<Page>

- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21379

CUBIST PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 22-3192085
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)

65 HAYDEN AVENUE
LEXINGTON, MASSACHUSETTS 02421
(Address of principal executive offices)

(781) 860-8660
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes /X/ No/ /

As of July 25, 2003 there were 30,450,615 shares outstanding of Cubist's common
stock, $0.001 per value per share.

- --------------------------------------------------------------------------------

<Page>

CUBIST PHARMACEUTICALS, INC.

INDEX

<Table>
<Caption>
ITEM PAGE
NUMBER NUMBER
- ------ ------

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Unaudited Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002.............2

Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2003 and 2002......................................................................3

Condensed Consolidated Statements of Cash Flows for the six months ended June 30,
2003 and 2002...............................................................................4

Notes to the Condensed Consolidated Unaudited Financial statements..........................5

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............10

Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................................26

Item 4. Controls and Procedures..........................................................................26

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders..............................................26

Item 6. Exhibits and Reports on Form 8-K.................................................................27

Signatures..................................................................................................28
</Table>

1
<Page>

CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<Table>
<Caption>
June 30, December 31,
2003 2002
--------------- ---------------

ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 41,090 $ 53,551
Short-term investments ............................................ 52,357 94,154
Prepaid expenses and other current assets ......................... 3,108 1,463
--------------- ---------------
Total current assets ........................................... 96,555 149,168
Property and equipment, net ....................................... 47,725 48,268
Intangible assets, net ............................................ 3,400 3,862
Restricted cash ................................................... -- 3,250
Long-term investments ............................................. 9,544 3,515
Other assets ...................................................... 12,154 13,459
--------------- ---------------
Total assets ................................................... $ 169,378 $ 221,522
=============== ===============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .................................................. $ 2,278 $ 9,600
Accrued clinical trial expenses ................................... 603 284
Accrued expenses .................................................. 6,864 3,664
Accrued interest .................................................. 2,341 2,341
Current portion of long-term debt ................................. 2,000 2,011
Current portion of capital lease obligations ...................... 118 --
--------------- ---------------
Total current liabilities ...................................... 14,204 17,900
Deferred revenue ..................................................... 2,500 2,500
Long-term debt, net of current portion ............................... 206,500 208,022
Long-term capital lease obligations, net of current portion .......... 252 --
--------------- ---------------
Total liabilities .............................................. 223,456 228,422

Stockholders' equity (deficit):
Preferred stock, non-cumulative; convertible, $.001 par value;
Authorized 5,000,000 shares; no shares issued and
outstanding .................................................... -- --
Common stock, $.001 par value; authorized 50,000,000
shares; 29,699,326 and 28,702,035 shares issued and
outstanding as of June 30, 2003 and December 31, 2002,
respectively ................................................... 30 29
Additional paid-in capital ........................................ 255,602 253,519
Accumulated deficit ............................................... (309,710) (260,448)
--------------- ---------------
Total stockholders' equity (deficit) ........................... (54,078) (6,900)
--------------- ---------------
Total liabilities and stockholders' equity (deficit) ........ $ 169,378 $ 221,522
=============== ===============
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIALS.

2
<Page>

CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>
Three months ended Six months ended
June 30, June 30,
------------------------ -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------

Total revenues ................................... $ -- $ 2,327 $ 357 $ 4,647

Operating expenses:
Research and development ...................... 13,354 15,536 29,243 29,032
Sales and marketing ........................... 3,755 1,791 6,084 3,290
General and administrative .................... 4,449 4,250 8,647 9,603
---------- ---------- ---------- ----------
Total operating expenses .................... 21,558 21,577 43,974 41,925
---------- ---------- ---------- ----------

Operating loss ................................... (21,558) (19,250) (43,617) (37,278)

Other income (expense)
Interest income ............................... 645 1,523 1,312 3,000
Interest expense .............................. (3,414) (3,534) (6,826) (6,789)
Other income (expense) ........................ 57 85 (131) 403
---------- ---------- ---------- ----------
Total other expense, net .................... (2,712) (1,926) (5,645) (3,386)
---------- ---------- ---------- ----------

Net loss ......................................... $ (24,270) $ (21,176) $ (49,262) $ (40,664)
========== ========== ========== ==========

Basic and diluted net loss per common share ...... $ (0.82) $ (0.74) $ (1.67) $ (1.43)

Basic and diluted weighted average number of
common shares .................................... 29,613 28,519 29,428 28,463
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIALS.

3
<Page>

CUBIST PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)

<Table>
<Caption>
Six Months Ended
June 30,
2003 2002
--------------- ---------------

Cash flows from operating activities:
Net loss ........................................................... $ (49,262) $ (40,664)
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss on the sale of equipment ...................................... -- 4
Depreciation and amortization ...................................... 2,565 2,979
Amortization of debt issuance costs ................................ 512 483
Amortization of premium on investments ............................. 936 --
Amortization of deferred compensation .............................. 361 287
Stock-based compensation ........................................... 27 767
Forgiveness of note receivable related to common stock ............. 50 169
Realized foreign currency exchange gain, net ....................... (4) (70)
Changes in assets and liabilities:
Accounts receivable ................................................ -- 106
Prepaid expenses and other current assets .......................... (1,638) 159
Other assets ....................................................... 793 (793)
Accounts payable and accrued expenses .............................. (3,819) (6,340)
Deferred revenue ................................................... -- (2,800)
--------------- ---------------
Total adjustments .................................................. (217) (5,049)
--------------- ---------------
Net cash used for operating activities ............................. (49,479) (45,713)
--------------- ---------------

Cash flows from investing activities:
Purchases of property and equipment, net ........................... (1,531) (2,910)
Purchases of investments ........................................... (28,581) (66,455)
Maturities and sales of investments ................................ 63,413 58,398
--------------- ---------------
Net cash provided by (used for) investing activities ............... 33,301 (10,967)
--------------- ---------------

Cash flows from financing activities:
Issuance of common stock ........................................... 1,646 1,392
Restricted cash .................................................... 3,250 --
Repayments of long-term debt ....................................... (6,533) (1,250)
Proceeds from term loan borrowings ................................. 5,000 685
Proceeds from sale/leaseback of equipment .......................... 407 --
Repayments of capital lease obligations ............................ (38) (423)
--------------- ---------------
Net cash provided by financing activities .......................... 3,732 404
--------------- ---------------

Net decrease in cash and cash equivalents ............................ (12,446) (56,276)
Effect of changes in foreign exchange rates on cash balances ......... (15) (95)
Cash and cash equivalents, beginning of period ....................... 53,551 120,322
--------------- ---------------
Cash and cash equivalents, end of period ............................. $ 41,090 $ 63,951
=============== ===============

Supplemental non-cash investing and financing activities:
Issuance of common stock to ACS Dobfar ............................. -- $ 2,000
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIALS.

4
<Page>

CUBIST PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

A. NATURE OF BUSINESS

Cubist Pharmaceuticals, Inc., or Cubist, is a biopharmaceutical company
focused on the research, development and commercialization of antiinfective
drugs. Cubist is headquartered in Lexington, Massachusetts.

B. ACCOUNTING POLICIES

BASIS OF PRESENTATION

These unaudited condensed consolidated financial statements should be read
in conjunction with our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and the financial statements and footnotes included therein.
In the opinion of management, the condensed consolidated financial statements
include all adjustments, consisting of only normal recurring accruals, necessary
to present fairly the financial position, results of operations and cash flows
of Cubist and our wholly owned subsidiary. Our accounting policies are described
in the Notes to the Consolidated Financial Statements in our 2002 Annual Report
on Form 10-K and updated, as necessary, in this Form 10-Q. Interim results are
not necessarily indicative of the operating results for the full year. All sales
and marketing departmental expenses have been reclassified from general and
administrative expenses for prior year financial statements to conform to the
2003 presentation.

NET LOSS PER COMMON SHARE

Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. Diluted net loss per share does not differ
from basic net loss per share because potential common shares from stock
options, warrants, convertible debt and notes payable are antidilutive for all
periods presented and are therefore excluded from the calculation. At June 30,
2003 and 2002, options to purchase 5,108,044 and 4,152,091 shares of common
stock, respectively, warrants to purchase 366,935 and 1,478,359 shares of common
stock, respectively, and convertible debt and notes payable convertible into
4,106,450 and 4,106,450 shares of common stock, respectively, were not included
in the computation of diluted net loss per share since their inclusion would be
antidilutive.

COMPREHENSIVE LOSS

Comprehensive loss is comprised of only net loss as there were no other
comprehensive income (loss) for the three and six months ended June 30, 2003 and
2002, respectively.

ACCOUNTING FOR STOCK-BASED COMPENSATION

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". This statement, which is
effective for fiscal years ending after December 15, 2002, amends Statement No.
123, Accounting for Stock-Based Compensation, and provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation. In addition, Statement No. 148 amends
the disclosure requirements of Statement No. 123 to require prominent
disclosures in both the annual and interim financial statements about the method
of accounting for stock-based compensation and the effect of the method used on
reported results.

Cubist has several stock-based compensation plans. We apply APB Opinion No.
25 "Accounting for Stock Issued to Employees" in accounting for qualifying
options granted to our employees under our plans and apply Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Issued to
Employees" ("SFAS 123") for disclosure purposes only. The SFAS 123 disclosures
include pro forma net loss and net loss per share as if the fair value-based
method of accounting had been used.

