the investment community in getting us to this important stage in our growth for the leading global acute care biopharmaceutical company. Now let’s open the line for your questions.

(Operator Instructions) Our first question comes from the line of David Friedman [Morgan Stanley].

I was wondering just for Cubicin in the US if you could talk about how your gross to net has changed in fourth quarter as well as the vial growth, if you are still willing to talk about that –

Hi David, this is Rob. Fourth quarter gross to net for Cubicin was 13.4% which was just about it was in the fourth quarter of 2011. For the year gross to net was 13.5% in 2012 and that was up from 12.6% in 2011. So we saw some growth but not extraordinary in 2012. On vials, Cubicin vials were up 2.2% in Q4 of 2012 over Q4 of 2011. For the full year vials were up 5.2% in 2012 over 2011 and sequential Q4 over Q3 was 3.7% in vials.

And then just a quick follow up, do you have a sense of where you could expect gross to net to be over 2013 and beyond, is this a number that you would think is going to continue to creep up over time or is there a ceiling at some point?

I think that there is a ceiling at some point but the affordable care act it’s fully implemented and depending on what choices patients make for how they’re going to be insured we could see some increase in the gross to net over time. It does appear that, that changed, slowed down a bit at least for the short term.

Our next question comes from the line of Steve Byrne [Bank of America Merrill Lynch].

Rob, can you talk about what share of Cubicin vials are actually in the bacteremia and are you seeing that increase as vanco MIC levels increase?

It’s been fairly stable. Right now Cubicin use is about 30% in bacteremia and it’s been pretty stable at that amount, Steve we’re not really seeing a change in the mix of business. There are couple things driving I’d say Cubicin overall share or I don’t have that, the individual market share per indication but I would expect that our market share is higher in bacteremia but we also have the other kind of driving for us of patient use, which is driven more by (inaudible). So you have both of those things that continue to drive the business and continue to I think provide strong outlook for growth in the future.

And can you comment on any specific market research that tempered your outlook for the OIC market in Europe?

So as you may know Steve, the use of opiods as chronic pain meds is relatively rare in the EU compared to the US. So that was a part of our decision-making, the mark opportunity just isn’t as large in the EU by any stretch of imagination as it is in the US. And the second thing is that the regulatory requirements for registering a drug for OIC in the EU are quite a bit different than the US and given that large disparity in markets we thought it prudent to focus at this stage on developing the drug for the US market. Once we see what the phase 3 data look like we may take another look at the EU but right now our view is that market is given the complexity of the regulatory path combined with the relatively small opportunity doesn’t justify the investment.

And just one for you Dave, can you comment on how much of your R&D guidance is milestone payments?

It’s not a huge amount of milestone in 2013. We also have this time clinical trials and internal resources to support that clinical trials.

Our next question comes from the line of Mario Corso [Mizuho Securities].

I was wondering just on 5945 you could talk labout where you are or how you’re viewing presently the licensing opportunity there and is there any quantification of the European cost you’re talking about for 2013 as well?

I will answer the second part of that question first. We’re not pursuing anything in Europe. So there are no costs associated with European development of 5945 in our guidance for 2013.

We did have a interest in 5945 but as you probably can tell we feel very strongly about this product and we felt like we have the resources and the ability to run this trial. And we didn't need to do a deal unless we like the deal. So after taking stock of what we had, we decided that it was best to go forward with the phase 3 trial ourselves and we will look at partnering opportunity when we get the data. But our sense is that this market is breaking towards us in terms of the potential competitive profile of bevenopran versus the competition and we want to make sure we are getting the right deal for the product.

Your next question comes from the line of Adnan Butt [RBC Capital].

First a couple on Cubicin, can you shed some light on how much vial growth surge you’re expecting in 2013 and then if you cannot after – if you don’t want to answer that, and basically what’s changed to drive outpatient use and what’s driving ex-US use (inaudible)?

Okay, we’re not going to give you the vial growth number and frankly give me a chance, talk a little bit about – I did mention that what we are still positive is going to be a smaller portion growth overall than price and at this point in Cubicin’s kind of strategy that is expected. So I was focused more on the dollars that will be growing for $110 million in 2012 as David mentioned it’s $100 million at the midpoint of our guidance this year, we’re going to get it from some vial growth but also price. So I don’t want you to be too focused on just the vial growth.

