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 September 30, 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 October 31, 2015 was 189,293,493.

ARIAD PHARMACEUTICALS, INC.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION		1

ITEM 1.	UNAUDITED FINANCIAL STATEMENTS		1

	Condensed Consolidated Balance Sheets – September 30, 2015 and December 31, 2014		1

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014		2

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2015 and 2014		3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014		4

	Notes to 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		35

ITEM 4.	CONTROLS AND PROCEDURES		35

PART II.	OTHER INFORMATION		36

ITEM 1.	LEGAL PROCEEDINGS		36

ITEM 1A.	RISK FACTORS		37

ITEM 6.	EXHIBITS		38

	SIGNATURES		39

	EXHIBIT INDEX		40

PART I.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


*In thousands, except share and per share data*	September 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	282,187		$	352,688
Marketable securities		15,138			—
Accounts receivable, net		15,475			8,397
Inventory		1,518			979
Other current assets		15,217			23,578

Total current assets		329,535			385,642
Restricted cash		11,316			11,308
Property and equipment, net		232,263			203,027
Intangible and other assets, net		3,025			3,139

Total assets	$	576,139		$	603,116

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,865		$	10,819
Current portion of long-term debt		9,666			6,707
Accrued compensation and benefits		17,871			21,095
Accrued product development expenses		21,974			13,958
Other accrued expenses		20,696			11,514
Current portion of deferred revenue		7,976			8,075
Other current liabilities		22,628			17,830

Total current liabilities		115,676			89,998
Long-term debt (Note 8)		419,722			345,474
Other long-term liabilities		12,227			11,338
Deferred revenue		78,164			75,505

Total liabilities		625,789			522,315

Commitments and contingencies (Note 9)

Stockholders’ equity (deficit):
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 189,189,890 shares in 2015 and 187,294,094 shares in 2014		189			187
Additional paid-in capital		1,331,678			1,299,394
Accumulated other comprehensive income (loss)		4,363			(4,185	)
Accumulated deficit		(1,385,880	)		(1,214,595	)

Total stockholders’ equity (deficit)		(49,650	)		80,801

Total liabilities and stockholders’ equity (deficit)	$	576,139		$	603,116

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended September 30,						Nine Months Ended September 30,
*In thousands, except per share data*	2015			2014			2015			2014
Revenue:
Product revenue, net	$	27,543		$	14,499		$	79,262		$	34,371
License revenue		1,527			183			3,038			4,206

Total revenue		29,070			14,682			82,300			38,577

Operating expenses:
Cost of product revenue		483			594			1,666			4,277
Research and development expense		48,219			27,600			126,401			87,948
Selling, general and administrative expense		36,744			33,622			118,916			99,411

Total operating expenses		85,446			61,816			246,983			191,636

Loss from operations		(56,376	)		(47,134	)		(164,683	)		(153,059	)

Other income (expense):
Interest income		20			19			61			63
Interest expense		(5,228	)		(3,720	)		(12,897	)		(4,312	)
Foreign exchange gain		291			881			906			836

Other income (expense), net		(4,917	)		(2,820	)		(11,930	)		(3,413	)

Loss before provision for income taxes		(61,293	)		(49,954	)		(176,613	)		(156,472	)

Benefit from (provision for) income taxes		5,842			(154	)		5,328			(379	)

Net loss	$	(55,451	)	$	(50,108	)	$	(171,285	)	$	(156,851	)

Net loss per share – basic and diluted	$	(0.29	)	$	(0.27	)	$	(0.91	)	$	(0.84	)

Weighted-average number of shares of common stock outstanding – basic and diluted		188,921			187,034			188,456			186,703

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE LOSS


	Three Months Ended September 30,						Nine Months Ended September 30,
*In thousands, except per share data*	2015			2014			2015			2014
Net loss	$	(55,451	)	$	(50,108	)	$	(171,285	)	$	(156,851	)

Other comprehensive income (loss):
Cumulative translation adjustment		(327	)		120			(168	)		122
Unrealized gain on marketable securities, net of tax		9,052			—			9,052			—
Amortization of prior service cost included in net periodic pension cost		82			40			(336	)		122

Other comprehensive income (loss)		8,807			160			8,548			244

Comprehensive loss	$	(46,644	)	$	(49,948	)	$	(162,737	)	$	(156,607	)

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
*In thousands*	2015			2014
Cash flows from operating activities:
Net loss	$	(171,285	)	$	(156,851	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment charges		9,019			6,079
Stock-based compensation		29,009			24,583
Deferred executive compensation expense		—			119
Non-cash accrued interest		1,121
Deferred income tax benefit		(6,086	)		—
Increase (decrease) from:
Accounts receivable		(7,078	)		(5,957	)
Inventory		(539	)		1,549
Other assets		8,720			(1,558	)
Accounts payable and other		13,901			1,292
Deferred revenue		2,560			1,445
Deferred executive compensation paid		—			(2,631	)

Net cash used in operating activities		(120,658	)		(131,930	)

Cash flows from investing activities:
Investment in property and equipment		(4,446	)		(2,475	)

Net cash used in investing activities		(4,446	)		(2,475	)

Cash flows from financing activities:
Proceeds from royalty financing		50,000			—
Proceeds from issuance of convertible debt		—			192,921
Proceeds from issuance of warrants		—			27,580
Purchase of convertible bond hedges		—			(43,220	)
Repayment of long-term debt		(313	)		(9,100	)
Reimbursement of amounts related to facility lease obligation		1,816			—
Proceeds from issuance of common stock pursuant to stock option and purchase plans		3,596			3,059
Payment of tax withholding obligations related to stock compensation		(321	)		(716	)

Net cash provided by financing activities		54,778			170,524

Effect of exchange rates on cash		(175	)		153

Net increase (decrease) in cash and cash equivalents		(70,501	)		36,272
Cash and cash equivalents, beginning of period		352,688			237,179

Cash and cash equivalents, end of period	$	282,187		$	273,451

Supplemental non-cash investing and financing disclosure:
Capitalization of construction-in-progress related to facility lease obligation	$	26,634		$	71,818

Investment in property and equipment included in accounts payable or accruals	$	1,106		$	187

Deferred financing costs included in accounts payable or accruals	$	3,846		$	—

See notes to unaudited condensed consolidated financial statements.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Business

Nature of Business

Unless the content requires otherwise, references to “ARIAD,” “Company,” “we,” “our,” and “us,” in this quarterly report refer to ARIAD Pharmaceuticals, Inc. and its subsidiaries. ARIAD is a global oncology company focused on transforming 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.

The Company is selling its cancer medicine, Iclusig^® (ponatinib), for the treatment of adult patients with chronic myeloid leukemia (“CML”) and Philadelphia chromosome positive acute lymphoblastic leukemia (“Ph+ ALL”). In addition to commercializing Iclusig 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

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. The Company has prepared the condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Company’s audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014. The condensed consolidated balance sheet as of December 31, 2014 was derived from the audited consolidated balance sheet included in the Annual Report on Form 10-K for the year ended December 31, 2014.

In the opinion of management, the Company has prepared the accompanying condensed consolidated financial statements on the same basis as its audited financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2015.

Principles of Consolidation

The 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.

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.

Marketable Securities

Marketable securities consist of 687,139 shares of common stock of REGENXBIO, Inc. (“REGENXBIO”), which became a publicly traded company in September 2015. The Company obtained these shares in connection with a license agreement it entered into with REGENXBIO in November 2010 for certain gene expression regulation technology. The Company is restricted from trading these securities until March 2016 pursuant to an agreement it entered into with REGENXBIO. The Company has classified these shares as “available for sale” investments and recognized an unrealized gain of $15.1 million, using a Level 1 valuation input, which has been excluded from the determination of net loss and is recorded in accumulated other comprehensive income (loss), net of tax, a separate component of stockholders’ equity, in the three and nine month periods ended September 30, 2015. These shares had been accounted for using the equity method with a carrying value of zero due to losses incurred by REGENXBIO in previous years.

Intra-period tax allocation rules require the Company to allocate its provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income. In periods in which the Company has a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive income, the Company must allocate the tax provision to the other categories of earnings. The Company then records a related tax benefit in continuing operations. The following table summarizes the fair value, accumulated other comprehensive income and intra-period tax allocation regarding the Company’s investment in REGENXBIO, at September 30, 2015.


In thousands	2015
Accumulated other comprehensive income, before tax	$	15,138
Intra-period tax allocation recorded as a benefit from income taxes		(6,086	)

Accumulated other comprehensive income, net of tax	$	9,052

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 the production of Iclusig raw materials and intermediate materials, but has qualified multiple suppliers for the remaining steps in the manufacturing process, including Iclusig finished drug product. Accordingly, the Company has concentration risk with certain steps associated with its manufacturing process and relies on its currently approved contract manufacturers for these product manufacturing steps.

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 $360,000 for the three-month periods ended September 30, 2015 and 2014, respectively, and $462,000 and $3.5 million for the nine-month periods ended September 30, 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.

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 into U.S. dollars in these circumstances are excluded from the determination of net loss and are recorded in accumulated other comprehensive income (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. Adjustments resulting from remeasurement of financial statements into U.S. dollars in these circumstances are recorded in the net loss as foreign currency gains or losses.

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 risk of loss and title passes to the customer, 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 until it was dispensed to the patient. Prior to 2015, the Company recognized revenue in the United States, assuming all revenue recognition criteria had been met, when Iclusig was sold by its customers to patients. As of January 1, 2015, the Company concluded that it had sufficient experience to estimate returns in the United States, as a result of over two years of sales experience. Accordingly, since January 1, 2015, the Company has recognized revenue in the United States upon shipment of Iclusig to Biologics.

The Company has written contracts or standard terms of sale with each of its customers and delivery occurs when risk of loss and title passes to the customer. 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. Estimates relating to these rebates and discounts are deducted from gross product revenues at the time the revenues are recognized. 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 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 nine-month period ended September 30, 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
Provision		304			3,262			228			3,794
Payments or credits		(289	)		(2,808	)		(62	)		(3,159	)

Balance, June 30, 2015		114			3,001			586			3,701
Provision		298			3,997			92			4,387
Payments or credits		(302	)		(3,314	)		(219	)		(3,835	)

Balance, September 30, 2015	$	110		$	3,684		$	459		$	4,253

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. 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 $23.3 million through September 30, 2015, of which $21.9 million was received as of September 30, 2015. Amounts received from shipments in France are recorded in other liabilities in the condensed consolidated balance sheet.

The Company has entered into distributor arrangements for Iclusig in a number of countries including Australia, Canada, Israel, certain countries in central and eastern Europe, Turkey and Japan. The Company recognizes Iclusig net product revenue from these arrangements when all criteria for revenue recognition have been satisfied. Upfront fees are recognized over the remaining term of the agreement at the point at which all deliverables under the agreement have commenced, usually at the point when product is initially received by the distributor.

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 September 30, 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 and nine-month periods ended September 30, 2015, one individual customer accounted for 74 percent and 76 percent of net product revenue, respectively. As of September 30, 2015, one individual customer accounted for 61 percent of accounts receivable. For the three-month and nine-month periods ended September 30, 2014, one individual customer accounted for 72 percent and 67 percent of net product revenue, respectively. As of September 30, 2014, one customer accounted for 75 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 September 30, 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 September 30, 2015 and 2014, net product revenue from customers outside the United States totaled 27 percent and 28 percent of the Company’s consolidated net product revenue, respectively, with 9 percent and 17 percent, respectively, representing product revenue from customers in Germany. For the nine-month periods ended September 30, 2015 and 2014, product revenue from customers outside the United States totaled 24 percent and 33 percent of the Company’s consolidated net product revenue respectively, with 9 percent and 5 percent, respectively, representing net product revenue from customers in Germany. Long lived assets outside the United States totaled $1.4 million at September 30, 2015 and $1.4 million at December 31, 2014.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued amended accounting guidance related to the presentation of debt issuance costs in the financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt rather than as an asset. The Company has elected early adoption of this recent guidance as of September 30, 2015. Adoption of the guidance classifies debt issuance costs from prepaid and other assets to long-term obligations, less current portion, within the condensed consolidated balance sheet related to the $200 million convertible note offering in June 2014 and the $50 million royalty financing in July 2015.

In May 2014, the FASB issued amended accounting guidance related to revenue recognition. This guidance is based on the principle that revenue is recognized in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the transfer of goods or services to customers. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This amendment will be effective for the Company in the first quarter of fiscal 2018. The Company is evaluating the options for adoption and the impact on its financial position and results of operations.

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 at approximately year-end 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 up to $80 million in 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 of 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 is being recognized as revenue on a straight-line basis commencing in April 2015, the time at which the Company has commenced providing all elements included in the Collaboration Agreement. The Company has recognized as license revenue approximately $1.3 million and $2.6 million of the upfront fee for the three-month and nine month periods ending September 30, 2015, respectively.

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 determined at December 31, 2014 that the release of those funds to the Company was probable and therefore recorded a receivable for such amounts, with an offsetting amount included in deferred revenue. The Company received the $15.8 million from the Japanese tax authorities in April 2015.

Medinol Ltd.

The Company entered into a license agreement with 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 U.S. Food and Drug Administration (“FDA”) triggered milestone payments to the Company of $3.8 million, which are recorded as license revenue in the accompanying consolidated statement of operations for the nine-month period ended September 30, 2014. The Company is eligible to receive additional, regulatory, clinical and commercial milestone payments of up to $34.8 million under the agreement if two products are successfully developed and commercialized.

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 September 30, 2015 and December 31, 2014:


*In thousands*	2015			2014
Raw materials	$	499		$	—
Work in process		89			460
Finished goods		1,430			979

		2,018			1,439
Current portion		(1,518	)		(979	)

Non-current portion included in intangible and other assets, net	$	500		$	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 commercial 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 September 30, 2015 and December 31, 2014:


*In thousands*	2015			2014
Leasehold improvements	$	23,149		$	22,315
Construction in progress		225,941			196,027
Equipment and furniture		24,652			23,511

		273,742			241,853
Less accumulated depreciation and amortization		(41,479	)		(38,826	)

	$	232,263		$	203,027

As of September 30, 2015 and December 31, 2014, the Company has recorded a facility lease obligation of $220.6 million and $196.0 million, respectively, related to a lease for a new facility under construction in Cambridge, Massachusetts. See Note 9 to the condensed consolidated financial statements included in this report.

Depreciation and amortization expense was $951,000 and $1.3 million for the three-month periods ended September 30, 2015 and 2014, respectively, and $2.7 million and $3.9 million for the nine-month periods ended September 30, 2015 and 2014, respectively.

6. Intangible and Other Assets, Net

Intangible and other assets, net, were comprised of the following at September 30, 2015 and December 31, 2014:


*In thousands*	2015			2014
Capitalized patent and license costs	$	5,975		$	5,975
Less accumulated amortization		(5,065	)		(5,036	)

		910			939
Inventory, non-current		500			460
Other assets		1,615			1,740

	$	3,025		$	3,139

7. Other Current Liabilities

Other current liabilities consisted of the following at September 30, 2015 and December 31, 2014:


*In thousands*	2015		2014
Amounts received in advance of revenue recognition	$	21,958	$	17,186
Other		670		644

	$	22,628	$	17,830

Amounts received in advance of revenue recognition consist of payments received from customers in France which do not currently qualify for revenue recognition.

8. Long-term Debt

Our long-term debt consisted of the following at September 30, 2015 and December 31, 2014:


*In thousands*	2015			2014
Convertible notes, net	$	162,293		$	156,154
Royalty financing, net		46,483			—
Facility lease obligation		220,612			196,027

		429,388			352,181
Less current portion		(9,666	)		(6,707	)

	$	419,722		$	345,474

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, in order to reduce the potential dilution to the Company’s common stockholders and/or offset any cash payments in excess of the principal amount due upon conversion of the convertible notes, the Company used $43.2 million of the net proceeds from the sale of the convertible notes to pay the cost of convertible bond hedges which cost was partially offset by $27.6 million in proceeds to the Company from the related sale of warrants to the counter-party in the convertible bond hedge transaction.

The outstanding convertible note balances as of September 30, 2015 and December 31, 2014 consisted of the following:


*In thousands*	2015			2014
Principal	$	200,000		$	200,000
Less: debt discount, net		(37,707	)		(43,846	)

Net carrying amount	$	162,293		$	156,154

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 September 30, 2015. Interest expense related to the convertible notes during for the three-month and nine-month periods ended September 30, 2015 consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
*In thousands*	2015		2014		2015		2014
Contractual interest expense	$	1,813	$	1,812	$	5,438	$	2,074
Amortization of debt discount		2,058		1,872		6,032		2,141
Amortization of debt issuance costs		36		33		105		38

	$	3,907	$	3,717	$	11,575	$	4,253

Royalty Financing

On July 28, 2015, the Company entered into a royalty financing agreement with PDL BioPharma, Inc. (“PDL”) under which the Company received an initial payment of $50 million in exchange for a percentage of global net revenues from sales of Iclusig until PDL receives a fixed internal rate of return on the funds it advances the Company. The Company will receive an additional $50 million one year from the effective date of the agreement with the option to receive up to an additional $100 million in one or two tranches between the six-month and twelve-month anniversary dates of the agreement. The proceeds received from PDL are referred to as “advances”.

Under the agreement, the Company agreed to pay PDL a percentage of global Iclusig net product revenues subject to an annual maximum payment of $20 million per year through 2018. The rate is 2.5 percent during the first year and increases to 5 percent in the second year through the end of 2018 and 6.5 percent from 2019 until PDL receives a 10 percent internal rate of return. If the Company draws down in excess of $150 million, the 6.5 percent rate would increase to 7.5 percent until PDL receives 10 percent internal rate of return. Through September 30, 2015, the Company has paid a total of $313,000 to PDL under this agreement. Payments are deemed to be applied against advances. Interest expense related to the financing agreement was $1.3 million for the nine-month period ended September 30, 2015.

Beginning in 2019, if PDL does not receive specified minimum payments each year from sales of Iclusig, then it will also have the right to receive a certain percentage of net revenues from sales of brigatinib, subject to its approval by regulatory authorities. If PDL has not received total cumulative payments under this agreement that are at least equal to the amounts PDL has advanced to the Company by the fifth anniversary of each funding date, the Company is required to pay PDL an amount equal to the shortfall.

PDL retains the option to require the Company to repurchase the then outstanding net advances, together with additional payments representing return on investment as described below (the “put” option), in the event the Company experiences a change of control, undergoes certain bankruptcy events, transfers any of its interests in Iclusig (other than pursuant to a license agreement, development, commercialization, co-promotion, collaboration, partnering or similar agreement), transfers all or substantially all of its assets, or breaches certain of the covenants, representations or warranties made under the agreement. Similarly, the Company has the option to terminate the agreement at any time by payment of the then outstanding net advances, together with additional payments representing return on investment as described below (the “call” option). Both the put and call options can be exercised at a price which is equal to the greater of (a) the then outstanding net advances and an amount that would generate an internal rate of return to PDL of 10 percent after taking into account the amount and timing of all payments made to PDL by the Company or (b) a multiple of the then outstanding net advances of 1.15 if exercised on or prior to the first anniversary of the closing date, 1.20 if exercised after the first anniversary but on or prior to the second anniversary of the closing date or 1.30 if exercised after the second anniversary of the closing date.

In connection with the agreement, the Company also entered into a security agreement with PDL on the same date as the royalty financing agreement. Under the security agreement, the Company granted PDL a security interest in certain assets relating to Iclusig, including all of the Company’s revenues from sales of Iclusig covered by the royalty financing agreement, a certain segregated deposit account established under the royalty financing agreement, and certain intellectual property, license agreements, and regulatory approvals related to Iclusig. The collateral set forth in the security agreement secures the Company’s obligations under the royalty financing agreement, including its obligation to pay all amounts due thereunder.

For accounting purposes, the agreement has been classified as a debt financing as the Company will have significant continuing involvement in the sale of Iclusig and other products which might be covered by the agreement, the parties have the right to cancel the agreement as described above, PDL’s rate of return is implicitly limited by the terms of the transaction, volatility in the sale of Iclusig and other products would have no effect on PDL’s expected ultimate return, and PDL has certain rights in the event that product sales and related payments under this agreement are insufficient to pay down the Company’s obligations.

In connection with the transaction, the Company recorded the initial net proceeds as long-term debt. The Company will impute interest expense associated with this borrowing using the effective interest rate method and will record a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement, including the required 10 percent internal rate of return to PDL. Determining the effective interest rate requires judgment and is based on significant assumptions related to estimates of the amounts and timing of future revenue streams. Determination of these assumptions is highly subjective and different assumptions could lead to materially different outcomes.

The Company has evaluated the Company’s call option and PDL’s put option in accordance with ASC 815 “Accounting for Derivative Instruments and Hedging Activities”, and determined that the put option is an embedded derivative. This item is being accounted for as a derivative and the estimated fair value of the put option is carried as part of the carrying value of the related liability, and was not material as of the date of the agreement or September 30, 2015.

Facility Lease Obligation

As of September 30, 2015 and December 31, 2014, the Company has recorded a facility lease obligation related to its lease for a new facility under construction in Cambridge, Massachusetts. See notes 5 and 9 to the condensed consolidated financial statements included in this report for information regarding the lease and related asset under construction. During the construction period the Company is capitalizing the costs as a component of construction in process with a corresponding credit to facility lease obligation.

The Company expects to complete construction and occupy the facility in the third quarter of 2016. Under terms of the lease, the Company commenced making lease payments in March 2015. During the construction period a portion of the lease payment is allocated to land lease expense with the remainder accounted for as a reduction of the obligation.

9. Leases and Other Commitments

Facility Leases

The Company conducts the majority of its operations in a 100,000 square foot office and laboratory facility in Cambridge, Massachusetts 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 lease agreement for an additional 26,000 square feet of office space in Cambridge, Massachusetts which expires in August 2017. Future non-cancelable minimum annual rental payments through July 2019 under these leases are $1.9 million remaining in 2015, $7.5 million in 2016, $7.1 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 is in process and is expected to be completed in the third quarter of 2016, at which time the Company expects to occupy the buildings.

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 September 30, 2015, the Company has recorded construction in progress and a facility lease obligation of $225.9 million and $220.6 million, respectively, including the current portion of the obligation of $4.0 million included in current liabilities.

The lease has an initial term of 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 by calendar year beginning upon commencement of the lease are $2.4 million in 2015, $8.7 million in 2016, $25.5 million in 2017, $31.0 million in 2018, $31.5 million in 2019 and 357.4 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 maintains a letter of credit as security for the lease of $9.2 million, which is supported by restricted cash.

In August 2015, the Company entered into a sublease agreement for approximately 160,000 square feet of the total leased space in the Binney Street facility. The sublease has an initial term of 10 years from the rent commencement date which is expected to be in the third quarter of 2016 with an option to extend for the remainder of the initial term of the Company’s underlying lease. The sublease

rent is subject to increases over the term of the lease. Based on the agreement, during the initial term the non-cancelable minimum annual sublease payments by calendar year beginning upon the rent commencement date of the sublease are approximately $5.3 million in 2016, $10.7 million in 2017, $10.9 million in 2018, $11.1 million in 2019 and $11.3 million in 2020 and $65.6 million in total thereafter, plus the subtenant’s share of the facility operating expenses.

Lausanne, Switzerland

In January 2013, the Company entered into a lease agreement for approximately 22,000 square feet of office space in a building in Lausanne, Switzerland, which the Company occupied in 2014. The lease has an initial term of ten years, with options to extend the term and an early termination right at the Company’s option after five years. Future non-cancelable minimum annual lease payments under the lease are expected to be approximately $0.3 million remaining in 2015, $1.1 million in 2016, $1.0 million in 2017, $1.1 million in 2018 and 2019 and $4.4 million in total thereafter.

Total rent expense for the leases described above as well as other Company leases was $2.8 million, and $1.9 million for the three-month periods ended September 30, 2015 and 2014, respectively, and $7.3 million and $5.7 million for the nine month-periods ended September 30, 2015 and 2014, respectively. Contingent rent for the three-month periods ended September 30, 2015 and 2014 was $191,000 and $167,000 respectively, and for the nine-month periods ended September 30, 2015 and 2014 was $574,000 and $519,000 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 $4.7 million, $18.1 million, $33.7 million, $38.1 million, $36.2 million and $361.7 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 September 30, 2015 extending through the end of 2016 or 2017, providing for aggregate base salaries of $2.3 million for the remainder of 2015, $13.3 million for 2016 and $8.3 million for 2017.

10. Stockholders’ Equity (Deficit)

The changes in stockholders’ equity (deficit) for the nine-month period ended September 30, 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		1,895,796		2		3,596									3,598
Stock-based compensation						29,009									29,009
Payment of tax withholding obligations related to stock-based compensation						(321	)								(321	)
Other comprehensive income									8,548						8,548
Net loss												(171,285	)		(171,285	)

Balance, September 30, 2015		189,189,890	$	189	$	1,331,678		$	4,363		$	(1,385,880	)	$	(49,650	)

11. Fair Value of Financial Instruments

At September 30, 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. Our marketable securities, consisting of shares of common stock of REGENXBIO, are classified as Level 1 assets as they have readily observable prices, and therefore a reliable fair market value as of September 30, 2015. 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 $196.9 million at September 30, 2015 and $203.4 million at December 31, 2014, respectively.

12. Stock Compensation

ARIAD Stock Option and Stock Plans

The Company’s 2001, 2006 and 2014 stock option and stock 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 or option agreement, 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 September 30, 2015, there were 9,473,048 shares available for awards under the 2014 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 nine-month periods ended September 30, 2015 and 2014, 193,178 and 185,243 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 and nine-month periods ended September 30, 2015 and 2014, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
*In thousands*	2015		2014		2015		2014
Compensation cost from:
Stock options	$	3,348	$	3,583	$	11,718	$	12,427
Stock and stock units		6,396		3,961		16,858		11,787
Purchases of common stock at a discount		187		94		433		369

	$	9,931	$	7,638	$	29,009	$	24,583

Compensation cost included in:
Research and development expenses	$	3,633	$	3,229	$	11,629	$	10,570
Selling, general and administrative expenses		6,298		4,409		17,380		14,013

	$	9,931	$	7,638	$	29,009	$	24,583

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 nine-month period ended September 30, 2015 was as follows:


	Number of shares			Weighted Average Exercise Price Per Share
Options outstanding, January 1, 2015		10,148,087		$	10.09
Granted		1,095,500		$	7.87
Forfeited		(541,138	)	$	10.27
Exercised		(638,743	)	$	5.84

Options outstanding, September 30, 2015		10,063,706		$	10.11

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 nine-month period ended September 30, 2015 was as follows:


	Number of shares			Weighted Average Grant Date Fair Value
Stock units outstanding, January 1, 2015		3,503,153		$	9.97
Granted / awarded		3,003,375		$	8.70
Forfeited		(115,112	)	$	8.17
Vested or restrictions lapsed		(1,250,520	)	$	11.87

Stock units outstanding, September 30, 2015		5,140,896		$	8.81

The total fair value of stock and stock unit awards that vested as of September 30, 2015 and 2014 was $9.2 million and $4.9 million, for the period, respectively. The total unrecognized compensation expense for restricted shares or units that have been granted and are probable to become vested was $16.8 million at September 30, 2015 and will be recognized over 1.6 years on a weighted average basis.

Included in the table above are outstanding performance share units which were awarded from 2012 to 2015 as noted below:


Years of Award	Number of Units		Description of Performance Metric
2013		158,000	Brigatinib clinical trial enrollment (100%) – achieved in 2015
2014		1,044,000	Iclusig clinical trial enrollment (50%); cumulative revenues from sales of Iclusig in 2014 and 2015 (50%)
2015		731,300	Iclusig clinical trial enrollment (315,000 units); 2015 revenues from sales of Iclusig (315,000 units); total relative return on common stock 2015-2017 (101,300 units)

The Company recognizes compensation expense for performance share units when the achievement of the performance metric is determined to be probable of occurrence. The total number of units earned, and related compensation cost, may be up to 60 percent higher depending on the level or timing of achievement of the metric as defined in the specific award agreement.

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 and nine-month periods ended September 30, 2015 and 2014 are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
*In thousands, except per share data*	2015			2014			2015			2014
Net loss	$	(55,451	)	$	(50,108	)	$	(171,285	)	$	(156,851	)

Net loss per share – basic and diluted	$	(0.29	)	$	(0.27	)	$	(0.91	)	$	(0.84	)

Weighted average shares – basic and diluted		188,921			187,034			188,456			186,703

14. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) for three-month and nine-month periods ended September 30, 2015 were as follows:


*In thousands*	Unrealized Gain on Marketable Equity Securities		Cumulative Translation Adjustment			Defined Benefit Pension Obligation			Total
Balance, July 1, 2015	$	—	$	333		$	(4,777	)	$	(4,444	)
Other comprehensive income (loss), net of tax		9,052		(327	)		82			8,807

Balance, September 30, 2015	$	9,052	$	6		$	(4,695	)	$	4,363


*In thousands*	Unrealized Gain on Marketable Equity Securities		Cumulative Translation Adjustment			Defined Benefit Pension Obligation			Total
Balance, January 1, 2015	$	—	$	174		$	(4,359	)	$	(4,185	)
Other comprehensive income (loss), net of tax		9,052		(168	)		(336	)		8,548

Balance, September 30, 2015	$	9,052	$	6		$	(4,695	)	$	4,363

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 benefit from (provision for) income taxes was $5.8 million and $(154,000) for the three-month periods ended September 30, 2015 and 2014, respectively, and $5.3 million and $(379,000) for the nine-month periods ended September 30, 2015 and 2014, respectively. The Company recorded a tax benefit of $6.1 million related to the $15.1 million unrealized gain associated with the change in market value of its marketable securities for the three and nine-month periods ended September 30, 2015.

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 nine-month period ended September 30, 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 implemented in November 2013. 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 September 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 and nine-month periods ended September 30, 2015 and 2014 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
*In thousands*	2015			2014			2015			2014
Service cost	$	431		$	234		$	1,319		$	761
Interest cost		33			40			102			119
Expected return on plan assets		(24	)		(34	)		(73	)		(101	)
Amortization of prior service cost		82			37			(336	)		110

Net periodic benefit cost	$	522		$	277		$	1,012		$	889

The Company expects to contribute $1.7 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. Briefing on the plaintiffs’ appeal to the United States Court of Appeals for the First Circuit has been completed, and the Company expects a hearing to be scheduled.

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. On May 18, 2015, the Company filed a motion to dismiss the complaint in this action. On July 31, 2015, the United States District Court for the Southern District of Florida heard oral argument on the Company’s motion to dismiss the complaint. On August 4, 2015, the court granted the Company’s motion to dismiss with respect to the plaintiff’s cause of action for punitive damages and denied the remainder of the Company’s motion to dismiss. In response, on August 7, 2015, the plaintiff filed an amended complaint. The amended complaint asserts punitive damages as a remedy, in addition to seeking unspecified monetary damages and an award of costs and expenses, including attorney’s fees. The parties are currently engaged in discovery.

The Company believes these actions are without merit. 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 probable or reasonably estimable under U.S. GAAP. In addition, due to the early stages of these matters described above, the Company cannot reasonably estimate the possible loss or range of loss, if any, that may result from these matters.

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 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 by year-end 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. Following the appointment of a new Chief Executive Officer, we expect that we will engage 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, and similar matters, 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 prescriptions of tyrosine kinase inhibitors (“TKI”), for patients with CML and Ph+ ALL in the United States.

We and our distributors are now selling Iclusig in Germany, the United Kingdom, Austria, the Netherlands, Norway, Denmark, Sweden, Finland, Switzerland, Italy, Spain, Australia and Canada. 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 market Iclusig upon obtaining all necessary approvals.

In certain ex-U.S. territories, we are providing for the sale and distribution of Iclusig through partnership or distributorship arrangements. For example, 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 has agreed to fund future clinical development in those countries. We expect to file for marketing approval in Japan in collaboration with Otsuka at approximately year-end 2015. In addition, we have entered into distributorship agreements with third parties to provide for distribution of Iclusig in Australia and New Zealand, Israel, certain countries in central and eastern Europe, Turkey and Canada.

Ongoing Development of Iclusig

Initial approval of Iclusig in the United States and Europe was based on results from our 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. Our 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.

We are initiating 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 regulatory commitments, as well as studies designed to evaluate its use in earlier lines of therapy. These studies include:

•

a dose-ranging trial of Iclusig, which we initiated in August 2015, in approximately 450 patients with chronic phase CML, who have become resistant to at least two prior TKIs. This study, known as the OPTIC trial, is designed to inform the optimal use of Iclusig in these patients.

•

a randomized, Phase 3 trial in approximately 600 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. This trial is expected to open for enrollment prior to year-end 2015.

•

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. This trial, known as SPIRIT3, is expected to open for enrollment in 2016.

Brigatinib (AP26113)

Brigatinib (AP26113) is an investigational inhibitor of anaplastic lymphoma kinase, or ALK. We are currently conducting a Phase 1/2 clinical trial of brigatinib, which we fully enrolled in the third quarter of 2015. 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 Phase 2 trial of brigatinib in the first quarter of 2014 in patients with locally advanced or metastatic NSCLC who were previously treated with crizotinib, known as the ALTA trial. 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 achieved full patient enrollment in the ALTA trial in the third quarter of 2015 and, subject to the results of our clinical trials, expect to file for approval of brigatinib in the United States in the third quarter of 2016.

In the first half of 2016, we plan to initiate a front-line Phase 3 clinical trial of brigatinib in ALK+ NSCLC patients not previously treated with an ALK inhibitor. We expect to enroll approximately 300 patients in this trial, who will be randomized to treatment with either brigatinib or crizotinib.

Our development of brigatinib also includes key product and process development activities to support our clinical trials as well as the anticipated filing of a New Drug Application, or NDA, and potential commercial launch of the product, quality and stability studies, clinical and non-clinical pharmacology studies and pharmacovigilance and regulatory activities.

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 application, or IND application, for AP32788 that we expect to file by year-end 2015. We expect to begin a Phase 1/2 proof-of-concept trial in 2016.

Ridaforolimus

We have entered into a license agreement with Medinol Ltd., or Medinol, pursuant to which Medinol is developing 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.

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.

Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board, or FASB, issued amended accounting guidance related to the presentation of debt issuance costs in the financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt rather than as an asset. We have elected early adoption of this recent guidance as of September 30, 2015. Adoption of the guidance reclassifies debt issuance costs from prepaid and other assets to long-term debt, less current portion, within the condensed consolidated balance sheet.

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., or Biologics. Biologics dispenses Iclusig directly to patients. In Europe, we sell 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 our customers. 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 risk of loss and title passes to the customer, assuming we can estimate potential returns. 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 our United States customers did not meet the criteria for revenue recognition until it was dispensed to the patient. As of January 1, 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, since January 1, 2015, we have recognized net product revenue in the United States upon shipment of Iclusig to Biologics.

We have entered into distributor arrangements for Iclusig in a number of countries including Australia, Canada, Israel, certain countries in central and eastern Europe, Turkey and Japan. We recognize Iclusig net product revenue from these arrangements when all criteria for revenue recognition have been satisfied. Upfront fees are recognized over the remaining term of the agreement at the point at which all deliverables under the agreement have commenced, usually at the point when product is initially received by the distributor.

Royalty Financing

On July 28, 2015, we entered into a royalty financing agreement with PDL BioPharma, Inc., or PDL, under which we received an initial payment of $50 million in exchange for a percentage of global net revenues from sales of Iclusig until PDL receives a fixed internal rate of return on the funds it advances to us. We will receive an additional $50 million one year from the effective date of the agreement with the option to receive up to an additional $100 million in one or two tranches between the six-month and twelve-month anniversary dates of the agreement. Additional details regarding the terms of this agreement are found in Note 8 to the condensed consolidated financial statements found elsewhere in this report.

For accounting purposes, the agreement has been classified as a debt financing as we will have significant continuing involvement in the sale of Iclusig and other products which might be covered by the agreement, the parties have the right to cancel the agreement, PDL’s rate of return is implicitly limited by the terms of the transaction, volatility in the sale of Iclusig and other products would have no effect on PDL’s expected ultimate return, and PDL has certain rights in the event that product sales and related payments under this agreement are insufficient to pay down our obligations.

In connection with the transaction, we recorded the initial net proceeds as a long-term debt. We will impute interest expense associated with this borrowing using the effective interest rate method and will record a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement, including the required 10 percent of that return to PDL. Determining the effective interest rate requires judgment and is based on significant assumptions related to estimates of the amounts and timing of future revenue streams. Determination of these assumptions is highly subjective and different assumptions could lead to materially different outcomes.

We have evaluated our call option and PDL’s put option in accordance with ASC 815 “Accounting for Derivative Instruments and Hedging Activities”, and determined that the put option is an embedded derivative. This item is being accounted for as a derivative and the estimated fair value of the put option is carried as part of the carrying value of the related liability and was not material as of the date of the agreement or September 30, 2015.

Results of Operations

For the Three Months ended September 30, 2015 and 2014

Revenue

Our revenues for the three-month period ended September 30, 2015, as compared to the corresponding period in 2014, were as follows:


	Three Months Ended September 30,				Increase/
*In thousands*	2015		2014		(decrease)
Product revenue, net	$	27,543	$	14,499	$	13,044
License revenue		1,527		183		1,344

	$	29,070	$	14,682	$	14,388

Adjustments for trade allowances, rebates, chargebacks and discounts and other incentives that reduced gross product revenues are summarized as follows:


	Three Months Ended September 30,						Increase/
*In thousands*	2015			2014			(decrease)
Trade allowances	$	298		$	195		$	103
Rebates, chargebacks and discounts		3,997			954			3,043
Other incentives		92			221			(129	)

Total adjustments	$	4,387		$	1,370		$	3,017

Gross product revenue	$	31,930		$	15,869		$	16,061

Percentage of gross product revenue		13.7	%		8.6	%

The increase in product revenue reflects increasing demand for Iclusig in the United States and Europe, along with price increases in the United States described below. In the United States, net product revenue increased from $10.5 million in the three-month period ended September 30, 2014 to $20.3 million in the corresponding period in 2015 due to an increase in units sold of 87 percent and the impact of a 9 percent price increase in February 2015 and a 6 percent price increase in September 2015. In Europe, net product revenue increased from $4.0 million in the three-month period ended September 30, 2014 to $7.2 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 September 30, 2015, gross to net deductions, as a percentage of gross revenue, were approximately 13.7 percent as compared to 8.6 percent for the corresponding period in 2014. The increase was primarily related to the impact of higher rebates associated with higher Medicaid utilization plus government mandated discounts in certain European countries where we have commenced sales of Iclusig.

We recognized $1.5 million of license revenue in the three months ended September 30, 2015 primarily related to the amortization of the up-front payment of $77.5 million from our Iclusig co-development and commercialization agreement with Otsuka. We recognized $183,000 of license revenue in the three months ended September 30, 2014 pursuant to license agreements related to ridaforolimus and our ARGENT technology.

We expect product revenue to increase in the final fiscal quarter of 2015 compared to the three-month period ended September 30, 2015 as we continue to market and distribute Iclusig in the United States and Europe. We also expect license revenue in the final fiscal quarter of 2015 to be comparable to license revenue recognized in the three-month period ended September 30, 2015.

Operating Expenses

Cost of Product Revenue

Our cost of product revenue for the three-month period ended September 30, 2015, as compared to the corresponding period in 2014, includes the following:


	Three Months Ended September 30,				Increase/
*In thousands*	2015		2014		(decrease)
Inventory cost of Iclusig sold	$	189	$	130	$	59
Shipping and handling costs		77		104		(27
Provision for excess inventory		217		360		(143	)

	$	483	$	594	$	(111	)

Prior to receiving regulatory approval for Iclusig from the FDA in December 2012, we expensed, as research and development costs, all costs incurred in the manufacturing of Iclusig to be sold upon commercialization. In addition, in the fourth quarter of 2013, we wrote down significant amounts of inventory that we estimated to be excess inventory. For Iclusig sold in the three-month periods ended September 30, 2015 and 2014, the majority of manufacturing costs incurred had previously been expensed. Therefore, the cost of inventory sold included limited manufacturing costs and the cost of packaging and labeling for commercial sales.

Cost of product revenue for the three-month periods ended September 30, 2015 and 2014 also includes a provision for excess inventory of $217,000 and $360,000, respectively.

Research and Development Expenses

Research and development expenses increased by $20.6 million, or 75 percent, to $48.2 million in the three-month period ended September 30, 2015, compared to $27.6 million in the corresponding period in 2014, for the reasons set forth below.

The research and development process necessary to develop a pharmaceutical product for commercialization is subject to extensive regulation by numerous governmental authorities in the United States and other countries. This process typically takes years to complete and requires the expenditure of substantial resources. Current requirements include:

•

preclinical toxicology, pharmacology and metabolism studies, as well as in vivo efficacy studies in relevant animal models of disease;

•

manufacturing of drug product for preclinical studies and clinical trials and ultimately for commercial supply;

•

submission of the results of preclinical studies and information regarding manufacturing and control and proposed clinical protocol to the FDA in an IND (or similar filings with regulatory agencies outside the United States);

•

conduct of clinical trials designed to provide data and information regarding the safety and efficacy of the product candidate in humans; and

•

submission of all the results of testing to the FDA in an NDA (or similar filings with regulatory agencies outside the United States).

Upon approval by the appropriate regulatory authorities in a territory, including in some countries approval of product pricing and reimbursement, we may commence commercial marketing and distribution of the product in that territory.

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 September 30, 2015, as compared to the corresponding period in 2014, were as follows:


	Three Months Ended September 30,				Increase/
*In thousands*	2015		2014		(decrease)
Direct external expenses:
Iclusig	$	13,563	$	5,144	$	8,419
Brigatinib		9,266		3,548		5,718
All other R&D expenses		25,390		18,908		6,482

	$	48,219	$	27,600	$	20,619

Direct external expenses for Iclusig were $13.6 million in the three-month period ended September 30, 2015, an increase of $8.4 million as compared to the corresponding period in 2014. The increase is primarily due to increases in clinical trial costs of $6.2 million and other support costs of $2.2 million. Increases in clinical trial costs relate primarily to initiation of several new trials designed to better understand the safety profile of Iclusig in resistant and intolerant CML and Ph+ ALL patients and to evaluate its use in earlier lines of therapy and investigator sponsored trials. Increases in other support costs relate to ongoing studies to assess the safety profile and risk factors associated with cardio vascular occlusive events; activities in support of commercializing Iclusig in Canada and activities related to preparation of a NDA filing in Japan. We expect that our direct external expenses for Iclusig in the final fiscal quarter of 2015 will increase when compared to the three-month period ended September 30, 2015 as we continue to treat patients in our ongoing clinical trials, initiate additional clinical trials and conduct additional studies to support continued development of Iclusig.

Direct external expenses for brigatinib were $9.3 million in the three-month period ended September 30, 2015, an increase of $5.7 million as compared to the corresponding period in 2014. The increase in expenses for brigatinib was due primarily to an increase of $2.4 million in contract manufacturing cost, an increase in other support costs of $572,000 and an increase in clinical trial costs of $2.8 million. The increase in contract manufacturing costs was due to costs related to product and process development activities of brigatinib, manufacturing of product in support of clinical trials and activities in preparation for regulatory filings. Increases in other costs related to pharmacology and toxicology studies conducted to support regulatory filings. Increases in clinical trial costs were due to increased costs in the now fully enrolled ALTA pivotal trial for brigatinib, which we initiated in March 2014, and initiation of clinical pharmacology studies in support of this program. We expect that our direct external expense for brigatinib in the final fiscal quarter of 2015 will increase as compared to the three-month period ended September 30, 2015 as we continue to treat patients in our Phase 1/2 clinical trial and our ALTA clinical trial, and as we prepare to initiate a front-line Phase 3 clinical trial of brigatinib in comparison with crizotinib in ALK+ NSCLC patients in 2016 and conduct other studies to support potential regulatory approval.

