LEXINGTON,
Mass. (AP) — Cubist Pharmaceuticals
Inc. said Monday it has resolved a patent suit with Teva Pharmaceutical Industries
Ltd., agreeing to give the drugmaker a license to sell a generic version of its
antibiotic Cubicin by 2018.

The news sent Cubist shares up $3.45, or nearly 14 percent,
to $28.70 in after-hours trading, having closed the regular session at $25.25
before the announcement.

Cubist, which makes the drug, has spent several years in a
patent dispute with Teva over the generic company’s plans to make a lower-cost
version. Cubist had previously claimed that certain patents in question on the
drug don’t expire until 2016 and 2019. Israel-based Teva has already asked the
Food and Drug Administration to approve its generic version of the drug.

The FDA approved Cubicin in 2003 to treat severe skin
infections often found in hospital patients. It is Cubist’s only marketed
product. Cubist President and CEO Mike Bonney said he expects Cubicin to bring
in $1 billion in U.S.
revenue before Teva launches its product.

Teva may now launch its generic version in the U.S. on June
24, 2018, if Cubist obtains a six-month extension of marketing exclusivity for
the drug for pediatric use. If not, Teva can launch the generic version six
months sooner.

The companies also agreed that Cubist will be Teva’s sole
supplier of the active ingredient, daptomycin, for all U.S. sales of
the generic version.

“We are very pleased with this result, which reflects
our continued confidence in the strength of our patents while removing the
uncertainty, distraction and cost of litigation,” Bonney said in a
statement.

Shares of Teva fell 50 cents to close earlier at $50.04.