If compensation for employee options had been determined based on SFAS 123,
Cubist's pro forma net loss, and pro forma net loss per share for the three and
six months ending June 30, would have been as follows:

5
<Page>

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(in thousands except per share data)

Reported net loss..................................................... $ (24,270) $ (21,176) $ (49,262) $ (40,664)

Add: Stock-based compensation recorded in net loss, as reported...... 163 123 361 287

Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax
effects............................................................. (1,772) (3,027) (3,459) (7,107)
---------- ---------- ---------- ----------
Pro forma net loss ................................................... $ (25,879) $ (24,080) $ (52,360) $ (47,484)
========== ========== ========== ==========

Reported basic and diluted loss per share ............................ $ (0.82) $ (0.74) $ (1.67) $ (1.43)

Pro forma basic and diluted loss per share ........................... $ (0.87) $ (0.84) $ (1.78) $ (1.67)
</Table>

The fair value of each stock option was estimated on the date of grant
using the Black-Scholes option-pricing model under the accelerated method. The
following weighted-average assumptions were used:

<Table>
<Caption>
2003 2002
---- ----

Expected stock price volatility 100% 100%
Risk free interest rate 2.7% 4.5%
Expected annual dividend yield per share 0% 0%
Expected life of options 7 years 7 years
</Table>

NEW ACCOUNTING PRONOUNCEMENTS

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with characteristics of both Liabilities and Equity". SFAS
No. 150 changes the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. The new statement
requires that those instruments be classified as liabilities in statements of
financial position. Most of the guidance in SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period beginning after June
30, 2003. We do not expect the adoption of this statement to have a material
impact on our consolidated financial position or results of operations

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement will be effective in fiscal 2004 for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We do not expect the adoption of
this statement to have a material impact on our consolidated financial position
or results of operations.

In January 2003, FASB issued FASB Interpretation No. 46 or FIN 46,
"Consolidation of Variable Interest Entities," to expand upon and strengthen
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity.
Until now, one company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
FIN 46 changes that by requiring a variable interest entity, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. FIN 46 also requires
disclosures about variable interest entities that the company is not required to
consolidate but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003 and to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established. The
adoption of FIN 46 had no effect on Cubist's results of operations and financial
position.

In November 2002, the FASB Emerging Issues Task Force reached consensus on
EITF No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". EITF No. 00-21 addresses the accounting

6
<Page>

treatment for arrangements that provide the delivery or performance of multiple
products or services where the delivery of a product, system or performance of
services may occur at different points in time or over different periods of
time. EITF No. 00-21 requires the separation of the multiple deliverables that
meet certain requirements into individual units of accounting that are accounted
for separately under the appropriate authoritative accounting literature. EITF
No. 00-21 is applicable to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The adoption of EITF 00-21 had no effect on
Cubist's results of operations and financial position.

C. GUARANTEES

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." FIN
45 elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also requires that a guarantor recognize, at the inception of
a guarantee, a liability for the fair value of certain guarantees. The initial
recognition and measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. Any
indemnification provisions entered into prior to December 31, 2002 were
grandfathered under the provisions of FIN 45. The adoption of FIN 45 did not
have a material effect on Cubist's results of operations and financial position.

Pursuant to Article 7 of Cubist's Amended and Restated By-Laws, Cubist
has agreed to indemnify any person who is made a party to any action or
threatened with any action as a result of such person's serving or having
served as an officer or director of Cubist or having served, at our request,
as an officer or director of another company. The indemnification does not
apply if the person is adjudicated not to have acted in good faith in the
reasonable belief that his or her actions were in the best interests of
Cubist. The indemnification obligation survives termination of the
indemnified party's involvement with Cubist but only as to those claims
arising from such person's role as an officer or director. The maximum
potential amount of future payments that Cubist could be required to make
under the By-Law provision is unlimited; however, we have director and
officer insurance policies that, in most cases, would limit our exposure and
enable us to recover a portion of any future amounts paid. The estimated fair
value of these indemnification provisions is minimal. Accordingly, we had no
liabilities recorded for these agreements as of June 30, 2003.

We typically include indemnification provisions under our agreements
with other companies in our ordinary course of business, typically with
business partners, contractors, and clinical sites. Under these provisions we
generally indemnify and hold harmless the indemnified party for losses
suffered or incurred by the indemnified party as a result of our activities.
These indemnification provisions generally survive termination of the
underlying agreement. The maximum potential amount of future payments we
could be required to make under these indemnification provisions is
unlimited. We have not incurred material costs to defend lawsuits or settle
claims related to these indemnification agreements. As a result, the
estimated fair value of these agreements is minimal. Accordingly, we had no
liabilities recorded for these agreements as of June 30, 2003.

D. BUSINESS AGREEMENTS

MANUFACTURING AND DISTRIBUTION AGREEMENTS

Cubist entered into various manufacturing and distribution agreements with
ACS Dobfar SpA, Abbott Laboratories and DSM Capua SpA (these agreements are
fully described in our 2002 Annual Report on Form 10-K) in 2000 and 2001. During
the six months ended June 30, 2003 and 2002, we made payments related to our
manufacturing and distribution agreements in the aggregate of $1.9 million and
$185,000, respectively, which were recorded as research and development expense,
and $103,000 and $0, respectively, which were recorded as other assets.

LICENSING AGREEMENTS

On July 31, 2002, Cubist entered into a license agreement with Sandoz GmbH
(formerly known as Biochemie GmbH) for the exclusive worldwide rights to
CAB-175, a proprietary compound, for the purpose of developing and
commercializing CAB-175. In consideration for such license, we made an upfront
license fee payment upon execution of the license agreement that was recorded as
research and development expense in 2002. We will be required to pay royalties
to Sandoz on worldwide sales of any drug developed and commercialized from any
products derived from this license.

7
<Page>

On June 27, 2001, Cubist and Syrrx, Inc, or Syrrx, announced the formation
of an antiinfective drug discovery collaboration. The joint effort used Syrrx
and Cubist technologies for the high-throughput characterization of novel
antiinfective drug targets and rational drug design. As a result of our decision
to discontinue the Company's target-based drug discovery program, the parties
have ceased work under this collaboration and have terminated the relationship.
We recorded an impairment charge of $134,000 during the six months ended June
30, 2003 relating to our equity investment in Syrrx based upon pricing derived
from a recent round of financing. Our equity investment at June 30, 2003 after
the impairment charge was $166,000.

On February 3, 1999, we entered into a research and license agreement
with Novartis Pharma AG, or Novartis, to use our proprietary VITA functional
genomics technology to validate and develop assays for antiinfective targets
and to identify new compounds for development as antiinfective agents. In
exchange for the license, Novartis funded a research program for a period of
four years. In February 2003, the collaboration between Cubist and Novartis
was completed.

On November 7, 1997, we entered into a license agreement with Eli Lilly
and Company, or Eli Lilly, pursuant to which Cubist acquired exclusive
worldwide rights to develop, manufacture and market daptomycin. In exchange
for such license, Cubist paid an upfront license fee in cash and, if certain
drug development milestones are achieved, agreed to pay milestone payments by
issuing shares of common stock to Eli Lilly. In addition, the license
agreement required Cubist to pay royalties to Eli Lilly on worldwide sales of
daptomycin. On February 19, 1999, Cubist issued shares of common stock as a
milestone payment pursuant to, and in accordance with, the terms of the
license agreement. The value of the common stock was recorded as research and
development expense. On October 6, 2000, Cubist and Eli Lilly terminated the
first license agreement and entered into a new agreement in order to expand
the field of the original license. In December 2002, Cubist issued shares of
common stock as a milestone payment to Eli Lilly related to Cubist filing its
New Drug Application for Cidecin(R) (daptomycin for injection) and recorded
the value as research and development expense.

During the six months ended June 30, 2003 and 2002, we made payments
related to our various license agreements (which agreements are fully described
in our 2002 Annual Report on Form 10-K), in the aggregate of $3.2 million and
$481,000, respectively, which were recorded as research and development expense.

E. STOCKHOLDERS' EQUITY

In the first quarter of 2003, a charge of $109,000 was taken to account for
the accelerated vesting of stock options for Cubist's former CEO related to his
transition from that position in June 2003.

On March 7, 2003, Cubist filed a shelf registration statement on Form S-3
to register the offering on a delayed or continuous basis of $75.0 million of
common stock. The registration statement became effective on June 23, 2003.

F. ACCRUED CLINICAL TRIAL EXPENSES

Accrued clinical trial expenses are comprised of amounts owed to
third-party Clinical Research Organizations, or CROs, for research and
development work performed on behalf of Cubist. At each period end, we evaluate
the accrued clinical trial expenses balance based upon information received from
each CRO, and ensure that the balance is appropriately stated. The accrued
clinical trial expenses balance of $603,000 at June 30, 2003 represents our best
estimate of amounts owed for clinical trial services performed through June 30,
2003 based on all information available. Such estimates are subject to change as
additional information becomes available.

G. INTANGIBLE ASSETS

Intangible assets consisted of the following at June 30, 2003 and December
31, 2002:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(in thousands)

Patents $ 4,892 $ 4,868
Intellectual property and processes and other intangibles 5,363 5,387
----------- ------------
10,255 10,255
Less: Accumulated amortization - patents (1,492) (1,321)
Accumulated amortization - intellectual property (5,363) (5,072)
----------- ------------
Intangible assets, net $ 3,400 $ 3,862
=========== ============
</Table>

8
<Page>

Amortization expenses were $462,000 and $774,000 for the six months ended June
30, 2003 and 2002, respectively.

The estimated aggregate amortization expenses for intangible assets owned
as of June 30, 2003 for each of the five succeeding years is as follows:

<Table>
<Caption>
(in thousands)

Remainder of 2003 $ 166
2004 285
2005 269
2006 269
2007 269
Thereafter 2,142
--------------
$ 3,400
--------------
</Table>

H. CAPITAL AND OPERATING LEASE ARRANGEMENTS

In the first quarter of 2003, Cubist entered into a sale/leaseback
arrangement with General Electric Capital Corporation, or GE Capital, to finance
lab equipment up to the value of $2.0 million. No gain or loss was recorded as a
result of this sale/leaseback. The transaction is accounted for as a capital
lease. At June 30, 2003, $407,000 of lab assets had been sold to GE Capital and
were leased back to Cubist. The equipment is leased for a period of 42 months.
The amount outstanding under capital lease obligations at June 30, 2003 was
$370,000.

Our UK subsidiary leases 18,000 square feet of commercial office and
laboratory space in Slough, England pursuant to a term lease that expires in
April 2005. We have the right to terminate the lease upon three months notice.
In February 2003, the UK subsidiary also leased approximately 30,000 square feet
of additional space in Slough, England. The term of the new lease is fifteen
years. As of June 30, 2003, we had not yet occupied the new facility. The
aggregate outstanding amount of the UK lease commitments is $22.6 million.