All other R&D expenses increased by $6.5 million in the three-month period ended September 30, 2015, as compared to the corresponding period in 2014. This increase was due to an increase in personnel expenses of $2.7 million, an increase in other pre-clinical programs of $1.8 million, an increase of general and other expenses of $944,000, and an increase in overhead expenses of $.5 million. We expect that all other R&D expenses will remain consistent in the final fiscal quarter of 2015 when compared to the quarter ended September 30, 2015.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $3.1 million, or 9 percent, to $36.7 million in the three-month period ended September 30, 2015, compared to $33.6 million in the corresponding period in 2014. Personnel expenses increased by $3.6 million in the three-month period ending September 30, 2015 compared to the corresponding period in 2014, due to expenses associated with the pending retirement of our chief executive officer of $2.9 million, including severance and stock based compensation, as well as growth in the number of our employees. Expenses for outside professional services decreased by $1.5 million in the three-month period ended September 30, 2015 compared to the corresponding period in 2014, reflecting a decrease in legal expense, offset by an increase in consulting services. Overhead and general expenses increased $1.1 million. We expect that our selling, general and administrative expenses will increase in the final fiscal quarter of 2015 as we continue to invest in the commercialization of Iclusig in the United States and Europe.

We expect that our quarterly operating expenses in total will increase in the final fiscal quarter of 2015 for the reasons described above. Operating expenses may fluctuate from quarter to quarter. The actual amount of any increase in 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, results of continuing non-clinical studies and the costs of product and process development activities and product manufacturing for Iclusig and brigatinib, the status of pre-clinical studies of AP23788, costs related to regulatory requirements and filings for Iclusig, brigatinib, and our other product candidates, on-going Iclusig commercialization activities in the United States, Europe and other territories and related supporting costs.

Other Income (Expense)

Interest Income/Expense

Interest income was $20,000 in the three-month period ended September 30, 2015 as compared to $19,000 in the corresponding period in 2014.

Interest expense increased to $5.2 million in the three-month period ended September 30, 2015 from $3.7 million in the corresponding period in 2014 as a result of $3.9 million in interest expense related to our $200 million convertible note issuance completed in June 2014, and $1.3 million related to our royalty financing completed in July 2015, offset in part by the payoff of our bank term loan in June 2014.

Foreign Exchange Gain (Loss)

We recognized net foreign exchange transaction gains of $291,000 in the three-month period ended September 30, 2015 compared to a gain of $881,000 in the corresponding period in 2014. The gains are a result of our European operations, as we carry accounts denominated in foreign currencies.

Benefit from (Provision for) Income Taxes

Our benefit from income taxes for the three-month period ended September 30, 2015 was $5.8 million compared to a provision of $154,000 in the corresponding period in 2014, and primarily reflects a tax benefit recorded related to the use of net losses generated by continuing operations to offset tax provided on an unrealized gain on marketable securities recorded in other comprehensive income.

Operating Results

We reported a loss from operations of $56.4 million in the three-month period ended September 30, 2015 compared to a loss from operations of $47.1 million in the corresponding period in 2014, an increase of $9.2 million, or 20 percent. We also reported a net loss of $55.5 million in the three-month period ended September 30, 2015, compared to a net loss of $50.1 million in the corresponding period in 2014, an increase in net loss of $5.4 million or 11 percent, and a net loss per share of $0.29 and $0.27 respectively. The increase in net loss is largely due to the increase of $20.6 million in research and development expenses and $3.1 million in selling, general and administrative expenses, offset in part by an increase in product revenue of $13.0 million described above. Our results of operations for the final fiscal quarter of 2015 will vary from those of the quarter ended September 30, 2015 and actual results will depend on a number of factors, including the success of our commercialization efforts for Iclusig in the United States, Europe and other territories, the status of regulatory and subsequent pricing and reimbursement approvals in Europe and other territories, the progress of our product development programs, changes in the number of our employees and related personnel costs, the progress of our discovery research programs, the impact of costs and the sub-leasing of 41 percent our building currently under construction in Cambridge, Massachusetts, the impact of any commercial and business development activities 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.

For the Nine Months Ended September 30, 2015 and 2014

Revenue

Our revenues for the nine-month period ended September 30, 2015, as compared to the corresponding period in 2014, were as follows:


	Nine Months Ended September 30,				Increase/ (decrease)
*In thousands*	2015		2014		Increase/ (decrease)
Product revenue, net	$	79,262	$	34,371	$	44,891
License, collaboration and other revenue		3,038		4,206		(1,168	)

Total revenue	$	82,300	$	38,577	$	43,723

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


	Nine Months Ended September 30,						Increase/ (decrease)
*In thousands*	2015			2014			Increase/ (decrease)
Trade allowances	$	856		$	497		$	359
Rebates, chargebacks and discounts		9,356			2,267			7,089
Other incentives		538			744			(206	)

Total adjustments	$	10,750		$	3,508		$	7,242

Gross product revenue	$	90,012		$	37,879		$	52,133

Percentage of gross product revenue		11.9	%		9.3	%

The increase in product revenue reflects increasing demand for Iclusig in the United States and Europe, along with price increases in the United States described below. In the United States, net product revenue increased from $23.1 million in the nine-month period ended September 30, 2014 to $60.6 million in the corresponding period in 2015 due to an increase in units sold of 149 percent and the impact of a 9 percent price increase in February 2015 and a 6 percent price increase in September 2015. In Europe, net product revenue increased by 65 percent from $11.3 million in the nine-month period ended September 30, 2014 to $18.7 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 nine-month period ended

September 30, 2015, gross to net deductions, as a percentage of gross revenue, were approximately 11.9 percent as compared to 9.3 percent for the corresponding period in 2014. The increase primarily related to the impact of higher rebates associated with higher Medicaid utilization plus government mandated discounts in certain European countries where we have commenced sales of Iclusig.

License revenue decreased for the nine-month period ended September 30, 2015 compared to the corresponding period in 2014 by $1.2 million. This decrease was related to the $3.8 million of license revenue received in the nine-month period ended September 30, 2014, pursuant to our license agreement with Medinol for the development of ridaforolimus eluting stents offset by the amortization of the Otsuka up-front payment of approximately $2.6 million recognized in the nine-month period ended September 30, 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 nine-month period ended September 30, 2015 as compared to the corresponding period in 2014, was as follows:


	Nine Months Ended September 30,				Increase/ (decrease)
*In thousands*	2015		2014		Increase/ (decrease)
Inventory cost of Iclusig sold	$	728	$	292	$	436
Shipping and handling costs		476		445		31
Inventory reserves/write-downs		462		3,540		(3,078	)

	$	1,666	$	4,277	$	(2,611	)

Prior to receiving regulatory approval for Iclusig from the FDA in December 2012, we expensed, as research and development costs, all costs incurred in the manufacturing of Iclusig to be sold upon commercialization. In addition, in the fourth quarter of 2013, we wrote down significant amounts of inventory that we estimated to be excess inventory. For Iclusig sold in the nine-month period ended September 30, 2015, the majority of manufacturing costs incurred had previously been expensed. Therefore, the cost of inventory sold included limited manufacturing costs and the cost of packaging and labeling for commercial sales.

Cost of product revenue for the nine-month periods ended September 30, 2015 and 2014 also includes a provision for excess inventory of $462,000 and $3.5 million, respectively. During the nine-month period ended September 30, 2014, the provision was due to inventory produced during the quarter in accordance with minimum lot size requirements that was deemed to be excess upon receipt of the inventory and for units that were not expected to be sold. During the nine-month period ended September 30, 2015 the provision was primarily related to excess packaging supplies, inventory in Europe that had to be destroyed that does not comply with current European regulations as well as inventory that has expired.

Research and Development Expenses

Our R&D expenses for the nine-month period ended September 30, 2015 as compared to the corresponding period in 2014, were as follows:


	Nine Months Ended September 30,				Increase/ (decrease)
*In thousands*	2015		2014		Increase/ (decrease)
Direct external expenses:
Iclusig	$	25,420	$	18,930	$	6,490
Brigatinib		26,068		12,125		13,943
All other R&D expenses		74,913		56,893		18,020

	$	126,401	$	87,948	$	38,453

Direct external expenses for Iclusig were $25.4 million in the nine-month period ended September 30, 2015, an increase of $6.5 million, or 34 percent, as compared to the corresponding period in 2014. Increases were due primarily to an increase in clinical trial costs of $4.3 million, an increase in other support costs of $5.1 million, offset in part by a decrease in manufacturing costs of $3.1 million. Increases in clinical trial costs relate primarily to increasing activities in several new Company sponsored and investigator sponsored trials offset in part by decreasing activities and costs of various legacy trials, including the Phase 2 PACE clinical trial, and close-out of the Phase 3 EPIC trial. Decreases in manufacturing costs were due to technology transfer and process validation activities and costs to qualify back-up manufacturing sources conducted in 2014. 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, as well as activities and costs related to preparation of an NDA filing in Japan.

Direct external expenses for brigatinib were $26.1 million in the nine-month period ended September 30, 2015, an increase of $13.9 million, or 115 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 $4.6 million, in contract manufacturing costs of $7.4 million and in other supporting costs of $1.9 million. The increase in clinical trial costs relates primarily to increases in activities to our now fully enrolled ALTA pivotal Phase 2 trial for brigatinib and clinical pharmacology trial activities in support of this program. Contract manufacturing costs increased due to activities related to product and process development activities and validation activities as well as manufacturing of product to support clinical trials and preparation of agency filings for this product candidate. Other supporting costs increased due to the conduct of toxicology studies in support of the program.

All other R&D expenses increased by $18.0 million, or 32 percent, in the nine-month period ended September 30, 2015 as compared to the corresponding period in 2014. This increase was due to an increase in personnel costs of $8.7 million, related to an approximate 25 percent increase in R&D headcount, an increase in other pre-clinical programs of $3.8 million, as well as increases in professional and general expenses of $5.9 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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $19.5 million, or 20 percent, to $118.9 million in the nine-month period ended September 30, 2015, compared to $99.4 million in the corresponding period in 2014. Expenses for outside professional services increased by $8.1 million in the nine-month period ended September 30, 2015 as compared to the corresponding period in 2014 primarily due to an increase in legal expenses and other consulting services associated with the preparation of this year’s proxy and related initiatives of $6.0 million as well as ongoing legal matters. Personnel expense increased by $7.7 million due to expenses associated with the pending retirement of our chief executive officer of $5.5 million, including severance and stock based compensation, as well as growth in the number of our employees. Overhead expenses increased by $2.0 million due to rent expense related to our new building under construction on Binney Street in Cambridge, Massachusetts, as our rent obligations commenced in March 2015. General expenses increased $1.0 million as a result of increased headcount.

Other Income (Expense)

Interest Income/Expense

Interest income decreased slightly to $61,000 in the nine-month period ended September 30, 2015 from $63,000 in the corresponding period in 2014.

Interest expense increased to $12.9 million in the nine-month period ended September 30, 2015 from $4.3 million in the corresponding period in 2014 as a result of $11.6 million in interest expense related to our $200 million convertible note issuance completed in June 2014, and $1.3 million related to our royalty financing completed in July 2015, offset in part by the payoff of our bank term loan in June 2014.

Foreign Exchange Gain

We recognized net foreign exchange transaction gains of $906,000 for the nine-month period ended 2015 compared to net foreign exchange gains of $836,000 in the corresponding period in 2014. The gains 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.

Benefit from (Provision for) Income Taxes

Our benefit from income taxes for the nine-month period ended 2015 was $5.3 million, which primarily reflects a tax benefit related to the use of net losses generated by continuing operations to offset tax provided on an unrealized gain on marketable securities recorded in other comprehensive income, compared to a provision of $379,000 in the corresponding period in 2014.

Operating Results

We reported a loss from operations of $164.7 million for the nine-month period ended September 30, 2015 compared to a loss from operations of $153.1 million for the nine-month period ended September 30, 2014. We also reported a net loss of $171.3 million for

the nine-month period ended September 30, 2015, compared to a net loss of $156.9 million for the nine-month period ended September 30, 2014, an increase in net loss of $14.4 million or 9 percent, and a net loss per share of $0.91 and $0.84, respectively. The increase in net loss for 2015 is largely due to an increase in our operating expenses of $55.3 million consisting primarily of an increase of approximately $38.5 million in research and development expenses, an increase of $19.5 million in selling, general and administrative expenses and an increase of $8.6 million in interest expense, offset in part by an increase in product revenue of $44.9 million, all as described above.

Liquidity and Capital Resources

At September 30, 2015, we had cash and cash equivalents totaling $282.2 million and working capital of $213.9 million, compared to cash and cash equivalents totaling $352.7 million and working capital of $295.6 million at December 31, 2014. These decreases are due to our results of operations for the nine-month period ended September 30, 2015 as described above, offset in part by $50 million in proceeds that we received from our royalty financing in July 2015. Of the $282.2 million of cash and cash equivalents at September 30, 2015, $7.9 million was in accounts held by our international subsidiaries.

In July 2015, we entered into a royalty financing agreement with PDL BioPharma Inc., or PDL, under which we received $50 million and will receive an additional $50 million on the one-year anniversary with an option to draw down up to an additional $100 million between the six-month and twelve-month anniversaries of the agreement. In return, we agreed to pay PDL a percentage of Iclusig global net revenues equal to 2.5 percent during the first year of the agreement, 5 percent from the end of the first year through the end of 2018 (subject to annual maximum payments of $20 million per year through 2018), and 6.5 percent from 2019 until PDL receives an internal rate of return of 10 percent on funds advanced to us. The 6.5 percent royalty rate would increase to 7.5 percent if we draw down more than $150 million. This financing allows us to accelerate the initiation of a front-line trial of brigatinib and invest in launch readiness while providing strategic flexibility with respect to additional financing and partnering alternatives.

For the nine-month period ended September 30, 2015, we reported a net loss of $171.3 million and cash used in operating activities of $120.7 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.

Our balance sheet at September 30, 2015 includes property and equipment of $232.3 million, which represents an increase of $29.2 million from December 31, 2014. The increase is primarily due to the accounting, as described in Note 9 to our condensed consolidated financial statements in this report, 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 third quarter 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 have recorded the project construction costs as an asset of $225.9 million and a corresponding facility lease obligation of $220.6 million at September 30, 2015. As construction continues on the facility, the asset and corresponding facility lease obligation will continue to increase.

Sources of Funds

During the nine-month period ended September 30, 2015 and 2014 our sources of cash were as follows:


*In thousands*	2015		2014
Sales/issuances of common stock pursuant to stock option and purchase plans	$	3,596	$	3,059
Proceeds from issuance of convertible debt and related transactions, net.		—		177,281
Proceeds from royalty financing		50,000		—
Reimbursements of amounts related to facility lease obligation		1,816		—

	$	55,412	$	180,340

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 our royalty financing, 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, including the funding provided by and available from our July 2015 royalty financing agreement with PDL, 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 who are treated with Iclusig and launch the product in new markets. In addition, our royalty financing agreement with PDL allows us to draw down up to $200 million in aggregate financing and provides us with substantial flexibility in addressing any financing needs and alternatives for the Company. We believe that this non-dilutive royalty financing agreement with PDL helps to provide necessary resources until such time that we generate revenues from sales of Iclusig and our product candidates, if approved, that would be sufficient to fund our operations.

Uses of Funds

The primary uses of our cash are to fund our operations and working capital. Our uses of cash during the nine-month periods ended September 30, 2015 and 2014 were as follows:


*In thousands*	2015		2014
Net cash used in operating activities	$	120,658	$	131,930
Investment in property and equipment		4,446		2,475
Re-payment of long-term borrowings		313		9,100
Payment of tax withholding obligations related to stock compensation		321		716

	$	125,738	$	144,221

The net cash used in operating activities is comprised of our net losses, adjusted for non-cash expenses, deferred revenue and changes in working capital requirements. As noted previously, our net loss in the nine-month period ended September 30, 2015 increased by $14.4 million as compared to the corresponding period in 2014. However, our net cash used in operating activities for the nine-month period ended September 30, 2015 decreased by $11.3 million compared to the corresponding period in 2014 due primarily to changes in working capital requirements.

We currently occupy facilities in Cambridge, Massachusetts and Lausanne, Switzerland from which we conduct and manage our business. We also plan to move our principal offices to new space in Cambridge, Massachusetts currently under construction. The landlord completed construction of the core and shell of the buildings in March 2015, at which time our lease payments commenced. Tenant improvements and the fit-out of the facility have started and are expected to be completed in the third 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. 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. In addition, we are required to make payments to PDL under our royalty financing obligation based on a single digit percentage of our net product sales of Iclusig over the term of the agreement. We also have a substantial facility lease obligation, as noted above. We expect that cash flows from sales of Iclusig together with our current cash and cash equivalents and funding available to us from our royalty financing agreement with PDL or that we might raise 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, 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 such as our royalty financing agreement with PDL 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 September 30, 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 September 30, 2015:


			Payments Due By Periods
*In thousands*	Total		In 2015		2016 through 2018		2019 through 2020		After 2020
Long-term debt	$	236,854	$	3,927	$	22,052	$	210,875	$	—
Royalty financing		99,565		862		45,090		53,613		—
Lease agreements		492,569		4,728		89,928		69,351		328,562
Employment agreements		23,902		2,323		21,579		—		—
Purchase commitments		40,315		1,454		23,512		5,877		9,472
Other long-term obligations		6,078		—		5,843		135		100

Total fixed contractual obligations	$	899,283	$	13,294	$	208,004	$	339,851	$	338,134

Long-term debt reflects the payment at maturity of our $200 million of convertible notes issued in June 2014 and due on June 15, 2019. 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 September 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.

Royalty financing reflects the repayment of the advances provided by PDL of $50 million received in July 2016 and an additional committed advance of $50 million which will occur within one year of the effective date of the agreement. Repayments of principal are calculated based on a single digit royalty on projected Iclusig net product revenues and an internal rate of return of 10 percent over the term of the agreement based on the timing and outstanding balances of advances.

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 as amended. 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.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued amended accounting guidance related to the presentation of debt issuance costs in the financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt rather than as an asset. We have elected early adoption of this recent guidance as of September 30, 2015. Adoption of the guidance reclassifies debt issuance costs from other assets to long-term obligations, less current portion, within the condensed consolidated balance sheet within the presentation of our long-term $200 million convertible note issuance and $50 million royalty financing.

In May 2014, the FASB issued amended accounting guidance related to revenue recognition. This guidance is based on the principle that revenue is recognized in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the transfer of goods or services to customers. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This amendment will be effective for us in the first quarter of fiscal 2018. We are continuing to evaluate the options for adoption and the impact on our financial position and results of operations.

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. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding our expectations with respect to: (i) our future financial performance, results of operations and liquidity, including both domestic and international revenues, expenses, including research and development and selling, general and administrative expenses, capital expenditures, income taxes, and our expected liquidity needs and available cash; (ii) the future performance of our distributors and partners; (iii) the manufacturing and commercialization, including pricing and reimbursement of Iclusig and our product candidates, if approved; (iv) the development, regulatory filing and review, and commercial potential of our products and product candidates, including the anticipated timing and results of our clinical trials, and the timing and results of our submissions to regulatory authorities for our products and product candidates; (v) potential changes to our near- and long-term objectives; (vi) the timing and costs associated with our new corporate headquarters under construction in Cambridge, Massachusetts; and (vii) the expected benefits from our royalty financing with PDL. All such forward-looking 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 new collaboration agreements or strategic alliances; 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, derivative and product liability 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. At September 30, 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.

At September 30, 2015, our marketable securities of $15.1 million consisted of 687,139 shares of common stock of REGENXBIO, Inc. which completed an initial public offering in September 2015. In connection with the initial public offering, we entered into a lock-up agreement with REGENXBIO that restricts us from selling these shares until March 2016. The value of these shares are subject to market risk common to development stage companies and may increase or decrease in value over the period during which we are restricted from selling these shares.

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 effect 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 $196.9 million at September 30, 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 in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as updated in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015, except as follows:

1.	Class action lawsuit

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.

Briefing on the plaintiffs’ appeal to the United States Court of Appeals for the First Circuit has been completed, and we expect a hearing to be scheduled.

2.	Product liability lawsuit

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

On August 7, 2015, the plaintiff filed an amended complaint. The amended complaint asserts punitive damages as a remedy, in addition to seeking unspecified monetary damages and an award of costs and expenses, including attorney’s fees. The parties are currently engaged in discovery.

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, as updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, except as follows.

1. The first risk factor under the caption “Risks relating to our operations” is replaced with the following risk factor:

If we fail to manage the size of our workforce and other resources effectively, our business may suffer.

The number of our employees more than doubled prior to our initial launch of Iclusig in January 2013 as we built out the commercial organization that was responsible for the commercialization of Iclusig in the United States and Europe, but was then reduced by approximately 40 percent of our employees in the United States in the fourth quarter of 2013 in connection with our announcements concerning the updated safety, marketing and commercial distribution and further clinical development of Iclusig. With the re-launch of Iclusig in the United States in January 2014, we have hired necessary personnel to manage the requirements of our business.

We have also entered into a lease for approximately 386,000 square feet of laboratory and office space in two adjacent connected buildings at 75 - 125 Binney Street in Cambridge, Massachusetts, with an initial term of 15 years and options to renew for three terms of five years each. We had planned to relocate our corporate headquarters and laboratory facilities into this space in early 2015, but construction was delayed and we do not expect to take occupancy until the third quarter of 2016. Based on the terms of the lease, as amended, we commenced making lease payments in March 2015. In addition, in August 2015, we entered into an agreement to sublease approximately 160,000 square feet of the total leased space at 75-125 Binney Street to a third party, with commencement expected in the third quarter of 2016.

In addition, because our drug discovery and development activities are highly technical in nature, we require the services of highly qualified and trained scientists who have the skills necessary to conduct these activities. We need to attract and retain employees with experience in these fields. We face intense competition for our personnel from our competitors, our collaborators and other companies throughout our industry. The growth of local biotechnology companies and the expansion of major pharmaceutical companies into the Cambridge, Massachusetts area have increased competition for the available pool of skilled employees, especially in technical fields, and the high cost of living in the Cambridge area makes it difficult to attract employees from other parts of the country to these areas.

We must respond effectively to these demands and manage our internal organization and our facilities to accommodate our anticipated needs and to respond to any unexpected developments. If we are unable to manage the size of our workforce, our facilities and our other resources effectively, there could be a material adverse effect on our business, results of operations and financial condition.

2. The second risk factor under the caption “Risks relating to our operations” is replaced with the following risk factor:

We are currently subject to securities class action and product liability litigation and we have been and may be subject to similar or other litigation in the future.

The market price of our common stock declined significantly following our October 2013 announcements concerning the safety, marketing and commercial distribution and further clinical development of Iclusig in the United States. Class action lawsuits were subsequently filed in October and December 2013 alleging, among other things, that we and certain of our officers violated federal securities laws by making allegedly material misrepresentations and/or omissions of material fact regarding clinical and safety data for Iclusig in our public disclosures. The plaintiffs seek unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees. 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. Briefing on the plaintiffs’ appeal to the United States Court of Appeals for the First Circuit has been completed, and we expect a hearing to be scheduled.

Furthermore, in March 2015, a product liability lawsuit was filed alleging 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. On May 18, 2015, we filed a motion to dismiss the complaint in this action. On August 4, 2015, the court granted our motion to dismiss with respect to the plaintiff’s cause of action for punitive damages and denied the remainder of our motion to dismiss. On August 7, 2015, the plaintiff filed an amended complaint. The amended complaint asserts punitive damages as a remedy, in addition to seeking unspecified monetary damages and an award of costs and expenses, including attorney’s fees. The parties are currently engaged in discovery.

While we believe we have meritorious defenses in all of the currently pending matters, we cannot predict the outcome of these lawsuits. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities, and we cannot predict how long it may take to resolve these matters.

In addition, we may incur substantial legal fees and costs in connection with litigation. Although we have insurance, coverage could be denied or prove to be insufficient. We are not currently able to estimate the possible cost to us from the currently pending lawsuits, and we cannot be certain how long it may take to resolve these matters or the possible amount of any damages that we may be required to pay. We have not established any reserves for any potential liability relating to these lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages and could have a material adverse effect on our business, results of operations and financial condition. In addition, the uncertainty of the currently pending lawsuits could lead to more volatility in our stock price.

ITEM 6.

EXHIBITS



10.1*		Sublease, effective as of August 20, 2015, between ARIAD Pharmaceuticals, Inc. and International Business Machines Corporation.

10.2*		Revenue Interest Assignment Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.

10.3*		Security Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.

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 September 30, 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.

(*)	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: November 6, 2015		(Principal financial officer and chief accounting officer)

EXHIBIT INDEX


10.1*		Sublease, effective as of August 20, 2015, between ARIAD Pharmaceuticals, Inc. and International Business Machines Corporation.

10.2*		Revenue Interest Assignment Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.

10.3*		Security Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.

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 September 30, 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.

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

Exhibit 10.1

SUBLEASE

by and between

ARIAD Pharmaceuticals, Inc.

as Sublandlord,

and

INTERNATIONAL BUSINESS MACHINES CORPORATION,

as Subtenant

Date: July 17, 2015

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.

TABLE OF CONTENTS


1.	DEMISE OF SUBLEASED PREMISES; DEFINITIONS	1

2.	TERM	3

3.	SUBORDINATION TO AND INCORPORATION OF THE LEASE	3

4.	RENT	6

5.	ADDITIONAL RENT	6

6.	EXTENSION OPTION	9

7.	ROFO RIGHTS	11

8.	CONTRACTION OPTION	13

9.	SECURITY DEPOSIT	15

10.	USE OF SUBLEASED PREMISES	15

11.	CONDITION OF SUBLEASED PREMISES	15

12.	SUBTENANT IMPROVEMENTS/BASE TI ALLOWANCE	16

13.	ALTERATIONS	17

14.	ELECTRICITY; HVAC	17

15.	SUBLANDLORD OBLIGATIONS	18

16.	PARKING	19

17.	GENERATOR/COMMUNICATIONS EQUIPMENT	19

18.	COMPETITORS	20

19.	ACCESS	20

20.	INDEMNIFICATION; INSURANCE	20

21.	ASSIGNMENT AND SUBLETTING	21

22.	CASUALTY AND CONDEMNATION	29

23.	CONSENTS	29

24.	CONDITIONS; CONSENT OF LANDLORD; SNDA	29

25.	DEFAULTS	30

26.	NOTICE	31

27.	SURRENDER OF SUBLEASED PREMISES	32

28.	BROKERS	32

29.	COUNTERPARTS	32

30.	ROOF RIGHTS	32

31.	SIGNAGE	32

32.	CONFIDENTIALITY	33

33.	ATRIUM	33

34.	MISCELLANEOUS	34


Exhibit A - Redacted Lease			A-1

Exhibit B-1-Subleased Premises			B-1

Exhibit B-2-Plan of B1 Space, B2 Space; and Penthouse			B-2

Exhibit C- Pre-Commencement Date Work			C-1

Exhibit D- Landlord/Tenant Responsibility Matrix dated March 30, 2015			D-1

Exhibit E-Excluded Competitors			E-1

Exhibit F- Form of Consent to Sublease			F-1

SUBLEASE

This Sublease (the “Sublease”) is made as of July 16, 2015 by and between ARIAD Pharmaceuticals, Inc., a Delaware corporation, having an address of 26 Landsdowne Street, Cambridge, MA 02139 (“Sublandlord”), and INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, having an address of New Orchard Road, Armonk NY 10504 (“Subtenant”).

W I T N E S S E T H:

WHEREAS, by Lease Agreement dated January 4, 2013 (“Original Lease”), as amended (i) by First Amendment to Lease dated as of September 16, 2013 (the “First Amendment”), and (ii) by letter dated as of October 17, 2013 (the “Letter Amendment”), and (iii) by Second Amendment to Lease dated as of March 24, 2015 (the “Second Amendment”; as so amended, the “Lease”) between ARE-MA REGION NO. 48, LLC, a Delaware limited liability company (the “Landlord”, also sometimes referred to herein as the “Overlandlord”) as landlord thereunder, and Sublandlord as tenant thereunder, copies of which are attached in redacted form as Exhibit “A” hereto, Landlord leased to Sublandlord certain premises (the “Premises”) in the Project located at 75 and 125 Binney Street, Cambridge Massachusetts for a term commencing on March 24, 2015 and ending on March 31, 2030. The Premises are located in two buildings, the “75 Binney Building” and the “125 Binney Building”; and

WHEREAS, Subtenant desires to sublease from Sublandlord and Sublandlord desires to sublease to Subtenant a portion of the 75 Binney Building, as identified on Exhibit “B-1” attached hereto (hereinafter referred to as the “Subleased Premises”), which Subleased Premises are agreed to consist of 163,186 rentable square feet. The parties acknowledge and agree that the measurements for the Premises and the Subleased Premises are the rentable square footages set forth in Section 1 of the First Amendment. Neither the Subleased Premises nor the Premises will be re-measured and the rentable square footages set forth in Section 1 of the First Amendment are final and binding on the parties for all purposes of this Sublease in accordance with Section 1(d) of the First Amendment;

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

1. DEMISE OF SUBLEASED PREMISES; DEFINITIONS.

(a) Sublandlord hereby demises and subleases to Subtenant, and Subtenant hereby subleases and takes from Sublandlord, the Subleased Premises, consisting of the following floors and corresponding square footage, for the Term (as hereinafter defined) and upon the conditions hereinafter set forth.


Floor	Rentable Square Footage (rsf)
Floor L1		15,368
L1 Mezzanine		3,500
Floor L2		38,984
Floor L3		39,131
Floor L4		39,006
Floor L5		27,197
TOTAL:		163,186

(b) Subject to Section 16(b) below, Subtenant shall have the right to exclusive use of the following portions of the Common Areas of the 75 Binney Building:

(1) Basement B1 (the “B1 Space”),

(2) Basement B2 (the “B2 Space”). and

(3) Penthouse/Floor M1 (the “Penthouse”), all as set forth on the plan attached hereto as Exhibit “B-2”. Collectively, the B1 Space, the B2 Space and the Penthouse are sometimes referred to as “Ancillary Space”.

(c) Subtenant shall have the right to non-exclusive use of (1) all other Common Areas and (2) the New Atrium Area as shown on attached Exhibit “B-2”.

(d) Sublandlord confirms, as of the date hereof, (i) that the Lease is in full force and effect, (ii) that there are no Defaults on the part of either Landlord or Sublandlord under the Lease, and (iii) that there are no other amendments or modifications to the Lease except as specifically referenced in the recitals above.

(e) Sublandlord agrees that it shall not amend or modify the Lease in any way which materially and adversely affects Subtenant’s rights under this Sublease without the consent of Subtenant. Sublandlord shall promptly (within five (5) business days of receipt) furnish to Subtenant copies of any notices received from any party relating to the Sublease or the use or occupancy of the Subleased Premises.

(f) Subtenant acknowledges that Subtenant is taking the Subleased Premises in their present condition, broom clean and “as is”, subject to the terms and conditions of this Sublease, and to the specific items of Landlord and Sublandlord work, if any, to be performed prior to the Commencement Date, as described within the attached Exhibit “C”/Pre-Commencement Date Work. Sublandlord shall use best efforts to enforce, for the benefit of Sublandlord and Subtenant, Landlord’s Warranty and such other warranties described in Schedule 5.2 of the Amended and Restated Work Letter dated March 24, 2015 (the “Work Letter”) attached to the Second Amendment.

(g) Sublandlord shall use best efforts to pursue and to enforce, in due course, for the benefit of Sublandlord and Subtenant, the material remaining items on the “punch list” related to Landlord’s completion of the Project.

2. TERM.

(a) The initial term of this Sublease (the “Initial Term” or “Term”) shall commence on the date which is two (2) business days following the date upon which the Consent and the SNDA (as such terms are defined in Section 24) are obtained and delivered to both Sublandlord and Subtenant (the “Commencement Date”). The parties agree that this Sublease, and the obligation of the parties to perform hereunder, shall be expressly subject to Section 24 hereof and shall not take effect unless and until the conditions set forth therein are waived in writing or satisfied.

(b) The Initial Term shall end on the date (the “Expiration Date”) which is the last day of the month in which the tenth (10th) anniversary of the Rent Commencement Date occurs (as hereinafter defined) or upon such earlier date upon which the Term may expire or be terminated pursuant to any of the conditions or covenants of this Sublease or pursuant to law.

(c) Promptly following the Commencement Date, Sublandlord and Subtenant shall enter into an agreement confirming such Commencement Date; provided, however, that failure to execute and deliver such agreement shall not affect the validity of the Commencement Date.

3. SUBORDINATION TO AND INCORPORATION OF THE LEASE.

(a) This Sublease is in all respects subject and subordinate to the terms and conditions of the Lease and to the matters to which the Lease, including any amendments thereto, is or shall be subordinate. Subtenant agrees that Subtenant has reviewed and is familiar with the Lease, and will not do or suffer or permit anything to be done which would result in a default or breach (whether or not subject to notice or grace periods) on the part of Sublandlord, as tenant, under the Lease or cause the Lease to be terminated. Sublandlord agrees that Sublandlord will not do or suffer or permit anything to be done which would result in a Default on the part of Sublandlord (as tenant), under the Lease. If, however, the Lease is terminated prior to its scheduled expiration for any reason whatsoever, including a voluntary termination, then except as may otherwise be expressly provided for in the Consent from Landlord, this Sublease shall likewise terminate, without further notice and without further obligation or liability on the part of the parties.

(b) Except as otherwise expressly provided in this Sublease, the terms, covenants, conditions, rights, obligations, remedies and agreements of the Lease are incorporated into this Sublease by reference and made a part hereof as if fully set forth herein and shall constitute the terms of this Sublease, mutatis mutandis, Sublandlord being substituted for “Landlord” thereunder and Subtenant being substituted for “Tenant” thereunder, except to the extent that such terms do not relate to the Subleased Premises or are inapplicable to, or specifically inconsistent with, the terms of this Sublease, it being understood and agreed that Sublandlord will not be acting as, or assuming any of the responsibilities of, Landlord, and all references in the Lease to landlord-provided functions, services and/or allowances, or to landlord insurance

requirements, including the preparation of Annual Estimates and Annual Statements of Operating Expenses pursuant to Section 5 (Operating Expense Payments), Section 11 (Utilities and Services; Emergency Generator; Service Interruptions), Section 13 Landlord’s Repairs, Section 17(a) Landlord’s Insurance, Section 18 (Restoration) and Section 19 (Eminent Domain) shall continue to be references to Landlord and not to Sublandlord. Nothing in this Section 3 shall be diminished or impaired by reason of any repetition anywhere in this Sublease expressly referring to specific incorporation by reference in the Sublease of any provision of the Lease.

(c) The following provisions of the Original Lease shall not be incorporated herein by reference and are expressly excluded from the terms of this Sublease:


Section 1 (except for the second sentence thereof, which is incorporated by reference)		Lease of Premises

Section 2(a), 2(b), 2(c), 2(d), 2(e)		Delivery; Acceptance of Premises; Commencement Date

Section 4		Base Rent Adjustments; Prepayment of Additional Tenant Improvement Allowance

Section 5(f)		Operating Expense Payments

First Sentence of Section 3(a) and Section 6		Security Deposit

Section 22		Assignment and Subletting

Section 30(c)		Representation and Warranty re: Environmental Requirements

Section 31(b) (delete only last sentence)		[***]

Section 35		Brokers

Section 38 (delete subparagraphs (a), (b) and (c), and leave introductory paragraph)		Signs; Exterior Appearance

Section 39		Right of First Offer

Section 40		Right to Expand

Section 41		Right to Extend Term

Section 42		Right of First Refusal to Lease

Exhibit A		Description of Premises

Exhibit G		Adjustment Calculations

(d) The following provisions of the First Amendment shall not be incorporated herein by reference and are expressly excluded from the terms of this Sublease:


Section 2(b)		Commencement Date

Section 4		TI Allowances for Expansion Space

Section 6		Security Deposit

Section 7(f)		Use

Section 8		Parking

Section 9		Excess Rent With Respect to Assignment or Subletting of Expansion Space

(e) Exhibit C/Amended and Restated Workletter attached to the Second Amendment shall be and is incorporated herein by reference, with the exception that the following provisions are expressly excluded:


Section 2.3;		Landlord’s Modification to Shell, Core and Site Construction Documents

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

Section 2.6 (delete only last sentence)		Approved Tenant Modifications

Section 2.7 and Schedule 2.7		Shared Staffing Costs During Construction

Section 6.3		Additional TI Allowance; Base Rent Allocable to Additional TI Allowance

Section 6.4		Notice As to Use of TI Allowance

Section 6.6 (delete only the second paragraph, and delete Schedule 6.6)		Costs Includable in TI Allowance

Section 6.10		Test Fit Allowance

Section 7.14; Schedule 7.14		Project Accounting

The reference in this Sublease to any particular section or article of the Lease shall not in any way be deemed or construed to derogate from the general incorporation by reference of the entire Lease (except as aforesaid) into this Sublease.

(f) In connection with any meetings and/or discussions scheduled by Sublandlord and Landlord regarding (i) Annual Estimates for Operating Expenses pursuant to Section 5(a) Annual Estimates, (ii) Building Systems pursuant to Section 11(a) Utilities and Sewers, (iii) building security as set forth in Section 33 (Security), and (iv) retail signage approval as provided in Section 38(d) of the Lease, Sublandlord will give Subtenant reasonable prior written notice of such meetings and/or discussions and invite (via email) a representative of Subtenant to attend and/or participate. Except in case of emergency, such notice shall not be less than five (5) days.

4. RENT.

From and after the Rent Commencement Date (as hereinafter defined), Subtenant shall pay to Sublandlord monthly installments of annual base rent (the “Base Rent”), which Base Rent shall be paid in advance on or before the first day of each calendar month in accordance with Section 3 (Rent) of the Lease. For purposes hereof, the “Rent Commencement Date” shall be the date which is the earlier to occur of: (i) the twelfth (12th) monthly anniversary of the Commencement Date, and (ii) the date upon which Subtenant occupies [***] ([***]) or more full floors of the Subleased Premises for the Permitted Use. In the event Subtenant occupies fewer than [***] ([***]) full floors of the Subleased Premises for the Permitted Use prior to the [***] ([***]) monthly anniversary of the Commencement Date, then, until the Rent Commencement Date occurs, Subtenant shall pay only its share of Expense Rent, Parking Charges and Subtenant Surcharges (but not Base Rent) proportionately allocable to the floors so occupied. If the Rent Commencement Date shall be on any day other than the first day of a calendar month, Base Rent for the partial month shall be prorated based on the number of days in that month. Subtenant shall pay Base Rent in accordance with the following schedule:


Period	Base Rent (Annual)		Base Rent (Monthly)		Base Rent/ rentable square foot
RCD – Month 1 (plus any partial month)	$	—	$	883,924.17	$	65.00
Month 2 -13	$	10,607.090.00	$	883,924.17	$	65.00
Months 14-25	$	10,793,122.04	$	889,426.84	$	66.14
Months 26-37	$	10,980,785.94	$	915,065.50	$	67.29
Months 38-49	$	11,173,345.42	$	931,112.12	$	68.47
Months 50-61	$	11,369,168.62	$	947,430.72	$	69.67
Months 62-73	$	11,568,255.54	$	964,021.30	$	70.89
Months 74-85	$	11,770,606.18	$	980,883.85	$	72.13
Months 86-97	$	11,976,220.54	$	998,018.38	$	73.39
Months 98-109	$	12,186,730.48	$	1,015,560.87	$	74.68
Months 110-121	$	12,398,872.28	$	1,033,239.36	$	75.98

5. ADDITIONAL RENT.

(a) In addition to the Base Rent and any other sums which Subtenant may be obligated to pay pursuant to any other provision of this Sublease, from and after the Rent Commencement Date, Subtenant agrees to pay to Sublandlord as additional rent hereunder, in monthly installments based on Landlord’s Annual Estimates (as defined in Section 5(a) of the Lease), as and when such sums are due and payable by Sublandlord under the Lease, or as otherwise hereinafter provided.

(i) Subtenant’s Share of Administration Rent and Additional Rent (as such terms are defined in Section 3 of the Lease) (collectively, “Expense Rent”). The term “Additional Rent” includes Operating Expenses attributable to the Premises. For purposes hereof, “Subtenant’s Share” shall be a percentage, the numerator of which is the agreed rentable area of the then Subleased Premises, and the denominator of which is 380,111, the total combined rentable square feet in the 75 Binney Building and the 125 Binney Building. Subtenant’s Share may increase or decrease, as the case may be, as additional area is added to or subtracted from the Subleased Premises pursuant to the terms hereof. As of the date of this Sublease, Subtenant’s Share is forty two and nine tenths percent (42.9%), reflecting a numerator of 163,186 rentable square feet as the agreed rentable area of the Subleased Premises and a denominator of 380,111 rentable square feet; and

(ii) all Parking Charges (as hereinafter defined) attributable to Subtenant’s Pro Rata Share of Parking Spaces in the Garage pursuant to Section 10(b) of the Lease and Section 16 hereof; and

(iii) all Subtenant Surcharges (as hereinafter defined). As used herein, the term “Subtenant Surcharges” shall mean any and all amounts, in addition to Expense Rent under Section 5(a)(i) and Parking Charges under Section 5(a)(ii) above, which become due and payable by Sublandlord to the Landlord under the Lease, whether as “additional rent” or for any extra services or otherwise which would not have become due and payable but for the acts and/or failures to act of Subtenant under this Sublease or which are otherwise attributable to the Subleased Premises for: (x) any increases in the Landlord’s fire, rent or other insurance premiums resulting from any act or omission of Subtenant, (y) any charges payable by Sublandlord under the Lease on account of Subtenant’s use or maintenance of heating, ventilation or air conditioning, electricity, or other extra services requested by Subtenant and provided under the Lease for the benefit of Subtenant or the Subleased Premises, and (z) any charges payable by Sublandlord under the Lease on account of any other additional service requested by Subtenant and as may be provided under the Lease to or for the benefit of the Subleased Premises, including but not limited to Section 11(b) (Other Services).

(b) Subtenant shall pay the additional rents set forth in Section 5(a)(i) and (ii) within five (5) business days after the presentation of statements therefor by Landlord or Sublandlord to Subtenant, and the additional rents set forth in Section 5(a)(iii) hereof within forty-five (45) days after the presentation of statements therefor. Any failure or delay by Sublandlord in billing any sum set forth in this Section 5 shall not constitute a waiver of Subtenant’s obligation to pay the same in accordance with the terms of this Sublease, but the time period for payment shall be extended accordingly. Annual reconciliations of payments for Expense Rent shall be made within the time frames provided for in Section 5(e) of the Lease.

(c) In connection with any Sublandlord and Landlord meetings and/or discussions regarding the Annual Estimates for Operating Expenses pursuant to Section 5(a) of the Lease (Annual Estimates), Sublandlord will give Subtenant reasonable prior written notice of all such “open book” cooperative meetings and/or discussions with Landlord and invite a representative of Subtenant to attend and/or participate in same.

(d) Sublandlord shall within five (5) business days of receipt furnish to Subtenant a copy of each notice or statement from the Landlord affecting the Subleased Premises with respect to Subtenant’s obligations hereunder. If Sublandlord disputes the correctness of any such notice or statement and if such dispute is resolved in Sublandlord’s favor, or if Sublandlord shall receive any refund of additional rent with or without a dispute, Sublandlord shall, within thirty (30) days of receipt of funds pay to Subtenant any refund (after deducting from the amount of any such refund an equitable portion of all expenses, including court costs and reasonable attorneys’ fees, incurred by Sublandlord in resolving such dispute) received by Sublandlord in respect (but only to the extent) of any related payments of additional rent made by Subtenant less any amounts theretofore received by Subtenant directly from the Landlord and relating to such refund; provided, however, that, if Sublandlord is required under the terms of the Lease to pay such amounts pending the determination of any such dispute (by agreement or otherwise), Subtenant shall pay the full amount of the Base Rent, Expense Rent, Subtenant Surcharges and Parking Charges in accordance with this Sublease and the applicable Landlord’s statement or notice.

(e) Subtenant shall have all audit rights and the benefit of all audit periods set forth under Section 5 (Operating Expense Payments) of the Lease.

(f) Subtenant shall have the same rights as set forth in Section 9(a) of the Lease to seek an abatement of Taxes provided Subtenant shall give Sublandlord notice at least twenty (20) days prior to the deadline for filing such requests. Sublandlord agrees to cooperate with Subtenant in connection with Subtenant’s review of any Annual Statements, bills or other materials furnished by Landlord relating to the Subleased Premises and, upon request of Subtenant, to request from Landlord any additional supporting materials reasonably requested by Subtenant in connection therewith and, at Subtenant’s sole cost and expense, to conduct an audit pursuant to the terms and conditions of Section 5(e)(iv) of the Lease, and/or to file an abatement pursuant to the terms and conditions of Section 9(a) of the Lease.

