Quarterly Report (10-q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition periods from to

Commission File Number: 001-36172

ARIAD Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware

22-3106987

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

26 Landsdowne Street, Cambridge, Massachusetts 02139

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 494-0400

Former Name, Former Address and Former Fiscal Year,

If Changed Since Last Report: Not Applicable

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 has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b - 2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding as of April 30, 2015 was 188,561,850.

ARIAD PHARMACEUTICALS, INC.

TABLE OF CONTENTS


		Page

PART I.	FINANCIAL INFORMATION		1

ITEM 1.	UNAUDITED FINANCIAL STATEMENTS		1

	Condensed Consolidated Balance Sheets – March 31, 2015 and December 31, 2014		1

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014		2

	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2015 and 2014		3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014		4

	Notes to Unaudited Condensed Consolidated Financial Statements		5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		31

ITEM 4.	CONTROLS AND PROCEDURES		32

PART II.	OTHER INFORMATION		32

ITEM 1.	LEGAL PROCEEDINGS		32

ITEM 1A.	RISK FACTORS		33

ITEM 6.	EXHIBITS		33

	SIGNATURES		34

	EXHIBIT INDEX		35

PART I.

FINANCIAL INFORMATION

ITEM 1.

UNAUDITED FINANCIAL STATEMENTS

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


*In thousands, except share and per share data*	March 31, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	304,016		$	352,688
Accounts receivable, net		11,269			8,397
Inventory		704			979
Other current assets		24,918			23,578

Total current assets		340,907			385,642
Restricted cash		11,320			11,308
Property and equipment, net		224,380			203,027
Intangible and other assets, net		3,844			3,893

Total assets	$	580,451		$	603,870

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,679		$	10,819
Current portion of long-term facility lease obligation		6,595			6,707
Accrued compensation and benefits		8,278			21,095
Accrued product development expenses		17,514			13,958
Other accrued expenses		14,906			11,514
Current portion of deferred revenue		7,057			8,075
Other current liabilities		17,791			17,830

Total current liabilities		85,820			89,998

Long-term debt		158,872			156,908

Long-term facility lease obligation		210,843			189,320

Other long-term liabilities		11,295			11,338

Deferred revenue		75,558			75,505

Commitments and contingencies (note 9)
Stockholders’ equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares, none issued and outstanding Common stock, $.001 par value; authorized, 450,000,000 shares in 2015 and 2014; issued and outstanding, 188,367,784 shares in 2015 and 187,294,094 shares in 2014		188			187
Additional paid-in capital		1,309,018			1,299,394
Accumulated other comprehensive loss		(3,872	)		(4,185	)
Accumulated deficit		(1,267,271	)		(1,214,595	)

Total stockholders’ equity		38,063			80,801

Total liabilities and stockholders’ equity	$	580,451		$	603,870

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended March 31,
*In thousands, except per share data*	2015			2014
Revenue:
Product revenue, net	$	23,901		$	7,992
License, collaboration, and other revenue		90			3,790

Total revenue		23,991			11,782

Operating expenses:
Cost of product revenue		695			1,288
Research and development expense		39,444			28,554
Selling, general and administrative expense		33,550			31,591

Total operating expenses		73,689			61,433

Loss from operations		(49,698	)		(49,651	)

Other income (expense), net:
Interest income		19			22
Interest expense		(3,856	)		(33	)
Foreign exchange gain (loss)		1,073			(41	)

Other income (expense), net		(2,764	)		(52	)

Loss before provision for income taxes		(52,462	)		(49,703	)
Provision for income taxes		214			119

Net loss	$	(52,676	)	$	(49,822	)

Net loss per share – basic and diluted	$	(0.28	)	$	(0.27	)

Weighted-average number of shares of common stock outstanding – basic and diluted		187,837			186,252

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE LOSS


	Three Months Ended March 31,
*In thousands*	2015			2014
Net loss	$	(52,676	)	$	(49,822	)

Other comprehensive income (loss):
Cumulative translation adjustment		236			(1	)
Defined benefit pension obligation		77			41

Other comprehensive income (loss)		313			40

Comprehensive loss	$	(52,363	)	$	(49,782	)

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
*In thousands*	2015			2014
Cash flows from operating activities:
Net loss	$	(52,676	)	$	(49,822	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment charges		2,859			1,297
Stock-based compensation		8,434			8,496
Deferred executive compensation expense		—			117
Increase (decrease) from:
Accounts receivable		(2,872	)		(2,936	)
Inventory		274			(61	)
Other current assets		(1,338	)		(5,258	)
Other assets		7			466
Accounts payable		2,465			2,449
Accrued compensation and benefits		(12,817	)		(3,864	)
Current portion of long-term facility lease obligation		(112	)		—
Accrued product development expenses		3,556			(1,254	)
Other accrued expenses		2,996			(809	)
Other liabilities		(4	)		(728	)
Deferred revenue		(966	)		1,225
Deferred executive compensation paid		—			(1,727	)

Net cash used in operating activities		(50,194	)		(52,409	)

Cash flows from investing activities:
Investment in property and equipment		(754	)		(1,706	)

Net cash used in investing activities		(754	)		(1,706	)

Cash flows from financing activities:
Repayment of long-term borrowings		—			(1,050	)
Reimbursements of amounts related to facility lease obligation		861			—
Proceeds from issuance of common stock pursuant to stock option and purchase plans		1,320			1,358
Payment of tax withholding obligations related to stock compensation		(130	)		(398	)

Net cash provided by (used in) financing activities		2,051			(90	)

Effect of exchange rates on cash		225			(1	)

Net decrease in cash and cash equivalents		(48,672	)		(54,206	)
Cash and cash equivalents, beginning of period		352,688			237,179

Cash and cash equivalents, end of period	$	304,016		$	182,973

Supplemental disclosures:
Capitalization of construction-in-progress related to facility lease obligation	$	20,662		$	21,452

Investment in property and equipment included in accounts payable or accruals	$	1,090		$	88

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Business

Nature of Business

ARIAD is a global oncology company whose vision is to transform the lives of cancer patients with breakthrough medicines. The Company’s mission is to discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest unmet medical need – aggressive cancers where current therapies are inadequate.

In addition to commercializing Iclusig^® (ponatinib) in the United States, Europe and other territories, the Company is developing Iclusig for approval in additional countries and for additional cancer indications. The Company is also developing two product candidates, brigatinib (AP26113) and AP32788. Brigatinib is being studied in patients with advanced solid tumors, including non-small cell lung cancer. AP32788 is being developed for the treatment of non-small cell lung cancer and other solid tumors. Ridaforolimus, a compound that the Company discovered internally and subsequently out-licensed to Medinol, Ltd. (“Medinol”), is being developed by Medinol for use on drug-eluting stents and other medical devices. In addition to its clinical development programs, the Company has a focused drug discovery program centered on small-molecule therapies that are molecularly targeted to cell-signaling pathways implicated in cancer.

2. Significant Accounting Policies

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of ARIAD Pharmaceuticals, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency

A subsidiary’s functional currency is the currency of the primary economic environment in which the subsidiary operates; normally, that is the currency of the environment in which a subsidiary primarily generates and expends cash. In making the determination of the appropriate functional currency for a subsidiary, the Company considers cash flow indicators, local market indicators, financing indicators and the subsidiary’s relationship with both the parent company and other subsidiaries. For subsidiaries that are primarily a direct and integral component or extension of the parent entity’s operations, the U.S. dollar is the functional currency.

For foreign subsidiaries that transact in functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign exchange rate for the period. Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are excluded from the determination of net loss and are recorded in accumulated other comprehensive loss, a separate component of stockholders’ equity. For foreign subsidiaries where the functional currency is the U.S. dollar, monetary assets and liabilities are re-measured into U.S. dollars at the current exchange rate on the balance sheet date. Nonmonetary assets and liabilities are re-measured into U.S. dollars at historical exchange rates. Revenue and expense items are translated at average rates of exchange prevailing during each period.

The net total of unrealized transaction gains and losses was a gain of $1.1 million and a loss of $41,000 for three- month periods ended March 31, 2015 and 2014, respectively.

Accounting Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts and disclosure of revenue and expenses during the reporting period. Significant estimates included in the Company’s financial statements include estimates associated with revenue recognition and the related adjustments, research and development accruals, inventory, leased buildings under construction and stock-based compensation. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents include short-term, highly liquid investments, with remaining maturities at the date of purchase of 90 days or less, and money market accounts.

Restricted Cash

Restricted cash consists of cash balances held as collateral for outstanding letters of credit related to the lease of the Company’s laboratory and office facilities, including those currently under construction in Cambridge, Massachusetts and for other purposes.

Accounts Receivable

The Company extends credit to customers based on its evaluation of the customer’s financial condition. The Company records receivables for all billings when amounts are due under standard terms. Accounts receivable are stated at amounts due net of applicable prompt pay discounts and other contractual adjustments as well as an allowance for doubtful accounts. The Company assesses the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the customer’s ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company will write off accounts receivable when the Company determines that they are uncollectible.

Inventory

The Company outsources the manufacturing of Iclusig and uses contract manufacturers that produce the raw and intermediate materials used in the production of Iclusig as well as the finished product. The Company currently has one supplier qualified for each step in the manufacturing process and is in the process of qualifying additional suppliers for certain steps of the production process of Iclusig. Accordingly, the Company has concentration risk associated with its manufacturing process and relies on its currently approved contract manufacturers for supply of its product.

Inventory is composed of raw materials, intermediate materials, which are classified as work-in-process, and finished goods, which are goods that are available for sale. The Company records inventory at the lower of cost or market. The Company determines the cost of its inventory on a specific identification basis. The Company evaluates its inventory balances quarterly and if the Company identifies excess, obsolete or unsalable inventory, it writes down its inventory to its net realizable value in the period it is identified. These adjustments are recorded based upon various factors, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected demand for the foreseeable future and the expected shelf-life of the inventory components. The Company recorded such adjustments of $217,000 and $1.0 million for the three-month periods ended March 31, 2015 and 2014, respectively, which are recorded as a component of cost of product revenue in the accompanying condensed consolidated statements of operations. Inventory that is not expected to be used within one year is included in other assets, net, on the accompanying condensed consolidated balance sheet.

Shipping and handling costs for product shipments are recorded as incurred in cost of product revenue along with costs associated with manufacturing the product sold and any inventory reserves or write-downs.

Intangible Assets

Intangible assets consist primarily of purchased technology and capitalized patent and license costs. The cost of purchased technology, patents and patent applications, costs incurred in filing patents and certain license fees are capitalized when recovery of the costs is probable. Capitalized costs related to purchased technology are amortized over the estimated useful life of the technology. Capitalized costs related to issued patents are amortized over a period not to exceed seventeen years or the remaining life of the patent, whichever is shorter, using the straight-line method. Capitalized license fees are amortized over the periods to which they relate. In addition, capitalized costs are expensed when it becomes determinable that the related patents, patent applications or technology will not be pursued.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, including the above-mentioned intangible assets, for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. When the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met.

Product Revenue, Net

The Company sells Iclusig in the United States to a single specialty pharmacy, Biologics, Inc. (“Biologics”). Biologics dispenses Iclusig directly to patients. In Europe, the Company sells Iclusig to retail pharmacies and hospital pharmacies, which dispense Iclusig directly to patients. These specialty pharmacies, retail pharmacies and hospital pharmacies are referred to as the Company’s

customers. The Company provides the right of return to customers in the United States for unopened product for a limited time before and after its expiration date. European customers are provided the right to return product only in limited circumstances, such as damaged product. Revenue is generally recognized when product is delivered, assuming the Company can estimate potential returns. For European customers, who are provided with a limited right of return, the criteria for revenue recognition is met at the time of shipment and revenue is recognized at that time, provided all other revenue recognition criteria are met. Prior to 2015, with the Company’s limited sales history for Iclusig and the inherent uncertainties in estimating product returns, the Company had determined that the shipments of Iclusig to its United States customers did not meet the criteria for revenue recognition at the time of shipment. For periods prior to the quarter ended March 31, 2015, the Company recognized revenue in the United States, assuming all revenue recognition criteria had been met, when Iclusig was sold by Biologics to patients. During the quarter ended March 31, 2015, the Company concluded that it now had sufficient experience to estimate returns in the United States, as a result of over two years of sales experience. Accordingly, during the quarter ended March 31, 2015, the Company commenced recognizing revenue in the United States on delivery of Iclusig to Biologics and recognized a one-time net product revenue increase of $1.2 million as a result of the change.

The Company has written contracts or standard terms of sale with each of its customers and delivery occurs when the customer receives Iclusig. The Company evaluates the creditworthiness of each of its customers to determine whether collection is reasonably assured. In order to conclude that the price is fixed and determinable, the Company must be able to (i) calculate its gross product revenues from the sales to its customers and (ii) reasonably estimate its net product revenues. The Company calculates gross product revenues based on the wholesale acquisition cost that the Company charges its customers for Iclusig. The Company estimates its net product revenues by deducting from its gross product revenues (i) trade allowances, such as invoice discounts for prompt payment and customer fees, (ii) estimated government and private payor rebates, chargebacks and discounts, such as Medicare and Medicaid reimbursements in the United States, (iii) estimated product returns and (iv) estimated costs of incentives offered to certain indirect customers including patients. These deductions from gross revenue to determine net revenue are also referred to as gross to net deductions.

Trade Allowances: The Company provides invoice discounts on Iclusig sales to certain of its customers for prompt payment and pays fees for certain distribution services, such as fees for certain data that its customers provide to the Company. The Company deducts the full amount of these discounts and fees from its gross product revenues at the time such discounts and fees are earned by such customers.

Rebates, Chargebacks and Discounts: In the United States, the Company contracts with Medicare, Medicaid, and other government agencies (collectively, “payers”) to make Iclusig eligible for purchase by, or for partial or full reimbursement from, such payers. The Company estimates the rebates, chargebacks and discounts it will provide to payers and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company’s estimates of rebates, chargebacks and discounts are based on (1) the contractual terms of agreements in place with payers, (2) the government-mandated discounts applicable to government funded programs, and (3) the estimated payer mix. Government rebates that are invoiced directly to the Company are recorded in accrued liabilities on the condensed consolidated balance sheet. In Europe, the Company is subject to mandatory rebates and discounts in markets where government-sponsored healthcare systems are the primary payers for healthcare. These rebates and discounts are recorded in accrued expenses on the condensed consolidated balance sheet.

Other Adjustments: Other adjustments to gross revenue include co-pay assistance and product returns. The Company offers to indirect customers co-pay assistance rebates to commercially insured patients who have coverage for Iclusig and who reside in states that permit co-pay assistance programs. The Company’s co-pay assistance program is intended to reduce each participating patient’s portion of the financial responsibility for Iclusig’s purchase price to a specified dollar amount. In each period, the Company records the amount of co-pay assistance provided to eligible patients based on the terms of the program. The Company provides the right of return to customers in the United States for unopened product for a limited time before and after its expiration date. European customers are provided the right to return product only in limited circumstances, such as damaged product. In addition, the Company is contractually obligated to ship product with specific remaining shelf life prior to expiry per its distribution agreements.

The following table summarizes the activity in each of the above product revenue allowances and reserve categories for the three-month period ended March 31, 2015:


*In thousands*	Trade Allowances			Rebates, Chargebacks and Discounts			Other Adjustments			Total
Balance, January 1, 2015	$	72		$	2,095		$	360		$	2,527
Provision		255			2,097			218			2,570
Payments or credits		(228	)		(1,645	)		(158	)		(2,031	)

Balance, March 31, 2015	$	99		$	2,547		$	420		$	3,066

In 2012, prior to the Company obtaining marketing authorization for Iclusig in Europe, the French regulatory authority granted an Autorisation Temporaire d’Utilisation (ATU), or Temporary Authorization for Use, for Iclusig for the treatment of patients with CML and Ph+ ALL under a nominative program on a patient-by-patient basis. Upon completion of this program, the Company became eligible to ship Iclusig directly to customers in France as of October 1, 2013. Shipments under these programs have not met the criteria for revenue recognition as the price for these shipments is not yet fixed or determinable.

The price of Iclusig in France will become fixed or determinable upon completion of pricing and reimbursement negotiations, which is expected in the second half of 2015. At that time, the Company will record revenue related to cumulative shipments as of that date in France, net of amounts that will be refunded to the health authority based on the results of the pricing and reimbursement negotiations. The aggregate gross selling price of the shipments under these programs amounted to $18.3 million through March 31, 2015, of which $17.1 million was received as of March 31, 2015.

License Revenue

The Company generates revenue from license and collaboration agreements with third parties related to use of the Company’s technology and/or development and commercialization of products. Such agreements typically include payment to the Company of non-refundable upfront license fees, regulatory, clinical and commercial milestone payments, payment for services or supply of product and royalty payments on net sales. Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer. When deliverables are

separable, consideration received is allocated to the separate units of accounting based on the relative selling price of each deliverable and the appropriate revenue recognition principles are applied to each unit. For arrangements with multiple elements, where the Company determines there is one unit of accounting, revenue associated with up-front payments will be recognized over the period beginning with the commencement of the final deliverable in the arrangement and over a period reflective of the Company’s longest obligation period within the arrangement on a straight-line-basis.

At the inception of each agreement that includes milestone payments, the Company evaluates whether each milestone is substantive on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether:

•

the consideration is commensurate with either (1) our performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone,

•

the consideration relates solely to past performance, and

•

the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

In making this assessment, the Company evaluates factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required, and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement. The Company recognizes revenues related to substantive milestones in full in the period in which the substantive milestone is achieved. If a milestone payment is not considered substantive, the Company recognizes the applicable milestone over the remaining period of performance.

The Company will recognize royalty revenue, if any, based upon actual and estimated net sales by the licensee of licensed products in licensed territories, and in the period the sales in the licensed territories occur.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers and cash held at financial institutions. The Company believes that such customers and financial institutions are of high credit quality. As of March 31, 2015, a portion of the Company’s cash and cash equivalent accounts were concentrated at a single financial institution, which potentially exposes the Company to credit risks. The Company does not believe that there is significant risk of non-performance by the financial institution and the Company’s cash on deposit at this financial institution is fully liquid.

For the three-month period ended March 31, 2015, one individual customer accounted for 77 percent of net product revenue. As of March 31, 2015, one individual customer accounted for 73 percent of accounts receivable. For the three-month period ended March 31, 2014, one individual customer accounted for 58 percent of net product revenue. As of March 31, 2014, one customer accounted for 67 percent of accounts receivable. No other customer accounted for more than 10 percent of net product revenue for either 2015 or 2014 or accounts receivable as of either March 31, 2015 or 2014.

Segment Reporting and Geographic Information

The Company organizes itself into one operating segment reporting to the Chief Executive Officer.

For the three-month periods ended March 31, 2015 and 2014, product revenue from customers outside the United States totaled 22 percent and 42 percent of the Company’s consolidated product revenue, respectively with 10 percent and 31 percent, respectively, representing product revenue from customers in Germany. Long lived assets outside the United States totaled $1.4 million at March 31, 2015 and $1.3 million at March 31, 2014.

3. License and Collaboration Agreements

Otsuka Pharmaceutical Co. Ltd

On December 22, 2014, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Otsuka Pharmaceutical Co., Ltd. (“Otsuka”) pursuant to which Otsuka will commercialize and further develop Iclusig in Japan, China, South Korea, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam (the “Territory”).

Key provisions of the Collaboration Agreement include the following:

•

The Company has granted an exclusive, non-assignable (except to affiliates) license to Otsuka to commercialize and distribute Iclusig in the Territory.

•

The Company has granted a co-exclusive license to Otsuka to conduct research and development in the Territory.

•

The Company will complete its ongoing pivotal trial of Iclusig in Japan and lead the preparation of the Japanese new drug application (the “JNDA”) on behalf of Otsuka and the Company.

•

Otsuka is responsible for filing of the JNDA on behalf of Otsuka and the Company, which is expected to occur in 2015.

•

The Company and Otsuka will form and participate on a joint development and commercialization committee (the “JDCC”) to oversee activities related to Iclusig in the Territory.

•

The Company is responsible for manufacture and supply of Iclusig to Otsuka in either bulk form or in final packaged form, as requested by Otsuka.

•

Otsuka is responsible for completion of final manufacturing, consisting of packaging and labeling of Iclusig for distribution in the Territory, as well as pricing and all other commercial activities by Otsuka within the Territory.

Following approvals in each country, Otsuka will market and sell Iclusig and record sales. Otsuka is not allowed to manufacture bulk product, but must purchase its supply from the Company. Otsuka will be responsible for medical affairs activities, determining pricing and reimbursement and all commercial activities in the Territory. With respect to the JDCC, each party has ultimate decision making authority with respect to a specified limited set of issues, and for all other issues, the matter must be resolved by consensus or by an expedited arbitration process.

In consideration for the licenses and other rights contained in the Collaboration Agreement, Otsuka paid the Company a non-refundable upfront payment of $77.5 million, less a refundable withholding tax in Japan of $15.8 million, and has agreed to pay the Company future milestone payments upon obtaining further regulatory approvals in the Territory. Otsuka will pay royalties based on a percentage of net sales in each country until the later of (i) the expiry date of the composition patent in each country, (ii) the expiration of any orphan drug exclusivity period or other statutory designation that provides similar exclusivity, or (iii) 10 years after the date of first commercial sale in such country. Otsuka will also pay for the supply of Iclusig purchased from the Company at a price based on a percentage of net sales in each country.

The Collaboration Agreement continues until the later of (x) the expiration of all royalty obligations in the Territory, or (y) the last sale by Otsuka in the Territory, or the last to expire patent in the Territory which is currently expected to be 2029. Under certain conditions, the Collaboration Agreement may be terminated by either party, in which case the Company would receive all rights to the regulatory filings related to Iclusig at our request, and the licenses granted to Otsuka would be terminated.

For accounting purposes, because Otsuka’s ability to access the value of the distribution rights in the license absent the delivery of the other elements of the arrangement, in particular the manufacturing deliverables which remain within the Company’s control, the Company has concluded that the licenses and other deliverables do not have standalone value, and have combined all deliverables into a single unit of accounting. The nonrefundable upfront cash payment has been recorded as deferred revenue on our balance sheet and will be recognized as revenue on a straight-line basis over the estimated term (currently estimated to extend through 2029), anticipated to begin in the second quarter of 2015, the point at which the Company has commenced providing all elements included in the Collaboration Agreement.

The upfront payment was subject to a Japan withholding tax of $15.8 million which was remitted by Otsuka to the Japanese tax authorities. The Company has determined that the release of those funds to the Company is probable and therefore has recorded a receivable for such amounts with an offsetting amount included in deferred revenue as of March 31, 2015. The Company received the $15.8 million from the Japanese tax authorities in April of 2015.

Medinol Ltd.

The Company entered into an agreement with Medinol Ltd. (“Medinol”) in 2005 pursuant to which the Company granted to Medinol a non-exclusive, world-wide, royalty-bearing license, under its patents and technology, to develop, manufacture and sell stents and other medical devices to deliver the Company’s mTOR inhibitor, ridaforolimus, to prevent reblockage of injured vessels following stent-assisted angioplasty. The term of the license agreement extends to the later to occur of the expiration of the Company’s patents relating to the rights granted to Medinol under the license agreement or fifteen years after the first commercial sale of a product developed under the agreement.

Medinol is required under the license agreement to use commercially reasonable efforts to develop products. The Company is required under a related supply agreement to use commercially reasonable efforts to supply agreed-upon quantities of ridaforolimus to Medinol, and Medinol shall purchase such supply of ridaforolimus from the Company, for the development, manufacture and sale of products. The supply agreement is coterminous with the license agreement. These agreements may be terminated by either party for breach after a 90-day cure period. In addition, Medinol may terminate the agreements upon 30-day notice to the Company upon certain events, including if it determines, in its reasonable business judgment, that it is not in its business interest to continue the development of any product, and the Company may terminate the agreements upon 30-day notice to Medinol, if it determines that it is not in its business interest to continue development and regulatory approval efforts with respect to ridaforolimus.

The license agreement provides for the payment by Medinol to the Company of an upfront license fee, payments based on achievement of development, regulatory and commercial milestones and royalties based on commercial sale of products developed under the agreement. In January 2014, Medinol initiated two registration trials of its NIRsupreme^™ Ridaforolimus-Eluting Coronary Stent System. The

commencement of enrollment in these clinical trials along with the submission of an investigational device exemption with the FDA triggered milestone payments to the Company of $3.75 million, which are recorded as license revenue in the accompanying consolidated statement of operations for the three month period ended March 31, 2014. The Company is eligible to receive additional, regulatory, clinical and commercial milestone payments of up to $34.75 million under the agreement if two products are successfully developed and commercialized.

ICON Medical Corp.

In 2007, the Company entered into an agreement with ICON Medical Corp. (“ICON”), similar to the Medinol agreement, pursuant to which the Company granted to ICON a non-exclusive, world-wide, royalty-bearing license to develop, manufacture and sell stents and other medical devices to deliver ridaforolimus to prevent reblockage of injured vessels following stent-assisted angioplasty. In March 2015, the Company terminated this agreement. As of March 31, 2015, no products had been approved for sale resulting from this agreement and the Company had not received any milestone or other payments from ICON pursuant to this agreement.

4. Inventory

All of the Company’s inventories relate to the manufacturing of Iclusig. The following table sets forth the Company’s inventories as of March 31, 2015 and December 31, 2014:


*In thousands*	2015			2014
Raw materials	$	—		$	—
Work in process		447			460
Finished goods		704			979

		1,151			1,439
Current portion		(704	)		(979	)

Non-current portion included in intangible and other assets, net	$	447		$	460

The Company has not capitalized inventory costs related to its other drug development programs. Non-current inventory consists of work-in-process inventory that was manufactured in order to provide adequate supply of Iclusig in the United States and Europe and to support continued clinical development.

5. Property and Equipment, Net

Property and equipment, net, was comprised of the following at March 31, 2015 and December 31, 2014:


*In thousands*	2015			2014
Leasehold improvements	$	22,546		$	22,315
Construction in progress		217,820			196,027
Equipment and furniture		23,694			23,511

		264,060			241,853
Less accumulated depreciation and amortization		(39,680	)		(38,826	)

	$	224,380		$	203,027

As of March 31, 2015 and December 31, 2014, the Company has recorded a facility lease obligation of $217.4 million and $196.0 million, respectively, related to a lease for a new facility under construction in Cambridge, Massachusetts. See Note 9 for further information.

Depreciation and amortization expense for the three-month periods ended March 31, 2015 and 2014 was $0.9 million, and $1.3 million, respectively.

6. Intangible and Other Assets, Net

Intangible and other assets, net, were comprised of the following at March 31, 2015 and December 31, 2014:


*In thousands*	2015			2014
Capitalized patent and license costs	$	5,975		$	5,975
Less accumulated amortization		(5,044	)		(5,036	)

		931			939
Inventory, non-current		447			460
Other assets		2,466			2,494

	$	3,844		$	3,893

7. Other Current Liabilities

Other current liabilities consisted of the following at March 31, 2015 and December 31, 2014:


*In thousands*	2015		2014
Amounts received in advance of revenue recognition	$	17,179	$	17,186
Amounts due to former customers		111		122
Other		501		522

Total	$	17,791	$	17,830

Amounts received in advance of revenue recognition consists of payments received from customers in France. Amounts due to former customers consist of amounts due for product returns.

8. Long-term Debt

3.625 percent Convertible Notes due 2019

On June 17, 2014, the Company issued $200.0 million aggregate principal amount of 3.625 percent convertible senior notes due 2019 (the “convertible notes”). The Company received net proceeds of $192.9 million from the sale of the convertible notes, after deducting fees of $6.0 million and expenses of $1.1 million. At the same time, the Company used $43.2 million of the net proceeds from the sale of the convertible notes to pay the cost of the convertible bond hedges, as described below, which cost was partially offset by $27.6 million in proceeds to the Company from the sale of warrants in the warrant transactions also described below.

The convertible notes are governed by the terms of an indenture between the Company, as issuer, and Wells Fargo Bank, National Association, as the trustee. The convertible notes are senior unsecured obligations and bear interest at a rate of 3.625 percent per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2014. The convertible notes will mature on June 15, 2019, unless earlier repurchased or converted. The convertible notes are convertible, subject to adjustment as described below, into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, at an initial conversion rate of approximately 107.5095 shares of common stock per $1,000 principal amount of the convertible notes, which corresponds to an initial conversion price of approximately $9.30 per share of the Company’s common stock and represents a conversion premium of approximately 32.5 percent based on the last reported sale price of the Company’s common stock of $7.02 on June 11, 2014, the date the notes offering was priced. The principal amount of the notes exceeded their if-converted value as of March 31, 2015.