I. TERM LOAN

In April 2003, our term loan with Fleet National Bank was repaid in full
and was replaced by a term loan with Citizens Bank of Massachusetts. As a
result, restricted cash of $3.3 million, which was held by Fleet National Bank
as cash collateral, has been released to us. The term loan with Citizens Bank
allows Cubist to borrow up to $5.0 million. Advances under this facility are to
be repaid over a 24-month period, commencing on June 30, 2003. Interest on the
borrowings accrues at the bank's LIBOR rate plus a margin of 2.75% (3.77% at
June 30, 2003). Borrowings under the facility are collateralized by all of our
assets other than intellectual property and real estate. This agreement contains
certain covenants, the most restrictive of which requires us to maintain an
unencumbered cash balance, which by definition includes all investments, of at
least $50.0 million. During the second quarter of 2003, we drew down the entire
$5.0 million under this facility. At June 30, 2003, outstanding borrowings under
this facility totaled $4.5 million.

J. SUBSEQUENT EVENTS

On July 2, 2003, we purchased from Eli Lilly a reduction in the
royalties payable to Eli Lilly on net sales of CIDECIN, should it gain
regulatory approval. On July 21, 2003, under the terms of the transaction, we
issued to Eli Lilly $8.0 million or 723,619 shares of Cubist common stock at
a price of $11.056 per share, with registration rights. The per share price
was determined based on the average closing price of the stock over the
twenty consecutive trading days ending July 18, 2003. In exchange for the
shares, our global royalty obligation to Eli Lilly on CIDECIN sales will be
reduced by one percentage point.

On July 16, 2003, Cubist and Sandoz GmbH amended the license agreement
dated July 31, 2002, in order to change certain success criteria for studies
to be performed by Sandoz under the license agreement.

9
<Page>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Cubist Pharmaceuticals, Inc., or Cubist, is a biopharmaceutical company
focused on the research, development and commercialization of antiinfective
drugs.

In December 2002, we filed a New Drug Application, or NDA, with the
United States Food & Drug Administration, or FDA, for our lead
investigational antibiotic, CIDECIN for the treatment of complicated skin and
skin structure infections, or cSSSI, caused by Gram-positive organisms.
CIDECIN is the first antibiotic in a new class of drug candidates called
lipopeptides and attacks bacteria through a novel mechanism of action.
CIDECIN has demonstrated the ability IN VITRO to rapidly kill virtually all
clinically significant Gram-positive bacteria, including those resistant to
current therapies. In February 2003, the FDA accepted the NDA for CIDECIN and
granted the filing priority review status, indicating that CIDECIN, if
approved, would represent a therapeutic advance over existing medicines, and
established a target date to act on the NDA filing by June 20, 2003.

On June 18, 2003, we received notification from the FDA that the agency
anticipated completing its priority review of the NDA for CIDECIN on or before
September 20, 2003, a three-month extension of the original action date. This
extension resulted from the FDA classifying a response to a question concerning
the reformatting of certain data sets as a major amendment to the application.

In July 2002, we acquired exclusive worldwide rights to develop and
commercialize a novel compound referred to as CAB-175. CAB-175 is an
investigational parenteral cephalosporin antibiotic with demonstrated IN VITRO
activity against most clinically relevant Gram-positive and Gram-negative
bacteria, including important resistant species such as methicillin-resistant
STAPHYLOCOCCUS AUREUS, or MRSA. On June 24, 2003, we commenced a multi-dose
Phase 1 trial in the U.S. for CAB-175 following the filing of an Investigational
New Drug, or IND, application with the FDA.

We are also developing oral formulations of the antibiotic ceftriaxone,
referred to as OCTX, which is currently available only in an intravenous
formulation and marketed by Hoffmann-La Roche in the U.S. under the brand name
Rocephin(R). We have developed capsule versions enabling oral delivery of
ceftriaxone and are continuing pre-clinical studies to determine the suitability
of these formulations for human clinical development.

Additionally, we use our natural products and other technologies to
identify novel pharmaceutical compounds.

Since our incorporation, we have experienced significant net losses.
Through June 30, 2003, we have an accumulated deficit of $309.7 million. We
expect to incur significant additional operating losses over the next several
years due to the implementation of manufacturing, distribution, marketing and
sales capabilities as well as continued research and development efforts,
pre-clinical testing and clinical trials.

RESULTS OF OPERATIONS

TOTAL REVENUES

<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
% %
2003 2002 CHANGE 2003 2002 CHANGE
------------------------------ ------------------------------
(in millions)

Novartis - Collaboration Revenues $ -- $ 0.6 (100)% $ 0.3 $ 1.5 (84)%
Gilead Sciences - License Fee -- 1.4 (100)% -- 2.8 (100)%
SBIR Grants -- 0.3 (100)% 0.1 0.3 (69)%
------------------------------ ------------------------------

Total Revenues $ -- $ 2.3 (100)% $ 0.4 $ 4.6 (92)%
============================== ==============================
</Table>

The decrease in revenues in the three and six months ended June 30, 2003
over the comparable period in 2002 was mainly attributable to the mutual
termination, in September 2002, of a European commercialization agreement with
Gilead Sciences, as well as the completion of a research collaboration with
Novartis in February 2003. Revenues from SBIR grants in the six months ended
June 30, 2003 were $109,000 as compared to $347,000 for the same period of 2002,
a decrease of $238,000.

10
<Page>

OPERATING EXPENSES

Research and Development $ 13.4 $ 15.5 (14)% $ 29.2 $ 29.0 1%
Sales and Marketing 3.8 1.8 110% 6.1 3.3 85%
General and Administrative 4.4 4.3 5% 8.6 9.6 (10)%
------------------------------ ------------------------------

Total Operating Expenses $ 21.6 $ 21.6 --% $ 43.9 $ 41.9 5%
============================== ==============================
</Table>

The decrease in research and development expenses during the three months
ended June 30, 2003 was due primarily to a decrease of $2.0 million in clinical
studies costs resulting largely from the completion of certain clinical trials
related to CIDECIN development in 2002 as well as a $800,000 decrease in
research spending as a result of our decision to discontinue the target-based
drug discovery program. The decrease in research and development expenses was
partially offset by a $600,000 increase in expenses associated with the start-up
of the manufacturing of CIDECIN and consisted primarily of labor related and
consulting expenses. The increase for the six months ended June 30, 2003 as
compared to the six months ended June 30, 2002 was due primarily to a
restructuring of our research group in the first quarter of 2003 offset by the
completion of certain clinical trials of CIDECIN and discontinuation of our
target-based drug discovery program.

Sales and marketing expense increases in both the three and six month
periods ending June 30, 2003 as compared to the same periods ending June 30,
2002 were primarily due to an increase of $1.4 million in sales expenditures
related to labor and consulting costs in anticipation of the commercial launch
of CIDECIN in the fourth quarter of 2003 and increased expenses of $1.4 million
related to marketing research, consulting and medical education.

General and administrative expense growth in the second quarter of 2003 was
mainly due to increases in general and administrative staffing. General and
administrative expenses decreased in the six months ended June 30, 2003 over the
same period of the prior year primarily due to an expense of $767,000 for the
termination of employment of one of our officers in the first quarter of 2002.

TOTAL OTHER EXPENSE, NET

<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
(in millions)

Interest Income $ 0.6 $ 1.5 $ 1.3 $ 3.0
Interest Expense (3.4) (3.5) (6.8) (6.8)
Other Income (Expense) 0.1 0.1 (0.1) 0.4
------------ ------------ ------------ ------------

Total Other Expense, Net $ (2.7) $ (1.9) $ (5.6) $ (3.4)
============ ============ ============ ============
</Table>

The decreases in interest income for the three and six months of 2003 were
due primarily to the decrease in ending cash, cash equivalents and investments,
as well as lower average yields on invested funds.

Interest expense for the second quarter of 2003 was $3.4 million
compared to $3.5 million in the same period of 2002, a decrease of $120,000
or 3%. The decrease in interest expense in the second quarter of 2003
resulted from a lower average loan balance with Citizens Bank. Interest
expense for the first six months of 2003 remained the same as compared to the
first six months of 2002.

The decrease in other income (expense) for the six months ended June 30,
2003 was due primarily to an impairment charge of $134,000 in the first quarter
of 2003 relating to an equity investment in Syrrx.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations through the sale of equity
securities, convertible debt securities, equipment financing, sponsored research
revenues, license revenues, research grants and interest earned on

11
<Page>

invested capital. Our total cash, cash equivalents and investments at June 30,
2003 was $103.0 million compared to $151.2 million, excluding restricted cash,
at December 31, 2002.

In September 2001, we increased our term loan with Fleet National Bank by
an additional $6.5 million to $10.0 million to finance leasehold improvements
and fixed asset purchases for the new corporate headquarters building. The
facility was collateralized by all capital equipment purchased with the funds
under the term loan and a minimum cash collateral amount of $3.3 million. In
April 2002, the term loans were consolidated and were to be paid over a 48-month
period. In April 2003, the loan was repaid in full and replaced by a term loan
with Citizens Bank of Massachusetts.

In April 2003, we entered into a term loan with Citizens Bank under which
we may borrow up to $5.0 million. Advances under this facility are to be repaid
over a 24-month period, commencing on June 30, 2003. Interest on the borrowings
accrues at the bank's LIBOR rate plus a margin of 2.75% (3.77% at June 30,
2003). Borrowings under the facility are collateralized by all of our assets
other than intellectual property and real estate. During the second quarter of
2003, we drew down the entire $5.0 million under this facility. At June 30,
2003, outstanding borrowings under this facility totaled $4.5 million.

