-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QhzFpTOBWVw/T0o4RQx4Uahr10hsYzJFPiWX3qZkmwUpUUpL+cGBlBhDZIos8IgV ZT2ssVENwh7SkKymI+yMaw== 0001157523-06-004988.txt : 20060510 0001157523-06-004988.hdr.sgml : 20060510 20060510153741 ACCESSION NUMBER: 0001157523-06-004988 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060510 DATE AS OF CHANGE: 20060510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIAD PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000884731 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 223106987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21696 FILM NUMBER: 06825823 BUSINESS ADDRESS: STREET 1: 26 LANDSDOWNE ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6174940400 MAIL ADDRESS: STREET 1: 26 LANDSDOWNE CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 a5144411.htm ARIAD PHARMACEUTICALS 10-Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission File Number: 0-21696

ARIAD Pharmaceuticals, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
22-3106987
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 

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 o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “large accelerated filer and accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o  Accelerated filer x  Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b - 2 of the Exchange Act).
Yes o  No x
 
The number of shares of the Registrant’s common stock outstanding as of April 28, 2006 was 62,097,526.
 
 
 
ARIAD PHARMACEUTICALS, INC.

TABLE OF CONTENTS
 
     
     
   
 
     
   
 
     
   
 
     
 
     
     
     
     
     
     
     
     
 
     
 
 


 
     
         
         
     
 
  
     
         
         
               
         
               
         
         
         
               
         
     
               
         
               
         
               
     
               
           
           
     
         
         
         
         
         
               
         
               
         
               
         
               
         
               
             
         
         
         
     
     
               
         
               
     
               
 
 
 
 
   
       
 
          
     
               
 
              
             
         
         
 
              
         
 
              
 
          
     
               
 
          
         
         
     
               
         
               
 
          
 
               
 
          
 
               
               
         

 
 
     
       
         
           
             
 
             
         
         
         
             
     
       
     
         
         
       
         
         
               
     
               
             
         
     
     
     
               
       
               
             
     
         
               
       
               
     
         
               
     
 
 


In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of March 31, 2006, the results of operations for the three-month periods ended March 31, 2006 and 2005 and cash flows for the three-month periods ended March 31, 2006 and 2005. The results of operations for the three-month period ended March 31, 2006 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, which includes consolidated financial statements and notes thereto for the years ended December 31, 2005, 2004 and 2003.









 
 







 


 
 



 

















This case was tried before a jury in the U.S. District Court from April 10, 2006 through April 28, 2006. After deliberations, on May 4, 2006, the jury rendered a verdict in favor of the Plaintiffs by finding that the NF-kB ‘516 Claims asserted in the lawsuit are valid and infringed by Lilly through sales of Evista and Xigris in the United States. The jury awarded damages to the Plaintiffs in the amount of approximately $65.2 million, based on the jury's determination of a reasonable royalty rate of 2.3% to be paid by Lilly to the Plaintiffs based on U.S. sales of Evista and Xigris from the date of the filing of the lawsuit on June 25, 2002 through February 28, 2006. The jury awarded further damages on an ongoing basis, in amounts to be determined, equal to 2.3% of U.S. sales of Evista and Xigris through the year 2019, when the patent expires.





 
 


The timing and ultimate outcome of the reexamination by the PTO of the Merged Requests, the Lilly litigation (including the pending bench trial and any appeal of the jury verdict and court’s ruling in the bench trial) cannot be determined at this time, and, as a result, no determination can be made with respect to whether the PTO will allow the claims of the ‘516 Patent in the reexamination proceeding of the Merged Requests, nor can any final determination be made with respect to the validity or infringement of the claims of the ‘516 Patent in the Lilly litigation and the Amgen litigation, nor can management predict whether the damages awarded by the jury in the U.S. District Court in the Lilly litigation will be upheld, eliminated or limited. Although the Company has prevailed at trial in the Lilly litigation, the damages the Company has been awarded by the jury may be eliminated or limited by an adverse finding upon appeal or in the event that the claims of the ‘516 Patent are invalidated by the PTO.


We are engaged in the discovery and development of breakthrough medicines to treat cancers by regulating cell signaling with small molecules. We are developing a comprehensive approach to patients with cancer that addresses the greatest medical need - aggressive and advanced-stage cancers for which current treatments are inadequate. Our goal is to build a fully integrated oncology company focused on novel, molecularly targeted therapies to treat solid tumors and hematologic cancers, as well as the spread of primary tumors to distant sites.

Our lead cancer product candidate, AP23573, has been or is being studied in multiple clinical trials in patients with various types of cancers, including sarcomas, hormone refractory prostate cancer, endometrial cancer, brain cancer and leukemias and lymphomas. Medinol Ltd. is also developing stents to deliver AP23573 to prevent reblockage at sites of vascular injury following stent-assisted angioplasty.

We have a focused drug discovery program centered on small-molecule, molecularly targeted therapies and cell-signaling pathways implicated in cancer. We also have an exclusive license to pioneering technology and patents related to certain NF-κB cell-signaling activity, which may be useful in treating certain diseases. Additionally, we have developed a proprietary portfolio of cell-signaling regulation technologies, our ARGENT technology, to control intracellular processes with small molecules, which may be useful in the development of therapeutic vaccines and gene and cell therapy products, and which provide versatile tools for applications in cell biology, functional genomics and drug discovery research.

Since our inception in 1991, we have devoted substantially all of our resources to our research and development programs. We receive no revenue from the sale of pharmaceutical products, and most of our revenue to date was received in connection with a joint venture we had with a major pharmaceutical company from 1997 to 1999. Except for the gain on the sale of our fifty percent interest in that joint venture in December 1999, which resulted in net income for fiscal 1999, we have not been profitable since inception. We expect to incur substantial and increasing operating losses for the foreseeable future, primarily due to costs associated with our pharmaceutical product development programs, including costs for clinical trials and product manufacturing, personnel and our intellectual property. We expect that losses will fluctuate from quarter to quarter and that these fluctuations may be substantial. At March 31, 2006, we had an accumulated deficit of $262.5 million and cash, cash equivalents and marketable securities of $68.1 million and working capital of $53.1 million.

General

Our operating losses are primarily due to the costs associated with our pharmaceutical product development programs, personnel and intellectual property protection and enforcement. As our product development programs progress, we incur significant costs for toxicology and pharmacology studies, product development, manufacturing, clinical trials and regulatory support. These costs can vary significantly from quarter to quarter depending on the number of product candidates in development, the stage of development of each product candidate, the number of patients enrolled in and complexity of clinical trials and other factors. Costs associated with our intellectual property include legal fees and other costs to prosecute, maintain, protect and enforce our intellectual property, which can fluctuate from quarter to quarter depending on the status of patent issues being pursued.
 
12

Because we currently receive no revenue from the sale of pharmaceutical products and receive only limited license revenue, we have relied primarily on the capital markets as our source of funding. In August 2005, we raised approximately $57.9 million through an underwritten public offering of our common stock. We also utilize long-term debt to supplement our funding, particularly as a means to fund investment in property and equipment and infrastructure needs. In addition, we may seek funding from collaborations with pharmaceutical, biotechnology and/or medical device companies for development and commercialization of our product candidates. These collaborations may take the form of licensing arrangements, co-development or joint venture arrangements or other structures. If funding from these various sources is unavailable on reasonable terms, we may be required to reduce our operating expenses in order to conserve cash and capital by delaying, scaling back or eliminating one or more of our product development programs.