The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. At any time prior to the close of business on the business day immediately preceding December 15, 2018, holders may convert their convertible notes at their option only under the following circumstances:

•

during any calendar quarter commencing after the calendar quarter ending on March 31, 2015 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 percent of the conversion price, or approximately $12.00 per share, on each applicable trading day;

•

during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of the convertible notes for each trading day of the measurement period was less than 98 percent of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or

•

upon the occurrence of specified corporate events.

On or after December 15, 2018 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their convertible notes, in multiples of $1,000 principal amount, at their option regardless of the foregoing circumstances. Upon conversion, the Company will satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of common stock, or a combination thereof, at its election.

If a make-whole fundamental change, as described in the indenture, occurs and a holder elects to convert its convertible notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the indenture.

The Company may not redeem the convertible notes prior to the maturity date and no “sinking fund” is provided for the convertible notes, which means that the Company is not required to periodically redeem or retire the convertible notes. Upon the occurrence of certain fundamental changes involving the Company, holders of the convertible notes may require the Company to repurchase for cash all or part of their convertible notes at a repurchase price equal to 100 percent of the principal amount of the convertible notes to be repurchased, plus accrued and unpaid interest.

The indenture does not contain any financial or maintenance covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company or any of its significant subsidiaries) occurs and is continuing, the trustee by notice to the Company, or the holders of at least 25 percent in principal amount of the outstanding convertible notes by written notice to the Company and the trustee, may declare 100 percent of the principal and accrued and unpaid interest, if any, on all of the convertible notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company or any of its significant subsidiaries, 100 percent of the principal of and accrued and unpaid interest, if any, on all of the convertible notes will become due and payable automatically. Notwithstanding the foregoing, the indenture provides that, to the extent the Company elects and for up to 180 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the indenture consists exclusively of the right to receive additional interest on the convertible notes.

In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the convertible notes by allocating the proceeds between the liability component and the embedded conversion option, or equity component, due to the Company’s ability to settle the convertible notes in cash, common stock or a combination of cash and common stock, at the Company’s option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The equity component of the convertible notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of the convertible notes and the fair value of the liability of the convertible notes on their date of issuance. The excess of the principal amount of the liability component over its carrying amount, or debt discount, is amortized to interest expense using the effective interest method over the five year life of the convertible notes. The approximate remaining discount amortization period as of March 31, 2015 was 50.5 months. The equity component will not be remeasured for changes in fair value as long as it continues to meet the conditions for equity classification.

The outstanding convertible note balances as of March 31, 2015 and December 31, 2014 consisted of the following:


*In thousands*	2015			2014

Principal	$	200,000		$	200,000
Less: debt discount, net		(41,128	)		(43,092	)

Net carrying amount	$	158,872		$	156,908

In connection with the issuance of the convertible notes, the Company incurred approximately $1.1 million of debt issuance costs, which primarily consisted of legal, accounting and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $1.1 million of debt issuance costs, $254,000 was allocated to the equity component and recorded as a reduction to additional paid-in capital and $825,000 was allocated to the liability component and recorded in other assets on the balance sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the convertible notes using the effective interest method.

The Company determined the expected life of the debt was equal to the five-year term on the convertible notes. The effective interest rate on the liability component was 9.625 percent for the period from the date of issuance through March 31, 2015. The following table sets forth total interest expense recognized related to the convertible notes during for the three-month period ended March 31, 2015.


*In thousands*
Contractual interest expense	$	1,857
Amortization of debt discount		1,965
Amortization of debt issuance costs		34

Total interest expense	$	3,856

Convertible Bond Hedge and Warrant Transactions

In connection with the pricing of the convertible notes and in order to reduce the potential dilution to the Company’s common stock and/or offset any cash payments in excess of the principal amount due upon conversion of the convertible notes, on June 12, 2014, the Company entered into convertible note hedge transactions covering approximately 21.5 million shares of the Company’s common stock underlying the $200.0 million aggregate principal amount of the convertible notes with JPMorgan Chase Bank, National Association, an affiliate of JPMorgan Securities LLC (the “Counter Party”). The convertible bond hedges have an exercise price of approximately $9.30 per share, subject to adjustment upon certain events, and are exercisable when and if the convertible notes are converted. Upon conversion of the convertible notes, if the price of the Company’s common stock is above the exercise price of the convertible bond hedges, the Counter Party will deliver shares of the Company’s common stock and/or cash with an aggregate value approximately equal to the difference between the price of the Company’s common stock at the conversion date and the exercise price, multiplied by the number of shares of the Company’s common stock related to the convertible bond hedges being exercised. The convertible bond hedges are separate transactions entered into by the Company and are not part of the terms of the convertible notes or the warrants, discussed below. Holders of the convertible notes will not have any rights with respect to the convertible bond hedges. The Company paid $43.2 million for these convertible bond hedges and recorded this amount as a reduction to additional paid-in capital.

At the same time, the Company also entered into separate warrant transactions with the Counter Party relating to, in the aggregate, approximately 21.5 million shares of the Company’s common stock underlying the $200.0 million aggregate principal amount of the convertible notes. The initial exercise price of the warrants is $12.00 per share, subject to adjustment upon certain events, which is approximately 70 percent above the last reported sale price of the Company’s common stock of $7.02 per share on June 11, 2014. Upon exercise, the Company will deliver shares of the Company’s common stock and /or cash with an aggregate value equal to the excess of the price of the Company’s common stock on the exercise date and the exercise price, multiplied by the number of shares, of the Company’s common stock underlying the exercise. The warrants will be exercisable and will expire in equal installments for a period of 100 trading days beginning on September 15, 2019. The warrants were issued to the Counter Party pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act. The Company received $27.6 million for these warrants and recorded this amount as an increase to additional paid-in capital.

Aside from the initial payment of a $43.2 million premium to the Counter Party under the convertible bond hedges, which cost is partially offset by the receipt of a $27.6 million premium under the warrants, the Company is not required to make any cash payments to the Counter Party under the convertible bond hedges and will not receive any proceeds if the warrants are exercised.

9. Leases, Licensed Technology and Other Commitments

Facility Leases

The Company conducts the majority of its operations in a 100,000 square foot office and laboratory facility under a non-cancelable operating lease that extends to July 2019 with two consecutive five-year renewal options. The Company maintains an outstanding letter of credit of $1.4 million in accordance with the terms of the amended lease. In May 2012, the Company entered into a three-year operating lease agreement for an additional 26,000 square feet of office space. Future non-cancelable minimum annual rental payments through July 2019 under these leases are $4.9 million remaining in 2015, $5.9 million in 2016, $6.0 million in 2017, $6.1 million in 2018 and $3.6 million in 2019.

Binney Street, Cambridge, Massachusetts

In January 2013, the Company entered into a lease agreement for approximately 244,000 square feet of laboratory and office space in two adjacent, connected buildings which are under construction in Cambridge, Massachusetts. Under the terms of the original lease, the Company leased all of the rentable space in one of the two buildings and a portion of the available space in the second building. In September 2013, the Company entered into a lease amendment to lease all of the remaining space, approximately 142,000 square feet, in the second building, for an aggregate of 386,000 square feet in both buildings. The terms of the lease amendment were consistent with the terms of the original lease. Construction of the core and shell of the building was completed in March 2015 at which time, pursuant to a second amendment to the lease in March 2015, the Company commenced making lease payments. Construction of tenant improvements in the building will commence now that the core and shell have been completed. Construction of the tenant improvements is expected to be completed in the first half of 2016.

In connection with this lease, the landlord is providing a tenant improvement allowance for the costs associated with the design, engineering, and construction of tenant improvements for the leased facility. The tenant improvements will be in accordance with the Company’s plans and include fit-out of the buildings to construct appropriate laboratory and office space, subject to approval by the landlord. To the extent the stipulated tenant allowance provided by the landlord is exceeded, the Company is obligated to fund all costs incurred in excess of the tenant allowance. The scope of the planned tenant improvements do not qualify as “normal tenant improvements” under the lease accounting guidance. Accordingly, for accounting purposes, the Company is the deemed owner of the buildings during the construction period.

As construction progresses, the Company records the project construction costs incurred as an asset, along with a corresponding facility lease obligation, on the consolidated balance sheet for the total amount of project costs incurred whether funded by the Company or the landlord. Upon completion of the buildings, the Company will determine if the asset and corresponding financing obligation should continue to be carried on its consolidated balance sheet under the appropriate accounting guidance. Based on the current terms of the lease, the Company expects to continue to be the deemed owner of the buildings upon completion of the construction period. As of March 31, 2015, the Company has recorded construction in progress and a facility lease obligation of $217.8 million and $217.4 million, respectively, (including the current portion of the obligation of $6.6 million included in current liabilities).

The initial term of the lease is for 15 years from substantial completion of the buildings with options to renew for three terms of five years each at market-based rates. The base rent is subject to increases over the term of the lease. Based on the original and amended leased space, the non-cancelable minimum annual lease payments for the annual periods beginning upon commencement of the lease are $4.8 million, $8.9 million, $26.6 million, $30.4 million and $30.9 million in the first five years of the lease and $347.1 million in total thereafter, plus the Company’s share of the facility operating expenses and other costs that are reimbursable to the landlord under the lease. The Company has the right to sublease portions of the space and is currently planning to sublease approximately 170,000 square feet of the total of 386,000 square feet available.

The Company maintains a letter of credit as security for the lease of $9.2 million, which is supported by restricted cash.

Lausanne, Switzerland

In January 2013, the Company entered into a lease agreement for approximately 22,000 square feet of office space in a building, which the Company occupied in 2014. The term of the lease is for ten years, with options for extension of the term and an early termination at the Company’s option after five years. Future non-cancelable minimum annual lease payments under their lease are expected to be approximately $0.8 million remaining in 2015, $1.0 million in 2016, $1.1 million in 2017, 2018, 2019 and $4.3 million in total thereafter.

Total rent expense for the leases described above as well as other Company leases for the three-month periods ended March 31, 2015 and 2014 was $1.9 million, and $1.9 million, respectively. Contingent rent for the three-month periods ended March 31, 2015 and 2014 was $199,000 and $186,000, respectively. Total future non-cancelable minimum annual rental payments for the leases described above as well as other Company leases, for the next five years and thereafter are $11.1 million, $16.1 million, $33.7 million, $37.6 million, $35.6 million and $351.5 million, respectively.

Other Commitments

The Company has entered into employment agreements with each of the officers of the Company. The agreements for these officers have remaining terms as of March 31, 2015 extending through the end of 2016 or 2017, providing for aggregate base salaries of $6.2 million for 2015, $8.3 million for 2016 and $0.8 million for 2017.

10. Stockholders’ Equity

Changes in Stockholders’ Equity

The changes in stockholders’ equity for the three-month period ended March 31, 2015 were as follows:


	Common Stock				Additional Paid-in Capital			Other Comprehensive Income (Loss)			Accumulated Deficit			Total
*$ in thousands*	Shares		Amount		Additional Paid-in Capital			Other Comprehensive Income (Loss)			Accumulated Deficit			Total

Balance, January 1, 2015		187,294,094	$	187	$	1,299,394		$	(4,185	)	$	(1,214,595	)	$	80,801
Issuance of common stock pursuant to ARIAD stock plans		1,073,690		1		1,320									1,321
Stock-based compensation						8,434									8,434
Payment of tax withholding obligations related to stock-based compensation						(130	)								(130	)
Other comprehensive income									313						313
Net loss												(52,676	)		(52,676	)


Balance, March 31, 2015		188,367,784	$	188	$	1,309,018		$	(3,872	)	$	(1,267,271	)	$	38,063

11. Fair Value of Financial Instruments

The Company provides disclosure of financial assets and financial liabilities that are carried at fair value based on the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements may be classified based on the amount of subjectivity associated with the inputs to the fair valuation of these assets and liabilities using the following three levels:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s estimates of the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

At March 31, 2015 and December 31, 2014, the carrying amounts of cash equivalents, accounts payable and accrued liabilities approximate fair value because of their short-term nature. All such measurements are Level 2 measurements in the fair value hierarchy. The fair value of the convertible notes, which differs from their carrying value, is influenced by interest rates and stock price and stock price volatility and is determined by prices for the convertible notes observed in market trading. The market for trading of the convertible notes is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs. The estimated fair value of the convertible notes, face value of $200 million, was $230 million at March 31, 2015.

12. Stock Compensation

ARIAD Stock Option and Stock Plans

The Company’s 2001, 2006 and 2014 stock option and stock plans (the “Plans”) provide for the award of nonqualified and incentive stock options, stock grants, restricted stock units, performance share units and other equity-based awards to officers, directors, employees and consultants of the Company. Stock options become exercisable as specified in the related option certificate, typically over a three or four-year period, and expire ten years from the date of grant. Stock grants, restricted stock units and performance share units provide the recipient with ownership of common stock subject to terms of vesting, any rights the Company may have to

repurchase the shares granted or other restrictions. The 2001 and 2006 Plans have no shares remaining available for grant, although existing stock options granted under these Plans remain outstanding. As of March 31, 2015, there were 11,786,706 shares available for awards under the 2015 Plan. The Company generally issues new shares upon the exercise or vesting of stock plan awards.

Employee Stock Purchase Plan

In 1997, the Company adopted the 1997 Employee Stock Purchase Plan (“ESPP”) and reserved 500,000 shares of common stock for issuance under this plan. The ESPP was amended in June 2008 to reserve an additional 500,000 shares of common stock for issuance and the plan was further amended in 2009 and in June 2014 to reserve an additional 750,000 shares of common stock for issuance pursuant to each of those amendments. Under this plan, substantially all of the Company’s employees may, through payroll withholdings, purchase shares of the Company’s common stock at a price of 85 percent of the lesser of the fair market value at the beginning or end of each three-month withholding period. For the three-month period ended March 31, 2015 and 2014, 72,379, and 69,161 shares of common stock were issued under the plan, respectively. Compensation cost is equal to the fair value of the discount on the date of grant and is recognized as compensation in the period of purchase.

Stock-Based Compensation

The Company’s statements of operations included total compensation cost from awards under the Plans and purchases under the ESPP for the three-month periods ended March 31, 2015 and 2014, as follows:


*In thousands*	2015		2014
Compensation cost from:
Stock options	$	4,241	$	4,680
Stock and stock units		4,067		3,649
Purchases of common stock at a discount		126		167

	$	8,434	$	8,496

Compensation cost included in:
Research and development expense	$	3,816	$	3,708
Selling, general and administrative expense		4,618		4,788

	$	8,434	$	8,496

Stock Options

Stock options are granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. Stock options generally vest ratably over three or four years and have contractual terms of ten years. Stock options are valued using the Black-Scholes option valuation model and compensation cost is recognized based on such fair value over the period of vesting on a straight-line basis.

Stock option activity under the Company’s stock plans for the three-month period ended March 31, 2015 was as follows:


	Number of shares			Weighted Average Exercise Price Per Share
Options outstanding, January 1, 2015		10,148,087		$	10.09
Granted		519,255		$	7.22
Forfeited		(182,904	)	$	8.19
Exercised		(366,730	)	$	5.85

Options outstanding, March 31, 2015		10,117,708

Stock and Stock Unit Grants

Stock and stock unit grants carry restrictions as to resale for periods of time or vesting provisions over time as specified in the grant. Stock and stock unit grants are valued at the closing market price of the Company’s common stock on the date of grant and compensation expense is recognized over the requisite service period, vesting period or period during which restrictions remain on the common stock or stock units granted.

Stock and stock unit activity under the Company’s stock plans for the three-month period ended March 31, 2015 was as follows:


	Number of shares			Weighted Average Exercise Price Per Share
Options outstanding, January 1, 2015		3,503,153		$	9.97
Granted / awarded		1,242,650		$	8.05
Forfeited		(11,254	)	$	6.04
Vested or restrictions lapsed		(802,126	)	$	9.54

Options outstanding, March 31, 2015		3,932,423

The total fair value of stock and stock unit awards that vested as of March 31, 2015 and 2014 was $5.7 million and $2.7 million, respectively. The total unrecognized compensation expense for restricted shares or units that have been granted and are probable to become vested was $16.5 million at March 31, 2015 and will be recognized over 1.7 years on a weighted average basis.

Stock and stock units outstanding in the above table include 121,200 performance share units which were earned upon the granting of marketing authorization of Iclusig by the European Commission in July 2013. These performance share units will vest in July 2015.

Stock and stock units outstanding in the table above also include 316,000 performance share units awarded in 2013. The number of shares that may vest, if any, related to the 2013 performance share unit awards is dependent on the achievement, and timing of the achievement, of the performance criteria defined for the award. The compensation cost for such performance-based stock awards will be based on the awards that ultimately vest and the grant date fair value of those awards. The Company begins to recognize compensation expense related to performance share units when achievement of the performance condition is probable. The Company has concluded that it is probable that the performance condition related to the 2013 performance share unit awards would be met. The performance condition is based upon continued success in specific research and development initiatives.

Stock and stock units outstanding in the above table as of March 31, 2015 also include 997,000 and 47,000 performance share units awarded on January 31, 2014 and June 25, 2014, respectively. The vesting of fifty percent of the award is dependent upon the achievement of specific commercial objectives by the end of 2015 and the vesting of the remainder is dependent upon the achievement, and timing of the achievement, of specific research and development objectives. The Company has concluded that it is probable that these performance conditions will be met. The total compensation expense for the portion related to the research and development objectives may be up to 60 percent higher depending on the timing of the achievement of the specific performance objectives.

13. Net Loss Per Share

Basic net loss per share amounts have been computed based on the weighted-average number of common shares outstanding. Diluted net loss per share amounts have been computed based on the weighted-average number of common shares outstanding plus the dilutive effect, if any, of potential common shares. The computation of potential common shares has been performed using the treasury stock method. Because of the net loss reported in each period, diluted and basic net loss per share amounts are the same.

The calculation of net loss and the number of shares used to compute basic and diluted earnings per share for the three-month periods ended March 31, 2015 and 2014 are as follows:


*In thousands, except per share amounts*	2015			2014
Net loss	$	(52,676	)	$	(49,822	)

Weighted average shares outstanding – basic and diluted		187,837			186,252

Net loss per share – basic and diluted	$	(0.28	)	$	(0.27	)

14. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) for three-month period ended March 31, 2015 were as follows:


*In thousands*	Cumulative Translation Adjustment		Defined Benefit Pension Obligation			Total
Balance, January 1, 2015	$	174	$	(4,359	)	$	(4,185	)
Other comprehensive income		236		77			313

Balance, March 31, 2015	$	410	$	(4,282	)	$	(3,872	)

15. Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized.

The Company’s tax provision reflects that the Company has an international corporate structure and certain subsidiaries are profitable on a stand-alone basis. Accordingly, a tax provision is reflected for the taxes incurred in such jurisdictions. In addition, the Company has recognized a prepaid tax related to the tax consequences arising from intercompany transactions and is amortizing such prepaid tax over the period that the assets transferred are being amortized. The total provision for income taxes for the three-month periods ended March 31, 2015 and 2014 was $214,000 and $119,000, respectively.

The Company does not recognize a tax benefit for uncertain tax positions unless it is more likely than not that the position will be sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of cumulative benefit that has greater than a 50 percent likelihood of being realized upon ultimate settlement. Deferred tax assets that do not meet these recognition criteria are not recorded and the Company recognizes a liability for uncertain tax positions that may result in tax payments. If such unrecognized tax benefits were realized and not subject to valuation allowances, the entire amount would impact the tax provision. No uncertain tax positions are expected to be resolved within the next twelve months. During the three-month period ended March 31, 2015, the Internal Revenue Service completed its audit of the Company’s 2012 U.S. federal income tax return, and issued a “no-change” letter indicating that no adjustments would be made to the return as filed.

16. Restructuring Actions

In the first quarter of fiscal 2014, the Company incurred expenses of $4.8 million associated with employee workforce reductions of approximately 155 positions, designed to reduce the Company’s operating expenses and extend its cash runway. The Company recorded $2.2 million of the employee separation costs in research and development expense and $2.6 million in selling, general and administrative expense. The restructuring charges were paid by the end of June 30, 2014.

17. Defined Benefit Pension Obligation

The Company maintains a defined benefit pension plan for employees in its Switzerland subsidiary. The plan provides benefits to employees upon retirement, death or disability.

The net periodic benefit cost for the defined benefit pension plan for the three-month periods ended March 31, 2015 and 2014 was as follows:


*In thousands*	2015			2014
Service cost	$	448		$	288
Interest cost		50			43
Expected return on plan assets		(37	)		(37	)
Amortization of prior service cost		77			41

Net periodic benefit cost	$	538		$	335

The Company expects to contribute $1.6 million in total to the plan in 2015.

18. Litigation

On October 10, 2013, October 17, 2013, December 3, 2013 and December 6, 2013, purported shareholder class actions, styled Jimmy Wang v. ARIAD Pharmaceuticals, Inc., et al., James L. Burch v. ARIAD Pharmaceuticals, Inc., et al., Greater Pennsylvania Carpenters’ Pension Fund v. ARIAD Pharmaceuticals, Inc., et al, and Nabil Elmachtoub v. ARIAD Pharmaceuticals, Inc., et al, respectively, were filed in the United States District Court for the District of Massachusetts (the “District Court”), naming the Company and certain of its officers as defendants. The lawsuits allege that the defendants made material misrepresentations and/or omissions of material fact regarding clinical and safety data for Iclusig in its public disclosures during the period from December 12, 2011 through October 8, 2013 or October 17, 2013, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. On January 9, 2014, the District Court consolidated the actions and appointed lead plaintiffs. On February 18, 2014, the lead plaintiffs filed an amended complaint as contemplated by the order of the District Court. The amended complaint extends the class period for the Securities Exchange Act claims through October 30, 2013. In addition, plaintiffs allege that certain of the Company’s officers, directors and certain underwriters made material misrepresentations and/or omissions of material fact regarding clinical and safety data for Iclusig in connection with the Company’s January 24, 2013 follow-on public offering of common stock in violation of Sections 11 and 15 of the Securities Act of 1933, as amended. The plaintiffs seek unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees. On April 14, 2014, the defendants and the underwriters filed separate motions to dismiss the amended complaint. On June 10, 2014, the District Court heard oral argument on the motion to dismiss. On March 24, 2015, the District Court granted the defendants’ and the underwriters’ motions to dismiss the plaintiffs’ amended complaint in these consolidated actions. On April 21, 2015, the plaintiffs filed an appeal of the District Court’s decision to grant the motions to dismiss with the United States Court of Appeals for the First Circuit.

On November 6, 2013, a purported derivative lawsuit, styled Yu Liang v. ARIAD Pharmaceuticals, Inc., et al., was filed in the United States District Court for the District of Massachusetts (the “District Court”), on behalf of the Company naming its directors and certain of its officers as defendants. On December 6, 2013, an additional purported derivative lawsuit, styled Arkady Livitz v. Harvey J. Berger, et al, was filed in the District Court. The lawsuits allege that the Company’s directors and certain of its officers breached their fiduciary duties related to the clinical development and commercialization of Iclusig and by making misrepresentations regarding the safety and commercial marketability of Iclusig. The lawsuits also assert claims for unjust enrichment and corporate waste, and for misappropriation of information and insider trading by the officers named as defendants. On January 23, 2014, the District Court consolidated the actions. On February 3, 2014, the plaintiffs designated the Yu Liang complaint as the operative complaint as contemplated by the order of the District Court. The plaintiffs seek unspecified monetary damages, changes in the Company’s corporate governance policies and internal procedures, restitution and disgorgement from the individually named defendants, and an award of costs and expenses, including attorney fees. On March 5, 2014, the defendants filed a motion to dismiss the complaint. In response, on March 26, 2014, the plaintiffs filed an amended complaint. On April 23, 2014, the defendants filed a motion to dismiss the amended complaint. On July 23, 2014, the District Court heard oral argument on the motion to dismiss. On March 9, 2015, the District Court granted the defendants’ motion to dismiss the plaintiffs’ amended complaint in these consolidated actions. On April 16, 2015, the plaintiffs filed an appeal of the District Court’s decision to grant the motion to dismiss with the United States Court of Appeals for the First Circuit.

On March 11, 2015, a product liability lawsuit, styled Thomas Montalbano, Jr. v. ARIAD Pharmaceuticals, Inc., was filed in the United States District Court for the Southern District of Florida naming the Company as defendant. The lawsuit alleges that the Company’s cancer medicine Iclusig was defective, dangerous and lacked adequate warnings when the plaintiff used it from July to August 2013. The plaintiff seeks unspecified monetary damages, punitive damages and an award of costs and expenses, including attorney’s fees.

The Company believes that all these actions are without merit. Also, the Company believes that any liability in the Montalbano lawsuit would be covered by the Company’s product liability insurance. At this time, the Company has not recorded a liability related to damages in connection with these matters because it believes that any potential loss is not currently probable or reasonably estimable under U.S. GAAP.

From time to time, the Company may be subject to various claims and legal proceedings. If the potential loss from any claim, asserted or unasserted, or legal proceedings is considered probable and the amount is reasonably estimated, the Company will accrue a liability for the estimated loss.

ITEM 2.

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

The information set forth below should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto included herein, as well as our audited consolidated financial statements, and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Overview

ARIAD is a global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. Our mission is to discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest and most urgent unmet medical need – aggressive cancers where current therapies are inadequate. We are focused on value-driving investments in commercialization, research and development, and new business development initiatives that we expect will lead to sustained profitability beginning in 2018 and increased shareholder value.

We are currently commercializing or developing the following three products and product candidates:

•

Iclusig^® (ponatinib) is our first approved cancer medicine, which we are commercializing in the United States, Europe and other territories for the treatment of certain patients with rare forms of leukemia.

•

Brigatinib (previously known as AP26113) is our most advanced drug candidate, which we are developing for the treatment of certain patients with a form of non-small cell lung cancer, or NSCLC.

•

AP32788 is our most recent, internally discovered drug candidate. In December 2014, we nominated AP32788 for clinical development. We are conducting studies necessary to support the filing of an investigational new drug application, or IND, which we expect to submit in 2015.

These products and product candidates complement our earlier discovery of ridaforolimus, which we have out-licensed for development in drug-eluting stents and other medical devices for cardiovascular indications, and rimiducid (AP1903), which we have out-licensed for development in novel cellular immunotherapies. All of our product candidates that we are developing or have out-licensed were discovered internally by our scientists based on our expertise in computational chemistry and structure-based drug design.

On April 29, 2015, we announced the decision of our founder, Harvey J. Berger, M.D., to retire as Chairman, Chief Executive Officer and President of the Company upon the appointment of his permanent successor or December 31, 2015, whichever is earlier. During the transition period pending Dr. Berger’s retirement, as well as after a new Chief Executive Officer joins the Company, we expect that our Board will be engaged in a review of our strategic and operating plans, and it is possible that changes to our near- and long-term objectives will be adopted. We cannot anticipate at this time what changes, if any, will result from that review. Accordingly, the disclosures in this Quarterly Report on Form 10-Q relate to our currently existing strategic and operating plans. All forward-looking statements with respect to our plans, operations, programs, anticipated performance, etc. are provided subject to this known uncertainty, which could cause actual results to differ materially.

Iclusig (ponatinib)

Commercialization

As noted above, Iclusig is approved in the United States, Europe and other territories for the treatment of certain patients with chronic myeloid leukemia, or CML, and Philadelphia chromosome-positive acute lymphoblastic leukemia, or Ph+ ALL.

In the United States, we are distributing Iclusig through a single specialty pharmacy. We employ an experienced and trained sales force and other professional staff, including account specialists, regional business directors, corporate account directors and medical science liaisons, who target the approximate 5,000 physicians who generate the majority of tyrosine kinase inhibitors (“TKI”), prescriptions for patients with CML and patients with PH+ ALL in the United States.

In Europe, we are now selling Iclusig in Germany, the United Kingdom, Austria, the Netherlands, Norway, Sweden, Switzerland, and Italy. In addition, we are distributing Iclusig to patients in France prior to pricing and reimbursement approval as permitted under French regulations. Full pricing and reimbursement approvals in France and other European countries are expected by the end of 2015. In total, we anticipate that Iclusig will be available for sale in 16 European countries by the end of 2015.