During the first quarter of 2003, we entered into a leasing arrangement
with GE Capital to finance lab equipment up to the value of $2.0 million. No
gain or loss was recorded as a result of this sale/leaseback. The transaction is
accounted for as a capital lease. During the first six months of 2003, $407,000
of lab assets were sold to GE Capital and were leased back to Cubist. The
equipment is leased for a period of 42 months. The amount outstanding under
capital lease obligations at June 30, 2003 was $370,000.

On March 7, 2003, we filed a shelf registration statement on Form S-3 to
register the offering on a delayed or continuous basis of $75.0 million of
common stock. The registration statement became effective on June 23, 2003.

COMMITMENTS AND CONTINGENCIES

Our major outstanding contractual obligations relate to convertible notes,
a term loan and our facilities leases.

The aggregate outstanding principal of convertible notes was $204.0 million
as of June 30, 2003. These notes consist of $165.0 million of 5 1/2% convertible
subordinated notes due 2008, and $39.0 million of 8 1/2% senior convertible
notes due 2005. Both the convertible subordinated notes and the senior
convertible notes require semi-annual interest payments through maturity.

The aggregate outstanding amount of the commercial commitments is $111.9
million as of June 30, 2003. These commitments represent maximum payments based
on current operating forecasts. Certain of these commitments could be lessened
if changes to our operating forecast occur in the future.

12
<Page>

The following summarizes our contractual obligations and commercial
commitments as of June 30, 2003 and the effect such obligations and commitments
are expected to have on our liquidity and cash flow in the future periods:

<Table>
<Caption>
LAST SIX
MONTHS OF 2008 AND
2003 2004 2005 2006 2007 THEREAFTER TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS)

CONTRACTUAL OBLIGATIONS:
Senior convertible notes ........ $ 1.7 $ 3.3 $ 42.3 $ -- $ -- $ -- $ 47.3
Subordinated convertible notes .. 4.5 9.1 9.1 9.1 9.1 174.0 214.9
Term loan ....................... 1.1 2.1 1.5 -- -- -- 4.7
Operating leases ................ -- 1.6 1.5 1.4 1.4 16.1 22.0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total contractual obligations . $ 7.3 $ 16.1 $ 54.4 $ 10.5 $ 10.5 $ 190.1 $ 288.9

COMMERCIAL COMMITMENTS:
Clinical CRO costs .............. $ 3.0 $ 2.9 $ -- $ -- $ -- $ -- $ 5.9
Manufacturing and distribution .. 8.4 6.6 8.8 8.2 10.8 29.7 72.5
Licenses and collaborations ..... 2.7 2.6 4.0 0.2 6.2 17.8 33.5
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total commercial commitments .. $ 14.1 $ 12.1 $ 12.8 $ 8.4 $ 17.0 $ 47.5 $ 111.9
</Table>

We believe that our existing cash resources, existing capital resources and
projected interest income will be sufficient to fund our operating expenses and
capital requirements as currently planned through the next 15 months. Our actual
cash requirements may vary materially from those now planned and will depend on
numerous factors. We cannot be sure that our existing cash, cash equivalents,
other capital resources and interest income will be sufficient to fund our
operating expenses and capital requirements during that period.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

In our Annual Report on Form 10-K for the year ended December 31, 2002, we
disclosed our critical accounting policies and estimates upon which our
financial statements are derived. There have been no changes to these policies
since December 31, 2002. Readers are encouraged to review these disclosures in
conjunction with the review of this Form 10-Q.

NEW ACCOUNTING PRONOUNCEMENTS

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No. 150 changes the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. The new statement
requires that those instruments be classified as liabilities in statements of
financial position. Most of the guidance in SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period beginning after June
30, 2003. We do not expect the adoption of this statement to have a material
impact on our consolidated financial position or results of operations

In January 2003, the FASB issued FASB Interpretation No. 46 or FIN 46,
"Consolidation of Variable Interest Entities," to expand upon and strengthen
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity.
Until now, one company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.

13
<Page>

FIN 46 changes that by requiring a variable interest entity, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. FIN 46 also requires
disclosures about variable interest entities that the company is not required to
consolidate but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003 and to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established. The
adoption of FIN 46 had no effect on our results of operations and financial
position.

In November 2002, the FASB Emerging Issues Task Force reached consensus on
EITF No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". EITF No. 00-21 addresses the accounting treatment for
arrangements that provide the delivery or performance of multiple products or
services where the delivery of a product, system or performance of services may
occur at different points in time or over different periods of time. EITF No.
00-21 requires the separation of the multiple deliverables that meet certain
requirements into individual units of accounting that are accounted for
separately under the appropriate authoritative accounting literature. EITF No.
00-21 is applicable to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The Company does not expect the adoption of EITF
00-21 to have a material effect on its results of operations and financial
position.

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements" within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. In some cases, these statements can be identified by the
use of forward-looking terminology such as "may," "will," "could," "should,"
"would," "expect," "anticipate," "continue" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition, or state trends and known uncertainties or
other forward-looking information. You are cautioned that forward-looking
statements are based on current expectations and are inherently uncertain.
Actual performance and results of operations may differ materially from those
projected or suggested in the forward-looking statements due to certain risks
and uncertainties, including, but not limited to, the risks and uncertainties
described or discussed in the Section "Risk Factors" below. The forward-looking
statements contained herein represent our judgment as of the date of this
quarterly report, and Cubist cautions readers not to place undue reliance on
such statements.

Forward-looking statements include information concerning possible or
assumed future results of our operations, including, but not limited to,
statements regarding:

- whether we will receive, and the potential timing of, regulatory
approvals or clearances to market potential products, including
daptomycin;

- our expectations regarding clinical trials and development time lines;

- the acceptance of daptomycin by physicians, patients, third party
payors and the medical community if approved by the FDA and other
regulatory agencies;

- our ability to successfully develop satisfactory sales and marketing
capabilities;

- our ability to use our research and development and technology
platforms and methods to identify potential product candidates;

- our expectations regarding selection of clinical development
candidates;

- our ability to manufacture daptomycin on a commercial scale;

- our expectation regarding our ability to commercialize products in the
coming years;

- the continuation of our collaborations with our partners;

- our future capital requirements and our ability to finance our
operations;

- the timing of new product launches; and

14
<Page>

- our expectations regarding business conditions generally and growth in
the biopharmaceutical industry and overall economy.

Many factors could affect our actual financial results, and could cause
these actual results to differ materially from those in these forward-looking
statements. These factors include, but are not limited to, the following:

- the risk that we may be unable to successfully finance and secure
regulatory approval of and market our drug candidates, including
daptomycin;

- unanticipated increases in financing and operating costs;

- general economic or business conditions being less favorable than
expected;

- legislative or regulatory changes adversely affecting cubist or the
biopharmaceutical industry generally;

- our inability to further identify, develop and achieve commercial
success for new products and technologies;

- the levels and timing of payments for sales of daptomycin, if approved
by the FDA and other regulatory agencies;

- our ability to manufacture daptomycin on a commercial scale;

- the possibility of delays in the research and development necessary to
select drug development candidates and delays in clinical trials;

- the risk that research and development may not result in marketable
products;

- the acceptance of daptomycin by physicians, patients, third party
payors and the medical community if approved by the FDA and other
regulatory agencies;

- our dependence upon pharmaceutical and biotechnology collaborations;

- uncertainties about our ability to obtain new corporate collaborations
and acquire new technologies on satisfactory terms, if at all; and

- our ability to protect our proprietary technologies.

Cubist(R), Cidecin(R), and VITA(TM) are our trademarks. This quarterly
report contains trademarks and trade names of other companies.

RISK FACTORS

INVESTING IN OUR COMPANY INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW, TOGETHER WITH THE OTHER
INFORMATION IN AND INCORPORATED BY REFERENCE INTO THIS DOCUMENT. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, OPERATING RESULTS OR FINANCIAL
CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE MARKET
PRICE OF OUR COMMON STOCK TO DECLINE, AND COULD CAUSE YOU TO LOSE ALL OR PART OF
YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

IF WE DO NOT OBTAIN REGULATORY APPROVALS FOR OUR DRUG CANDIDATES, AND IN
PARTICULAR OUR LEAD DRUG CANDIDATE DAPTOMYCIN, WE WILL NOT BE ABLE TO GENERATE
REVENUES FROM THE COMMERCIALIZATION OR SALE OF OUR DRUG CANDIDATES.

The FDA and comparable regulatory agencies in foreign countries impose
substantial requirements for the development, production and commercial
introduction of drug products. These include lengthy and detailed pre-clinical,
laboratory and clinical testing procedures, sampling activities and other costly
and time-consuming procedures. All of our drug candidates will require
governmental approvals for commercialization, and, to date, we have not

15
<Page>

obtained government approval for any drug product. Pre-clinical testing,
clinical trials and manufacturing of our drug candidates will be subject to
rigorous and extensive regulation by the FDA and corresponding foreign
regulatory authorities. In addition, such authorities, including the FDA, may
impose more stringent requirements than currently in effect, which may adversely
affect our planned on-going development. Satisfaction of the requirements of the
FDA and the foreign regulatory agency requirements typically takes a significant
number of years and can vary substantially based upon the type, complexity and
novelty of the drug candidate.

No product can receive FDA approval unless human clinical trials show
both safety and efficacy for each target indication in accordance with FDA
standards. The majority of drug candidates that begin human clinical trials
fail to demonstrate the desired safety and efficacy characteristics. Failure
to demonstrate the safety and efficacy of our drug candidates for each target
indication in clinical trials would prevent us from obtaining required
approvals from regulatory authorities for those indications, which would
prevent us from commercializing those drug candidates for those indications.
The results of our clinical testing of a drug candidate may cause us to
suspend, terminate or redesign our clinical testing program with regards to
that drug candidate. We cannot be sure when we, independently or with our
collaborative partners, might be in a position to submit additional drug
candidates for regulatory review. Although we have conducted clinical trials
for daptomycin, and have only recently commenced Phase 1 clinical trials for
CAB-175, we have not initiated formal clinical trials for oral ceftriaxone.
In addition, we cannot be sure that regulatory approval will be granted for
drug candidates that we submit for regulatory review. Moreover, if regulatory
approval to market a drug product is granted, the approval may impose
limitations on the indicated use for which the drug product may be marketed.