Critical Accounting Policies and Estimates

Our financial position and results of operations are affected by subjective and complex judgments, particularly in the areas of the carrying value of intangible assets, deferred compensation benefits for executives, and stock-based compensation.

At March 31, 2006, we reported $4.6 million of intangible assets consisting of capitalized costs related primarily to purchased and issued patents, patent applications and licenses, net of accumulated amortization. These costs are being amortized over the estimated useful lives of the underlying patents or licenses. Changes in these lives or a decision to discontinue using the technologies could result in material changes to our balance sheet and statements of operations. For example, during the three-month period ended March 31, 2006, we expensed $173,000 of unamortized costs related to certain intangible assets which we are not actively pursuing any longer. We have concluded that the carrying value of our remaining intangible assets is not currently impaired because such assets are utilized in our product development programs and/or continue to be viable technologies for collaborations or licensing efforts which we continue to pursue. If we were to abandon the underlying technologies or terminate our efforts to pursue collaborations or license agreements, we may be required to write off a portion of the carrying value of our intangible assets. The net book value as of March 31, 2006 of intangible assets related to our NF-êB technology is $496,000. If the patentability of our NF-κB patents is successfully challenged and such patents are subsequently narrowed, invalidated or circumvented, we may be required to write off some or all of the net book value related to such technology.

Under our deferred executive compensation plans, we are required to adjust our recorded obligations to our employees on a periodic basis to reflect fair value based on the value of certain underlying mutual funds. Fluctuations in the fair value of such mutual funds can result in uneven expense charges or credits to our statements of operations. If, for example, the market prices of the underlying mutual funds were 10% higher at March 31, 2006, we would have recognized an additional $99,000 in compensation expense in the three-month period ended March 31, 2006.

In determining expense related to stock-based compensation, we utilize the Black-Scholes valuation model to estimate the fair value of stock options granted to employees, consultants and directors. Application of the Black-Scholes valuation model requires the use of factors such as the market value and volatility of our common stock, a risk-free discount rate and an estimate of the life of the option contract. Fluctuations in these factors can result in adjustments to our statements of operations. If, for example, the market value of our common stock, its volatility, or the expected life of stock options granted in the three-month period ended March 31, 2006 were 10% higher or lower than used in the valuation of such stock options, our stock-based compensation expense for the three-month period ended March 31, 2006 would have increased or decreased by up to $12,600, $7,800, or $5,000, respectively.

13
 
Results of Operations

For the three months ended March 31, 2006 and 2005

Revenue

We recognized license revenue of $229,000 in the three month period ended March 31, 2006, compared to $304,000 in the corresponding period in 2005. The decrease in license revenue was due primarily to the expected timing of receipt of future milestone payments pursuant to our agreement with Medinol Ltd., in accordance with our revenue recognition policy.

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $1.0 million, or 10%, to $11.7 million in the three month period ended March 31, 2006, compared to $10.7 million in the corresponding period in 2005. 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 United States Food and Drug Administration, or FDA, in an Investigational New Drug application, or 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 a New Drug Application, or NDA (or similar filings with regulatory agencies outside the United States).

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

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 laboratory studies, to develop manufacturing processes and manufacture the product candidate, to conduct and manage clinical trials and similar costs related to our clinical and preclinical studies. 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 maintain our facility, equipment and overhead and similar costs of our research and development efforts. These costs apply to work on our clinical and preclinical candidates as well as our discovery research efforts. These costs are not tracked by product candidate because the number of product candidates and projects in R&D may vary from time to time and because we utilize internal resources across multiple projects at the same time.
 
14
 
Direct external expenses are further categorized as costs for clinical programs and costs for preclinical programs. Preclinical programs include product candidates undergoing toxicology, pharmacology, metabolism and efficacy studies and manufacturing process development required before testing in humans can begin. 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 research and development expenses for the three month period ended March 31, 2006, as compared to the corresponding period in 2005, were as follows:
 
   
Three months ended March 31,
  
Increase/
  
In thousands
  
2006
  
2005
  
(decrease)
  
Direct external expenses:
              
   Clinical programs
  
$
4,183
  
$
6,150
  
$
(1,967
)
Preclinical programs
    
135
    
437
    
(302
)
All other R&D expenses
    
7,356
    
4,067
    
3,289
  
   
$
11,674
  
$
10,654
  
$
1,020
  

AP23573, our lead product candidate which is in Phase 2 clinical trials, was our only clinical program in 2006 and 2005. Direct external expenses for AP23573 decreased by $2.0 million in the three-month period ended March 31, 2006, as compared to the corresponding period in 2005, due primarily to decreased costs in manufacturing related costs of $1.3 million and clinical trials costs of $500,000. The decrease in manufacturing related costs was due to the completion in 2005 of certain product and process development studies and the timing of production runs of AP23573. The decrease in clinical trial costs is directly related to a decrease in number of patients on trial during the period driven by successful conclusion in 2005 of enrollment in several clinical trials. Through March 31, 2006, we have incurred a total of approximately $44.7 million in direct external expenses for AP23573 from the date it became a clinical program. We expect that our direct external costs for AP23573 will increase during 2006 as we expand our enrollment in on-going clinical trials and prepare to initiate a Phase 3 trial for this product candidate.

Preclinical programs consist primarily of our oncogenic kinase inhibitor program and our bone-targeted mTOR inhibitor program. Direct external expenses on preclinical programs will increase or decrease from period to period depending on the status and number of programs in this stage of development and the mix between external and internal efforts applied to such programs. Direct external expenses for preclinical programs decreased by $302,000 in the three month period ended March 31, 2006 as compared to the corresponding period in 2005 due primarily to the completion of certain pharmacology and toxicology studies conducted by outside contract laboratories in 2005. We expect that our direct external expenses for preclinical programs will increase during 2006 as we continue to move these programs forward in development.

All other R&D expenses increased by $3.0 million in the three month period ended March 31, 2006 as compared to the corresponding period in 2005 due to higher personnel and related costs as a result of an increase in the number of personnel and salary adjustments ($1.4 million) and the impact of the adoption of SFAS No. 123R regarding stock-based compensation expense ($833,000), an increase in depreciation and amortization costs due to investments in property and equipment ($545,000), and miscellaneous increases in laboratory supplies and services, maintenance and utility costs related to our facility, and intellectual property expenses. We expect that all other R&D expenses will continue to increase during 2006 in support of our clinical and preclinical development programs.