(g) To the extent then accrued but not satisfied, Subtenant’s obligation to pay the Base Rent, Expense Rent, Subtenant Surcharges, Parking Charges and all other sums payable under this Section 5 or otherwise under this Sublease shall survive the termination or earlier expiration of this Sublease.

(h) The Base Rent, Expense Rent, Subtenant Surcharges, Parking Charges and any other amounts payable pursuant to this Sublease (“Rent”) shall be paid by Subtenant to Sublandlord at the address first set forth above, or at such other place as Sublandlord may hereafter designate from time to time in writing, in lawful money of the United States of America, or at Subtenant’s option, by wire transfer, as and when the same become due and payable, without demand therefor and without any deduction, set-off or abatement whatsoever except as otherwise provided herein. Any other amounts of additional rents and other charges herein reserved and payable shall be paid by Subtenant in the manner and to the persons set forth in the statement from Sublandlord describing the amounts due. All Expense Rent, adjustments

of Base Rent, Subtenant Surcharges, Parking Charges and all other costs, charges and expenses which Subtenant assumes, agrees or is obligated to pay to Sublandlord pursuant to this Sublease shall be additional rent and, in the event of nonpayment thereof, Sublandlord shall have all the rights and remedies with respect thereto as are herein provided for in case of nonpayment of the Base Rent reserved hereunder (and subject to the same notice and grace periods set forth in the Lease).

(i) Utilities are provided and paid for by Landlord in accordance with Section 11(a) (Utilities and Services) of the Lease. In accordance with Section 11(a) of the Lease, Subtenant shall pay all costs or amounts due on account of any separately metered or sub-metered, as the case may be, Utilities and/or other services which may be furnished to Subtenant or the Subleased Premises during the Sublease Term. Submeters for gas and electric shall be provided for and installed by Subtenant as part of the Subtenant Improvements.

6. EXTENSION OPTION.

(a) Provided that at the time of such exercise and upon the commencement of the Extended Term (i) there then exists no Default or condition which, with the giving of notice or passage of time or both, would constitute a Default, (ii) this Sublease is then in full force and effect, and (iii) Subtenant or Subtenant’s Permitted Transferee is in actual occupancy of not less than [***] ([***]) full floors of the Subleased Premises, Subtenant shall have one (1) option to extend the Initial Term of the Sublease (the “Extension Option”) for the Subleased Premises beginning on the day immediately following the Sublease Expiration Date (the “Extended Term Commencement Date”) and ending on March 30, 2030 (the “Extended Term”) on the same terms and conditions as set forth herein (other than Base Rent), by giving Sublandlord written notice of its election to exercise such Extension Option at least fifteen (15) months, but not more than eighteen (18) months, prior to the expiration of the Initial Term. Provided the conditions set forth in the foregoing clauses (i), (ii) and (iii) shall have been satisfied, the giving of such notice by Subtenant shall automatically extend the Initial Term for the Extended Term, and no instrument of renewal need be executed. In the event that Subtenant fails to give such notice to Sublandlord, this Sublease shall automatically terminate at the end of the Initial Term, and Subtenant shall have no further option to extend the Initial Term, it being agreed that time is of the essence with respect to the giving of such notice. The Extended Term shall be on all the terms and conditions of this Sublease, except that during the Extended Term, Subtenant shall have no further option to extend the Term and the rent for the Extended Term shall be determined as provided in Subsections 5(c) though (h), inclusive, below. Subtenant’s Extension Option shall be personal to the original Subtenant and shall be void if the interest of Subtenant is assigned or transferred to any entity other than a Permitted Transferee.

(b) The Base Rent for the Extended Term (“Extended Term Base Rent”) shall be equal to the Fair Market Rent for the Subleased Premises, as hereinafter determined. In no event, however, shall the Extended Term Base Rent be less than [***] Dollars ($[***]) per rentable square foot of the Subleased Premises, increasing annually commencing on the first anniversary of the first day of the Extended Term, and on each successive anniversary thereof, by [***]% of the Extended Term Base Rent in effect as of the end of the previous year. During the Extended Term, Subtenant shall continue to pay all Expense Rent, Subtenant Surcharges and Parking Charges in accordance with Section 5 of this Sublease.

(c) Sublandlord shall deliver to Subtenant Sublandlord’s determination of the Fair Market Rent (as hereinafter defined) and rent escalations payable during the Extended Term (“Sublandlord’s Rent Determination”) within thirty (30) days after delivery of Subtenant’s notice of its election to exercise such Extension Option (provided that Sublandlord shall not be obligated to deliver such determination to Subtenant earlier than fifteen (15) months prior to the expiration of the Initial Term). The term “Fair Market Rent” shall mean the then fair market rental rate for the Subleased Premises taking into consideration all relevant factors that a tenant would pay upon an arms-length rental of the Subleased Premises on a direct lease as of the last day of the Initial Term. A determination of the Fair Market Rent payable for the Subleased Premises during the Extended Term shall be made in the manner described in subsections (d) through (h), inclusive, below.

(d) If, on or before the date which is sixty (60) days following the date of Sublandlord’s Rent Determination Notice, Subtenant has not agreed with Sublandlord’s determination of the Fair Market Rent and the rent escalations applicable during the Extended Term after negotiating in good faith, Subtenant may by written notice to Sublandlord delivered not later than the last day of such sixty (60) day period, elect arbitration as described in Subsections 5(e), (f) and (g) below. If, on or before the last day of such sixty (60) day period, Subtenant does not either give written notice to Sublandlord of either Subtenant’s acceptance of Sublandlord’s Rent Determination or Subtenant’s election of arbitration, Subtenant shall be deemed to have accepted Sublandlord’s Rent Determination, and Sublandlord’s Rent Determination of the Fair Market Rent and rent escalations shall be the Fair Market Rent and rent escalations for the Subleased Premises during the Extended Term.

(e) Within ten (10) business days of Subtenant’s notice to Sublandlord of its election to arbitrate Fair Market Rent and escalations, each party shall deliver to the other a proposal containing the Fair Market Rent and escalations that the submitting party believes to be correct (“Extension Proposal”). If either party fails to timely submit an Extension Proposal, with an additional five (5) business days after notice that the same has not been received, then the other party’s submitted proposal shall determine the Base Rent and escalations for the Extended Term. If both parties submit Extension Proposals, then Sublandlord and Subtenant shall meet within seven (7) days after delivery of the last Extension Proposal and make a good faith attempt to mutually appoint a single Arbitrator (and defined below) to determine the Fair Market Rent and escalations. If Sublandlord and Subtenant are unable to agree upon a single Arbitrator, then each shall, by written notice delivered to the other within ten (10) days after the meeting, select an Arbitrator. If either party fails to timely give notice of its selection for an Arbitrator, the other party’s submitted proposal shall determine the Base Rent and escalations for the Extended Term. The two (2) Arbitrators so appointed shall, within five (5) business days after their appointment, appoint a third Arbitrator. If the two (2) Arbitrators so selected cannot agree on the selection of the third Arbitrator within the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any state court of general jurisdiction in the jurisdiction in which the Subleased Premises are located, upon ten (10) days’ prior written notice to the other party of such intent.

(f) The decision of the Arbitrator(s) shall be made within thirty (30) days after the appointment of a single Arbitrator or the third Arbitrator, as applicable. If there is a single Arbitrator, the decision of the single Arbitrator shall be final and binding upon the parties. If there are three (3) Arbitrators, the third Arbitrator shall chose in full one (1) of the decisions of the other two (2) Arbitrators, and such choice shall be final and binding upon the parties. Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the third Arbitrator shall be borne equally by both parties. If, pursuant to the preceding provisions of this Section 6, Fair Market Rent and escalations have not been determined as of the first day of the Extended Term, Subtenant shall pay on account of Base Rent the rent specified by Sublandlord in Sublandlord’s Rent Determination as the Fair Market Rent until such determination is made. After the determination of the Fair Market Rent and escalations, the parties shall make any necessary adjustments to such payments made by Subtenant.

(g) An “Arbitrator” shall be any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be (A) a member of the American Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of improved office and high tech industrial real estate in Cambridge, Massachusetts, or (B) a licensed commercial real estate broker with not less than 15 years’ experience representing landlords and/or tenants in the leasing of high tech or life sciences space in Cambridge, Massachusetts, (ii) devoting substantially all of their time to professional appraisal, brokerage work, or institutional real estate advisory work, as applicable, at the time of appointment and (iii) be in all respects impartial and disinterested (i.e., shall not have been engaged by either Sublandlord or Subtenant, or their respective affiliates, as their exclusive representative during the immediately preceding 2-year period).

(h) If Subtenant shall validly exercise the Extension Option, it shall promptly, after such election and the determination of the Fair Market Rent and escalations for the Extended Term, enter into an amendment to the Sublease incorporating the terms thereof, but failure to do so shall have no effect on Subtenant’s agreement to extend the Sublease Term for the Extended Term.

7. ROFO RIGHTS.

(a) Provided that at the time of such availability and at the time Subtenant elects to lease such Offered Space (as hereinafter defined) (i) there then exists no Default or condition which, with the giving of notice or passage of time or both, would constitute a Default, (ii) this Sublease is then in full force and effect, and (iii) original Subtenant named under this Sublease or Subtenant’s Permitted Transferee is in actual occupancy of not less than [***] ([***]) full floors of the Subleased Premises (except during any period prior to initial occupancy of the Subleased Premises), if, at any time during the Initial Term all or any portion of the Premises within the 125 Binney Building, except as provided below (the “First Offer Space”), shall become available for sublease (and specifically excluding any portion of the Premises which Sublandlord desires to retain for its own use or sublease to any entity controlled by, controlling, or under common control with, Sublandlord), Sublandlord shall notify Subtenant in writing (the “ROFO Notice”), identifying the space available (the “ROFO Offered Space”) and shall set forth the terms and

conditions on which Sublandlord is willing to lease the ROFO Offered Space. Notwithstanding the foregoing, in no event shall the First Offer Space include or shall this first offer right apply to (i) any Contraction Space (as hereinafter defined) which may have been deleted from the Subleased Premises in accordance with Section 8, or (ii) any portion of the first (1^st) floor allocated for a café or food service area.

(b) Subtenant shall have the right (the “First Offer Right”), by giving written notice to Sublandlord within ten (10) business days after receipt of the ROFO Notice, time being of the essence, to lease the ROFO Offered Space on the terms offered by Sublandlord, and Subtenant’s election to lease the ROFO Offered Space shall constitute a binding agreement to lease the ROFO Offered Space on the terms offered by Sublandlord. If Subtenant shall so elect to lease the ROFO Offered Space, it shall promptly after such election enter into an amendment to this Sublease incorporating the terms contained in Sublandlord’s notice, but failure to do so shall have no effect on Subtenant’s agreement to lease the ROFO Offered Space. If Subtenant shall not elect to lease the ROFO Offered Space within such ten (10) business day period, then Subtenant shall have no further rights under this Section with respect to the ROFO Offered Space, and Sublandlord shall be free to sublease any or all of such space to a third party or parties from time to time on such terms and conditions as Sublandlord may deem appropriate; provided, however, that if Sublandlord does not lease the Offered Space to a third party or parties within [***] after giving such notice to Subtenant (as described in subsection (d) below), and such ROFO Offered Space is still available for sublease (or thereafter if such ROFO Offered Space shall again become available for sublease), then Sublandlord shall not lease the ROFO Offered Space to any third party or parties without first again offering the ROFO Offered Space to Subtenant pursuant to the terms hereof. Nothing herein shall be construed to limit Subtenant’s rights under this Section with respect to space within the First Offer Space other than the ROFO Offered Space. The First Offer Right shall be personal to the original Subtenant named in this Sublease and shall be void if the interest of the Subtenant originally named in this Sublease is assigned or otherwise transferred except to a Permitted Transferee.

(c) For purposes of this Section, space shall not be deemed to be “available for sublease” (i) in the event that Sublandlord desires to utilize such space for its own purposes or to sublease any of the First Offer Space to any entity controlled by, controlling, or under common control with, Sublandlord, or (ii) in the event that Sublandlord and an existing occupant of such space desire to renew or extend such existing occupant’s sublease or enter into a new sublease; and Subtenant’s rights under this Section shall be subject and subordinate to any such extension, renewal, or subleasing to such existing occupant occupying its then current space.

(d) If Subtenant shall not elect to lease the ROFO Offered Space pursuant to an offer from Sublandlord under this Section as aforesaid, then notwithstanding anything to the contrary contained in the preceding paragraph, if Sublandlord shall thereafter (i) fail to lease the Offered Space for a Net Effective Rental (as hereinafter defined) of not less than [***] percent ([***]%) of the Net Effective Rental proposed to Subtenant within [***] from the date of the ROFO Notice, and (ii) such space remains available for sublease, and Sublandlord shall propose to lease the ROFO Offered Space for a Net Effective Rental of less than [***] percent ([***]%) of the Net Effective Rental proposed to Subtenant, Sublandlord shall re-offer the ROFO Offered Space to Subtenant pursuant to this Section. The term “Net Effective Rental” shall mean for purposes

of this Section, with respect to any proposed lease of ROFO Offered Space, the net present value, determined as of the effective date of the proposed sublease, using a discount rate of [***] percent ([***]%), of the aggregate of all Base Rent, Expense Rent, Parking Charges and Subtenant Surcharges payable under the proposed sublease, discounted from the date such payment would have been made under the proposed sublease to the commencement date of the proposed sublease, after deducting therefrom the amount of all inducements (such as, by way of example only, work allowances, work letters or rent abatements) that are (or will be) granted by Sublandlord to such subtenant in respect thereof, discounted, using a discount rate of [***] percent ([***]%), from the date that such inducements were to have been given under the proposed sublease to the commencement date of the proposed sublease.

(e) Upon any re-offering of ROFO Offered Space to Subtenant following any reduction of the price or expiration of the [***] period as provided in subsections (b) and (d) above and if such space remains available for sublease, Subtenant shall have five (5) business days after Subtenant’s receipt of a ROFO Notice to exercise its right hereunder, by giving written notice to Sublandlord, time being of the essence, to lease the ROFO Offered Space on the terms offered by Sublandlord, and Subtenant’s election to lease the ROFO Offered Space shall constitute a binding agreement to lease the ROFO Offered Space on the terms offered by Sublandlord.

(f) Effective as of Sublandlord’s delivery to Subtenant of the applicable ROFO Offered Space, (i) the definition of Subleased Premises shall be modified to include the applicable ROFO Offered Space; (ii) Base Rent shall be increased proportionately to include the applicable ROFO Offered Space; (iii) Subtenant’s Pro Rata Share of Parking Spaces in the Garage shall be increased proportionately; and (iv) Subtenant’s Share in Section 5(a)(i) hereof shall be increased proportionately to include the ROFO Offered Space. Further, as of the date of Sublandlord’s delivery to Subtenant of the applicable ROFO Offered Space, Subtenant shall pay Subtenant’s Share of Expense Rent, Subtenant Surcharges and Parking Charges with respect to the applicable ROFO Offered Space in accordance with Section 5(a) of this Sublease.

(g) Promptly after Sublandlord’s delivery to Subtenant of the applicable ROFO Offered Space, Sublandlord and Subtenant shall execute an amendment to this Sublease confirming the terms of the expansion, but failure to do so shall have no effect on Subtenant’s agreement to lease the applicable ROFO Offered Space.

8. CONTRACTION OPTION.

(a) Provided that (i) the Subleased Premises include at least [***] ([***]) full floors of the 75 Binney Building, including Floors [***] and [***], (ii) there then exists no Default or condition which, with the giving of notice or passage of time or both, would constitute a Default, and (iii) this Sublease is then in full force and effect, Subtenant shall have the one-time right, at Subtenant’s election, to reduce the size of the Subleased Premises (the “Contraction Option”) by deleting the [***] of the Subleased Premises (the “Contraction Space”), effective upon the seventh (7^th) anniversary of the Rent Commencement Date (the “Contraction Date”), provided further that:

(1) Subtenant shall exercise the Contraction Option by written notice given to Sublandlord no later than December 31, 2021 (the “Contraction Notice”);

(2) this Sublease is in full force and effect as to all of the Subleased Premises both as of the date Subtenant delivers the Contraction Notice (provided that Sublandlord shall have the right to waive this condition) and as of the Contraction Date;

(3) there then exists no uncured Default both as of the date Subtenant delivers the Contraction Notice (provided that Sublandlord shall have the right to waive this condition) and as of the Contraction Date; and

(4) at least sixty (60) days prior to the Contraction Date, Subtenant shall pay to Sublandlord by wire transfer, certified check or bank check, an amount equal to Sublandlord’s Unamortized Costs (as hereinafter defined).

“Sublandlord’s Unamortized Costs” shall mean an amount equal to the sum of the unamortized amounts, as of the Contraction Date and assuming straight line amortization over a period of ten (10) years, of (1) the Base TI Allowance (as hereinafter defined) paid by Sublandlord, allocable on a proportionate basis to the Contraction Space, (2) brokerage commissions paid by Sublandlord in connection with this Sublease, allocable on a proportionate basis to the Contraction Space, (3) legal fees incurred by Sublandlord in connection with this Sublease, allocable on a proportionate basis to the Contraction Space, and (4) interest on the foregoing items (1) through (3) at the rate of [***] percent ([***]%) per annum. Prior to Subtenant’s delivery of the Contraction Notice, Subtenant shall request Sublandlord’s written statement of Sublandlord’s Unamortized Costs for the Contraction Space. Within twenty (20) business days after receipt of Subtenant’s request, Sublandlord shall deliver to Subtenant Sublandlord’s statement of Sublandlord’s Unamortized Costs.

(b) In the event that Subtenant fails to deliver the Contraction Notice to Sublandlord in accordance with the terms hereof, Subtenant shall have no further option to reduce the size of the Subleased Premises under this Section 8, it being agreed that time is of the essence with respect to the giving of such Notice.

(c) Time is of the essence with respect to all of the conditions and limitations set forth in this Section upon Subtenant’s exercise of the Contraction Option. Subtenant shall surrender the Contraction Space on the Contraction Date in accordance with the surrender and restoration provisions of the Sublease and the Lease, as if the Contraction Date were the Expiration Date with respect to the Contraction Space only. If Subtenant should fail to so surrender the Contraction Space on the Contraction Date, such failure shall constitute a Default and holding over with respect to the Contraction Space and Sublandlord may exercise any and all available rights and remedies under the Sublease and the Lease, at law or in equity, by reason of such Default and holding over.

(d) Provided that Subtenant complies with the provisions of Section 8 hereof with respect to the Contraction Space, effective as of the Contraction Date: (i) the definition of Subleased Premises shall be modified to exclude the Contraction Space; (ii) and Base Rent for the remaining Term shall be decreased proportionately to exclude the Contraction Space; (iii) Subtenant’s Pro Rata Share of Parking Spaces in the Garage shall be decreased proportionately; and (iv) Subtenant’s Share in Section 5(a)(i) hereof shall be decreased proportionately to exclude the Contraction Space.

(e) Promptly after the Contraction Date, Sublandlord and Subtenant shall execute a suitable instrument confirming such adjustments, but failure to do so shall have no effect on the Contraction Date.

9. SECURITY DEPOSIT. No security deposit shall be required to be provided by Subtenant.

10. USE OF SUBLEASED PREMISES. (a) Subtenant shall use the Subleased Premises only for the Permitted Use set forth in the Basic Lease Provisions of the Lease and in accordance with Section 7 (Use) of the Lease, and for no other purposes.

(b) Subject to approval by Landlord, any applicable Legal Requirements, and final approval of plans as otherwise provided herein, Sublandlord shall approve the use by Subtenant of a portion of the Floor L1 of the Subleased Premises for use as an auditorium and/or a fitness center, provided the same is not generally open to the public for use or membership.

11. CONDITION OF SUBLEASED PREMISES.

(a) As of the date hereof, Sublandlord represents that it is not aware of any condition within the Premises and/or the Subleased Premises that would materially adversely affect Subtenant’s design, permitting, construction or use of the Subleased Premises including, without limitation, any restrictions on utilities, any exclusive use restrictions or any environmental conditions impacting the Subleased Premises.

(b) Subtenant represents and warrants that it has made a thorough examination of the Subleased Premises and it is familiar with the condition thereof and the requirements of the Landlord/Tenant Responsibility Matrix dated March 30, 2015 (the “Landlord/Tenant Matrix”) attached hereto as Exhibit “D”/Schedule 2.1. Subtenant acknowledges that Subtenant is taking the Subleased Premises in its present condition, broom clean and “as is”, subject to the terms and conditions of this Sublease, and to the specific items of Landlord and Sublandlord work, if any, to be performed prior to the Commencement Date, as described within the attached Exhibit “C”/Pre-Commencement Date Work. Except as otherwise expressly set forth herein, Subtenant acknowledges that it enters into this Sublease without any representation or warranties by Sublandlord as to present or future condition of the Subleased Premises or the appurtenances thereto, any improvements therein, or as to the Premises. Subtenant understands that the Subleased Premises require substantial additional improvements to be available for use and occupancy and that Sublandlord has no obligation to perform any work therein, or to contribute to the cost of any work, except as expressly set forth in Section 12 hereof. Sublandlord shall be informed of and invited to attend Subtenant job meetings, in accordance with Section 1.1 and Section 3.5 of the Work Letter.

12. SUBTENANT IMPROVEMENTS/BASE TI ALLOWANCE. Subtenant acknowledges and agrees that all work to be performed within the Subleased Premises to make the Subleased Premises suitable for Subtenant’s occupancy shall be performed in accordance with the Work Letter attached to the Second Amendment, except as modified herein:

(a) Performance of Subtenant Improvements. Subtenant, at subtenant’s sole cost and expense, subject to the Base TI Allowance as defined in Section 12(b) hereof, will construct improvements within the Subleased Premises (the “Subtenant Improvements”) to make the Subleased Premises suitable for its occupancy.

(b) Base TI Allowance. Subject to Landlord’s obligation under Section 6.2 of the Work Letter to provide Sublandlord with a tenant improvement allowance, Sublandlord will provide to Subtenant a tenant improvement allowance (the “Base TI Allowance”) of [***] Dollars ($[***]) per rentable square foot of the Subleased Premises, or [***] Dollars ($[***]) in the aggregate, to be used for Subtenant’s TI Costs (as defined in the Lease).

(c) Notice As to Use of TI Allowance. Subject to the terms of the Work Letter and to this Sublease, Subtenant shall have the right to the availability of all or any portion of the Base TI Allowance by requisitions made any time through and ending on December 31, 2019.

(d) Direct Payment of Base TI Allowance. Sublandlord shall use reasonable efforts to coordinate with Landlord to arrange for direct payment by Landlord to Subtenant or Subtenant’s designee of disbursements of Subtenant’s Base TI Allowance. Upon written authorization by Tenant, Landlord shall disburse the applicable portion of the Base TI Allowance directly to Subtenant or Subtenant’s designee for TI Costs allocable to the Subleased Premises, up to the maximum Base TI Allowance allocable to the Subleased Premises. Sublandlord agrees, for the benefit of Landlord, that any such amount so authorized by Sublandlord and Subtenant and disbursed by Landlord shall be deemed an advance to Sublandlord, as Tenant, of the applicable portion of Sublandlord’s Base TI Allowance under the Lease.

(e) Subtenant’s and Sublandlord’s Authorized Representatives. Subtenant designates as Subtenant’s representatives (each, “Subtenant’s Authorized Representative”), (i) Senior Program Manager and (ii) Director, Engineering & Construction Services, each of whom is authorized to issue to, initial and sign, as applicable, all plans, drawings, approvals and Changes pursuant to the Work Letter. Sublandlord shall not be obligated to respond to or act upon any such item until such item has been initialed or signed (as applicable) by Subtenant’s Authorized Representative. Subtenant may change Subtenant’s Authorized Representative upon two (2) business days’ prior written notice to Sublandlord. Sublandlord designates as Sublandlord’s representatives (each, “Sublandlord’s Authorized Representative”), (i) Chief Financial Officer and (ii) Senior Director, Global Real Estate & Facilities.

(f) Designation of TI Architect and Contractors. Sublandlord hereby approves, for purposes of constructing the Subtenant Improvements, (i) [***] as Subtenant’s “TI Architect”, and (ii) [***], [***] and [***] as Subtenant’s general contractors (“Subtenant’s General Contractors”). Subtenant hereby acknowledges and agrees that the TI Architect and Subtenant’s General Contractors shall be subject to Landlord’s approval pursuant to the terms of the Work Letter and/or the Consent. Any additional contractors or subcontractors designated by

Subtenant in connection with the completion of the Subtenant Improvements shall be subject to Sublandlord’s and Landlord’s approval pursuant to the terms of the Work Letter, which approval by Sublandlord shall not be unreasonably withheld, conditioned or delayed if approved by Landlord.

(g) Reimbursement for Costs. Except for Administrative Rent as provided below, Subtenant shall reimburse Sublandlord for any actual, reasonable third party costs payable to Landlord in reviewing any requests received from Subtenant in connection with the Subtenant Improvements and any subsequent Subtenant Alterations. Sublandlord shall pay and Subtenant shall have no obligation to reimburse Sublandlord for the direct costs of construction management or supervision payable to Landlord as “Administrative Rent” in accordance with Section 6.1 of the Work Letter, whether in connection with the TI Improvements for the Premises or for the Subleased Premises. Prior to the Rent Commencement Date, Subtenant will not be charged for use of the loading docks or elevators within the 75 Binney Building.

(h) Cooperation and Coordination. Sublandlord and Subtenant shall reasonably cooperate to facilitate all necessary Landlord approvals required in connection with Subtenant’s completion of the Subtenant Improvements. Sublandlord shall review concurrently with Landlord in the time periods set forth in the Work Letter all Subtenant submissions on account of Subtenant’s proposed Subtenant Improvements (and any subsequent Alterations) including all requisition requests. Sublandlord and Subtenant shall coordinate and cooperate with each other in connection with the review and approval of plans for the Subtenant Improvements. Subtenant shall submit plans for approvals to Sublandlord and to Landlord jointly, and the time periods for review and approval in accordance with the Work Letter shall proceed simultaneously for all approvals thereunder.

13. ALTERATIONS. Subject to the terms and conditions of Section 12 (Alterations and Tenant’s Property) of the Lease and the Work Letter, Subtenant shall not make any changes, alterations, additions or improvements (collectively, “Alterations”) to the Subleased Premises without first obtaining the written consent of Sublandlord and Landlord, it being expressly agreed that Sublandlord’s consent to such Alterations shall not be unreasonably withheld, conditioned or delayed if approved by Landlord. Subtenant shall have the same rights as Sublandlord with respect to Notice-Only Alterations not requiring the consent of Landlord as provided in Section 12 of the Lease. Except as expressly permitted pursuant to the terms of the Lease or by written agreement by Sublandlord and Landlord at the time of Subtenant’s request for approval, all of the Subtenant Improvements, Alterations and Installations made within the Subleased Premises shall become the property of the Landlord upon the expiration of the Sublease Term.

14. ELECTRICITY; HVAC. Electricity and heating, ventilating and air conditioning are available to the Subleased Premises in the capacities and to the extent provided in the Landlord/Tenant Matrix attached hereto as Exhibit “D”/Schedule 2.1.

15. SUBLANDLORD OBLIGATIONS. (a) Subtenant acknowledges and agrees that, except as expressly provided hereunder, Sublandlord shall have no obligation to provide any services to the Subleased Premises, to fund the Base TI Allowance provided under the Work Letter independent of Landlord’s obligation to provide same to Sublandlord under the terms of the Lease, or to perform the terms, covenants, conditions or obligations of Landlord, as the owner of the Project, contained in the Lease including the preparation of Annual Estimates and Annual Statements of Operating Expenses pursuant to Section 5 (Operating Expense Payments), Section 11 (Utilities and Services; Emergency Generator; Service Interruptions), Section 13 Landlord’s Repairs, Section 17(a) Landlord’s Insurance, Section 18 (Restoration) and Section 19 (Eminent Domain). Subtenant agrees to look solely to Landlord, as the owner of the Project, for the furnishing of such services, for providing the Base TI Allowance, and for the performance of such Landlord terms, covenants, conditions or obligations. In the event that Landlord shall fail to furnish such services, or to provide the Base TI Allowance, or to perform any of the terms, covenants, conditions or obligations contained in the Lease on its part to be performed, Sublandlord shall be under no obligation or liability whatsoever to Subtenant for such failure.

(b) Subtenant shall notify Sublandlord of any Material Services Failure with respect to the Subleased Premises, and Subtenant shall have the same rights as Sublandlord with respect to equitable abatement of Base Rent and Subtenant’s Share of Additional Rent proportionately allocable to the Subleased Premises as provided in Section 11 of the Lease.

(c) Notwithstanding anything to the contrary herein, nothing in Section 15(a) above shall derogate from Sublandlord’s responsibility to notify Landlord and seek Landlord’s performance or rectification resulting from any Subtenant’s notice regarding a Landlord default or from Sublandlord’s obligation to cooperate with Subtenant under the terms and conditions set forth herein. Upon written notice from Subtenant to Sublandlord of Landlord’s failure to perform its obligations under the Lease, Sublandlord shall notify Landlord to that effect and demand Landlord’s performance or rectification of such breach. Sublandlord shall, at Subtenant’s sole cost and expense (subject to reimbursement and/or recoupment and the same rights of offset as forth in Section 31(b) of the Lease), use such best efforts as Subtenant may reasonably request to cause Landlord to comply with its obligations under the Lease, including, without limitation, exercising Sublandlord’s rights of self-help under Section 31(b) of the Lease. In addition, upon any failure of Landlord to fund all or any portion of Subtenant’s Base TI Allowance under and in accordance with this Sublease, Subtenant shall be entitled to the same rights of offset as provided under Section 31(c) Right of Base Rent Offset for TI Allowance Default of Landlord of the Lease.

(d) To the extent that Sublandlord is entitled to and actually receives an abatement of Rent due under the Lease in accordance with Section 11, Section 18, Section 19 or Section 31 of the Lease due to the circumstances specifically described in the Lease (a “Lease Rent Abatement”), which circumstances adversely affect the Subleased Premises, then to the extent such Lease Rent Abatement is allocable to the Subleased Premises (or any portion thereof) then Subtenant shall be entitled to a corresponding abatement of Rent due under the Sublease (a “Sublease Rent Abatement”), it being understood that the Sublease Rent Abatement shall not exceed either the number of days or the ratably allocable portion of the Subleased Premises of the Lease Rent Abatement. Subtenant may notify Landlord and Subtenant of any such condition causing untenantability in the Premises. Subtenant may request that Sublandlord make a demand upon Landlord under the Lease, if applicable, with respect to such untenantability.

16. PARKING.

(a) Subject to the terms and conditions of Section 10 (Parking) of the Lease, commencing on the Rent Commencement Date, Subtenant shall be obligated to pay, in addition to Base Rent, Expense Rent and Subtenant Surcharges hereunder, and also as Additional Rent hereunder in respect of Subtenant’s Pro Rata Share of Parking Spaces in the Garage, the market rate monthly charge therefor designated by Landlord (“Parking Charges”). As of July 1, 2015 the Parking Charge is at the rate of $[***]/month per Parking Space. For purposes hereof, Subtenant’s “Pro Rata Share of Parking Spaces” shall initially be [***] ([***]) parking spaces in the Garage, to be adjusted to Subtenant’s Share of the parking spaces provided to the Premises in accordance with the Lease upon any adjustment of the size of the Subleased Premises in accordance with the terms of this Sublease. Subtenant’s allocated parking spaces are inclusive of any parking spaces in areas designated for exclusive parking for Subtenant as provided in Section 16(b) below. All such Parking Spaces shall be used solely for Subtenant’s employees working in the 75 Binney Building and for the guests, clients and invitees of Subtenant working in the 75 Binney Building. Notwithstanding any provision hereof to the contrary, by notice given to Sublandlord on or before the Rent Commencement Date, Subtenant may elect, to exclude and relinquish all or any portion of Tenant’s Pro Rata Share of Parking Spaces, and, in such event, Subtenant shall not be obligated to pay the monthly parking charge for any relinquished Parking Spaces.

(b) Subject to Landlord’s written approval, Subtenant shall have the right to use the B1 Space for parking exclusively for Subtenant’s employees and the parking area designated as “Portion of Parking B1 Level to be segregated via barrier arm” on the plan attached hereto as Exhibit “B-2”, and to install an arm barrier to vehicular entry, which rights to the B1 Space shall be subject to the access rights of Landlord and Sublandlord as provided in the Lease, and to the rights of the retail tenants in the Building to access the retail and restaurant related equipment located within the B1 Space.

(c) Subtenant’s Pro Rata Share of Parking Spaces shall be (i) proportionately reduced in the event Subtenant exercises its Contraction Option pursuant to Section 8 (Contraction Option) hereof, and/or (ii) proportionately increased in the event Subtenant exercises its First Offer Right with respect to any First Offer Space pursuant to Section 7 (ROFO Rights) hereof. Subject to the Landlord’s rules and regulations applicable to the Garage, and to Landlord’s consent, Sublandlord shall not grant any other subtenant or occupant of the 75 Binney Building the right to park on the “B1” parking level located directly below “Floor L1” of the 75 Binney Building.

17. GENERATOR/COMMUNICATIONS EQUIPMENT. Subject to the terms and conditions of the Lease, including without limitation Exhibit J (Rooftop Rights) thereto, Subtenant shall have the right to use a portion of the roof on the 75 Binney Building, subject to the approval of Landlord and in a location designated by Landlord, for installation of Subtenant’s Rooftop Equipment (including but not limited to a standby generator and communications equipment). Subtenant acknowledges and agrees that Landlord’s obligation to provide a standby generator or emergency back-up power is outlined under Section 11(c) (Tenant’s Standby Generator) of the Lease, the Work Letter, and the Landlord/Tenant Matrix attached hereto as Exhibit “D”/Schedule 2.1.

18. COMPETITORS. Provided that (i) there then exists no Default or condition which, with the giving of notice or passage of time or both, would constitute a Default, and (ii) this Sublease is then in full force and effect, Sublandlord agrees not to enter into any assignment, lease, sublease (or consent to a sub-sublease) for any portion of the Premises to any company that is in competition with the business of Subtenant (a “Competitor”) and which Competitor is specifically listed on Exhibit “E” attached hereto.

19. ACCESS. Subtenant and Sublandlord confirm that the Sublease incorporates by reference Section 32 (Inspection and Access) of the Lease, permitting access to the Subleased Premises by Landlord and by Sublandlord.

20. INDEMNIFICATION; INSURANCE.

(a) The parties confirm that the provisions of Section 16 (Indemnification) of the Lease are incorporated herein by reference.

(b) The parties confirm that the provisions of Section 17 (Insurance) of the Lease are incorporated herein by reference. Subtenant shall carry all insurance required pursuant to be carried by the tenant pursuant to Section 17(b) of the Lease, specifically naming both Sublandlord and Landlord as additional insureds.

(c) Sublandlord hereby approves the following waivers to Section 17(b) of the Lease, subject to Landlord’s written approval of the same for Landlord and Subtenant: (i) eliminate requirement to include “agents” as additional insured, (ii) policyholder rating of A-, (iii) acceptance of a policy with no hostile fire exclusion rather than a hostile fire endorsement, (iv) waiver of a “per location” endorsement, and (v) acceptance of certificates of insurance issued by an insurer or agent rather than copies of actual complete policies.

(d) Notwithstanding anything to the contrary contained in this Sublease or in the Lease, and subject to the written consent of Landlord, at Subtenant’s option, for so long as (i) original Subtenant named under this Sublease is subleasing the entire Subleased Premises, (ii) no Default (as defined in Section 25 below) exists, (iii) Subtenant maintains a credit rating from Standard & Poors of “AAA” and a credit rating from Moody’s of “Aaa”, or better, (iv) Subtenant has a net worth in excess of [***] Dollars ($[***]), and (v) Subtenant maintains a program of self-insurance with respect to its properties generally, which program is administered and monitored in accordance with accepted standards of the insurance industry by professional insurance personnel retained or employed by Subtenant, Subtenant may self-insure for some or all of the insurance required under Section 17 (Insurance) of the Lease. Any undertaking by Subtenant to self-insure pursuant to this section shall not relieve Subtenant from any of Subtenant’s other obligations under the Lease or this Sublease, nor shall it serve to adversely affect Sublandlord or Landlord. The rights and obligations of Sublandlord shall remain the same as if Subtenant had obtained and maintained separate insurance from an independent institutional insurer of recognized responsibility for the coverages as provided herein, including the application of the waivers and releases in Section 22(c) Waiver of Subrogation under the Lease.

Subtenant shall be liable as a self-insurer for the same coverages and the same amount of insurance as would Subtenant’s insurer if Subtenant maintained the insurance described in this Section and Section 17 of the Lease.

(e) Subject to all of the other requirements of this Section 20, Sublandlord consents to self-insurance for some or all of the insurance required by this Section and Section 17 of the Lease, provided that (i) the original Subtenant maintains a program of insurance substantially in accordance with original Subtenant’s program of insurance in effect as of the date of this Sublease as set forth on the certificates of insurance with respect to both property insurance and liability insurance whereby (i) Subtenant maintains its own captive insurance company, (ii) Subtenant maintains re-insurance in amounts sufficient to satisfy the requirements of this Section 21 which re-insurance provides to Sublandlord direct access to re-insurers via a “cut-through” endorsement and (iii) the re-insurers satisfy the requirements of Section 17 of the Lease. Subtenant shall give Sublandlord prompt notice of any material change in Subtenant’s program of insurance.

(f) The parties confirm that the provisions of Section 30 (Environmental Requirements) of the Lease are incorporated herein by reference (except for subsection 30(c) which is excluded). Each of Sublandlord and Subtenant agrees to comply with the Environmental Requirements set forth in the Lease. Each of Sublandlord and Subtenant shall indemnify the other to the extent of any damage caused by Hazardous Materials brought upon the Premises or the Subleased Premises by such party in accordance with the same indemnification provisions as provided in Section 30 of the Lease.

(g) The parties confirm that the provisions of Section 16 (Indemnification) of the Lease are incorporated herein by reference. In addition, each of Sublandlord and Subtenant agrees to hold the other harmless from Claims caused by its negligence or willful misconduct in connection with the use or control of the New Atrium Area in accordance with the same indemnification provisions as provided in Section 16 of the Lease.

21. ASSIGNMENT AND SUBLETTING.

(a) General Prohibition. Without Sublandlord’s and Landlord’s prior written consent, subject to and on the conditions described in this Section 21 and subject to the terms of this Section 21, Subtenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Sublease or sub-sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Subleased Premises, and any attempt to do any of the foregoing shall be void and of no effect. Except as provided in Section 21(b) below, if Subtenant is a corporation, partnership or limited liability company, the shares or other ownership interests thereof which are not actively traded upon a stock exchange or in the over-the-counter market, a transfer or series of transfers whereby 50% or more of the issued and outstanding shares or other ownership interests of such corporation are, and voting control is, transferred (but excepting transfers upon deaths of individual owners) from a person or persons or entity or entities which were owners thereof at time of execution of this Sublease to persons or entities who were not owners of shares or other ownership interests of the corporation, partnership or limited liability company at time of execution of this Sublease, shall be deemed an assignment of this Sublease requiring the consent of Sublandlord as provided in this Section 21. Notwithstanding the foregoing, any public offering of shares or other ownership interest in Subtenant shall not be deemed an assignment.

(b) Permitted Transfers. If Subtenant desires to assign, sublease, hypothecate or otherwise transfer this Sublease or sublet the Subleased Premises (or a portion thereof) other than pursuant to a Permitted Assignment (as defined below) then at least 15 days, but not more than 45 days, before the date Subtenant desires the assignment or sublease to be effective (the “Assignment Date”), Subtenant shall give Sublandlord a notice (the “Assignment Notice”). The Assignment Notice shall set forth the portion of the Subleased Premises to be made available (the “Offered Space”) and the terms and conditions upon which such Offered Space is to be available including the proposed term and all relevant financial terms. At Subtenant’s option the Assignment Notice may identify a specific proposed assignee or subtenant and the material terms and conditions of the proposed transaction (a “Specific Assignment Notice”). A Specific Assignment Notice shall include a copy of an executed Letter of Intent or Term Sheet setting forth all materials terms and conditions of the proposed assignment or sublease, information about the proposed assignee or sublessee, including the proposed use of the Subleased Premises and any Hazardous Materials proposed to be used, stored handled, treated, generated in or released or disposed of from the Subleased Premises, the Assignment Date, any relationship between Subtenant and the proposed assignee or sublessee, and such other information as Sublandlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent. If, after having submitted an Assignment Notice, Subtenant shall identify a specific third party assignee or subtenant for such Offered Space, Subtenant shall submit a Specific Assignment Notice with respect to such Offered Space. Sublandlord may, by giving written notice to Subtenant within 2 months after receipt of the Assignment Notice (which period shall be reduced to 15 business days in the case of a Specific Assignment Notice):

(i) in the case of a Specific Assignment Notice, grant such consent, which consent shall not be unreasonably withheld, conditioned or delayed, including reasonable approval of the assignee, transferee or subtenant, its net worth and the proposed use of the Offered Space (and such consent may be subject to Landlord’s and Sublandlord’s further right to reasonably approve the final form of documentation of such transaction);

(ii) in the case of a Specific Assignment Notice, refuse such consent, in its sole and absolute discretion, if: (x) at the time of such notice Sublandlord has other space then available for sublease; or (y) concerns any transferee, assignee or subtenant which, in Sublandlord’s or Landlord’s reasonable judgment, is engaged in areas of scientific research or other business concerns that are controversial such that they may (1) attract or cause negative publicity for or about the 75 Binney Building or the Project, (2) negatively affect the reputation of the 75 Binney Building, the Project or Sublandlord, or (3) attract protestors to the 75 Binney Building; or (z) concerns any transferee, assignee or subtenant which has engaged in mismanagement or improper disposal of Hazardous Materials (unless the same has been, or is reasonably in the process of being, corrected by the transferee, assignee or subtenant);

(iii) in the case of an Assignment Notice which is not a Specific Assignment Notice, waive any right to terminate the Sublease (or sublease from Subtenant) as to the Offered Space for a period of 9 months following the Assignment Notice, during which period Sublandlord and Landlord shall continue to have the right to reasonably approve any prospective subtenant or assignee of the Offered Space in the same manner as provided in subsections (i) and (ii) above; or

(iv) recapture the Offered Space pursuant to the provisions of Section 21(g) below as of the Assignment Date, in the event that the proposed transaction is either: (x) an assignment of this Sublease; or (y) a Full Term Third Party Sublease (as hereinafter defined). A “Full Term Third Party Sublease” is defined as a sublease of the entirety, or any portion, of the Subleased Premises, to anyone other than a Permitted Transferee, for a term which expires at or within 24 months prior to the expiration of the then current Sublease Term.

Subtenant shall reimburse each of Sublandlord and Landlord for their respective reasonable out-of-pocket expenses in connection with its consideration of any Assignment Notice, up to a combined maximum of $[***] in connection with any Assignment Notice. Notwithstanding the foregoing, Sublandlord’s consent to an assignment of this Sublease or a subletting of any portion of the Subleased Premises to any entity controlling, controlled by or under common control with Subtenant (a “Permitted Assignment”) shall not be required, provided that Sublandlord shall have the right to reasonably approve the form of any such sublease or assignment. In addition, Subtenant shall have the right to assign this Sublease, without obtaining Sublandlord’s prior written consent, to a corporation or other entity which is a successor-in-interest to Subtenant, by way of merger, consolidation, recapitalization or corporate reorganization, or by the purchase of all or substantially all of the assets or the ownership interests of Subtenant (“Permitted Successor”) provided that (i) such merger or consolidation, or such acquisition or assumption, as the case may be, is for a good business purpose and not principally for the purpose of transferring the Sublease, and (ii) the net worth (as determined in accordance with GAAP) of the assignee is not less than the net worth (as determined in accordance with GAAP) of Subtenant as of the date of this Sublease, and (iii) such assignee shall agree in writing to assume all of the terms, covenants and conditions of this Sublease arising after the effective date of the assignment (a “Permitted Assignment”). Any transferee pursuant to a Permitted Assignment is a “Permitted Transferee”. Subtenant shall give at least upon 10 business days prior written notice to Sublandlord of any Permitted Assignment, except that if, in connection with a transfer to a Permitted Successor, Subtenant is under a legal obligation of confidentiality, either by reason of applicable Legal Requirements or pursuant to a confidentiality agreement to which Subtenant is subject, then Subtenant shall give Sublandlord notice of such Permitted Assignment as soon as reasonably possible after such confidentiality restriction lapses or is waived by the party having the right to enforce such restriction.