Daptomycin is the first drug candidate for which we have conducted clinical
trials, and it is the first drug candidate for which we have filed for
regulatory approval. Although the FDA has given daptomycin priority review as a
treatment for complicated skin and skin structure infections, we may not obtain
regulatory approval to commercialize daptomycin in the United States. If we do
not obtain regulatory approval for daptomycin in the United States, we will not
receive any revenues or royalties from commercial sales of daptomycin in the
United States. In addition, in order to execute our business plan we will need
to obtain regulatory approval for additional indications for daptomycin, foreign
regulatory approvals for daptomycin and regulatory approvals for additional drug
candidates. Our ability to generate revenues from the commercialization and sale
of drug products will be limited by any failures to obtain these approvals.

IF CLINICAL TRIALS FOR OUR DRUG CANDIDATES ARE UNSUCCESSFUL OR DELAYED, WE WILL
BE UNABLE TO MEET OUR ANTICIPATED DEVELOPMENT AND COMMERCIALIZATION TIMELINES,
WHICH COULD HARM OUR BUSINESS.

Before we receive regulatory approvals for the commercial sale of any of
our drug candidates, our drug candidates are subject to extensive pre-clinical
testing and clinical trials to demonstrate their safety and efficacy in humans.
Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming
and expensive process, that often takes many years. Furthermore, we cannot be
sure that pre-clinical testing or clinical trials of any drug candidates will
demonstrate the safety and efficacy of our drug candidates at all or to the
extent necessary to obtain regulatory approvals. Companies in the biotechnology
and pharmaceutical industries, including companies with greater experience in
pre-clinical testing and clinical trials than we have, have suffered significant
setbacks in advanced clinical trials, even after demonstrating promising results
in earlier trials. For example, our clinical trials on daptomycin for the
treatment of pneumonia failed to demonstrate sufficient efficacy despite
promising results in pre-clinical and early clinical trials.

Our clinical trials must be carried out under protocols that are acceptable
to regulatory authorities and to the committees responsible for clinical studies
at the sites at which the studies are conducted. There may be delays in
preparing protocols or receiving approval for them that may delay either or both
of the start and finish of our clinical trials. Feedback from regulatory
authorities or results from earlier stage clinical studies might require
modifications or delays in later stage clinical trials. These types of delays
can result in increased development costs and delayed regulatory approvals.

Furthermore, there are a number of additional factors that may cause
delays in our clinical trials. We have limited experience in conducting
pre-clinical testing or clinical trials. We have conducted clinical trials with
daptomycin and recently commenced Phase 1 clinical trials for CAB-175, but we
have not conducted clinical trials for any of our other drug candidates. The
rate of completion of our clinical trials is also dependent in part on the rate
of patient enrollment. There may be limited availability of patients who meet
the criteria for certain clinical trials. Delays in planned patient enrollment
can result in increased development costs and delays in regulatory approvals. In
particular, our ongoing clinical trial to determine the safety and efficacy of
using daptomycin to treat endocarditis, or infections of the heart valves, has
experienced delays attributable to slow enrollment. In addition, our clinical
trials may be delayed by one or more of the following factors, including:

16
<Page>

- inability to manufacture sufficient quantities of materials for use in
clinical trials;

- inability to adequately follow patients after treatment;

- the failure of third-party clinical trial managers to perform; or

- the failure of our clinical investigational sites and related
facilities and records to be in compliance with Good Clinical
Practices.

If clinical trials for our drug candidates are unsuccessful or delayed, we will
be unable to meet our anticipated development and commercialization timelines,
which could harm our business and cause our stock price to decline.

DAPTOMYCIN MAY NOT BE ACCEPTED BY PHYSICIANS, PATIENTS, THIRD PARTY PAYORS, OR
THE MEDICAL COMMUNITY IN GENERAL.

The commercial success of daptomycin will depend upon its acceptance by the
medical community. We cannot be sure that daptomycin will be accepted by
purchasers in the pharmaceutical market even if it is approved by the relevant
regulatory authorities. Daptomycin will compete with a number of existing
antiinfective drugs manufactured and marketed by major pharmaceutical companies
and potentially against new antiinfective drugs that are not yet marketed. The
degree of market acceptance of daptomycin depends on a number of factors,
including, but not limited to:

- the demonstration of the clinical efficacy and safety of daptomycin;

- the advantages and disadvantages of daptomycin compared to alternative
therapies;

- our ability to educate the medical community about the safety and
effectiveness of daptomycin;

- the reimbursement policies of government and third party payors; and

- the market price of daptomycin.

We cannot be sure that physicians, patients, third party payors, or the
medical community in general will accept and utilize daptomycin. Even if the
medical community accepts that daptomycin is safe and efficacious for its
approved indications, physicians may choose to restrict the use of daptomycin
due to antibiotic resistance concerns.

WE WILL FACE SIGNIFICANT COMPETITION FROM OTHER BIOTECHNOLOGY AND PHARMACEUTICAL
COMPANIES, PARTICULARLY WITH RESPECT TO DAPTOMYCIN, AND OUR OPERATING RESULTS
WILL SUFFER IF WE FAIL TO COMPETE EFFECTIVELY.

The biotechnology and pharmaceutical industries are intensely competitive.
We have competitors both in the United States and internationally, including
major multinational pharmaceutical and chemical companies, biotechnology
companies and universities and other research institutions. Many of our
competitors have greater financial and other resources, such as larger research
and development staffs and more experienced marketing and manufacturing
organizations. Our competitors may succeed in developing or licensing on an
exclusive basis technologies and drug products that are more effective or less
costly than any drug candidate that we are currently developing or that we may
develop, which could render our technology and future drug products obsolete and
noncompetitive.

Competitors have obtained regulatory approvals from the FDA and foreign
regulatory agencies for products that are used to treat the target indications
for our drug candidates and may obtain regulatory approvals for additional drug
candidates that will compete with our drug candidates. In general, companies
that begin commercial sale of their drug products before their competitors have
a significant competitive advantage in the marketplace, including the ability to
obtain patent and FDA marketing exclusivity rights that would delay their
competitors ability to market specific products. Even if our drug candidates are
approved for sale, we may not be able to compete successfully with existing drug
products or drug candidates under development.

The competition in the market for therapeutic products that address
infectious diseases is intense. Should daptomycin receive regulatory approval,
it would face competition from commercially available drugs such as vancomycin,
marketed generically by Abbott, Shionogi & Co. Ltd., and others, Zyvox, marketed
by Pfizer, Inc., and

17
<Page>

Synercid, marketed by King Pharmaceuticals, Inc. Vancomycin is a generic drug
and therefore costs less than the anticipated cost of daptomycin, and these
products, including vancomycin, have established efficacy and safety profiles.
In particular, vancomycin has been a widely used and well known antibiotic for
over 40 years and is now sold in a relatively inexpensive generic form.
Accordingly, if price competition inhibits the acceptance of daptomycin or if
the reluctance of physicians to switch from existing drugs to daptomycin
inhibits the acceptance of daptomycin, we will not achieve our business plan. In
addition, daptomycin may face competition from drug candidates currently in
clinical development, including drug candidates that could receive regulatory
approval (i) before daptomycin in countries outside the U.S., or (ii) before
daptomycin in the U.S., should daptomycin encounter significant delay with the
FDA. The inability to compete with existing drug products or the subsequent
introduction of drug products that would compete with our drug candidates or
drug products would have a material adverse impact on our operating results.

IF WE ARE UNABLE TO DEVELOP SATISFACTORY SALES AND MARKETING CAPABILITIES, WE
MAY NOT SUCCEED IN COMMERCIALIZING DAPTOMYCIN.

We have not previously marketed or sold a drug product. Except for a
marketing collaboration in Israel and Palestine, we do not have a sales and
marketing collaboration for daptomycin anywhere in the world. Although we are
developing sales and marketing capabilities of our own in the U.S., we will
seek to collaborate with third parties to market daptomycin in Europe, Asia
and other parts of the world. We cannot be sure that collaborative agreements
can be reached on terms acceptable to us.

We have developed marketing capabilities in the U.S. and we will need to
continue to develop those marketing capabilities. We recently hired most of
our hospital-based sales representatives that we estimate we will need to
sell daptomycin by ourselves in the U.S., and we expect to complete the
hiring of our sales representatives by September 2003. We cannot be sure that
we will be able to acquire adequate sales and marketing capabilities, or
establish third party relationships, in the U.S. We will incur substantial
fixed expenses in hiring and maintaining a substantial sales force. Even if
we are able to acquire sales and marketing capabilities, we cannot guarantee
that we will be successful in commercializing daptomycin.

WE ARE COMPLETELY DEPENDENT ON THIRD PARTIES TO MANUFACTURE DAPTOMYCIN, AND OUR
COMMERCIALIZATION OF DAPTOMYCIN COULD BE STOPPED, DELAYED, OR MADE LESS
PROFITABLE IF THOSE THIRD PARTIES FAIL TO PROVIDE US WITH SUFFICIENT QUANTITIES
OF DAPTOMYCIN AT ACCEPTABLE PRICES.

We do not have the capability to manufacture our own daptomycin bulk
drug substance or finished drug product. We anticipate that we will depend
entirely on one company, DSM Capua, or DSM, to manufacture daptomycin drug
substance for commercial sale at the time of the potential U.S. launch of
daptomycin unless FDA approval for such launch is withheld or delayed past
2003. We currently depend entirely on two companies, ACS Dobfar, or ACS and
DSM, to manufacture daptomycin drug substance for our clinical trials. We
have entered into manufacturing and supply agreements with both DSM and ACS
to manufacture and supply to us daptomycin drug substance for commercial
purposes. However, only DSM is currently capable of manufacturing daptomycin
drug substance for commercial sale, and ACS will not be capable of
manufacturing daptomycin drug substance for commercial sale until such time
as they have requested and received the required regulatory approvals. We
currently anticipate that ACS will be able to manufacture daptomycin drug
substance for commercial sale by the end of 2004. We currently depend on one
company, Abbott Laboratories, or Abbott, to manufacture clinical grade vialed
formulations of daptomycin. We have also entered into a development and
supply agreement with Abbott to manufacture and supply final vialed
daptomycin commercial drug product.