We have established headquarters for our European operations in Switzerland where we manage all aspects of our business in Europe, including sales and marketing, distribution and supply chain, regulatory, medical affairs and supporting functions. We employ personnel in key countries in Europe to build company and brand awareness, manage the local country pricing and reimbursement process and sell Iclusig upon obtaining all necessary approvals.

In order to provide for access to Iclusig in countries where we do not employ personnel, we enter into relationships with distributors in such countries. These distributorship arrangements provide for the exclusive right to sell and distribute Iclusig in a specific territory for a specified period of time in exchange for fees and payments related to purchase of Iclusig from us and/or sales of Iclusig in the territory. In December 2014, we entered into an agreement with Angelini Pharma, through its Austrian subsidiary, CSC Pharmaceuticals, whereby it will distribute Iclusig in countries in central and eastern Europe.

In territories outside the United States and Europe, we provide for the sale and distribution of Iclusig through partnership or distributorship arrangements. In December 2014, we entered into a co-development and commercialization agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, under which Otsuka has exclusive rights to commercialize Iclusig in Japan and nine other Asian countries and will fund future clinical development in those countries. We expect to file for marketing approval in Japan in collaboration with Otsuka in the second half of 2015. In Australia, we obtained marketing approval for Iclusig in November 2014 and will distribute Iclusig through Specialised Therapeutics Australia Pty Ltd, under a distribution agreement we entered into in January 2014 that covers Australia and New Zealand. In Israel, we entered into a distribution agreement with Medison Pharma Ltd. in August 2014 and obtained marketing approval in March 2015. We have also obtained marketing approval for Iclusig in Canada and are preparing for commercial launch in that country.

Ongoing Development of Iclusig

Initial approval of Iclusig in the United States and Europe was based on results from the pivotal Phase 2 PACE clinical trial in patients with CML or Ph+ ALL who were resistant or intolerant to prior TKI therapy, or who had the T315I mutation of BCR-ABL. The PACE trial is fully enrolled and we continue to treat and follow patients in this trial who continue to respond to treatment. We also continue to treat and follow patients in our first, Phase 1 clinical trial of Iclusig in heavily pre-treated patients with resistant or intolerant CML or Ph+ALL, which was initiated in 2008; our Phase 2 clinical trial in CML patients in Japan; and our Phase 2 clinical trial in patients with gastrointestinal stromal tumors. In addition, Iclusig is being studied in ongoing investigator-sponsored trials in settings including first line and second line CML, acute myeloid leukemia, or AML, non-small cell lung cancer, or NSCLC, and medullary thyroid cancer, or MTC. Our development of Iclusig also includes ongoing activities in manufacturing, quality, safety and regulatory functions.

In 2015, we plan to initiate studies designed to better understand the safety profile of Iclusig in resistant and intolerant CML and Ph+ ALL patients, with the objective of improving the balance of benefit and risk for these patients as post-marketing commitments, as well as studies designed to evaluate its use in earlier lines of therapy. These studies include:

•

a dose-ranging trial of Iclusig in approximately 450 patients with chronic phase CML, who have become resistant to at least two prior TKIs, designed to inform the optimal use of Iclusig in these patients.

•

a randomized, Phase 3 trial in approximately 500 patients with chronic phase CML who have experienced treatment failure after imatinib therapy, designed to evaluate two doses of Iclusig compared to the standard dose of nilotinib; and

•

an investigator-sponsored, early-switch trial of Iclusig in approximately 1,000 second-line chronic phase CML patients that will be conducted in the United Kingdom, designed to inform the use of Iclusig as part of the emerging paradigm in CML for early switching of TKIs in patients with suboptimal responses.

In addition, we expect that additional investigator-sponsored clinical trials will be initiated in 2015 in various indications.

Brigatinib (AP26113)

Brigatinib (AP26113) is an investigational inhibitor of anaplastic lymphoma kinase, or ALK. ALK was first identified as a chromosomal rearrangement in anaplastic large-cell lymphoma, or ALCL. Genetic studies indicate that abnormal expression of ALK is a key driver of certain types of non-small cell lung cancer, or NSCLC, and neuroblastomas, as well as ALCL. Since ALK is generally not expressed in normal adult tissues, it represents a highly promising molecular target for cancer therapy.

We are currently conducting a Phase 1/2 clinical trial of brigatinib, which we initiated in 2011. The primary objectives of the Phase 1 portion of the trial were to determine the maximum tolerated dose and the recommended dose for further study and to characterize its safety and preliminary anti-tumor activity. The primary purpose of the Phase 2 portion of the trial is to evaluate the efficacy of brigatinib in patients with TKI-naïve and crizotinib-resistant ALK-positive NSCLC, including in patients with brain metastases after crizotinib treatment. Results of this trial to date show robust anti-tumor activity in patients with TKI-naïve and crizotinib-resistant ALK-positive NSCLC, including in patients with brain metastases after crizotinib treatment. Crizotinib is the currently available first-generation ALK inhibitor.

We commenced a pivotal trial of brigatinib in the first quarter of 2014 in patients with locally advanced or metastatic NSCLC who were previously treated with crizotinib. The ALTA trial is designed to determine the safety and efficacy of brigatinib in refractory ALK+ NSCLC patients. We anticipate that the results of the ALTA trial will form the basis for our application for initial regulatory approval. We expect to achieve full patient enrollment in the ALTA trial in the third quarter of 2015 and to file for approval of brigatinib in the United States in 2016.

Our development of brigatinib also includes key product and process development activities to support our clinical trials as well as the anticipated filing of an NDA and potential commercial launch of the product, quality and stability studies and pharmacovigilance and regulatory activities.

We are currently pursuing a partnership to co-develop and co-commercialize brigatinib. We expect that such a partnership, if entered into, would allow us to continue to leverage our existing infrastructure and capabilities, as well as support a randomized, first-line trial of brigatinib vs. crizotinib in ALK+ NSCLC. A partnership may also support the exploration of new combination therapies in lung cancer that include brigatinib and other approved and unapproved medicines.

AP32788

At the end of 2014, we nominated our next internally discovered development candidate, AP32788. This orally active TKI has a unique profile against a validated class of mutated targets in non-small cell lung cancer and certain other solid tumors and may address an unmet medical need. We are currently performing pharmacology, toxicology and other studies necessary to support the filing of an investigational new drug (IND) application for AP32788 that we expect to file in 2015. We expect to begin a Phase 1/2 proof-of-concept trial in 2016.

Ridaforolimus

We previously entered into license agreements with Medinol and ICON pursuant to which they agreed to develop drug-eluting stents and other medical devices to deliver ridaforolimus to prevent restenosis, or reblockage, of injured vessels following interventions in which stents are used in conjunction with balloon angioplasty. In 2014, Medinol initiated two registration trials in the United States and other countries of its NIRsupreme^TM Ridaforolimus-Eluting Coronary Stent System incorporating ridaforolimus and submitted an investigational device exemption, or IDE, to the FDA. These actions triggered milestone payments to us of $3.8 million in 2014. As of March 2015, we had not received any milestone or other payments from ICON pursuant to its agreement. In March 2015, we terminated our agreement with ICON.

In 2010, we entered into an amended and restated agreement with Merck & Co., Inc., or Merck, for the development of ridaforolimus for oncology applications. In February 2014, we received notice from Merck that it was terminating the license agreement. This termination became effective in November 2014 at which time all rights to ridaforolimus in oncology licensed to Merck were returned to us.

Our Discovery Programs

Our research and development programs are focused on discovering and developing small-molecule drugs that regulate cell signaling for the treatment of cancer. Many of the critical functions of cells, such as cell growth, differentiation, gene transcription, metabolism, motility and survival, are dependent on signals carried back and forth from the cell surface to the nucleus and within the cell through a system of molecular pathways. When disrupted or over-stimulated, such pathways may trigger diseases such as cancer. Our research focuses on exploring cell-signaling pathways, identifying their role in specific cancers and cancer subtypes, and discovering drug candidates to treat those cancers by interfering with the aberrant signaling pathways of cells. The specific cellular proteins blocked by our product candidates have been well characterized as cancer targets. Iclusig, brigatinib, AP32788 and ridaforolimus were each discovered internally through the integrated use of structure-based drug design and computational chemistry, and their targets have been validated with techniques such as functional genomics, proteomics, and chemical genetics.

Critical Accounting Policies and Estimates

Our financial position and results of operations are affected by subjective and complex judgments, particularly in the areas of revenue recognition, accrued product development expenses, inventory, leased buildings under construction and stock-based compensation expense. We evaluate our estimates, judgments and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of our critical accounting policies and estimates, read Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no changes in those policies or in the method of developing the estimates used to apply those policies, except as discussed below.

Revenue Recognition

Revenue is recognized when the four basic criteria for revenue recognition are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. When the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met.

Product Revenue, Net

We sell Iclusig in the United States to a single specialty pharmacy, Biologics, Inc. (“Biologics”). Biologics dispenses Iclusig directly to patients. In Europe, we sell Iclusig to retail pharmacies and hospital pharmacies, which dispense Iclusig directly to patients. We provide the right of return to customers in the United States for unopened product for a limited time before and after its expiration date. European customers are provided the right to return product only in limited circumstances, such as damaged product. Revenue is generally recognized when product is delivered, assuming the Company can estimate potential returns. For European customers, who are provided with a limited right of return, the criteria for revenue recognition is met at the time of shipment and revenue is recognized at that time, provided all other revenue recognition criteria are met. Prior to 2015, with our limited sales history for Iclusig and the inherent uncertainties in estimating product returns, we had determined that the shipments of Iclusig to its United States customers did not meet the criteria for revenue recognition at the time of shipment. For periods prior to the quarter ended March 31, 2015, we recognized revenue in the United States, assuming all revenue recognition criteria had been met, when Iclusig was sold by Biologics to patients. During the quarter ended March 31, 2015, we concluded that we had sufficient experience to estimate returns in the United States, as a result of over two years of sales experience. Accordingly, during the quarter ended March 31, 2015, the Company commenced recognizing revenue in the United States on delivery of Iclusig to Biologics and recognized a one-time net product revenue increase of $1.2 million as a result of the change.

Results of Operations

For the Three Months Ended March 31, 2015 and 2014

Revenue

Our revenues for the three-month period ended March 31, 2015, as compared to the corresponding period in 2014, were as follows:


	Three Months Ended March 31,				Increase/
*In thousands*	2015		2014		(decrease)
Product revenue, net	$	23,901	$	7,992	$	15,909
License, collaboration and other revenue		90		3,790		(3,700	)

Total revenue	$	23,991	$	11,782	$	12,209

Product revenue is stated net of adjustments for trade allowances, rebates, chargebacks and discounts and other incentives, summarized as follows:


	Three Months Ended March 31,						Increase/
*In thousands*	2015			2014			(decrease)
Trade allowances	$	255		$	126		$	129
Rebates, chargebacks and discounts		2,097			685			1,412
Other incentives		218			389			(171	)

Total adjustments	$	2,570		$	1,200		$	1,370

Gross product revenue	$	26,471		$	9,192		$	17,279

Percentage of gross product revenue		9.7	%		13.1	%

The increase in product revenue reflects increasing demand for Iclusig in the United States and Europe. In the United States, net product revenue increased from $4.7 million in the three-month period ended March 31, 2014 to $18.7 million in the corresponding period in 2015 due to an increase in units sold of 179% and the impact of a 9% price increase in February 2015. In Europe, net product revenue increased from $3.3 million in the three-month period ended March 31, 2014 to $5.2 million in the corresponding period in 2015, due to expanded access in additional countries and the positive completion of a regulatory review of the safety of Iclusig in late 2014. Product revenue is reduced by certain gross to net deductions. For the three-month period ended March 31, 2015, gross to net deductions, as a percentage of gross revenue, were approximately 9.7 percent as compared to 13.1 percent for the corresponding period in 2014. The decrease primarily related to product returns in the three-month period ended March 31, 2014 of $279,000 related to the product suspension in 2013, and other U.S. government payor adjustments recorded in that quarter of $315,000.

We expect that our product revenue will continue to increase in 2015 compared to 2014 due primarily to increasing acceptance of and demand for Iclusig, as well as pricing adjustments, in the United States, and increasing sales of Iclusig in Europe as we obtain pricing and reimbursement approval in various countries in Europe during the year. With the re-launch of Iclusig in the United States in January 2014, we have re-established marketing and distribution activities that have driven increasing product revenue that we expect will continue in 2015 and beyond. In Europe, our growth in revenues is dependent on the successful completion of pricing and reimbursement negotiations in countries throughout Europe. We currently have pricing and reimbursement approval in eight countries in Europe and expect to receive approval and formally launch commercial distribution in an additional eight to twelve countries in Europe in 2015, which we expect will drive additional increases in Iclusig product revenue. In addition, we have obtained marketing approval for Iclusig in Australia, Israel and Canada, and expect to file for approval in Japan in the second half of 2015. In these and other territories, we plan to rely on partnerships and distribution arrangements to make Iclusig available in these markets to patients. Actual revenues will be subject to the outcome of pricing and reimbursement negotiations in Europe and the ultimate resolution of pricing negotiations and refunds in France.

License revenue decreased for the three-month period ended March 31, 2015 compared to the corresponding period in 2014 by approximately $3.7 million. This was related to the $3.8 million of license revenue received pursuant to our license agreement with Medinol for the development of ridaforolimus eluting stents in the three-month period ended March 31, 2014.

We expect our license revenue will increase during the remainder of 2015 due primarily to initiating revenue recognition of the up-front payment of $77.5 million received from our collaboration agreement with Otsuka effective in December 2014. No revenue has been recognized on this agreement as of March 31, 2015.

Operating Expenses

Cost of Product Revenue

Our cost of product revenue relates to sales of Iclusig in the United States and in Europe. Our cost of product revenue for the three-month period ended March 31, 2015 as compared to the corresponding period in 2014, was as follows:


	Three Months Ended March 31,				Increase/ (decrease)
*In thousands*	2015		2014		Increase/ (decrease)
Inventory cost of Iclusig sold	$	263	$	76	$	187
Shipping and handling costs		215		199		16
Inventory reserves/write-downs		217		1,013		(796	)

	$	695	$	1,288	$	(593	)

Research and Development Expenses

Research and development expenses increased by $10.9 million, or 38 percent, to $39.4 million for the three-month period ended March 31, 2015, compared to $28.6 million for the three-month period ended March 31, 2014, for the reasons set forth below.

We group our research and development, or R&D, expenses into two major categories: direct external expenses and all other R&D expenses. Direct external expenses consist of costs of outside parties to conduct and manage clinical trials, to develop manufacturing processes and manufacture product candidates, to conduct laboratory studies and similar costs related to our clinical programs. These costs are accumulated and tracked by product candidate. All other R&D expenses consist of costs to compensate personnel, to purchase lab supplies and services, to lease, operate and maintain our facility, equipment and overhead and similar costs of our research and development efforts. These costs apply to our clinical programs as well as our preclinical studies and discovery research efforts. Product candidates are designated as clinical programs once we have filed an IND with the FDA, or a similar filing with regulatory agencies outside the United States, for the purpose of commencing clinical trials in humans.

Our R&D expenses for the three-month period ended March 31, 2015 as compared to the corresponding period in 2014, were as follows:


	Three Months Ended March 31,				Increase/ (decrease)
*In thousands*	2015		2014		Increase/ (decrease)
Direct external expenses:
Iclusig	$	6,229	$	6,524	$	(295	)
Brigatinib		8,761		3,240		5,521
All other R&D expenses		24,454		18,790		5,664

	$	39,444	$	28,554	$	10,890

Direct external expenses for Iclusig were $6.2 million in the three-month period ended March 31, 2015, a decrease of $295,000, or four percent, as compared to the corresponding period in 2014. The decrease is primarily due to a decrease in clinical trial costs of $2.8 million, offset in part by increases in contract manufacturing costs of $1.1 million and other costs of $1.5 million. The decrease in clinical trial costs relates primarily to the discontinuation of the Phase 3 EPIC trial in October 2013, the impact of clinical holds placed on certain trials, including investigator sponsored trials, and decreasing activities in the Phase 2 PACE trial and other trials. The increase in manufacturing costs relates to large scale process development activities for Iclusig at a contract manufacturer. The increase in other costs relates to the conduct of other studies to assess the safety profile and risk factors associated with cardio vascular occlusive events.

Direct external expenses for brigatinib were $8.8 million in the three-month period ended March 31, 2015, an increase of $5.5 million, or 170 percent, as compared to the corresponding period in 2014. The increase in expenses for brigatinib was due primarily to increases in clinical trial costs of $2.1 million, in contract manufacturing costs of $2.7 million and $709,000 in other supporting costs. The increase in clinical trial costs relates primarily to increasing enrollment in the ALTA pivotal Phase 2 trial for brigatinib. Contract manufacturing costs increased due to activities related to process development and qualification, as well as drug development and validation activities to support preparation of agency filings for this product candidate. Other costs increased due to costs related to toxicology studies in support of the program.

We expect that our quarterly direct external R&D expenses will increase over the remainder of 2015 as we continue to invest in Iclusig and our product candidates’ brigatinib and AP32788. We continue to treat and follow patients in on-going clinical trials of Iclusig and plan to commence additional trials in 2015 designed to better understand the safety profile of Iclusig and to evaluate its use in earlier lines of therapy, as well as conduct additional studies to support continued development of Iclusig. For brigatinib, we continue to treat and follow patients in our Phase 1/2 clinical trial and continue to enroll patients in the ALTA pivotal trial, and plan to conduct additional studies to support continued development and potential regulatory approval of brigatinib. For AP32788, which we recently nominated as our next development candidate, we plan to conduct various studies that are necessary to support the filing of an investigational new drug application with the FDA.

All other R&D expenses increased by $5.7 million or 30 percent, in the three-month period ended March 31, 2015 as compared to the corresponding period in 2014. This increase was due to an increase in personnel costs of $2.8 million as well as increases in professional and general expenses of $2.4 million. Personnel costs increased due to an increase in number of employees to support the development activities of our product and product candidates. Professional and general costs increased due to increasing activities to support regulatory filings in multiple jurisdictions and related increase in travel. We expect that all other R&D expenses will increase over the remainder of 2015 due to increased expenses in support of additional clinical trials and increased other pre-clinical activities.

The successful development of our product candidates is uncertain and subject to a number of risks. We cannot be certain that any of our products or product candidates will prove to be safe and effective or will meet all of the applicable regulatory requirements needed to receive and maintain marketing approval. Data from preclinical studies and clinical trials are susceptible to varying interpretations that could delay, limit or prevent regulatory approval or could result in label warnings related to or recalls of approved products. Our ability to obtain sources of product revenue from the successful development our product candidates will depend on, among other things, our efforts to develop Iclusig in other patient populations and cancers, as well as the success of brigatinib, AP32788 and other product candidates, if any. Other risks associated with our products and product candidates are described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, as updated in our subsequent periodic and current reports filed with the SEC.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $2.0 million, or 6 percent, to $33.6 million in the three-month period ended March 31, 2015, compared to $31.6 million in the corresponding period in 2014. Expenses for outside professional services increased by $1.1 million in the three-month period ended March 31, 2015 as compared to the corresponding period in 2014 primarily due to an increase in legal expenses and other consulting services associated with ongoing litigation matters and annual proxy and corporate compliance matters. General and other expenses increased $1.1 million as a result of activities required to track and monitor safety events related to Iclusig. We expect that selling, general and administrative expenses will remain at approximately the same level on a quarterly basis over the remainder of 2015.

We expect that operating expenses in total will increase over the remainder of 2015 as described in the sections above. The actual amount of operating expenses will depend on, among other things, costs related to the progress of our product development programs including the initiation of and increases in enrollment in our clinical trials of Iclusig and brigatinib, the status of pre-clinical studies of AP32788, costs related to regulatory requirements and filings for Iclusig and our other product candidates, and related supporting activities and costs.

Other Income (Expense)

Interest Income/Expense

Interest income decreased to $19,000 in the three-month period ended March 31, 2015 from $22,000 in the corresponding period in 2014, as a result of decreases in yields for invested cash balances.

Interest expense increased to $3.9 million in the three-month period ended March 31, 2015 from $33,000 in the corresponding period in 2014 as a result of the issuance of $200 million in convertible notes in June 2014, including coupon interest of $1.8 million and amortization of debt discount of $2.0 million in 2015.

Foreign Exchange Gain (Loss)

We recognized net foreign exchange transaction gains of $1.1 million for the three-month period ended 2015 compared to net foreign exchange losses of $41,000 in the corresponding period in 2014. The gains and losses are a result of our operations in Europe as we carry accounts denominated in foreign currencies and are caused by changes in exchange rates during these periods.

Provision for Income Taxes

Our provision for income taxes for the three-month period ended 2015 was $214,000, compared to $119,000 in the corresponding period in 2014 and reflects estimated expenses for state taxes and taxes associated with certain foreign subsidiaries.

Operating Results

We reported a loss from operations of $49.7 million for the three-month period ended March 31, 2015 compared to a loss from operations of $49.7 million for the three-month period ended March 31, 2014. We also reported a net loss of $52.7 million for the three-month period ended March 31, 2015, compared to a net loss of $49.8 million for the three-month period ended March 31, 2014 , an increase in net loss of $2.9 million or 6 percent, and a net loss per share of $(0.28) and $(0.27), respectively. The increase in net loss for 2015 is largely due to an increase in our operating expenses of $12.8 million consisting primarily of an increase of approximately $10.9 million in research and development expenses, and an increase of $3.8 million in interest expense, offset in part by an increase in revenue of $12.2 million, all as described above. Our results of operations for the remaining quarters of 2015 will vary from those of the quarter ended March 31, 2015 and actual results will depend on a number of factors, including our ability to successfully grow Iclusig product revenue in the United States, Europe and other territories, the status of pricing and reimbursement approvals in Europe, the progress of our product development programs, ongoing employee and related personnel costs, the progress of our discovery research programs, our ability to secure a partnership to co-develop and co-commercialize brigatinib and the impact of any commercial and business development activities, the impact of costs and potential sub-leasing activity for our building currently under construction in Cambridge, Massachusetts and other factors. The extent of changes in our results of operations will also depend on the sufficiency of funds on hand or available from time to time, which will influence the amount we will spend on operations and capital expenditures and the development timelines for our product candidates.

Liquidity and Capital Resources

At March 31, 2015, we had cash and cash equivalents totaling $304.0 million and working capital of $255.1 million, compared to cash and cash equivalents totaling $353.7 million and working capital of $296.6 million at December 31, 2014. These decreases are due to our results of operations for the quarter ended March 31, 2015 as described above. Of the $304.0 million of cash and cash equivalents at March 31, 2015, $10.4 million was in accounts held by our international subsidiaries. For the three-month period ended March 31, 2015, we reported a net loss of $52.7 million and cash used in operating activities of $50.2 million. We expect to continue to incur losses on a quarterly basis until we can substantially increase revenues as a result of increased sales of Iclusig and potential future regulatory approvals of our product candidates, the timing of which are uncertain. However, pursuant to our current operating plan, we are focused on investments in commercialization, research and development, and new business development initiatives that we expect will lead to sustained profitability in 2018.

Our balance sheet at March 31, 2015 includes property and equipment of $224.4 million, which represents an increase of $21.4 million from December 31, 2014. The increase is primarily due to the accounting, as described earlier, for our lease of new laboratory and office space in two adjacent, connected buildings currently under construction in Cambridge, Massachusetts. Construction of the core and shell of the buildings was completed in March 2015 at which time we commenced making lease payments. Construction of tenant improvements is expected to be completed in the first half of 2016, at which time we expect to occupy the buildings. Under the relevant accounting guidance, we are the deemed owner for the project during the construction periods and accordingly, we record the project construction costs as an asset $217.8 million and a corresponding facility lease obligation of $217.4 million at March 31, 2015. As construction continues on the facility, the asset and corresponding facility lease obligation will continue to increase.

Sources of Funds

We have financed our operations and investments to date primarily through sales of our common stock and convertible notes in public and private offerings, through the receipt of upfront and milestone payments from collaborations and licenses with pharmaceutical and biotechnology companies and, to a lesser extent, through issuances of our common stock pursuant to our equity incentive and employee stock purchase plans, supplemented by the borrowing of long-term debt from commercial lenders.

With the sales of Iclusig in the United States from January through October 2013 and commencing again in January 2014 as well as sales in Europe since the second half of 2013, we have generated product revenues that have contributed to our cash flows. However, our cash flows generated from sales of Iclusig are not currently sufficient to fund operations and we rely on funding from other sources to fund our operations.

We intend to rely on our existing cash and cash equivalents, cash flows from sales of Iclusig and funding from new collaborative agreements or strategic alliances, as our primary sources of liquidity. In the near-term, we expect cash flows from sales of Iclusig to increase as we continue to increase the number of patients that are treated with Iclusig and launch the product in new markets. In addition, we are currently pursuing a partnership arrangement to co-develop and co-commercialize brigatinib. We expect that such an agreement will further improve our liquidity, allow us to continue to leverage our existing infrastructure and capabilities, and support key development activities. We believe that these and similar non-dilutive funding transactions will provide necessary resources until such time that we generate revenues from sales of Iclusig and our product candidates sufficient to fund operations.

Uses of Funds

The primary uses of our cash are to fund our operations and working capital. Our uses of cash during the three-month periods ended March 31, 2015 and 2014 were as follows:


	Three Months Ended March 31,
*In thousands*	2015		2014
Net cash used in operating activities	$	50,194	$	52,409
Investment in property and equipment		754		1,706
Re-payment of long-term borrowings		—		1,050

	$	50,948	$	55,165

The net cash used in operating activities is comprised of our net losses, adjusted for non-cash expenses, deferred revenue and working capital requirements. As noted previously, our net loss in the three-month period ended March 31, 2015 increased by $2.9 million as compared to the corresponding period in 2014. However, our net cash used in operating activities for the three-month period ended March 31, 2015 decreased by $2.2 million compared to the corresponding period in 2014 due primarily to changes in working capital requirements.

We currently occupy facilities in Cambridge, Massachusetts and Switzerland from which we conduct and manage our business. We also plan to occupy space in Cambridge, Massachusetts currently under construction. We had planned to move into the new buildings in early 2015. However, in light of our announcements in the fourth quarter of 2013 concerning Iclusig, we re-assessed our current and future need for space in Cambridge and expect to require less space than previously planned. We could not terminate the new lease without substantial cost, and we would have been required to make substantial expenditures to make necessary improvements to our existing facilities. We are, therefore, planning to sub-lease approximately 170,000 square feet of the 386,000 square feet of the space comprising the new buildings. If we are not successful in subleasing this space, our cost of the space we occupy will increase. The landlord completed construction of the core and shell of the buildings in March 2015 at which time lease payments commenced. Tenant improvements and the fit-out of the facility have started and are expected to be completed in the second quarter of 2016. The landlord has provided a tenant improvement allowance for such costs. To the extent such costs exceed the allowance, we will be responsible for funding such excess.

Liquidity

We incur substantial operating expenses to conduct research and development and commercialization activities and operate our business. In addition, we must pay interest on the $200 million principal amount of convertible notes we issued in June 2014 and will be required to repay the principal amount of the notes in June 2019, or earlier in specified circumstances, if the notes are not converted into shares of our common stock. We also have a substantial facility lease obligation, as noted above. We expect that cash flows from Iclusig together with our current cash and cash equivalents and funding we expect to receive from new collaborative agreements or strategic alliances will be sufficient to fund our operations for the foreseeable future.

The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the amounts of future revenue generated by Iclusig, our ability to enter into a partnership to co-develop and co-commercialize brigatinib and the amount of funding generated from such partnership, the potential introduction of one or more of our other drug candidates to the market, and the number, breadth, cost and prospects of our research and development programs.

To the extent that product revenues or non-dilutive funding transactions are not sufficient to fund our operations, we may seek to fund our operations by issuing common stock, debt or other securities in one or more public or private offerings, as market conditions permit, or through the incurrence of additional debt from commercial lenders or other financing transactions. Under SEC rules, we currently qualify as a “well-known seasoned issuer,” which allows us to file shelf registration statements to register an unspecified amount of securities that are effective upon filing, giving us the opportunity to raise funding when needed or otherwise considered appropriate. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. In addition, we may raise additional capital through securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and to consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile.