Any refusal by Sublandlord to grant its consent as provided herein shall specify in reasonable detail the reasons for such disapproval.

(c) Additional Conditions. As a condition to any such assignment or subletting, whether or not Sublandlord’s consent is required, Sublandlord may require:

(i) that any assignee or subtenant agree, in writing at the time of such assignment or subletting, that if Sublandlord gives such party notice that a Default of Subtenant has occurred hereunder, such party shall thereafter make all payments otherwise due Subtenant directly to Sublandlord, which payments will be received by Sublandlord without any liability except to credit such payment against those due under the Sublease, and any such third party shall agree to attorn to Sublandlord or its successors and assigns should this Sublease be terminated for any reason; provided, however, in no event shall Sublandlord or its successors or assigns be obligated to accept such attornment; and

(ii) A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublessee intends to use, store, handle, treat, generate in or release or dispose of from the Subleased Premises, together with copies of all documents relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Subleased Premises or on the Project, prior to the proposed assignment or subletting, including, without limitation: permits; approvals; reports and correspondence; storage and management plans; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Sublandlord has given its written consent to do so, which consent may be withheld in Sublandlord’s sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks. Neither Subtenant nor any such proposed assignee or subtenant is required, however, to provide Sublandlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities.

(d) No Release of Subtenant, Sharing of Excess Rents. Notwithstanding any assignment or subletting, Subtenant shall at all times remain fully and primarily responsible and liable for the payment of Rent and for compliance with all of Subtenant’s other obligations under this Sublease. Except in the case of a Permitted Assignment, if the Rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto in any form) exceeds the sum of the rental payable under this Sublease (excluding however, any Rent payable under this Section), and actual and reasonable tenant improvement costs, brokerage fees, legal costs, design or construction fees, free rent, lease take-over costs, or other similar concessions actually and reasonably incurred in connection with the proposed assignment or sublease (“Excess Rent”), then Subtenant shall be bound and obligated to pay Sublandlord as Additional Rent hereunder [***] percent ([***]%) of such Excess Rent within 10 days following receipt thereof by Subtenant. If Subtenant shall sublet the Subleased Premises or any part thereof, Subtenant hereby immediately and irrevocably assigns to Sublandlord, as security for Subtenant’s obligations under this Sublease, all rent from any such subletting, and Sublandlord as assignee, or a receiver for Subtenant appointed on Sublandlord’s application, may collect such rent and apply it toward Subtenant’s obligations under this Sublease; except that, until the occurrence of a Default, Subtenant shall have the right to collect such rent.

(e) No Waiver. The consent by Sublandlord to an assignment or subletting shall not relieve Subtenant or any assignees of this Sublease or any sublessees of the Subleased Premises from obtaining the consent of Sublandlord to any further assignment or subletting nor shall it release Subtenant or any assignee or sublessee of Subtenant from full and primary liability under this Sublease. The acceptance of Rent hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Sublease or a consent to any subletting, assignment or other transfer of the Subleased Premises.

(f) Prior Conduct of Proposed Transferee. Notwithstanding any other provision of this Section 21, if (i) the proposed assignee or sublessee of Subtenant has been required by any prior Sublandlord, lender or Governmental Authority to take remedial action in connection with Hazardous Materials contaminating a property, where the contamination resulted from such party’s action or use of the property in question and such party has failed to do so as required, (ii) the proposed assignee or sublessee is subject to an enforcement order issued by any Governmental Authority which has not been complied with in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority), or (iii) because of the existence of a pre-existing environmental condition in the vicinity of or underlying the Project, the risk that Sublandlord would be targeted as a responsible party in connection with the remediation of such pre-existing environmental condition would be materially increased or exacerbated by the proposed use of Hazardous Materials by such proposed assignee or sublessee, Sublandlord shall have the absolute right to refuse to consent to any assignment or subletting to any such party.

(g) Recapture. No failure of Sublandlord to exercise any such option to terminate this Sublease (or to underlet as provided herein), or to deliver a timely notice in response to the Assignment Notice within the applicable time period shall be deemed to be Sublandlord’s consent to the proposed assignment, sublease or other transfer or otherwise shall be deemed a waiver of Sublandlord’s options as to the Offered Space to the extent provided herein. If Sublandlord elects to recapture the Offered Space as provided in Section 21(b), Sublandlord may elect to do so either by termination of the Sublease (as to the Offered Space only), or by electing to sub-sublease the Offered Space from Subtenant as follows:

(i) Sublandlord’s Right to Terminate. Upon receipt of any Assignment Notice in which Subtenant proposes to assign this Sublease (which shall include, for purposes of this Section 21(g)(i), a proposed subletting of all or substantially all of the Subleased Premises for the entire or substantially the entire remaining Sublease Term), or in which Subtenant proposes to sublet less than substantially all of the Subleased Premises for a Full Term Third Party Sublease, then and in such event Sublandlord shall have the right, exercisable by notice to Subtenant given within sixty (60) days (which period shall be reduced to 15 business days in the case of a Specific Assignment Notice) after Sublandlord receives Subtenant’s Assignment Notice and in addition to the other rights

granted Sublandlord under this Section 21(g)(i), (x) in the case of an assignment, to terminate this Sublease, in which event this Sublease shall terminate on the Assignment Date, with the same force and effect as if the Assignment Date were the date originally fixed in this Sublease as the Expiration Date, or (y) in the case of a Full Term Third Party Sublease, to terminate this Sublease solely with respect to Offered Space, in which event on the Assignment Date, such space shall no longer be part of the Subleased Premises or covered by this Sublease and the rentable area of the Subleased Premises, the Base Rent and Expense Rent shall be appropriately reduced.

(ii) Sublandlord’s Right to Underlet. Upon receipt of any Assignment Notice in which Subtenant proposes to sublet all or any part of the Subleased Premises for a Full Term Third Party Sublease, Sublandlord shall have the option with respect to each such Assignment Notice, exercisable by Sublandlord in writing within sixty (60) days (which period shall be reduced to 15 business days in the case of a Specific Assignment Notice) after receipt of such Assignment Notice, to underlet from Subtenant the space which Subtenant so desires to sublet, for the term for which Subtenant desires to sublet it and for a rent equal to the lower of

A. the rent for which Subtenant proposes to sublet such space, as set forth in the Assignment Notice and the instruments which accompany such notice, or

B. the rent which Subtenant by the terms of this Sublease is required to pay for the rentable area of the space so to be sublet, such underlease to be upon the covenants, agreements, terms, provisions and conditions contained in this Sublease except as hereinafter provided and except for such thereof which are irrelevant or inapplicable. Without limiting the generality of the foregoing, it is agreed that:

(1) such underlease to Sublandlord shall give the undertenant the unqualified and unrestricted right, without Subtenant’s permission, (x) to assign such underlease or any interest therein and/or to underlet from time to time the space covered by such underlease or any parts of such space for any purpose, or purposes that the undertenant, in the undertenant’s uncontrolled discretion, shall deem suitable or appropriate, except that Sublandlord agrees that any such underlease will not be assigned except simultaneously with an assignment of Sublandlord’s interest under this Sublease so that at all times the Sublandlord under this Sublease and the undertenant under said underlease shall be the same person, corporation or other entity, and each assignor of such underlease shall thereafter be released of all obligations under such underlease, and (y) to make any and all changes, alterations and improvements in the space covered by such underlease deemed desirable by the undertenant;

(2) such underlease shall provide that any assignee or subtenant of the undertenant may, at the election of the undertenant, be permitted to make alterations, decorations and installations in such space or any part thereof (subject to the receipt of Landlord’s approval of the same, and Subtenant shall have no obligation of any restoration with respect to any such alterations, decorations or installations);

(3) such underlease shall provide that the parties to such underlease expressly negate any intention that any estate created under such underlease be merged with any other estate held by either of said parties;

(4) Subtenant shall and will at all times at its expense provide and permit an appropriate and lawful means of ingress and egress from such space so underlet by Subtenant to Sublandlord, such means of ingress or egress to be specified by Subtenant in the Assignment Notice with respect to such space;

(5) Sublandlord, at Subtenant’s expense, may make such Alterations as may be required or deemed necessary by Sublandlord physically to separate the underleased space from the balance of the Subleased Premises and to comply with all laws and requirements of public authorities relating to such separation;

(6) the occupant or occupants of all or any part or parts of such space shall, in common with Subtenant, have the use of toilet and other common facilities on the floor on which such space is located; and

(7) no default by Sublandlord under such underlease or by anyone claiming through such underlease shall be deemed to constitute a default under this Sublease.

(h) Other Additional Conditions. If Sublandlord does not exercise any option granted to Sublandlord by Sections 21(g)(i) or 21(g)(ii) with respect to a proposed sublease or assignment which is the subject of an Assignment Notice, Sublandlord agrees that, after Sublandlord’s receipt of an executed copy of the proposed instrument of sublease or assignment and all other agreements, if any, related to the proposed sublease or assignment, and any other information reasonably requested by Sublandlord, Sublandlord will not unreasonably withhold or delay its consent to such proposed sublease or assignment provided that the terms of the instrument of sublease or assignment conform to the Assignment Notice, the conditions of Section 21(c) above shall be satisfied, and the following further conditions shall be satisfied:

(i) the Subleased Premises or any part thereof shall not, without Sublandlord’s prior consent, have been listed or otherwise publicly advertised for subletting at a rental rate less than the rental rate being sought by Landlord or Sublandlord for space in the Project, and all advertisements of the Subleased Premises or any portion thereof for subletting shall have been approved by Sublandlord. The foregoing, however, shall not be deemed to prohibit Subtenant from negotiating or consummating a sublease at a lower rental rate;

(ii) Subtenant shall not then be in Default under this Sublease with respect to any monetary obligations beyond the time herein provided, if any, to cure such default and shall not otherwise be in Default under this Sublease beyond the time herein provided, if any, to cure such default;

(iii) the proposed subtenant or assignee is engaged in a business or activity, and the Subleased Premises, or the relevant part thereof, will be used in a manner, which (A) is in keeping with the then standards of the 75 Binney Building and the Project and (B) is not prohibited under the Sublease or the Lease;

(iv) if Landlord or Sublandlord has space available for lease or sublease in the Project, the proposed subtenant or assignee shall not then be a person or entity, nor an affiliate of a person or entity, with whom Sublandlord or Landlord, as applicable, is then actively negotiating to lease space in the Building;

(v) the proposed subtenant or assignee is of good reputation with sufficient financial worth considering the responsibility involved, and Sublandlord has been furnished with reasonable evidence of such financial worth and any sublease shall provide that, upon Sublandlord’s request from time to time, the proposed subtenant shall deliver to Sublandlord a copy of subtenant’s most recent financial statements certified by an officer of subtenant;

(vi) any proposed sublease shall state that it is expressly subject to all of the obligations of Subtenant under this Sublease and shall contain the further condition and restriction that the sublease shall not be assigned, encumbered or otherwise transferred or the subleased premises further sublet by the sublessee in whole or in part, or any part thereof suffered or permitted by the sublessee to be used or occupied by others, without the prior written consent of Sublandlord and Landlord in each instance as provided herein;

(vii) any proposed sublease shall provide that it is subject and subordinate to this Sublease and to the matters to which this Sublease is or shall be subordinate, and that in the event of the termination of this Sublease, or the re-entry or dispossession of Subtenant by Sublandlord under this Sublease, such subtenant shall, at Sublandlord’s option, attorn to Sublandlord as its sublessor pursuant to the then applicable terms of such sublease for the remaining term thereof, except that such subtenant shall have no right to use any portion of the Subleased Premises (or other space in the Building occupied or controlled by Subtenant) which is not part of the subleased premises, and Sublandlord shall not be (1) liable for any previous act or omission of Subtenant; (2) subject to any offset or defense which theretofore accrued to such subtenant (including, without limitation, any rights under 11 U.S.C. §365(h)); (3) bound by any rent or other sums paid by such subtenant more than one month in advance; (4) liable for any security deposit not actually received by Sublandlord; (5) liable for any work or payments on account of improvements to the subleased premises or (6) bound by any amendment of such sublease not consented to in writing by Sublandlord;

(viii) no subletting shall be for a term of less than two (2) years (provided, however, that if less than two (2) years remains in the Sublease Term, such sublease may be for the balance of the Sublease Term);

(ix) in no event shall there be more than three (3) occupants including Subtenant on any one floor of the Subleased Premises; and

(x) without the express written consent of Sublandlord, the proposed subtenant or assignee shall not be a person or entity, nor an affiliate of a person or entity, which is engaged in research, development, sale or marketing of drugs for the treatment of cancer.

Subtenant agrees to furnish Sublandlord such information in addition to the information set forth in the Assignment Notice as Sublandlord may reasonably request in connection with the proposed sublease or assignment.

22. CASUALTY AND CONDEMNATION. Notwithstanding anything to the contrary contained in this Sublease or in the Lease, Subtenant shall not have the right to terminate this Sublease as to all or any part of the Subleased Premises, or be entitled to an abatement of Base Rent, Expense Rent, Parking Charges, Subtenant Surcharges, additional rent or any other item of rental, by reason of a casualty or condemnation affecting the Subleased Premises unless Sublandlord is entitled to terminate the Lease or is entitled to a corresponding abatement with respect to its corresponding obligation under the Lease. If Sublandlord is entitled to terminate the Lease for all or any portion of the Subleased Premises by reason of casualty or condemnation, Subtenant may terminate this Sublease as to any corresponding part of the Subleased Premises by written notice to Sublandlord given at least two (2) business days prior to the date(s) Sublandlord is required to give notice to Landlord of such termination under the terms of the Section 18 (Restoration) of the Lease.

23. CONSENTS. In no event shall Sublandlord be liable for failure to give its consent or approval in any situation where consent or approval has been withheld or refused by Landlord, whether or not such withholding or refusal was proper. Sublandlord shall diligently pursue any reasonable request for Landlord consents or approvals required hereunder and upon request of Subtenant shall appeal any unreasonable withholding of approval or refusal of consent by Landlord. Any consent required of Sublandlord under this Sublease shall not be withheld or unreasonably conditioned or delayed if approved by Landlord pursuant to the terms and conditions of this Sublease and the Consent.

24. CONDITIONS; CONSENT OF LANDLORD; SNDA.

(a) Subtenant hereby acknowledges and agrees that this Sublease is subject to and conditioned upon Sublandlord obtaining the written consent (including recognition of this Sublease) (the “Consent”) of Landlord as provided in the Lease, which Consent shall be substantially on the terms and conditions set forth in the attached Exhibit “F”/Landlord’s Consent, acceptable to each of Subtenant and Sublandlord in its sole discretion.

(b) Subtenant and Sublandlord hereby acknowledge and agree that this Sublease is subject to and conditioned upon Sublandlord obtaining a subordination, non-disturbance and attornment agreement (“SNDA”), in substantially the form attached to the Lease as Exhibit “I”, from the Holder of any Mortgage (as such terms are defined in the Lease) in accordance with the terms and provisions of Section 27 (Subordination) of the Lease acceptable to each of Sublandlord and Subtenant in its sole discretion.

(c) Promptly following the execution and delivery of this Sublease by Sublandlord and Subtenant, Sublandlord shall submit this Sublease to Landlord. It is expressly understood and agreed that, notwithstanding anything to the contrary contained herein, the Initial Term shall not commence, nor shall Subtenant take possession of the Subleased Premises or any part thereof, until the Consent and the SNDA have been obtained. Subtenant hereby agrees that it shall cooperate in good faith with Sublandlord and shall comply with any reasonable requests made of Subtenant by Sublandlord or Landlord in the procurement of the Consent and the SNDA. In no event shall either Sublandlord or Subtenant be obligated to make any payment to Landlord or to the Holder of any Mortgage in order to obtain the Consent, the SNDA or Landlord’s consent to any provision hereof, except as expressly provided hereunder or in the Lease. Subject to the foregoing, Sublandlord shall pay all costs or fees charged by or due to Landlord in connection with obtaining the Consent and the SNDA, whether pursuant to the Lease or otherwise.

(d) In the event Landlord does not give its written Consent to this Sublease or the Holder of any Mortgage does not deliver its SNDA as aforesaid, in each instance on or before July 31, 2015 (the “Notice and SNDA Delivery Date”), then, at the option of Subtenant upon written notice delivered to the Sublandlord following such Notice and SNDA Delivery Date, this Sublease shall not become effective, and there shall be no further obligation of the parties, unless within thirty (30) additional days following the giving of any such notice the Consent and the SNDA shall have been executed and delivered.

(e) In the event Landlord does not give its written Consent to this Sublease or the Holder of any Mortgage does not deliver its SNDA as aforesaid, in each instance on or before August 31, 2015 (the “Outside Notice and SNDA Delivery Date”), then, at the option of Subtenant or Sublandlord and upon written notice delivered to the other following such Outside Notice and SNDA Delivery Date, this Sublease shall not become effective, and there shall be no further obligation of the parties, unless within thirty (30) additional days following the giving of any such notice the Consent and the SNDA shall have been executed and delivered.

25. DEFAULTS. Subtenant covenants and agrees that in the event that it shall default in the performance of any of the terms, covenants and conditions of this Sublease or of the Lease, beyond the expiration of any applicable notice, grace or cure period as provided in the Lease with the same force and effect as if herein set forth in full (each, a “Default”), Sublandlord shall be entitled to exercise any and all of the rights and remedies to which it is entitled by law, including, without limitation, the remedy of summary proceeding, and also any and all of the rights and remedies specifically provided for in the Lease, which are incorporated herein and made a part hereof, with the same force and effect as if herein set forth in full, and that wherever in the Lease rights and remedies are given to Landlord therein named, the same shall be deemed to refer to Sublandlord herein. If Sublandlord shall receive notice from Landlord of any default occurring under the Lease with respect to the Subleased Premises, or if there is a default by Subtenant hereunder, Sublandlord shall deliver written notice thereof to Subtenant of such default (Subtenant having the same corresponding applicable notice, grace or cure period).

26. NOTICE. Whenever, by the terms of this Sublease, any notice, demand, request, approval, consent or other communication (each of which shall be referred to as a “notice”) shall or may be given either to Sublandlord or to Subtenant, such notice shall be in writing and shall be sent by hand delivery, reputable overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows (or to such other address or addresses as may from time to time hereafter be designated by Sublandlord or Subtenant, as the case may be, by like notice):

(a)

If intended for Sublandlord, to:

ARIAD Pharmaceuticals, Inc.

26 Landsdowne Street

Cambridge, MA 02139

Attention: Chief Financial Officer

and to:

ARIAD Pharmaceuticals, Inc.

26 Landsdowne Street

Cambridge, MA 02139

Attention: General Counsel

and to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

One Financial Center

Boston, MA 02111

Attention: Stuart A. Offner, Esq.

(b)

If intended for Subtenant, to:

INTERNATIONAL BUSINESS MACHINES CORPORATION

294 Route 100

Somers, New York 10589

Attention: Program Manager, Real Estate Operations

and to:

INTERNATIONAL BUSINESS MACHINES CORPORATION

New Orchard Road

Armonk, New York 10504

Attention: Senior Counsel, Real Estate

All such notices shall be deemed to have been served on the date of actual receipt (in the case of hand delivery), or one (1) business day after such notice shall have been deposited with a reputable overnight courier, or three (3) business days after such notice shall have been deposited in the United States mails within the continental United States (in the case of mailing by registered or certified mail as aforesaid).

27. SURRENDER OF SUBLEASED PREMISES.

Upon expiration or other termination of the Sublease Term, as it may be extended, Subtenant shall complete Subtenant’s restoration obligations within the Subleased Premises in accordance with the requirements of Section 12 (Alterations and Tenant’s Property) and Section 28 (Surrender) of the Lease.

28. BROKERS.

(a) Subtenant warrants and represents that Subtenant has not dealt with any broker in connection with the Project or the Subleased Premises and/or the consummation of this Sublease other than Jones Lang LaSalle Americas, Inc. and DTZ (the “Brokers”) and, in the event any claim is made against Sublandlord by any other broker or agent alleging dealings with Subtenant, Subtenant shall defend Sublandlord against such claim, using counsel approved by Sublandlord, such approval not to be unreasonably withheld, and save harmless and indemnify Sublandlord on account of any loss, cost, damage and expense (including, without limitation, attorneys’ fees and disbursements) which may be suffered or incurred by Sublandlord by reason of such claim.

(b) Sublandlord warrants and represents that Sublandlord has not dealt with any broker in connection with the Project or the Subleased Premises and/or the consummation of this Lease other than the Brokers; and in the event any claim is made against Subtenant by any other broker or agent alleging dealings with Sublandlord, Sublandlord shall defend Subtenant against such claim, using counsel approved by Subtenant, such approval not to be unreasonably withheld, and save harmless and indemnify Subtenant on account of any loss, cost, damage and expense (including, without limitation, attorneys’ fees and disbursements) which may be suffered or incurred by Subtenant by reason of such claim. Sublandlord agrees that it shall be solely responsible for the payment of brokerage commissions to the Brokers.

29. COUNTERPARTS. This Sublease may be executed in one or more counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

30. ROOF RIGHTS. (a) Subject to the terms and provisions of Exhibit J of the Lease and at Subtenant’s sole cost and expense, Subtenant shall be permitted to install, maintain and remove on the top of the roof of the 75 Binney Building, in a location reasonably designated by Landlord, such Rooftop Equipment (as defined in the Lease) reasonably acceptable to Landlord and necessary for the conduct of the Permitted Uses in the Subleased Premises.

31. SIGNAGE. (a) Subject to the terms and provisions of Section 38 (Signs; Exterior Appearance) of the Lease, Subtenant, at Subtenant’s sole cost and expense, shall be permitted (i) such interior directory signage and door signage for the Subleased Premises as set forth in the Lease, and (ii) the exterior signs as set forth below.

(b) Subject to the written approval of Landlord, Subtenant shall be provided monument signage for identification of Subtenant at the 75 Binney Building provided that Sublandlord obtains all necessary approvals for a second comparable monument sign for identification of Sublandlord at the 75 Binney Building. The cost and expense of the additional

monument sign shall be shared equally by Sublandlord and Subtenant (provided that if Subtenant will not pre-approve the cost of such sign, Subtenant shall have the right to waive its right to such monument sign by notice within 30 days of receipt of the estimated cost). In the event that Landlord shall not approve a second monument sign, the Subtenant shall have the right to substantially equivalent signage identification on the single monument sign for the Project.

(c) Subject to (i) the terms and provisions of Section 38 of the Lease, and (ii) receipt of approval by the City of Cambridge to allow exterior signage on both the 75 Binney Building and 125 Binney Building in the Project, Subtenant shall be permitted to install, at Subtenant’s sole cost and expense, one (1) building-mounted, non-illuminated, sign on the exterior of the 75 Binney Building, in a size and location, and upon such other terms, as mutually agreed upon by Landlord, Sublandlord and Subtenant. The size of any Subtenant exterior signage on the 75 Binney Building shall be substantially equivalent in size to signage for the 125 Binney Building, all of which are subject to the allowable area for exterior signage in accordance with the applicable Legal Requirements of the City of Cambridge. Subtenant and Sublandlord agree that no exterior signage on either the 75 Binney Building or the 125 Binney Building shall be installed by either party unless and until exterior signage is approved for both Buildings.

(d) Sublandlord shall commence (on or before December 31, 2015) and shall diligently prosecute to completion obtaining approvals for (i) an additional monument sign, and (ii) substantially equivalent exterior signage for both the 75 Binney Building and 125 Binney Building. Subtenant shall cooperate with Sublandlord in making such applications, and shall provide drawings and other materials as required by the City of Cambridge.

32. CONFIDENTIALITY. Sublandlord and Subtenant confirm that the terms, provisions and covenants of Section 12 (Confidentiality) of the First Amendment as between Sublandlord and Subtenant are incorporated herein for purposes of this Sublease.

33. ATRIUM. (a) Sublandlord’s Premises includes the area consisting of approximately 6,000 rentable square feet and known as the “New Atrium Area”. Sublandlord and Subtenant agree and acknowledge that said New Atrium Area is not part of the Subleased Premises, and pursuant to the terms of Section 7(f) of the First Amendment, Sublandlord has the exclusive right to control the use of the New Atrium Area and that the City of Cambridge Planning Board has required that the New Atrium Area include features promoting and supporting public access thereto, possibly including a café, indoor seating, and/or restrooms, as more fully set forth in Section 7(f) of the First Amendment.

(b) Sublandlord agrees that, during the Sublease Term, the New Atrium Area will be available to be used by Subtenant on a non-exclusive basis in common with Sublandlord and others entitled thereto. The New Atrium Area shall not be subleased by Sublandlord to subtenants for exclusive use other than in accordance with the limitation set forth in the Planning Board approval.

(c) Subtenant shall have the right in common with others to use the New Atrium Area for access to and egress from the Subleased Premises.

(d) Subtenant shall have the right, from time to time, subject to applicable Legal Requirements and to approval of Landlord to the extent required under the Lease, to reserve the use of the New Atrium Area for temporary events without additional rent or fee other than payment of any and all direct expenses in connection therewith.

34. MISCELLANEOUS.

(a) This Sublease contains the entire agreement between the parties and all prior negotiations and agreements are merged in this Sublease. Any agreement hereafter made shall be ineffective to change, modify or discharge this Sublease in whole or in part unless such agreement is in writing and signed by the parties hereto. No provision of this Sublease shall be deemed to have been waived by Sublandlord or Subtenant unless such waiver is in writing and signed by Sublandlord or Subtenant, as the case may be. The covenants and agreements contained in this Sublease shall bind and inure to the benefit of Sublandlord and Subtenant and their respective permitted successors and assigns.

(b) In the event that any provision of this Sublease shall be held to be invalid or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions of this Sublease shall be unaffected thereby.

(c) The paragraph headings appearing herein are for purposes of convenience only and are not deemed to be a part of this Sublease.

(d) Capitalized terms used herein shall have the same meanings as are ascribed to them in the Lease, unless otherwise expressly defined herein.

(e) This Sublease is offered to Subtenant for signature with the express understanding and agreement that this Sublease shall not be binding upon Sublandlord or Subtenant unless and until Sublandlord and Subtenant shall have executed and delivered a fully executed copy of this Sublease to the other and all conditions to this Sublease as provided in Section 24 above shall have been satisfied.

(f) The shareholders, partners, directors and officers of Sublandlord (collectively, the “Sublandlord Parties”) shall not be liable for the performance of Sublandlord’s obligations under this Sublease. The shareholders, partners, directors and officers of Subtenant (collectively, the “Subtenant Parties”) shall not be liable for the performance of Subtenant’s obligations under this Sublease. Subtenant shall look solely to Sublandlord to enforce Sublandlord’s obligations hereunder and shall not seek damages against any of the Sublandlord Parties. Sublandlord shall look solely to Subtenant to enforce Subtenant’s obligations hereunder and shall not seek damages against any of the Subtenant Parties. Subtenant shall look only to the assets of Sublandlord for the satisfaction of Subtenant’s remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Sublandlord in the event of any default by Sublandlord hereunder, and no property or assets of the Sublandlord Parties shall be subject to levy, execution or other enforcement procedure for the satisfaction of Subtenant’s remedies under or with respect to this Sublease, the relationship of Sublandlord and Subtenant hereunder or Subtenant’s use or occupancy of the Premises. Sublandlord shall look only to the assets of Subtenant for the satisfaction of Sublandlord’s remedies for the collection of a

judgment (or other judicial process) requiring the payment of money by Subtenant in the event of any default by Subtenant hereunder, and no property or assets of the Subtenant Parties shall be subject to levy, execution or other enforcement procedure for the satisfaction of Sublandlord’s remedies under or with respect to this Sublease, the relationship of Subtenant and Sublandlord hereunder or Sublandlord’s use or occupancy of the Premises.

(g) This Sublease shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.

(h) Subtenant and Sublandlord shall, within ten (10) business days after each and every request by the other, execute, acknowledge and deliver a statement in writing: (i) certifying that this Sublease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified, and stating the modifications); (ii) specifying the dates to which the Base Rent, Expense Rent, Parking Charges, Subtenant Surcharges, and any other sums due under this Sublease have been paid; (iii) stating whether or not, to the knowledge of such party, Sublandlord or Subtenant is in default in performance or observance of its obligations under this Sublease, and, if so, specifying each such default; (iv) stating whether or not, to the knowledge of such party, any event has occurred which with the giving of notice or passage of time, or both, would constitute a Default by Sublandlord or Subtenant under this Sublease, and, if so, specifying each such event; and (v) as to any other matters reasonably requested. Any such statement delivered pursuant to this Section may be relied upon by the Landlord or by any actual or prospective assignee, transferee or mortgagee. Subtenant and Sublandlord agree to deliver the form of Estoppel Certificate attached to the Lease as Exhibit “H”.

(i) Each party represents and warrants (a) that it is a valid existing corporation licensed to do business in the Commonwealth of Massachusetts and (b) that it has the power and authority to execute and deliver the Sublease and perform its obligations thereunder.

(j) Sublandlord agrees to enter into a Notice of Sublease, subject to the approval of Landlord.

(k) In the extent of any inconsistencies by and between the Sublease and the Lease, the Sublease shall govern.

[Signatures follow on the next page.]

IN WITNESS WHEREOF, Sublandlord and Subtenant herein have duly executed this instrument on the day and year first above written.


LANDLORD:	ARIAD Pharmaceuticals, Inc.,
	a Delaware corporation

	By:	/s/ Harvey J. Berger, M.D.
	Name:	Harvey J. Berger, M.D.
	Title:	Chairman and CEO
		Hereunto Duly Authorized

SUBTENANT:	INTERNATIONAL BUSINESS MACHINES
	CORPORATION, a New York corporation

	By:	/s/ Thomas L. Ponesse III
	Name:	Thomas L. Ponesse III
	Title:	Director, Real Estate Operations
		Hereunto Duly Authorized

EXHIBIT A

REDACTED LEASE

A-1

EXHIBIT B-1

SUBLEASED PREMISES

(see attached floor plans)

B-1

[***]

B-1

[***]

B-1

[***]

B-1

[***]

B-1

[***]

B-1

[***]

B-1

EXHIBIT B-2

B1, B2 and Penthouse Plans dated July 16, 2015

B-2

[***]

B-2

[***]

B-2

[***]

B-2

EXHIBIT C

Pre-Commencement Date Work

[None.]

C-1

EXHIBIT D/Schedule 2.1

[Landlord/Tenant Responsibility Matrix dated March 30, 2015]

D-1

SCHEDULE 2.1

LANDLORD/TENANT RESPONSIBILITY MATRIX


DESCRIPTION	ALLOCATION
DESCRIPTION	Landlord	Tenant
GENERAL
Building Core & Shell shall be certified by the USGBC at not less than Silver.	X
Landlord to provide below-grade parking with [***] spaces per 1,000 GFA.	X
Third-party Commissioning of the Core & Shell	X
Third-party Commissioning of the Tenant Improvements		X
SITEWORK
Perimeter sidewalks, street curbs, miscellaneous site furnishings, landscaping and parking	X
Telephone service to main demarcation room from local exchange carrier	X
Domestic sanitary sewer connection to street	X
Lab waste sewer connection	X
Roof storm drainage	X
NStar primary and secondary electrical service	X
NStar gas service	X
Domestic water service to Building	X
Fire protection water service to Building	X
LANDSCAPING
Landlord to provide complete site improvements package, including design and installation	X
Landscape plans to include location, species, and sizes of trees, shrubs, groundcovers, flowering plants, ornamental flowering trees and coniferous evergreen trees. All plantings shall be of specimen quality.	X
Hardscape plans shall include walkways, driveways, curbing, exterior lighting, and signage. Design and site improvements materials shall be of corporate headquarters quality.	X
STRUCTURE
Reinforced concrete slab with live load capacity of l00psf	X
Maximum design value for vibration for floors is designed to 8,000 micro-inches per second.	X
Structural enhancements for specific Tenant load requirements		X
Floor to floor height of l4’-6” at Levels 2 through 4; 14’-0” at Level 5; 19’-11” at 1^st floor (9’-0” to Floor of Mezzanine from First Floor); 10’-l1” at mezzanine level (mezzanine level is allocated for support space only – no office functions).	X
Structural framing dunnage above roof for Base Building equipment	X
Structural framing dunnage above roof for Tenant equipment subject to Landlord review and approval.		X
Framed openings for Base Building utility risers	X
Framed openings for Tenant utility risers in addition to Base Building within pre-allocated base Building areas subject to Landlord review and approval.	X
Miscellaneous metals items and/or concrete pads for Base Building equipment	X
Miscellaneous metals items and/or concrete pads for Tenant equipment		X
ROOFING
Single ply EPDM roofing system with rigid insulation with 20 year warranty	X
Roofing penetrations for Base Building equipment/systems	X
Roofing penetrations for Tenant equipment/systems, installed by Base Building roofing subcontractor		X


Alexandria Real Estate Equities		Page 1 of 10
March 30, 2015

D-2


DESCRIPTION	ALLOCATION
DESCRIPTION	Landlord	Tenant
Walkway pads to Base Building equipment	X
Walkway pads to Tenant equipment		X
Roofing alterations due to Tenant changes within Building penthouse, installed by Base Building roofing subcontractor		X
EXTERIOR
Building exterior consisting of curtainwall, glass fiber reinforced concrete panels, metal panel rain screen, and storefront windows.	X
Base Building entrances	X
Ground mounted exterior monument for Tenant identification	X
Building mounted signage in accordance with City of Cambridge rules and regulations (full building tenants only)		X
Loading dock overhead door	X
Penthouse enclosure for Base Building rooftop equipment	X
Penthouse enclosure for Tenant rooftop equipment	X
COMMON AREAS
Accessible main entrance. Entrance vestibules will include accessible full glass medium stile aluminum framed entrance doors with integrated security hardware, and recessed walk-off grid floor.	X
First floor finished lobby.	X
Modification of lobby reception desks.		X
Core area toilet rooms. Toilet room floors and base shall be thin set ceramic tile. One full-height mirror per toilet room. Full height ceramic tile shall be provided on wet walls. All other wall surfaces shall be painted drywall. Lavatory counters shall be solid surface with integral sinks, and continuous mirror above lavatory counters to the ceiling height. Toilet room ceilings shall be painted drywall. Metal toilet enclosures shall be ceiling mounted, steel panel construction with a stainless steel finish. Toilet room accessories shall be similar or equal to those manufactured by Bobrick Company, all in accordance with MAAB. No marble materials included in toilet rooms.	X
Bicycle storage and shower rooms sufficient to obtain LEED Sustainable Sites Credit 3.2: Alternative Transportation.	X
Shower rooms shall utilize finishes similar to core area toilet rooms.	X
Walls in toilet rooms, stairways, and Base Building utility rooms shall have a final paint finish.	X
Painted metal railings in all stairways.	X
Interior signage for all Base Building rooms	X
Janitor’s closets in core areas	X
Electrical closets in core areas. Electrical closets can be used for Tenant provided electrical equipment, subject to coordination with Base Building equipment, and conformance to all code requirements.	X
IDF connected to demarcation room	X
Demarcation room	X
Loading dock area in each building, to include 48” high raised loading dock platforms, measured from the loading dock slab immediately in front of the platform. A scissor lift will also be provided in 125 Binney by Landlord.	X
Doors, frames, and hardware at common areas	X
Tenant Premises HVAC Rooms		X
ELEVATORS
Three (3) passenger elevators per building with 3,500 lb. capacity; 350 FPM	X
One service elevator per building with 5,000 lb. capacity; 350 FPM, 4’-6” wide door.	X


Alexandria Real Estate Equities		Page 2 of 10
March 30, 2015

D-3


WINDOW TREATMENT
Furnish and install Base Building window treatment, including blocking for window treatment. Window treatments are to be horizontal blinds (specification TBD) for all windows. At areas of full height floor-to-floor clear glazing, Mechoshade roller system shades (or equal; specification TBD) are required. Mechoshade and Room Darkening + AV Mechoshades for other areas, such as conference rooms, are optional.		X
Solid surface window sills, as applicable		X
TENANT AREAS
Drywall at inside face of exterior walls		X
Finishes at inside face of exterior walls		X
Finishes at inside face at Tenant side of core partitions		X
Additional toilet rooms within Tenant Premises		X
Electrical closets within Tenant Premises		X
Tel/data rooms for interconnection with Tenant tel/data		X
Tenant kitchen areas		X
Modifications to core areas to accommodate Tenant requirements		X
Partitions, ceilings, flooring, painting, finishes, doors, frames, hardware, millwork, casework, and buildout.		X
Fixed or movable casework.		X
Laboratory Equipment including, but not limited to, biosafety cabinets, autoclaves, glasswashers, bioreactors.		X
Chemical Fume Hoods, bench fume hood, lab casework		X
Shaft enclosures for Base Building systems’ risers	X
Shaft enclosures for Tenant risers within allocated space in the main vertical Base Building shafts, installed in accordance with Base Building schedule.	X
Shaft enclosures for Tenant risers outside of the allocated space in the main vertical Base Building shafts.		X
All interior signage for Tenant Premises		X
FIRE PROTECTION
Fire service entrance including fire department connection, alarm valve, and flow protection	X
Core area distribution piping and sprinkler heads	X
Stair distribution piping and sprinkler heads	X
Primary distribution and sprinkler heads adequate to support ordinary hazard (with upturned heads)	X
All run outs, drop heads, and related equipment within Tenant Premises		X
Modification of sprinkler piping and head locations to suit Tenant layout and hazard index		X
Specialized extinguishing systems		X
Preaction dry-pipe systems (if required)		X
Fire extinguisher cabinets at core areas	X
Fire extinguisher cabinets in Tenant Premises		X
Additional fire department connections in tenant space per CFD spacing. All piping, fittings, and valves from the capped connections are provided by Tenant.		X
Capped connections are available on the Base Building standpipes at each floor for Tenant use. Additionally, the Landlord will provide a base riser valve with a capped connection in the first floor ceiling of each building for Tenant use.	X
PLUMBING
Domestic water service with backflow prevention and Base Building risers	X
Domestic water distribution within Tenant Premises including reduced pressure backflow preventer		X


Alexandria Real Estate Equities		Page 3 of 10
March 30, 2015

D-4


Core restroom plumbing fixtures compliant with accessibility requirements	X
Tenant restroom plumbing fixtures compliant with accessibility requirements (in addition to those provided by the Base Building)		X
Wall hydrants in core areas (where required by code)	X
Non-potable water riser for lab use, including water booster system and reduced pressure backflow preventer	X
Non-potable water distribution within Tenant Premises.		X
Tenant metering and sub-metering at Tenant connection to water services.		X
Storm drainage system	X
Sanitary waste and vent service for core areas	X
Sanitary waste and vent risers (2 per building) serving Tenant Premises	X
Sanitary waste and vent distribution serving Tenant Premises		X
Two stage active pH neutralization system		X
Lab waste and vent pipe risers (2 per building)	X
Lab waste and vent pipe distribution serving Tenant Premises		X
Hot water generation for core restrooms	X
Non-potable Hot water generation for Tenant use		X
Central lab air compressor		X
Compressed air pining risers		X
Compressed air pipe distribution in Tenant Premises for specific points of use		X
Central lab vacuum system		X
Lab vacuum pipe risers		X
Lab vacuum pipe distribution in Tenant Premises for specific points of use		X
Tepid water generator	X
Tepid water pipe risers (2 per building)	X
Tepid water pipe distribution in Tenant Premises		X
RO/DI water generator		X
Capped connection at cooling tower water make-up for RO/DI rejcct water.	X
Reject water piping, valves, fittings, etc. from the RO/DI system to the cooling tower water make-up.		X
RO/DI water pipe risers		X
DI water pipe distribution in Tenant Premises for specific points of use		X
Manifolds, piping, and other requirements including cylinders, not specifically mentioned above		X
Open end drains at each floor, including dedicated stacks and piping from the stacks to the rainwater cistern, for clear water wastes/condensate.	X
NATURAL GAS
Natural gas service to Building	X
Natural gas service to Base Building boilers	X
Natural gas service, pressure regulator and meter for Tenant equipment. Gas main has capacity to serve a IMW Tenant-provided generator per building. Gas main also has an additional capacity for the building’s use of 8,400 MBH for 75 Binney and 12,300 MBH for 125 Binney.		X
Natural gas piping from Tenant meter to Tenant Premises		X
Natural gas pipe distribution within Tenant Premises		X
Natural gas pressure regulator vent pipe riser from valve location through roof	X
HEATING, VENTILATION, AIR CONDITIONING
Central water-cooled chilled water plant with performance optimization control, 2,185 tons total for both building’s Base Building equipment only. Tenant is responsible for differential costs associated with the increased chilled water plant capacities to accommodate Tenant requirements. Chiller capacity, assuming an energy recovery loop on laboratory exhaust, is based on the ASHRAE 1% weather data.	X
Chilled water pipe risers for Base Building loads.	X


Alexandria Real Estate Equities		Page 4 of 10
March 30, 2015

D-5


Premium cost to provide an additional 250 ton chiller on building 125, including an 8” chilled water supply and return riser from the chiller to the penthouse, a chilled water pump and a condenser water pump to serve the chiller.		X
Increase cooling tower capacity by 250 tons per building, for Tenant use. Cooling towers will have the ability to provide 640 tons of winter cooling on 75 Binney and 747 tons of winter cooling on 125 Binney.	X
Chilled water pipe risers for Tenant requirements.		X
Chilled water pipe distribution within Tenant Premises		X
Roof mounted central cooling towers on standby power	X
Condenser water capacity for Base Building loads.	X
Condenser water capacity for Tenant requirements, including the heat exchanger to isolate base building water from Tenant equipment, pumps, piping, and risers.		X
Condenser water pipe risers for Base Building loads.	X
Condenser water pipe risers for Tenant requirements.		X
Condenser water pipe distribution within Tenant Premises.		X
Central gas fired condensing boiler plant, for both buildings to be a total nominal output of 32.4 million BTU/hr	X
Hot water pipe risers	X
Hot water pipe distribution within Tenant Premises		X
Chilled beam units within Tenant Premises		X
Reheat coils within Tenant Premises		X
Reheat coils within core areas	X
Building Management System (BMS) for Base Building Infrastructure.	X
BMS (compatible with Landlord’s system) within Tenant Premises monitoring Tenant infrastructure		X
Once-through supply air handling units with 30% prefilters, electronically enhanced 85% final filters, chilled water coils, and hot water coils and heat recovery coils. Units are sized for approximately 1.75 cfm per usable square foot (excluding mechanical space), for a total of 538,000 CFM for both buildings. The air handling system is sized for 2.0 CFM/USF for 70% of the total building usable area and 1.17 CFM/USF for 30% of the total building usable area.	X
Vertical supply air duct distribution. All duct risers are sized for 2.0 CFM/USF at rates between 1800 FPM and 2000 FPM, depending on the shaft size available.	X
Supply air duct distribution. VAV terminals, equipment connections, insulation, air terminals, dampers, hangers, etc. within Tenant Premises.		X
Supply air duct distribution, VAV terminals, equipment connections, insulation, air terminals, dampers, hangers, etc. within core areas.	X
Roof mounted laboratory exhaust air handlers and fans, with energy recovery coils.	X
Vertical exhaust air duct risers	X
Exhaust air duct distribution, exhaust air valves, equipment connections, insulation, air terminals, dampers, hangers, etc. within Tenant Premises.		X
Exhaust air duct distribution, exhaust air valves, equipment connections, insulation, air terminals, dampers, hangers, etc. within core: areas	X
Restroom exhaust for core area restrooms	X
Restroom exhaust for restrooms within Tenant Premises (additional)		X
Electric room ventilation system for Base Building electrical closets	X
Electric room ventilation system for electrical closets within Tenant Premises		X
Sound attenuation for Base Building infrastructure to comply with Cambridge Noise Ordinance	X
Sound attenuation for Tenant equipment to comply with Cambridge Noise Ordinance		X