We may not be able to enter into definitive agreements on acceptable terms
for the expanded commercial scale manufacturing of daptomycin, either for drug
substance or drug product. If we are unable to enhance our current manufacturing
network, we could experience significant delays in the supply of daptomycin.
Because both the DSM and ACS manufacturing facilities are located in Italy, we
may also experience interruption or significant delay in the supply of
daptomycin drug substance due to natural disasters, acts of war or terrorism,
labor unrest, or political instability, in Italy. If we are required to transfer
manufacturing processes to other third-party manufacturers, we would be required
to satisfy various additional regulatory requirements, and we could experience
significant delays in supply of daptomycin.

We anticipate that the initial costs of commercial scale manufacturing of
daptomycin will be high. We cannot guarantee that we will be able to reduce the
costs over time. If the cost of daptomycin is too high, it may significantly

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delay or prevent Cubist from achieving profitability. We cannot guarantee that
we will be able to increase the yields from our commercial manufacturing
process. If we cannot increase our yields, it may be too costly for us to
produce it.

WE HAVE COLLABORATIVE RELATIONSHIPS THAT MAY EXPOSE US TO A NUMBER OF RISKS.

We have entered into, and anticipate continuing to enter into,
collaborative arrangements with multiple third parties to discover, test,
manufacture, and market drug candidates and drug products. These collaborations
are necessary for us to research, develop, and commercialize drug candidates. In
particular, our business plan contemplates that we will need to enter into a
collaboration agreement to seek regulatory approvals and commercialize
daptomycin in Europe. We cannot be sure that we will be able to establish such
collaborative relationships or any additional collaborative relationships on
terms acceptable to us.

Reliance on collaborative relationships poses a number of risks including
the following:

- our collaborators may not perform their obligations as expected;

- the amount and timing of resources dedicated by our collaborative
partners to their respective collaborations with us is not under our
control;

- some drug candidates discovered in collaboration with us may be viewed
by our collaborative partners as competitive with their own drug
candidates or drug products;

- our collaborative partners may not elect to proceed with the
development of drug candidates that we believe to be promising;

- disagreements with collaborators, including disagreements over
proprietary rights, might cause delays or termination of the research,
development or commercialization of drug candidates, might lead to
additional responsibilities with respect to drug candidates, or might
result in litigation or arbitration, any of which would be time
consuming and expensive; and

- some of our collaborative partners might develop independently, or
with others, drug products that could compete with ours.

For example, in September 2002, we agreed to terminate our collaboration
with Gilead Sciences relating to commercialization rights to daptomycin in 16
European countries. If we establish and then terminate future commercialization
collaborations, such termination could negatively affect our ability to generate
revenues from the affected countries.

Collaborative arrangements with third parties are a critical part of our
business strategy, and any inability on our part to be able to establish
collaborations on terms favorable to us or to work successfully with our
collaborators will have an adverse effect on our operations and financial
performance.

WE HAVE INCURRED SUBSTANTIAL LOSSES IN THE PAST AND EXPECT TO INCUR ADDITIONAL
LOSSES OVER THE NEXT SEVERAL YEARS.

Since we began operations, we have incurred substantial net losses in every
fiscal period. We had net losses of $49.3 million during the first six months of
2003, and we had an accumulated deficit of $309.7 million through June 30,
2003. These losses have resulted principally from costs in conducting research
and development activities, conducting clinical trials and associated
administrative costs.

While we do not currently maintain cost accounting systems to accurately
track costs on an individual project basis, based on an estimated average
full-time equivalent basis, we estimate that during the first six months of
2003 we incurred costs of less than $0.1 million in connection with all of
our research collaborations, which generated approximately $0.3 million of
revenue in the aggregate during such six month period.

We expect to incur significant additional operating losses over the next
several years as we expand our research and development efforts and our
pre-clinical testing and clinical trials and as we implement manufacturing,
marketing and sales programs. As a result, we cannot predict when we will become
profitable, if at all, and if we do, we may not

19
<Page>

remain profitable for any substantial period of time. If we fail to achieve
profitability within the time frame expected by investors, the market price of
our common stock may decline.

WE ARE NOT A SELF-SUSTAINING BUSINESS, AND WE WILL REQUIRE ADDITIONAL FUNDS.

Currently, we are not a self-sustaining business, and certain economic and
strategic factors will require us to seek substantial additional funds. We
believe that our existing cash, cash equivalents, short-term investments and
cash flow from revenues will be sufficient to fund our operating expenses, debt
obligations and capital requirements under our current business plan through the
second half of 2004. We expect capital outlays and operating expenditures to
increase over the next several years as we expand our infrastructure and
research and development activities. We may need to spend more money than
currently expected because of unforeseen circumstances or circumstances beyond
our control. We have no committed sources of capital and do not know whether
additional financing will be available when needed, or, if available, that the
terms will be favorable to our stockholders or us.

We may seek additional funding through public or private financing or other
arrangements with collaborative partners. If we raise additional funds by
issuing equity securities, further dilution to existing stockholders may result.
In addition, as a condition to giving additional funds to us, future investors
may demand, and may be granted, rights superior to those of existing
stockholders. We cannot be sure, however, that additional financing will be
available from any of these sources or, if available, will be available on
acceptable or affordable terms.

Our annual debt service obligations on our 5 1/2% subordinated convertible
notes due 2008 are approximately $9.1 million per year in interest payments, and
our annual debt service obligations on our 8 1/2% senior convertible notes due
in 2005 are approximately $3.3 million per year in interest payments. In
addition, we have a term loan that allows us to borrow up to $5.0 million. We
may add additional lease lines to finance capital expenditures and may obtain
additional long-term debt and lines of credit. If we issue other debt securities
in the future, our debt service obligations will increase further. If we are
unable to generate sufficient cash to meet these obligations and need to use
existing cash or liquidate investments in order to fund our debt service
obligations, we may be forced to delay or terminate clinical trials, curtail
operations, or obtain funds through collaborative and licensing arrangements
that may require us to relinquish commercial rights or potential markets or
grant licenses on terms that are not favorable to us. If we fail to obtain
additional capital, we will not be able to execute our current business plan
successfully.

WE MAY NOT BE ABLE TO OBTAIN, MAINTAIN OR PROTECT CERTAIN PROPRIETARY RIGHTS
NECESSARY FOR THE DEVELOPMENT AND COMMERCIALIZATION OF DAPTOMYCIN, OUR OTHER
DRUG CANDIDATES, AND OUR RESEARCH TECHNOLOGIES.

Our commercial success will depend in part on obtaining and maintaining
United States and foreign patent protection for daptomycin, our other drug
candidates, and our research technologies and successfully enforcing and
defending these patents against third party challenges. The patent positions of
pharmaceutical and biotechnology companies can be highly uncertain and involve
complex legal and factual questions. Legal standards relating to the validity
and scope of patents covering pharmaceutical and biotechnological inventions are
continually developing. Our patent position is highly uncertain and involves
complex legal and factual questions, and we cannot predict the scope and breadth
of patent claims that may be afforded to our patents or to other companies'
patents.

The primary composition of matter patent covering daptomycin in the U.S.
has expired. We own or have licensed a limited number of patents directed toward
methods of administration and methods of manufacture of daptomycin. We cannot be
sure that patents will be granted with respect to any of our pending patent
applications for daptomycin, our other drug candidates, or our research
technologies, or with respect to any patent applications filed by us in the
future; nor can we be sure that any of our existing patents or any patents that
may be granted to us in the future will be commercially useful in protecting
daptomycin, our other drug candidates and our technology.

The degree of future protection for our proprietary rights is uncertain. We
cannot be certain that the named applicants or inventors of the subject matter
covered by our patent applications or patents, whether directly owned by us or
licensed to us, were the first to invent or the first to file patent
applications for such inventions. Third parties may challenge, infringe,
circumvent or seek to invalidate existing or future patents owned by or licensed
to us. A court or other agency with jurisdiction may find our patents invalid
and/or unenforceable. Even if we have valid and enforceable patents, these
patents still may not provide sufficient protection against competing products
or processes.

20
<Page>

If our collaborative partners, employees or consultants develop inventions
or processes independently that may be applicable to our products under
development, disputes may arise about ownership of proprietary rights to those
inventions and/or processes. Such inventions and/or processes will not
necessarily become our property, but may remain the property of those persons or
their employers. Protracted and costly litigation could be necessary to enforce
and determine the scope of our proprietary rights. Moreover, the laws of foreign
countries in which we market our drug products may afford little or no effective
protection of our intellectual property.

We also occasionally engage in collaborations, sponsored research
agreements, and other arrangements with academic researchers and institutions
that have received and may receive funding from U.S. government agencies. As a
result of these arrangements, the U.S. government or certain third parties may
have rights in certain inventions developed during the course of the performance
of such collaborations and agreements as required by law or by such agreements.

We also rely on trade secrets and other unpatented proprietary information
in our product development activities. To the extent that we maintain a
competitive advantage by relying on trade secret and unpatented proprietary
information, such competitive advantage may be compromised if others
independently develop the same or similar technology, resulting in an adverse
effect on our business, financial condition and results of operations. We seek
to protect trade secrets and proprietary information in part through
confidentiality provisions and invention assignment provisions in agreements
with our collaborative partners, employees and consultants. It is possible that
these agreements could be breached or that we might not have adequate remedies
for any such breaches.

THIRD PARTY PATENT AND INTELLECTUAL PROPERTY RIGHTS MAY INTERFERE WITH OUR
ABILITY TO COMMERCIALIZE DRUG PRODUCTS AND RESEARCH TECHNOLOGIES.