There can be no assurance that additional funds will be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to: (1) delay, limit, reduce or terminate our commercialization of Iclusig; (2) delay, limit, reduce or terminate preclinical studies, clinical trials or other clinical development activities for one or more of our approved products or product candidates; (3) delay, limit, reduce or terminate our discovery research or preclinical development activities; or (4) enter into licenses or other arrangements with third parties on terms that may be unfavorable to us or sell, license or relinquish rights to develop or commercialize our product candidates, approved products, technologies or intellectual property.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities for financial partnerships, such as entities often referred to as structured finance or special purpose entities which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2015, we maintained outstanding letters of credit of $11.3 million in accordance with the terms of our existing leases for our office and laboratory space, our new lease for office and laboratory space under construction, and for other purposes.

Contractual Obligations

We have substantial fixed contractual obligations under our long-term debt agreement, lease agreements, employment agreements, purchase commitments and benefit plans. These non-cancellable contractual obligations were comprised of the following as of March 31, 2015:


			Payments Due By Periods
*In thousands*	Total		In 2015		2016 through 2018		2019 through 2020		After 2020
Long-term debt	$	240,479	$	7,552	$	22,052	$	210,875	$	—
Lease agreements		485,573		11,085		87,364		68,150		318,974
Employment agreements		15,315		6,209		9,106		—		—
Purchase commitments		39,932		2,221		22,361		5,877		9,473
Other long-term obligations		6,133		55		5,843		135		100

Total fixed contractual obligations	$	787,432	$	27,122	$	146,726	$	285,037	$	328,547

Long-term debt reflects the payment at maturity of our $200 million of convertible notes issued in June 2015 and due on June 15, 2020. Interest on this debt accrues at a rate of 3.625 percent of the principal, or $7.25 million, annually and is payable in arrears in December and June of each year. We may not redeem the convertible notes prior to the maturity date and no “sinking fund” is provided for the convertible notes, which means that we are not required to periodically redeem or retire the convertible notes. Upon the occurrence of certain fundamental changes involving our company, holders of the convertible notes may require us to repurchase for cash all or part of their convertible notes at a repurchase price equal to 100 percent of the principal amount of the convertible notes to be repurchased, plus accrued and unpaid interest.

Leases consist of payments to be made on our building leases in Cambridge, Massachusetts and Lausanne, Switzerland, including future lease commitments related to leases executed for office and laboratory space in two buildings currently under construction in Cambridge and office space in a building in Lausanne that completed construction in early 2014. The minimum non-cancelable payments for the facility being constructed in Cambridge are included in the table above and include amounts related to the original lease and the lease amendment. We are the deemed owner for accounting purposes and have recognized a financing obligation associated with the cost of the buildings incurred to date for the buildings under construction in Cambridge, Massachusetts. In addition to minimum lease payments, the leases require us to pay additional amounts for our share of taxes, insurance, maintenance and operating expenses, which are not included in the above table. Employment agreements represent base salary payments under agreements with officers. Purchase commitments represent non-cancelable contractual commitments associated with certain clinical trial activities. Other long-term obligations are comprised primarily of our liability for unrecognized tax positions, which is expected to be determined by 2016.

Securities Litigation Reform Act

Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This Quarterly Report on Form 10-Q, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements in connection with any discussion of future operating or financial performance are identified by the use of words such as “may,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. Such statements are based on management’s expectations and are subject to certain factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to meet anticipated clinical trial commencement, enrollment and completion dates for our products and product candidates and to move new development candidates into the clinic; our ability to secure a partnership for brigatinib (AP26113); difficulties or delays in obtaining regulatory and pricing and reimbursement approvals to market our products; our ability to successfully commercialize and generate profits from sales of Iclusig; competition from alternative therapies, our reliance on the performance of third-party manufacturers and specialty pharmacies for the distribution of Iclusig; the occurrence of adverse safety events with our products and product candidates; preclinical data and early-stage clinical data that may not be replicated in later-stage clinical studies; the costs associated with our research, development, manufacturing and other activities; the conduct and results of preclinical and clinical studies of our product candidates; the adequacy of our capital resources and the availability of additional funding; patent protection and third-party intellectual property claims; litigation, including our pending securities class action and derivative lawsuits; our operations in foreign countries; ; risks related to key employees, markets, economic conditions, health care reform, prices and reimbursement rates; and other factors detailed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, and any updates to those risk factors contained in our subsequent periodic and current reports filed with the U.S. Securities and Exchange Commission. The information contained in this document is believed to be current as of the date of original issue. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest our available funds in accordance with our investment policy to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment.

We invest cash balances in excess of operating requirements first in short-term, highly liquid securities, and money market accounts. Depending on our level of available funds and our expected cash requirements, we may invest a portion of our funds in marketable securities, consisting generally of corporate debt and U.S. government and agency securities. Maturities of our marketable securities are generally limited to periods necessary to fund our liquidity needs and may not in any case exceed three years. These securities are classified as available-for-sale.

Our investments are sensitive to interest rate risk. We believe, however, that the effect, if any, of reasonable possible near-term changes in interest rates on our financial position, results of operations and cash flows generally would not be material due to the short-term nature and high credit quality of these investments. At March 31, 2015 our available funds are invested solely in cash and cash equivalents and we do not have significant market risk related to interest rate movements.

As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Euro, Swiss Franc and British Pound against the U.S. dollar. The current exposures arise primarily from cash, accounts receivable, intercompany receivables, payables and inventories. Both positive and negative affects to our net revenues from international product sales from movements in foreign currency exchange rates are partially mitigated by the natural, opposite affect that foreign currency exchange rates have on our international operating costs and expenses.

In June 2014, we issued $200 million of convertible notes due June 15, 2019. The convertible notes have a fixed annual interest rate of 3.625 percent and we, therefore, do not have economic interest rate exposure on the convertible notes. However, the fair value of the convertible notes is exposed to interest rate risk. We do not carry the convertible notes at fair value on our balance sheet but present the fair value of the principal amount for disclosure purposes. Generally, the fair value of the convertible notes will increase as interest rates fall and decrease as interest rates rise. These convertible notes are also affected by the price and volatility of our common stock and will generally increase or decrease as the market price of our common stock changes. The estimated fair value of the $200 million face value convertible notes was $230 million at March 31, 2015.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

There have been no material developments in the legal proceedings disclosed Part I, Item 3 our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, except as follows:

Jimmy Wang v. ARIAD Pharmaceuticals, Inc., et al., James L. Burch v. ARIAD Pharmaceuticals, Inc., et al., Greater Pennsylvania Carpenters’ Pension Fund v. ARIAD Pharmaceuticals, Inc., et al, and Nabil Elmachtoub v. ARIAD Pharmaceuticals, Inc., et al.

On March 24, 2015, the United States District Court for the District of Massachusetts, or the District Court, granted the defendants’ and the underwriters’ motions to dismiss the plaintiffs’ amended complaint in these consolidated actions. On April 21, 2015, the plaintiffs filed an appeal of the District Court’s decision to grant the motions to dismiss with the United States Court of Appeals for the First Circuit.

Yu Liang v. ARIAD Pharmaceuticals, Inc., et al.

On March 9, 2015, the District Court granted the defendants’ motion to dismiss the plaintiffs’ amended complaint in these consolidated actions. On April 16, 2015, the plaintiffs filed an appeal of the District Court’s decision to grant the motion to dismiss with the United States Court of Appeals for the First Circuit.

Thomas Montalbano, Jr. v. ARIAD Pharmaceuticals, Inc.

On March 11, 2015, a product liability lawsuit, styled Thomas Montalbano, Jr. v. ARIAD Pharmaceuticals, Inc., was filed in the United States District Court for the Southern District of Florida naming the Company as defendant. The lawsuit alleges that our cancer medicine Iclusig was defective, dangerous and lacked adequate warnings when the plaintiff used it from July to August 2013. The plaintiff seeks unspecified monetary damages, punitive damages and an award of costs and expenses, including attorney’s fees.

We believe all of the actions are without merit. We also believe that any liability in the Montalbano lawsuit would be covered by our product liability insurance. At this time, we have not recorded a liability related to damages in connection with these matters because we believe that any potential loss is not currently probable or reasonably estimable under U.S. generally accepted accounting principles.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

ITEM 6.

EXHIBITS


10.1+		Executive Employment Agreement, dated January 20, 2015, between ARIAD Pharmaceuticals, Inc., and Thomas DesRosier (previously filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 001-36172) and incorporated herein by reference).

10.2*		License Agreement, effective January 26, 2005, by and between ARIAD Pharmaceuticals, Inc. and Medinol Ltd.

10.3+		Letter Agreement, dated April 28, 2015, between ARIAD Pharmaceuticals, Inc. and Harvey J. Berger, M.D. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on April 29, 2015 (File No. 001-36172) and incorporated herein by reference).

10.4+		Agreement, dated April 28, 2015, by and between ARIAD Pharmaceuticals, Inc., Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 29, 2015 (File No. 001-36172) and incorporated herein by reference).

10.5*		Second Amendment to Lease, dated March 24, 2015, between ARIAD Pharmaceuticals, Inc. and ARE-MA REGION NO. 48, LLC (for lease at 75 Binney Street and 25 Binney Street)

31.1		Certification of the Chief Executive Officer.

31.2		Certification of the Chief Financial Officer.

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from ARIAD Pharmaceutical, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Comprehensive Loss, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.

(+)	Management contract or compensatory plan or arrangement.

(*)	Confidential treatment has been requested from the Securities and Exchange Commission as to certain portions.

ARIAD, the ARIAD logo and Iclusig are our registered trademarks. The domain name and website address www.ariad.com, and all rights thereto, are registered in the name of, and owned by, ARIAD. The information in our website is not intended to be part of this Quarterly Report on Form 10-Q. We include our website address herein only as an inactive textual reference and do not intend it to be an active link to our website.

SIGNATURES

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.


	ARIAD Pharmaceuticals, Inc.

	By:	/s/ Harvey J. Berger, M.D.
		Harvey J. Berger, M.D.
		Chairman and Chief Executive Officer (Principal executive officer)

	By:	/s/ Edward M. Fitzgerald
		Edward M. Fitzgerald
		Executive Vice President,
		Chief Financial Officer
Date: May 8, 2015		(Principal financial officer and chief accounting officer)

EXHIBIT INDEX


Exhibit No.		Title

10.1+		Executive Employment Agreement, dated January 20, 2015, between ARIAD Pharmaceuticals, Inc., and Thomas DesRosier (previously filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 001-36172) and incorporated herein by reference).

10.2*		License Agreement, effective January 26, 2005, by and between ARIAD Pharmaceuticals, Inc. and Medinol Ltd.

10.3+		Letter Agreement, dated April 28, 2015, between ARIAD Pharmaceuticals, Inc. and Harvey J. Berger, M.D. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on April 29, 2015 (File No. 001-36172) and incorporated herein by reference).

10.4+		Agreement, dated April 28, 2015, by and between ARIAD Pharmaceuticals, Inc., Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 29, 2015 (File No. 001-36172) and incorporated herein by reference).

10.5*		Second Amendment to Lease, dated March 24, 2015, between ARIAD Pharmaceuticals, Inc. and ARE-MA REGION NO. 48, LLC (for lease at 75 Binney Street and 25 Binney Street)

31.1		Certification of the Chief Executive Officer.

31.2		Certification of the Chief Financial Officer.

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from ARIAD Pharmaceutical, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Comprehensive Loss, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.

(+)	Management contract or compensatory plan or arrangement.

(*)	Confidential treatment has been requested from the Securities and Exchange Commission as to certain portions.

Exhibit 10.2

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 406 of the Securities Act.

LICENSE AGREEMENT

(AP23573 in Medical Devices)

This License Agreement (this “Agreement”) is made effective as of January 26, 2005 (the “Effective Date”), by and between ARIAD Pharmaceuticals, Inc. and ARIAD Gene Therapeutics, Inc., both corporations with a principal place of business at 26 Landsdowne Street, Cambridge, MA 02139 (collectively, “ARIAD”), and MEDINOL Ltd., a company with a principal place of business at Kiryat Atidim, P.O. Box 58165, Tel Aviv, 61581, Israel (“MEDINOL”). ARIAD and MEDINOL are each hereafter referred to individually as a “Party” and together as the “Parties.”

WHEREAS, ARIAD is the owner of, or otherwise controls, certain patents and technology relating to AP23573 (as defined below);

WHEREAS, MEDINOL has expertise in developing and commercializing stents, which can deliver drug products for the treatment of restenosis;

WHEREAS, MEDINOL desires to obtain the right from ARIAD to use AP23573 to evaluate, develop and commercialize certain medical devices, including stents, that will deliver AP23573;

WHEREAS, MEDINOL desires ARIAD to supply quantities of AP23573 to MEDINOL for research, clinical and commercial use with certain medical devices, including stents, that will deliver AP23573; and

WHEREAS, ARIAD desires to grant to MEDINOL rights to use AP23573 to evaluate, develop and commercialize certain medical devices, including stents, that will deliver AP23573 and to supply quantities of AP23573 to MEDINOL in connection therewith on the terms and conditions set forth in this Agreement and the Supply Agreement (as defined below).

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

DEFINITIONS

Whenever used in the Agreement with an initial capital letter, the terms defined in this Article 1 shall have the meanings specified.

1.1 “Adverse Event” shall mean any untoward medical occurrence required to be reported to any Regulatory Authority, including without limitation any

occurrence defined as a “serious adverse event” in applicable Regulatory Authority regulations or guidelines (including 21 CFR §§312.32 and 314.80, and European Standard EN540) in a patient who has been administered AP23573.

1.2 “Affiliate” shall mean any corporation, firm, limited liability company, partnership or other entity that directly controls, is controlled by or is under common control with a Party to this Agreement. For purposes of this Section 1.2, “control” means ownership, directly or indirectly through one or more entities, of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.

1.3 “API” shall mean the active pharmaceutical ingredient of AP23573.

1.4 “AP23573” shall mean ARIAD’s proprietary compound designated “AP23573,” described in [***] filed by ARIAD with the FDA.

1.5 “AP23573 Phase 1 Clinical Data” shall mean a narrative summary report prepared by ARIAD of unaudited clinical data obtained by ARIAD for patients enrolled in the AP23573 Phase 1 Clinical Trials as of the date which is three weeks preceding the date of each such summary report. Each such narrative summary report shall summarize each protocol, the number of enrolled patients receiving each dosage level in accordance with each protocol, and the safety information (which shall comprise all Adverse Events reported on draft data listings and “serious adverse events” required to be reported to any Regulatory Authority) obtained by ARIAD. For purposes of clarity, all AP23573 Phase 1 Clinical Data (i) is subject to change after audit, (ii) shall be treated as Confidential Information of ARIAD, (iii) shall be used by MEDINOL solely for internal purposes in performing its obligations and/or exercising its rights under this Agreement and the Supply Agreement, and (iv) shall not be disclosed by MEDINOL to any Third Party under any circumstances without ARIAD’s prior written consent.

1.6 “AP23573 Phase 1 Clinical Trials” shall mean only the following studies of AP23573: (a) [***] to be conducted in accordance with Protocol No. [***], and (b) [***] to be conducted in accordance with Protocol No. [***].

1.7 “Authorized Distributor” shall mean a seller or distributor of MEDINOL Licensed Products approved by ARIAD pursuant to Section 2.1.3.

1.8 “CE Mark” shall mean the “Conformite Europeene” mark issued upon approval by the European Union Regulatory Authority to market and sell MEDINOL Licensed Products in the countries of the European Union.

1.9 “Change-in-Control” shall have the meaning set forth in Section 11.8.

1.10 “CMC Data” means the chemistry, manufacturing, and controls data set forth in 21 CFR 314.50, as the same may be amended from time to time, or as otherwise required by applicable law and regulations to be included in an NDA, or the equivalent application to a Regulatory Authority for grant of marketing authorization outside the United States, as such data may be amended or supplemented from time to time. For purposes of clarity, CMC Data shall be treated as Confidential Information for purposes of this Agreement.

1.11 “Confidential Information” shall mean (a) with respect to a Party (the “Receiving Party”), all information (including without limitation, with respect to ARIAD, all data from AP23573 Phase 1 Clinical Trials, the chemical structure of AP23573 and, with respect to each Party, all Licensed Technology, CMC Data, development plans and schedules, marketing and sales information, clinical and pre-clinical data, information and results, specifications, and protocols), which are disclosed by the other Party (the “Disclosing Party”) to the Receiving Party hereunder or to any of its employees, consultants or Affiliates; and which is designated as confidential information, prior to, during or immediately after such disclosure. Confidential Information does not include information which (i) as of the date of disclosure, is known to the Receiving Party or its Affiliates, as demonstrated by written records, other than by virtue of a prior confidential disclosure to such Party or its Affiliates; (ii) as of the date of disclosure is in, or subsequently enters, the public domain, through no breach of this Agreement by the Receiving Party; (iii) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (iv) is independently developed by or for the Receiving Party without reference to, or reliance upon, any Confidential Information of the Disclosing Party as demonstrated by written records.

1.12 “Control” or “Controlled” shall mean with respect to any Patent Rights or Technology, the possession by a Party of the ability to grant a license or sublicense of such Patent Rights or Technology, as provided for herein, without violating the terms of any agreements between such Party and any Third Party and without requiring such Party to make any contractual payment to any Third Party in connection with such grant of rights or the exercise thereof by the grantee.

1.13 “Current Good Laboratory Practices” or “cGLP” shall mean current good laboratory practice and standards as described in Directive 2004/9/EC of the European Parliament and of the Council of 11 February 2004 and in Directive 2004/10/EC of the European Parliament and of the Council of 11 February 2004 or in 21 CFR Part 58, as amended, from time to time.

1.14 “Current Good Manufacturing Practices” or “cGMP” shall mean European Community requirements for good manufacturing practice as set forth in Commission Directives 91/356/EEC and 2003/94/EC, as amended, and guidance documents issued pursuant to them, or as set forth in, Title 21 of the United States Code of Federal Regulations, Parts 210 and 211, as amended, from time to time.

1.15 “Drug Master File” or “DMF” shall mean a drug master file and any amendment and supplements thereto, filed and maintained with a Regulatory Authority by or on behalf of ARIAD, which shall contain, among other things, CMC Data and other relevant information concerning AP23573.

1.16 “Excess API Cost,” as defined in the Supply Agreement, means, the difference, if any, between (i) the purchase price per gram of API [***] following expiration of the [***] notice period of a Refusal to Supply by ARIAD, minus (ii) [***]amount equal to [***] Dollars (U.S. $[***]), subject to annual adjustment for inflation, from the Effective Date to the date of purchase by MEDINOL, using the United States Bureau of Labor Statistics Producer Price Index for Pharmaceutical Preparation Manufacturing published at www.bls.gov. To calculate the Excess API Cost, all payments made by MEDINOL for API in foreign currency shall be converted into United States Dollars at the conversion rate existing in the United States (as reported in The Wall Street Journal, Eastern Edition, for purchasing United States Dollars) on the last business day of the applicable calendar quarter in which the purchase of API took place.

1.17 “Exclusive Licensees” shall mean MEDINOL and up to two (2) additional Third Parties who may be granted a license, under ARIAD’s interest in the Licensed Patent Rights and Licensed Technology to develop, have developed, make, have made, use, have used, sell, have sold, offer for sale, import, have imported, export, have exported, distribute, market and promote Licensed Products for use in the Licensed Field.

1.18 “FDA” shall mean the United States Food and Drug Administration and any successor agency or authority thereto.

1.19 “First Commercial Sale” shall mean, on a country-by-country basis, the date of the first arm’s length transaction, transfer or disposition for value to a

Third Party of a MEDINOL Licensed Product by or on behalf of MEDINOL or any Affiliate of MEDINOL in such country, but specifically excluding any transfers made in furtherance of clinical trials, research, or other such non-commercial uses.

1.20 “First-In-Humans Clinical Trial” shall mean, with respect to a MEDINOL Licensed Product, the first study in humans of the MEDINOL Licensed Product as an investigational device in accordance with applicable rules and regulations of the country or jurisdiction in the which the clinical trial is conducted.

1.21 “IDE” shall mean an investigational device exemption, as defined in Title 21 of the United States Code of Federal Regulations, Part 812 et seq., as amended from time to time, filed or to be file with the FDA.

1.22 “IND” shall mean an investigational new drug application, as defined in Title 21 of the United States Code of Federal Regulations, Part 312 et seq., as amended from time to time, filed or to be filed with the FDA.

1.23 “Licensed Field” shall mean the [***] of any [***].

1.24 “Licensed Patent Rights” shall mean all Patent Rights that (i) are Controlled by ARIAD as of the Effective Date, to the extent necessary to develop, use, make, have made, import, have imported, export, have exported, sell, have sold, offer to sell, distribute, market and promote MEDINOL Licensed Products in the Licensed Field and/or (ii) become Controlled by ARIAD during the License Term, to the extent necessary for MEDINOL to develop, use, make, have made, import, have imported, export, have exported, sell, have sold, offer to sell, distribute, market and promote MEDINOL Licensed Products in the Licensed Field. The Licensed Patent Rights as of the Effective Date are listed in Schedule A attached hereto and made a part hereof. During the Term, ARIAD shall provide to MEDINOL an annual written update of Schedule A which includes any additional patents and patent applications comprising Licensed Patents not previously listed.

1.25 “Licensed Product” shall mean any Medical Device which delivers AP23573.

1.26 “Licensed Technology” shall mean and include all Technology, whether or not patentable, including but not limited to formulations, techniques and materials, that (i) is Controlled by ARIAD as of the Effective Date, to the extent necessary for MEDINOL to develop, use, make, have made, import, have imported, export, have exported, sell, have sold, offer to sell, distribute, market and promote MEDINOL Licensed Products in the Licensed Field, and/or (ii) becomes Controlled by ARIAD during the License Term, to the extent necessary for MEDINOL to make and have made MEDINOL Licensed Products in the Licensed Field.

1.27 “License Term” shall mean, with respect to each MEDINOL Licensed Product, the period commencing on the Effective Date and continuing, on a country-by-country and product-by-product basis, until the expiration or termination of the last Valid Claim covering the manufacture, sale, use or importation of AP23573 in such country.

1.28 “Medical Device” shall mean any [***].

1.29 “MEDINOL-Gore Agreement” shall mean the Collaboration Agreement between MEDINOL and W.L. Gore dated September 12, 2002.

1.30 “MEDINOL Licensed Product” shall mean any embodiment of a Licensed Product manufactured by or exclusively for MEDINOL and sold by MEDINOL, W.L. Gore or MEDINOL’s Authorized Distributors, for which all Patent Rights are reasonably believed by MEDINOL to be owned or Controlled by MEDINOL, or for which MEDINOL reasonably believes it otherwise has the right to practice all Patent Rights. For avoidance of doubt, MEDINOL Licensed Product shall include any embodiment of a Licensed Product manufactured by or exclusively for MEDINOL, but which is bundled for sale by MEDINOL, W.L. Gore or MEDINOL’s Authorized Distributors with any other product or products (each of which may or may not be a MEDINOL Licensed Product); for example, a MEDINOL Licensed Product sold by W.L. Gore, either as a single unit or bundled with other products manufactured by or exclusively for W.L. Gore, pursuant to the MEDINOL-Gore Agreement).

1.31 “NDA” shall mean a New Drug Application filed with the FDA or any equivalent successor application or entity seeking authorization to market AP23573.

1.32 “Net Sales” shall mean the gross invoiced sales price for all MEDINOL Licensed Products sold by MEDINOL, W.L. Gore or MEDINOL’s Authorized Distributors, their respective Affiliates and the subdistributors of W.L. Gore or MEDINOL’s Authorized Distributors to Third Parties throughout the world during each calendar quarter, before the deduction of any promotional discounts, promotions, royalties, taxes, duties, fees, charges or other expenses to such seller and before any reimbursements made to its customers and after deduction of other discounts to individual customers not in excess of [***]% for any MEDINOL Licensed Product for any customer.

1.33 “Patent Rights” shall mean the rights and interests in and to issued patents and pending patent applications (including inventor’s certificates and utility models) in any country or jurisdiction, including all provisionals, substitutions, continuations, continuations in part, divisionals, supplementary protection certificates, renewals, all letters patent granted thereon, and all reissues, reexaminations, extensions, confirmations, revalidations, registrations, patents of addition thereof, PCTs and foreign counterparts.

1.34 “Patented MEDINOL Licensed Product” shall mean a MEDINOL Licensed Product manufactured or sold in a country in which there is a Valid Claim of a Licensed Patent Right at the time of manufacture or sale.

1.35 “Permitted Assignee” shall mean any assignee assuming the rights and obligations of a Party under this Agreement pursuant to a Change-in-Control.

1.36 “Pivotal Clinical Trial” shall mean, with respect to a MEDINOL Licensed Product, a well-controlled study in humans designed to determine, taking into account statistical considerations, the safety and efficacy of such MEDINOL Licensed Product, which is designed to demonstrate whether such MEDINOL Licensed Product is safe and effective for one or more indication(s) in the Licensed Field.

1.37 “PMA” shall mean an application to obtain pre-market approval, as defined in Title 21 of the United States Code of Federal Regulations, Part 814 et. seq., as amended from time to time, filed with the FDA.

1.38 “Registration Process” shall mean ARIAD’s manufacturing process for manufacturing API under cGMP which is validated and reproducible to achieve Regulatory Approval of the MEDINOL Licensed Product in the United States and the European Union.

1.39 “Regulatory Approval” shall mean any and all approvals by applicable Regulatory Authorities necessary to market and sell a MEDINOL Licensed Product in any country or jurisdiction.

1.40 “Regulatory Authority” shall mean any applicable supranational, national, federal, state or local regulatory agency, department, bureau or other governmental entity of any country or jurisdiction (including the FDA in the United States), having responsibility in such country or jurisdiction for any Regulatory Approvals of any kind in such country or jurisdiction, and any successor agency or authority thereto.

1.41 “Stent” shall mean a metal wire mesh tube that is placed, by means of a catheter, at the site of a blockage within an artery [***] to keep the vessel open after balloon angioplasty.

1.42 “Supply Agreement” shall mean that certain Supply Agreement, entered into as of even date herewith between ARIAD and MEDINOL, in the form attached hereto as Exhibit 3.3.

1.43 “Technology” shall mean and include any and all unpatented proprietary ideas, inventions, discoveries, Confidential Information, biological materials, data, results, formulae, designs, specifications, methods, processes, formulations, techniques, ideas, know-how, technical information (including, without limitation, structural and functional information), process information, pre-clinical information, clinical information, and any and all proprietary biological, chemical, pharmacological, toxicological, pre-clinical, clinical, assay, control and manufacturing data and materials, and, in the case of MEDINOL, any and all mechanical, mechanical design and material science data and materials.

1.44 “Term” shall mean have the meaning set forth in Section 9.1.

1.45 “Third Party” shall mean any person or entity other than MEDINOL or ARIAD.

1.46 “Unpatented MEDINOL Licensed Product” shall mean a MEDINOL Licensed Product that is neither manufactured nor sold in a country in which there is a Valid Claim of a Licensed Patent Right at the time of manufacture or sale.

1.47 “Valid Claim” shall mean a claim in an issued, unexpired patent within the Licensed Patent Rights that (a) has not been finally cancelled, withdrawn, abandoned or rejected by any administrative agency or other body of competent jurisdiction, (b) has not been revoked, held invalid, or declared unpatentable or unenforceable in a decision of a court or other body of competent jurisdiction that is unappealable or unappealed within the time allowed for appeal, (c) has not been rendered unenforceable through disclaimer or otherwise, and (d) is not lost through an interference proceeding.

1.48 [***].

1.49 “W.L. Gore” shall mean W.L. Gore and Associates.

GRANT OF RIGHTS

2.1 License and Retained Rights.

2.1.1 Grant of License. Subject to the terms and conditions of this Agreement, ARIAD hereby grants to MEDINOL a tri-exclusive, with up to two other Exclusive Licensees, worldwide royalty-bearing license during the Term, with the right to grant sublicenses solely to MEDINOL’s Affiliates, W.L. Gore, MEDINOL’s Authorized Distributors and/or other sellers and distributors of MEDINOL products who are not Affiliates of W.L. Gore or an Authorized Distributor and who purchase MEDINOL products from W.L. Gore or an Authorized Distributor (including in multi-tiered distribution channels), solely to enable such Affiliates and/or W.L. Gore and Authorized Distributors and other such sellers and distributors to market and sell MEDINOL Licensed Products, under ARIAD’s interest in the Licensed Patent Rights and Licensed Technology, to develop, have developed, make, have made, use, have used, sell, have sold, offer to sell, import, have imported, export, have exported, distribute, market and promote MEDINOL Licensed Products in the Licensed Field.