Alexandria Real Estate Equities		Page 5 of 10
March 30, 2015

D-6


Additional/ dedicated cooling for Tenant requirements.		X
Garage exhaust fans with CO detection	X
Stair and elevator pressurization systems for stairs and elevators within core areas	X
Elevator pressurization systems within Tenant Premises or installed by Tenant		X
NStar vault ventilation system for Base Building vault	X
Garage Ramp Snow Melt System	X
ELECTRICAL
Electrical utility service to switchgear in main electrical room	X
480/277v bus riser, two 4,000 amp services for 75 Binney, and two 4,000 amp services for 125 Binney.	X
Allocation of bus power for Tenant use (w/sf): o Office lighting – 1.5 o Office power – 4 o Office HVAC – 6 o Lab lighting – 1.5 o Lab power – 8.5 o Lab HVAC – 12	X
One (1) 800 kW Diesel Life Safely Generator per Building. (Automatic transfer switches and distribution for Base Building loads will be provided by Landlord).	X
Premium cost to upgrade the 800 kW Base Building generator to 2,000 kW for both life safety and Tenant standby use in 125 Binney Street and 1000 kW in 75 Binney Street including automatic transfer switch, increased fuel system requirements (for Tenant standby power) and distribution of Tenant standby power.		X
Standby generator for Tenant use in addition to the 0.25 watts/USF allowance provided for Tenant emergency lighting.		X
Sound attenuation for Tenant standby generator to comply with Cambridge Noise Ordinance		X
Sound attenuation for life safety generator to comply with Cambridge Noise Ordinance	X
Automatic transfer switch for Tenant load		X
Automatic transfer switch for life safety generator for Base Building loads	X
Standby power distribution within Tenant Premises		X
Lighting and power distribution for core areas	X
Lighting and power distribution for Tenant Premises		X
Meter socket and meter for Tenant bus tie in		X
Common area life safety emergency lighting/signage	X
Tenant Premises life safety emergency lighting/signage		X
Tenant panels, transformers, etc. in addition to Base Building		X
FIRE ALARM
Base Building fire alarm system with devices in core areas	X
Fire alarm sub panels and devices for Tenant Premises with integration into Base Building system		X
Alteration to fire alarm system to facilitate Tenant program		X
TELEPHONE/DATA
Underground local exchange carrier service to primary demarcation room in basement	X
Service from primary demarcation room to secondary demarcation room	X
Intermediate distribution frame rooms	X
Tenant tel/data rooms		X
Pathways from demarcation room directly into Tenant tel/data rooms	X


Alexandria Real Estate Equities		Page 6 of 10
March 30, 2015

D-7


Tel/Data cabling from demarcation room to intermediate distribution frame rooms.		X
Tel/Data cabling from demarcation room and/ or intermediate distribution frame rooms to Tenant tel/data room.		X
Fiber optic service for Tenant use		X
Tel/data infrastructure including, but not limited to, servers, computers, phone systems, switches, routers, MUX panels, equipment racks, ladder racks, etc.		X
Provisioning of circuits and service from service providers		X
Audio visual systems and support		X
Station cabling from Tenant tel/data room to all Tenant locations, within the suite and exterior to the suite, if needed		X
SECURITY
Card access at Building entries	X
Card access into or within Tenant Premises on separate Tenant installed and managed system		X
Video camera coverage of Tenant Premises on separate Tenant installed and managed system		X
Manned security station in lobby		X
ATRIUM ARCHITECTURE AND LANDSCAPE
Add louver and insulated blank out panel exterior north 125 and 75.	X
Electrochromic solar shading glass for Atrium skylight	X
Connection of the electrochromic solar shading glass control system into the building management system	X
Modify 125 and 75 penthouse screen wall and structure to add scuppers to allow glass skylight to drain	X
Provide glazed-in sloped insulated metal panel system to skylight glazing system to allow for glass skylight to drain	X
Provide non-glazed roof system between Atrium skylight and penthouse screenwall.	X
Structural support beams located below insulated glass skylight at north and south elevations	X
Horizontal wind girt trusses at each floor level tied to columns.	X
Continuous interior louver, (align with and match exterior typical louver) at upper level of atrium to be used for smoke evacuation exhaust systems and natural ventilation system. Louver to connect to plenum space to between atrium and penthouse screen wall system. Plenum space to be insulated, provide insulation, AVB and weather barrier to penthouse screen wall system.	X
Modify building structural system to accommodate atrium skylight and wall loads	X
Structure to accommodate 6” expansion joint and expansion joint cover on 125 Binney street side. No expansion joint on 75 Binney street side.	X
North and south elevations, structural insulated glass, Basis of design PPG Solarban 70 XL, or similar, (U-value: 0.3 BTU/F-ft2 SHGC: 0.28 (SB70xl).	X
Structural insulated glass supported using spider connections and support rods/wire rope system all supported from Primary glazed wall support trusses and horizontal wind girts at each floor.	X
Automated sun shade roller blind system on interior side of south elevation only mounted to horizontal girts to meet design parameters for thermal comfort	X
Connection of sun shade roller blind control system into the building management system	X
Vestibules for Atrium entries	X


Alexandria Real Estate Equities		Page 7 of 10
March 30, 2015

D-8


Four (4) sets smoke evacuation make up air window systems with auto openers at Level 1. North and south vestibule doors to be on auto openers for smoke evacuation system	X
Auto louvers Level 1 near bathrooms for smoke evacuation make-up air system.	X
1^st floor interior SSG system within Atrium enclosure with mullion spacing to match exterior system	X
Code compliant Structural silicon glazing system with water curtain system where required within and at perimeter of Atrium	X
Rated gwb partitions (prime coat only) and rated wood door and frame to complete fire separation at boundaries of Atrium. The Atrium fire separation is achieved by means of one-hour rated partitions, doors, frames, and sprinkler curtain on glazing. Fire separation does not rely on Tenant construction to meet code.	X
Premium cost to upgrade to glass doors at rated partitions		X
Finish ceiling at Atrium terraces		X
Finish built up fascia system at atrium terrace outboard edges to match base building interior profile, material and color to cover structural slab edge.	X
Finish floor at Atrium terraces on upper floors		X
Tempered glass guardrails at crossing bridges and tempered glass guardrails with stainless steel handrails at atrium terraces.	X
Crossing bridges, 2^nd, 3^rd, 4^th and 5^th level, connecting atrium terraces at 125 Binney to 75 Binney.	X
Crossing bridges finish floor		X
Crossing bridges metal fascia panels	X
Crossing bridges finish ceiling at underside of bridges	X
Accent walls, at column lines J and K (from south face of Atrium to column line 4) on Levels 2 through 5, with clear anodized extruded aluminum, sill conditions typical all openings. (Finish to be GWB with Level 5 Finish)	X
AESS communicating stair between Level 1 and Level 2 125 Lobby. With stone or wood treads. Riser material to be painted metal.	X
Spiral communicating stair between Level 2 and Level 5 of 125 Binney. Structural frame system with thermoformed solid surface clad guardrail, solid surface cladding system with concealed seams and fasteners for a monolithic look. Treads to be stone or wood. Riser material to be painted metal. Exterior color of the stair to be ARIAD approved red.	X
Recessed curb below structural insulated glass at north and south elevations	X
Architectural floor grill in Atrium along north and south wall and dispersed throughout center of atrium floor to temper atrium glazing	X
Atrium storage space.	X
Public restrooms with floor to ceiling tile walls with floor mounted toilet partitions.	X
Interior and exterior ground floor plantings, flooring, pavers, movable and fixed furnishings	X
Seating for café		X
Blocking at attachment points at five (5) locations for banners to be hung within atrium at locations agreed upon by landlord and tenant	X
ATRIUM STRUCTURE
Composite slab bridges designed for 100 psf live load	X
Additional/modified steel columns, beams, braces, and trusses to support Atrium skylight and glass walls	X
Spiral stair from Level 2 to Level 5	X
Entry vestibules	X


Alexandria Real Estate Equities		Page 8 of 10
March 30, 2015

D-9


Steel modifications for revised slab edge/balconies	X
Structural framing dunnage for Atrium MEP equipment	X
Atrium skylight and curtain walls	X
ATRIUM FIRE PROTECTION
Distribution and sprinkler heads at top of Atrium and under bridges and stairs, including separate floor controls	X
Any code required water curtain sprinkler system within the volume of the Atrium required for core & shell occupancy.	X
Any modifications to the rated Atrium boundaries or fire protection system required to maintain the rated separation during Tenant Improvements.		X
Distribution and sprinkler heads (upturned) with separate floor control on each Level, within the Atrium	X
Modification of sprinkler piping and head location to suit Tenant layout		X
ATRIUM PLUMBING
Drains at interior planting areas and entry vestibules	X
Irrigation system for interior planting areas	X
Public restroom with services from Base Building	X
Services for potential Café (room W102), including gas, water, sanitary, and grease traps.		X
ATRIUM HVAC
Nominal 26,000 CFM air handling unit with hot water and chilled water coils, supply and return fans, 30% and 85% filters, and air side economizer serving the ground floor level. Fan coil units mounted in the elevator lobbies will provide conditioned air to the bridges.	X
Additional 250 ton water-cooled chiller, located on 75 Binney Street side of chiller plant room. 100 tons are dedicated to the Atrium cooling; 150 tons are available for Tenant use. Additional 100 tons of cooling lower capacity for tenant use (to maintain requested total of 250 tons capacity available to Tenant)	X
Chilled water and condenser water pumps to support new 250 ton chiller	X
Additional 2.7 million BTU/hr output condensing boiler module located in 75 Binney Street boiler room	X
Chilled and hot water piping to air handling unit and radiant floors and fan coil units serving the bridges	X
Duct distribution to/from the AHU and FCU to the conditioned space	X
Smoke exhaust fans and makeup system	X
Environmental controls to monitor and maintain Atrium Thermal Criteria of perceived temperature, as defined by ANSI/ASHRAE 55, in the range of 68 to 78 degrees F and a relative humidity below 55% on the ground floor of the Atrium, the Atrium bridges, and stair when the outdoor conditions are between the ASHRAE 99% and 0.4% design values for Boston in winter and summer respectively.	X
Environmental controls to maintain thermal criteria in the range of 70 to 75 degrees F and a relative humidity below 55% in seating areas on the Atrium terraces.		X
Environmental controls to maintain thermal criteria in the range of 68 to 78 degrees F and a relative humidity below 55% in circulation areas on the Atrium terraces.		X
Smoke management control	X


Alexandria Real Estate Equities		Page 9 of 10
March 30, 2015

D-10


Distribution for Café		X
ATRIUM ELECTRICAL
Power to landlord installed equipment	X
Lighting in Atrium	X
Convenience outlets on the 1st floor of the Atrium	X
Life safety lighting as required by building code.	X
Modifications to life safety lighting for tenant changes on upper floors		X
Power to tenant installed equipment		X
Lighting within the terraces		X
Building Code minimum required convenience outlets on upper floors	X
Additional Convenience outlets on the upper floor terraces		X
In the Level 5 connecting bridge, four (4) empty steel conduits 1 @ 4” dia. plus 3 @ 3” dia. with pull string accessible from the terrace for tenant’s future use		X
ATRIUM FIRE ALARM
Fire alarm initiation devices and wiring	X
Fire alarm notification devices and wiring	X
Fire alarm system interface and programming (75 and 125 Binney)	X
Fire alarm interface to BMS (75 and 125 Binney)	X
Modification of fire alarm system to suit Tenant layout		X
ATRIUM SECURITY SYSTEM
Card access at Atrium exterior doors	X
Card access into or within Tenant Premises		X
Conduit (with pull wires) and mounting for future Video Cameras within Atrium for tenant use integrated within design of the atrium	X


Alexandria Real Estate Equities		Page 10 of 10
March 30, 2015

D-11

EXHIBIT E

COMPETITORS

[***]

E-1

Exhibit F

Form of Consent to Sublease

CONSENT TO SUBLEASE

This Consent to Sublease (this “Consent”) is made as of , 2015, by ARE-MA REGION NO. 48, LLC, a Delaware limited liability company, having an address of 385 East Colorado Boulevard, Suite 299, Pasadena, California 91101 (“Landlord”), ARIAD Pharmaceuticals, Inc. a Delaware corporation, having an address of 26 Landsdowne Street, Cambridge MA 02139 (“Tenant”; Tenant is also sometimes referred to as “Sublandlord” herein and in the Sublease hereinafter described), and INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, having an address of (“Subtenant”), with reference to the following Recitals.

R E C I T A L S

Landlord and Tenant have entered into that certain Lease Agreement dated as of January 4, 2013 (“Original Lease”), as amended by (i) First Amendment to Lease dated as of September 16, 2013 (“First Amendment”), (ii) letter dated October 17, 2013 (“Letter Amendment”) and (iii) Second Amendment to Lease dated as of March 24, 2015 (“Second Amendment”). Collectively, the Original Lease, First Amendment, Letter Amendment and Second Amendment are referred to as the “Lease”. Pursuant to the Lease, Landlord leased to Tenant certain premises (the “Premises”) in the Project known as and located at 75 Binney Street and 125 Binney Street, Cambridge, Massachusetts, as more particularly described in the Lease.

B.	A Notice of Lease with respect to the Lease is recorded in Book 60968, Page 552 of the Middlesex County Registry of Deeds, and an Amended and Restated Notice of Lease is recorded in Book 62736, Page 397 of the Middlesex County Registry of Deeds.

Tenant, as Sublandlord, desires to sublease to Subtenant a portion of the Premises located on the Floors L1, L1 Mezzanine, L2, L3, L4 and L5 floors of the 75 Binney Building (the “Subleased Premises”) together with (i) non-exclusive rights to use the Common Areas of the Project and the New Atrium Area, and (ii) exclusive rights to use the portions of the Common Area of the Project designated as portions of B1, B2 and Penthouse (M1) levels of the 75 Binney Building, as more particularly described in and pursuant to the provisions of that certain Sublease dated , 2015 (the “Sublease”), a copy of which is attached hereto as Exhibit A.

F-1

D.	Tenant and Subtenant desire to obtain Landlord’s consent to the Sublease, and to provide for the recognition of the Sublease by Landlord subject to and except as otherwise provided by the terms hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord hereby consents to the sublease of the Subleased Premises to Subtenant, such consent being subject to and upon the following terms and conditions to which Landlord, Tenant and Subtenant all hereby agree:

DEFINED TERMS. ALL INITIALLY CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS CONSENT SHALL HAVE THE MEANINGS SET FORTH IN THE LEASE UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE.

EFFECT; TRUE COPY. THIS CONSENT SHALL NOT BE EFFECTIVE AND THE SUBLEASE SHALL NOT BE VALID NOR SHALL SUBTENANT TAKE POSSESSION OF THE SUBLEASED PREMISES UNLESS AND UNTIL LANDLORD SHALL HAVE RECEIVED: (A) A FULLY EXECUTED COUNTERPART OF THE SUBLEASE, AND (B) A FULLY EXECUTED COUNTERPART OF THIS CONSENT. TENANT AND SUBTENANT EACH REPRESENT AND WARRANT TO LANDLORD THAT THE COPY OF THE SUBLEASE ATTACHED HERETO AS EXHIBIT A IS TRUE, CORRECT AND COMPLETE IN ALL MATERIAL RESPECTS.

SUBORDINATE TO LEASE; TERMS. (A) EXCEPT AS OTHERWISE PROVIDED HEREIN, LANDLORD NEITHER APPROVES NOR DISAPPROVES THE TERMS, CONDITIONS AND AGREEMENTS CONTAINED IN THE SUBLEASE, ALL OF WHICH SHALL BE SUBORDINATE AND AT ALL TIMES SUBJECT TO: (I) ALL OF THE COVENANTS, AGREEMENTS, TERMS, PROVISIONS AND CONDITIONS CONTAINED IN THE LEASE, AND (II) THE SUPERIOR MORTGAGES, DEEDS OF TRUST, OR ANY OTHER HYPOTHECATION OR SECURITY NOW EXISTING OR HEREAFTER PLACED UPON THE REAL PROPERTY OF WHICH THE PREMISES ARE A PART AND TO ANY AND ALL ADVANCES SECURED THEREBY AND TO ALL RENEWALS, MODIFICATIONS, CONSOLIDATIONS, REPLACEMENTS AND EXTENSIONS THEREOF (SUBJECT TO PROVIDING AN SNDA AS PROVIDED IN SECTION 27 OF THE LEASE), AND (III) ALL MATTERS OF RECORD AFFECTING THE PREMISES AND ALL LAWS, ORDINANCES AND REGULATIONS NOW OR HEREAFTER AFFECTING THE PREMISES.

F-2

(b) Notwithstanding the provisions of Section 3(a) above, Landlord specifically consents, and Landlord and Tenant specifically agree to modify the Lease to the extent necessary to confirm and agree as follows:

(i) Ancillary Space; Parking. Subject to the rights of access of Landlord and to the right of access by retail tenants to the grease trap equipment located in the B1Space, Tenant has exclusive right to use of the B1 Space, the B2 Space and the Penthouse and the right to grant exclusive use of portions of such space to Subtenant, and Landlord consents to the exclusive use of the parking area on the B1 Space and to installation by Subtenant of an arm barrier to vehicular access.

(ii) Signage. Landlord consents to Tenant’s installation, at no additional cost to Landlord, of a second monument sign in addition to the monument sign provided for in Section 38 of the Lease.

(iii) Base TI Allowance. Landlord agrees to provide for direct payment from Landlord to Subtenant of the Base TI Allowance (up to $[***]/rsf) in accordance with Section 14 below of this Consent.

(iv) Right to Cure. Both Tenant and Subtenant have the same rights to cure as provided in Section 31(b) of Lease.

(v) Meetings. Landlord consents to Subtenant’s participation in meetings regarding Operating Expenses, retail signage, building systems and security.

(vi) Exclusive Use of B1, B2 and PH. Landlord consents to Subtenant’s exclusive rights to portions of the B1 Space and the bicycle rooms.

(vii) Approved Architect and Contractors. Landlord specifically approves the architects and contractors described in Section 13 below of this Consent.

(viii) ROFO Offered Space. Landlord approves any expansion of or increase in the size of the Subleased Premises to include ROFO Offered Space in accordance with Section 7 of the Sublease, subject to the limitations hereinafter set forth.

(ix) Insurance. Landlord and Sublandlord consent to and agree that (A) delivery of certificates of insurance in lieu of policies are acceptable in accordance with Section 17 of the Lease, (B) elimination of the requirement to include “agents” as an additional insured, (C) approve a policyholder rating of “A-”, (D) approve acceptance of a policy with no hostile fire exclusion rather than a hostile fire endorsement, and (E) approve waiver of a “per location” endorsement.

F-3

(x) Direct Provision of Additional Services. Upon request of either Tenant or Subtenant, Landlord will provide the additional services and provide for direct billing to Subtenant of charges for additional services provided to Subtenant or to the Subleased Premises.

(xi) Notice of Sublease. Landlord agrees to execute a Notice of Sublease with respect to the Sublease in the form set forth in the Lease.

(xii) Fitness Center and Auditorium. Landlord approves the use of a portion of the L1 level of the Subleased Premises for use as an auditorium and/or a fitness center, subject to review of all plans therefor and to all applicable Legal Requirements.

(xiii) Extension Option. Landlord consents to the exercise of the option to extend the term of the Sublease in accordance with and subject to the limitations set forth in Section 5(d)(iii) below of this Consent.

(xiv) Tenant Right of Self-Help. Landlord consents to the deletion of the last sentence of Section 31(b).

NO MODIFICATION; NO WAIVER. EXCEPT AS OTHERWISE PROVIDED HEREIN, NOTHING CONTAINED HEREIN OR IN THE SUBLEASE SHALL BE CONSTRUED:

(a)

to modify, waive, impair, or affect any of the terms, covenants or conditions contained in the Lease (including Tenant’s obligation to obtain any required consents for any other or future sublettings), or to waive any breach thereof, or any rights or remedies of Landlord under the Lease against any person, firm, association or corporation liable for the performance thereof, or to enlarge or increase Landlord’s obligations or liabilities under the Lease , and all terms, covenants and conditions of the Lease are hereby declared by each of Landlord and Tenant to be in full force and effect; or

(b)

to require Landlord to accept any payments from Subtenant on behalf of Tenant, except as expressly provided in Section 5 and Section 7 hereof.

Tenant shall remain liable and responsible for the payment of the annual rent, additional rent and all other sums now and hereafter becoming payable thereunder for all of the Premises, including, without limitation, the Subleased Premises and for the due keeping, performance and observance of all the terms, covenants and conditions set forth in the Lease on the part of the Tenant to be kept, performed and observed.

F-4

ASSUMPTION; TERMINATION OF THE LEASE, ETC. NOTWITHSTANDING ANYTHING IN THE SUBLEASE TO THE CONTRARY:

(a)

Subtenant does hereby expressly assume and agree to be bound by and to perform and comply with, for the benefit of Landlord, each and every obligation of Tenant under the Lease to the extent applicable to the Subleased Premises as expressly set forth in the Sublease, up to the extent of the Rent payable pursuant to the Sublease. Landlord and Subtenant each hereby release the other, and waive their respective rights of recovery against the other for direct or consequential loss or damage arising out of or incident to the perils covered by property insurance carried by such party to the extent of such insurance and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof.

(b)

Landlord, Tenant and Subtenant agree to each of the terms and conditions of this Consent, and upon any conflict between the terms of the Lease or the Sublease and this Consent, the terms of this Consent shall control.

(c)

The Sublease shall be deemed and agreed to be a sublease only, and not an assignment, and there shall be no further subletting or assignment of all or any portion of the Premises demised under the Lease (including the Subleased Premises demised by the Sublease) except in accordance with the terms and conditions of the Lease.

(d)

If Landlord terminates the Lease as a result of a default by Tenant, thereunder, or if the Lease terminates for any other reason (other than as a result of a default of Subtenant under the Sublease), then the Sublease shall automatically and without any further action required by Landlord or by Subtenant become and be deemed to be a direct lease between Landlord and Subtenant upon all of the terms and conditions set forth in the Sublease, except as follows:

(i) Rent Commencement Date. The Rent Commencement Date shall be no later than the date of recognition of the Sublease or the automatic transformation of the Sublease into a direct lease in accordance with Section 5(d) above (except in connection with a voluntary termination of the Lease by Landlord and Tenant, in which case the Rent Commencement Date shall be as set forth in the Sublease) and in no event shall there be any reduction of the term of the Sublease in connection with such adjustment.

F-5

(ii) Administrative Rent. The supervisory charge for Administrative Rent in connection with the Subtenant Improvements payable pursuant to Section 6.1 of the Work Letter, to the extent not already paid by Tenant, shall be paid by Subtenant (except in the case of a voluntary termination of the Lease by Landlord and Tenant, in which case there shall be no such charge for Administrative Rent).

(iii) Extension Option. Landlord recognizes the right of Subtenant to extend the term of the Sublease subject to the conditions set forth in the Sublease, provided however that the Base Rent during the Extended Term, if applicable, shall be payable at the rate set for in the Lease for Tenant’s Premises, ratably allocated to the size of the Subleased Premises, rather than the rate provided for in the Sublease.

(iv) ROFO. Subtenant shall not have any rights of first offer with respect to the 125 Binney Building or any other portion of the Project. With respect to any portion of the Subleased Premises which may have been added to the Subleased Premises pursuant to the Right of First Offer in the Sublease, the Base Rent shall be payable at the rate set forth in the Lease for Tenant’s Premises, ratably allocated to the size of the relevant portion of the Subleased Premises, rather than the rate provided for in the Sublease.

(v) Competitors. The restriction on subleasing portions of the Premises to other subtenants which are “Competitors” of Subtenant shall not be applicable.

Expressly subject to the provisions of this Section 5(d), Landlord shall recognize the Sublease, as modified as set forth above, as a direct lease to Subtenant, and Subtenant shall attorn to Landlord, and Tenant, by its execution of this Consent effective only from and after the termination of the Lease and effectiveness of this section, releases and discharges Subtenant of all of its obligations to Tenant under the Sublease accruing from and after such date. Landlord shall undertake the obligations of Tenant under the Sublease (as modified hereby) from the date of the Lease termination through the expiration or earlier termination of the Sublease, but Landlord shall not in any event (i) be liable for more

F-6

than one (1) month’s rent or for any security deposit paid by Subtenant (except to the extent actually delivered to Landlord), (ii) be liable for any prior act or omission of Tenant under the Lease prior to the date of Lease termination or for any other defaults of Tenant under the Sublease prior to the date of Lease termination, (iii) except to the extent of any unpaid portion of the Base TI Allowance due or payable pursuant to the terms of the Work Letter, and except for any valid rights of offset under Sections 11(d), 18, 19, 31(b) and/or 31(c), be subject to any defenses or offsets previously accrued which Subtenant may have against Tenant for any period prior to the date of Lease termination, or (iv) be bound by any changes or modifications made to the Sublease without the prior written consent of Landlord.

(e)

Tenant agrees to reimburse all of Landlord’s costs and expenses in connection with this Consent.

ACTIONS OF SUBTENANT. ANY ACT OR OMISSION OF SUBTENANT OR ANYONE CLAIMING UNDER OR THROUGH SUBTENANT THAT VIOLATES ANY OF THE PROVISIONS OF THE LEASE SHALL BE DEEMED A VIOLATION OF THE LEASE BY TENANT.

DIRECT ACTION; EXHAUSTION OF REMEDIES. UPON A DEFAULT BY TENANT UNDER THE LEASE, LANDLORD MAY PROCEED DIRECTLY AGAINST TENANT, ANY GUARANTORS OR ANYONE ELSE LIABLE UNDER THE LEASE WITHOUT FIRST EXHAUSTING LANDLORD’S REMEDIES AGAINST ANY OTHER PERSON OR ENTITY LIABLE THEREON TO LANDLORD. IF LANDLORD GIVES SUBTENANT NOTICE THAT TENANT IS IN DEFAULT UNDER THE LEASE, SUBTENANT SHALL THEREAFTER MAKE DIRECTLY TO LANDLORD ALL PAYMENTS OTHERWISE DUE TENANT, WHICH PAYMENTS WILL BE RECEIVED BY LANDLORD WITHOUT ANY LIABILITY TO LANDLORD EXCEPT TO CREDIT SUCH PAYMENTS AGAINST AMOUNTS DUE UNDER THE LEASE AND TENANT EXPRESSLY CONSENTS TO THE SAME. THE MENTION IN THIS CONSENT OF ANY PARTICULAR REMEDY SHALL NOT PRECLUDE LANDLORD FROM ANY OTHER REMEDY IN LAW OR IN EQUITY.

NO BROKERS. TENANT SHALL PAY ANY BROKER COMMISSIONS OR FEES THAT MAY BE PAYABLE AS A RESULT OF THE SUBLEASE AND TENANT HEREBY INDEMNIFIES AND AGREES TO HOLD LANDLORD HARMLESS FROM AND AGAINST ANY LOSS OR LIABILITY ARISING THEREFROM OR FROM ANY OTHER COMMISSIONS OR FEES PAYABLE IN CONNECTION WITH THE SUBLEASE WHICH RESULT FROM THE ACTIONS OF TENANT.

F-7

SUBTENANT HEREBY INDEMNIFIES AND AGREES TO HOLD LANDLORD HARMLESS FROM AND AGAINST ANY LOSS OR LIABILITY ARISING FROM ANY COMMISSIONS OR FEES PAYABLE IN CONNECTION WITH THE SUBLEASE WHICH RESULT FROM THE ACTIONS OF SUBTENANT. SUBTENANT AND TENANT EACH REPRESENT AND WARRANT TO EACH OTHER AND TO LANDLORD THAT THERE ARE NO BROKERS IN CONNECTION WITH THE SUBLEASE OTHER THAN DTZ AND JONES LANG LASALLE BASED UPON ANY ENGAGEMENT OR ACTION BY TENANT OR SUBTENANT. LANDLORD REPRESENTS AND WARRANTS TO TENANT AND SUBTENANT THAT THERE ARE NO BROKERS WHO MAY BE OWED ANY COMMISSION IN CONNECTION WITH THE SUBLEASE BASED UPON ANY ENGAGEMENT OR ACTION BY LANDLORD.

NO MODIFICATION. TENANT AND SUBTENANT AGREE THAT THE SUBLEASE WILL NOT BE MODIFIED OR AMENDED IN ANY WAY WITHOUT THE PRIOR WRITTEN CONSENT OF LANDLORD, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED. TENANT AND SUBTENANT HEREBY AGREE THAT IT SHALL BE REASONABLE FOR LANDLORD TO WITHHOLD ITS CONSENT TO ANY MODIFICATION OR AMENDMENT OF THE SUBLEASE WHICH WOULD CHANGE THE PERMITTED USE OF THE SUBLEASED PREMISES OR WHICH WOULD AFFECT LANDLORD’S STATUS AS A REAL ESTATE INVESTMENT TRUST. ANY MODIFICATION OR AMENDMENT OF THE SUBLEASE WITHOUT LANDLORD’S PRIOR WRITTEN CONSENT SHALL BE VOID AND OF NO FORCE OR EFFECT.

10.

CHANGES IN WRITING. THIS CONSENT MAY NOT BE CHANGED ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY LANDLORD AND THE PARTY AGAINST WHOM ENFORCEMENT OF ANY CHANGE IS SOUGHT.

11.

COUNTERPARTS. THIS CONSENT 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 BUT ONE AND THE SAME INSTRUMENT.

12.

GOVERNING LAW. THIS CONSENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

F-8

13.

APPROVALS RELATING TO SUBLEASE. PURSUANT TO SECTION 3.1 OF THE WORK LETTER, LANDLORD HEREBY APPROVES, FOR PURPOSES OF THE SUBTENANT IMPROVEMENTS (I) [***] AS THE TI ARCHITECT, AND (II) [***], [***] AND [***] AS SUBTENANT’S GENERAL CONTRACTORS (“SUBTENANT’S GENERAL CONTRACTORS”).

14.

DIRECT DISBURSEMENT AUTHORIZATION; BASE TI ALLOWANCE.

(A) SUBJECT TO THE TERMS OF THE WORK LETTER ATTACHED TO THE LEASE AND THE SUBLEASE, UPON WRITTEN AUTHORIZATION BY TENANT, LANDLORD SHALL DISBURSE THE BASE TI ALLOWANCE FOR THE SUBLEASE OF UP TO [***] DOLLARS ($[***]) PER RENTABLE SQUARE FOOT OF THE SUBLEASED PREMISES, OR [***] DOLLARS ($[***]) IN THE AGGREGATE, TO BE USED FOR SUBTENANT’S TI COSTS DIRECTLY TO SUBTENANT OR SUBTENANT’S DESIGNEE FOR TI COSTS ALLOCABLE TO THE SUBLEASED PREMISES. TENANT AGREES THAT ANY SUCH AMOUNT SO AUTHORIZED AND DISBURSED TO SUBTENANT SHALL BE DEEMED AN ADVANCE TO TENANT OF SUCH PORTION OF TENANT’S BASE TI ALLOWANCE UNDER THE LEASE.

(B) LANDLORD AGREES TO ALLOCATE AND TO RESERVE SUCH PORTION OF THE BASE TI ALLOWANCE AVAILABLE TO TENANT IN ACCORDANCE WITH THE TERMS OF THE LEASE IN THE AMOUNT OF UP TO [***] DOLLARS ($[***]) PER RENTABLE SQUARE FOOT OF THE SUBLEASED PREMISES, OR [***] DOLLARS ($[***]) IN THE AGGREGATE, TO BE DISBURSED DIRECTLY TO (OR AT THE DIRECTION OF) SUBTENANT TO BE USED FOR SUBTENANT’S TI COSTS AS PROVIDED ABOVE.

(C) UPON FAILURE TO PROVIDE THE BASE TI ALLOWANCE, EACH OF TENANT AND SUBTENANT SHALL HAVE THE RIGHT (AND NOT THE OBLIGATION) TO OFFSET AS PROVIDED IN SECTION 31(C) OF THE LEASE.

15.

LEASE CONFIRMATION. LANDLORD AND TENANT EACH CONFIRMS THAT (I) THE COMMENCEMENT DATE OF THE LEASE IS MARCH 24, 2015; (II) THE BASE TERM OF THE LEASE EXPIRES ON MARCH 31, 2030; AND (III) THE STATEMENTS SET FORTH IN SECTION 9 OF THE SECOND AMENDMENT AS TO THE FULL FORCE AND EFFECT OF THE LEASE AND ALL OTHER ITEMS SET FORTH THEREIN ARE TRUE AND CORRECT AS OF THE DATE HEREOF.

[Signatures on next page]

F-9

IN WITNESS WHEREOF, Landlord, Tenant and Subtenant have caused their duly authorized representatives to execute this Consent as of the date first above written.


TENANT/SUBLANDLORD:	ARIAD Pharmaceuticals, Inc.,
	a Delaware corporation

	By:
	Its:

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

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

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

			By:
				Name:
				Title:

SUBTENANT:			INTERNATIONAL BUSINESS MACHINES CORPORATION,
			a New York corporation

			By:
			Name:
			Title:

F-10

EXHIBIT A

Copy of Sublease dated 2015 between ARIAD Pharmaceuticals, Inc., a Delaware corporation, as Sublandlord, and INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, as Subtenant

See Attached

F-1

Exhibit 10.2

REVENUE INTEREST ASSIGNMENT AGREEMENT

Dated as of July 28, 2015

between

ARIAD PHARMACEUTICALS, INC.

and

PDL BIOPHARMA, INC.

Table of Contents


ARTICLE I DEFINITIONS			1
Section 1.01 Definitions			1

ARTICLE II PURCHASE OF ASSIGNED INTERESTS			15
Section 2.01 Purchase			15
Section 2.02 Payments by the Company			15
Section 2.03 Closing; Payment of Closing Purchase Price; Closing Deliveries; Payment of Additional Purchase Price			16
Section 2.04 Make Whole Payments			17
Section 2.05 No Assumed Obligations			18

ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY			19
Section 3.01 Organization			19
Section 3.02 Authorization			19
Section 3.03 Governmental Authorization			19
Section 3.04 Ownership			19
Section 3.05 Financial Statements			20
Section 3.06 No Undisclosed Liabilities			21
Section 3.07 Solvency			21
Section 3.08 Litigation			21
Section 3.09 Compliance with Laws			21
Section 3.10 Conflicts			22
Section 3.11 Subordination			22
Section 3.12 Intellectual Property			22
Section 3.13 Regulatory Approval			24
Section 3.14 Material Contracts			25
Section 3.15 Place of Business			25
Section 3.16 Broker’s Fees			25
Section 3.17 Other Information			25
Section 3.18 Taxes			26

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER			26
Section 4.01 Organization			26
Section 4.02 Authorization			26
Section 4.03 Broker’s Fees			26
Section 4.04 Conflicts			27


ARTICLE V COVENANTS			27
Section 5.01 Consents and Waivers			27
Section 5.02 Access; Information			27
Section 5.03 Material Contracts			29
Section 5.04 Confidentiality; Public Announcement			29
Section 5.05 Security Agreement			30
Section 5.06 Efforts; Further Assurance			30
Section 5.07 Put Option; Call Option			31
Section 5.08 [Remittance to Deposit Account]			32
Section 5.09 Intellectual Property			36
Section 5.10 Protective Covenants			36
Section 5.11 Insurance			38
Section 5.12 Notice			38
Section 5.13 Use of Proceeds			38

ARTICLE VI TERMINATION			40
Section 6.01 Termination Date			40
Section 6.02 Effect of Termination			41

ARTICLE VII MISCELLANEOUS			41
Section 7.01 Survival			41
Section 7.02 Specific Performance; Limitations on Damages			41
Section 7.03 Notices			41
Section 7.04 Successors and Assigns			43
Section 7.05 Indemnification			43
Section 7.06 No Implied Representations and Warranties			44
Section 7.07 Independent Nature of Relationship			45
Section 7.08 Tax Treatment			45
Section 7.09 Entire Agreement			46
Section 7.10 Amendments; No Waivers			46
Section 7.11 Interpretation			46
Section 7.12 Headings and Captions			46
Section 7.13 Counterparts; Effectiveness			46
Section 7.14 Severability			47
Section 7.15 Expenses			47
Section 7.16 Governing Law; Jurisdiction			47
Section 7.17 Waiver of Jury Trial			47

EXHIBITS


Exhibit A	–	Form of Security Agreement
Exhibit B	–	Form of Assignment of Interests
Exhibit C		Form of Legal Opinion (Mintz Levin)

REVENUE INTEREST ASSIGNMENT AGREEMENT

This REVENUE INTEREST ASSIGNMENT AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Agreement”) is made and entered into as of July 28, 2015, by and between ARIAD Pharmaceuticals, Inc., a Delaware corporation (“ARIAD” or the “Company”), and PDL BioPharma, Inc., a Delaware corporation (“Purchaser”).

WHEREAS, the Company wishes to obtain financing in respect of the development of its pipeline product Brigatinib and the commercialization of the Product (as hereinafter defined);

WHEREAS, the Company wishes to sell, assign, convey and transfer to Purchaser the Assigned Interests in consideration for its payment of the Purchase Price (as hereinafter defined) to raise such financing;

WHEREAS, the Purchaser wishes to purchase from the Company, the Assigned Interests (as hereinafter defined), all upon and subject to the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants, agreements representations and warranties set forth herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions.

The following terms, as used herein, shall have the following meanings:

“Accounts” shall mean, collectively, the Deposit Account, the Joint Concentration Account, the Company Concentration Account, the Purchaser Concentration Account, and, if applicable, the Brigatinib Divestiture Account, each established and maintained pursuant to the Deposit Agreement.

“Additional Purchase Price” shall mean $50,000,000.

“Additional Product Financing Trigger Event” shall mean the first date on which the Net Revenue for the Product for the immediately preceding four fiscal quarters of the Company and its Subsidiaries, calculated as of the end of any fiscal quarter, exceeds $[***].

“Additional Purchase Price Closing Date” shall have the meaning set forth in Section 2.03(d).

“Affiliate” shall mean any Person that controls, is controlled by, or is under common control with another Person. For purposes of this definition, “control” shall mean (i) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (ii) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.

“Agreement” shall have the meaning set forth in the first paragraph hereof.

“Allowable Additional Product Financing” shall mean, after the occurrence of an Additional Product Financing Trigger Event, (a) any Indebtedness secured by Liens granted on the Shared Assigned Interest Collateral that is incurred by the Company or any Subsidiary of the Company to any Third Party (other than Purchaser) and (b) any sale of Revenue Interests other than the Assigned Interests by the Company or any Subsidiary of the Company to any Third Party not to exceed [***] percent ([***]%) of the total Revenue Interest; provided, however, that (i) in the case of any such Indebtedness, any such Liens must be granted pari passu with, or junior to, but not senior to, the Liens on the Shared Assigned Interests Collateral granted by the Company to the Purchaser pursuant to this Agreement and the Security Agreement, (ii) the terms of any such Indebtedness or sale shall not conflict in any respect with the terms of the Transaction Documents (including, without limitation, Section 5.08(c)), (iii) the sum of the aggregate principal amount of any such Indebtedness and the aggregate amount of any payments on account of the acceleration of all or a substantial portion of payments, mandatory redemption or repurchase, put or sinking fund or similar payment of any such sale (not including payment of the Revenue Interest itself) shall not exceed $[***], (iv) in the case of any such Indebtedness, such Indebtedness has a maturity date that is a date (such date, the “Outside Date”) at least 91 days after the latest of (X) the [***] anniversary of the Closing Date, (Y) the [***] anniversary of the payment of the Additional Purchase Price by Purchaser to the Company and (Z) the [***] anniversary of the payment of the final Second Tranche Purchase Price by Purchaser to the Company (and the terms of such Indebtedness shall not provide for any scheduled repayment, mandatory redemption, put or sinking fund obligations prior to the Outside Date (other than customary offers to, or put right to require, repurchase upon a change of control, asset sale or casualty event and customary acceleration rights after an event of default)), (v) in the case of any such sale, (1) such sale shall not provide for any acceleration of all or a substantial portion of payments, mandatory redemption or repurchase, put or sinking fund or similar payment obligation prior to the Outside Date and (2) the Third Party purchaser in any such sale shall have entered into one or more inter-creditor agreements with respect to its rights in the portion of the Revenue Interests it purchased in form and substance reasonably satisfactory to Purchaser, whose consent shall not be unreasonably withheld or delayed and (vi) after giving effect to all such Allowable Additional Product Financings and any working capital revolving loans and equipment financings described in clause (iii) of the definition of Permitted Secured Financings, at least [***]% of the Revenue Interests shall remain unsold and subject to no Liens other than (1) any Lien or agreements in favor of Purchaser granted under or pursuant to this Agreement and the other Transaction Documents; and (2) liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable.

“Allowable Back-up Product Financing” shall mean the incurrence of any Indebtedness secured by Liens granted on the Net Revenue of the Back-up Product that is incurred by the Company or any Subsidiary of the Company to any Third Party; provided, however, that such Indebtedness has a maturity date that is not earlier than the Outside Date (as defined above in the definition of “Allowable Additional Product Financing”) (and the terms of such Indebtedness shall not provide for any scheduled repayment, mandatory redemption, put or sinking fund obligations prior to the Outside Date (other than customary offers to, or put right to require, repurchase upon a change of control, asset sale or casualty event and customary acceleration rights after an event of default)).

“Applicable Percentage” shall mean, as of any date of determination (i) from the Closing through the Second Drawdown Date, 2.5%, (ii) from the Second Drawdown Date through and including December 31, 2018, 5.0% and (iii) thereafter, 6.5%; provided, however, that Applicable Percentage pursuant to this clause (iii) shall increase to 7.5% if the aggregate Purchase Price paid by the Purchaser exceeds $150,000,000.

“Assigned Interests” shall mean Purchaser’s right to receive amounts equal to the product of the Applicable Percentage multiplied by the worldwide Net Revenues of the Product during the Revenue Interest Period, subject to the Yearly Payment Cap, pursuant to the terms and conditions of this Agreement.

“Assigned Interests Collateral” shall mean the property included in the definition of “Collateral” in the Security Agreement.

“Assignment of Interests” shall mean the Assignment of Interests pursuant to which the Company shall assign to Purchaser all of its rights and interests in and to the Assigned Interests purchased hereunder, which Assignment of Interests shall be substantially in the form of Exhibit B.

“Audit Costs” shall mean, with respect to any audit of the books and records of the Company or its Subsidiaries with respect to amounts payable or paid under this Agreement, the reasonable out-of-pocket cost of such audit, including all fees, costs and expenses incurred in connection therewith.

“Back-up Product” shall mean Brigatinib.

“Back-up Product True-Up Amount” shall have the meaning set forth in Section 5.08(f)(iv).

“Back-up Product True-Up Cap” shall have the meaning set forth in Section 5.08(f)(v).

“Bankruptcy Event” shall mean the occurrence of any of the following:

(a) the Company shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, relief of debtors or the like, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any portion of its assets, or the Company shall make a general assignment for the benefit of its creditors;

(b) there shall be commenced against the Company any case, proceeding or other action of a nature referred to in clause (a) above which remains un-dismissed, undischarged or un-bonded for a period of sixty (60) days;

(c) there shall be commenced against the Company any case, proceeding or other action seeking issuance of a warrant of attachment, execution, restraint or similar process against (i) all or a substantial portion of its assets and/or (ii) the Product or a substantial portion of the Intellectual Property related to the Product, which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed, satisfied or bonded pending appeal within sixty (60) days from the entry thereof;

(d) the failure of the Company to take action to object to any of the acts set forth in clause (b) or (c) above within ten (10) days of the Company receiving written notice of such act;

(e) the Company shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its respective debts as they become due; or

(f) an affirmative vote by the Board to commence any case, proceeding or other action described in clause (a) above.

“Board” shall mean the Board of Directors of the Company.

“Brigatinib” means the compound currently known as brigatinib, also known as AP26113, which is an inhibitor of anaplastic lymphoma kinase and is currently under investigation as a potential treatment for non-small cell lung cancer, regardless of the drug formulation or dosage form that is made with brigatinib and regardless of the indication or purpose for which the drug incorporating brigatinib is ultimately marketed or sold.

“Brigatinib Divestiture Account” shall have the meaning set forth in Section 5.17.

“Brigatinib Divestiture Collateral Amount” shall have the meaning set forth in Section 5.17.

“Brigatinib Divestiture Event” shall have the meaning set forth in Section 5.17.

“Business Day” shall mean any day other than a Saturday, a Sunday, any day which is a legal holiday under the laws of the State of New York, or any day on which banking institutions located in the State of New York are required by law or other governmental action to close.

“Call Closing Date” shall have the meaning set forth in Section 5.07(b).

“Call Option” shall have the meaning set forth in Section 5.07(b).

