Cubist discloses DOJ, SEC investigations of Optimer payments

Cubist Pharmaceuticals Inc. said Monday that a global biopharmaceutical company it bought in 2013 may have violated the FCPA.

Lexington, Massachusetts-based Cubist acquired Optimer Pharmaceuticals late last year for $551 million.

In Monday’s disclosure, Cubist said the DOJ and SEC are investigating “a potentially improper payment to a research laboratory” and an “attempted share grant by Optimer” in 2011.

In 2013, when San Diego-based Optimer still traded as an independent company on Nasdaq, it said in an SEC filing that its CEO and general counsel resigned at the request of independent board members after a year-long internal investigation uncovered potential compliance problems.

Earlier, the board had also removed Dr. Michael Chang as chairman.

Optimer said a share grant to Dr. Chang may have involved conflicts of interest. That grant and a $300,000 payment to a research laboratory may have also violated U.S. laws, including the FCPA, Optimer said then.

In 2011, after learning of the share grant and lab payment, the Optimer board fired the company’s CFO and VP for clinical development.

Monday’s disclosure by Cubist didn’t link the current DOJ and SEC investigations to Optimer’s earlier disclosures.

Cubist said it can’t yet estimate any potential penalties it could face, and it hasn’t reserved any money for a possible enforcement action.

The company appeared on the FCPA Blog’s July 2014 Corporate Investigations List.

Cubist’s shares are listed on NASDAQ (ticker symbol: CBST).

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Here’s the full FCPA disclosure from Cubist’s Form 10-Q filed with the SEC on August 11, 2014:

We are continuing to cooperate with the investigations by the SEC and the U.S. Department of Justice in their review of potential violations by Optimer of certain applicable laws, which occurred prior to our acquisition of Optimer.

The investigations relate to an attempted share grant by Optimer and certain related matters in 2011, including a potentially improper payment to a research laboratory involving an individual associated with the share grant, that may have violated certain applicable laws, including the Foreign Corrupt Practices Act (FCPA).

Optimer had already taken remedial steps in response to its internal investigation of these matters; nonetheless, these events could result in lawsuits being filed against us or Optimer and certain of Optimer’s former employees and directors, or certain of our employees. Such persons could also be the subject of criminal or civil enforcement proceedings and we may be required to indemnify such persons for any costs or losses incurred in connection with such proceedings.

We cannot predict the ultimate resolution of these matters, whether we or such persons will be charged with violations of applicable civil or criminal laws, or whether the scope of the investigations will be extended to new issues. We also cannot predict what potential penalties or other remedies, if any, the authorities may seek against us, any of our employees, or any of Optimer’s former employees and directors, or what the collateral consequences may be of any such government actions.

We do not have any amounts accrued related to potential penalties or other remedies related to these matters as of June 30, 2014, and cannot estimate a reasonably possible range of loss.

In the event any such lawsuit is filed or enforcement proceeding is initiated, we could be subject to a variety of risks and uncertainties that could have material adverse effects on our business, results of operations and financial condition.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.