2.1.2 Retained Rights. Subject to the other terms of this Agreement, ARIAD retains all rights to the Licensed Technology and the Licensed Patent Rights, including without limitation, the right to:

(a) develop, have developed, make, have made, use, have used, sell, have sold, offer for sale, import, have imported, export, have exported, distribute, market or promote any product, except that ARIAD shall not have the right to use, have used, sell, have sold, offer for sale, import, have imported, export or have exported, distribute, market or promote any Licensed Product in the Licensed Field;

(b) grant licenses to Affiliates and Third Parties under ARIAD’s interest in the Licensed Patent Rights and Licensed Technology, except that ARIAD will not grant more than two (2) tri-exclusive licenses to Exclusive Licensees, under ARIAD’s interest in the Licensed Patent Rights and Licensed Technology, to develop, have developed, make, have made, use, have used, sell, have sold, offer for sale, import, have imported, export, have exported, distribute, market and promote Licensed Products in the Licensed Field,

(c) make or have made and sell or supply AP23573 for any purpose, provided that ARIAD will not use AP23573 in Licensed Products in the Licensed Field nor supply AP23573 to any party for use in Licensed Products in the Licensed Field other than to MEDINOL hereunder or under the Supply Agreement or to an Exclusive Licensee licensed in accordance with clause (b) above; and

(d) otherwise develop and exploit Licensed Patent Rights and Licensed Technology for any purpose other than Licensed Products for use in the Licensed Field.

No rights or licenses are granted hereunder (by implication, estoppel or otherwise) except as expressly set forth herein. The restrictions and limitations on ARIAD’s retained rights in clauses (a) and (b) of this Section 2.1.2 shall, on a country by country basis, terminate and become void upon the expiration or termination of the Licensed Term each such country.

2.1.3 Authorized Distributors. If MEDINOL wishes to appoint a seller or distributor of MEDINOL Licensed Products other then W.L. Gore, it shall so notify ARIAD and shall provide ARIAD with all material information regarding the relationship and a copy of all relevant agreements (collectively, the “Distributor Information”). No Third Party shall be appointed as a seller or distributor of MEDINOL Licensed Products without written approval of ARIAD, which shall not be unreasonably withheld. ARIAD shall respond to any request for approval within ten (10) days of receipt of the Distributor Information from MEDINOL. If ARIAD’s approval of any proposed seller or distributor is withheld, ARIAD shall so notify MEDINOL in writing within such 10-day period, including an explanation of the reasons therefor. Some examples (but not a complete list) of reasons ARIAD may withhold its approval of a proposed seller or distributor include ARIAD’s reasonable belief that such proposed seller or distributor has a history of under performance, is competitive with ARIAD or its Affiliates, is adverse to ARIAD or its Affiliates in a pending or threatened dispute or would cause ARIAD or its Affiliates to be in breach under, or conflict with, any agreement, decree, law, rule or regulation governing ARIAD’s business. MEDINOL shall remain obligated for its performance under this Agreement notwithstanding MEDINOL’s sublicense to, or appointment of, W.L. Gore or any Authorized Distributor to sell or distribute MEDINOL License Products on MEDINOL’s behalf.

DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS.

3.1 Development Obligations. ARIAD’s and MEDINOL’s obligations concerning the development and commercialization of AP23573 and MEDINOL Licensed Products are set forth in this Article 3.

3.1.1 ARIAD’s Obligations. During the Term, at ARIAD’s sole expense, ARIAD shall use commercially reasonable efforts to:

(a) for so long as ARIAD and/or its pharmaceutical partners continue development of AP23573 for use to treat cancer, take all actions necessary to continue development and manufacture under cGMP of AP23573 in order to facilitate MEDINOL’s efforts pursuant to Section 3.1.2;

(b) as mutually agreed, provide to MEDINOL, from time to time, such AP23573 Phase 1 Clinical Data to facilitate MEDINOL in meeting its obligations pursuant to Section 3.1.2. MEDINOL shall maintain all such AP23573 Phase 1 Clinical Data in confidence and shall not use or disclose it to any Third Party except as expressly permitted under Section 3.4 of this Agreement.

(c) as soon as practicable following completion of its AP23573 Phase 1 Clinical Trials, provide to MEDINOL a final audited report of all clinical data, including all Adverse Events, obtained from patients enrolled in ARIAD’s AP23573 Phase 1 Clinical Trials. MEDINOL shall maintain the final audited report disclosed to it pursuant to this Section 3.1.1(c) in confidence and shall not use or disclose it to any Third Party except as expressly permitted under Section 3.4 of this Agreement;

(d) take all actions necessary to file and maintain its U.S. DMF with respect to API made using the Registration Process on a timetable to be mutually agreed between ARIAD and MEDINOL;

(e) take all actions necessary, including completion of its ongoing AP23573 Phase 1 Clinical Trials, to file and maintain a European DMF with respect to API made using the Registration Process on a timetable to be mutually agreed between ARIAD and MEDINOL; and

(f) take all actions agreed upon by the Parties and necessary to seek marketing approval for AP23573 in Japan on a timetable to be mutually agreed between ARIAD and MEDINOL.

For purposes of clarity, it is acknowledged that (i) ARIAD’s obligation under this Section 3.1.1 shall be limited to AP23573 as a drug, independent of any Medical Device, and shall not apply to any MEDINOL Licensed Product, and (ii) ARIAD’s obligations under this Section 3.1.1 to use commercially reasonable efforts do not require ARIAD and/or its pharmaceutical partner to continue development, manufacture and regulatory approval efforts with respect to AP23573 if, in ARIAD’s and/or its pharmaceutical partner’s reasonable commercial judgment, it is not in its or their business interest to do so.

3.1.2 MEDINOL’s Obligations. During the Term, at MEDINOL’s sole expense, MEDINOL shall use commercially reasonable efforts to:

(a) take all actions necessary to develop and manufacture MEDINOL Licensed Product(s) under cGMP and to market (itself or through its Affiliates or W.L. Gore or its Authorized Distributors) such MEDINOL Licensed Product(s) in the United States, European Union and Japan in order to achieve the milestones and cause ARIAD to receive the payments set forth in Section 4.4 as soon as practicable;

(b) initiate First-In-Man Clinical Trials using a MEDINOL Licensed Product on a timetable to be mutually agreed between ARIAD and MEDINOL;

(c) take all actions necessary, including the conduct of necessary clinical trials, to file a PMA for a MEDINOL Licensed Product in the U.S. on a timetable to be mutually agreed between ARIAD and MEDINOL;

(d) take all actions necessary, including the conduct of necessary clinical trials, to file for CE Mark for a MEDINOL Licensed Product in Europe on a timetable to be mutually agreed between ARIAD and MEDINOL; and

(e) take all actions necessary, including the conduct of necessary clinical trials, to seek pricing and marketing approval for MEDINOL Licensed Products in Japan on a timetable to be mutually agreed between ARIAD and MEDINOL.

MEDINOL’s obligations under this Section 3.1.2 do not require MEDINOL to continue development, manufacture clinical development and regulatory work with respect to MEDINOL Licensed Product(s) if, in MEDINOL’s reasonable commercial judgment, it is not in MEDINOL’s business interest to do so.

3.1.3 Compliance with Laws and Regulations. In undertaking its respective obligations pursuant to this Article 3, each of ARIAD and MEDINOL shall comply with all applicable laws, regulations, ordinances and guidelines. Without limiting the generality of the foregoing, with respect to the conduct of clinical trials in humans sponsored by a Party, such Party (and its agents and representatives) shall ensure compliance with, among other things, applicable standards of good clinical practice of the FDA, ICHGCP guidelines and other regulations of the FDA and other Regulatory Authorities governing the performance of such clinical investigations.

3.2 Supply Agreement. Contemporaneously with the execution hereof, ARIAD and MEDINOL shall enter into the Supply Agreement, pursuant to which ARIAD shall supply, and MEDINOL shall purchase, API on the terms and conditions set forth on Exhibit 3.3 attached hereto.

3.3 Project Committee and Reporting.

3.3.1 Project Committee. Each Party shall designate an appropriate individual to serve as its principal liaison (“Principal Liaison”). A Party’s Principal Liaison shall serve as the principal point of contact for the other Party and shall coordinate and manage the performance of that Party’s obligations under this Agreement. The Principal Liaisons shall function as a Project Committee and shall meet in person or by telephone, at a minimum, on a quarterly basis. For purposes of the Project Committee operations, the parties’ understand and acknowledge that ARIAD’s employees have and can contribute expertise in the area of pharmaceutical product development, testing and commercialization and MEDINOL’s employees have and can contribute expertise in the area of medical device product development, testing and commercialization.

3.3.2 Committee Operations. The Project Committee shall establish procedures for regular quarterly meetings at which it shall: (a) provide summary progress reports and discuss and cooperate to resolve technical and regulatory issues relating to the development and commercialization of MEDINOL Licensed Products encountered by either Party, (b) discuss and help in the development of strategies to commercialize MEDINOL Licensed Products worldwide, (c) provide input for the development plans for each MEDINOL Licensed Product, including, without limitation, assistance with the development of timelines for achievement by each Party of the obligations specified in Sections 3.1.1 and 3.1.2 in order to seek marketing approval for MEDINOL Licensed Products in the United States, the European Union and Japan, and (d) discuss and implement procedures to coordinate and manage each Party’s activities in meeting its respective obligations in Sections 3.1.1 and 3.1.2. In addition to participation in such quarterly meetings, ARIAD shall use reasonable efforts to provide technical and regulatory assistance to MEDINOL, within its area of expertise and solely related to AP23573, to assist MEDINOL to develop, manufacture and obtain Regulatory Approvals to market MEDINOL Licensed Products. Such assistance shall be organized through the Principal Liaisons of ARIAD and MEDINOL who shall act as the principal contacts and project managers for development of MEDINOL Licensed Products in their respective companies. All information shared at Project Committee meetings shall be treated as Confidential Information of the disclosing party and the recipient shall use such information only for purposes expressly permitted under this Agreement. For sake of clarity, it is stressed that no information exchanged under the mutual program or pursuant to this Agreement will be shared by ARIAD with any of the other Exclusive Licensees without the written consent of MEDINOL.

3.3.3 Regulatory Information. During the Term, the Parties shall share information for clinical and regulatory purposes as follows:

3.3.4 Investigator Safety Letters. Each Party shall promptly (but in no event later than 72 hours before expiration of the earliest deadline to provide notice to clinical investigators pursuant to all relevant guidelines of Regulatory Authorities governing the conduct of clinical trials worldwide) provide a copy of all investigator safety letters generated by it or its Affiliates or licensees in connection with worldwide clinical studies of products containing AP23573 to the Principal Liaison of other Party. Upon receipt thereof, the Party receiving such investigator safety letter shall (i) timely (in accordance with all relevant guidelines of Regulatory Authorities) disseminate or cause to be disseminated such investigator safety letters to each clinical investigator conducting clinical trials in any patient population worldwide with any product containing AP23573 on behalf of it or its Affiliates or licensees, and (ii) within 24 hours thereafter, confirm in writing to the Principal Liaison of the Party disclosing such investigator safety letter that it has complied with its obligation in clause (i) of this sentence.

3.3.5 MEDINOL Data. Subject to applicable laws governing patient confidentiality and to the extent necessary for ARIAD to comply with applicable statutes, laws, regulations, ordinances and guidelines governing Regulatory Approval of AP23573, MEDINOL shall provide to ARIAD: (a) in electronic database format, all safety data (including Adverse Events) from its worldwide clinical trials relating to MEDINOL Licensed Products, (b) copies of all investigator safety letters provided by MEDINOL to its clinical investigators in connection with clinical studies of MEDINOL Licensed Products, and (c) only to the extent reasonably necessary for ARIAD to obtain Regulatory Approval of AP23573, summaries of relevant data generated by MEDINOL in connection with its preclinical studies of any product containing AP23573 (collectively, “MEDINOL Data”). MEDINOL’s Data shall be treated as Confidential Information and ARIAD shall maintain such MEDINOL Data disclosed to it pursuant to this Section 3.4.2 in confidence and shall not use or disclose it to any Third Party other than to disclose, itself or through its agent, such MEDINOL Data, after obtaining assurances that such MEDINOL Data will be afforded confidential treatment by the recipient, to its Exclusive Licensees, pharmaceutical partners or any Regulatory Authority solely as required in order for such recipient to obtain or grant, as the case may be, Regulatory Approval of a product containing AP23573.

3.3.6 ARIAD Data. Subject to applicable laws governing patient confidentiality and to the extent necessary for MEDINOL to comply with applicable statutes, laws, regulations, ordinances and guidelines governing Regulatory Approval of MEDINOL Licensed Products, ARIAD shall provide MEDINOL (i) the right to cross-reference to all safety data (including Adverse Events) reported to the FDA by ARIAD under its IND to obtain Regulatory Approval for AP23573, (ii) copies of all investigator safety letters provided by ARIAD to its clinical investigators in connection with clinical studies of AP23573, (iii) only to the extent reasonably necessary for MEDINOL to obtain Regulatory Approval of any MEDINOL Licensed Product, summaries of relevant data generated by ARIAD in connection with its preclinical studies of AP23573, and (iv) summary reports of all safety data (including Adverse Events) attributable to the use of AP23573 provided to ARIAD by any party granted a license pursuant to ARIAD’s retained rights in Section 2.1.2 (together with ARIAD’s audited report referred to in Section 3.1.1(b), “ARIAD Data”). ARIAD Data shall be treated as Confidential Information and MEDINOL shall maintain such ARIAD Data disclosed to it pursuant to this Section 3.4.3 in confidence and shall not use or disclose it to any Third Party other than: (i) MEDINOL, itself or through its agent, may provide a cross-reference to ARIAD Data reported to the FDA by ARIAD under its IND or corresponding foreign country filing to obtain Regulatory Approval for AP23573 in any country or may disclose ARIAD Data in a written submission to any such Regulatory Authority, in each case solely as required to obtain Regulatory Approval of MEDINOL Licensed Products in the Licensed Field, but only after obtaining prior written permission from ARIAD to make such disclosure which is conditioned upon MEDINOL obtaining written assurances from the Regulatory Authorities to whom the information is being disclosed that such ARIAD Data will be afforded confidential treatment by such Regulatory Authority, and (ii) MEDINOL, upon prior notice to ARIAD, may verbally disclose ARIAD Data in any teleconference or meeting with any Regulatory Authority, in each case solely as required to obtain Regulatory Approval of MEDINOL Licensed Products in the Licensed Field, but only after obtaining prior written permission from ARIAD which is conditioned upon affording appropriate ARIAD personnel the opportunity participate in each such teleconference or meeting.

3.3.7 MEDINOL Licensed Product Reports. During the Term, in addition to the requirements set forth in Sections 3.4.1 and 3.4.2, MEDINOL shall provide the Project Committee with [***] written reports that summarize MEDINOL’s efforts to develop and commercialize MEDINOL Licensed Products hereunder. In addition, MEDINOL shall provide the Project Committee with prompt written notice of the occurrence of the First Commercial Sale of any MEDINOL Licensed Product in each country in which MEDINOL Licensed Products are introduced. ARIAD acknowledges that all reports provided by MEDINOL pursuant to this Section 3.4.4 are MEDINOL Confidential Information and shall use such information only for purposes expressly permitted under this Agreement.

3.3.8 ARIAD AP23573 Development Program Reports. During the Term, ARIAD shall provide the Project Committee with [***] written reports that summarize ARIAD’s efforts to obtain regulatory approval for AP23573 in any territory, and its progress in arranging to supply MEDINOL with AP23573 on a timely basis according to this Agreement and the Supply Agreement (in other words, ARIAD’s progress with its manufacturing development program for AP23573). MEDINOL acknowledges that all reports provided by ARIAD pursuant to this Section 3.4.5 are ARIAD Confidential Information and shall use such information only for purposes expressly permitted under this Agreement.

PAYMENTS AND ROYALTIES

4.1 License Fee. As partial consideration for this Agreement, MEDINOL hereby agrees to pay ARIAD, on the Effective Date, a non-refundable, non-creditable upfront fee in the amount of Seven Hundred Fifty Thousand Dollars ($750,000).

4.2 [Intentionally omitted.]

4.3 Payment of Royalties; Royalty Rates. In further consideration of the grant of the license granted under Section 2.1.1, and subject to the other terms of this Agreement (including the remainder of this Section 4), commencing on the date of the First Commercial Sale of each MEDINOL Licensed Product in each country, MEDINOL shall pay to ARIAD royalties on Net Sales of MEDINOL Licensed Products as follows: The royalty rate shall be: (a) with respect to all MEDINOL Licensed Products [***] (i) [****] percent ([***]%) of Net Sales for the [***] units of any such MEDINOL Licensed Products sold in each calendar year, and (ii) [****] percent ([***]%) of Net Sales for [***] of any such MEDINOL Licensed Product sold in each calendar year, and (b) with respect to all MEDINOL Licensed Products [***]: (i) [***] percent ([***]%) of Net Sales for the first [***] units of any such MEDINOL Licensed Products sold in each calendar year, and (ii) [***] percent ([***]%) of Net Sales for [***] of any such MEDINOL Licensed Product sold in each calendar year. In the event that, in any calendar quarter, MEDINOL actually makes payments of Excess API Cost to purchase API from a Third Party Approved Manufacturer to make or have MEDINOL Licensed Products, then MEDINOL shall have the right to reduce royalties otherwise due ARIAD pursuant to this Section 4.3, but only over the next [***] ([***]) consecutive quarters following the calendar quarter in which such payment of Excess API Cost is made by MEDINOL, by up to [***] percent ([***]%) of such Excess API Cost. Notwithstanding the foregoing,

reductions for payments of Excess API Cost pursuant to this Section 4.3 shall in no event reduce the royalty due ARIAD in any calendar quarter to less than [***] percent ([***]%) of Net Sales of MEDINOL Licensed Products. The Royalty Payments shall be due and payable (a) for Patented MEDINOL Licensed Products until the expiration or termination of the last Valid Claim within the Licensed Patent Rights in both the country where the MEDINOL Licensed Product is manufactured and the country where the MEDINOL Licensed Product is sold and (b) for Unpatented MEDINOL Licensed Products until [***] ([***]) years from the date of first commercial sale of the Unpatented MEDINOL Licensed Product in each country, as determined on a country-by-country and MEDINOL Licensed Product-by-MEDINOL Licensed Product basis. For the avoidance of doubt, clause (b) shall be applicable to Patented MEDINOL Licensed Products which become Unpatented MEDINOL Licensed Product as a result of the expiration of patents for the remainder of the [***] ([***]) year period.

4.4 Milestone Payments.

4.4.1 Payment. In further consideration of the licenses granted under Section 2.1.1, and subject to the other terms and conditions of this Agreement, MEDINOL shall make the non-refundable, non-creditable payments set forth in the table below to ARIAD within thirty (30) days of the first achievement of each of the following events by MEDINOL or its Affiliates or partners with respect to (i) a MEDINOL Licensed Product [***], and (ii) each MEDINOL Licensed Product. [***]. For purposes of clarity, it is expressly agreed that these milestone payments will be payable only once for all MEDINOL Licensed Products [***] when the first MEDINOL Licensed Product [***] reaches each milestone. MEDINOL Licensed Products [***], which will trigger separate milestone payments hereunder, means another [***].


Milestone Number	Milestone	Milestone Payment
1	Initiation of [***]	$	[***	]
2	Initiation of [***]	$	[***	]
3	Submission of an IDE for MEDINOL Licensed Product in the U.S.	$	[***	]
4	Completion of [***]	$	[***	]
5	Granting of [***]	$	[***	]
6	Filing of [***]	$	[***	]
7	Granting of [***]	$	[***	]
8	Granting of [***]	$	[***	]
9	[***]	$	[***	]
10	[***]	$	[***	]

4.4.2 Determination that Payments are Due. MEDINOL shall provide ARIAD with prompt written notice upon its achievement of each of the milestones set forth in Section 4.4.1. In the event that ARIAD believes any milestone payment is due in spite of not having received notice from MEDINOL, it shall so notify MEDINOL and shall provide to MEDINOL the data and information reasonably supporting its belief that the conditions for payment have been achieved. If MEDINOL does not provide reasonable evidence that such milestone has not been achieved within forty five (45) days of receipt of the data and information from ARIAD, the conditions for such milestone payment under Section 4.4.1 shall be deemed to have been achieved.

4.5 Payment Terms.

4.5.1 Payment of Royalties and Milestones. Except as otherwise provided herein, MEDINOL shall make any milestone, license or royalty payments owed to ARIAD hereunder, in arrears, within sixty (60) days following the end of each calendar quarter in which such payment accrues. For purposes of determining when a sale of any MEDINOL Licensed Product occurs under this Agreement, royalties shall accrue on the date of the [payment on] invoice to the purchaser of the MEDINOL Licensed Product. Each royalty payment shall be accompanied by a report for each country in which sales of MEDINOL Licensed Products occurred, and for which a royalty payment is due, in the calendar quarter covered by such statement, specifying: (i) the gross sales (if available) and Net Sales in each country’s currency; (ii) the applicable royalty rate under this Agreement; (iii) the royalties payable in US Dollars, including an accounting of deductions taken in the calculation of Net Sales; (iv) the applicable exchange rate used to convert from each country’s currency to United States Dollars under this Section 4.5. In no event shall more than one royalty be due ARIAD for any unit of MEDINOL Licensed Product sold by MEDINOL and/or its Affiliates or W.L. Gore, Authorized Distributors or other sellers or distributors of MEDINOL Licensed Products hereunder.

4.5.2 Overdue Royalties. Subject to the other terms of this Agreement, royalties not paid within the time period set forth in this Article 4 shall bear interest at a rate of the lesser of either the maximum legally allowable interest rate or [***] percent ([***]%) per month, from the due date until paid in full.

4.5.3 Accounting. All payments hereunder shall be made in the United States in United States Dollars. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States (as reported in The Wall Street Journal, Eastern Edition, for purchasing United States Dollars) on the last business day of the applicable calendar quarter in which the Net Sales took place. If The Wall Street Journal ceases to be published, then the rate of exchange to be used shall be that reported in such other business publication of national circulation in the United States as the Parties reasonably agree. Each Party shall deduct any taxes which the Party is obligated to pay and/or withhold in its country on the payments due under this Agreement and pay them to the proper authorities as required by applicable laws. Therefore, it is agreed and understood that any amount to be paid under the terms of this Agreement is net of any such tax, but the calculation of royalty according to Section 4.3 and milestone payments according to Section 4.4 is calculated as the gross payment. Each Party shall maintain official receipts of payment of any such taxes and forward these receipts to the other Party within sixty (60) days of such payment and shall provide reasonable assistance to the other Party in obtaining any legally due credit or refund of such taxes.

4.5.4 Tax Withholding; Restrictions on Payment. All payments hereunder shall be made free and clear of any taxes, duties, levies, fees or charges, except for withholding taxes as set forth in Section 4.5.3. If by law, regulations or fiscal policy of a particular country, remittance of royalties in United States Dollars is restricted or forbidden, written notice thereof shall promptly be given to ARIAD, and payment of the royalty shall be made by the deposit thereof in local currency to the credit of ARIAD in a recognized banking institution reasonably designated by ARIAD by written notice to MEDINOL. When, in any country, the law or regulations prohibit both the transmittal and the deposit of royalties on sales in such country, royalty payments shall be made in U.S. Dollars from the United States for as long as such prohibition is in effect.

4.6 Records Retention; Review.

4.6.1 Royalty Record Retention. Commencing as of the date of First Commercial Sale of the first MEDINOL Licensed Product, MEDINOL, W.L. Gore, the Authorized Distributors and their Affiliates shall retain, for a minimum of three (3) years from the end of the calendar year to which they pertain, complete and accurate

records of sales by MEDINOL, W.L. Gore, the Authorized Distributors or their Affiliates, as the case may be, of each MEDINOL Licensed Product in sufficient detail to allow the accuracy of the payments hereunder to be confirmed.

4.6.2 Review of Royalty Records. Subject to the other terms of this Section 4.6.2, upon thirty (30) days’ prior written request from ARIAD no more frequently than once each calendar year, at ARIAD’s expense (except as provided in this Section 4.6.2 below), MEDINOL shall permit an independent certified public accountant reasonably selected by ARIAD and reasonably acceptable to MEDINOL to inspect (during regular business hours) the relevant records required to be maintained by MEDINOL under this Section 4.6. In every case, the accountant must have previously entered into a confidentiality agreement with both Parties substantially similar to the provisions of Section 5 and limiting the disclosure and use of such information by such accountant to authorized representatives of the Parties and the purposes germane to this Section 4.6. Results of any such review shall be binding on both Parties, absent manifest error. Each Party agrees to treat the results of any such accountant’s review of the other Party’s records under this Section 4.6 as Confidential Information of the other Party subject to the terms of Section 5. If any review reveals a deficiency in the calculation of royalties resulting from any underpayment by MEDINOL, MEDINOL shall promptly pay ARIAD the amount remaining to be paid, and if such underpayment is by [****] percent ([***]%) or more, MEDINOL shall pay the reasonable out-of-pocket costs and expenses of the review.

4.6.3 Affiliates and Distributors. MEDINOL shall cause W.L. Gore and all Authorized Distributors of MEDINOL Licensed Products and their Affiliates to retain records relating to MEDINOL Licensed Products and permit ARIAD to inspect such records in the same manner as set forth in this Section 4.6.

TREATMENT OF CONFIDENTIAL INFORMATION

5.1 Confidential Obligations.

5.1.1 Each Party shall be deemed the owner of all right, title and interest, including all intellectual property rights, in and to the Confidential Information of that Party. ARIAD and MEDINOL each agree that, during the Term and thereafter, it shall (a) keep confidential, and shall cause all of its officers, employees, consultants, Third Party contractors and licensees and the officers, employees, consultants, Third Party contractors and licensees of its Affiliates to keep confidential, all Confidential Information of the other Party, and (b) use, and shall cause all of its officers, employees, consultants, Third Party contractors and licensees and the officers, employees, consultants, Third Party contractors and licensees of its Affiliates to use, all Confidential

Information of the other Party solely for purposes expressly permitted under this Agreement. Each Party shall take such action, and shall cause its Affiliates to take such action, to preserve the confidentiality of each other’s Confidential Information as it would customarily take to preserve the confidentiality of its own Confidential Information, but no less than reasonable action.

5.1.2 ARIAD and MEDINOL each agree that any disclosure of the other Party’s Confidential Information to any officer, employee, consultant, Third Party contractor or licensee of the other Party or any of its Affiliates (or W.L. Gore or an Authorized Distributor in the case of MEDINOL) shall be made only to the extent necessary to perform its obligations or exercise its rights under this Agreement, shall be limited to the maximum extent possible consistent with such obligations or rights and shall only be made to persons who are bound by written confidentiality obligations to maintain the confidentiality thereof and not to use such Confidential Information except as expressly permitted by this Agreement. MEDINOL shall maintain all Confidential Information of ARIAD comprising the structure of AP23573, all CMC Data and other chemistry data in a secure file with access limited to MEDINOL’s regulatory personnel (and shall maintain a log tracking personnel access to such data). Without limiting the generality of the foregoing, MEDINOL shall cause W.L. Gore and each Authorized Distributor to execute a written Confidentiality Agreement with ARIAD in form and substance satisfactory to ARIAD. MEDINOL hereby guarantees full and complete compliance by W.L. Gore and each Authorized Distributor with the terms of such Confidentiality Agreement and shall be liable for any breach thereof by W.L. Gore, any Authorized Distributor or any person or entity receiving Confidential Information of ARIAD directly or indirectly from W.L. Gore.

5.1.3 Notwithstanding the provisions of Section 5.1.2, ARIAD and MEDINOL agree not to disclose or transfer the other Party’s Confidential Information to any Third Parties under any circumstances without the prior written approval from the other Party (such approval not to be unreasonably withheld), except (i) filing and prosecuting patent applications and maintaining patents which are filed in accordance with Article 6 of this Agreement, except that MEDINOL may not disclose the chemical structure of AP23573 or descriptive information sufficient to determine the chemical structure of AP23573 in connection therewith without ARIAD’s prior written consent, (ii) filing, prosecuting or defending litigation in accordance with the provisions of Article 6, except that MEDINOL may not voluntarily disclose the chemical structure of AP23573 or descriptive information sufficient to determine the chemical structure of AP23573 in connection therewith without ARIAD’s prior written consent, or (iii) as required to obtain Regulatory Approval to market or sell AP23573 and MEDINOL Licensed Products, (iv) as reasonably necessary to obtain the services of any Third Party

contractor in connection with the preclinical or clinical development of MEDINOL Licensed Products, except that MEDINOL may not disclose the chemical structure of AP23573 without ARIAD’s prior written consent, (v) as permitted in the Supply Agreement, or (vi) complying with court orders; provided, however, that if a Party is required to make any such disclosure of the other Party’s Confidential Information pursuant to any court order or discovery request, it will give reasonable advance notice to the other Party of such disclosure requirement and will use reasonable efforts to assist such other Party in efforts to limit disclosure of such information to the maximum extent possible and to secure confidential treatment of such information required to be disclosed.