The successful development of our products is uncertain and subject to a number of risks. We cannot be certain that any of our product candidates will prove to be safe and effective or will meet all of the applicable regulatory requirements needed to receive and maintain marketing approval. Data from preclinical studies and clinical trials are susceptible to varying interpretations that could delay, limit or prevent regulatory clearance. We, the FDA or other regulatory authorities may suspend clinical trials
 
15
 
at any time if we or they believe that the subjects participating in such trials are being exposed to unacceptable risks or if such regulatory agencies find deficiencies in the conduct of the trials or other problems with our products under development. Delays or rejections may be encountered based on additional governmental regulation, legislation, administrative action or changes in FDA or other regulatory policy during development or the review process. Other risks associated with our product development programs are described in Risk Factors in our Form 10-K for the fiscal year ended December 31, 2005, which has been filed with the SEC as updated from time to time in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Due to these uncertainties, accurate and meaningful estimates of the ultimate cost to bring a product to market, the timing of completion of any of our drug development programs and the period in which material net cash inflows from any of our drug development programs will commence are unavailable.

General and Administrative Expenses

General and administrative expenses were $4.5 million in the three month period ended March 31, 2006, as compared to $2.3 million in the corresponding period in 2005. Professional fees increased by $1.6 million to $2.8 million in the three month period ended March 31, 2006 as compared to $1.2 million in the corresponding period in 2005, due primarily to costs related to business and commercial development initiatives, including market research, and to our patent infringement litigation with Lilly. Personnel and related costs increased by $413,000 to $1.2 million in the three month period ended March 31, 2006 as compared to $743,000 in the corresponding period in 2005 due to an increase in the number of personnel and salary adjustments ($200,000) and the impact of adoption of SFAS No. 123R ($214,000). We expect that our general and administrative expenses will continue to increase during 2006 as necessary to support our research and development programs.

We expect that our operating expenses in total will increase during 2006 for the reasons described above, and such increases could be substantial given the anticipated expansion of our clinical trials for AP23573, including our expected commencement of a Phase 3 trial. Operating expenses may fluctuate from quarter to quarter. The actual amount of any increase in operating expenses will depend on the progress of our product development programs, including preclinical and clinical studies and product manufacturing, the status of our patent infringement litigation with Lilly and Amgen and our ability to raise funding through equity offerings, collaborations, licensing, joint ventures or other sources.

Interest Income/Expense

Interest income increased to $664,000 in the three month period ended March 31, 2006 from $394,000 in the corresponding period in 2005, as a result of a higher interest yields from our securities, offset in part by a lower average balance of funds invested in 2006.

Interest expense increased to $121,000 in the three month period ended March 31, 2006 from $74,000 in the corresponding period in 2005, as a result of higher interest rates in 2006, offset by lower average loan balances.

Operating Results

We reported a loss from operations of $15.9 million in the three month period ended March 31, 2006 compared to a loss from operations of $12.7 million in the corresponding period in 2005, an increase in loss of $3.2 million, or 26%. Such increase was due primarily to the increase in operating expenses noted above. We expect that our loss from operations will continue to increase during 2006 due to the expected increases in research and development expenses and general and administrative expenses described above. Such increases could be substantial. Losses may fluctuate depending on the extent to which, if at all, we enter into collaborations for one or more of our product candidates or licenses for our technologies. The extent of operating losses will also depend on our ability to raise funds from other sources, such as the capital markets, which will influence the amount we will spend on research and development and the development timelines for our product candidates.
 
16
 
We reported a net loss of $15.4 million in the three month period ended March 31, 2006, compared to a net loss of $12.3 million in the corresponding period in 2005, an increase in net loss of $3.0 million or 24%, and a net loss per share of $0.25 and $0.23, respectively.
 
Liquidity and Capital Resources

We have financed our operations and investments primarily through sales of our common stock to institutional investors and, to a lesser extent, through issuances of our common stock pursuant to our stock option and employee stock purchase plans, supplemented by the issuance of long-term debt. We sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. We seek to balance the level of cash, cash equivalents and marketable securities on hand with our projected needs and to allow us to withstand periods of uncertainty relative to the availability of funding on favorable terms.

Sources of Funds

For the three months ended March 31, 2006 and 2005, our sources of funds were issuances of our common stock pursuant to stock option and purchase plans of $986,000 in 2006 and $295,000 in 2005.

We most recently completed an underwritten public offering of our common stock in August 2005 from which we realized net proceeds of approximately $57.9 million.

Uses of Funds

The primary uses of our cash are to fund our operations and working capital requirements and, to a lesser degree, to repay our long-term debt, to invest in intellectual property and to invest in our property and equipment as needed for our business. For the three months ended March 31, 2006 and 2005, our uses of funds were as follows:
 
   
Three Months Ended March 31, 
  
In thousands
  
2006
  
2005
  
           
Net cash used in operating activities
  
$
13,945
  
$
10,146
  
Repayment of borrowings
    
480
    
480
  
Investment in intangible assets
    
208
    
213
  
Investment in property and equipment
    
354
    
1,723
  
   
$
14,987
  
$
12,562
  

The net cash used in operating activities is comprised of our net losses, adjusted for non-cash expenses and working capital requirements. As noted above, our net loss for the three months ended March 31, 2006 increased by $3.0 million, as compared to the corresponding period in 2005, due primarily to increased personnel and professional services expenses. However, as a result of changes in our working capital requirements offset in part by increases in non-cash expenses, including stock-based compensation expense, our net cash used in operating activities increased by $3.8 million for the three months ended March 31, 2006, compared with the corresponding period in 2005. Also, as noted above, we expect that our loss from operations will increase in the remainder of 2006 due to continued progress in development of our product candidates, and we expect that our net cash used in operations will increase accordingly. We also expect that our investment in intangible assets, consisting of our intellectual property, will increase in support of our product development activities.

17
 
Contractual Obligations

We have substantial fixed contractual obligations under various research and licensing agreements, consulting and employment agreements, lease agreements and long-term debt instruments. These contractual obligations were comprised of the following as of March 31, 2006:

In thousands
        
Payments Due By Period
 
    
Total 
 
 
In
2006
 
 
2007
through
2009
 
 
2010
through
2011
 
 
After
2011
  
                                 
Long-term debt
  
$
7,175
  
$
1,440
  
$
5,735
  
$
—
  
$
—
  
                                 
Operating leases, net of sub-leases
    
786
    
465
    
321
    
—
    
—
  
                                 
Other long-term obligations
   
14,394
    
3,332
    
9,431
    
1,236
    
395
  
                                 
Total fixed contractual obligations
  
$
22,355
  
$
5,237
  
$
15,487
  
$
1,236
  
$
395
  
                                 
 
 
Long-term debt consists of scheduled principal payments on such debt. Interest on our long-term debt is based on variable interest rates. Assuming a constant interest rate of 6.7%, our average interest rate on our debt at March 31, 2006, over the remaining term of the debt, our interest expense would total approximately $322,000 for the remainder of 2006 and $380,000 in the period 2007 through 2009.

Other long-term obligations are comprised primarily of employment agreements and license agreements. The license agreements generally provide for payment by us of annual license fees, milestone payments and royalties upon successful commercialization of products. All license agreements are cancelable by us. The above table reflects remaining license fees for the lives of the agreements but excludes milestone and royalty payments, as such amounts are not probable or estimable at this time.

Liquidity

At March 31, 2006, we had cash, cash equivalents and marketable securities totaling $68.1 million and working capital of $53.1 million, compared to cash, cash equivalents and marketable securities totaling $81.5 million and working capital of $66.0 million at December 31, 2005.