The outpatient growth you saw on the slide was 12% for outpatient and 15% for inpatient. One of the things we are seeing and one of the dynamics that I spoke about is we are starting to see extraordinary growth in the hospital outpatient market, and that’s we’re hearing from our sales force. And that complicates the analysis a little bit because those vials are counted as in patient (inaudible) we don’t have a way to track every vials in terms of where it ends up getting used. We have done some analysis to show that that a good chunk of Cubicin vials and I mentioned 15% during the call are used in the hospital outpatient department. So all that means that really we are not seeing a change in the way that product is used. But we are seeing a shifting of some of our outpatient growth to frankly a place where it’s counted as inpatient. So that makes the analysis a little bit tricky but what that says is that over 50% of actual vials are used in the outpatient setting and that the growth is probably more split evenly or even still greater in outpatient but we can’t track it specifically as we did in the past. And then finally on the EU, we’re getting healthy growth across-the-board. Novartis was up substantially in their market both existing market as well as some of their newer markets Latin America, Brazil for example doing very, very well. We’re seeing really strong growth in small markets like Canada, they are starting to pick up but another significant player is Japan where Merck is off to a very good start in their launch and I mentioned that part of their – part of the ex-US sales – smaller part that was driven by the build up of some inventory and Merck’s doing that to ensure that they have enough for what is turning out to be a very nice launch. So we are excited about the ex US Cubicin opportunity and it’s really starting to pick up.

If I could just get a question on pipeline you mentioned that there was some interest in the program. Can you shed some light on how much interested it was and then does it mean that you will now partner when the program is completed or is your option to potentially partner while phase 3 is still ongoing that’s still out there on the table?

So we’re open to partnering the asset at any appropriate time. We’ve had a range of parties interested but our view is that the value that this asset could bring is underappreciated. And so we are very comfortable funding the phase 3 program for the US and looking at what that data looks like before we reengage but certainly if someone is interested in engaging the four of the phase 3 data we’d be happy to entertain those conversations.

Our next question comes from the line of Alan Carr [Needham & Co.] Alan Carr - Needham & Co.: Wondering if you could give us an update on your views on the C. diff opportunity for 315. And to what extent you are still involved with Optimer and the co-marketing and the sort of insights you are gaining from that?

Sure, while we are still involved with Optimer until July of this year we don’t expect that the relationship will continue past that. Both companies have essentially said that the partnership will likely end at that point. We’ve been very pleased with the relationship and we are continuing to promote the product through July of this year but at that point the Optimer folks will focus on Dificid and we will focus on Surotomycin 315. And we do believe that the market opportunity remains healthy. That’s still a very, very large market, worldwide we estimate they are at least 30 million days of therapy in the CDAD space. And while we will have to see what the impact of Optimer’s pricing schedule will be and it’s really too early to tell what impact that will have on the market. We still believe that the market is strong and that where we have a drug that can get to the 400, 500 million worldwide peak year number. And again, keep in mind Alan that we have complete rights to this product, that we owe no royalties and essentially the incremental commercialization costs assuming ceftolozane/tazobactam will be minimal. Alan Carr - Needham & Co.: And can you also comment, I guess, broadly on Gram-positive and MRSA infections. You mentioned that your assumption was at flat MRSA cases. And I'm wondering if you can tell us a bit more what you are thinking about the status of gram-positive infections in hospitals?

Well, I think we are now at a place in the past much of the growth in the MRSA market was growth of MRSA relative to MSFA. So the staff pie is changing from a susceptible staff to a resistant staff market. That has levelled off at this point and now the growth is really a growth of population overall. We are not really getting any increases in MRSA relative to MSSA. So that’s why you are looking at overall market growth, I think that the market in the US for MRSA therapy grew about 1% in 2012 so that will give you a sense for what’s going on with the overall market. These are volume growth numbers Alan. Alan Carr - Needham & Co.: Can you give us the same sense for gram-negative in pseudomonas, which 201 is primarily going after?

What we have seen in the 70 years since penicillin was introduced our alternating sign ways of resistance were gram positive agents, gram positive bacteria become resistant, new antibiotics developed for the gram positive resistant bacteria and then you see a growing increase in resistance for the gram negative. That appears to be part of the cycle we are in right now. So that combines the two questions that you asked Alan, resistance to the generally used agents whether they be third generation surplus 4 and (inaudible) or even ceftolozane/tazobactam continue to truck along at a scary rate somewhere between 25% of strain isolated across the US and the EU appear to be resistant to one or more of those other agents. So I think we are in sort of what is becoming or at least in some factions of the IV community is thought to be the sort of normal cycle of alternating levels of resistance of gram positive and gram negative bacteria.