5.1.4 Each Party, upon the request of the other Party, will return or destroy all the Confidential Information disclosed or transferred to it by the other Party pursuant to this Agreement, including all copies and extracts of documents and all manifestations in whatever form, upon termination or expiration of this Agreement; provided however, that one (1) copy of such Confidential Information may be retained in a secure location solely for the purpose of establishing compliance with this Agreement and/or if required by law or regulation.

5.1.5 The Parties acknowledge and agree that any breach or threatened breach of the Article 5 will result in irreparable harm to the Party whose Confidential Information is subject to such breach or threatened breach, for which remedies at law will not be adequate. Each Party, as a disclosing Party, shall therefore be entitled to seek injunctive relief in any court of competent jurisdiction in addition to any other remedy at law or in equity in the event of a breach or threatened breach of this Article.

5.2 Publication. Notwithstanding the confidentiality obligations set forth in this Section 5, MEDINOL and its Affiliates and academic collaborators shall have the right to publish (solely in recognized, peer-reviewed scientific journals) or present the results of its clinical studies. In order to balance this right with ARIAD’s proprietary interests, MEDINOL will submit for ARIAD’s review manuscripts or other material intended for publication, abstracts, posters and other disclosures (“Proposed Disclosures”) at least thirty (30) days prior to the date of submission for publication or other disclosure. ARIAD will complete its review within thirty (30) days of receipt of the Proposed Disclosure. Prior to such publication or other disclosure, ARIAD shall have the right to review and to request that MEDINOL delete any reference to ARIAD Confidential Information (excluding the results of MEDINOL’s clinical studies). If not delayed pursuant to the preceding sentence, at the end of the 30-day period, MEDINOL will have the right to publish or present the disclosure as amended by ARIAD.

5.3 Publicity. Neither Party may publicly disclose the existence or terms or any other matter of fact regarding this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that either Party may make such a disclosure (a) to the extent required by law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded or intends to be listed or traded, or (b) to any professional advisors, potential acquirers, investors, prospective investors, lenders and other potential financing sources who are obligated to keep such information confidential. In the event that such disclosure is required as aforesaid in clause (a), the disclosing Party shall make reasonable efforts to provide the other Party with notice beforehand and to coordinate with the other Party with respect to the wording and timing of any such disclosure. The Parties shall mutually agree to the form and timing of a press release with respect to this transaction. Once such press release or any other written statement is approved for disclosure by both Parties, either Party may make subsequent public disclosure of the contents of such statement without the further approval of the other Party.

5.4 Use of Name. Neither Party shall employ or use the name of the other Party in any promotional materials or advertising without the prior express written permission of the other Party.

5.5 Trademark. MEDINOL shall have the right to market the MEDINOL Licensed Products under trademarks selected by MEDINOL. Any commercial use of AP23573 in MEDINOL’s Licensed Products must reflect ARIAD’s then current product mark and description.

PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS; OWNERSHIP OF INVENTIONS

6.1 Patent Filing, Prosecution and Maintenance. Subject to the other terms of this Section 6.1, ARIAD shall be responsible for preparing, filing, prosecuting, obtaining and maintaining, at its sole cost, expense and discretion, and acting through patent attorneys or agents of its choice, all Licensed Patent Rights in each of the countries listed on Exhibit 6.1. MEDINOL represents that the countries listed on Exhibit 6.1 comprise all of the markets wherein MEDINOL intends to market and sell MEDINOL Licensed Products as of the Effective Date. ARIAD (i) will provide MEDINOL with a copy of pending claims of the Licensed Patent Rights that are relevant to the Licensed Field, and (ii) will keep MEDINOL reasonably informed of the issuance or abandonment of such claims.

6.2 Notice of Infringement. If, during the License Term, either Party learns of any actual, alleged or threatened infringement by a Third Party of any Licensed Patent Rights in the Licensed Field under this Agreement, such Party shall promptly notify the other Party and shall, to the extent it may lawfully do so, provide such other Party with available evidence of such infringement.

6.3 Infringement of Patent Rights. ARIAD shall have the right (but not the obligation), at its own expense and with legal counsel of its own choice, to bring suit (or take other appropriate legal action) against any actual, alleged or threatened infringement of the Licensed Patent Rights in the Licensed Field. MEDINOL shall have the right, at its own expense, to be represented in any such action by counsel of MEDINOL’s own choice; provided, however, that under no circumstances shall the foregoing affect the right of ARIAD to control the suit as described in the first sentence of this Section 6.3. If ARIAD brings any such action or proceeding hereunder (i) MEDINOL agrees to be joined as party plaintiff if necessary to prosecute such action or proceeding, and (ii) at ARIAD’s expense, MEDINOL shall give ARIAD reasonable assistance and authority to file and prosecute the suit, and (iii) ARIAD shall be permitted to settle any such suit without the prior consent of MEDINOL. For the avoidance of doubt, it is hereby expressly agreed that MEDINOL shall have the sole right (but not the obligation) to take any action in respect of any actual, alleged or threatened infringement of MEDINOL Patent Rights.

6.4 Ownership of Inventions.

6.4.1 Background IP. Subject to the rights and licenses expressly granted herein, each Party shall retain all right, title and interest in and to all inventions, discoveries and other intellectual property rights owned or controlled by a Party, or which such Party otherwise has a right to use, prior to the Effective Date.

6.4.2 Sole Inventions.

(a) Subject to the rights and licenses expressly granted herein, all right, title and interest in and to all inventions, discoveries and other intellectual property rights therein conceived or invented solely by personnel of a Party without use of the Confidential Information or proprietary materials of the other Party in connection with the performance of such Party’s rights and obligations hereunder shall be owned solely by such Party (collectively, “Sole IP”).

(b) MEDINOL shall solely own all right, title and interest in patent claims filed by MEDINOL after the Effective Date which: (i) comprise inventions conceived or invented solely by personnel of MEDINOL after the Effective Date using

the Confidential Information of ARIAD as permitted by this Agreement, and (ii) include the limitation of a Medical Device, and (iii) comprise a Medical Device, a method of using a Medical Device in the Licensed Field or a method of treatment using a Medical Device in the Licensed Field (collectively, “MEDINOL Sole IP”).

(c) ARIAD shall solely own all right, title and interest in patent claims filed by ARIAD after the Effective Date which: (i) comprise inventions conceived or invented solely by personnel of ARIAD after the Effective Date using the Confidential Information of MEDINOL as permitted by this Agreement, and (ii) do not include the limitation of a Medical Device, and (iii) comprise the composition of matter of a rapamycin analog, the use of a rapamycin analog or methods of treatment using a rapamycin analog (collectively, “ARIAD Sole IP”).

6.4.3 Joint Inventions. Except as otherwise set forth in this Section 6.4, all right, title and interest in and to all inventions, discoveries and other intellectual property rights therein conceived or invented jointly by personnel of ARIAD and MEDINOL or solely by personnel of a Party using the Confidential Information or proprietary materials of the other Party in connection with the performance of such Party’ rights and obligations hereunder shall be jointly owned by ARIAD and MEDINOL (collectively, “Joint IP”). Except as expressly provided in this Agreement, it is understood that neither Party shall have any obligation to account to the other for profits, or to obtain any approval of the other Party to license or exploit Joint IP, by reason of joint ownership thereof.

6.4.4 Assignments. The Parties hereby agree to execute and deliver any and all documents, including without limitation, any agreements relating to the assignment of ownership rights, as the other Party may reasonably request to give effect to the allocation of ownership rights set forth in this Section 6.4.

6.4.5 Licenses.

(a) MEDINOL hereby grants to ARIAD a non-exclusive, royalty-free, fully paid up, sublicensable license under its interest in Joint IP to develop, have developed, make, have made, use, have used, sell, have sold, offer to sell, import, have imported, export, have exported, distribute, market and promote products for sale and use outside the Licensed Field (and, to the extent ARIAD retains rights in the Licensed Field pursuant to Section 2.1.1(b), also in the Licensed Field). Further, in the event that MEDINOL files any patent application which discloses the chemical structure of AP23573 or any analog of AP23573 or descriptive information sufficient to determine the chemical structure of AP23573 or any analog of AP23573 (“AP23573 Claims”), MEDINOL shall grant to ARIAD a non-exclusive, royalty-free, fully paid up,

sublicensable license under its interest in AP23573 Claims (whether or not such claims constitute MEDINOL Sole IP or Joint IP) to develop, have developed, make, have made, use, have used, sell, have sold, offer to sell, import, have imported, export, have exported, distribute, market and promote products.

(b) ARIAD hereby grants to MEDINOL a non-exclusive, royalty-free, fully paid up, sublicensable license under its interest in ARIAD Sole IP and Joint IP to develop, have developed, make, have made, use, have used, sell, have sold, offer to sell, import, have imported, export, have exported, distribute, market and promote MEDINOL License Products for sale and use in the Licensed Field.

REPRESENTATIONS AND WARRANTIES

7.1 ARIAD Representations. ARIAD represents and warrants to MEDINOL that:

7.1.1 The execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate ARIAD corporate action.

7.1.2 This Agreement is a legal and valid obligation binding upon ARIAD and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by ARIAD does not conflict with any agreement, instrument or understanding to which ARIAD is a party or by which it is bound.

7.1.3 ARIAD is the owner of, or has sufficient rights to, all of the Licensed Patent Rights and the Licensed Technology to grant to MEDINOL the licenses granted under Section 2.1.1. All Licensed Patent Rights are in full force and effect and free of all liens, charges, encumbrances and security interests except those placed or granted in the ordinary course of business. As of the Effective Date, to the best knowledge of ARIAD, there are no actions or claims threatened (in writing) or pending against ARIAD or its Affiliates in any court with respect to the Licensed Patent Rights and the Licensed Technology.

7.1.4 As of the Effective Date, ARIAD intends to develop, make or have made and supply AP23573 in accordance with this Agreement and the Supply Agreement.

7.2 MEDINOL Representations. MEDINOL represents and warrants to ARIAD that:

7.2.1 The execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate MEDINOL corporate action.

7.2.2 This Agreement is a legal and valid obligation binding upon MEDINOL and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by MEDINOL does not conflict with any agreement, instrument or understanding to which MEDINOL is a party of or by which it is bound. MEDINOL further represents and warrants that it has no knowledge of any information that would affect the validity of the Licensed Patent Rights.

7.2.3 As of the Effective Date, there are no actions or claims threatened (in writing) or pending against MEDINOL or its Affiliates in any court with respect to MEDINOL Licensed Products, except as set forth in Schedule 7.2.3.

7.2.4 As of the Effective Date, MEDINOL intends to develop manufacture, market and sell MEDINOL Licensed Products in accordance with this Agreement and the Supply Agreement.

7.3 No Warranties.

7.3.1 Nothing in this Agreement is or shall be construed as: (a) a warranty or representation by either Party as to the validity or scope of any patent application or patent licensed hereunder; or (b) a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted pursuant to this Agreement is or will be free from infringement of patents, copyrights, and other rights of Third Parties.

7.3.2 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF NON-INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF THIRD PARTIES, OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.

7.3.3 IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER OR AS A RESULT OF THIS AGREEMENT FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, TREBLE, PUNITIVE, EXEMPLARY

OR OTHER SIMILAR TYPES OF DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR BUSINESS OPPORTUNITY, INCURRED BY THE OTHER PARTY, WHETHER IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

INDEMNIFICATION AND INSURANCE

8.1 Indemnification.

8.1.1 MEDINOL Indemnity. MEDINOL shall at all times, during and after the Term, indemnify, defend and hold harmless ARIAD, its Affiliates and their respective directors, officers, employees, stockholders and agents and their respective successors, heirs and assigns (the “ARIAD Indemnitees”) from and against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) incurred by or imposed upon such ARIAD Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including, without limitation, personal injury and product liability matters, to the extent arising out of (i) any actions or omissions of MEDINOL and its Affiliates in the development, testing, production, manufacture, supply, promotion, import, sale or use by any person of any MEDINOL Licensed Product (or any component thereof) manufactured or sold by MEDINOL or any Affiliate under this Agreement, (ii) infringement of the intellectual property rights of any Third Party through the manufacture, use or sale of MEDINOL Licensed Products, except to the extent such infringement relates to the manufacture, sale, or use of AP23573 generally, and not to its delivery by a MEDINOL Licensed Product, (iii) any material breach of this Agreement by MEDINOL, or (iv) gross negligence or willful misconduct on the part of MEDINOL or any of its directors, officers and employees.

8.1.2 Indemnification Procedures. In the event that any Indemnitee is seeking indemnification under Section 8.1 above from a Party (the “Indemnifying Party”), the other Party shall notify the Indemnifying Party of such claim with respect to such Indemnitee as soon as reasonably practicable after the Indemnitee receives notice of the claim, and the Party (on behalf of itself and such Indemnitee) shall permit the Indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration) and shall cooperate as requested (at the expense of the Indemnifying

Party) in the defense of the claim; provided, however, that the Indemnifying Party shall not agree to any settlement that adversely impacts the Indemnitee without first seeking and receiving the Indemnitee’s prior written consent. The indemnification obligations under Article 8 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnifying Party, which consent shall not be withheld or delayed unreasonably. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnifying Party and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by Section 8.1.

8.2 Insurance.

8.2.1 ARIAD. During the Term and for [***] ([***]) years thereafter, ARIAD shall have and maintain in effect, at ARIAD’s sole cost, the following insurance relating to ARIAD’s performance hereunder: (a) commercial general liability Insurance for each occurrence of bodily injury and property damage, in an amount of not less than [***] Dollars ($[***]), and (b) product liability insurance in an amount of not less than [***] Dollars ($[***]).

8.2.2 MEDINOL. During the Term and for [****] ([***]) years thereafter, MEDINOL shall have and maintain in effect, at MEDINOL’s sole cost, the following insurance relating to MEDINOL’s performance hereunder: (a) commercial general liability insurance for each occurrence of bodily injury and property damage, in an amount of not less than [***] Dollars ($[***]), and (b) product liability insurance in an amount of not less than [***] Dollars ($[***]).

8.2.3 Scope. The insurance required by this Section 8.3 shall cover all performance under this Agreement by the applicable Party and its agents, officers, directors, employees, and representatives.

8.2.4 Additional Insured. ARIAD shall have MEDINOL named as additional insured under the above insurance policy obtained by ARIAD. MEDINOL shall have ARIAD named as additional insured under the above insurance policy obtained by MEDINOL. Such additional insured status shall be procured and evidenced by an additional insured endorsement on the policy and certificate of insurance.

8.2.5 Certificates and Endorsements. Each Party shall furnish valid certificates of insurance and endorsements to the other Party evidencing that the first Party has obtained insurance coverage required under this Section 8.3.

TERM AND TERMINATION

9.1 Term; Expiration. The “Term” of this Agreement shall commence on the Effective Date and unless earlier terminated in accordance with this Article 9 shall expire upon the later to occur of (i) the expiration of the final royalty payment obligation under Section 4.3.1 above, or (ii) fifteen (15) years after the First Commercial Sale of a MEDINOL Licensed Product. Upon the expiration of the Term, MEDINOL shall have a fully paid-up, irrevocable license under the Licensed Patent Rights and Licensed Technology, to develop, use, make, have made, import, have imported, export, have exported, sell, have sold, offer to sell, distribute, market and promote MEDINOL Licensed Products, for any and all uses within the Licensed Field; and ARIAD shall provide to MEDINOL such Confidential Information of ARIAD as may be reasonably necessary, but that is not in MEDINOL’s possession as of the expiration of the Term, for MEDINOL to make or have made MEDINOL Licensed Products. MEDINOL acknowledges that all such Confidential Information provided by ARIAD pursuant to this Section 9.1 is ARIAD Confidential Information and shall continue to be subject to the provisions of Article 5 following expiration of the Term.

9.2 Termination for Breach. In addition to any other remedies available by law or in equity, this Agreement may be terminated by either Party upon any material breach by the other Party of any obligation of this Agreement or the Supply Agreement, such termination to be effective thirty (30) days, in the case of non-payment of any amount due, ninety (90) days, in the case of any other curable material breach, and immediately, in the case of any non-curable material breach, after receipt by the breaching Party of written notice of termination from the non-breaching Party describing such material breach of this Agreement and/or the Supply Agreement in reasonable detail. Notwithstanding the foregoing, if such default or breach is curable and is cured or remedied or shown to be non-existent within the aforesaid 30-day or 90-day, as the case may be, period (the “Cure Period”), the notice of termination shall be automatically withdrawn and of no legal force and effect; provided, that such Cure Period shall be shortened, as appropriate, if such breach or default must be cured within non-extendible time limits set forth by governmental entities (e.g., Regulatory Authorities, patent office, etc.). Any termination based upon notice of termination describing a curable material breach shall be stayed, and the Cure Period tolled, in the event that, during any Cure Period, the Party alleged to have materially breached this Agreement shall have initiated dispute resolution in accordance with Section 10.2 with respect to the alleged default, which stay and tolling shall last until a final arbitral award is made.

9.3 Termination for Bankruptcy. In the event that either Party files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement effective immediately upon written notice to such Party.

9.4 Termination Without Cause.

9.4.1 MEDINOL may terminate this Agreement upon thirty days’ prior written notice to ARIAD: (i) if MEDINOL reasonably concludes that no MEDINOL Licensed Product will be safe for use in man, [***]

9.4.2 ARIAD may terminate this Agreement upon thirty days’ prior written notice to MEDINOL pursuant to Section 3.1.1.

9.5 Effects of Termination. Upon termination of this Agreement under Section 9.2, 9.3 or 9.4 and subject to Section 5.1.4, as of the effective date of any such termination:

9.5.1 Termination by Reason of Material Breach or under Section 9.4. In the event of a termination of this Agreement for material breach by either Party (other than by reason of a breach by ARIAD described in Section 9.5.2), or termination of this Agreement by MEDINOL pursuant to Section 9.4.1 above, all relevant licenses and sublicenses granted by ARIAD to MEDINOL hereunder, ARIAD’S covenants to MEDINOL in Article 2 and the Parties’ future obligations under Article 3 and Sections 4.1 through 4.4, shall terminate automatically and MEDINOL shall not be liable to make any further payments to ARIAD under this Agreement (other than payments accrued before the date of termination). Notwithstanding the foregoing, MEDINOL and its Affiliates shall have the right to sell or otherwise dispose of all MEDINOL Licensed Products then on hand, with royalties to be paid to ARIAD on all Net Sales of such MEDINOL Licensed Products as provided for in this Agreement.

9.5.2 Termination by Reason of ARIAD’s Material Breach of Supply Agreement. In the event of a termination of this Agreement for breach by ARIAD of the Supply Agreement or termination of this Agreement by ARIAD pursuant to Section 9.4.2 above at any time following the earlier of initiation by MEDINOL of a Pivotal Clinical Trial in the United States or the First Commercial Sale by MEDINOL of a MEDINOL Licensed Product in any country: (a) all relevant licenses and sublicenses

granted by ARIAD to MEDINOL hereunder shall remain in full force and effect, (b) the Parties future obligations under Article 3 shall automatically terminate, (c) MEDINOL shall have the right (i) without further consent required by ARIAD, to access and refer to any and all filings made by ARIAD with Regulatory Authorities and FDA solely in furtherance of MEDINOL’s interest in developing and commercializing MEDINOL Licensed Product; and (ii) to disclose to its Third Party manufacturers (with ARIAD providing introductions to appropriate Third Party manufacturers to MEDINOL at MEDINOL’s request upon any termination under this Section 9.5.2) under a confidentiality agreement containing provisions no less stringent that those set forth in Article 5 such information as is necessary to establish an alternate supply of AP23573 for use in MEDINOL Licensed Products, (d) all of MEDINOL’s obligations pursuant to Section 3.6 shall survive such termination, and (e) MEDINOL and its Affiliates shall have the right to develop, market and sell MEDINOL Licensed Products, with royalties to be paid to ARIAD on all Net Sales of such MEDINOL Licensed Products as provided for in this Agreement.

9.6 Remedies. Except as otherwise expressly set forth in this Agreement, the termination provisions of this Section 9 are in addition to any other relief and remedies available to either Party at law or equity; provided, however, that in no event will MEDINOL be required to pay any amount beyond those payments by MEDINOL pursuant to this Agreement that accrued prior to the date of termination.

9.7 Surviving Provisions. Notwithstanding any provision herein to the contrary, the rights and obligations of the Parties set forth in Article 4 (except Section 4.4), 5, 8, 10 and 11, and Sections 1.10, 2.1.2, 6.3, 6.4 and 9.4 shall survive the expiration or termination of the Term. Without limiting the generality of the foregoing, MEDINOL shall have no obligation to make any milestone payment to ARIAD that has not accrued prior to the effective date of any termination of this Agreement, but shall remain liable for all such payment obligations accruing prior to the effective date of such termination.

10.

DISPUTES

10.1 The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the term of this Agreement which relates to either Party’s rights and/or obligations hereunder. In the event of the occurrence of such a dispute, either Party may, by written notice to the other Party, have such dispute referred to their respective senior officials designated below or their successors, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated senior officials are as follows:


For MEDINOL:		Chief Executive Officer

For ARIAD:		Chief Executive Officer

In the event the designated senior officials are not able to resolve such dispute within the thirty (30) day period, either Party may invoke the provisions of Section 10.2.

10.2 Any dispute, controversy or claim initiated by either Party arising out of, resulting from or relating to this Agreement, or the performance by either Party of its obligations under this Agreement (other than bona fide Third Party actions or proceedings filed or instituted in an action or proceeding by a Third Party against a Party), whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other Party. Any such arbitration shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association by a panel of three arbitrators appointed in accordance with such rules. Any such arbitration shall be held in Boston, Massachusetts. The method and manner of discovery in any such arbitration proceeding shall be governed by the Federal Rules of Civil Procedure and the local rules of the District Court for the District of Massachusetts. The arbitrators shall have the authority to grant injunctions and/or specific performance and to allocate between the Parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, either Party shall have the right, without waiving any right or remedy available to such Party under this Agreement or otherwise, to seek and obtain from any court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such Party, pending the selection of the arbitrators hereunder or pending the arbitrators’ determination of any dispute, controversy or claim hereunder.

11.

MISCELLANEOUS

11.1 Notification. All notices, requests and other communications hereunder shall be in writing, shall be addressed to the receiving Party’s address set forth below or to such other address as a Party may designate by notice hereunder, and shall be either: (i) delivered by hand, (ii) made by facsimile transmission (to be

followed with written fax confirmation), (iii) sent by private courier service providing evidence of receipt, or (iv) sent by registered or certified mail, return receipt requested, postage prepaid. The addresses and other contact information for the Parties are as follows:


If to ARIAD:		ARIAD Pharmaceuticals, Inc.
		ARIAD Gene Therapeutics, Inc.
		26 Landsdowne Street
		Cambridge, MA 02139
		Telephone: (617) 494-0400
		Fax: (617) 225-2860
		Attn.: Chief Legal Officer

With a copy to:		Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
		One Financial Center
		Boston, MA 02111
		Phone: (617) 542-6000
		Fax: (671) 542-2241
		Attn.: Jeffrey M. Wiesen, Esq.

If to MEDINOL:		MEDINOL Inc.
		Kiryat Atidim
		P.O. Box 58165,
		Tel Aviv, 61581, Israel
		Tel: 972-3-767-9000
		Fax: 972-3-648-2310
		Attn.: Mr. Kobi Richter

With a copy to:		Doron Cohen-David Cohen, Law Offices
		14 Abba Hillel Silver Road
		Ramat Gan, Israel 52520
		Phone: (972) 3-753-1000
		Fax: (972) 3-753-1001
		Attn: David Cohen, Adv.

All notices, requests and other communications hereunder shall be deemed to have been given either (i) if by hand, at the time of the delivery thereof to the receiving Party at the address of such Party set forth above, (ii) if made by telecopy or facsimile transmission, at the time that receipt thereof has been acknowledged by electronic confirmation or otherwise, unless not on a business day on the receiving end, in which

event such communication shall be deemed to have been given on the next business day, (iii) if sent by private courier, on the third (3rd) business day following the day such notice is delivered to the courier service, or (iv) if sent by registered or certified mail, on the fifth (5th) business day following the day such mailing is made (10th business day if sent internationally).

11.2 Language. This Agreement has been prepared in the English language and the English language shall control its interpretation.

11.3 Governing Law. This Agreement will be construed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts (excluding its body of law controlling conflicts of law).

11.4 Limitations. Except as set forth elsewhere in this Agreement, neither Party grants to the other Party any right or license to any of its intellectual property.

11.5 Entire Agreement. This Agreement and the Supply Agreement constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior representations, understandings and agreements between the Parties with respect to the subject matter hereof and thereof. No modification of this Agreement shall be effective unless in writing with specific reference to this Agreement and signed by the Parties. In the event of any conflict between this Agreement and the Supply Agreement, the terms of this Agreement shall control.

11.6 Waiver. The terms or conditions of this Agreement may be waived only by a written instrument executed by the Party waiving compliance. The failure of either Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either Party of any condition or term shall be deemed as a continuing waiver of such condition or term or of another condition or term.

11.7 Headings. Section and Subsection headings are inserted for convenience of reference only and do not form part of this Agreement.

11.8 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned, delegated or otherwise transferred, in whole or part, by either Party without the prior express written consent of the other; provided, however, that (i) each of ARIAD Pharmaceuticals, Inc. or ARIAD Gene Therapeutics, Inc. may, without the written consent of MEDINOL, assign this Agreement to its Affiliates, or in

connection with the transfer or sale of all or substantially all of its assets or business related to this Agreement, or in the event of its merger, consolidation, change in control or similar transaction (collectively, “Change in Control”), (ii) MEDINOL may, without ARIAD’s written consent, assign this Agreement to its Affiliates, [***], or in a transaction involving Change in Control. In the event of a Change in Control of ARIAD, ARIAD shall use commercially reasonable efforts to cause its assignee to agree that, following the effective date of such Change in Control, such assignee shall take reasonable steps to segregate any part of its business which is developing, manufacturing, using or selling Medical Devices which are directly competitive with MEDINOL Licensed Products in the Licensed Field from those activities to be performed by ARIAD after the effective date of such Change in Control pursuant to this Agreement and the Supply Agreement. In the event of a Change in Control of MEDINOL [***], MEDINOL shall cause its assignee to agree that, following the effective date of such Change in Control or assignment, such assignee shall segregate any part of its business which is developing, manufacturing, using or selling rapamycin or a rapamycin analog delivered by stents which are directly competitive with Licensed Patent Rights in the Licensed Field from those activities to be performed by MEDINOL after the effective date of such Change in Control or assignment pursuant to this Agreement and the Supply Agreement. As a condition to assignment, any permitted assignee under this Section 11.8 shall assume all obligations of its assignor under this Agreement in a separate written agreement signed by the assignor and assignee. Any purported assignment in violation of this Section 11.8 shall be void. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties.

11.9 Force Majeure. Neither Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters or any causes beyond the reasonable control of such Party. In event of such force majeure, the Party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

11.10 Construction. The Parties hereto acknowledge and agree that: (i) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.

11.11 Severability. If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction or are deemed unenforceable under then current applicable law from time to time in effect during the Term hereof, it is the intention of the Parties that the remainder of this Agreement shall not be affected thereby provided that a Party’s rights under this Agreement are not materially affected. The Parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid, illegal or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.

11.12 Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

11.13 Independent Contractors. Notwithstanding any provision to the contrary herein, the relationship of the Parties is that of independent contractor, and nothing herein shall be construed to create a partnership, joint venture, franchise, employment, or agency relationship between the Parties. Neither Party shall have authority to enter into agreements of any kind on behalf of the other Party, nor shall either Party have the power or authority to bind or obligate the other Party in any manner.

11.14 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representative in three (3) originals.