We will require substantial additional funding for our research and development programs, including pre-clinical development and clinical trials, for operating expenses including intellectual property protection and enforcement, for the pursuit of regulatory approvals, and for establishing manufacturing, marketing and sales capabilities. In order to fund our needs, we may (1) sell common stock through public or private offerings as market conditions permit, (2) enter into partnerships for our product candidates, and/or (3) license our cell-signaling technologies, including our ARGENT and NF-kB intellectual property portfolios. We have available 2,815,000 shares of our common stock under effective shelf registration statements, which may be sold to raise capital.

We believe that our cash, cash equivalents and marketable securities should be sufficient to satisfy our capital and operating requirements into mid-2007. However, there are numerous factors that are likely to affect our spending levels, including the timing of the start of the initial registration trial for AP23573, the timing of product and process development work for AP23573, the manufacture of drug product for clinical trials and potential product launch, if approved, developments in our ongoing clinical trials,
 
18
 
the timing and terms of a partnership, if any, to commercialize AP23573 outside of the U.S., the status of our in-house efforts to prepare for the potential launch of AP23573 in the U.S., the progress of our preclinical programs, and developments in our NF-kB litigation, among other factors. These variables could result in earlier depletion of our current funds if we are to achieve our intended timelines for development. In any event, we expect to need additional capital in order to pursue our business plan, which we will seek to raise through the sale of additional securities, collaborative partnerships, and possible additional credit arrangements. There can be no assurance, however, that adequate resources will be available when needed or on terms acceptable to us.

Securities Litigation Reform Act

Safe harbor statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained in this Quarterly Report on Form 10-Q, the matters discussed herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are identified by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such statements are based on management’s current 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 include, but are not limited to, risks and uncertainties regarding our ability to accurately estimate the timing and actual research and development expenses and other costs associated with the preclinical and clinical development and manufacture of our product candidates, the adequacy of our capital resources and the availability of additional funding, risks and uncertainties regarding our ability to successfully enroll and conduct preclinical and clinical studies of product candidates, risks and uncertainties regarding our ability to manufacture our product candidates on a commercial scale or to supply our product candidates to collaborators, risks and uncertainties regarding our and our collaborator’s ability to successfully enroll and conduct preclinical and clinical studies of product candidates, risks and uncertainties that clinical trial results at any phase of development may be adverse or may not be predictive of future result or lead to regulatory approval of any of our or any collaborator’s product candidates, risks and uncertainties of third-party intellectual property claims relating to our and any collaborator’s product candidates, and risks and uncertainties relating to regulatory oversight, the timing, scope, cost and outcome of legal proceedings, future capital needs, key employees, dependence on collaborators and manufacturers, markets, economic conditions, products, services, prices, reimbursement rates, competition and other risks detailed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, which has been filed with the SEC, as updated from time to time in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. As a result of these and other factors, actual events or results could differ materially from those described herein. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.


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, with maturities of 90 days or less, 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. Available-for-sale securities are recorded on the balance sheet at fair market value with unrealized gains or losses reported as a separate component of stockholders’ equity (accumulated other comprehensive income or loss). Realized gains and losses on marketable security transactions are reported on the specific-identification method. Interest income is recognized when earned. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary results in a charge to earnings and establishes a new cost basis for the security.

Our investments are sensitive to interest rate risk. We believe, however, that the effect, if any, of reasonable possible near-term changes in interest rates on our financial position, results of operations and cash flows generally would not be material due to the current short-term nature of these investments. In particular, at March 31, 2006, because our available funds are invested solely in short-term securities with remaining maturities of twelve months or less, our risk of loss due to changes in interest rates is not material.

We have a deferred executive compensation program which provides participants with deferred compensation based on the value of certain designated mutual funds. The fair value of our obligations under this program is reflected as a liability on our balance sheet. In the event of a hypothetical 10% increase in the fair market value of the underlying mutual funds as of March 31, 2006, we would have incurred approximately $99,000 of additional compensation expense in the three-month period ended March 31, 2006.

At March 31, 2006, we had $7.2 million outstanding under a bank term note which bears interest at prime or, alternatively, LIBOR + 2%. This note is sensitive to interest rate risk. In the event of a hypothetical 10% increase in the interest rate on which the loan is based (66.7 basis points), we would incur approximately $41,000 of additional interest expense per year based on expected balances over the next twelve months.
19

(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 Exchange Act Rules 13a-15(e) and 15d-15(e)) 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 adequate and effective to ensure that material information relating to us, including our consolidated subsidiaries, was made known to them by others within those entities, 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 the last fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
20
 


NF-κB Patent Infringement Litigation and Reexamination

Lilly Litigation

In 2002, the Company, together with Massachusetts Institute of Technology, The Whitehead Institute for Biomedical Research and Harvard University (collectively, the Plaintiffs) filed a lawsuit in the United States District Court for the District of Massachusetts, or the U.S. District Court, against Eli Lilly and Company, hereinafter referred to as Lilly, alleging infringement of certain claims, or the NF-kB ‘516 Claims, of the Plaintiffs’ U.S. Patent No. 6,410,516, or the ‘516 Patent, covering methods of treating human disease by regulating NF-kB cell-signaling activity through sales of Lilly’s osteoporosis drug, Evista®, and Lilly’s septic shock drug, Xigris®, and seeking monetary damages from Lilly.

This case was tried before a jury in the U.S. District Court from April 10, 2006 through April 28, 2006. After deliberations, on May 4, 2006, the jury rendered a verdict in favor of the Plaintiffs by finding that the NF-kB ‘516 Claims asserted in the lawsuit are valid and infringed by Lilly through sales of Evista and Xigris in the United States. The jury awarded damages to the Plaintiffs in the amount of approximately $65.2 million, based on the jury's determination of a reasonable royalty rate of 2.3% to be paid by Lilly to the Plaintiffs based on U.S. sales of Evista and Xigris from the date of the filing of the lawsuit on June 25, 2002 through February 28, 2006. The jury awarded further damages on an ongoing basis, in amounts to be determined, equal to 2.3% of U.S. sales of Evista and Xigris through the year 2019, when the patent expires.

A separate trial, or bench trial, remains pending before the judge on certain defenses asserted by Lilly relating to the validity and enforceability of the NF-kB ‘516 Claims before a final judgment may be entered in this lawsuit by the U.S. District Court. A date for the commencement of the bench trial has not been set by the U.S. District Court. Lilly has the right to file motions challenging the jury’s verdict in this lawsuit, and, upon the entry of a final judgment by the U.S. District Court, to file an appeal of the jury’s verdict and other rulings by the U.S. District Court with the Court of Appeals for the Federal Circuit.

Amgen Litigation

On April 20, 2006, Amgen Inc. and certain affiliated entities, hereinafter referred to as Amgen, filed a lawsuit against the Company in the U.S. District Court for the District of Delaware seeking a declaratory judgment that each of the claims contained in the ‘516 Patent are invalid and that Amgen has not infringed any of the claims of the ‘516 Patent based on activities related to Amgen’s products, Enbrel® and Kineret®. The Company believes there is no basis for the declaratory relief sought by Amgen and intends to vigorously contest Amgen's claim as without merit.