“Change of Control” shall mean:

(a) the acquisition by any Person or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of any capital stock of the Company, if after such acquisition, such Person or group would be the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors;

(b) a merger or consolidation of the Company, with any other Person, other than a merger or consolidation which would result in the Company’s voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the Company’s voting securities or such surviving entity’s voting securities outstanding immediately after such merger or consolidation; or

(c) the bona fide sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any of its Subsidiaries of all or substantially all the assets of the Company and its Subsidiaries, taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more Subsidiaries of the Company if substantially all of the assets of the Company and its Subsidiaries, taken as a whole, are held by such Subsidiary or Subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned (direct or indirect) Subsidiary of the Company.

“Closing” shall have the meaning set forth in Section 2.03(a).

“Closing Date” shall have the meaning set forth in Section 2.03(a).

“Closing Purchase Price” shall mean $50,000,000.

“Company” shall have the meaning set forth in the first paragraph hereof.

“Company Concentration Account” shall mean a segregated account established and maintained at the Deposit Bank pursuant to the terms of the Deposit Agreement and this Agreement. The Company Concentration Account shall be the account into which the funds remaining in the Joint Concentration Account after payment therefrom of the amounts payable to Purchaser pursuant to this Agreement are swept in accordance with the terms of this Agreement and the Deposit Agreement.

“Company Indemnified Party” shall have the meaning set forth in Section 7.05(b).

“Confidential Information” shall mean, as it relates to the Company and its Affiliates and the Product, the Intellectual Property, confidential business information, financial data and other like information (including ideas, research and development, know-how, formulas, schematics, compositions, technical data, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), client lists and tangible or intangible proprietary information or material, or such other information that either party identifies to the other as confidential or the nature of which or the circumstances of the disclosure of which would reasonably indicate that such information is confidential. Notwithstanding the foregoing definition, Confidential Information shall not include information that (a) is already in the public domain at the time the information is disclosed, (b) thereafter becomes lawfully obtainable from other sources who, to the knowledge of the recipient, have no obligation of confidentiality, (c) can be shown to have been independently developed by the recipient or its representatives without reference to any Confidential Information of the other party, or (d) is required to be disclosed under laws, rules

and regulations of any Governmental Authority applicable to the Company or its Affiliates or the Purchaser or its Affiliates, as the case may be, or pursuant to the rules and regulations of any securities exchange or trading system or pursuant to any other laws, rules or regulations of any Governmental Authority having jurisdiction over the Company and its Affiliates or Purchaser and its Affiliates.

“Daily Amount” shall have the meaning set forth in Section 2.02(b).

“Delinquent Assigned Interests Payment” shall mean, with respect to any Assigned Interests payment and, if owed by the Company to Purchaser, any payment due under Section 5.08(f)(iii) that is not paid when due, an amount equal to the product of the amount so owed multiplied by the lower of (i) the highest rate permitted by applicable law, and (ii) [***] percent ([***]%) per year, compounded annually; provided, however, if Purchaser has Knowledge of a delinquent payment and fails to give notice to the Company of such delinquency, then no interest shall accrue in respect of such delinquent payment until notice is given to the Company or the Company otherwise becomes of aware of such delinquency.

“Deposit Account” shall mean collectively, any deposit and segregated deposit account established and maintained at the Deposit Bank pursuant to a Deposit Agreement and this Agreement. The Deposit Account shall be the account into which all payments made to the Company in respect of the sale of the Product are to be remitted, regardless of whether or not any Allowable Additional Product Financings have been entered into by the Company or any Subsidiary.

“Deposit Agreement” shall mean the agreement to be entered into by a Deposit Bank, ARIAD and Purchaser in accordance with Section 5.08, pursuant to which, among other things, the Deposit Account, the Joint Concentration Account, the Purchaser Concentration Account, the Company Concentration Account and, upon the occurrence of a Brigatinib Divestiture Event, the Brigatinib Divestiture Account shall be established and maintained.

“Deposit Bank” shall mean the bank or financial institution approved by each of Purchaser and the Company in accordance with Section 5.08 that is a party to any Deposit Agreement.

“Dispute” shall have the meaning set forth in Section 3.12(e).

“European Subsidiaries” shall mean ARIAD Pharmaceuticals (Luxembourg) S.a.r.l, ARIAD Pharmaceuticals (Europe) S.a.r.l, ARIAD Pharmaceuticals (Denmark) ApS, ARIAD Pharmaceuticals (Finland) Oy, ARIAD Pharmaceuticals (Germany) GmbH, ARIAD Pharmaceuticals (Benelux) B.V., ARIAD Pharmaceuticals (Spain) S.L.U., ARIAD Pharma (UK) Ltd., ARIAD Pharmaceuticals (Austria) GmbH, ARIAD Pharmaceuticals (France), ARIAD Pharmaceuticals (Italy) S.R.L., ARIAD Pharmaceuticals (Norway) AS, ARIAD Pharma S.A. (Greece), and ARIAD Pharmaceuticals (Nordic) AB.

“Excluded Liabilities and Obligations” shall have the meaning set forth in Section 2.05.

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

“Financial Statements” shall mean (a) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2014, and December 31, 2013, and the related audited consolidated statements of operations, cash flows and shareholders’ equity for the Fiscal Years then ended and (b) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of March 31, 2015, and the related unaudited consolidated statements of operations, cash flows and shareholders’ equity for the three (3) month period then ended.

“Fiscal Quarter” shall mean each three (3) month period commencing January 1, April 1, July 1 or October 1, provided however that (a) the first Fiscal Quarter of the Term shall extend from the Closing Date to the end of the first full Fiscal Quarter thereafter, and (b) the last Fiscal Quarter of the Term shall end upon the expiration or termination of this Agreement.

“Fiscal Year” shall mean the calendar year.

“GAAP” shall mean generally accepted accounting principles in the United States in effect from time to time.

“Governmental Authority” shall mean any government, court, regulatory or administrative agency or commission, or other governmental authority, agency or instrumentality, whether foreign, federal, state or local (domestic or foreign), including the United States Patent and Trademark Office, the FDA, or the United States National Institutes of Health.

“Gross Product Revenues” means, for any period of determination during the Revenue Interest Period, the amount equal to the sum of the following for such period: (a) the amounts invoiced and recognized as revenue in accordance with GAAP by the Company or its Affiliates with respect to the sale by the Company or its Affiliates of Product to a Third Party (including distributors), (b) to the extent not covered by (a) above, any amounts invoiced and recognized as revenue in accordance with GAAP by the Company or its Affiliates from a Third Party solely with respect to the sale, distribution or other use of the Product by such Third Party (including any royalties received by the Company, but excluding (i) [***], (ii) [***] or (iii) [***]), and (c) any collections in respect of write-offs or allowances for bad debts in respect of items described in the preceding clauses (a) and (b); provided, however, that with respect to the use of this definition in the definition of “Quarterly Report” and Section 5.02(f) only, “Gross Product Revenue” shall include revenue with respect to the sale of both the Product and, when and as relevant, the Back-up Product.

“Gross Back-up Product Revenues” shall have the same meaning as “Gross Product Revenues” except shall be determined with respect to the Back-up Product.

“Gross Product Revenues of the Company” shall mean Gross Product Revenues that are owned, invoiced, and recognized as revenue in accordance with GAAP by the Company and its Subsidiaries (other than the European Subsidiaries), which correspond to the Revenue Interest (excluding the European Subsidiaries).

“Indebtedness” shall mean all indebtedness for borrowed money and all obligations issued, undertaken or assumed as the deferred purchase price of property or services.

“Intellectual Property” shall mean all proprietary information; technical data; laboratory notebooks; clinical data; priority rights; trade secrets; know-how; confidential information; inventions (whether patentable or unpatentable and whether or not reduced to practice or claimed in a pending patent application); Patents; registered or unregistered trademarks, trade names, service marks, including all goodwill associated therewith; registered and unregistered copyrights and all applications thereof; in each case that are owned, controlled by, generated by, issued to, licensed to, licensed by or hereafter acquired by or licensed by the Company or its Subsidiaries, in each case solely relating to the manufacture and sale of the Product.

“IRR” shall mean the internal rate of return calculated on a quarterly basis utilizing the same methodology utilized by the XIRR function in Microsoft Excel.

“Joint Concentration Account” shall mean a segregated account, subject to a control agreement in favor of Purchaser, which shall only be exercisable by Purchaser during the occurrence and continuation of the Security Agreement Remedies Period (as defined in the Security Agreement), established for the benefit of the Company and Purchaser and maintained at the Deposit Bank pursuant to the terms of the Deposit Agreement and this Agreement. The Joint Concentration Account shall be the account into which the Deposit Bank sweeps the funds held in the Deposit Account.

“Knowledge of the Company” shall mean the [***].

“Knowledge of Purchaser” shall mean the actual knowledge of Purchaser’s [***] relating to a particular matter.

“License Agreement” shall mean any existing or future license, commercialization, co-promotion, collaboration, distribution, marketing or partnering agreement entered into before or during the Revenue Interest Period by the Company or any of its Affiliates that grants a license to a Third Party under the Intellectual Property covering the Product.

“Licensees” shall mean, collectively, the licensees and any sublicensees under the License Agreements; each a “Licensee”.

“Liens” shall mean all liens, encumbrances, security interests, mortgages, rights to preferential payments or charges of any kind, but excluding any License Agreements.

“Losses” shall mean collectively, any and all claims, damages, losses, judgments, awards, penalties, liabilities, costs and expenses (including reasonable expenses and reasonable attorneys’ fees) incurred in connection with defending any action, suit or proceeding.

“Major Countries” shall mean the United States, Germany, France, Great Britain, Spain, Italy and Japan.

“Make Whole Payment” shall have the meaning set forth in Section 2.04.

“Material Adverse Change” shall mean, with respect to the Company and its Subsidiaries, any event, change, circumstance, occurrence, effect or state of facts that has caused or is reasonably likely to cause a material adverse change in the business, operations, assets or financial condition of the Company and its Subsidiaries, taken as a whole.

“Material Adverse Effect” shall mean (a) the effect of a Material Adverse Change, (b) a material adverse effect on the validity or enforceability of any of the Transaction Documents, (c) material adverse effect on the ability of the Company to perform any of its material obligations under the Transaction Documents, (d) the inability or failure of the Company to make payment of the Assigned Interests in violation of this Agreement, (e) any material adverse effect on the Product or the ability of the Company and its Subsidiaries to distribute, market and/or sell the Product or (f) any material adverse effect on the Revenue Interests.

“Material Contract” shall mean: (a) any marketing agreement, co-promotion agreement or partnering agreement related to the manufacture, sale or distribution of the Product in any of the Major Countries; or (b) any agreement relating to any material Patent, including any license, assignment, or agreement related to control of such material Patent, in each case, for which breach, non-performance or failure to renew by the Company or its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

“Material Patents” means U.S. Patent Nos. [***]; [***] and [***]; EPO Patent Nos. [***] and EPO Application No. [***].

“Net Back-up Product Revenues” shall have the same meaning as “Net Revenues” except shall be determined with respect to the Back-up Product.

“Net Revenues” shall mean, for any period of determination, the amount equal to the difference of

(a)

Gross Product Revenues for such period, less

(b)

The sum, with respect to the items described in clauses (a) and (b) of the definition of Gross Product Revenues, of

(i)

[***];

(ii)

[***],

(iii)

[***],

(iv)

[***],

(v)

[***],

(vi)

[***], and

(vii)

[***].

Net Revenues shall be determined in accordance with GAAP as applied by the Company during the Term; provided that if there is any change in GAAP or its application by the Company during the Term that would reasonably be expected to result in an adverse effect on the Assigned Interests, the Company and Purchaser shall negotiate in good faith to make such adjustments as may be reasonably necessary to compensate PDL based on how such Net Revenues would have been calculated using GAAP as applied by the Company on the date of this Agreement. In calculating Net Revenues, any transfer from the Company to an Affiliate shall be disregarded and the calculation shall instead be based on the first transfer to a Third Party.

“Net Revenues of the Company” shall mean the Net Revenues of the Product that are invoiced and recognized as revenue in accordance with GAAP by the Company and its Subsidiaries (other than the European Subsidiaries) and shall be calculated based on Gross Product Revenues of the Company and its Subsidiaries (other than the European Subsidiaries).

“Obligations” shall mean any and all obligations of the Company under the Transaction Documents.

“Officer’s Certificate” shall mean the duly executed Officer’s Certificate, dated as of the Closing Date, in form and substance reasonably satisfactory to Purchaser, (W) attaching certified copies of the Company’s organizational documents (together with any and all amendments thereto); (X) attaching certified copies of the resolutions adopted by the Board authorizing and approving the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents and the transactions contemplated herein and therein; (Y) setting forth the incumbency of the officer or officers of the Company who have executed and delivered the Agreement and the Assignment of Interests; and (Z) attaching copies, certified by such officer as true and complete, of a certificate of the appropriate Governmental Authority of the Company’s jurisdiction of formation, stating that the Company is in good standing under the laws of the State of Delaware.

“Outside Date” shall have the meaning set forth in the definition of “Allowable Additional Product Financing”.

“Patents” shall mean all patents, patent rights, patent applications, patent disclosures and invention disclosures issued or filed, together with all reissues, divisions, continuations, revisions, term extensions, substitutes, supplementary protection certificates and reexaminations, including the inventions claimed in any of the foregoing and any priority rights arising therefrom, covering or related to the manufacture, use and sale of the Product that are issued or filed as of the date hereof or during the Term, including, without limitation, those identified in Schedule 3.12(a) in each case, which are owned by the Company, its Subsidiaries or any of its Affiliates.

“Permitted Liens” shall mean (i) Liens created in favor of Purchaser on or after the Closing pursuant to the Security Agreement, the Assignment of Interests, and any other Transaction Document; (ii) liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable, and (iii) any other Liens permitted pursuant to any Permitted Secured Financing.

“Permitted Secured Financings” shall mean, as of any date of determination, (i) the Allowable Additional Product Financing, (ii) the Allowable Back-up Product Financing, (iii) working capital revolving loans and equipment financings secured by the Shared Assigned Interests Collateral in an aggregate principal amount not to exceed $[***]; and (iv) secured financings that are not secured by the Product or Back-up Product or any of the assets or collateral included in the Shared Assigned Interest Collateral; provided that with respect to any of the foregoing set forth in item (i) above that are secured by a security interest in the Shared Assigned Interests Collateral, Purchaser and all other providers (or any designated agent thereof) of any such Permitted Secured Financing shall have entered into one or more inter-creditor agreements with respect to the Shared Assigned Interests Collateral in form and substance reasonably satisfactory to Purchaser, whose consent shall not be unreasonably withheld or delayed; and provided, further, that with respect to any of the foregoing set forth in item (iv) above, such Indebtedness has a maturity date that is not earlier than the Outside Date (and the terms of such Indebtedness shall not provide for any scheduled repayment, mandatory redemption, put or sinking fund obligations prior to the Outside Date (other than customary offers to, or put right to require, repurchase upon a change of control, asset sale or casualty event and customary acceleration rights after an event of default)).

“Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, but not including a government or political subdivision or any agency or instrumentality of such government or political subdivision.

“Prior Fiscal Quarter” shall mean the most recent prior Fiscal Quarter for which the Net Revenues of the Product were calculated and reported in a True-Up Statement in accordance with this Agreement.

“Product” shall mean the product currently known as Iclusig, also known as ponatinib hydrochloride, the chemical name for which is 3-(imidazo[1,2-b]pyridazin-3ylethynyl)-4-methyl-N-{4-[(4-methylpiperazin-1-yl)methyl]-3-(trifluoromethyl)phenyl}benzamide hydrochloride having molecular formula C₂₉H₂₈ClF₃N₆O and marketed and sold by the Company, regardless of the formulation or dosage form of such product and regardless of the indication or purpose for which such product is marketed or sold, and any and all future drug formulations and dosage forms incorporating ponatinib hydrochloride that are developed or licensed by the Company or its Subsidiaries.

“Projected Net Product Revenues” shall mean the projected annual Net Revenues of the Product as listed on Schedule A hereto.

“Purchase Price” shall mean the Closing Purchase Price, the Additional Purchase Price and any Second Tranche Purchase Price.

“Purchaser” shall have the meaning set forth in the first paragraph hereof.

“Purchaser Concentration Account” shall mean a segregated account established for the benefit of Purchaser and maintained at a bank specified in writing by Purchaser pursuant to the terms of the Deposit Agreement and this Agreement. The Purchaser Concentration Account shall be the account into which the funds held in the Joint Concentration Account which are payable to Purchaser pursuant to this Agreement are swept by the Deposit Bank in accordance with the terms of this Agreement and the Deposit Agreement.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 7.05(a).

“Put Option” shall have the meaning set forth in Section 5.07(a).

“Put Option Closing Date” shall have the meaning set forth in Section 5.07(a).

“Put Option Event” shall mean any one of the following events:

(a) any Bankruptcy Event;

(b) any Change of Control of the Company;

(c) any Transfer to a Third Party by the Company or its Subsidiaries of its interest in the Revenue Interests or all or substantially all of its interest in the Product, in each case that results in a reduction of the amount of the Assigned Interests other than in connection with a Permitted Secured Financing or a License Agreement; or

(d) any failure by the Company to pay any amounts due and owing from the Company to Purchaser under this Agreement within [***] ([***]) days of receipt of written notice from Purchaser of the failure by the Company to make payment of any such amounts, unless such amounts have been validly disputed (and remain in dispute) in the good faith determination of the Company and the Company has delivered written notice to Purchaser within such [***] period detailing such amounts in dispute.

“Put/Call Price” shall mean, as of any date of determination, the greater of (i) (X) an amount that, when paid to Purchaser, would generate an IRR to Purchaser of 10.0% after taking into account the amount and timing of all payments made by Purchaser to the Company pursuant to this Agreement as of the date of payment of the Put/Call Price, and taking into account the amount and timing of all payments made by the Company to Purchaser (and retained by Purchaser) pursuant to this Agreement plus (Y) any Delinquent Assigned Interest Payment owed; and (ii) the multiple of all payments made by Purchaser to the Company as of the date of determination pursuant to this Agreement as set forth below with respect to the period in which such date falls, less the amount of payments already received by Purchaser from the Company pursuant to this Agreement as of such date of determination (excluding any amounts attributable to Delinquent Assigned Interest Payments.)


Period		Multiple
On or prior to the first anniversary of the Closing Date		1.15x

After the first anniversary of the Closing Date through and including the second anniversary of the Closing Date		1.20x

After the second anniversary of the Closing Date and thereafter		1.30x

“Quarterly Report” shall mean, with respect to the relevant Fiscal Quarter of the Company, (a) a report showing Gross Product Revenues for both the Product and the Back-Up Product for such quarter and the adjustments and other reconciliations used to arrive at Net Revenues for such quarter, reconciled, in each case, to the most applicable line item in the Company’s consolidated statements of operations as most recently filed or to be filed with the Securities and Exchange Commission or furnished to Purchaser pursuant to Section 5.02(f) and (b) a reconciliation of all payments made by the Company to Purchaser pursuant to this Agreement during such quarter, including all amounts deposited into the Purchaser Concentration Account during such quarter.

“Regulatory Agency” shall mean a Governmental Authority with responsibility for the approval of the marketing and sale of pharmaceuticals or other regulation of pharmaceuticals in any Major Country.

“Regulatory Approval” shall mean all approvals (including, without limitation, where applicable, pricing and reimbursement approval and schedule classifications), product and/or establishment licenses, registrations or authorizations of any Governmental Authority necessary for the manufacture, use, storage, import, export, transport, offer for sale, or sale of the Product in a Major Country.

“Revenue Interest Period” shall mean the period from and including the Closing Date through and including December 31, 2033, unless earlier terminated upon (i) Purchaser’s exercise of the Put Option in accordance with Section 5.07(a) or the Company’s exercise of the Call Option in accordance with Section 5.07(b), in each case upon the payment of the Put/Call Price, or (ii) Company’s termination pursuant to Section 6.01.

“Revenue Interests” shall mean all of the interest of the Company and its Subsidiaries in the Gross Product Revenues.

“Second Drawdown Date” shall mean the one-year anniversary of the date hereof.

“Second Tranche Purchase Price” shall have the meaning set forth in Section 2.03(e).

“Second Tranche Purchase Price Closing Date” shall have the meaning set forth in Section 2.03(e).

“Security Agreement” shall mean the Security Agreement between the Company and Purchaser providing for, among other things, the grant by the Company in favor of Purchaser of a valid continuing, perfected lien on and security interest in, the Assigned Interests and the other Assigned Interests Collateral described therein, which Security Agreement shall be substantially in the form of Exhibit A.

“Shared Assigned Interests Collateral” shall mean the Assigned Interests Collateral in which Purchaser and, as applicable, the purchaser or provider of any Permitted Secured Financing has been granted a Lien. For the avoidance of doubt, the Shared Assigned Interests Collateral shall not include the Assigned Interests.

“Subsidiary” shall mean, with respect to any Person, any other Person controlled by such first Person, directly or indirectly, through one or more intermediaries.

“Sweep Percentage” shall mean (i) for the period from the Closing Date through the date of the delivery by the Company to the Purchaser of the first True-Up Statement, [***]%, and (ii) for any given Fiscal Quarter thereafter, the percentage equal to (i) the Applicable Percentage multiplied by worldwide Net Revenues of the Product for the Prior Fiscal Quarter, divided by (ii) the Net Revenues of the Company with respect to the Product for the Prior Fiscal Quarter. The Sweep Percentage shall be calculated on a quarterly basis and shall be set forth in the True-Up Statement for each Fiscal Quarter.

“Tax” or “Taxes” shall mean any federal, state, local or foreign tax, levy, impost, duty, assessment, fee, deduction or withholding or other charge, including all excise, sales, use, value added, transfer, stamp, documentary, filing, recordation and other fees imposed by any taxing authority (and interest, fines, penalties and additions related thereto).

“Tax Return” shall mean any report, return, form (including elections, declarations, statements, amendments, claims for refund, schedules, information returns or attachments thereto) or other information supplied or required to be supplied to a Governmental Authority with respect to Taxes.

“Term” shall have the meaning set forth in Section 6.01.

“Term Sheet” shall mean the Term Sheet discussed between the Company and Purchaser, on or around June 12, 2015.

“Third Party” shall mean any Person other than the Purchaser or the Company and its Subsidiaries.

“Transaction Documents” shall mean, collectively, this Agreement, the Assignment of Interests, the Security Agreement, the Deposit Agreement, and the Officer’s Certificate.

“Transfer” shall mean any sale, conveyance, assignment, disposition, pledge, hypothecation or transfer.

“True-Up Statement” shall have the meaning set forth in Section 5.08(f)(i).

“UCC” shall mean the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

“UCC Financing Statements” shall mean the UCC-1 financing statements, in form and substance reasonably satisfactory to Purchaser, that shall be filed by Purchaser, with the assistance of the Company as reasonably requested by the Purchaser, at or promptly following the Closing, as well as any additional UCC-1 financing statements or amendments thereto as reasonably requested from time to time, to perfect Purchaser’s security interest in the Assigned Interests Collateral.

“United States” shall mean the United States of America.

“Year-to-Date Applicable Net Revenues” shall have the meaning set forth in Section 5.08(f)(i).

“Yearly Payment Cap” shall have the meaning set forth in Section 2.02(a).

ARTICLE II

PURCHASE OF ASSIGNED INTERESTS

Section 2.01 Purchase.

(a) Upon the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell, assign, transfer and convey to Purchaser, and Purchaser agrees to purchase from the Company, free and clear of all Liens (except Permitted Liens), all of the Company’s rights and interests in and to the Assigned Interests on the Closing Date. Purchaser’s ownership interest in the Assigned Interests so acquired shall vest immediately upon the Company’s receipt of payment of the Closing Purchase Price for such Assigned Interests pursuant to Section 2.03(b), subject to the termination provisions of Section 6.01.

(b) The Company hereby consents to Purchaser recording and filing, at Purchaser’s sole responsibility, cost and expense, the UCC Financing Statements and other financing statements in the appropriate filing offices under the UCC (and continuation statements with respect to such financing statements when applicable) meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary or appropriate to perfect the purchase by Purchaser of the Assigned Interests.

Section 2.02 Payments by the Company.

(a) Payments in Respect of the Applicable Percentage of Net Revenues. In connection with the assignment of the Assigned Interests, Purchaser shall be entitled to receive (i) the Applicable Percentage of worldwide Net Revenues of the Product earned during the Revenue Interest Period; provided however, that the yearly amount required to be paid to Purchaser pursuant to this Section 2.02(a)(i) and Section 2.02(a)(ii) below shall not exceed $20,000,000 in any Fiscal Year for the years ended December 31, 2015, December 31, 2016, December 31, 2017 and December 31, 2018 (in each case, the “Yearly Payment Cap”); (ii)

payments in respect of the Back-up Product True-Up Amount as provided in Section 5.08(f) (subject to the Yearly Payment Cap); and (iii) without giving effect to any Yearly Payment Cap, any Delinquent Assigned Interests Payment, as and when due. Except with respect to any Delinquent Assigned Interests Payment, any amounts in excess of the Yearly Payment Cap shall be retained by the Company and shall not be part of the Assigned Interest for that year or any prior or subsequent year(s).

(b) Payments into Deposit Accounts. Commencing on the effective date of the Deposit Agreement, the applicable Sweep Percentage of the cash and cash equivalents deposited into the Deposit Account (subject to the Yearly Payment Cap) shall be swept from the Joint Concentration Account into the Purchaser Concentration Account on a daily basis (the “Daily Amount”) pursuant to Section 5.08. Prior to the establishment of the Deposit Account and Purchaser Concentration Account as contemplated by Section 5.08(a), the Company shall promptly pay to Purchaser upon demand the aggregate Daily Amount.

(c) Payment Procedure. All payments required to be made by the Company under this Agreement (including pursuant to this Section 2.02) shall be the obligations of the Company; provided, however, that the Company will use its best efforts to obtain payment from its Subsidiaries to the extent necessary for the Company to satisfy all of its monetary Obligations hereunder. Other than payments made pursuant to the Deposit Agreement, any payments to be made by the Company to Purchaser hereunder or under any other Transaction Document shall be made by wire transfer of immediately available funds.

Section 2.03 Closing; Payment of Closing Purchase Price; Closing Deliveries; Payment of Additional Purchase Price.

(a) Closing. The closing of the purchase of the Assigned Interests pursuant to this Agreement (the “Closing”) will take place concurrently with the execution of this Agreement on the date hereof (the “Closing Date”) and will be held at the offices of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC, The Chrysler Center, 666 Third Avenue, New York, NY 10017.

(b) Payment of Closing Purchase Price. At the Closing, Purchaser shall pay to the Company the Closing Purchase Price by wire transfer of immediately available funds to the account designated by the Company prior to the date hereof.

(i) At the Closing, the Company will deliver to Purchaser:

A. Its duly executed counterpart to each of this Agreement, the Assignment of Interests, and the Security Agreement;

B. a duly executed Officer’s Certificate, dated as of the Closing Date; and

C. a legal opinion, including certain customary qualifications, exceptions, limitations and assumptions, reasonably satisfactory to Purchaser from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC addressing such matters with respect to the Transaction Documents as set forth on Exhibit C hereto.

(ii) At the Closing, the Purchaser will deliver to the Company:

A. Payment of the Purchase Price consistent with Section 2.03(b); and

B. Its duly executed counterpart to each of this Agreement, the Assignment of Interests, and the Security Agreement.

(d) Payment of Additional Purchase Price. On the twelve-month anniversary of the Closing Date (or the first Business Day following such date if such date is not a Business Day) (the “Additional Purchase Price Closing Date”), Purchaser shall pay to the Company the Additional Purchase Price by wire transfer of immediately available funds to the account designated by the Company prior to the date thereof. Such additional purchase price payment shall have no contingencies. The failure by Purchaser to pay the Additional Purchase Price when due in accordance with this Section 2.03(d) shall constitute a material breach of this Agreement and shall give rise to the immediate right of the Company to terminate this Agreement in accordance with Section 6.01.

(e) Payment of Second Tranche Purchase Price. At any time from the six month anniversary to the twelve-month anniversary of the Closing Date (or the first Business Day following such date if such date is not a Business Day), at the election of the Company, Purchaser shall pay to the Company up to $100,000,000 in the aggregate (the “Second Tranche Purchase Price”) in no more than two payments (the first of such payments, the “Initial Second Tranche Payment,” and the last of such payments, the “Final Second Tranche Payment”) on dates specified by the Company within such period (with the first such payment date, the “Initial Second Tranche Closing Date,” the second such payment date, the “Final Second Tranche Closing Date” and either such date, a “Second Tranche Purchase Price Closing Date”) by wire transfer of immediately available funds to the account designated by the Company prior to the date thereof; provided, the Company shall provide a written request to Purchaser for any such payment of the Second Tranche Purchase Price at least 30 days prior to any Second Tranche Purchase Price Closing Date. Any such payment of the Second Tranche Purchase Price shall have no contingencies. The failure by Purchaser to pay Second Tranche Purchase Price when due in accordance with this Section 2.03(e) shall constitute a material breach of this Agreement and shall give rise to the immediate right of the Company to terminate this Agreement in accordance with Section 6.01.

Section 2.04 Make Whole Payments.

Notwithstanding any provision in this Agreement or any other writing to the contrary, in the event the Purchaser has not received (i) payments pursuant to this Agreement (excluding any payments attributable to Delinquent Assigned Interest Payments) equal to or greater than the Closing Purchase Price by the fifth anniversary of the Closing Date, (ii) if the Initial Second Tranche Closing Date occurred prior to the Additional Purchase Price Closing Date, payments pursuant to this Agreement (excluding any payments attributable to Delinquent Assigned Interest

Payments) equal to or greater than the Closing Purchase Price plus the Initial Second Tranche Payment by the fifth anniversary of the Initial Second Tranche Closing Date, (iii) if the Final Second Tranche Closing Date occurred prior to the Additional Purchase Price Closing Date, payments pursuant to this Agreement (excluding any payments attributable to Delinquent Assigned Interest Payments) equal to or greater than the Closing Purchase Price, plus the Initial Second Tranche Payment, plus the Final Second Tranche Payment by the fifth anniversary of the Final Second Tranche Closing Date, or (iv) payments pursuant to this Agreement (excluding any payments attributable to Delinquent Assigned Interest Payments) equal to or greater than the Closing Purchase Price, plus the Initial Second Tranche Payment (if any), plus the Final Second Tranche Payment (if any), plus the Additional Purchase Price by the fifth anniversary of the Additional Purchase Price Closing Date, the Company shall pay, (A) in the case of item (i), the difference between (X) the Closing Purchase Price, less (Y) the aggregate amount of all proceeds Purchaser has received pursuant to this Agreement (excluding any amounts attributable to Delinquent Assigned Interest Payments) on or prior to the last day of the fifth anniversary of the Closing Date in payments from the Company under Section 2.02(a) and Section 5.08 in respect of such five year period for which Net Revenues is calculated, (B) in the case of item (ii), the difference between (X) the Closing Purchase Price plus the Initial Second Tranche Payment, less (Y) the aggregate amount of all proceeds Purchaser has received pursuant to this Agreement (excluding any amounts attributable to Delinquent Assigned Interest Payments) on or prior to the last day of the fifth anniversary of the Initial Second Tranche Closing Date in payments from the Company under Section 2.02(a), Section 2.04(A) and Section 5.08, (C) in the case of item (iii), the difference between (X) the Closing Purchase Price plus the Initial Second Tranche Payment plus the Final Second Tranche Payment, less (Y) the aggregate amount of all proceeds Purchaser has received pursuant to this Agreement (excluding any amounts attributable to Delinquent Assigned Interest Payments) on or prior to the last day of the fifth anniversary of the Final Second Tranche Closing Date in payments from the Company under Section 2.02(a), Section 2.04(A), Section 2.04(B) and Section 5.08, and (D) in the case of item (iv), the difference between (X) the Closing Purchase Price plus each additional Second Tranche Purchase Price (if any) plus the Additional Purchase Price, less (Y) the aggregate amount of all proceeds Purchaser has received pursuant to this Agreement on or prior to the last day of the fifth anniversary of the Additional Purchase Price Closing Date in payments from the Company under Section 2.02(a), Section 2.04(A), Section 2.04(B), Section 2.04(C) and Section 5.08, in each case within twenty (20) Business Days of the receipt by Purchaser of the True-Up Statement for the Fiscal Year in which such five year anniversary falls.

Section 2.05 No Assumed Obligations.

Notwithstanding any provision in this Agreement or any other writing to the contrary, Purchaser is acquiring only the Assigned Interests and is not assuming any liability or obligation of the Company or any of its Affiliates of whatever nature, whether presently in existence or arising or asserted hereafter, whether under any Transaction Document or otherwise. All such liabilities and obligations shall be retained by and remain obligations and liabilities of the Company or its Affiliates (the “Excluded Liabilities and Obligations”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF COMPANY

For purposes of all the representations and warranties contained in Article III, the term “Product” shall mean the Product and the Back-up Product, as such products currently exist and are marketed (or in the case of the Back-up Product, as currently being developed) in any jurisdiction, and no broader definition shall be implied. The Company hereby represents and warrants to Purchaser, as of the Closing Date, the following:

Section 3.01 Organization.

Each of the Company and its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of formation and has all corporate powers and all licenses, authorizations, consents and approvals required to carry on its respective business as now conducted and as proposed to be conducted in connection with the transactions contemplated by the Transaction Documents. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the failure to do so would have a Material Adverse Effect. The Company has no direct or indirect Subsidiaries, other than those set forth on Exhibit 21.1 of the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Section 3.02 Authorization.

The Company has all necessary power and authority to enter into, execute and deliver the Transaction Documents and to perform all of the obligations to be performed by it hereunder and thereunder and to consummate the transactions contemplated hereunder and thereunder. The Transaction Documents have been duly authorized, executed and delivered by the Company and each Transaction Document constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or general equitable principles.

Section 3.03 Governmental Authorization.

The execution and delivery by the Company of the Transaction Documents, and the performance by the Company of its obligations hereunder and thereunder, does not require any notice to, action or consent by, or in respect of, or filing with, any Governmental Authority, except for the filing of the UCC Financing Statements, which are the responsibility of Purchaser.

Section 3.04 Ownership.

(a) The Company owns or holds a valid license under, all of the Intellectual Property and the Regulatory Approvals which it currently purports to own related to the Product free and clear of all Liens (except those Liens created in favor of Purchaser pursuant to the Security Agreement and any liens for taxes or other governmental charges arising by operation of law in

the ordinary course of business for sums which are not yet due and payable), and no license or covenant not to sue under any Intellectual Property has been granted by the Company or any of its Subsidiaries to any Third Party, except as set forth on Schedule 3.04(a). Neither the Company nor any of its Subsidiaries has granted, nor does there exist, any Lien on the Revenue Interests or the Assigned Interests (except those Liens created in favor of Purchaser pursuant to the Security Agreement and any liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable).

(b) The Company and its Subsidiaries, immediately prior to the purchase of the Assigned Interests, owns, and is the sole holder of, all the Revenue Interests and, except as provided in the Material Contracts, owns, and is the sole holder of, and/or has and holds a valid, enforceable and subsisting license to, all of those other assets that are required to produce or receive any payments from any Licensee or payor under and pursuant to, and subject to the terms of any Material Agreement to which they are a Party, in each case free and clear of any and all Liens (other than those Liens created in favor of Purchaser pursuant to the Security Agreement and any liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable). The Company and its Subsidiaries have not transferred, sold, or otherwise disposed of, or agreed to transfer, sell, or otherwise dispose of any portion of the Revenue Interests other than as contemplated by this Agreement. No Person other than the Company and its Subsidiaries has any right to receive the payments payable to the Company or such Subsidiaries on account of the Revenue Interests pursuant to the terms of any License Agreement, other than Purchaser’s rights with respect to the Assigned Interests. The Company has the full right to sell, transfer, convey and assign to Purchaser all of the Company’s rights and interests in and to the Assigned Interests being sold, transferred, conveyed and assigned to Purchaser pursuant to this Agreement without any requirement to obtain the consent of any Person. By the delivery to Purchaser of the executed Assignment of Interests, the Company shall transfer, convey and assign to Purchaser all of the Company’s rights and interests in and to the Assigned Interests being sold, transferred, conveyed and assigned to Purchaser pursuant to this Agreement, free and clear of any Liens (other than those Liens created in favor of Purchaser pursuant to the Security Agreement and any liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable). At the Closing, and upon the delivery of the Assignment of Interests to Purchaser by the Company, Purchaser shall have acquired good and valid rights and interests of the Company in and to the Assigned Interests being sold, transferred, conveyed and assigned to Purchaser pursuant to this Agreement, free and clear of any and all Liens (other than those Liens created in favor of Purchaser pursuant to the Security Agreement).

Section 3.05 Financial Statements.

The Financial Statements are complete and accurate in all material respects, were prepared in conformity with GAAP and present fairly in all material respects the financial position and the financial results of the Company and its Subsidiaries as of the dates and for the periods covered thereby, subject in the case of the unaudited financial statements to the absence of footnotes, year-end adjustments and other supplementary information required by GAAP.

Section 3.06 No Undisclosed Liabilities.

Except for those liabilities (a) identified in the Financial Statements (including the notes thereto) and/or in any current or periodic filing made by the Company with the Securities and Exchange Commission, (b) incurred by the Company in the ordinary course of business since March 31, 2015, or (c) in connection with the Obligations under the Transaction Documents, there are no material liabilities of the Company or its Subsidiaries related to the Product, of any kind whatsoever, whether accrued, contingent, absolute, determined or determinable.

Section 3.07 Solvency.

The Company and its Subsidiaries, taken as a whole, are not insolvent as defined in any statute of the United States Bankruptcy Code or in the fraudulent conveyance or fraudulent transfer statutes of the State of Delaware. Assuming consummation of the transactions contemplated by the Transaction Documents, (a) the present fair saleable value of the Company’s and its Subsidiaries’ assets, taken as a whole, is greater than the total amount of liabilities of the Company and its Subsidiaries as such liabilities mature, (b) the Company and its Subsidiaries, taken as a whole, do not have unreasonably small capital with which to engage in its business, and (c) the Company and its Subsidiaries, taken as a whole, have not incurred, nor do they have present plans to or intend to incur, debts or liabilities beyond their ability to pay such debts or liabilities as they become absolute and matured.

Section 3.08 Litigation.

Other than as disclosed in any current or periodic filing made by the Company with the Securities and Exchange Commission, there is no (a) action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries or (b) any governmental inquiry pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries, in each case with respect to clauses (a) and (b) above, which, if adversely determined, would question the validity of, or could adversely affect the transactions contemplated by any of the Transaction Documents or could reasonably be expected to have a Material Adverse Effect. There is no action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened against the Company, its Subsidiaries or any other Person relating to the Product, the Intellectual Property, the Regulatory Approvals, the Revenue Interests or the Assigned Interests.

Section 3.09 Compliance with Laws.

Neither the Company nor any of its Subsidiaries (a) is in violation of, has violated, or to the Knowledge of the Company, is under investigation with respect to, and, (b) has been threatened to be charged with or been given notice of any violation of, any law, rule, ordinance or regulation of, or any judgment, order, writ, decree, permit or license entered by any Governmental Authority applicable to the Company, the Assigned Interests or the Revenue Interests which would reasonably be expected to have a Material Adverse Effect.

Section 3.10 Conflicts.

Neither the execution and delivery of any of this Agreement or the other Transaction Documents to which the Company is a party nor the performance or consummation of the transactions contemplated hereby or thereby will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provisions of: (i) any law, rule, ordinance or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which the Company or its Subsidiaries or any of their respective assets or properties may be subject or bound; or (ii) any contract, agreement, commitment or instrument to which the Company or its Subsidiaries is a party or by which the Company or its Subsidiaries or any of their respective assets or properties is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the articles or certificate of incorporation or bylaws (or other organizational or constitutional documents) of the Company or its Subsidiaries; (c) except for the filing of the UCC Financing Statements required hereunder and filings with the United States Patent and Trademark Office, require any notification to, filing with, or consent of, any Person or Governmental Authority, except such consents that are obtained at or prior to Closing; (d) give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company, its Subsidiaries or any other Person or to a loss of any right to receive the Revenue Interests or the Assigned Interests; or (e) other than pursuant to the Security Agreement, the Assignment of Interests, or any other Transaction Document, result in the creation or imposition of any Lien on (i) the assets or properties of the Company or its Subsidiaries or (ii) the Assigned Interests, the Revenue Interests, or any other Assigned Interests Collateral, except, in the case of the foregoing clauses (a), (c), (d) or (e), for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect.

Section 3.11 Subordination.

The claims and rights of Purchaser created by any Transaction Document in and to the Assigned Interests, the Revenue Interests and any other Assigned Interests Collateral are not subordinated to any creditor of the Company or any other Person.

Section 3.12 Intellectual Property.

(a) For purposes of this Section 3.12 only, the use of the term “Product” shall refer to both the Product and Back-up Product. Schedule 3.12(a) sets forth an accurate, true and complete list of all (i) Patents and utility models, (ii) trade names, registered trademarks, registered service marks, and applications for trademark registration or service mark registration, (iii) registered copyrights and (iv) domain name registrations and websites, in each case with respect to clauses (i), (ii), (iii) and (iv) above in this subsection (a) that the Company owns or licenses and that cover or are or would be used to make, have made, use, sell, have sold, offer for sale, import, develop, promote, market, distribute, manufacture, commercialize or otherwise exploit the Product, including all Material Patents. For each item of Intellectual Property listed on Schedule 3.12(a), the Company has identified (x) the owner and, if licensed from a Third Party, whether the license is exclusive or non-exclusive, (y) the countries in which such listed item is patented or registered or in which an application for Patent or registration is pending and (z) the application number, the Patent number or registration number and the expiration date. The

Intellectual Property listed in Schedule 3.12(a) as owned by the Company is exclusively owned by the Company free and clear of any Liens, except for Permitted Liens. The Intellectual Property listed in Schedule 3.12(a) as licensed to the Company is subject to a valid and enforceable license in favor of the Company, free and clear of any Liens, except for Permitted Liens. Each issued Patent and registered trademark listed on Schedule 3.12(a) is subsisting and has not lapsed, expired, been cancelled or become abandoned and, to the Company’s Knowledge, is valid and enforceable. The Patent applications listed in Schedule 3.12(a) have been prosecuted by competent patent counsel in a diligent manner. To the Knowledge of the Company, all Persons relevant to the prosecution of any of the Material Patents or applications related thereto filed in the U.S. have complied with the duty to disclose information and/or the duty of candor owed to the United States Patent and Trademark Office. To the Knowledge of the Company, each of the Material Patents correctly identifies each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Material Patent is issued or pending, and the Company has performed appropriate reasonable inquiry with respect to such inventorship. Each Person who has or has had any rights in or to the Material Patents has executed an agreement assigning his, her or its entire right, title and interest in and to such Material Patents, and the inventions embodied, described and/or claimed therein, to the Company, and to the Knowledge of the Company, no such Person has any contractual or other obligation that would preclude or conflict with any such assignment or otherwise conflict with the obligations of such Person to the Company.

(b) Except for Intellectual Property licensed to or owned by the Company and set forth on Schedule 3.12(a), to the Knowledge of the Company, no other Intellectual Property is necessary to make, have made, offer to sell, sell, have sold, use, import, distribute, commercialize or market the Product in the Major Countries. To the Knowledge of the Company, the use, manufacture, import, export, offer for sale, distribution, marketing and sale of the Product by the Company does not infringe any Patents that are owned by a Third Party in the Major Countries.

(c) The Company has the full right, power and authority to grant all of the rights and interests granted to Purchaser in this Agreement.

(d) There are no unpaid maintenance, annuity or renewal fees currently overdue for any of the issued Patents included in the Material Patents.

(e) There is, and has been, no pending, decided or settled opposition, interference proceeding, reexamination proceeding, cancellation proceeding, injunction, claim, lawsuit, declaratory judgment, administrative post-grant review proceeding, other administrative or judicial proceeding, hearing, investigation, complaint, arbitration, mediation, International Trade Commission investigation, decree, or any other filed claim (other than routine prosecution before the U.S. Patent and Trademark Office) (collectively referred to hereinafter as “Disputes”) related to any of the Material Patents of which the Company has received written notice, nor, to the Knowledge of the Company, has any such Dispute been threatened challenging the legality, validity, enforceability or ownership of any Material Patents. There are no Disputes by any Person or Third Party against the Company, its Licensees or its licensor, and the Company has not received any written notice or claim of any such Dispute as pertaining to the Product. Neither the Company nor its Subsidiaries has sent any notice of any such Dispute to a Third Party. The Company is not subject to any outstanding injunction, judgment, order, decree, ruling, charge, settlement or other disposition of Dispute which relates to the Product or the Material Patents.