MEDINOL, INC.		ARIAD PHARMACEUTICALS, INC.

By:	/s/ Judith Richter	By:	/s/ Laurie A. Allen
		Name:	Laurie A. Allen
Name:	Judith Richter	Title:	Senior Vice President and Chief Legal Officer
Title:	Chief Executive Officer

		ARIAD GENE THERAPEUTICS, INC.

		By:	/s/ Harvey J. Berger, M.D.
		Name:	Harvey J. Berger, M.D.
		Title:	Chairman and Chief Executive Officer

SCHEDULE A

LICENSED PATENT RIGHTS

[***]

EXHIBIT 3.3

SUPPLY AGREEMENT

[ATTACHED ON FOLLOWING PAGE]

EXHIBIT 6.1

Countries

[***]

Exhibit 10.5

SECOND AMENDMENT TO LEASE

This Second Amendment to Lease (“Second Amendment”) is made as of March 24, 2015, by and between ARE-MA REGION NO. 48, LLC, a Delaware limited liability company (“Landlord”), and ARIAD Pharmaceuticals, Inc., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord and Tenant have entered into that certain Lease Agreement dated as of January 4, 2013, as amended (i) by a First Amendment (“First Amendment”) to Lease dated as of September 16, 2013, and (ii) by a letter dated as of October 17, 2013 (as so amended, the “Lease”), wherein Landlord leased to Tenant certain premises (“Premises”) located at 75-125 Binney Street, Cambridge, Massachusetts, more particularly described in the Lease.

B. Landlord and Tenant desire to amend the Lease as hereinafter provided.

C. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Lease.

AGREEMENT

Now, therefore, the parties hereto agree that the Lease is amended as follows:

1.	Target Commencement Date. The Basic Lease Provisions are hereby amended by changing the Target Commencement Date from February 20, 2015 to March 24, 2015.

2.	Commencement Date. Section 2 of the Lease is hereby amended as follows:

(a)

The first sentence of Section 2(b) is hereby deleted and replaced with the following:

“The “Commencement Date” is agreed to be March 24, 2015. Notwithstanding the foregoing, Tenant’s obligation to pay Rent hereunder shall be abated on a day for day basis for any period of Landlord Delay. The term “Landlord Delay” shall mean any actual net delay in Tenant’s completion of the Tenant Improvements caused by Landlord, all determined and subject to the same conditions and limitations, mutatis mutandis, as applicable with respect to a Tenant Delay as provided in Section 4.2 of the Work Letter.

(b)

Section 2(b) is further amended by deleting the last sentence thereof.

(c)

Section 2(c) is hereby deleted from the Lease; all references thereto in the Lease are also deleted

3.	Base Rent Adjustments. Section 4(a) of the Lease shall be amended by deleting the same and substituting therefor the following:

“(a)

Base Rent Adjustments.

(i)

Base Rent shall be increased on each Adjustment Date by multiplying the Base Rent payable immediately before such Adjustment Date by the Base Rent Adjustment Percentage and adding the resulting amount to the Base Rent payable immediately before such Adjustment Date.

Portions of this Exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(ii)

Tenant shall also pay as part of Base Rent from and after the Commencement Date Additional TI Base Rent in an amount calculated in accordance with the provisions of Section 6.3 of the Work Letter. Any such Additional TI Base Rent shall not be subject to adjustment by the Base Rent Adjustment Percentage.

(iii)

Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent adjustments for any fractional calendar month shall be prorated.”

Expansion Space. The term “Expansion Space” was defined in the First Amendment as approximately 135,988 rentable square feet in specified locations in the 75 Binney Building. For all purposes of this Lease, from and after the date hereof, the term “Expansion Space” shall mean 135,988 undesignated rentable square feet in either or a combination of both the 125 Binney Building and the 75 Binney Building, without reference to any specific space in either the 125 Binney Building or the 75 Binney Building.

5.	Utilities. Section 11(a) of the Lease is hereby amended by adding at the end thereof the following:

“For avoidance of doubt, from and after the Commencement Date, except during and to the extent of any active construction of any Tenant Improvements in the Premises pursuant to the Work Letter, all costs of power and other utilities used by Tenant constitute an Operating Expense under this Lease, and, accordingly, shall not be a TI Cost and shall not be paid from the TI Allowance.”

Work Letter; TI Allowances for Expansion Space. Exhibit C to the Lease is hereby deleted and the Amended and Restated Work Letter attached hereto as Exhibit C is substituted therefor. The provisions of Section 4 of the First Amendment are hereby deleted, it being agreed that the provisions of the Amended and Restated Work Letter shall supersede the provisions thereof.

7.	Exhibit G (Adjustment Calculations for Unused TI Allowance for Expansion Space and ROFR Space). Exhibit G to the Lease is hereby deleted.

8.	Deletion of First Amendment Provisions. Section 2(b) and Section 5 of the First Amendment are hereby deleted from the Lease. The following is hereby substituted for Section 5 of the First Amendment:

“5. Rent for Expansion Space and New Atrium Area. From and after the Commencement Date, Base Rent, Additional TI Base Rent (as defined in Section 6.3 of the Work Letter), Administration Rent, and Additional Rent shall

be payable with respect to the Expansion Space and the New Atrium Area in accordance with the terms of the Lease. Notwithstanding the foregoing: (a) Base Rent and Administration Rent (but not Additional TI Base Rent, which shall be payable from and after the Commencement Date to the extent due in accordance with the provisions of Section 6.3 of the Work Letter) payable in accordance with the Basic Lease Provisions and the provisions of Section 3 and Section 4 of the Lease shall be waived with respect to the Expansion Space for the 15-month period from and after the Commencement Date; and (b) Tenant’s Share of Operating Expenses for the Expansion Space payable in accordance with Section 5 of the Lease shall be waived until the earlier to occur of: (i) the expiration of the 24-month period from and after the Commencement Date; or (ii) the date upon which Tenant or any permitted subtenant occupies all or a portion of the Expansion Premises for the Permitted Uses (pro rated for such portion of the Expansion Premises as is occupied by Tenant or such subtenant).

9.	Miscellaneous.

(a)

This Second Amendment (together with the Original Lease and the First Amendment, as each is amended hereby) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This Second Amendment may be amended only by an agreement in writing, signed by the parties hereto.

(b)

This Second Amendment is binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors in interest.

(c)

This Second Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.

(d)

Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively “Broker”) in connection with this Second Amendment. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this Second Amendment.

(e)

As amended and/or modified by this Second Amendment, the Lease is hereby ratified and confirmed, and Landlord and Tenant each warrant and represent to each other that to the best of their respective knowledge and belief as of the date of this Second Amendment, neither party is in default under the Lease.

(f)

All other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this Second Amendment.

(g)

In the event of any conflict between the provisions of this Second Amendment and the provisions of the Lease, the provisions of this Second Amendment shall prevail. Whether or not specifically amended by this Second Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this Second Amendment.

(Signatures on Next Page)

IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first above written.


TENANT

ARIAD Pharmaceuticals, Inc. a Delaware corporation

By:	/s/ Edward M. Fitzgerald
Name:	Edward M. Fitzgerald
Title:	Executive Vice President, CFO
	Hereunto Duly Authorized

LANDLORD

ARE-MA REGION NO. 48, LLC, a Delaware limited liability company

By:	ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership, member

	By:	ARE-QRS CORP., a
		Maryland corporation, general partner

		By:	/s/ Eric Johnson
		Name:	Eric Johnson
		Its:	Senior Vice President,
			RE Legal Affairs

EXHIBIT C TO LEASE

AMENDED AND RESTATED WORK LETTER

See attached

AMENDED AND RESTATED WORK LETTER

This Amended and Restated Work Letter (this “Work Letter”) is made and entered into as of March 24, 2015, by and between ARE-MA REGION NO. 48, LLC, a Delaware limited liability company (“Landlord”), and ARIAD Pharmaceuticals, Inc., a Delaware corporation (“Tenant”), and is attached to and made a part of that Lease dated as of January 4, 2013, amended by a First Amendment to Lease dated as of September 16, 2013, and by that certain Second Amendment to Lease dated as of the date hereof (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, the “Lease”), by and between Landlord and Tenant for premises at 75 Binney Street and 125 Binney Street in Cambridge, Massachusetts. All capitalized terms used but not otherwise defined herein shall have the meanings given them in the Lease, as so amended. This Work Letter amends, restates, and supersedes in its entirety the Work Letter attached to the Lease, as such Work Letter was amended by the First Amendment to Lease.

1 GENERAL REQUIREMENTS

1.1

Authorized Representatives. Landlord designates as Landlord’s authorized representatives (each, “Landlord’s Authorized Representative”), Tom Andrews, Joseph Maguire, Andrew Reinach, and William DePippo each of whom is authorized to issue to Tenant and to initial and sign, as applicable, all plans, drawings, approvals and Changes (as defined below) pursuant to this Work Letter. Tenant shall not be obligated to respond to or act upon any such item until such item has been initialed or signed (as applicable) by any of Landlord’s Authorized Representatives. Landlord may change Landlord’s Authorized Representatives upon two (2) business days’ prior written notice to Tenant. A Landlord’s Authorized Representative shall personally attend all design and construction meetings for the Project Improvements as reasonably noticed by Landlord’s or Tenant’s Authorized Representatives.

1.1.1

Tenant designates as Tenant’s authorized representatives (each, “Tenant’s Authorized Representative”), Philip Plottel and Edward Fitzgerald, each of whom is authorized to issue to, initial and sign, as applicable, all plans, drawings, approvals and Changes pursuant to this Work Letter. Landlord shall not be obligated to respond to or act upon any such item until such item has been initialed or signed (as applicable) by Tenant’s Authorized Representative. Tenant may change Tenant’s Authorized Representative upon two (2) business days’ prior written notice to Landlord. Tenant’s Authorized Representative shall personally attend, and have access to meeting notes (except notes related to the cost of the Non-TI Project Improvements) of, all design and construction meetings for the Project Improvements, as noticed by Landlord’s or Tenant’s Authorized Representative.

1.2

Applicable Response Period. For purposes of this Work Letter, the “Applicable Response Period” shall mean the applicable number of days for a party to respond to a submission or a request for an approval as provided in this Work Letter, or, if no such period is set forth in this Work Letter, five (5) business days after receipt of the submission or request for approval.

1.3

Consents. Any refusal of consent by Landlord or Tenant shall specify in reasonable detail the reasons for such disapproval. No request shall be “deemed approved” unless the request for consent specifies in all capital letters as follows: “CONSENT TO THE MATTERS SET FORTH HEREIN SHALL BE DEEMED GIVEN IF NO RESPONSE IS PROVIDED WITHIN [ DAYS; specify relevant number of days] OF THE DATE HEREOF”.

2 LANDLORD’S CONSTRUCTION OF THE NON-TI PROJECT IMPROVEMENTS

2.1

Landlord shall construct the following improvements on the Project (collectively, the “Non-TI Project Improvements”; also referenced in the Lease as “Landlord’s Work”): (i) shell and core improvements for the Buildings, including the lobbies and underground parking (the “Shell and Core Improvements”) in accordance with the updated plans and specifications and Landlord/Tenant Responsibility Matrix referenced in Schedule 2.1 (the “Shell, Core and Site Construction Documents”); and (ii) all landscaping, plaza areas, walkways, driveways, sidewalks, and other improvements for the Project (the “Site Improvements”; the Shell and Core Improvements and the Site Improvements, collectively, the “Shell, Core and Site Improvements”) in accordance with the Site Plans set forth in Schedule 2.1 (“Site Plans”). Landlord shall construct the Non-TI Project Improvements at its sole cost and expense, except as otherwise expressly set forth herein. The cost of the Tenant Improvements to be undertaken by Tenant shall be paid for in accordance with Section 6 below.

2.2

Non-TI Project Improvements. Landlord’s construction of the Non-TI Project Improvements shall be effected by contractors selected and retained by Landlord, pursuant to the Shell, Core and Site Construction Documents, as the same may be further modified as provided in Sections 2.3 and 2.4 below, to include any Landlord Modifications and Approved Tenant Modifications (as each such term is defined below) and/or as required by any applicable Governmental Authorities.

2.2.1

Project Architect. Landlord has engaged Payette as the architect for the Non-TI Project Improvements (the “Project Architect”).

2.2.2

Construction Manager for Non-TI Project Improvements. Landlord has engaged Gilbane Building Company as the construction manager for the construction of the Non-TI Project Improvements (“Construction Manager”). Any change in the Construction Manager shall be subject to Tenant’s approval, not to be unreasonably withheld or delayed.

2.3	Landlord Modifications to Shell, Core and Site Construction Documents.

It is anticipated that prior to and during construction of the Non-TI Project Improvements, Landlord may reasonably require changes to the Shell, Core and Site Construction Documents as Landlord shall desire and/or as may be required to obtain building permits and other governmental approvals and comply with Applicable Laws. Landlord shall be entitled, from time to time, to make any such changes to the Shell, Core and Site Construction Documents (collectively, the “Landlord Modifications”), without Tenant’s consent, so long as such Landlord Modifications, if implemented, would not: (i) effect material changes to the design of the Shell, Core and Site Improvements previously approved by Tenant (including the exterior appearance thereof); (ii) adversely affect Tenant’s contemplated use or occupancy of the Building for the Permitted Uses; or (iii) create a Landlord Impact (collectively, an “Adverse Condition”). In the event any such Landlord Modification, if implemented, would be reasonably likely to create an Adverse Condition, Landlord shall notify Tenant of such Landlord Modifications prior to implementation thereof (which notice shall include Landlord’s description of the Adverse Condition, and the adverse effects and impacts which Landlord believes comprise such Adverse Condition to the extent then known or reasonably anticipated by Landlord), and any reasonable alternatives, and Tenant shall, within five (5) business days after receipt of Landlord’s notice, notify Landlord of Tenant’s approval or reasonable disapproval thereof with specified reasons for such disapproval. Tenant’s failure to notify Landlord of its approval or reasonable disapproval within such 5-business day period shall be deemed Tenant’s approval of such proposed Landlord Modifications. For purposes of determining whether a Landlord Modification would create an Adverse Condition pursuant to the foregoing, an “Adverse Condition” shall also include any material delays in Substantial Completion of the Non-TI Project Improvements beyond the Target Commencement Date specified in the Lease; provided, however, to the extent a Landlord Modification is necessary to comply with Applicable Laws or is required by any applicable Governmental Authorities in connection with its enforcement of Applicable Laws, such Landlord Modification shall not constitute an Adverse Condition.

2.4	Tenant-Requested Modifications to Shell, Core and Site Construction Documents.

To the extent set forth in the Shell, Core and Site Construction Documents, Tenant has requested, and Landlord has approved, changes to the Shell, Core and Site Construction Documents desired by Tenant. Tenant shall have no further right to request any Tenant-Requested Modifications.

2.5

Omitted

2.6	Approved Tenant Modifications.

Any Tenant-Requested Modification which Landlord has incorporated into the Shell, Core and Site Construction Documents shall be referred to herein as an “Approved Tenant Modification”. Landlord has performed the design and construction of such Approved Tenant Modifications as a “TI Cost” for the purpose of Article 6 below. Landlord and Tenant confirm their agreement with respect to the substance and pricing of such Tenant-Requested Modifications as described on Schedule 2.6 hereof. The parties hereby confirm that there shall be charged against the Tenant Allowance the cost of Tenant-Requested Modifications in accordance with Schedule 2.6 hereof.

2.7	Shared Staffing Costs During Construction.

It had been anticipated that, during the construction process under the original Work Letter, in which Landlord was constructing both the Non-TI Project Improvements and the Tenant Improvements, Landlord would share with the Construction Manager’s team undertaking the TI Improvements certain staffing, the cost of which was to be reasonably allocated between the Non-TI Project Improvements and the TI Improvements. Due to the Tenant Delay in the prosecution of the Tenant Improvements, the Non-TI Project Improvements and Tenant Improvements were not prosecuted by Landlord as a single project. Tenant’s portion of such staffing is a cost for which Tenant is responsible. The parties hereby confirm that there shall be charged against the Tenant Allowance the cost of such staffing which would have been allocated to the Tenant during the construction by Landlord of the Non-TI Project Improvements and the Tenant Improvements in accordance with Schedule 2.7.

2.8	Substantial Completion of the Non-TI Project Improvements.

For purposes of this Work Letter, the term “Substantially Completed” or “Substantial Completion” as to the Non-TI Project Improvements shall occur upon: (i) the substantial completion of construction of the Shell and Core Improvements; and any Punch List Items for the Shell and Core Improvements, which Punch List Items shall be diligently completed by Landlord not later than thirty (30) days thereafter, provided that such Punch List Items (as defined below) which arise due to a delayed delivery of such item or material portion thereof shall be completed not later than ninety (90) days after Substantial Completion (except for exterior items affected by seasonal conditions, which shall be completed as soon as practicable)); (ii) the Building systems included in the Shell and Core are tested and ready for operation, to the extent feasible given the absence of Tenant Improvements or plans therefor; (iii) a temporary Certificate of Occupancy (sufficient for Tenant’s installation of the Tenant Improvements) for the Shell and Core has been issued by the applicable Governmental Authority; (iv) Landlord is able to provide parking for Tenant sufficient to satisfy the parking requirements under the Lease for the Premises in the Building Parking Garage; (v) Landlord is able to provide Tenant reasonable and continuous ingress and egress to and from the parking areas and the Premises, (vi) continuous and uninterrupted power is available to the Premises; (vii) main interior fire protection, main electrical and main mechanical core improvements have been completed, to the extent feasible given the absence of Tenant Improvements or plans therefor; (viii) the Premises is in “watertight” condition; (ix) the elevators in the Buildings have been installed and are available for unrestricted use by Tenant to the extent feasible given the absence of Tenant Improvements or plans therefor; and (x) the Project Architect has executed a Certificate of Substantial Completion for the Shell and Core Improvements in the form of the American Institute of Architects (“AIA”) document G704 with respect to the Non-TI Project Improvements, subject to the qualifications set forth in this Section 2.8. The term “Punch List Items” shall mean minor items of completion, correction or repair with respect to the Shell and Core Improvements, which by their nature will not interfere with, or impair in any material respect, Tenant’s installation of the Tenant Improvements in the Premises.

The parties hereby confirm that as of March 24, 1015 the Non-TI Project Improvements have been Substantially Completed. The agreed upon Punch List Items as of March 24, 2015 are listed in the attached Schedule 2.8(a). Except as set forth in Schedule 2.8(a), the Punch List Items shall be diligently completed by Landlord not later than thirty (30) days after the date hereof, provided that such Punch List Items which arise due to a delayed delivery of such item or material portion thereof shall be completed not later than ninety (90) days after Substantial Completion, or the later date therefor set forth on Schedule 2.8(a) (except for exterior items affected by seasonal conditions, which shall be completed as soon as practicable)). As soon as the same become available, Landlord shall provide Tenant with all commissioning reports and protocols, “as built” drawings (CAD and BIM), balancing reports, and interim and final engineering summary, analysis, conclusions and recommendations as reasonably required for design and completion of the Non-TI Project Improvements and the Tenant Improvements. Landlord and Tenant shall review all of the same together and shall cooperate to set forth and require Landlord’s contractors to add such additional Punch List Items as are reasonably required for actual final completion of the Non-TI Project Improvements. The completion of the Site Improvements was not a condition precedent to the Substantial Completion of the Non-TI Project Improvements, it being agreed that the completion of the Site Improvements may be deferred by Landlord to accommodate construction of improvements at 270 Third Street and the Binney Street Area Infrastructure Project. The Site Improvements are anticipated to be completed in accordance with the exterior work phasing plan attached hereto as Schedule 2.8(b). In the event that either of the two (2) phases of the Site Improvements have not been completed within 180 days after the scheduled completion date for each such phase, as set forth in Schedule 2.8 (as such date may be extended by Force Majeure and any Tenant Delays), the sole remedy of Tenant therefor shall be the exercise of Tenant’s remedies under Section 31(b) of the Lease.

3 TENANT IMPROVEMENTS

As used in this Work Letter, “Tenant Improvements” shall mean and refer to all improvements to the Premises desired by Tenant of a fixed and permanent nature. Other than funding the TI Allowance in accordance with Section 6 below, Landlord shall not have any obligation whatsoever with respect to the finishing of the Premises for Tenant’s use and occupancy. Tenant may undertake the Tenant Improvements in phases (each, a “TI Phase”) to accommodate Tenant’s phased occupancy of the Premises, or Tenant’s subleasing thereof. In such event, the provisions of this Section 3 shall be applicable to each such TI Phase. At the time of approval of the TI Construction Documents, Landlord and Tenant shall mutually agree upon the schedule for performance and completion by Tenant of the Tenant Improvements (or TI Phase) (“Anticipated TI Schedule”).

3.1	Selection of Architects, Consultants and Contractors for Tenant Improvements

Landlord and Tenant hereby acknowledge and agree that the architect (the “TI Architect”) for the Tenant Improvements, the general contractor and any subcontractors for the

Tenant Improvements shall be selected by Tenant, subject to Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall be named a third party beneficiary of any contract entered into by Tenant with the TI Architect, any consultant, any contractor or any subcontractor, and of any warranty made by any contractor or any subcontractor. Landlord hereby approves Payette Architects and Chan Mock Architects as the TI Architect. Landlord further consents to Tenant’s selection of the general contractor for the Tenant Improvements from the general contractors listed on Schedule 3.1.

3.2	Tenant’s Design Drawings.

Tenant shall deliver to Landlord schematic drawings and outline specifications (the “TI Design Drawings”) detailing Tenant’s requirements for the Tenant Improvements (or the applicable TI Phase) on a schedule determined by Tenant. Not more than 5 business days thereafter, Landlord shall deliver to Tenant the written objections, questions or comments of Landlord with regard to the TI Design Drawings. Tenant shall cause the TI Design Drawings to be revised to address such written comments and shall resubmit said drawings to Landlord for approval within 5 business days thereafter. Such process shall continue until Landlord has approved the TI Design Drawings.

3.3	Working Drawings.

Following the approval of the TI Design Drawings by Landlord, Tenant shall cause the TI Architect to prepare and deliver to Landlord for review and comment construction plans, specifications and drawings for the Tenant Improvements (or the applicable TI Phase) (“TI Construction Drawings”), which TI Construction Drawings shall be prepared substantially in accordance with the TI Design Drawings. Tenant shall be solely responsible for ensuring that the TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements. Landlord shall deliver its written comments on the TI Construction Drawings to Tenant not later than 5 business days after Landlord’s receipt of the same; provided, however, that Landlord may not disapprove any matter that is consistent with the TI Design Drawings. Tenant and the TI Architect shall consider all such comments in good faith and shall, within 5 business days after receipt, notify Landlord how Tenant proposes to respond to such comments. Any disputes in connection with such comments shall be resolved in accordance with Section 3.4 hereof. Provided that the design reflected in the TI Construction Drawings is consistent with the TI Design Drawings, Landlord shall approve the TI Construction Drawings submitted by Tenant. Once approved by Landlord, subject to the provisions of Section 3.8 below, Tenant shall not materially modify the TI Construction Drawings except as may be reasonably required in connection with the issuance of the TI Permit (as defined in Section 3.7 below).

3.4	Approval and Completion.

If any dispute regarding the design of the Tenant Improvements is not settled within 10 business days after notice of such dispute is delivered by one party to the other, Tenant may make the final decision regarding the design of the Tenant Improvements, provided (i) Tenant acts reasonably and such final decision is either consistent with or a compromise between

Landlord’s and Tenant’s positions with respect to such dispute, (ii) that all costs and expenses resulting from any such decision by Tenant shall be payable as provided in Section 6 below; and (iii) Tenant’s decision will not affect the base Building, structural components of the Building or any Building systems (in which case Landlord shall make the final decision). Any changes to the TI Construction Drawings following Landlord’s and Tenant’s approval of same requested by Tenant shall be processed as provided in Section 3.8 hereof.

3.5	Landlord’s Review of Tenant Improvement Plans and Review of Tenant Improvement Construction.

Any review of the TI Design Drawings or the TI Construction Drawings by Landlord, Landlord’s Authorized Representative, the Project Architect or anyone else acting on Landlord’s behalf, including without limitation construction advisors, design professionals, contractors and subcontractors (collectively, “Landlord’s Agents”), shall be for Landlord’s sole purpose and shall not imply Landlord’s review of the same (or obligate Landlord to review the same) for quality, design, compliance with Applicable Laws or other like matters. Neither Landlord, Landlord’s Authorized Representatives nor any of Landlord’s Agents shall have any liability whatsoever in connection with, and shall not be responsible for any omissions or errors contained in the TI Design Drawings or the TI Construction Drawings (collectively, the “Tenant Plans”) as a result of any inspections or review thereof. Throughout the construction of any Tenant Improvements, Landlord shall have the right, at its sole cost and expense, on not less than two (2) business days’ advance notice to Tenant, and, if specified by Tenant at Tenant’s option, accompanied by a representative of Tenant, to inspect the construction of the Tenant Improvements; provided that no such inspections shall interfere with or otherwise delay Tenant’s construction of the Tenant Improvements. Without limitation of the foregoing, Landlord shall be permitted to have representatives attend Tenant’s weekly project meetings during the construction of the Tenant Improvements for coordination purposes, and shall receive copies of all meeting minutes at the time of their issuance.

3.6	Compliance with LEED Standards.

All plans prepared by Tenant and the TI Architect for the Tenant Improvements shall comply with the LEED standards set forth in Schedule 3.6.

3.7	Performance of Tenant Improvements.

(a) Commencement and Permitting of the Tenant Improvements. Tenant shall commence construction of the Tenant Improvements (or the applicable TI Phase) upon obtaining and delivering to Landlord a building permit (the “TI Permit”) authorizing the construction of the Tenant Improvements (or the applicable TI Phase), consistent with the TI Construction Drawings approved by Landlord, and shall thereafter prosecute the same to completion in accordance with the Anticipated TI Schedule, subject to Force Majeure and any Landlord Impacts. The cost of obtaining the TI Permit shall be payable as provided in Section 6 below. Prior to the commencement of the Tenant Improvements, Tenant shall deliver to Landlord a copy of all contracts with Tenant’s contractors (including the TI Architect), and

certificates of insurance from any contractor performing any part of the Tenant Improvement evidencing industry standard commercial general liability, automotive liability, “builder’s risk”, and workers’ compensation insurance. Tenant shall cause the general contractor to provide a certificate of insurance naming Landlord, Alexandria Real Estate Equities, Inc., and Landlord’s lender (if any) as additional insureds for the general contractor’s liability coverages required above. In addition, Tenant shall provide to Landlord a certificate of insurance evidencing the professional liability and commercial general liability insurance policies of the TI Architect.

(b) Selection of Materials, Etc. Where more than one type of material or structure is indicated on the TI Construction Drawings approved by Tenant and Landlord, the option will be within Tenant’s reasonable discretion if the matter concerns the Tenant Improvements, and within Landlord’s sole and absolute subjective discretion if the matter concerns the structural components of the Building or any Building system.

(d) Substantial Completion of the Tenant Improvements. Tenant shall diligently prosecute and substantially complete or cause to be substantially completed the Tenant Improvements (or the applicable TI Phase) in a good and workmanlike manner, in accordance with the TI Permit and Tenant’s contracts, subject, in each case, to Minor Variations and normal “punch list” items of a non-material nature which do not interfere with the use of the Premises (“TI Substantial Completion” or “TI Substantially Complete”). Tenant shall obtain and deliver to Landlord a Certificate of Occupancy for the Tenant Improvements (or applicable TI Phase) as a condition precedent to TI Substantial Completion. Upon TI Substantial Completion, Tenant shall require the TI Architect and the general contractor to execute and deliver, for the benefit of Tenant and Landlord, a Certificate of Substantial Completion in the form of the American Institute of Architects (“AIA”) document G704. For purposes of this Work Letter, “Minor Variations” shall mean any modifications reasonably required: (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with any required permit (including the TI Permit); (ii) to comport with good design, engineering, and construction practices which are not material; or (iii) to make reasonable adjustments for field deviations or conditions encountered during the construction of the Tenant Improvements.

3.8	Changes to the Tenant Improvements

Any changes to the Approved TI Construction Documents (each, a “Change”) shall be requested and instituted in accordance with the provisions of this Section 3.8 and shall be subject to the written approval of Landlord to the extent required under this Work Letter.