Re-examination Proceedings in PTO

On April 4, 2005, Lilly filed an ex parte request in the United States Patent and Trademark Office, or PTO, to reexamine the patentability of certain claims of the ‘516 Patent. In addition, an unrelated third party filed an ex parte request in the PTO on December 2, 2005 to reexamine the patentability of certain claims of the ‘516 Patent. The PTO has granted both of these reexamination requests. On April 4, 2006, counsel for the patentees of the ‘516 Patent filed separate Petitions requesting the PTO to merge these two reexamination requests, which was granted by the PTO on May 4, 2006. Additionally, on April 7, 2006, counsel for the patentees of the ‘516 Patent filed a third ex parte request in the PTO with respect to one claim of the ‘516 Patent, which was denied by the PTO on May 5, 2006.
 
21
 
As a result of the PTO orders described above, Lilly’s ex parte request has been merged into a single action with the ex parte request filed on December 2, 2005 (the “Merged Requests”), and the PTO will proceed with its reexamination of the Merged Requests. The Merged Requests question the patentability of certain claims of the ‘516 Patent by newly cited references which (i) either inherently or expressly disclose the use of a variety of prior art compounds as reducing NF-kB activity and resulting gene expression, or (ii) are directed to the use of oligonucleotides having an NF-kB binding site for reduction of NF-kB activity.

The timing and ultimate outcome of the reexamination by the PTO of the Merged Requests, the Lilly litigation (including the pending bench trial and any appeal of the jury verdict and court’s ruling in the bench trial) cannot be determined at this time, and, as a result, no determination can be made with respect to whether the PTO will allow the claims of the ‘516 Patent in the reexamination proceeding of the Merged Requests, nor can any final determination be made with respect to the validity or infringement of the claims of the ‘516 Patent in the Lilly litigation and the Amgen litigation, nor can management predict whether the damages awarded by the jury in the U.S. District Court in the Lilly litigation will be upheld, eliminated or limited. Although the Company has prevailed at trial in the Lilly litigation, the damages the Company has been awarded by the jury may be eliminated or limited by an adverse finding upon appeal or in the event that the claims of the ‘516 Patent are invalidated by the PTO.
 

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, 2005, other than as set forth below.

We will continue to expend significant resources on the enforcement and licensing of our NF-kB patent portfolio and may be unable to generate material revenues from these efforts, if we are unable to enforce against, or license our NF-kB patents to, pharmaceutical and biotechnology companies.

We are the exclusive licensee of a family of patents, three in the U.S. and one in Europe, including a pioneering U.S. patent covering methods of treating human disease by regulating NF-kB cell-signaling activity, hereinafter referred to as the ’516 Patent, awarded to a team of inventors from The Whitehead Institute for Biomedical Research, Massachusetts Institute of Technology and Harvard University. We have initiated a licensing program to generate revenues from the discovery, development, manufacture and sale of products covered by our NF-kB patent portfolio. These patents have been, and in the future may be, challenged and may be subsequently narrowed, invalidated, declared unenforceable or circumvented, any of which could materially impact our ability to generate licensing revenues from them.

On June 25, 2002, we, together with these academic institutions, filed a lawsuit in the United States District Court for the District of Massachusetts, or the U.S. District Court, against Eli Lilly and Company, hereinafter referred to as Lilly, alleging infringement of certain claims of the ’516 Patent through sales of Lilly’s osteoporosis drug, Evista®, and its septic shock drug, Xigris®.

This case was tried before a jury in the U.S. District Court from April 10, 2006 through April 28, 2006. After deliberations, on May 4, 2006, the jury rendered a verdict in favor of the Plaintiffs by finding that the NF-kB ‘516 Claims asserted in the lawsuit are valid and infringed by Lilly through sales of Evista and Xigris in the United States. A separate trial, or bench trial, remains pending before the judge on certain defenses asserted by Lilly relating to the validity and enforceability of the NF-kB ‘516 Claims before a final judgment may be entered in this lawsuit by the U.S. District Court. Lilly has the right to file motions challenging the jury’s verdict in this lawsuit and to file an appeal of the jury’s verdict and other rulings by the U.S. District Court.

On April 20, 2006, Amgen Inc. and certain affiliated entities, hereinafter referred to as Amgen, filed a lawsuit against us in the U.S. District Court for the District of Delaware seeking a declaratory judgment that each of the claims contained in the ‘516 Patent are invalid and that Amgen has not infringed any of the claims of the ‘516 Patent based on activities related to Amgen’s products, Enbrel® and Kineret®.
 
22
 
In addition, on April 4, 2005, Lilly filed a request in the United States Patent and Trademark Office, or PTO, to reexamine the patentability of certain claims of the ‘516 Patent. An unrelated third party filed a similar request in the PTO on December 2, 2005 to reexamine the patentability of certain claims of the ‘516 Patent. These two requests have been merged by the PTO and are currently pending.

As exclusive licensee of this patent, we are obligated for the costs expended for its prosecution in the PTO, for its enforcement in the above noted litigation and otherwise. Therefore, we will continue to expend significant capital and management resources pursuing these matters in court and in the reexamination process in the PTO, and the outcome is uncertain.

If some or all of the claims of the ’516 Patent are invalidated by the PTO or in the courts or found not to be infringed in these matters, we will not realize any revenues on sales of the above-named products, and could be liable under certain limited circumstances in the Lilly litigation for litigation costs and potentially attorneys’ fees. The damages awarded to us in the Lilly litigation could be subsequently eliminated or limited by an adverse finding by the U.S. District Court judge following the bench trial, upon appeal or in the event that the claims of the ‘516 Patent are invalidated by the PTO. Invalidation of any of the claims of the ’516 Patent in litigation or by the PTO would likely have a significant adverse impact on our ability to generate revenues from our NF-kB licensing program. Moreover, significant expenditures to enforce these patent rights without generating revenues or accessing additional capital or other funding could adversely impact our ability to further our clinical programs and our research and development programs at the current levels or at levels that may be required in the future.
23
 

 
  10.1**  License Agreement, dated August 19, 1991, by and among ARIAD Pharmaceuticals, Inc., Massachusetts Institute of Technology and The Whitehead Institute for Biomedical Research, as amended November 20, 1991 and January 2, 2002.
     
  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.
 
    ** Confidential treatment as to certain portions of this agreement has been requested from  the Securities and Exchange Commission.


ARIAD and the ARIAD logo are our registered trademarks and ARGENT is our trademark. 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.
 

 
24
 

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.
(Registrant)
     
 
By:
/s/ Harvey J. Berger, M.D.
   
Harvey J. Berger, M.D.
   
Chairman and Chief Executive Officer
     
     
 
By:
/s/ Edward M. Fitzgerald
   
Edward M. Fitzgerald
   
Senior Vice President, Finance and Corporate Operations and Chief Financial Officer
   
(Duly authorized officer, principal financial officer
Date: May 10, 2006
  
and chief accounting officer)
 
25
 
 
 
Exhibit No. Title
   
10.1**
License Agreement, dated August 19, 1991, by and among ARIAD Pharmaceuticals, Inc., Massachusetts Institute of Technology and The Whitehead Institute for Biomedical Research, as amended November 20, 1991 and January 2, 2002.
   