Because the patent positions of pharmaceutical and biotechnology companies
can be highly uncertain and involve complex legal and factual questions, there
can be no assurance that the patents owned and licensed by us, or any future
patents, will ensure that others will not be issued patents that may prevent the
sale of our drug products or require licensing and the payment of significant
fees or royalties. Moreover, to the extent that any of our drug products or
methods infringe the patents of a third party, or that our patents or future
patents fail to give us an exclusive position in the subject matter claimed in
those patents, we will be adversely affected. If our drug candidates, drug
products, or processes are found to infringe the patents of others or are found
to impermissibly utilize the intellectual property of others, our development,
manufacture and sale of our infringing drug candidates or drug products could be
severely restricted or prohibited. We may be unable to avoid infringement of a
third party patent and may have to obtain a license, defend an infringement
action, or challenge the validity of a patent in a court of law or agency of
competent jurisdiction. A license may be unavailable on terms and conditions
acceptable to us, if at all. Intellectual property litigation can be expensive
and time consuming, and we may be unable to prevail in any such litigation or
devote sufficient resources to pursue such litigation. If we do not obtain an
appropriate license, if we are found liable for patent infringement or trade
secret misappropriation, or if we are not able to have such patents declared
invalid and/or unenforceable, we may be liable for significant monetary damages,
may encounter significant delays in bringing products to market, and/or may be
precluded from participating in the manufacture, use, or sale of products or
methods of treatment requiring such licenses.

IF WE ARE UNABLE TO DISCOVER OR IN-LICENSE DRUG CANDIDATES, DEVELOP DRUG
CANDIDATES OR COMMERCIALIZE DRUG PRODUCTS, WE WILL NOT GENERATE SIGNIFICANT
REVENUES OR BECOME PROFITABLE.

In order to implement our business plan we will need to identify, develop
and commercialize drug products. Our approach to drug discovery requires the
development of multiple novel technologies to create a successful drug
candidate. We have not proven that compounds that we have developed internally
can be utilized clinically as a therapeutic drug. We have not tested any drug
candidates developed from our drug discovery program in humans, and we cannot
assure you that there will be clinical benefits associated with any drug
candidates we do develop.

Our three drug candidates, daptomycin, CAB-175 and oral ceftriaxone, are
each the result of in-licensing patents and technologies from third parties.
These in-licensing activities represent a significant expense for Cubist. Unless
we are able to use our drug discovery approach to identify suitable drug
candidates, in-licensing will be our only source of drug candidates. However,
there can be no assurance that we will be able to in-license additional
desirable drug candidates on acceptable terms, or at all, or that we will be
successful in developing them. Our failure to develop

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<Page>

or in-license new drug candidates on acceptable terms would have a material
adverse effect on our business, operating results and financial condition.

A VARIETY OF RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.

Because we have a portion of our research operations in United Kingdom, we
have manufacturing and clinical relationships outside the U.S., and we plan to
market daptomycin worldwide, we are, and will continue to be, subject to
additional risks related to operating in foreign countries. Associated risks of
conducting operations in foreign countries include, but are not limited to:

- differing regulatory requirements for drug approvals in foreign
countries;

- unexpected changes in tariffs, trade barriers and regulatory
requirements;

- economic weakness, including inflation, or political instability in
particular foreign economies and markets;

- compliance with tax, employment, immigration and labor laws for
employees living and traveling abroad;

- foreign taxes including withholding of payroll taxes;

- foreign currency fluctuations, which could result in increased
operating expenses and reduced revenues, and other obligations
incident to doing business or operating a subsidiary in another
country;

- workforce uncertainty in countries where labor unrest is more common
than in the U.S.;

- production shortages resulting from any events affecting raw material
supply or manufacturing capabilities abroad; and

- business interruptions resulting from geo-political actions,
including, but not limited to, war and terrorism.

These and other risks associated with our international operations may
materially adversely affect our ability to attain or maintain profitable
operations.

WE DEPEND ON CERTAIN KEY EMPLOYEES, AND THE LOSS OF ANY KEY EMPLOYEE COULD
POTENTIALLY HARM OUR BUSINESS.

We believe that our ability to successfully implement our business strategy
is highly dependent on key employees in all areas of the organization. In
addition, our success is highly dependent on our ability to attract, train,
retain, and motivate high quality personnel, especially for our senior
management team. The loss of the services of any of our executive officers,
officers, or other key employees could potentially harm our business or
financial results.

IF WE ARE NOT SUCCESSFUL IN OUR MANAGEMENT TRANSITION OR IN ATTRACTING AND
RETAINING MANAGEMENT TEAM MEMBERS AND OTHER HIGHLY QUALIFIED INDIVIDUALS IN OUR
INDUSTRY, WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY.

Our ability to compete in the highly competitive biotechnology and
pharmaceuticals industries, depends in large part upon our ability to attract
and retain highly qualified managerial personnel. We historically have been
highly dependent on our senior management and scientific team, including Dr.
Scott M. Rocklage who served as our chief executive officer from July 1994 until
June 2003. On June 10, 2003, Michael W. Bonney, became our Chief Executive
Officer. Mr. Bonney had been serving as our chief operating officer and
president since 2002 and has not previously served as the chief executive
officer of a publicly traded corporation. Five of our six executive officers,
including Mr. Bonney, have joined us since December 2001. In addition, we have
hired several other key members of our management team since June 2002. As a
result, our management team has only worked together for a limited period of

22
<Page>

time. Our future success depends on a successful management transition and will
also depend on our continuing to attract, retain and motivate highly skilled
management team members.

WE MAY UNDERTAKE ADDITIONAL STRATEGIC ACQUISITIONS IN THE FUTURE, AND
DIFFICULTIES INTEGRATING SUCH ACQUISITIONS COULD DAMAGE OUR ABILITY TO ATTAIN OR
MAINTAIN PROFITABILITY.

Although we have limited experience in acquiring businesses and have
completed only one business acquisition since our inception, we may acquire
additional businesses that complement or augment our existing business.
Integrating any newly acquired businesses or technologies could be expensive and
time-consuming. We may not be able to integrate any acquired business
successfully. Moreover, we may need to raise additional funds through public or
private debt or equity financing to acquire any businesses, which may result in
dilution for stockholders and the incurrence of indebtedness. We may not be able
to operate acquired businesses profitably or otherwise implement our growth
strategy successfully.

RISKS RELATED TO OUR INDUSTRY

EVEN IF WE DO OBTAIN REGULATORY APPROVALS, OUR PRODUCTS WILL BE SUBJECT TO
ONGOING REGULATORY REVIEW.

Regulatory approvals can be conditioned on certain factors which may delay
the marketing of drug products, and increase the cost of developing,
manufacturing, or marketing drug products. Even if initial regulatory approvals
for our drug candidates are obtained, our company, our drug products and the
manufacturing facilities for our drug products would be subject to continual
review and periodic inspection by the FDA and other regulatory agencies. In
addition, if there are any modifications to a drug product, further regulatory
approval will be required. Failure to comply with manufacturing regulations of
the FDA and other regulatory agencies can, among other things, result in fines,
denial or withdrawal of regulatory approvals, product recalls or seizures,
operating restrictions and criminal prosecution. Later discovery of previously
unknown problems with a drug product, manufacturer or facility may result in
restrictions on the drug product, us or our manufacturing facilities, including
withdrawal of the drug product from the market. The cost of compliance with pre-
and post-approval regulation may have a negative effect on our operating results
and financial condition.

WE MAY BECOME INVOLVED IN PATENT LITIGATION OR OTHER INTELLECTUAL PROPERTY
PROCEEDINGS RELATING TO OUR PRODUCTS OR PROCESSES THAT COULD RESULT IN LIABILITY
FOR DAMAGE OR STOP OUR DEVELOPMENT AND COMMERCIALIZATION EFFORTS.

The pharmaceutical industry has been characterized by significant
litigation and interference and other proceedings regarding patents, patent
applications and other intellectual property rights. The types of situations in
which we may become parties to such litigation or proceedings include:

- We or our collaborators may initiate litigation or other proceedings
against third parties to enforce our patent rights.

- We or our collaborators may initiate litigation or other proceedings
against third parties to seek to invalidate the patents held by such
third parties or to obtain a judgment that our products or processes
do not infringe such third parties' patents.

- If our competitors file patent applications that claim technology also
claimed by us, we or our collaborators may participate in interference
or opposition proceedings to determine the priority of invention.

- If third parties initiate litigation claiming that our processes or
products infringe their patent or other intellectual property rights,
we and our collaborators will need to defend against such proceedings.

An adverse outcome in any litigation or other proceeding could subject us
to significant liabilities to third parties and require us to cease using the
technology that is at issue or to license the technology from third parties. We
may not be able to obtain any required licenses on commercially acceptable terms
or at all.

The cost of any patent litigation or other proceeding, even if resolved in
our favor, could be substantial. Some of our competitors may be able to sustain
the cost of such litigation and proceedings more effectively than we can

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<Page>

because of their substantially greater resources. Uncertainties resulting from
the initiation and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the marketplace.
Patent litigation and other proceedings may also absorb significant management
time.

OUR ABILITY TO GENERATE FUTURE REVENUES FROM ANY DRUG PRODUCTS THAT WE MAY
SUCCESSFULLY DEVELOP AND FOR WHICH WE OBTAIN REGULATORY APPROVAL WILL DEPEND ON
REIMBURSEMENT AND DRUG PRICING.

Acceptable levels of reimbursement for costs of developing and
manufacturing of drug products and treatments related to those drug products by
government authorities, private health insurers and other organizations, such as
HMOs, will have an effect on the successful commercialization of, and attracting
collaborative partners to invest in the development of, our drug candidates. We
cannot be sure that reimbursement in the U.S. or elsewhere will be available for
any drug products we may develop or, if already available, will not be decreased
in the future. Also, we cannot be sure that reimbursement amounts will not
reduce the demand for, or the price of, our drug products. Any reduction in
demand would adversely affect our business. If reimbursement is not available or
is available only at limited levels, we may not be able to obtain collaborative
partners to manufacture and commercialize drug products, and may not be able to
obtain a satisfactory financial return on our own manufacture and
commercialization of any future drug products.