(f) There is no pending, or to the Knowledge of the Company threatened, action, suit, or proceeding, or any investigation or claim by any Governmental Authority to which the Company is a party or is the subject (i) that would be the subject of a claim for indemnification by any Person or Third Party under any agreement, or (ii) that the marketing, sale or distribution of the Product worldwide by the Company or its Licensees pursuant to any related License Agreement, as applicable, does or will infringe on any Patent of any other Person.

(g) The Company has taken commercially reasonable measures and precautions to protect and maintain (i) the confidentiality of all trade secret Intellectual Property that it owns and (ii) the value of all Intellectual Property related to the Product, except where such failure to take action would not reasonably be expected to have a Material Adverse Effect.

(h) No material trade secret of the Company has been published or disclosed to any Person except pursuant to a written agreement requiring such Person to keep such trade secret confidential, except where such disclosure would not reasonably be expected to have a Material Adverse Effect.

(i) The Product, or its manufacture or use, is covered by one or more valid and enforceable claims of an issued Patent in the United States.

Section 3.13 Regulatory Approval.

(a) The Company and its Subsidiaries have made available to Purchaser any written reports or other written communications received from a Governmental Authority that would indicate that any Regulatory Agency (A) is likely to revise or revoke any current Regulatory Approval granted by any Regulatory Agency with respect to the Product, or (B) is likely to pursue any material compliance actions against the Company.

(b) The Company and its Subsidiaries possess all Regulatory Approvals issued or required by the appropriate Regulatory Agencies, which Regulatory Approvals are necessary to conduct the current clinical trials relating to the Product, and neither the Company nor its Subsidiaries has received any notice of proceedings relating to the revocation, suspension, termination or modification of any such Regulatory Approvals.

(c) The Company and its Subsidiaries are in compliance with, and has complied with, all applicable federal, state, local and foreign laws, rules, regulations, standards, orders and decrees governing its business, including all regulations promulgated by each Regulatory Agency, the failure of compliance with which could reasonably be expected to result in a Material Adverse Effect; the Company and its Subsidiaries have not received any notice citing action or inaction by any of them that would constitute any non-compliance with any applicable federal, state, local and foreign laws, rules, regulations, or standards, which could reasonably be expected to result in a Material Adverse Effect; and to the Company’s Knowledge, no prospective change in any applicable federal, state, local or foreign laws, rules, regulations or standards has been adopted which, when made effective, would reasonably be expected to result in a Material Adverse Effect.

(d) Preclinical and clinical trials conducted on behalf of the Company or its Subsidiaries relating to the Product were conducted in all material respects in compliance with applicable laws and, in all material respects, in accordance with experimental protocols, procedures and controls pursuant to, where applicable, accepted professional and scientific standards; the descriptions of the results of such trials provided to Purchaser are complete and accurate in all material respects. Neither the Company nor its Subsidiaries has received any notices or correspondence from any Regulatory Agency or comparable authority requiring the termination, suspension, or material modification or clinical hold of any clinical trials conducted by or on behalf of the Company or its Subsidiaries with respect to the Product, which termination, suspension, material modification or clinical hold could reasonably be expected to result in a Material Adverse Effect.

Section 3.14 Material Contracts.

Schedule 3.14 sets forth all Material Contracts. Neither the Company nor its Subsidiaries is in breach of or in default under any Material Contract, which default, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. To the Knowledge of the Company, nothing has occurred and no condition exists that would permit any other party thereto to terminate any Material Contract. Neither the Company nor its Subsidiaries has received any notice or, to the Knowledge of the Company, any threat of termination of any such Material Contract. To the Knowledge of the Company, no other party to a Material Contract is in breach of or in default under such Material Contract. All Material Contracts are valid and binding on the Company or its Subsidiaries and, to the Knowledge of the Company, on each other party thereto, and are in full force and effect.

Section 3.15 Place of Business.

The Company’s principal place of business and chief executive office are set forth on Schedule 3.15.

Section 3.16 Broker’s Fees.

The Company and its Subsidiaries have not taken any action that would entitle any Person to any commission or broker’s fee in connection with this Agreement except fees, commissions and expenses to be paid to Houlihan Lokey Capital, Inc., all of which will be paid by the Company.

Section 3.17 Other Information.

No written statement, information, report or materials prepared by or on behalf of the Company or its Subsidiaries and furnished to Purchaser by or on behalf of the Company or its Subsidiaries in connection with any Transaction Document or any transaction contemplated hereby or thereby, and no written representation, warranty or statement made by the Company or its Subsidiaries in any Transaction Document, and no Schedule or Exhibit hereto or thereto, in each case taken in the aggregate, contains any untrue statement of a material fact or omits any statement of material fact necessary in order to make the statements made therein in light of the circumstances under which they were made not misleading.

Section 3.18 Taxes.

Each of the Company and its Subsidiaries has timely filed (taking into account all extensions of due dates) all material Tax Returns required to be filed by, or on behalf of, it and has timely paid all Taxes required to be paid with such returns. All Tax Returns filed by the Company or its Subsidiaries (or on any of their behalves) have been true, correct and complete in all material respects. Except as set forth on Schedule 3.18, there is no outstanding or, to the Company’s Knowledge, threatened action, claim or other examination or proceeding with respect to Taxes of the Company or any of its Subsidiaries or their assets (including with respect to the Assigned Interests and the Revenue Interests). Except as set forth on Schedule 3.18, there are no Taxes of the Company or any of its Subsidiaries that form or could form, individually or in the aggregate, the basis for a material encumbrance (other than encumbrances for current taxes not yet past due or Permitted Liens) on any of its assets (including the Assigned Interests and the Revenue Interests).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to the Company the following:

Section 4.01 Organization.

Purchaser is a corporation duly incorporated and validly existing under the laws of the State of Delaware.

Section 4.02 Authorization.

Purchaser has all necessary power and authority to enter into, execute and deliver the Transaction Documents and to perform all of the obligations to be performed by it hereunder and thereunder and to consummate the transactions contemplated hereunder and thereunder. The Transaction Documents have been duly authorized, executed and delivered by Purchaser and each Transaction Document constitutes the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with their respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or general equitable principles.

Section 4.03 Broker’s Fees.

Purchaser has not taken any action that would entitle any Person to any commission or broker’s fee in connection with the transactions contemplated by the Transaction Documents.

Section 4.04 Conflicts.

Neither the execution and delivery of this Agreement or any other Transaction Document to which Purchaser is a party nor the performance or consummation of the transactions contemplated hereby or thereby will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provisions of: (i) any law, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which Purchaser or any of its assets or properties may be subject or bound; or (ii) any contract, agreement, commitment or instrument to which Purchaser is a party or by which Purchaser or any of its assets or properties is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the organizational or constitutional documents of Purchaser; or (c) require any notification to, filing with, or consent of, any Person or Governmental Authority, except, in the case of the foregoing clauses (a) or (c), for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a material adverse effect on the ability of Purchaser to perform any of its obligations under the Transaction Documents.

ARTICLE V

COVENANTS

From the date hereof through and including the end of the Revenue Interest Period, the following covenants shall apply:

Section 5.01 Consents and Waivers.

The Company shall use its commercially reasonable efforts to obtain and maintain any required consents, acknowledgements, certificates or waivers so that the transactions contemplated by this Agreement or any other Transaction Document may be consummated and shall not result in any default or breach or termination of any of the Material Contracts.

Section 5.02 Access; Information.

(a) License Notices. Subject to any applicable confidentiality restrictions, the Company shall promptly provide Purchaser with copies of any material written notices received or given by the Company or any of its Subsidiaries under any Material Contract, and to the extent the Company is barred from providing Purchaser with copies of such notices due to any applicable confidentiality restrictions, the Company shall (i) inform Purchaser of the existence of such notice accompanied by a written description of the substance contained in such notice and (ii) promptly use commercially reasonable efforts to seek the removal or waiver of any such confidentiality restrictions so as to permit a free exchange of information with the Purchaser regarding the substance of such notice. The Company shall promptly notify Purchaser of any breaches or alleged breaches under any Material Contracts and of any other events with respect to any Material Contract or the subject matter thereof which could reasonably be expected to have a Material Adverse Effect.

(b) Litigation or Investigations. The Company shall promptly notify Purchaser of (i) any action, demand, suit, claim, cause of action, proceeding or investigation pending or, to the Knowledge of the Company, threatened by or against the Company or any of its Subsidiaries, or (ii) proceeding or inquiry of any Governmental Authority pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, related to any Material Contract, the Product, the Material Patents or any Transaction Document.

(c) Maintenance of Books and Records. During the Term, the Company shall keep and maintain, or cause to be kept and maintained, at all times full and accurate books of account and records adequate to correctly reflect all payments paid and/or payable with respect to the Revenue Interests and Assigned Interests and all deposits made into the applicable deposit accounts.

(d) Inspection Rights. Purchaser shall have the right, once a year, to designate a Third Party independent public accounting firm (the “Purchaser Representative”) to visit the Company and its Subsidiaries’ offices and properties where the Company and its Subsidiaries keep and maintain their books and records relating or pertaining to the Revenue Interests, the Assigned Interests and the other Assigned Interests Collateral for purposes of conducting an audit of such books and records, and to inspect and audit such books and records, during normal business hours, and, upon five (5) Business Days’ written notice given by Purchaser to the Company, the Company will provide such Purchaser’s Representative reasonable access to such books and records, and shall permit the Purchaser Representatives to discuss the business, operations, properties and financial and other condition of the Company or any of its Affiliates including, but not limited to, matters relating or pertaining to the Revenue Interests, the Assigned Interests and the other Assigned Interests Collateral with officers of the Company and with the Company’s independent certified public accountants.

(e) Audit Costs. In the event any audit of the books and records of the Company and its Subsidiaries relating to the Revenue Interests, Assigned Interests, and the other Assigned Interests Collateral by Purchaser and/or any of Purchaser’s representatives reveals that the amounts paid to Purchaser hereunder for the period of such audit have been understated by more than five percent (5%) of the amounts determined to be due for the period subject to such audit, then the Audit Costs in respect of such audit shall be borne by the Company; and in all other cases, such Audit Costs shall be borne by Purchaser.

(f) Quarterly Reports. During the Term, the Company shall, promptly after the end of each Fiscal Quarter of the Company (but in no event later than forty-five (45) days following the end of such quarter), produce and deliver to Purchaser a Quarterly Report for such quarter, together with a certificate of the Company, certifying that to the Knowledge of the Company (i) such Quarterly Report is a true and complete copy and (ii) any statements and any data and information therein prepared by the Company are true, correct and accurate in all material respects.

(g) Periodic Reports. In the event that the Company is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Company shall deliver to Purchaser the following financial statements:

(i) Within forty-five (45) days after the end of each Fiscal Quarter, copies of the unaudited consolidated financial statements of the Company and its Subsidiaries for such Fiscal Quarter; and

(ii) Within ninety (90) days after the end of each Fiscal Year, copies of the audited consolidated financial statements of the Company and its Subsidiaries for such Fiscal Year.

Section 5.03 Material Contracts.

The Company shall comply, and shall cause each of its Subsidiaries to comply, with all terms and conditions of and fulfill all of its obligations under all the Material Contracts to which it is a Party, except for such noncompliance which would not reasonably be expected to give rise to a Material Adverse Effect. The Company shall not, and shall cause its Subsidiaries not to, amend the payment rate or payment amount that it is entitled to receive under any Material Contract or issue any consents or other approvals under any Material Contract that would change the payment rate or alter the timing of the payment amount or otherwise affect the Revenue Interests payable to Purchaser hereunder without the prior written consent of Purchaser (not to be unreasonably withheld, conditioned, or delayed), except where such amendment or consent would not reasonably be expected to give rise to a Material Adverse Effect.

Section 5.04 Confidentiality; Public Announcement.

(a) All Confidential Information furnished by Purchaser to the Company or by the Company to Purchaser in connection with this Agreement and any other Transaction Document and the transactions contemplated hereby and thereby, as well as the terms, conditions and provisions of this Agreement and any other Transaction Document, shall be kept confidential by the Company and Purchaser. Notwithstanding the foregoing, the Company and Purchaser may disclose such Confidential Information to their partners, directors, employees, managers, officers, investors, bankers, advisors, trustees and representatives, provided that such Persons shall be informed of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section 5.04(a), or as may otherwise be required by applicable law. The Company will consult with Purchaser, and Purchaser will consult with the Company, on the form, content and timing of any such disclosures of Confidential Information, including, without limitation, any disclosures made pursuant to applicable securities laws or made to investment or other analysts.

(b) Each Party is a publicly traded company and has certain disclosure obligations under the U.S. securities laws and the rules and regulations of the U.S. Securities Exchange Commission. In addition to any disclosures required by applicable law, each Party may issue a press release announcing the transactions set forth in the Transaction Documents. Prior to issuing any such press release, each Party shall provide the other Party with an advance copy of press release and provide a reasonable opportunity (not to exceed two Business days) for the other Party to comment thereon. The Party issuing the press release shall give reasonable consideration in good faith to any reasonable comments provided by the other Party. Except as required by applicable law or by the rules and regulations of any securities exchange or trading system or the FDA, taxing authority or any Governmental Authority with similar regulatory authority, or except with the prior written consent of the other party (which consent shall not be unreasonably withheld), no party shall issue any other press release or make any other public disclosure containing Confidential Information with respect to the transactions contemplated by this Agreement or any other Transaction Document.

Section 5.05 Security Agreement.

During the Revenue Interest Period, except as permitted by Section 7.18, the Company shall, at all times until the Obligations are paid and performed in full, grant in favor of Purchaser a valid, continuing, first perfected lien on and security interest in the Assigned Interests and the other Assigned Interests Collateral described in the Security Agreement.

Section 5.06 Efforts; Further Assurance.

(a) Subject to the terms and conditions of this Agreement, each of Purchaser and the Company will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement and any other Transaction Document. Purchaser and the Company agree to execute and deliver such other documents, certificates, agreements and other writings (including any financing statement filings requested by Purchaser) and to take such other actions as may be reasonably necessary in order to consummate or implement expeditiously the transactions contemplated by this Agreement and any other Transaction Document and to vest in Purchaser good, valid and marketable rights and interests in and to the Assigned Interests, which are, as of the Closing, free and clear of all Liens, except for (i) Liens created in favor of Purchaser on or after the Closing pursuant to the Security Agreement, the Assignment of Interests, and any other Transaction Document, and (ii) liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable.

(b) Purchaser and the Company shall execute and deliver such additional documents, certificates and instruments, and perform such additional acts, as may be reasonably requested and necessary or appropriate to carry out and effectuate all of the provisions of this Agreement and any other Transaction Document and to consummate all of the transactions contemplated by this Agreement and any other Transaction Document. In the event that the Company or any of its Affiliates enters into any license, commercialization, co-promotion, collaboration, distribution, marketing or partnering agreement before or during the Revenue Interest Period that grants a license with respect to the Intellectual Property covering the Product to any Subsidiary of the Company that is incorporated or organized under the laws of the United States, any state thereof or the District of Columbia, at least 10 Business Days prior to the consummation of any such transaction, the Company shall give Purchaser written notice thereof and will prior to such consummation cause any such Subsidiary to execute and deliver to Purchaser a joinder agreement and other documents reasonably requested and satisfactory to Purchaser in order to cause such Subsidiary to become a party to the applicable Transaction Documents as if such Subsidiary was a party thereto as of the date hereof.

(c) Purchaser and the Company shall cooperate and provide assistance as reasonably requested by the other party in connection with any Third Party litigation, arbitration or other Third Party proceeding (whether threatened, existing, initiated, or contemplated prior to, on or after the date hereof) to which any party hereto or any of its officers, directors, shareholders, agents or employees is or may become a party or is or may become otherwise directly or indirectly affected or as to which any such Persons have a direct or indirect interests, in each case relating to this Agreement, any other Transaction Document, the Assigned Interests or any other Assigned Interests Collateral, or the transactions described herein or therein.

Section 5.07 Put Option; Call Option.

(a) Put Option. In the event that a Put Option Event shall occur during the Term, Purchaser shall have the right, but not the obligation (the “Put Option”), exercisable within sixty (60) days of the later of (i) Purchaser’s receipt of written notice from the Company of the Put Option Event or (ii) Purchaser’s discovery that a Put Option Event has occurred (other than, in either case, with respect to a Bankruptcy Event or a Put Option Event pursuant to clause (d) of said definition, which shall be exercisable immediately by the Purchaser), to require the Company to repurchase from Purchaser the Assigned Interests at the Put/Call Price. In the event Purchaser elects to exercise its Put Option, Purchaser shall deliver written notice to the Company specifying the closing date which date shall be forty-five (45) days from such notice date (the “Put Option Closing Date”), which notice must be given within sixty (60) days of Purchaser’s receipt of written notice from the Company of a Put Option Event. Failure to provide notice by such times will be deemed an irrevocable waiver of the right to exercise the Put Option. On the Put Option Closing Date, the Company shall repurchase from Purchaser the Assigned Interests at the Put/Call Price in cash, the payment of which shall be made by wire transfer of immediately available funds to the account designated by Purchaser. Notwithstanding anything to the contrary contained herein, immediately upon the occurrence of a Bankruptcy Event, Purchaser shall be deemed to have automatically and simultaneously elected to have the Company repurchase from Purchaser the Assigned Interests for the Put/Call Price in cash and the Put/Call Price shall be immediately due and payable without any further action or notice by any party. Immediately upon exercise by Purchaser of the Put Option and the payment by the Company to Purchaser of the Put/Call Price, Purchaser shall be deemed to have automatically assigned to the Company all right, title, and interest in and to the Assigned Interest.

(b) Call Option. At any time after the Closing Date, the Company shall have the right, but not the obligation (the “Call Option”), exercisable upon ten (10) days’ written notice to Purchaser, to repurchase the Assigned Interests from Purchaser at a repurchase price equal to the Put/Call Price. In order to exercise the Call Option, the Company shall deliver written notice to Purchaser of its election to so repurchase the Assigned Interests not less than ten (10) days prior to the proposed closing date (the “Call Closing Date”). On the Call Closing Date, the Company shall repurchase from Purchaser the Assigned Interests at the Put/Call Price, the payment of which shall be made by wire transfer of immediately available funds to the account designated by Purchaser. Immediately upon exercise by the Company of the Call Option and the payment by the Company to Purchaser of the Put/Call Price, Purchaser shall be deemed to have automatically assigned to the Company all right, title, and interest in and to the Assigned Interest.

(c) Obligations of Purchaser. In connection with the consummation of a repurchase of the Assigned Interests pursuant to the Put Option or Call Option, Purchaser agrees that it will (i) promptly but no later than three (3) Business Days execute and deliver to the Company such UCC termination statements and other documents as may be necessary to release Purchaser’s Lien on the Assigned Interests Collateral and otherwise give effect to such repurchase and (ii) take such other actions or provide such other assistance as may be necessary to give effect to such repurchase.

Section 5.08 Remittance to Deposit Account.

(a) Within sixty (60) days after the date of this Agreement, the parties hereto shall enter into a deposit agreement in form and substance reasonably satisfactory to the parties hereto and the Deposit Bank (the “Deposit Agreement”), which Deposit Agreement will provide for, among other things, the establishment and maintenance of a Deposit Account, a Joint Concentration Account, a Company Concentration Account and a Purchaser Concentration Account in accordance with the terms herein and therein. Any Purchaser Concentration Account shall be held solely for the benefit of Purchaser, but shall be subject to the terms and conditions of this Agreement, the Security Agreement and the other Transaction Documents. Funds deposited into the Deposit Account shall be swept by the Deposit Bank on a daily basis into the Joint Concentration Account and subsequent thereto on a daily basis, the Daily Amount shall be swept into the Purchaser Concentration Account; provided that once the amount of cash swept into the Purchaser Concentration Account during any of the Fiscal Years ended December 31, 2015, December 31, 2016, December 31, 2017 and December 31, 2018, reaches the Yearly Payment Cap, Deposit Bank shall not make any further sweeps from the Deposit Account into the Joint Concentration Account during the remainder of such Fiscal Year, and shall instead sweep the entirety of funds deposited into the Deposit Account for the balance of such Fiscal Year directly into the Company Concentration Account for immediate and full access by the Company. Purchaser shall have immediate and full access to any funds held in the Purchaser Concentration Account and such funds shall not be subject to any conditions or restrictions whatsoever, subject to Purchaser’s obligations under Section 5.08(f). After the Daily Amount is swept into the Purchaser Concentration Account, the amounts remaining in the Joint Concentration Account shall then be swept, automatically or as otherwise directed by the Company, into the Company Concentration Account. The Company shall have immediate and full access to any funds held in the Company Concentration Account and such funds shall not be subject to any conditions or restrictions whatsoever other than those of the Deposit Bank; provided, however, that nothing herein shall (i) affect or reduce the Company’s obligations to pay in full all amounts due to Purchaser under this Agreement, or (ii) in any manner limit the recourse of Purchaser to the Assigned Interests Collateral in accordance with the Security Agreement.

(b) The Company shall pay all fees, expenses and charges of the Deposit Bank.

(c) Commencing on the Closing Date and thereafter, any and all payments in respect of sales of the Product received by the Company or its Subsidiaries (other than the European Subsidiaries) on account of Gross Product Revenues of the Company shall be deposited into the Deposit Account within two (2) Business Days of the Company’s receipt thereof, regardless of whether or not any Allowable Additional Product Financings have been entered into by the Company or any Subsidiary. In the event (i) the True-Up Statement for the second Fiscal Quarter in any Fiscal Year indicates that the Year-to-Date Net Revenues of the Product are less that [***] percent ([***]%) of the Projected Net Product Revenues set forth on Schedule A for

that Fiscal Year or (ii) the True-Up Statement for the third Fiscal Quarter in any Fiscal Year indicates that the Year-to-Date Net Revenues of the Product are less that [***] percent ([***]%) of the Projected Net Product Revenues set forth on Schedule A for that Fiscal Year, the Applicable Percentage of any and all payments in respect of Net Back-up Product Revenues received by the Company (including the Applicable Percentage of any amounts held in the Brigatinib Divestiture Account pursuant to Section 5.17) shall be deposited into the Purchaser Concentration Account within two (2) Business Days of the Company’s receipt of such True-Up Statement, but only until, and to the extent necessary such that, the Back-up Product True-Up Amount due and payable under Section 5.08(f) for that Fiscal Year is paid in full.

(d) With respect to any License Agreement existing on the date hereof (other than License Agreements to which a European Subsidiary is a party and License Agreements that do not call for direct payment to the Company or any Subsidiary of the Company), promptly following the entering into the Deposit Agreement, the Company shall or shall instruct such Subsidiary to instruct any party thereto under such agreement to remit to the Deposit Account when due all applicable payments in respect of Gross Product Revenues of the Company that are due and payable to the Company or such Subsidiary during the Revenue Interest Period, and the Company shall deliver to Purchaser evidence of such instruction and of such applicable party’s agreement thereto. With respect to any License Agreement (other than License Agreements to which a European Subsidiary is a party and License Agreements that do not call for direct payment to the Company or any Subsidiary of the Company) entered into by the Company or any Subsidiary after the Closing Date, the Company shall or shall instruct such Subsidiary to (i) at the time of the execution and delivery of such agreement, instruct any party thereto under such agreement to remit to the Deposit Account when due all applicable payments in respect of Gross Product Revenues of the Company that are due and payable to the Company or such Subsidiary during the Revenue Interest Period, and (ii) deliver to Purchaser evidence of such instruction and of such applicable party’s agreement thereto.

(e) During the Revenue Interest Period and prior to the termination of this Agreement, the Company shall not have any right to terminate the Deposit Agreement without Purchaser’s prior written consent. Any such consent, which Purchaser may grant or withhold in its sole and absolute discretion, shall be subject to the satisfaction of each of the following conditions to the satisfaction of Purchaser:

(i) the successor Deposit Bank shall be acceptable to Purchaser;

(ii) Purchaser, the Company and the successor Deposit Bank shall have entered into a deposit agreement substantially in the form of the Deposit Agreement initially entered into;

(iii) all funds and items in the accounts subject to the Deposit Agreement to be terminated shall be transferred to the new accounts held at the successor Deposit Bank prior to the termination of the then existing Deposit Bank; and

(iv) Purchaser shall have received evidence that all of the applicable parties making payments in respect of sales of the Product have been instructed to remit all future payments in respect of sales of the Product to the new accounts held at the successor Deposit Bank.

(f) True-Up.

(i) Following the end of each Fiscal Quarter, as soon as the Company shall have determined the Applicable Percentage of Net Revenues of the Product for such Fiscal Quarter and for each other Fiscal Quarter in the Fiscal Year in which the then most recently ended Fiscal Quarter occurred (the “Year-to-Date Applicable Net Revenues”) and in any event no later than forty-five (45) days after the end of such Fiscal Quarter (unless such Fiscal Quarter is the last Fiscal Quarter of a Fiscal Year in which case no later than ninety (90) days after the end of such Fiscal Quarter), the Company shall present to Purchaser a certificate of an officer of the Company, in reasonable detail with supporting calculations and information, detailing the Year-to-Date Applicable Net Revenues of the Product (broken down by U.S., Europe, and the rest of world (i.e., global Net Revenues of the Product other than in the U.S. or Europe) (the “True-Up Statement”). The True-Up Statement shall include a calculation of the Net Revenues of the Product for such Fiscal Quarter and for each other Fiscal Quarter in the Fiscal Year in which the then most recently ended Fiscal Quarter occurred, with a reconciliation of such calculation to the Year-to-Date Applicable Net Revenues and the Applicable Percentage of Net Revenues of the Product for such Fiscal Quarter. For purposes of this Section 5.08(f), the first Fiscal Quarter shall comprise the period from the Closing Date through September 30, 2015. The True-Up Statement shall also include the Sweep Percentage that will be applicable to the next successive Fiscal Quarter.

(ii) If Purchaser has received, on or prior to the last day of the most recently ended Fiscal Quarter, payments from the Company under Section 2.02 or this Section 5.08 in respect of the Fiscal Year for which Year-to-Date Applicable Net Revenues is calculated under clause (i) above which are in excess of the Applicable Percentage of Year-to-Date Net Revenues of the Product (after giving effect to the full Yearly Payment Cap (i.e., no quarterly proration)), Purchaser shall pay such excess to the Company within twenty (20) Business Days of receipt by Purchaser of the True-Up Statement.

(iii) If the Applicable Percentage of Year-to-Date Net Revenues of the Product (after giving effect to the full Yearly Payment Cap (i.e., no quarterly proration)) is in excess of the amounts Purchaser has received on or prior to the last day of the most recently ended Fiscal Quarter in respect of the Fiscal Year for which Year-to-Date Applicable Net Revenues is calculated under clause (i) above under Section 2.02 or this Section 5.08, the Company shall pay such excess to Purchaser within twenty (20) Business Days of the receipt by Purchaser of the True-Up Statement.

(iv) Following the end of each Fiscal Year, the True-Up Statement for such Fiscal Year shall also include a calculation of the difference between (A) the Projected Net Product Revenues for that Fiscal Year multiplied by the Applicable Percentage for that Fiscal Year (after giving effect to the full Yearly Payment Cap), and (B) the actual revenues received by Purchaser on account of the Applicable Percentage of the Net Revenues as of the end of Fiscal Year (including any payments received by Purchaser on

account of the Back-up Product), after taking into account any true-up adjustments made pursuant to Sections 5.08(f)(ii) or (iii) above, plus any Make-Whole Payment under Section 2.04 received by Purchaser in such Fiscal Year (the “Back-Up Product True-Up Amount”). The Back-up Product True-up Statement shall also include a reconciliation against any remaining amounts held in the Brigatinib Divestiture Account (if applicable) and any debits or sweeps made to or out of such Account.

(v) If the Back-Up Product True-Up Amount calculated pursuant to clause (iv) above is positive for a Fiscal Year, the Company shall pay to Purchaser such Back-up Product True-Up Amount solely to the extent such amount does not exceed the greater of (X) the Applicable Percentage of Net Revenues of Back-up Product for that Fiscal Year and (Y) [***]% of all worldwide Net Sales of the Back-up Product for such Fiscal Year generated by the Company or any of its Affiliates as well as any Third Party, pursuant to any license, commercialization, co-promotion, collaboration, distribution, marketing or partnering agreement (the greater of (X) and (Y) being referred to herein as the “Back-up Product True-Up Cap”). The payment of such Back-up Product True-Up Amount due and owing under Section 5.08(f) shall be satisfied exclusively out of the Net Revenue of the Back-up Product, or in the event of Brigatinib Divestiture Event, exclusively out of the Net Revenue of the Back-up Product and/or the available amounts held in the Brigatinib Divestiture Collateral Account established in accordance with Section 5.17.

(vi) In the event the Net Revenues of the Back-Up Product received by the Company for that Fiscal Year are not sufficient to satisfy payment of the Back-up Product True-Up Amount required to be paid under Section 5.08(f) for that Fiscal Year (taking into account any available amounts then held in the Brigatinib Divestiture Collateral Account), no further amounts shall be due and owing by the Company to Purchaser on account of the Back-up Product True-Up Amount for that Fiscal Year. Any shortfall resulting from the failure of the Net Revenue of the Back-Up Product received by the Company for that Fiscal Year (or the funds available in the Brigatinib Divestiture Account, if applicable) to satisfy payment of the Back-up Product True-Up Amount required to be paid under Section 5.08(f) for that Fiscal Year shall impose no obligation on the Company to make any additional payment to the Purchaser pursuant to this clause (v), and such deficiency shall not carry over to any subsequent Fiscal Year. Payment of the Back-up Product True-Up Amount required to be paid hereunder shall be made by the Company to Purchaser within fifteen (15) Business Days of receipt by Purchaser of the True-Up Statement for that Fiscal Year.

(vii) If the Back-up Product True-Up Amount calculated pursuant to clause (iv) above is negative, no further payments need be made by the Company to the Purchaser for that Fiscal Year, and any excess payments made by Company to Purchaser in accordance with Section 5.08(c) based on Net Back-up Product Revenues shall be reimbursed to Company by Purchaser within fifteen (15) Business Days of receipt by Purchaser of the True-Up Statement for that Fiscal Year.

Section 5.09 Intellectual Property.

(a) The Company shall, at its sole expense, either directly or by causing any Licensee to do so, take such actions (including taking legal action to specifically enforce the applicable terms of any License Agreement), and prepare, execute, deliver and file any and all agreements, documents or instruments which are necessary to diligently maintain the Material Patents. The Company shall ensure that all patent applications corresponding to the Material Patents are diligently prosecuted with the intent to protect the Product. In the exercise of its reasonable business discretion, the Company shall use commercially reasonable efforts to diligently defend or assert such Intellectual Property and such Material Patents against infringement or interference by any other Persons, and against any claims of invalidity or unenforceability, in the Major Countries (including, without limitation, by bringing any legal action for infringement or defending any counterclaim of invalidity or action of a Third Party for declaratory judgment of non-infringement or non-interference, including timely bringing an action in response to a certification made by an applicant under paragraph IV of clause (vii) of 21 U.S.C. §355(j)(2)(A) with respect to an Abbreviated New Drug Application). The Company shall not, and shall use its commercially reasonable efforts to cause any Licensee not to, disclaim or abandon, or fail to take any action necessary to prevent the disclaimer or abandonment of, the Material Patents, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

(b) In the event that the Company becomes aware that the Product infringes or violates any Third Party’s Intellectual Property, the Company shall, in the exercise of its reasonable business discretion, use commercially reasonable efforts to attempt to secure the right to use such Intellectual Property on behalf of itself and any affected Licensee, as applicable, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect and shall pay all reasonable costs and amounts associated with obtaining any such license, without any reduction in the Assigned Interests.

(c) The Company shall directly, or through a Licensee, take any and all actions and prepare, execute, deliver and file any and all agreements, documents or instruments that are necessary to secure and maintain, all Regulatory Approvals in the Major Countries.

Section 5.10 Protective Covenants.

(a) The Company shall not, without the prior written consent of the Purchaser:

(i) Forgive, release or compromise any amount owed to the Company or its Subsidiaries and relating to the Assigned Interests outside the ordinary course of business in a manner which would reasonably be expected to result in a Material Adverse Effect on the Assigned Interests;

(ii) Waive, amend, cancel or terminate, exercise or fail to exercise, any of its material rights constituting or relating to the Revenue Interests (including any rights under any License Agreement) outside the ordinary course of business, except where such failure would not reasonably be expected to result in a Material Adverse Effect on the Revenue Interest;

(iii) Amend, modify, restate, cancel, supplement, terminate or waive any material provision relating to the payment rate or payment amount the Company or its Subsidiaries are entitled to receive under any Material Contract, or grant any related consent thereunder, or agree to do any of the foregoing, including, without limitation, entering into any agreement with any Person under the provisions of such Material Contract, (in each case) if such action would result in a reduction of any royalty rate, distribution split or other sales-based payments, up-front payment or milestone payment to the Company thereunder;

(iv) Create, incur, assume or suffer to exist any new Indebtedness (not including Indebtedness incurred for the purpose of paying to Purchaser the Put/Call Price in connection with an exercise of the Put Option or Call Option), other than (i) any Permitted Secured Financings, (ii) unsecured indebtedness so long as it remains unsecured, in an aggregate incremental principal amount not to exceed $[***] at any time outstanding (not including any financings in (iii) below); provided that such Indebtedness has a maturity date that is not earlier than the Outside Date (and the terms of such Indebtedness shall not provide for any scheduled repayment, mandatory redemption, put or sinking fund obligations prior to the Outside Date (other than customary offers to repurchase upon a change of control, asset sale or casualty event and customary acceleration rights after an event of default)) and (iii) any Indebtedness incurred to refinance the Company’s existing 3.625% Convertible Senior Notes due 2019 issued pursuant to the Indenture dated as of June 17, 2014, between the Company and Wells Fargo Bank, National Association, as Trustee; provided that any such refinancing Indebtedness is unsecured and has a maturity date that is not earlier than the Outside Date (and the terms of such Indebtedness shall not provide for any scheduled repayment, mandatory redemption, put or sinking fund obligations prior to the Outside Date (other than customary conversion rights, offers to, or put option to require, repurchase upon a fundamental change, change of control, asset sale or casualty event and customary acceleration rights after an event of default));

(v) Create, incur, assume or suffer to exist any Lien, or exercise any right of rescission, offset, counterclaim or defense, upon or with respect to the Deposit Account, the Joint Concentration Account or the Assigned Interests, or agree to do any of the foregoing, except for (i) any Lien or agreements in favor of Purchaser granted under or pursuant to this Agreement and the other Transaction Documents; and (ii) liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable;

(vi) Create, incur, assume or suffer to exist any Lien, or exercise any right of rescission, offset, counterclaim or defense, upon or with respect to the Shared Assigned Interests Collateral, or agree to do any of the foregoing, except for (i) any Lien or agreements in favor of Purchaser granted under or pursuant to this Agreement and the other Transaction Documents; and (ii) any Permitted Liens permitted by clause (ii) and clause (iv) of the definition of Permitted Liens (but, with respect to such clause (iv), only with respect to Permitted Secured Financings described in clause (i) and clause (iii) of the definition of Permitted Secured Financings); or

(vii) Transfer to any European Subsidiary any additional rights in the Product, the Gross Product Revenues or the Collateral; provided that the Company may transfer to ARIAD Europe, via amendment of the Territory of the ARIAD Europe Buy-in License or similar transaction, Product rights in Israel, Saudi Arabia, and other countries that will be managed by ARIAD Europe, as long as the chronic myelogenous leukemia market in those countries transferred in aggregate (as measured by IMS data) does not exceed [***]% of the global chronic myelogenous leukemia market (measured in U.S. dollars).

Section 5.11 Insurance.

The Company shall (i) maintain the current insurance policies with its current insurance companies or with companies having at the least the same rating from A.M. Best Company, Inc. and (ii) maintain Purchaser as an additional insured party with respect to its general liability and product liability insurance policies.

Section 5.12 Notice.

The Company shall provide Purchaser with written notice as promptly as practicable (and in any event within three (3) Business Days) after becoming aware of any of the following:

(a) any material breach or default by the Company of any covenant, agreement or other provision of this Agreement, or any other Transaction Document;

(b) any representation or warranty made by the Company in any of the Transaction Documents or in any certificate delivered to Purchaser pursuant hereto shall prove to be untrue, inaccurate or incomplete in any material respect on the date as of which made;

(d) the occurrence of a Put Option Event.

Section 5.13 Use of Proceeds.

The Company shall use proceeds received from Purchaser in support of the development of the Back-up Product and development and commercialization of the Product.

Section 5.14 Taxes.

(a) The Company shall timely file (taking into account all extensions of due dates) all Tax Returns required to be filed by it and will pay all Taxes required to be paid with such returns.

(b) Purchaser shall deliver to the Company and the Deposit Bank a properly completed IRS Form W-9 at Closing. The Company shall provide the Purchaser any reasonable assistance it may seek in obtaining an exemption or reduced rate from, or refund of, any U.S. federal withholding tax, if applicable. Neither party shall have any obligation to gross-up or otherwise pay the other party (including any assignee) any amounts with respect to source withholding. The parties furthermore agree to provide the Deposit Bank or any other party that is

a withholding agent for tax purposes any requested documentation necessary to establish an exemption from or reduction of applicable withholding taxes with respect to payments under the Deposit Agreement or this Agreement to the extent it is entitled to do so under the applicable law; and in the event the failure to provide such documentation results in the imposition of withholding, then such withholding shall be attributed to the party responsible for such failure.

Section 5.15 Right of First Negotiation with respect to Allowable Additional Product Financing.

In the event the Company intends, at any time and from time to time after the occurrence of an Allowable Additional Product Financing Trigger Event, to seek to obtain Allowable Additional Product Financing, the Company shall provide to Purchaser written notice (the “Financing Notice”) of such intention prior to engaging in any discussions with any Third Party with respect thereto, which Financing Notice shall include the proposed terms of such Allowable Additional Product Financing. Purchaser shall have two (2) Business Days following receipt of the Financing Notice to provide the Company written notice that it desires to enter into good faith negotiations with the Company regarding providing the Allowable Additional Product Financing. If Purchaser does not provide such written notice, the Company shall be free to negotiate and enter into an Allowable Additional Product Financing with a Third Party. If Purchaser provides such written notice, the Company shall negotiate exclusively, reasonably and in good faith with Purchaser concerning the terms of the Allowable Additional Product Financing for a period of [***] ([***]) days. In the event the Parties have not executed a binding term sheet for such Allowable Additional Product Financing within such [***]-day period, the Company shall be free to pursue an Allowable Additional Product Financing with one or more Third Parties on any terms, whether or not more favorable, without first coming back to Purchaser.

Section 5.16 Right of First Negotiation with respect to Allowable Back-up Product Financing.

In the event the Company intends, at any time and from time to time after the occurrence of an Allowable Additional Product Financing Trigger Event, to seek to obtain Allowable Back-up Product Financing, the Company shall provide to Purchaser written notice (the “Backup Financing Notice”) of such intention prior to engaging in any discussions with any Third Party with respect thereto, which Backup Financing Notice shall include the proposed terms of such Allowable Back-up Product Financing. Purchaser shall have two (2) Business Days following receipt of the Backup Financing Notice to provide the Company written notice that it desires to enter into good faith negotiations with the Company regarding providing the Allowable Back-up Product Financing. If Purchaser does not provide such written notice, the Company shall be free to negotiate and enter into an Allowable Back-up Product Financing with a Third Party. If Purchaser provides such written notice, the Company shall negotiate exclusively, reasonably and in good faith with Purchaser concerning the terms of the Allowable Back-up Product Financing for a period of [***] ([***]) days. In the event the Parties have not executed a binding term sheet for such Allowable Back-up Product Financing within such [***]-day period, the Company shall be free to pursue an Allowable Back-up Product Financing with one or more Third Parties on any terms, whether or not more favorable, without first coming back to Purchaser.

Section 5.17 Disposition of Back-up Product.

If, during the Revenue Interest Period, the Company Transfers any of its interest in the Back-up Product to a Third Party (other than in connection with a Permitted Secured Financing or a License Agreement (as defined above, except relating to Brigatinib) (a “Brigatinib Divestiture”), the Company shall, within 30 days of the closing of such Brigatinib Divestiture, create a separate account at the Deposit Bank (the “Brigatinib Divestiture Account”) and deposit into such Brigatinib Divestiture Account an amount equal to [***] percent ([***]%) of the net proceeds received by the Company on account of such Brigatinib Divestiture, subject to a maximum amount equal to the product of (a) the lesser of (i) such percent of the Company’s interest in the Backup Product subject to such Brigatinib Divestiture and (ii) [***]% (provided this percentage shall be [***]%, if the FDA suspends or prohibits sales of the Product), multiplied by (b) the Put/Call Price calculated as of the closing date of such Brigatinib Divestiture. At the end of each Fiscal Quarter thereafter, the Company shall include in the True-up Statement for such Fiscal Quarter a calculation of the Put/Call Price calculated as of the end of such Fiscal Quarter (the “Brigatinib Divestiture Collateral Amount”). Any amounts remaining in the Brigatinib Divestiture Account at the end of such Fiscal Quarter in excess of the Brigatinib Divestiture Collateral Amount shall be swept into the Company Concentration Account as soon as reasonable practicable, but in no event later than two (2) Business Days of Purchaser’s receipt of the True-Up Statement for such Fiscal Quarter.

ARTICLE VI

TERM AND TERMINATION

Section 6.01 Term and Termination Date.

Except as provided in this Section 6.01 and in Section 6.02, this Agreement shall terminate upon expiration of the Revenue Interest Period (the “Term”). If any payments are accrued hereunder on or prior to that date and are required to be made by one of the Parties hereunder, this Agreement shall remain in full force and effect until any and all such payments have been made in full, and (except as provided in Section 6.02) solely for that purpose. In addition, this Agreement shall sooner terminate if the Purchaser shall have exercised the Put Option in accordance with Section 5.07(a) or the Company shall have exercised the Call Option in accordance with Section 5.07(b), in each case upon the payment of the Put/Call Price. In addition, the Company may terminate this Agreement immediately upon Purchaser’s failure to pay the Additional Purchase Price on the Additional Purchase Price Closing Date or the Second Tranche Purchase Price on the Second Tranche Purchase Price Closing Date in accordance with Section 2.03(d) and Section 2.03(e), respectively. Upon expiration or termination of this Agreement in accordance with its terms, all right, title, and interest in and to the Assigned Interest shall automatically revert to Company, and Purchaser will have no further rights in the Assigned Interest, the Back-up Product True-Up Funds, or the Assigned Interest Collateral.

Section 6.02 Effect of Termination.

In the event of the termination of this Agreement pursuant to Section 6.01, this Agreement shall forthwith become void and have no effect without any liability on the part of any party hereto or its Affiliates, directors, officers, stockholders, partners, managers or members other than the provisions of this Section 6.02, Section 5.04, Section 5.05 (provided the Security Agreement and the Deposit Agreement shall each terminate as provided in those respective agreements), and Article VII hereof, which shall survive any termination as set forth in Section 6.01. Nothing contained in this Section 6.02 shall relieve any party from liability for any breach of this Agreement.

ARTICLE VII

MISCELLANEOUS

Section 7.01 Survival.

All representations and warranties made herein and in any other Transaction Document, any certificates or in any other writing delivered pursuant hereto or thereto shall survive the execution and delivery of this Agreement and shall continue to survive until the expiration or termination of this Agreement in accordance with Article VI.

Section 7.02 Specific Performance; Limitations on Damages.

(a) Each of the parties hereto acknowledges that the other party will have no adequate remedy at law if it fails to perform any of its obligations under any of the Transaction Documents. In such event, each of the parties agrees that the other party shall have the right, in addition to any other rights it may have (whether at law or in equity), to specific performance of this Agreement.

(b) Notwithstanding anything to the contrary in this Agreement, in no event shall either party be liable for special, indirect, incidental, punitive or consequential damages of the other party, whether or not caused by or resulting from the actions of such party or the breach of its covenants, agreements, representations or warranties hereunder, even if such party has been advised of the possibility of such damages.