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.
   
** Confidential treatment as to certain portions of this agreement has been requested from the Securities and Exchange Commission.
 
 
 
 
26
 EX-10.1 2 a5144411ex10_1.htm EXHIBIT 10.1 Exhibit 10.1
 
 
Exhibit 10.1
 
LICENSE AGREEMENT
 
DATED AUGUST 19, 1991
 
BY AND AMONG
 
THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY,
 
THE WHITEHEAD INSTITUTE
 
AND
 
ARIAD PHARMACEUTICALS, INC.
 
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
 
WHI Vers -1/28/91
LLN/#4: 4167ariad.agt
  Date: August 8, 1991
 
LICENSE AGREEMENT
 
TABLE OF CONTENTS
 

PREAMBLE
    
     
ARTICLES:
    
     
ARTICLE I -
3
     
ARTICLE II -
5
     
ARTICLE III -
7
     
ARTICLE IV -
7
     
ARTICLE V -
9
     
ARTICLE VI -
10
     
ARTICLE VII -
10
     
ARTICLE VIII -
12
     
ARTICLE IX -
12
     
ARTICLE X -
12
     
ARTICLE XI -
13
     
ARTICLE XII -
13
     
ARTICLE XIII -
13
     
ARTICLE XIV -
14
     
ARTICLE XV -
15
     
 
17
     
 
19
     
 
20
     
 
24
     
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
2

This Agreement is made and entered into this 19th day of August, 1991, (the Effective Date) by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having its principal office at 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, U.S.A. (hereinafter referred to as M.I.T.), and the WHITEHEAD INSTITUTE, a corporation organized and existing under the laws of Delaware and having its principal office at Nine Cambridge Center, Cambridge, Massachusetts 02142, U.S.A., (hereinafter referred to as Whitehead) and ARIAD PHARMACEUTICALS, INC., a corporation duly organized under the laws of Delaware and having its principal office at 687 Wetherby Lane, Devon, Pennsylvania 19333 (hereinafter referred to as LICENSEE).
 
WITNESSETH
 
WHEREAS, M.I.T. and Whitehead are the owners of certain “Patent Rights” (as later defined herein) relating to M.I.T. Case No. [***] by [***]; M.I.T. Case No. [***] (Whitehead No. [***]) “[***]” by [***]; M.I.T. Case No. [***] (Whitehead No. [***]) “[***]” by [***]; M.I.T. Case No. [***] (Whitehead [***]) “[***]” by [***] et al.; M.I.T. Case No. [***] (Whitehead No. [***]) “[***]” by [***] and has the right to grant licenses under said Patent Rights, subject only to a royalty-free, nonexclusive license heretofore granted to the United States Government;
 
WHEREAS, Whitehead has authorized M.I.T. to act as its sole and exclusive agent for the purposes of licensing Whitehead’s rights in the Patent Rights and has authorized M.I.T. to enter into this licensing agreement on its own and Whitehead’s behalf;
 
WHEREAS, M.I.T. and Whitehead desire to have the Patent Rights utilized in the public interest and is willing to grant a license thereunder;
 
WHEREAS, LICENSEE has represented to M.I.T., to induce M.I.T. to enter into this Agreement, that LICENSEE is committed to the development and commercialization of “Licensed Product(s)” (as later defined herein) and/or the use of the “Licensed Process(es)” (as later defined herein) and that it shall commit itself to a thorough, vigorous and diligent program of exploiting the Patent Rights so that public utilization shall result therefrom; and
 
WHEREAS, LICENSEE desires to obtain a license under the Patent Rights upon the terms and conditions hereinafter set forth.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein the parties hereto agree as follows:
 
 
For the purposes of this Agreement, the following words and phrases shall have the following meanings:
 
1.1           “LICENSEE” shall include a related company of LICENSEE, the voting stock of which is directly or indirectly at least Fifty Percent (50%) owned or controlled by LICENSEE, an organization which directly or indirectly controls more than Fifty Percent (50%) of the voting
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
3
 
stock of LICENSEE and an organization, the majority ownership of which is directly or indirectly common to the ownership of LICENSEE.
 
1.2           “Patent Rights” shall mean all of the following Whitehead and M.I.T. intellectual property:
 
 
(a)
the United States and foreign patents and/or patent applications listed in Appendix A;
 
 
(b)
United States and foreign patents issued from the applications listed in Appendix A and from divisionals and continuations of these applications;
 
 
(c)
claims of U.S. and foreign continuation-in-part applications, and of the resulting patents, which are directed to subject matter specifically described in the U.S. and foreign applications listed in Appendix A;
 
 
(d)
claims of all foreign patent applications, and of the resulting patents, which are directed to subject matter specifically described in the United States patents and/or patent applications described in (a), (b), or (c) above;
 
 
(e)
any reissues of United States patents described in (a), (b), (c), or (d) above.
 
1.3           A “Licensed Product” shall mean any product or part thereof which:
 
 
(a)
is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any Licensed Product is made, used or sold;
 
 
(b)
is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any Licensed Process is used or in which such product or part thereof is used or sold;
 
 
(c)
contains the Tangible Property,
 
subject to the limitations in Paragraph 4.4.
 
1.4           A “Licensed Process” shall mean any process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights or which uses the Tangible Property, subject to the limitations in Paragraph 4.4.
 
1.5           “Net Sales” shall mean LICENSEE’s (and its sublicensees’ where appropriate) billings for Licensed Products and Licensed Processes produced hereunder less the sum of the following:
 
 
(a)
discounts allowed in amounts customary in the trade;
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
4
 
 
(b)
sales, tariff duties and/or use taxes directly imposed and with reference to particular sales;
 
 
(c)
outbound transportation prepaid or allowed; and
 
 
(d)
amounts allowed or credited on returns.
 
No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by LICENSEE and on its payroll, or for cost of collections. Licensed Products shall be considered “sold” when billed out or invoiced.
 
1.6           “Tangible Property” shall mean cell lines containing [***] obtained directly or indirectly from M.I.T. or Whitehead, and any progeny and derivatives thereof.
 
 
2.1           M.I.T. hereby grants to LICENSEE the right and license to make, have made, use, lease and sell the Licensed Products, and to practice the Licensed Processes to the end of the term for which the Patent Rights are granted unless sooner terminated according to the terms hereof.
 
2.2           This license shall be subject to the research license and to the option granted to Centocor to acquire a license to the Patent Rights of M.I.T. Case 4167 for use with certain hybridomas, under the Collaborative Research Agreement between Centocor and M.I.T. dated November 14, 1988 as attached hereto as Appendix C. M.I.T. agrees that it will not renew the Collaboration Research Agreement as provided in Paragraph 2 thereof.
 