Our next question comes from the line of Brian Skorney [Brean Murray, Carret].

I guess just as we kind of think a little longer-term about R&D costs, it looks like, based on the OIC timelines, you might see increases in the Phase 3 costs towards the end of the year, at the same time we might see beginning to the decrease of the ceftolozane/tazobactam. But obviously, I'm not asking for long-term 2014 guidance, but do you think these are going to essentially offset? And should we think that R&D expenses, at least for the programs now are ramping up and will be at a standstill over the next two, three years before a fall off?

Well, we’re not going to provide even directional guidance beyond 2013 Brian but I think it is fair to say that when we roll out our building blocks of growth in June for what we think the company can become financially and some other parameters by the end of 2017 we were pretty clear that we expect R&D as a percentage of revenue to be a bit higher than the industry average but to come down to about the 25% range give or take because it will be dependent upon what products we have in the portfolio etc at that time. But we do expect that over the next five years or so the R&D expense as a percentage of revenue will decline from the guidance numbers we’ve given you in 2013.

Our next question comes from the line of Irina Rivkind [Cantor Fitzgerald].

I was wondering if you could make a general comment about pricing of gram-negative agents relative to branded gram-positive compounds? Do you think that the life-saving properties of these gram-negatives warrants higher pricing that you may be able to get for CXA-201 than, for example, a drug like CUBICIN? Thank you.

What I say is that we expect similar dynamic, I would say we’re not going to comment on what the pricing will be for our product or others. But similar dynamic in that the market will be from a days perspective will be dominated by generics, dominated meaning somewhere in the neighborhood of 60 to 70% of the market days will be dominated by products where the pricing is very, very low. But then there will be another segment and we think that somewhere in the neighborhood of 30 to 40% where the drivers are really not going to be priced and where you can’t get branded pricing and that's really what we saw on the gram positive and frankly one of the kind of innovation with the Cubicin business is having a strategy where you could yet brand a pricing for the appropriate patient. I think we’re going to see a very similar thing with the gram negative market and without commenting on whether the pricing is going to be higher or lower than gram positive I do think that there'll be a significant niche somewhere in the 30%, 40% range where efficacy is going to be the driver. The difference between gram-negative and gram positive however is on the gram positive side there are more products that are branded competing for that space, on gram-negative we’re going to be one of possibly two that will be competing for that branded segment. So that’s one of the reasons why we are still excited about 201, ceftolozane/tazobactam.

And then I just have a quick follow-up on your milestones that you are eligible to receive from the Optimer partnership in 2013. Are you -- I noticed in your guidance, you're not really modeling on the $12.5 million in additional milestones that you are eligible to receive. Should we think about that as upside?

We are basically the taking the same approach in 2013 as we did in 2012 and only guiding to the service revenues, we will have to see how the revenue numbers look as the second 12 months of the three year agreement unfold here.

Our last question comes from the line of Stephen Willey [Stifel Nicolaus].

Just curious, I guess as you think about building out EU infrastructure is it safe to assume that the plans there are to build out a formal EU sub and then, I guess longer-term are there anything that you guys think that you can do on the sub front to bring the effective tax rate down here in the States?

Yeah we actually have already created a subsidiary in the EU, we have actually some employees there now who work as quality folks in our contract manufacturing for the contract manufacturers and clearly as our business develops more internationally given that the difference between US corporate tax rates and tax rate in many of the jurisdictions in the EU is we would expect to see some moderation in the overall effective tax rate.

So it would be safe to assume then, that if you were to go out and acquire an acute care EU-based asset that would then be structured through that EU sub?

I don’t think that, that’s an unreasonable assumption but we of course would look at any individual transaction based on the facts and circumstances of that transaction.

Great, thanks.

Well, thanks everyone for your attention this evening. We look forward to reporting on our results for the first quarter of 2013. Mark your calendars now for our conference call at 5 PM Eastern on April 18. Have a great evening.

Thank you for all your questions and thanks for joining us. This concludes today’s web conference. You may now disconnect.