3.8.1

Change Request. Tenant may request Changes after Landlord approves the Approved TI Construction Documents by notifying Landlord in writing in substantially the same form as the AIA standard change order form (a “Change Request”), which Change Request shall detail the nature and extent of any requested Changes, including (a) the Change, (b) the estimated net incremental cost of the Change and (c) any modification of the

Approved TI Construction Documents necessitated by the Change. Change Requests shall be signed by Tenant’s Authorized Representative. In no event shall Landlord be required to approve any Change Request from Tenant that: (i) is inconsistent with the Approved TI Construction Documents; or (ii) could, in Landlord’s reasonable opinion, result in a Future Tenanting Impact (as defined below), unless Tenant agrees to remove and restore prior to expiration of Lease Term, at Tenant’s sole cost and expense, the portion of the Tenant Improvements constructed as part of such Change which causes the Future Tenanting Impact, pursuant to Landlord’s requirements for elimination of such Future Tenanting Impact as the same are specified by Landlord at the time such Change Request is made under this Section 3.8.1, provided further, that no deduction from the rentable square footage of the Premises for purposes of determination of Base Rent payable under the Lease, which would otherwise apply under the Lease, shall be made as a result of any vertical penetrations required by or as a part of such Change. A “Future Tenanting Impact” shall mean, in Landlord’s reasonable opinion, that a Tenant-Requested Modification would be reasonably likely to materially adversely affect the future re-tenanting of either of the Buildings as a either single-tenant or multi-tenant buildings. Notwithstanding the foregoing, Tenant may make Changes which (i) do not affect Building systems or structure and (ii) which would not reasonably be expected to cause a Future Tenanting Impact (“Notice-Only Changes”) which do not materially alter the nature of the Approved TI Construction Document having a cost of up to $[***] for any phase of the Tenant Improvements, provided that Tenant notifies Landlord in writing of such intended Notice-Only Change, and such notice shall be accompanied by plans, specifications (including sketches and similar construction detail documents), work contracts and such other information concerning the nature and cost of the Notice-Only Change as may be reasonably requested by Landlord, which notice and accompanying materials shall be delivered to Landlord not less than 5 business days in advance of any proposed construction thereof.

3.8.2

Approval of Changes. All Change Requests shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall have 5 business days after receipt of a Change Request to notify Tenant in writing of Landlord’s decision either to approve or object to the Change Request. Landlord’s failure to respond within such 5 business day period shall be deemed approval by Landlord. Any costs related to a Change for which Tenant is responsible under this Section 3.8 shall be paid for in accordance with the provisions of Section 6 below.

4 EXCUSED DELAYS

4.1	Construction Force Majeure. As used herein and in the Lease, “Construction Force Majeure” shall have the same meaning as “Force Majeure” set forth in Section 34 of the Lease.

4.2	Tenant Delay.

4.2.1

As used herein and in the Lease and subject to Sections 4.2.2 and 4.2.3 hereof, “Tenant Delay” shall mean any actual delay in Landlord’s achievement of Substantial Completion of the Non-TI Project Improvements as a result of any one or more of the following: (i) Tenant’s failure to respond within time limits specified in this Work Letter as to matters requiring Tenant’s approval unless such failure to respond is deemed approval or disapproval of such matter pursuant to the terms of this Work Letter; (ii) any delays due to Tenant-Requested Modifications to the extent not arising due to Landlord Impacts, (v) any delays caused by Tenant or Tenant’s Agents (as defined in Section 5.3.2 below); and/or (vi) Tenant’s failure to timely comply with its obligations under this Work Letter and/or the Lease to the extent such failure is not caused by any Construction Force Majeure delays encountered by Tenant with respect thereto. Landlord confirms that the Commencement Date is as set forth in the Second Amendment, and there is not any Tenant Delay except as agreed upon in connection with the establishment of Schedule 6.6 to this Work Letter and the mutual agreement upon the Commencement Date.

4.2.2

Landlord shall use commercially reasonable efforts to mitigate the effects of any claimed Tenant Delay, and shall provide reasonable information and alternatives to Tenant to assist in such mitigation efforts; provided, however, Landlord shall not be required to incur any material cost or incur any material liability in seeking to mitigate any Tenant Delay.

4.2.3

No Tenant Delay shall be deemed to have occurred hereunder unless Landlord shall have delivered notice to Tenant of such Tenant Delay after Landlord has actual knowledge of the circumstances giving rise to such Tenant Delay, which notice shall reasonably set forth the circumstances giving rise to such Tenant Delay. The period of Tenant Delay shall not commence until the date two (2) business days after the date on which such notice shall have been delivered to Tenant. Landlord shall give Tenant notice of the occurrence of (or of the existence of any conditions which would cause) a Tenant Delay with reasonable promptness after Landlord has received actual knowledge thereof in order to provide to Tenant an opportunity to end, to avoid or to minimize the consequences of any such Tenant Delay.

Notwithstanding anything to the contrary contained herein, no delay shall constitute a Tenant Delay to the extent such delay: (i) occurs by reason of a Landlord Impact (as defined below); (ii) does not result in actual “net” delay in completion of the Project; (iii) has been compensated for by Tenant by payment of overtime or other charges to make up the delay, or otherwise; or (iv) is caused by Construction Force Majeure. The term “Landlord Impact” shall mean any of the following occurrences: (a) Landlord’s failure to provide a response required of Landlord within the time periods set forth in this Work Letter unless such failure to respond is deemed approval or disapproval of such matter pursuant to the terms of this Work Letter, (b) any changes to the approved Non-TI Project Improvements Construction Documents made or requested by Landlord to the extent not arising due to a Tenant Change, or (c) Landlord’s failure to comply with its obligations in accordance with this Work Letter.

5 CERTAIN REQUIREMENTS APPLICABLE TO CONSTRUCTION OF THE PREMISES

Landlord shall comply with the following requirements in connection with its construction of the Premises:

5.1	Condition of Construction

Landlord hereby agrees to complete the construction of the Non-TI Project Improvements in accordance with the Shell, Core and Site Construction Documents and in compliance with Applicable Laws in effect as of the date of the building permit therefor, free of material defects and otherwise in good condition and working order.

5.2	Construction Warranties and Insurance

Landlord shall incorporate only new materials and equipment into the construction of the Non-TI Project Improvements. Landlord warrants and guarantees (i) the Non-TI Project Improvements will be completed in substantial accordance with the approved Shell, Core and Site Construction Documents (as the same may be modified by Changes approved hereunder) and free of defective workmanship and materials and (ii) the Non-TI Project Improvements (other than any Tenant-Requested Modifications) shall be free of design defects (“Landlord’s Warranty”). The Landlord’s Warranty shall survive and remain in effect for a period of one (1) year after the date of Substantial Completion of the Non-TI Project Improvements (the “Warranty Period”). Landlord shall, at its sole cost and expense, promptly correct or cause to be corrected (i) any defect in the Non-TI Project Improvements, including, without limitation, any defects arising from Landlord’s failure to complete the Non-TI Project Improvements in substantial accordance with the approved Shell, Core and Site Construction Documents (as the same may be modified by Changes approved hereunder), or (ii) any material deviation from the approved Shell, Core and Site Construction Documents (each, a “Non-TI Project Defect” and, collectively, the “Non-TI Project Defects”), provided that Tenant notifies Landlord of any Non-TI Project Defect within the Warranty Period. Landlord’s Warranty shall be in addition to the warranties provided by contractors and suppliers as set forth in Schedule 5.2, but Landlord’s Warranty shall be the sole and exclusive warranty provided by Landlord with respect to the Non-TI Project Improvements (subject to the provisions set forth in the Lease, including Section 5 and Section 13 thereof). Nothing in this Section 5.2 shall be construed as limiting or restricting in any way Landlord’s right to seek reimbursement from (x) professionals and contractors who are parties to the relevant contracts and/or (y) insurance companies for costs incurred by Landlord to correct any Non-TI Project Defects. Upon the expiration of the Warranty Period, Landlord shall assign to Tenant all surviving and assignable guaranties and warranties of workmanship or materials given by any contractor, subcontractors, architects, engineers or materialmen that guarantee or warrant against defective design, workmanship or materials for a period of time in excess of the Warranty Period in connection with the construction of the Non-TI Project Improvements and shall thereafter cooperate with Tenant, at no cost to Landlord, in the enforcement of any such guaranties and warranties, but Landlord shall not otherwise be responsible for any Non-TI Project Defects after the Warranty Period. Landlord shall obtain and

maintain builder’s risk/course of construction insurance coverage during Landlord’s construction of the Non-TI Project Improvements in commercially reasonable amounts and with customary coverages commensurate with the size and scope of the construction project contemplated by this Work Letter issued by financially viable and licensed insurers, and shall provide a certificate evidencing the same to Tenant upon request therefor. Tenant shall obtain and maintain builder’s risk/course of construction insurance coverage during Tenant’s construction of the Tenant Improvements (or TI Phase) in commercially reasonable amounts and with customary coverages commensurate with the size and scope of the construction project contemplated by this Work Letter issued by financially viable and licensed insurers, as approved by Landlord prior to the commencement of work, and shall provide a certificate evidencing the same to Landlord upon request therefor prior to the commencement of any work in the Premises.

5.3	Tenant Entry upon Premises.

5.3.1

Tenant Review of Project Construction Prior to Commencement Date. Throughout the construction of the Non-TI Project Improvements, Tenant shall have the right, at its sole cost and expense, on not less than two (2) business days’ advance notice to Landlord, and, if specified by Landlord at Landlord’s option, accompanied by a representative of Landlord, to inspect the construction of the Non-TI Project Improvements; provided that no such inspections shall interfere with or otherwise delay Landlord’s construction of the Non-TI Project Improvements. Any review of the Shell, Core and Site Construction Documents by Tenant, Tenant’s Authorized Representative or anyone acting on Tenant’s behalf, including without limitation construction advisors or design professionals (collectively, “Tenant’s Agents”), and/or any inspections of the Non-TI Project Improvement construction by Tenant, Tenant’s Authorized Representative, or Tenant’s Agents, shall be for Tenant’s sole purpose and shall not imply Tenant’s review of the same (or obligate Tenant to review the same) for quality, design, compliance with Applicable Laws or other like matters. Neither Tenant, Tenant’s Authorized Representatives nor any of Tenant’s Agents shall have any liability whatsoever in connection with, and shall not be responsible for any omissions or errors contained in the Shell, Core and Site Construction Documents as a result of any inspections or review thereof.

5.3.2

Tenant Entry Upon Premises From and After Commencement Date. From and after the Commencement Date, Tenant shall have access to the Premises 24 hours per day, 7 days per week, subject to a right of entry on the part of Landlord to complete any outstanding Punch List Items, to perform inspections and attend meetings in accordance with Section 3.5, and to otherwise perform the obligations of Landlord under the Lease.

5.3.3

Entry Requirements. In connection with Tenant’s entry onto the Premises pursuant to this Section 5.3 above and as a condition thereto, Tenant shall secure and maintain, and cause each of its contractors entering upon the Premises in connection with the Tenant’s Work to maintain, at Tenant’s sole cost, a commercial general liability and property damage insurance policy covering Tenant’s and Tenant Agent’s activities on the Premises, which shall conform with the provisions of Section 17 of the Lease. Tenant

and its contractors shall maintain workers’ compensation insurance as required by law. The insurance policies to be provided by Tenant hereunder shall name Landlord and Alexandria Real Estate Equities, Inc. as additional insureds and shall conform with the requirements of Section 22.4 of the Lease and Tenant shall be required to notify Landlord not later than thirty (30) days’ prior to any termination of such policies if such termination will become effective prior to the Term Commencement Date. All insurance policies of Tenant and its contractors shall be on a per project basis. Tenant shall deliver to Landlord certificates of such insurance as a condition precedent to Tenant’s entry onto the Premises pursuant to Section 5.3.1 above. Landlord and Tenant shall cause their respective contractors to reasonably cooperate with each other in the exercise of their rights of entry under this Section 5.3. Tenant and any of Tenant’s Agents entering upon the Premises hereunder shall comply with all established jobsite and safety rules and practices of Landlord’s contractor and Landlord until completion of the Non-TI Project Improvements and acceptance thereof by Tenant. If Landlord determines in good faith that the entry or activities of Tenant upon the Project or the Premises hereunder is materially interfering with or delaying the completion of the Non-TI Project Improvements or any inspections or issuance of final approvals by applicable governmental authorities, Landlord may upon notice to Tenant suspend such entry and activities.

6 COSTS

6.1

Budget For Tenant Improvements. Before the commencement of construction of the Tenant Improvements (or any TI Phase), Tenant shall obtain a detailed breakdown, by trade, of the costs incurred or that will be incurred, in connection with the design and construction of the Tenant Improvements (or such TI Phase) (the “Budget”), and deliver a copy of the Budget to Landlord for Landlord’s approval, which shall not be unreasonably withheld or delayed. The Budget shall be based upon the TI Construction Drawings approved by Landlord and shall include a payment to Landlord of administrative rent (“Administrative Rent”) equal to $[***] per rentable square foot (i.e., [***]% of $[***] per rentable square foot) for monitoring and inspecting the construction of the Tenant Improvements, which lump sum shall be payable from the TI Allowance on a percentage of completion basis. Such Administrative Rent shall include, without limitation, all out-of-pocket costs, expenses and fees incurred by or on behalf of Landlord arising from, out of, or in connection with, such monitoring of the construction of the Tenant Improvements (or the Tenant Improvements for such phase), and shall be payable as provided in this Section 6. If the Budget is greater than the TI Allowance (or the TI Allowance allocable to such TI Phase), Tenant shall pay Tenant’s Proportionate Share (as defined in Section 6.7 below) thereof.

6.2

Base TI Allowance. Landlord shall provide to Tenant a tenant improvement allowance (the “Base TI Allowance”) of $[***] per rentable square foot of the Premises (exclusive of the New Atrium Area), or $[***] in the aggregate, to be used for TI Costs (as defined below). The Base TI Allowance for the initial Premises and the Expansion Space may be used for any portion of the Premises (including the Expansion Space, but excluding the

New Atrium Area), provided that at all times there remains in the unused Base TI Allowance the sum of $[***] per rentable square foot of the Premises not being improved for use by ARIAD Pharmaceuticals, Inc. or a permitted subtenant thereof in accordance with the provisions of this Work Letter (“Unused Base TI Allowance Minimum Amount”).

6.3

Additional TI Allowance; Base Rent Allocable to Additional TI Allowance. If elected by Tenant, Landlord shall provide to Tenant an additional tenant improvement allowance (the “Additional TI Allowance’; with the Base TI Allowance, the “TI Allowance”) of $[***] per rentable square foot of the Premises (exclusive of the New Atrium Area), or $[***] in the aggregate, to be used by Tenant for TI Costs for ARIAD Pharmaceuticals, Inc. or a permitted subtenant thereof. Base Rent allocable to the entire Additional TI Allowance (“Additional TI Base Rent”) shall be payable solely with respect to each requisition of the Additional TI Allowance that is actually funded by Landlord. Such portion of Additional TI Base Rent shall be amortized over the then remaining initial Term of the Lease at an interest rate of [***]% per annum, and shall be payable as follows: (a) during the Anticipated TI Project Schedule for construction of the Tenant Improvements (or applicable TI Phase), Tenant shall pay monthly, as Additional TI Base Rent, interest only on such portion of the Additional TI Allowance as has been advanced therefor; and (b) from and after the scheduled date for TI Substantial Completion as set forth on the Anticipated TI Schedule, Additional TI Base Rent shall be increased by the amount necessary to amortize such Additional TI Allowance over the then remaining initial Term of the Lease at an interest rate of [***]% per annum.

6.4	Notice As to Use of TI Allowance. Tenant shall have the right to availability of all or any portion of the TI Allowance by requisitions made any time up through the fifth ([5^th]) anniversary of the Commencement Date.

6.5

Use of TI Allowance. The TI Allowance shall be disbursed in accordance with this Work Letter. Tenant shall have no right to the use or benefit (including any reduction to or payment of Base Rent) of any portion of the TI Allowance not required for payment of TI Costs as defined below. Tenant may use the TI Allowance for the improvement of subtenant space prior to the execution of a permitted sublease for such space, subject to the terms of this Work Letter, provided that in all events there remains undisbursed from the Base TI Allowance the Unused Base TI Allowance Minimum Amount.

6.6

Costs Includable in TI Allowance. The TI Allowance shall be used solely for TI Costs. The term “TI Costs” shall mean: (a) the aggregate cost of designing, engineering, permitting, consulting, and constructing the Tenant Improvements in the Premises (exclusive of the New Atrium Area) to the extent actually incurred, including, without limitation: (i) the cost of preparing any Tenant Plans (including the costs of specialty design and engineering consultants); (ii) all costs set forth in the Budget, including Landlord’s Administrative Rent, Landlord’s reasonable out-of-pocket expenses, costs resulting from Tenant Delays; and (iii) the cost of Changes pursuant to Section 3.4; and (iv) approved moving expenses; and (b) the cost of any Approved Tenant Modifications

to the Shell, Core and Site Construction Documents. In no event shall the TI Allowance be used for the cost of demolition of any portion of the Premises previously improved using the TI Allowance. Except during and to the extent of any active construction of any Tenant Improvements in the Premises pursuant to this Work Letter, all costs of power and other utilities used by Tenant constitute an Operating Expense under the Lease, and, accordingly, shall not be a TI Cost and shall not be paid from the TI Allowance. Further, TI Costs do not include, and the TI Allowance shall not be used for, the following: furniture (except that the TI Allowance may be used for furniture in the lobbies of the 75 Binney Building and the 125 Binney Building), audio visual, information technology (except that the TI Allowance may be used for the cost of IT installation, wiring, cabling and panels), scientific and other equipment to be used in the Premises, and costs, including brokerage fees, in connection with any subletting of the Premises or any portion thereof or any assignment of this Lease.

Landlord and Tenant confirm their agreement that certain TI Costs identified in Schedule 6.6 shall be funded and paid from the TI Allowance, as follows: (i) preconstruction costs allocable to the Tenant Improvements; (ii) certain costs associated with the Tenant Delay in delivery of the 50% TI Construction Documents and 100% TI Construction Documents; and (iii) TI Costs incurred to date.

6.7

Allocation of TI Costs. Landlord shall have no obligation to bear any portion of TI Costs except to the extent of the TI Allowance. As used in this Work Letter, “Landlord’s Portion” shall equal the TI Allowance. For purposes of this Work Letter, “Landlord’s Proportionate Share” shall mean a fraction, the numerator of which shall be the Landlord’s Portion and the denominator of which shall be the anticipated TI Costs (as reasonably determined by Landlord) for the Tenant Improvements (or applicable TI Phase). If at any time TI Costs under the Budget (or the Budget for the applicable TI Phase) exceed the TI Allowance, the difference shall be referred to herein as “Tenant’s Portion.” For purposes of this Work Letter, “Tenant’s Proportionate Share” shall mean a fraction, the numerator of which is Tenant’s Portion and the denominator of which is the anticipated TI Costs (as reasonably determined by Landlord). There shall be an adjustment of Landlord’s Proportionate Share and Tenant’s Proportionate Share from time to time based on changes in the anticipated TI Costs for the Tenant Improvements (or applicable TI Phase).

6.8

Excess TI Costs. Landlord shall have no obligation to bear any portion of the cost of any of the Tenant Improvements except to the extent of the TI Allowance (and, in the case of a TI Phase, the allocable TI Allowance therefor on a square footage basis). If at any time and from time-to-time, the remaining TI Costs under the Budget exceed the remaining unexpended TI Allowance, the calculation of Landlord’s Proportionate Share and Tenant’s Proportionate Share of each monthly requisition shall be adjusted at that time, so that each party continues to bear its respective Proportionate Share of the remaining TI Costs under the adjusted Budget. For purposes of any enforcement action instituted with regard to such amounts, those amounts will be deemed Rent under the Lease.

6.9

Payment for TI Costs. During the course of design and construction of the Tenant Improvements, and subject to Section 6.8, each of Landlord and Tenant shall pay their respective Proportionate Share of TI Costs (and shall provide to each other evidence of such payment) once a month against a draw request in Landlord’s standard form, containing such certifications, lien waivers (including a conditional lien release for each progress payment and unconditional lien releases for the prior month’s progress payments), inspection reports and other matters as Landlord customarily obtains, to the extent of Landlord’s approval thereof for payment, within 30 days of receipt of such draw request, so long as such draw request is submitted to, and approved by, Landlord by the 5^th day of the month. Upon completion of the Tenant Improvements for the Tenant Improvements or any phase thereof, Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and first tier subcontractors who did the work and final, unconditional lien waivers from all such contractors and first tier subcontractors; (ii) as-built plans (two (2) copies in print format and one (1) copy in electronic CAD format) for such Tenant Improvements (or TI Phase); (iii) a certification of substantial completion in Form AIA G704, (iv) a Certificate of Occupancy for the Premises (or temporary Certificate of Occupancy if for a portion of the Premises); and (v) copies of all operation and maintenance manuals and warranties affecting the Premises.

6.10	Test Fit Allowance.

Landlord has provided to Tenant a test fit allowance (“Test Fit Allowance”) in the amount of $[***] per rentable square foot of the Premises (exclusive of the New Atrium Area) for third party design costs incurred by Tenant for the initial preparation of test fit drawings and revisions thereto for the Tenant Improvements. Tenant acknowledges that the remaining balance of the Test Fit Allowance to which Tenant is entitled hereunder is the sum of $[***]. The Test Fit Allowance is in addition to the TI Allowance and the Additional TI Allowance.

7 MISCELLANEOUS

7.1	Number; Headings

Where applicable in this Work Letter, the singular includes the plural and the masculine or neuter includes the masculine, feminine and neuter. The section headings of this Work Letter are not a part of this Work Letter and shall have no effect upon the construction or interpretation of any part hereof.

7.2	Attorneys’ Fees

If either party commences an action against the other party arising out of or in connection with this Work Letter, then the prevailing party shall be entitled to have and recover from the other party reasonable attorneys’ fees, charges and disbursements and costs of suit.

7.3	Time of Essence

Time is of the essence with respect to the performance of every provision of this Work Letter in which time of performance is a factor.

7.4	Withholding of Consent

Whenever consent or approval of either party is required, that party shall not unreasonably withhold condition or delay such consent or approval, except as may be expressly set forth to the contrary.

7.5	Invalidity

Any provision of this Work Letter that shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof, and all other provisions of this Work Letter shall remain in full force and effect and shall be interpreted as if the invalid, void or illegal provision did not exist.

7.6	Interpretation

The language in all parts of this Work Letter shall be in all cases construed as a whole according to its fair meaning and not strictly for or against either Landlord or Tenant.

7.7	Successors

Each of the covenants, conditions and agreements herein contained shall inure to the benefit of and shall apply to and be binding upon the parties hereto and their respective heirs; legatees; devisees; executors; administrators; and permitted successors, assigns, sublessees. Nothing in this Section 7.7 shall in any way alter the provisions of the Lease regarding assignment or subletting.

7.8	Governing Law

This Work Letter shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without regard to its conflict of law principles.

7.9	Power and Authority

Each of Tenant and Landlord guarantees, warrants and represents to the other that the individual or individuals signing this Work Letter have the power, authority and legal capacity to sign this Work Letter on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations and entities on whose behalf said individual or individuals have signed.

7.10	Counterparts

This Work Letter may be executed in one or more counterparts, each of which, when taken together, shall constitute one and the same document.

7.11	Amendments; Waiver

No provision of this Work Letter may be modified, amended or supplemented except by an agreement in writing signed by Landlord and Tenant. The waiver by either party of any breach by the other party of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained.

7.12	Dispute Process

Any dispute between Landlord and Tenant with respect to any matter arising under this Work Letter shall be submitted first to the Landlord Representative and Tenant Representative named below for resolution. The initial Representatives of the parties shall be as follows, unless a party gives written notice to the other party that it is replacing its Representative:


Landlord Representative:		Tom Andrews

Tenant Representative:		Edward Fitzgerald

The Landlord and Tenant Representatives shall meet one or more times to attempt to resolve such dispute within the 5-business day period following the date that the dispute is submitted to them. If, after such meeting(s), the parties have been unable to resolve the dispute, either party may thereafter seek any available legal remedy, at law or in equity.

7.13	Waiver of Jury Trial

To the extent permitted by Applicable Laws, the parties waive trial by jury in any action, proceeding or counterclaim brought by the other party hereto related to matters arising out of or in any way connected with this Work Letter.

7.14	Project Accounting

Landlord shall provide to Tenant (a) on a quarterly basis: (i) an updated report as to certain costs of the Non-TI Project Improvements for the categories of expense identified in the attached Schedule 7.14 (collectively, “Reported Project Costs”), in the format attached hereto as Schedule 7.14 [***]. Any Disclosed Documents so provided shall be subject to the following terms and conditions:

Any Disclosed Documents provided to Tenant shall be used by Tenant only for the Special Permitted Use and for no other use. Specifically, the Disclosed Documents shall be used only to prepare the financial statements to be disclosed publicly by Tenant and shall not themselves be disclosed to third parties, unless required solely for the purpose of the preparation or audit of such financial statements (the “Preparing/Auditing Parties”).

Any Disclosed Documents provided to Tenant shall be considered “Confidential Information” and Tenant shall not copy, duplicate, deliver, disclose or transmit the Disclosed Documents or their content to any third party without Landlord’s express prior written approval, except to the Preparing/Auditing Parties solely for the purpose of the preparation or audit of such financial statements.

(c)

To the extent that any Disclosed Document will be prepared by a third party, such Disclosed Document will be prepared in accordance with a specific scope of work and maybe subject to specific limitations regarding its use by third parties, including Tenant.

(d)

Neither Landlord nor any of its affiliates, employees, agents, successors or assigns (collectively, the “Landlord Parties”), nor any third party that prepared any Disclosed Document, has made or shall be deemed to have made any representations, statements or warranties of any kind as to (i) the accuracy or validity of the information contained in any Disclosed Document; or (ii) the condition or cost of construction of the Project in any respect as a consequence of providing the Disclosed Documents.

(e)

Tenant is responsible for making its own independent assessment and investigation of the condition and cost of construction of the Project.

(f)

To the extent permitted under applicable law, Tenant agrees to indemnify, defend and hold the Landlord Parties harmless from and against losses, costs, damages, claims or causes of action (including, without limitation, any actions initiated by Tenant shareholders) arising out of any use of the Disclosed Information by Tenant or the Preparing/Auditing Parties, or their respective agents, employees or representatives, including, without limitation, the Special Permitted Use and any use in violation of paragraphs (a) and (b) above.

(g)

Tenant, for itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges each of the Landlord Parties from any and all rights, claims and demands at law or in equity, whether direct or indirect, known or unknown, foreseen or unforeseen, at the time of this First Amendment, which Tenant has or may have in the future, arising out of the financial information provided by Landlord in the Disclosed Documents. With respect to the waiver and release set forth herein relating to unknown and unsuspected claims, Tenant hereby acknowledges that such waiver and release is being made after obtaining the advice of counsel and with full knowledge and understanding of the consequences and effects of such waiver. Nothing set forth herein shall in any way waive or limit any right or obligation of Landlord or of Tenant as otherwise set forth in the Lease which either party now has or may have in the future.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to be effective on the date first above written.


LANDLORD:

ARE-MA REGION NO. 48, LLC, a Delaware limited liability company

	By:	Alexandria Real Estate Equities, L.P., a Delaware limited partnership, its managing member

		By:	ARE-QRS Corp.,
			a Maryland corporation, its general partner

			By:	/s/ Eric Johnson
			Name:	Eric Johnson
			Title:	Senior Vice President, RE Legal Affairs

TENANT:

ARIAD Pharmaceuticals, Inc., a Delaware corporation

By:	/s/ Edward M. Fitzgerald
Name:	Edward M. Fitzgerald
Title:	Executive Vice President, CFO
	Hereunto Duly Authorized

Exhibit 31.1

CERTIFICATIONS

Chief Executive Officer

I, Harvey J. Berger, M.D., certify that:

1.	I have reviewed this quarterly report of ARIAD Pharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

CERTIFICATIONS

Chief Financial Officer

I, Edward M. Fitzgerald, certify that:

1.	I have reviewed this quarterly report of ARIAD Pharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of ARIAD Pharmaceuticals, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the period ended March 31, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 8, 2015						/s/ Harvey J. Berger, M.D
						Harvey J. Berger, M.D.
						Chairman and Chief Executive Officer

Date: May 8, 2015						/s/ Edward M. Fitzgerald
						Edward M. Fitzgerald
						Executive Vice President,
						Chief Financial Officer