2.3           In order to establish a period of exclusivity for LICENSEE, M.I.T. hereby agrees that with the exception of the rights granted or optioned to Centocor, it shall not grant any other license to make, have made, use, lease and sell Licensed Products or to utilize Licensed Processes during the period of time commencing with the Effective Date of this Agreement and terminating with the first to occur of:
 
 
(a)
for each type of Licensed Product the expiration of Twelve (12) years after the first commercial sale of that Licensed Product; or
 
 
(b)
the expiration of Sixteen (16) years after the Effective Date of this Agreement;
 
provided, however, that for any Licensed Product for which an application for premarket approval has been submitted to the U.S. FDA prior to July 1, 2007, the time spent by the FDA reviewing said application(s) for that Licensed Product shall be added to the period of exclusivity which would otherwise apply.
 
2.4           At the end of the exclusive period, the license granted hereunder shall become nonexclusive and shall extend to the end of the term or terms for which any Patent Rights are issued, unless sooner terminated as hereinafter provided, or unless the parties agree to extend the period of exclusivity.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
5
 
2.5           M.I.T. and Whitehead also agree to bring to the attention of LICENSEE any inventions which relate to [***] which arise prior to December 31, 1994 from the M.I.T. or Whitehead laboratories of any of the inventors of the Patent Rights listed in Appendix A. LICENSEE shall have a three month option, dating from the date at which any such invention is revealed to LICENSEE, to begin negotiations with M.I.T. for an exclusive license to such invention. If such negotiations are begun at LICENSEE’s request, LICENSEE shall have an additional three month option to negotiate in good faith for an exclusive license to the invention. LICENSEE’s options under this Paragraph 2.5 shall, however, be subject to any options or licenses granted under a research agreement with sponsors of the research leading to such invention, and the terms of such research agreements shall not be limited by the provisions of this Paragraph 2.5. M.I.T. and Whitehead shall use their best reasonable efforts to notify LICENSEE of any planned or completed sponsorship agreements, other than those involving U.S. Government sponsorship, in the field of [***], subject, however, to any confidentiality provisions with sponsors that might limit such notification.
 
2.6           LICENSEE agrees that Licensed Products leased or sold in the United States shall be manufactured substantially in the United States.
 
2.7           Whitehead and M.I.T. reserve the right to practice under the Patent Rights and to use and distribute the Tangible Property for their noncommercial research purposes under a Materials Transfer agreement similar to that in Appendix D. M.I.T. and Whitehead shall use their best reasonable efforts to notify LICENSEE of any Tangible Property distributed to third parties.
 
2.8           LICENSEE shall have the right to enter into sublicensing agreements for the rights, privileges and licenses granted hereunder only during the exclusive period of this Agreement. Such sublicensees may extend past the expiration date of the exclusive period of this Agreement, but any exclusivity of such sublicenses will expire upon the expiration of LICENSEE’s exclusivity.
 
2.9           LICENSEE hereby agrees that every sublicensing agreement to which it shall be a party and which shall relate to the rights, privileges and license granted hereunder shall contain a statement setting forth the date upon which LICENSEE’s exclusive rights, privileges and license hereunder shall terminate.
 
2.10           LICENSEE agrees that any sublicenses granted by it shall provide that the obligations to M.I.T. and Whitehead of Articles II, V, VII, VIII, IX, X, XII, XIII, and XV of this Agreement shall be binding upon the sublicensee as if it were a party to this Agreement. LICENSEE further agrees to attach copies of these Articles to sublicense agreements.
 
2.11           LICENSEE agrees to forward to M.I.T. a copy of any and all fully executed sublicense agreements, and further agrees to forward to M.I.T. annually a copy of such reports received by LICENSEE from its sublicensees during the preceding twelve (12) month period under the sublicensee as shall be pertinent to a royalty accounting under said sublicense agreements.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
6
 
2.12           LICENSEE shall not receive from sublicensees anything of value in lieu of cash payments in consideration for any sublicense under this Agreement, without the express prior written permission of M.I.T..
 
2.13           The license granted hereunder shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology not specifically set forth in Appendix A hereof and Paragraph 2.5.
 
 
3.1           LICENSEE shall use its best efforts to bring one or more Licensed Products or Licensed Processes to market through a thorough, vigorous and diligent program for exploitation of the Patent Rights.
 
3.2           In addition, LICENSEE shall adhere to the following milestones:
 
 
(a)
LICENSEE shall deliver to M.I.T. on or before [***] on or before the ninetieth (90th) day following the close of LICENSEE’s fiscal year.
 
 
(b)
ARIAD PHARMACEUTICALS, INC. (LICENSEE) shall have received at least [***].
 
 
(c)
ARIAD PHARMACEUTICALS, INC. (LICENSEE) shall have received a cumulative total of at least [***].
 
 
(d)
LICENSEE shall, within six (6) months of a request by a suitable sublicensee willing to take a sublicense upon reasonable business terms, grant at least one sublicense to the Patent Rights and Tangible Property for sale of Licensed Products as research reagents with appropriate protection of LICENSEE’s commercial interests. Failure to reach such an agreement within six (6) months after a bona fide request shall allow M.I.T. to grant a license to the Patent Rights to the requestor for sale of research reagents on terms no more favorable than those of paragraph 4.1(d) below.
 
 
(e)
In any calendar year after [***] that LICENSEE has not made at least [***] in Net Sales of Licensed Product, LICENSEE shall have invested a minimum of [***].
 
3.3           LICENSEE’s failure to perform in accordance with Paragraphs 3.1 and 3.2 above shall be grounds for M.I.T. to terminate this Agreement pursuant to Paragraph 13.3 hereof.
 
 
4.1           For the rights, privileges and license granted hereunder, LICENSEE shall pay royalties to M.I.T. in the manner hereinafter provided to the end of the term of the Patent Rights or until this Agreement shall be terminated as hereinafter provided:
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
7
 
 
(a)
License Issue Fee of [***], which said License Issue Fee shall be deemed earned and due thirty days after the execution of this Agreement.
 
 
(b)
License Maintenance Fees of [***]per year payable on [***]and on January 1 of each year thereafter until the [***]. Following the submission of such [***], the License Maintenance Fees shall be [***] per year beginning January 1 of the year following the submission. However, beginning [***], the License Maintenance Fees shall be [***] per year [***] has been submitted by LICENSEE. The License Maintenance Fee for a given year shall be fully creditable against any Running Royalties subsequently due.
 
 
(c)
A one-time Milestone Fee of [***] payable within ninety (90) days after LICENSEE receives approval to [***] on a Licensed Product based upon its [***].
 
 
(d)
Running Royalties in an amount equal to [***] of the Net Sales of Licensed Products and Licensed Processes used, leased or sold by and/or for LICENSEE which are covered [***] of the Patent Rights in any country in which the Licensed Products and/or Licensed Processes are made, used, leased or sold; and Running Royalties in an amount equal to [***] of the Net Sales of Licensed Products and Licensed Processes used, leased or sold by and/or for LICENSFF which are covered [***] of the Patent Rights in any country in which the Licensed Products and/or Licensed Processes are made, used, leased or sold. The provisions of this paragraph shall not apply to any Licensed Products leased or sold by LICENSEE or its sublicensees for use as research reagents.
 