Third party payors are increasingly challenging prices charged for medical
products and services. Also, the trend toward managed health care in the United
States and the concurrent growth of organizations such as HMOs, as well as
legislative proposals to reform health care or reduce government insurance
programs, may result in lower prices for pharmaceutical products, including any
products that may be offered by us in the future. Cost-cutting measures that
health care providers are instituting, and the effect of any health care reform,
could materially adversely affect our ability to sell any drugs that are
successfully developed by us and approved by regulators. Moreover, we are unable
to predict what additional legislation or regulation, if any, relating to the
health care industry or third-party coverage and reimbursement may be enacted in
the future or what effect such legislation or regulation would have on our
business.

EVEN IF WE COMMERCIALIZE ONE OR MORE DRUG PRODUCTS, COMPETITORS MAY DEVELOP DRUG
PRODUCTS THAT MAKE OUR DRUG PRODUCTS OBSOLETE.

Researchers are continually learning more about diseases, which may lead to
new technologies for treatment. Even if we are successful in developing
effective drug products, new drug products introduced after we commence
marketing of any drug product may be safer, more effective, less expensive, or
easy to administer than our drug products.

WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR PHARMACEUTICAL PRODUCTS.

The nature of our business exposes us to potential liability risks inherent
in the testing, manufacturing and marketing of pharmaceutical products. Using
our drug candidates in clinical trials may expose us to product liability claims
and possible adverse publicity. These risks will expand with respect to drug
candidates, if any, that receive regulatory approval for commercial sale.
Product liability insurance is expensive, is subject to deductibles and coverage
limitations, and may not be available in the future. While we currently maintain
product liability insurance coverage that we believe is adequate for our current
operations, we cannot be sure that such coverage will be adequate to cover any
incident or all incidents. In addition, we cannot be sure that we will be able
to maintain or obtain insurance coverage at acceptable costs or in a sufficient
amount, that our insurer will not disclaim coverage as to a future claim or that
a product liability claim would not otherwise adversely affect our business,
operating results or financial condition.

WE OPERATE IN A COMPETITIVE LABOR MARKET, AND OUR INABILITY TO HIRE AND RETAIN
HIGHLY QUALIFIED PERSONNEL COULD LIMIT OUR OPERATIONS AND RESULTS.

Our success in large part depends upon our ability to attract, train,
motivate and retain qualified personnel for all aspects of our business. In
recent years, because of great demand for qualified personnel and the numerous
opportunities available to them in the biotechnology and pharmaceutical
industries, we have experienced intense competition in attracting and retaining
employees from the limited number of qualified personnel available. Because of
this intense competition, we have had to interview an increasing number of
candidates to meet our hiring needs. Other biotechnology and pharmaceutical
companies with whom we compete for qualified personnel have greater financial
and

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<Page>

other resources, different risk profiles, and a longer history in the industry
than we do. They also may provide more diverse opportunities and better chances
for career advancement. Some of these factors may be more appealing to high
quality candidates than what we have to offer. If we are unable to continue to
attract and retain high quality personnel, the rate at which we can discover,
develop and commercialize drug candidates will be limited.

OUR USE OF HAZARDOUS MATERIALS, CHEMICALS, VIRUSES AND RADIOACTIVE COMPOUNDS
EXPOSES US TO POTENTIAL LIABILITIES.

Our research and development involves the controlled use of hazardous
materials, chemicals, viruses, bacteria, and various radioactive compounds. We
are subject to numerous environmental and safety laws and regulations. We are
subject to periodic inspections for possible violations of any environmental or
safety law or regulation. Any violation of, and the cost of compliance with, the
regulations could adversely effect our operations. Although we believe that our
safety procedures for handling and disposing of hazardous materials comply with
the standards prescribed by state and federal regulations, we cannot completely
eliminate the risk of accidental contamination or injury from these materials.
In the event of such an accident, we could be held liable for significant
damages or fines.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

OUR STOCK PRICE MAY BE VOLATILE, AND YOUR INVESTMENT IN OUR STOCK COULD DECLINE
IN VALUE.

The trading price of our common stock has been, and is likely to continue
to be, extremely volatile. Our stock price could be subject to wide fluctuations
in response to a variety of factors, including, but not limited to, the
following:

- our failure to commercialize one or more drug products;

- adverse results or delays in clinical trials;

- the termination of a collaboration or the inability to establish one
or more collaborations;

- our decision to initiate a clinical trial, not to initiate a clinical
trial, or to terminate an existing clinical trial;

- inability to obtain adequate product supply for any approved drug
product or inability to do so at acceptable prices;

- adverse regulatory decisions;

- new products or services offered by us or our competitors;

- failure to meet our publicly announced revenue projections;

- actual or anticipated variations in quarterly operating results;

- changes in financial estimates by securities analysts;

- announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments by us or our competitors;

- issuances of debt or equity securities; and

- other events or factors, many of which are beyond our control.

In addition, the stock market in general, and the Nasdaq National Market
and biotechnology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of these companies. Broad market and industry factors may
negatively affect the market price of our common stock, regardless of our actual
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class action litigation has
often been instituted against companies. This

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<Page>

type of litigation, if instituted, could result in substantial costs and a
diversion of management's attention and resources, which would harm our
business.

IF OUR OFFICERS, DIRECTORS AND CERTAIN STOCKHOLDERS CHOOSE TO ACT TOGETHER, THEY
MAY BE ABLE TO SIGNIFICANTLY INFLUENCE OUR MANAGEMENT AND OPERATIONS, ACTING IN
THEIR BEST INTERESTS AND NOT NECESSARILY THOSE OF OTHER STOCKHOLDERS.

As of January 1, 2003, our directors, executive officers and greater than
5% stockholders and their affiliates beneficially owned approximately 39% of our
issued and outstanding common stock. Accordingly, they collectively may have the
ability to significantly influence the election of all of our directors and to
significantly influence the outcome of corporate actions requiring stockholder
approval. They may exercise this ability in a manner that advances their best
interests and not necessarily those of other stockholders.

WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD DISCOURAGE, PREVENT OR
DELAY A TAKEOVER, EVEN IF THE ACQUISITION WOULD BE BENEFICIAL TO OUR
STOCKHOLDERS.

The existence of our stockholder rights plan and provisions of our amended
and restated certificate of incorporation and bylaws, as well as provisions of
Delaware law, could make it difficult for a third party to acquire us, even if
doing so would benefit our stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in information affecting our market
risk since the end of the fiscal year ended December 31, 2002 as described in
Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Cubist maintains disclosure controls and procedures designed to ensure that
it is able to collect the information it is required to disclose in the reports
it files with the Securities and Exchange Commission, or the SEC, and to
process, summarize and disclose this information within the time periods
specified in the rules of the SEC. Based on their evaluation of Cubist's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of June 30, 2003, the Chief Executive and Chief Financial
Officers have concluded that such disclosure controls and procedures are
effective to ensure that information required to be disclosed in our periodic
reports filed under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified by the SEC's rules and
regulations.

No changes in Cubist's internal controls over financial reporting occurred
during the quarter ended June 30, 2003 that have materially affected, or are
reasonably likely to materially affect, Cubist's internal controls over
financial reporting.

PART II -- OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our 2003 annual meeting of stockholders was held June 10, 2003. At the
meeting, the following matters were voted on:

(a) The election of two Class III Directors to serve for a three-year
term. The following votes were tabulated with respect to the election:

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<Page>

<Table>
<Caption>
Number of Shares Number of Shares
Director Elected Voted For Voted against or Withheld
---------------- ---------------- -------------------------

David W. Martin, Jr. 23,024,819 523,867
John L. Zabriskie 23,013,289 535,397
</Table>

(b) The approval of the proposal for the Amended and Restated 2002
Directors' Stock Option Plan. The following votes were tabulated and
the amendment was accordingly adopted:

<Table>
<Caption>
For Against Abstain
--- ------- -------

18,388,003 5,132,165 28,516
</Table>

At the annual meeting, we also announced that Michael W. Bonney succeeded
Scott M. Rocklage as Cubist's Chief Executive Officer. In addition, immediately
following the annual meeting, Barry Bloom retired from the Board of Directors,
and Michael W. Bonney, Kenneth M. Bate and J. Matthew Singleton were elected to
the Board, each to serve until the annual meeting to be held in 2004, 2005 and
2006 respectively, or until his successor is duly elected. Both Mr. Bate and Mr.
Singleton were appointed members of Cubist's Audit Committee. Following the
annual meeting, each of Scott Rocklage, Susan Bayh, Walter Maupay and John
Clarke continued as directors of Cubist.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits have been filed with this report:

10.1 Amendment No.1 dated July 16, 2003 to the License Agreement
dated July 31, 2002, between Cubist and Sandoz GmbH.

10.2 Amendment No.1 dated July 1 2003 to the Assignment and License
Agreement dated October 20, 2000, between Cubist and Eli Lilly.

10.3 Credit Agreement dated April 30, 2003, by and between Cubist and
Citizens Bank of Massachusetts.

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

32.1 Certification pursuant to 18 U.S.C Section 1305, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification pursuant to 18 U.S.C Section 1305, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The Company filed the following current reports on Form 8-K during
the second quarter of 2003:

Form 8-K filed by Cubist with the Securities and Exchange Commission
on May 8, 2003 pursuant to Items 9 and 12 with respect to Cubist's
press release and transcript of the conference call relating to its
first-quarter 2003 results.

Form 8-K filed by Cubist with the Securities and Exchange Commission
on June 20, 2003 pursuant to Items 5 and 9 with respect to Cubist's
press release and transcript of the conference call relating to
receipt of notification from the FDA that the FDA anticipated
completing its priority review of the NDA for CIDECIN on or before
September 20, 2003.

27
<Page>

SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

CUBIST PHARMACEUTICALS, INC.

August 12, 2003 By:

/S/ David W.J. McGirr
-----------------------------------
David W.J. McGirr,
Senior Vice President and
Chief Financial Officer
(AUTHORIZED OFFICER AND PRINCIPAL
FINANCE AND ACCOUNTING OFFICER)