Section 7.03 Notices.

All notices, consents, waivers and communications hereunder given by any party to the other shall be in writing (including facsimile transmission) and delivered personally, by telegraph, telecopy, telex or facsimile, by a recognized overnight courier, or by dispatching the same by certified or registered mail, return receipt requested, with postage prepaid, in each case addressed (with a copy by email):

If to Purchaser to:

PDL BioPharma, Inc.

932 Southwood Blvd.

Incline Village, NV 89451

Attention: General Counsel

Facsimile No.: (775) 832-8501

Email: [***]

with a copy to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, CA 90071-3197

Attention: Karen Bertero

Facsimile No.: (213) 229-7888

Email: kbertero@gibsondunn.com

If to the Company to:

ARIAD Pharmaceuticals, Inc.

26 Landsdowne Street

Cambridge, MA 02139

Attention: General Counsel

Facsimile No.: (617) 494-8144

with a copy to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC

666 Third Avenue

New York, New York 10017

Attention: Richard Gervase, Esq.

Fax: (212) 983-3115

Email: RGervase@Mintz.com

with a copy to:

Houlihan Lokey Capital, Inc.

245 Park Avenue, 17^th Floor

New York, New York 10167

Attention: Lionel Leventhal

Fax: [***]

Email: [***]

or to such other address or addresses as Purchaser or the Company may from time to time designate by notice as provided herein, except that notices of changes of address shall be effective only upon receipt. All such notices, consents, waivers and communications shall: (a) when posted by certified or registered mail, postage prepaid, return receipt requested, be effective three (3) Business Days after dispatch, unless such communication is sent trans-Atlantic, in which case they shall be deemed effective five (5) Business Days after dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective upon receipt by the transmitting party of confirmation of complete transmission, or (c) when delivered by a recognized overnight courier or in person, be effective upon receipt when hand delivered.

Section 7.04 Successors and Assigns.

The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Company shall not be entitled to assign any of its obligations and rights under the Transaction Documents without the prior written consent of Purchaser. Solely upon the consent of the Company (which consent may not be unreasonably withheld, delayed or conditioned), Purchaser may assign any of its obligations or rights under the Transaction Documents without restriction other than to another pharmaceutical company; provided, however, that, notwithstanding the foregoing, Purchaser may assign any of its obligations or rights under the Transaction Documents to a pharmaceutical company in connection with a change of control of Purchaser by virtue of a merger, sale or issuance of stock or the sale of all or substantially all of Purchaser’s assets; provided, further, that Purchaser, notwithstanding such assignment, will remain liable under Section 5.08(f) (solely to the extent of any amount subject thereto during the Fiscal Year as of the date of such assignment) and Section 7.05.

Section 7.05 Indemnification.

(a) The Company hereby indemnifies and holds Purchaser and its Affiliates and any of their respective partners, directors, managers, members, officers, employees and agents (each, a “Purchaser Indemnified Party”) harmless from and against any and all Losses (including all Losses in connection with any product liability claims or claims of infringement or misappropriation of any Intellectual Property rights of any Third Parties) incurred or suffered by any Purchaser Indemnified Party arising out of any breach of any representation, warranty or certification made by the Company in any of the Transaction Documents or the True-Up Statement or any breach of or default under any covenant or agreement by the Company pursuant to any Transaction Document or the True-Up Statement, including any failure by the Company to satisfy any of the Excluded Liabilities and Obligations.

(b) Purchaser hereby indemnifies and holds the Company, its Affiliates and any of their respective partners, directors, managers, officers, employees and agents (each, a “Company Indemnified Party”) harmless from and against any and all Losses incurred or suffered by a Company Indemnified Party arising out of any breach of any representation, warranty or certification made by Purchaser in any of the Transaction Documents or any breach of or default under any covenant or agreement by Purchaser pursuant to any Transaction Document.

(c) If any claim, demand, action or proceeding (including any investigation by any Governmental Authority) shall be brought or alleged against an indemnified party in respect of which indemnity is to be sought against an indemnifying party pursuant to the preceding paragraphs, the indemnified party shall, promptly after receipt of notice of the commencement of any such claim, demand, action or proceeding, notify the indemnifying party in writing of the commencement of such claim, demand, action or proceeding, enclosing a copy of all papers

served, if any; provided, that the omission to so notify such indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 7.05 unless, and only to the extent that, such omission results in the forfeiture of, or has a material adverse effect on the exercise or prosecution of, substantive rights or defenses by the indemnifying party. In case any such action is brought against an indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7.05 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding, an indemnified party shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the indemnifying party has assumed the defense of such proceeding and has failed within a reasonable time to retain counsel reasonably satisfactory to such indemnified party or (iii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interests between them based on the advice of such counsel. It is agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to local counsel where necessary) for all such indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

(d) Purchaser’s sole remedy shall be to recover any monetary damages associated with a breach, subject to the other terms and provisions contained in this Agreement.

Section 7.06 No Implied Representations and Warranties.

Each party acknowledges and agrees that, other than the representations and warranties specifically contained in any of the Transaction Documents, there are no representations or warranties of either party or any other Person either expressed or implied with respect to the Assigned Interests or the transactions contemplated hereby. Without limiting the foregoing, Purchaser acknowledges and agrees that (a) Purchaser and its Affiliates, together with its and its Affiliates’ representatives, have made their own investigation of the Product and the Intellectual

Property and are not relying on any implied warranties or upon any representation or warranty whatsoever as to the future amount or potential amount of the Assigned Interests or as to the creditworthiness of Company and (b) except as expressly set forth in any representation or warranty in a Transaction Document, Purchaser shall have no claim or right to indemnification pursuant to Section 7.05 (or otherwise) with respect to any information, documents or materials furnished to Purchaser, any of its Affiliates, or any of its or its Affiliates’ representatives, including any information, documents or material made available to Purchaser and its Affiliates and its Affiliates’ representatives in any data room, presentation, interview or any other form relating to the transactions contemplated hereby.

Section 7.07 Independent Nature of Relationship.

(a) The relationship between the Company and Purchaser is solely that of seller and purchaser, and neither Purchaser nor the Company has any fiduciary or other special relationship with the other or any of their respective Affiliates. Nothing contained herein or in any other Transaction Document shall be deemed to constitute the Company and Purchaser as a partnership, an association, a joint venture or other kind of entity or legal form for any purposes, including any Tax purposes.

(b) No officer or employee or agent of Purchaser will be located at the premises of the Company or any of its Affiliates, except in connection with an audit performed pursuant to Section 5.02. No officer, manager or employee of Purchaser shall engage in any commercial activity with the Company or any of its Affiliates other than as contemplated herein and in the other Transaction Documents.

(c) The Company and/or any of its Affiliates shall not at any time obligate Purchaser, or impose on Purchaser any obligation, in any manner or respect to any Person not a party hereto.

Section 7.08 Tax Treatment.

The Purchaser and the Company acknowledge (a) that, for U.S. federal income tax purposes, they agree to treat the rights and interests in and to the Assigned Interests that are transferred pursuant to this Agreement as indebtedness subject to the U.S. Treasury Regulations Section 1.1275-4 governing contingent payment debt instruments, (b) that the rights in respect of the Closing Purchase Price, the Additional Purchase Price, and each Second Tranche Purchase Price (if any) represent separate debt instruments for U.S. federal income tax purposes; and (c) that the Purchaser will report original issue discount and interest on each such debt instrument in accordance with the Company’s determination of both the “comparable yield” and the “projected payment schedule” for such debt instrument, which determination shall be subject to the prior good faith consultation by the Company with the Purchaser. For this purpose, the “comparable yield” and the “projected payment schedule” relating to the Assigned Interests may be obtained by contacting the Company at the address set forth in Section 7.03. The parties hereto agree not to take any position that is inconsistent with the provisions of this Section 7.08 on any tax return or in any audit or other administrative or judicial proceeding unless (i) the other parties to this Agreement have consented in writing to such actions, which consent shall not be unreasonably withheld or delayed, or (ii) the party that contemplates taking such an inconsistent position has been advised by nationally recognized counsel or tax advisors in writing that it is more likely than not that there is no “reasonable basis” (within the meaning of Treasury Regulation Section 1.6662- 3(b)(3)) for the position specified in this Section 7.08.

Section 7.09 Entire Agreement.

This Agreement, together with the Exhibits and Schedules hereto (which are incorporated herein by reference), and the other Transaction Documents constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements (including the Term Sheet), understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein (or in the Exhibits, Schedules or other Transaction Documents) has been made or relied upon by either party hereto. None of this Agreement, nor any provision hereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

Section 7.10 Amendments; No Waivers.

(a) This Agreement or any term or provision hereof may not be amended, changed or modified except with the written consent of the parties hereto. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the party against whom such waiver is sought to be enforced.

(b) No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 7.11 Interpretation.

When a reference is made in this Agreement to Articles, Sections, Schedules or Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”. Neither party hereto shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one party or the other.

Section 7.12 Headings and Captions.

The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

Section 7.13 Counterparts; Effectiveness.

This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

Section 7.14 Severability.

If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.

Section 7.15 Expenses.

The Company will pay all of its own fees and expenses in connection with entering into and consummating the transactions contemplated by this Agreement.

Section 7.16 Governing Law; Jurisdiction.

(a) This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the state of New York, without giving effect to the principles of conflicts of law thereof.

(b) Any legal action or proceeding with respect to this Agreement or any other Transaction Document may be brought in any state or federal court of competent jurisdiction in the State of New York, County of New York. By execution and delivery of this Agreement, each party hereto hereby irrevocably consents to and accepts, for itself and in respect of its property, generally and unconditionally the non-exclusive jurisdiction of such courts. Each party hereto hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of any Transaction Document.

(c) Each party hereto hereby irrevocably consents to the service of process out of any of the courts referred to in subsection (b) of this Section 7.16 in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Agreement. Each party hereto hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder or under any other Transaction Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a party to serve process on the other party in any other manner permitted by law.

Section 7.17 Waiver of Jury Trial.

Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, proceeding, claim or counterclaim arising out of or relating to any Transaction Document or the transactions contemplated under any Transaction Document. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to any Transaction Document.

Section 7.18 Release of Liens upon Certain Allowable Additional Product Financings.

Upon any sale by the Company or any of its Subsidiaries of Revenue Interests that constitutes an Allowable Additional Product Financing, the security interest granted to Purchaser with respect to the portion of the Revenue Interests sold pursuant thereto shall automatically terminate concurrently with the consummation of such Allowable Additional Product Financing; provided, however, that such security interest shall be automatically reinstated for the benefit of Purchaser upon the termination of such Allowable Additional Product Financing. In connection therewith, Purchaser agrees, at the request of the Company, and at the sole expense of the Company, to execute and deliver such documents as the Company may reasonably request to evidence such release.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.


COMPANY:	ARIAD PHARMACEUTICALS, INC.

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

PURCHASER:	PDL BIOPHARMA, INC.

	By:	/s/ John P. McLaughlin
	Name:	John P. McLaughlin
	Title:	Chief Executive Officer

[Signature Page to Revenue Interest Assignment Agreement]

DISCLOSURE SCHEDULES

The following schedules constitute the disclosure schedules of ARIAD Pharmaceuticals, Inc. (the “Company”) with respect to the Revenue Interest Assignment Agreement (the “Revenue Interest Assignment Agreement”), dated as of July 28, 2015, by and between the Company and PDL BioPharma, Inc. (“Purchaser”). Unless otherwise defined in these disclosure schedules, all capitalized terms used herein have the meanings ascribed to them in the Revenue Interest Assignment Agreement. Nothing in these disclosure schedules, including any attachments hereto, is intended to change the scope of the representations or warranties of the Company contained in the Revenue Interest Assignment Agreement or to create any covenant on the part of the Company. Other than expressly set forth herein, all descriptions of documents herein do not purport to be complete and are qualified by reference to the documents themselves. In no event shall any disclosure schedule hereunder be deemed to constitute an acknowledgement that such disclosure schedule is material to the business or financial condition of the Company unless the representation, warranty or covenant to which such disclosure schedule relates expressly calls for the Company to disclose information that is material to the business or financial condition of the Company, pursuant to Article III of the Revenue Interest Assignment Agreement.

Schedule 1.01

[***]

Schedule 3.04(a)

Licenses to Intellectual Property

[***]

Schedule 3.12(a)

Intellectual Property

The following intellectual property is all owned by the Company:

(i) PATENTS AND PENDING APPLICATIONS

[***]

(ii) TRADEMARKS

[***]

(iii) COPYRIGHTS

None

(iv) DOMAIN NAMES AND WEBSITES

Domain Names

[***]

Website

[***]

Schedule 3.14

Material Contracts

[***]

Schedule 3.15

Principal Place of Business

26 Landsdowne Street, Cambridge, Massachusetts 02139

Schedule 3.18

Matters Involving Taxes

None.

Exhibit A

Form of Security Agreement

[See attached.]

Exhibit B

Form of Assignment of Interests

[See attached.]

FORM OF ASSIGNMENT OF INTERESTS

ASSIGNMENT OF INTERESTS

This ASSIGNMENT OF INTERESTS (this “Assignment”), dated as of July 28, 2015, is made and entered into by and between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the “Assignor”), and PDL BioPharma, Inc., a Delaware corporation (the “Assignee”).

WHEREAS, the Assignor and the Assignee are parties to that certain Revenue Interest Assignment Agreement, dated even date herewith (the “Revenue Interest Assignment Agreement”), pursuant to which, among other things, the Assignor agrees to sell, assign, transfer and convey to the Assignee, and the Assignee agrees to purchase, acquire and accept from the Assignor, all of the Assignor’s right, title and interest in and to the Assigned Interests, as that term is defined in the Revenue Interest Assignment Agreement, for consideration in the amount and on the terms and conditions provided therein;

WHEREAS, the parties now desire to carry out the purposes of the Revenue Interest Assignment Agreement by the execution and delivery of this instrument evidencing the Assignor’s sale, assignment, transfer and conveyance, and Assignee’s purchase, acquisition and acceptance, of the Assigned Interests; and

WHEREAS, capitalized terms used and not defined herein have the meanings given to them in the Revenue Interest Assignment Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and of other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Assignment of Assigned Rights. The Assignor hereby sells, assigns, transfers and conveys to the Assignee free and clear of all Liens (other than Permitted Liens), and the Assignee hereby purchases, acquires and accepts, all of the Assignor’s rights and interest in and to the Assigned Interests on the Closing Date.

2. No Assumption of Obligations. The parties hereto acknowledge that the Assignee is acquiring only the Assigned Interests and is not assuming any debt, liability or other obligation of the Assignor or any of its Affiliates of whatever nature, whether presently existing or hereafter arising or asserted, known or unknown, or fixed or contingent, including, without limitation, the Excluded Liabilities and Obligations.

3. Further Assurances. Each party hereto shall execute, acknowledge and deliver to the other party any and all documents or instruments, and shall take any and all actions, reasonably required by such other party from time to time, to confirm or effect the matters set forth herein, or otherwise to carry out the purposes of the Revenue Interest Assignment Agreement and this Assignment and the transactions contemplated thereby and hereby.

4. Revenue Interest Assignment Agreement. This Assignment is entered into pursuant to, and is subject in all respects to all of the terms, provisions and conditions of, the Revenue Interest Assignment Agreement, and nothing herein shall be deemed to modify any of the representations, warranties, covenants and obligations of the parties thereunder.

5. Interpretation. In the event of any conflict or inconsistency between the terms, provisions and conditions of this Assignment and the Revenue Interest Assignment Agreement, the terms, provisions and conditions of the Revenue Interest Assignment Agreement shall govern.

6. Counterparts; Effectiveness. This Assignment may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Assignment shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

7. Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

8. Governing Law; Jurisdiction; Service of Process; Waiver of Jury Trial. This Assignment shall be subject to the terms set forth in Section 7.16 and Section 7.17 of the Revenue Interest Assignment Agreement with respect to governing law, jurisdiction, service of process and waiver of trial by jury.

[Signature Page to Follow]

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment to be duly executed by their respective authorized officers as of the date first above written.


ASSIGNOR:

ARIAD PHARMACEUTICALS, INC.

By:
Name:
Title:

ASSIGNEE:

PDL BIOPHARMA, INC.

By:
Name:
Title:

Exhibit C

Form of Legal Opinion

•

The Company is a corporation validly existing and in corporate good standing under the laws of the State of Delaware.

•

The Company has the corporate power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party, has taken all necessary corporate action to authorize the execution, delivery and performance of such Transaction Documents and has duly executed and delivered such Transaction Documents.

•

Each Transaction Document to which the Company is a party is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

•

The execution and delivery by the Company of the Transaction Documents to which it is a party do not, and the compliance by the Company with its obligations thereunder will not, (i) result in a violation of the Certificate of Incorporation and the Bylaws of the Company, (ii) result in a breach or default under any material agreement of the Company, (iii) result in a violation of any order binding upon the Company or (iv) to our knowledge, result in or require the creation or imposition of any lien or encumbrance upon any assets of the Company under any material agreement of the Company (for the avoidance of doubt, any liens and security interests created pursuant to the Transaction Documents are excluded from this clause), and any material contracts or binding orders may be identified in a backup officer’s certificate from the Company.

•

The execution and delivery by the Company of the Transaction Documents to which it is a party do not, and the compliance by each of the Company with its obligations thereunder will not, require any approval from or filing with any governmental authority of the United States, the State of New York, or the State of Delaware, other than the filings and records contemplated by the Transaction Documents to perfect security interests.

•

The execution and delivery by each of the Company of the Transaction Documents to which it is a party do not, and the compliance by the Company with its obligations thereunder will not, result in any violation of any federal law of the United States, the law of the State of New York or any regulation thereunder, or the law of the State of Delaware or any regulation thereunder, which, in our experience are applicable to, or relevant in connection with, transactions of the type provided for in the Transaction Documents.

•

Neither the Company nor any Subsidiary of the Company is an “investment company” within the meaning of, and subject to regulation under, the Investment Company Act of 1940, as amended.

•

The Security Agreement is effective to create in favor of the Purchaser, as security for the Secured Obligations, as defined in the Security Agreement, a security interest (the “Article 9 Security Interest”) in the Collateral as described in the Security Agreement to the extent that a security interest may be created therein under Article 9 of the New York UCC (the “Article 9 Collateral”).

•

Upon the proper filing of the UCC Financing Statement with the Delaware Secretary of State, the Article 9 Security Interest will be perfected to the extent that a security interest can be perfected by the filing of financing statements pursuant to Article 9 of the Delaware UCC.

•

The Article 9 Security Interest in the Joint Concentration Account (to the extent constituting Collateral as defined in the Security Agreement) and the Article 9 Security Interest in the Purchaser Concentration Account will be perfected by control upon the execution and delivery of the Security Agreement and the Deposit Agreement and will rank prior to any other security interest in the Joint Concentration Account (to the extent constituting Collateral as defined in the Security Agreement) and the Purchaser Concentration Account that is not perfected by control under Article 9 of the New York UCC.

Schedule A

Projected Net Product Revenues


2015	$	—
2016	$	—
2017	$	—
2018	$	—
2019	$	[***]
2020	$	[***]
2021	$	[***]
2022	$	[***]
2023	$	[***]
2024	$	[***]
2025	$	[***]
2026	$	[***]
2027	$	[***]
2028	$	[***]
2029	$	[***]
2030	$	[***]

Exhibit 10.3

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of July 28, 2015 (as the same may be supplemented, replaced or otherwise modified from time to time, this “Security Agreement”), is made by ARIAD PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and ARIAD PHARMA LTD. (“ARIAD UK”), a company organized under the laws of England with company number 06356675, in favor of PDL BIOPHARMA, INC., a Delaware corporation, as Purchaser (in such capacity, the “Purchaser”) under the Revenue Interest Assignment Agreement, dated as of July 28, 2015 (as amended, supplemented or otherwise modified from time to time, the “Assignment Agreement”) between the Company and the Purchaser.

RECITALS

WHEREAS, pursuant to the Assignment Agreement, the Purchaser has agreed to purchase from the Company the Assigned Interests (as defined in the Assignment Agreement) and other payment amounts required to be paid by the Company to Purchaser under the Assignment Agreement, upon the terms and conditions set forth therein; and

WHEREAS, it is a condition precedent to the purchase by Purchaser that the Company and ARIAD UK shall have executed and delivered this Security Agreement to the Purchaser;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. DEFINITIONS.

1.01 Definition of Terms Generally. Except as otherwise provided herein, all capitalized terms used herein but not defined herein shall have the meanings set forth in the Assignment Agreement; provided, that, all terms used herein and defined in the UCC shall have the same definitions herein as specified therein.

1.02 Definition of Certain Terms. As used herein, the following terms shall have the following meanings:

“ARIAD UK” has the meaning as defined in the preamble hereof.

“Assignment Agreement” has the meaning as defined in the preamble hereof.

“Collateral” has the meaning specified in Section 2 hereof.

“Company” has the meaning as defined in the preamble hereof.

“Notice of Breach” shall mean a written notice sent by Purchaser to the Company asserting that the Company has materially breached the Assignment Agreement and specifying with particularity the detailed basis for such assertion of breach, including the basis for Purchaser’s assertion that such breach is material.

“Purchaser” has the meaning as defined in the preamble hereof.

“Secured Obligations” shall mean the monetary “Obligations” defined in the Assignment Agreement; provided that the full and prompt payment of such monetary Obligations shall be deemed to have occurred if all such monetary Obligations (other than inchoate indemnity obligations under the Assignment Agreement for which no claim has been asserted against Purchaser as of the date of payment) have been paid in full in cash; provided, further, if a claim has been asserted against Purchaser on account of such indemnity obligation at the time of full payment of the monetary Obligations under the Assignment Agreement, full payment of such indemnity obligation shall be deemed to have occurred if the Company deposits into escrow an amount of cash to secure payment, if any, of such indemnity obligation, which amount and escrow terms shall be reasonably satisfactory to Purchaser and the Company.

“Security Agreement” has the meaning set forth in the preamble hereof.

“Security Agreement Remedies Period” shall mean any period of time during which

(a) any portion of the Secured Obligations (as such term is defined herein) remains due and unpaid;

(b) there has occurred and is continuing a material breach of any representation, warranty or covenant of the Assignment Agreement, which breach remains uncured for 30 days from the earlier of (i) the date that the Company has knowledge of such breach and (ii) receipt by the Company of a Notice of Breach from the Purchaser. During such 30-day cure period, the Parties shall negotiate in good faith in an attempt to resolve such material breach to Purchaser’s reasonable satisfaction. If such material breach is not curable within said 30-day period, but the Company is diligently and continuously attempting to cure such breach, then such 30-day cure period shall be extended for an additional 30-day period (but only so long as the Company is diligently and continuously attempting to cure such breach during such additional 30-day period). If such material breach is not cured by the time of the expiration of such cure period (including any extension of such cure period pursuant to the immediately preceding sentence), the Securities Agreement Remedies Period for purposes of this subsection (b) shall not commence until the fourth business day after the day that Purchaser notifies the Company in writing that such breach has not been cured by the expiration of the cure period and that Purchaser intends to exercise its rights and remedies under this Security Agreement; or

“UCC” shall mean the applicable Uniform Commercial Code as in effect at the time.

1.03 Rules of Interpretation. The rules of interpretation specified in the Assignment Agreement shall be applicable to this Security Agreement. References to “Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and Schedules, respectively, of this Security Agreement unless otherwise specifically provided. Any of the terms defined in this Section 1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference.

Section 2. GRANT OF SECURITY INTEREST.

2.01 As collateral security for the full and prompt payment of the Secured Obligations, (i) the Company hereby grants to the Purchaser a security interest in, and first lien on, all of the right, title and interest of the Company in the assets described in Section 2.01(a) – (g) below and the Proceeds thereof, (ii) ARIAD UK hereby grants to the Purchaser a security interest in, and first lien on, all of the right, title and interest of ARIAD UK in the assets described in Section 2.01(h) below and the Proceeds thereof, in each case now owned or hereafter acquired, (collectively, the “Collateral”):

a. the Revenue Interest;

b. the Joint Concentration Account, but limited to the funds that are required to be swept by the Deposit Bank into the Purchaser Concentration Account;

c. the Purchaser Concentration Account;

d. the Intellectual Property and the Patents;

e. the License Agreements, including, without limitation, (i) all rights to receive moneys due or to become due under or pursuant to a License Agreement, (ii) all rights to receive proceeds of any insurance, indemnity, warranty or guaranty claim with respect to a License Agreement, (iii) all claims for damages arising out of any breach of or default under a License Agreement, and (iv) all other rights to obtain the benefits of a License Agreement;

f. the Material Contracts;

g. the Regulatory Approvals, but excluding the Japan marketing authorization; and

h. the Regulatory Approval granted by the European Medicines Agency comprising the marketing authorization for the Product in Europe (the “European Marketing Authorisation”).

For the avoidance of doubt, the Collateral does not include any assets related to the Back-up Product.

Section 3. VALIDITY AND PERFECTION OF LIEN

3.01 Authorization To File Financing Statements. The Company hereby irrevocably authorizes the Purchaser at any time and from time to time to file any initial UCC financing statements, continuation statements, and amendments thereto describing the applicable Collateral, and which are otherwise in accordance with and consistent with the Assignment Agreement. ARIAD UK hereby irrevocably authorizes the Purchaser at any time and from time to time to make any filing with U.K. Companies House necessary under applicable law to perfect its security interest in the European Marketing Authorisation and which are otherwise in accordance with and consistent with the Assignment Agreement.

3.02 Validity of Lien. Upon (i) the closing of the Assignment Agreement and the receipt by the Company of the Closing Purchase Price, and (ii) the filing of appropriate financing statements with the office of the Delaware Secretary of State, the security interest granted by the Company to the Purchaser hereunder will be a legal, valid and perfected security interest in the Collateral to the extent that a security interest can be granted and perfected in the Collateral under Article 9 of the UCC by the filing of financing statements. Upon (i) the closing of the Assignment Agreement and the receipt by the Company of the Closing Purchase Price, and (ii) the registration of the security interest within the applicable timeframe at UK Companies House, the security interest granted by ARIAD UK to the Purchaser hereunder in respect of the European Marketing Authorisation will be a legal, valid and perfected security interest in the European Marketing Authorisation to the extent that a security interest can be granted and perfected in the European Marketing Authorisation under the law of England and Wales.

Section 4. COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company agrees, represents and warrants, as applicable, as follows:

4.01 Legal Status. (a) The Company is a corporation incorporated in the State of Delaware, (b) Schedule 4.01 sets forth the Company’s prior organizational names within the previous five years and chief executive office, (c) the Company’s exact legal name is that set forth on the signature page hereof, and (d) ARIAD UK is a company incorporated in England and Wales.

4.02 Nature of Collateral. For the 12 months ended December 31, 2014 and the three months ended March 31, 2015, no amounts were paid by account debtors or other persons obligated on the Collateral that are Governmental Authorities subject to the Federal Assignment of Claims Act.

4.03 Organization. In the event that either of the Company or ARIAD UK changes its type of organization, jurisdiction of organization, or other legal structure, the Company shall notify the Purchaser in writing not less than ten (10) days after any such change.

4.04 Name Change. In the event that either of the Company or ARIAD UK changes its name, the Company shall notify the Purchaser in writing not less than ten (10) days after such change.

4.05 Priority Lien on Purchaser Concentration Account. In connection with the Purchaser Concentration Account, the Company shall cause the depository bank to enter into a Deposit Agreement in form and substance reasonably satisfactory to the Purchaser, such that the Purchaser shall be granted a perfected lien on the Purchaser Concentration Account ranking prior to any other lien on the Purchaser Concentration Account that may be created pursuant to the UCC.

4.06 Further Assurances; UCC Termination. The Company and ARIAD UK agree to take any other action reasonably requested by the Purchaser to ensure the attachment, perfection and first priority of the lien and security interest of the Purchaser in the Collateral. At such time, if any, that the Secured Obligations are indefeasibly paid in full in cash to the Purchaser, Purchaser agrees promptly thereafter to terminate its security interest in the Collateral, including the filing of UCC termination statements.

4.07 Instruments, Promissory Notes and Tangible Chattel Paper. If the Company shall at any time hold or acquire any instruments, promissory notes or tangible chattel paper in an aggregate principal amount of more than $[***] payable to the Company under or in connection with any account, the Company shall forthwith endorse, assign and deliver the same to the Purchaser, accompanied by such instruments of transfer or assignment duly executed in blank as the Purchaser may from time to time specify to be held by the Purchaser as Collateral pursuant to this Agreement.

4.08 Pledged Stock. If the Company shall at any time hold or acquire any shares of capital stock or other equity interest granted to the Company by an account debtor to settle an account in an aggregate principal amount of more than $[***] (the “Pledged Stock”), the Company shall forthwith deliver the same to the Purchaser, accompanied by an executed blank stock power and such other instruments of transfer or assignment duly executed in blank as the Purchaser may from time to time specify to be held by the Purchaser as Collateral pursuant to this Agreement.

Section 5. POWER OF ATTORNEY. Upon the commencement of a Security Agreement Remedies Period, the Company and ARIAD UK hereby constitute and appoint the Purchaser, with full power of substitution, as their true and lawful attorney-in-fact with full power and authority in the place and stead of the Company and ARIAD UK and in the name of the Company and ARIAD UK, or in its own name, for the purpose of performing the obligations of the Company and ARIAD UK hereunder, including, without limitation,

(i)

to ask for, demand, collect, sue for, recover, protect, preserve or realize upon the Collateral;

(ii)

to receive and direct payment of, or endorse and collect any drafts or other instruments, documents or chattel paper in respect of the Collateral;

(iii)

to file any claims or take any actions or institute any proceedings that Purchaser in good faith reasonably deems necessary or desirable for the collection of the Collateral or otherwise to enforce the rights of Purchaser with respect to the Collateral;

(iv)

to pay or discharge taxes or liens levied or placed upon the Collateral;

(v)

exercise all rights of the Company as owner of any Pledged Stock, including, without limitation, the right to sign any and all amendments, instruments, certificates, proxies, and other writings and exercise all voting and consent rights with respect to the Pledged Stock;

(vi)

in connection with any sale or other disposition of Collateral authorized by law or pursuant to this Security Agreement, execute any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral;

provided, that, the Purchaser shall not exercise any rights under the power of attorney provided for in this Section 5 on and after the termination of the Security Agreement Remedies Period.

5.01 No Duty to Act. (a) The powers conferred on the Purchaser by this Section are solely to protect the Purchaser’s interests in the Collateral and do not impose any duty to exercise any such powers. The Purchaser shall not be responsible for any act or failure to act in good faith, except for the Purchaser’s own gross negligence or willful misconduct.

(b) Anything herein to the contrary notwithstanding, the Company and ARIAD UK shall remain liable under each contract or agreement comprising the Collateral provided by it to be observed or performed by the Company or ARIAD UK thereunder. The Purchaser shall not have any obligation or liability under any such contract or agreement by reason of or arising out of this Security Agreement or the receipt by the Purchaser of any payment relating to any of the Collateral, nor shall the Purchaser be obligated in any manner to perform any of the obligations of the Company or ARIAD UK under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Purchaser in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Purchaser or to which the Purchaser may be entitled at any time or times.

Section 6. REMEDIES. During the Security Agreement Remedies Period, until the Secured Obligations are paid in full, the Purchaser may exercise and enforce, in any order, (i) each and all of the rights and remedies available to a secured party upon default under the UCC or other applicable law, (ii) each and all of the rights and remedies available to it under the Assignment Agreement or any other Transaction Documents, and (iii) each and all of the following rights and remedies:

(a) Notification of Account Debtors. At the request of the Purchaser, the Company shall notify any account debtors and other persons obligated on any of the Collateral of the lien of the Purchaser on the Collateral and shall direct such account debtors that payment thereof is to be made directly to the Purchaser or to any financial institution designated by the Purchaser as the Purchaser’s agent. Without notice to the Company or ARIAD UK, the Purchaser may notify any or all account debtors and obligors on any accounts or other claims constituting Collateral and may direct, demand and enforce payment thereof directly to the Purchaser.

(b) Disposition of Collateral. The Purchaser may sell, lease, license or otherwise dispose of or transfer any or all of the Collateral or any part thereof in one or more parcels at public foreclosure sale or in a private foreclosure sale or transaction, on any exchange or market or at the Purchaser’s offices or at any other location, for cash, on credit or for future delivery, and may enter into all contracts necessary or appropriate in connection therewith,

without any notice whatsoever unless required by law. Where permitted by law, the Purchaser may be the purchaser at any such sale. The Company and ARIAD UK agree that at least ten (10) calendar days’ written notice to the Company and ARIAD UK of the time and place of any public foreclosure sale of Collateral, or the time after which any private foreclosure sale of Collateral is to be made, shall be commercially reasonable. The giving of notice of any such sale or other disposition shall not obligate the Purchaser to proceed with the sale or disposition, and any such sale or disposition may be postponed or adjourned from time to time, without further notice.

6.02 Application of Proceeds. All proceeds received by the Purchaser in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Purchaser against the Secured Obligations in the following order of priority:

First, to the payment of all reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Purchaser and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Purchaser in connection therewith;

Second, to the payment of all other Secured Obligations then due and payable in the manner and order provided in the Assignment Agreement; and

Third, the reminder of such proceeds shall be paid to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Section 7. STANDARDS FOR EXERCISING REMEDIES. The powers conferred on the Purchaser hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. The Purchaser shall not be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral or to take any other action whatsoever with regard to the Collateral or any part thereof. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Purchaser shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or to protect, preserve, vote or exercise any rights pertaining to any Collateral. The powers conferred on the Purchaser hereunder are solely to protect the Purchaser’s interests in the Collateral and shall not impose any duty upon Purchaser to exercise any such powers. The Purchaser shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Purchaser accords its own property or if it selects, with reasonable care, a custodian to hold such Collateral on its behalf.

Section 8. WAIVERS BY COMPANY; OBLIGATIONS ABSOLUTE.

8.01 Specific Waivers. The Company and ARIAD UK waive demand, notice, protest, notice of acceptance of this Security Agreement, notice of any purchase pursuant to the terms of the Assignment Agreement, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description other than those required pursuant to the Assignment Agreement or any other Transaction Documents to which the Company is a party.

8.02 Obligations Absolute. All rights of the Purchaser hereunder, the grant of a security interest in respect of the Collateral, and all obligations of the Company and ARIAD UK hereunder (including in respect of the Limited Guaranty) shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Assignment Agreement, any other Transaction Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing; any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Assignment Agreement, any other Transaction Document, or any other agreement or instrument; any exchange, release or non-perfection of any lien on other collateral, or any release or amendment or waiver of or consent under or departure from or any acceptance of partial payment thereon or settlement, compromise or adjustment of any Secured Obligation or of any guarantee, securing or guaranteeing all or any of the Secured Obligations; or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company in respect of the Secured Obligations or this Security Agreement other than the prompt and complete performance and payment in full of the Secured Obligations.

Section 9. NO MARSHALLING. The Purchaser shall not be required to marshal any present or future Collateral or to resort to the Collateral in any particular order, and all of its rights hereunder and in respect of the Collateral shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, the Company and ARIAD UK hereby agree that they shall not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Purchaser’s rights under this Security Agreement or under any of the Transaction Documents and, to the extent that they lawfully may, the Company and ARIAD UK hereby irrevocably waive the benefits of all such laws.

Section 10. REINSTATEMENT. The obligations of the Company and ARIAD UK pursuant to this Security Agreement shall continue to be effective or automatically be reinstated, as the case may be, if at any time payment of any of the Secured Obligations is rescinded or otherwise must be restored or returned by the Purchaser upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or ARIAD UK, all as though such payment had not been made.

Section 11. MISCELLANEOUS.

11.01 Notices. All notices, requests and demands to or upon the Purchaser, the Company hereunder shall be delivered as provided in the Assignment Agreement. All notices, requests and demands to or upon ARIAD UK shall be delivered to the Company as provided in the Assignment Agreement.

11.02 Entire Agreement. This Security Agreement and the other Transaction Documents constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements (including the Term Sheet), understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Security Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein or in the other Transaction Documents has been made or relied upon by either party hereto. None of this Security Agreement, nor any provision hereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

11.03 Amendments; No Waivers.

(a) This Security Agreement or any term or provision hereof may not be amended, changed or modified except with the written consent of the parties hereto. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the party against whom such waiver is sought to be enforced.

11.04 Rights and Remedies Cumulative. The rights provided for in this Security Agreement and the other Transaction Documents are cumulative and are not exclusive of any other rights, powers or privileges or remedies provided by law or in equity, or under any other instrument, document or agreement. The Purchaser may exercise and enforce each right and remedy available to it either before or concurrently with or after, and independently of, any exercise or enforcement of any other right or remedy of the Purchaser against any Person or property. All such rights and remedies shall be cumulative, and no one of them shall exclude or preclude any other.

11.05 Interpretation.

When a reference is made in this Security Agreement to Articles, Sections, Schedules or Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit to this Security Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”. None of the parties hereto shall be or be deemed to be the drafter of this Security Agreement for the purposes of construing this Security Agreement against any party.

11.06 Headings and Captions.

The headings and captions in this Security Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Security Agreement.

11.07 Counterparts; Effectiveness.

This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Security Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

11.08 Severability.

If any provision of this Security Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.

11.09 Governing Law; Jurisdiction; Service of Process.

(a) This Security Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the state of New York, without giving effect to the principles of conflicts of law thereof.

(b) Any legal action or proceeding with respect to this Security Agreement or any other Transaction Document may be brought in any state or federal court of competent jurisdiction in the State of New York, County of New York. By execution and delivery of this Security Agreement, each party hereto hereby irrevocably consents to and accepts, for itself and in respect of its property, generally and unconditionally the non-exclusive jurisdiction of such courts. Each party hereto hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of any Transaction Document.

(c) Each party hereto hereby irrevocably consents to the service of process out of any of the courts referred to in subsection (b) of this Section in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Security Agreement. Each party hereto hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder or under any other Transaction Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a party to serve process on the other party in any other manner permitted by law.

11.10 Waiver of Jury Trial. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, proceeding, claim or counterclaim arising out of or relating to any Transaction Document or the transactions contemplated under any Transaction Document. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to any Transaction Document.

11.11 Counterparts. This Security Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

11.12 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Security Agreement.

11.13 Survival of Agreement. All representations, warranties and agreements made by or on behalf of any party in this Security Agreement and in the other Transaction Documents shall survive the execution and delivery hereof or thereof and the payment of the Secured Obligations. In addition, notwithstanding anything herein or under applicable law to the contrary, the provisions of this Security Agreement and the other Transaction Documents relating to the payment of costs and expenses shall survive the payment in full of the Secured Obligations and any termination of this Security Agreement or any of the other Transaction Documents.

11.14 Expenses.

(a) The Company agrees to pay upon demand the amount of any and all reasonable out-of-pocket expenses of the Purchaser, including the reasonable fees, disbursements and other charges of counsel, which the Purchaser may incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Purchaser hereunder, or (iii) the failure by the Company or ARIAD UK to perform or observe any of the provisions hereof.

(b) The agreements in this Section shall survive repayment of the Secured Obligations.

11.15 Binding Effect. This Security Agreement is binding upon the Company, ARIAD UK, and the Purchaser and their respective successors and permitted assigns, and shall inure to the benefit of the Company, ARIAD UK, and the Purchaser and their respective successors and permitted assigns, except that neither the Company nor ARIAD UK shall have any right to assign or transfer its rights or obligations hereunder or any interest herein, except as specifically permitted by the Assignment Agreement, without the prior written consent of the Purchaser (and any such assignment or transfer shall be void).

11.16 Consistency with Assignment Agreement. Notwithstanding anything contained herein to the contrary, in the event of any conflict or inconsistency between the terms of this Security Agreement and the Assignment Agreement, the terms of the Assignment Agreement shall control, including, without limitation, provisions in the Assignment Agreement relating to Allowable Additional Product Financing and Allowable Back-up Product Financing, and the lien rights of the Purchaser in respect of Permitted Secured Financings.

11.17 Limited Recourse Guaranty by ARIAD UK. ARIAD UK hereby irrevocably, absolutely and unconditionally guarantees (the “Limited Guaranty”) to Purchaser the full, prompt and complete payment when due of the Secured Obligations, provided that recourse to ARIAD UK under or in respect of such Limited Guaranty is limited to ARIAD UK’s

right, title and interest in the Collateral and the rights and remedies set forth in the Transaction Documents in respect of the Collateral, and no person or entity shall have recourse to ARIAD UK, or any of the assets of ARIAD UK, under or in respect of such Limited Guaranty other than ARIAD UK’s right, title and interest in the Collateral. The Limited Guaranty is a guaranty of payment and performance (and not collection). The obligations of ARIAD UK are limited solely to the obligations contained in this Security Agreement, and nothing contained herein or otherwise shall be deemed as constituting an assumption or guaranty by ARIAD UK of any other obligations of the Company under this Security Agreement, the Assignment Agreement, or the other Transaction Documents, all of which shall be non-recourse to ARIAD UK.

11.18 Unconditional Character of Obligations of ARIAD UK.

(a) The obligations of ARIAD UK herein, and the rights of Purchaser to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting the Company or any other Person; (ii) any failure by Purchaser or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Transaction Documents, or any document or instrument relating thereto; (iii) the release of the Company or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Transaction Documents, or any of the Secured Obligations, by operation of law or otherwise; or (iv) the release in whole or in part of any collateral or guarantee for or of any or all Secured Obligations or for any other obligation pursuant to the Assignment Agreement or any portion thereof.

(b) ARIAD UK hereby expressly and irrevocably waives: (i) the right to require Purchaser to proceed against the Company or any other Person, to proceed against or exhaust any Collateral or guarantee or to pursue any other remedy in Purchaser’s power whatsoever and the right to have the property of the Company or any other Person first applied to the discharge of the Secured Obligations; (ii) all rights and benefits under applicable law purporting to reduce a guarantor’s obligations in proportion to the obligation of the principal or providing that the obligation of a surety or guarantor must neither be larger nor in other respects more burdensome than that of the principal; (iii) the benefit of any statute of limitations affecting the Secured Obligations or any Person’s liability hereunder or under the Transaction Documents, including ARIAD UK; (iv) any right to assert against Purchaser any defense (legal or equitable), set-off, counterclaim and other right that ARIAD UK may now or any time hereafter have against the Company or any other Person; (v) presentment, demand for payment or performance (including diligence in making demands hereunder), notice of dishonor or nonperformance, protest, acceptance and notice of acceptance of this Agreement, and all other notices of any kind, including (A) notice of the existence, creation or incurrence of the security interest created herein or any new or additional Secured Obligations, (B) notice of any action taken or omitted by Purchaser in reliance hereon, (C) notice of any default by the Company or any other Person, (D) notice that any portion of the Secured Obligations is due, (E) notice of any action against the Company or any other Person, or any enforcement of other action with respect to any Collateral or under any other guarantee, or the assertion of any right of Purchaser hereunder; (vi) any rights, defenses and other benefits ARIAD UK may have by reason of any failure of Purchaser to hold a

commercially reasonable public or private foreclosure sale or otherwise to comply with applicable law in connection with a disposition of Collateral; and (vii) all defenses that at any time may be available to ARIAD UK by virtue of any valuation, stay, moratorium or other law now or hereafter in effect and ALL RIGHTS AND DEFENSES THAT ARE OR MAY BECOME AVAILABLE TO ARIAD UK BY REASON OF APPLICABLE LAW, other than payment in full in cash of the Secured Obligations.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written.


ARIAD PHARMACEUTICALS, INC.

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

ARIAD PHARMA LTD.

By:		/s/ Daniel M. Bollag
Name:		Daniel M. Bollag
Title:		Senior Vice President of Regulatory Affairs and Quality

PDL BIOPHARMA, INC.

By:		/s/ John P. McLaughlin
Name:		John P. McLaughlin
Title:		Chief Executive Officer

SCHEDULE 4.01

PRIOR NAMES AND CHIEF EXECUTIVE OFFICE

Prior names of the Company during the last five (5) years: NONE

Chief Executive Office of the Company during the last five (5) years:

26 Landsdowne Street

Cambridge, Massachusetts 02139-4234

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 September 30, 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: November 6, 2015						/s/ Harvey J. Berger, M.D
						Harvey J. Berger, M.D.
						Chairman and Chief Executive Officer

Date: November 6, 2015						/s/ Edward M. Fitzgerald
						Edward M. Fitzgerald
						Executive Vice President,
						Chief Financial Officer