 
(e)
Running Royalties in an amount equal to [***] of the Net Sales price of Licensed Products sold by or for LICENSER, or its sublicensees for use as research reagents.
 
 
(f)
[***] of any payments made to LICENSEE for sublicensing of the Patent Rights and/or Tangible Property. This subparagraph 4.1(f) shall not apply, however, to royalties paid to LICENSEE by sublicensee(s) on the Net Sales of Licensed Products sold by sublicensee(s) for use as research reagents, which shall fall under subparagraph 4.1(e) above.
 
4.2           The License Issue Fee, Milestone Fee and all License Maintenance Fees shall be cumulatively creditable against Running Royalties.
 
4.3           All patent costs incurred prior to July 1, 1991 and reimbursed by LICENSEE under Article VI shall be creditable against Running Royalties except for Running royalties on research reagents. [***] of patent costs incurred after July 1, 1991 shall be creditable against Running Royalties except for Running Royalties on research reagents.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
8
 
4.4           The definitions of Paragraphs 1.3 and 1.4 notwithstanding, after [***] Running Royalties shall be due on the Net Sales of a Licensed Product only if the Licensed Product is covered [***].
 
4.5           LICENSEE shall be entitled to credit [***] of the royalties paid to third parties for the use, lease or sale of a Licensed Product or Licensed Process by LICENSEE against the Running Royalties for that Licensed Product or Licensed Process due under subparagraph 4.1(d) above; provided, however that the amount credited shall not reduce the Running Royalty paid below [***] for the Licensed Product or Licensed Process covered [***], and [***] if the Licensed Product or Licensed Process is covered [***].
 
4.6           In no instance shall the amount paid to M.I.T. in total in a given year be less than the License Maintenance Fee for that year.
 
4.7           All payments due hereunder shall be paid in full, without deduction of taxes or other fees which may be imposed by any government and which shall be paid by LICENSEE.
 
4.8           No multiple royalties shall be payable because any Licensed Product, its manufacture, use, lease or sale are or shall be covered by more than one patent application or patent licensed under this Agreement.
 
4.9           Royalty payments shall be paid in United States dollars in Cambridge, Massachusetts, or at such other place as M.I.T. may reasonably designate consistent with the laws and regulations controlling in any foreign country. If any currency conversion shall be required in connection wish the payment of royalties hereunder, such conversion shall be made by using the exchange rate prevailing at the Chase Manhattan Bank (N.A.) on the last business day of the calendar quarterly reporting period to which such royalty payments relate.
 
 
5.1           LICENSEE, within sixty (60) days after March 31, June 30, September 30 and December 31, of each year, shall deliver to M.I.T. true and accurate reports, giving such particulars of the business conducted by LICENSEE and its sublicensees during the preceding three-month period under this Agreement as shall be pertinent to a royalty accounting hereunder. These shall include at least the following:
 
 
(a)
number of Licensed Products manufactured and sold.
 
 
(b)
total billings for Licensed Products sold.
 
 
(c)
accounting for all Licensed Processes used or sold.
 
 
(d)
deductions applicable as provided in Paragraph 1.5.
 
 
(e)
total royalties due.
 
 
(f)
names and addresses of all sublicensees of LICENSEE.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
9
 
5.2           With each such report submitted, LICENSEE shall pay to M.I.T. the royalties due and payable under this Agreement. If no royalties shall be due, LICENSEE shall so report.
 
5.3           On or before the ninetieth (90th) day following the close of LICENSEE’s fiscal year, LICENSEE shall provide M.I.T. with LICENSEE’s certified financial statements for the preceding fiscal year including, at a minimum, a Balance Sheet and an Operating Statement.
 
5.4           The royalty payments set forth in this Agreement shall, if overdue, bear interest until payment at a per annum rate two percent (2%) above the prime rate in effect at the Chase Manhattan Bank (N.A.) on the due date. The payment of such interest shall not foreclose M.I.T. from exercising any other rights it may have as a consequence of the lateness of any payment.
 
 
6.1           M.I.T. (and/or Whitehead, as appropriate, depending on ownership of the individual Patent Rights) shall apply for, seek prompt issuance of, and maintain during the term of this Agreement the Patent Rights in the United States and in the foreign countries listed in Appendix B hereto. Appendix B may be amended by verbal agreement of both parties, such agreement to be confirmed in writing within ten (10) days. The prosecution, filing and maintenance of all Patent Rights patents and applications shall be the primary responsibility of M.I.T. (and/or Whitehead); provided, however, LICENSEE shall have reasonable opportunities to advise M.I.T. (and/or Whitehead) and shall cooperate with M.I.T. (and/or Whitehead) in such prosecution, filing and maintenance.
 
6.2           Payment of all fees and costs relating to the filing, prosecution, and maintenance of the Patent Rights shall be the responsibility of LICENSEE, whether such fees and costs were incurred before or after the date of this Agreement. Such payments shall be creditable as specified in Paragraphs 4.2 and 4.3. For fees and costs incurred prior to July 1, 1991, LICENSEE shall reimburse M.I.T. and Whitehead on the following schedule:
 
25% of total:
30 days after billing
   
25% of total:
January 15, 1992
   
25% of total:
July 15, 1992
   
25% of total:
January 15, 1993
 
Fees and costs incurred after July 1, 1991 shall be reimbursed within 30 days after billing.
 
 
7.1           LICENSEE, M.I.T. and Whitehead shall promptly inform each other of any alleged infringement of the Patent Rights by a third party and of any available evidence thereof.
 
7.2           During the term of this Agreement, LICENSEE shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Patent Rights and in furtherance of such right, M.I.T. and Whitehead hereby agree that LICENSEE may include
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
10
 
M.I.T. or Whitehead as party plaintiffs in any such suit without expense to M.I.T. or Whitehead. The total cost of any such infringement action commenced or defended solely by LICENSEE shall be borne by LICENSEE. LICENSEE may, for such purposes, use the name of M.I.T. or Whitehead as party plaintiffs provided, however, that such right to bring an infringement action shall remain in effect only for so long as the license granted herein remains exclusive. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of M.I.T. and Whitehead, which consent shall not unreasonably be withheld. LICENSEE shall indemnify M.I.T. and Whitehead against any order for costs associated with the litigation that may be made against M.I.T. or Whitehead in such proceedings.
 
7.3           In the event that LICENSEE shall undertake the enforcement and/or defense of the Patent Rights by litigation, LICENSEE may withhold up to [***] of the royalties otherwise thereafter due M.I.T. hereunder and apply the same toward reimbursement of up to [***] of LICENSEE’s expenses, including reasonable attorney’s fees, in connection therewith. Any recovery of damages by LICENSEE for any such suit shall be applied pro rata in satisfaction of (i) any unreimbursed expenses and legal fees of LICENSEE relating to the suit; and (ii) any royalties due M.I.T. and withheld by LICENSEE and applied pursuant to this Paragraph 7.3. The balance remaining from any such recovery shall be divided between LICENSEE and M.I.T. in the proportion of [***].
 
7.4           If within six (6) months after having been notified of any alleged infringement, LICENSEE shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if LICENSEE shall notify M.I.T. at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, M.I.T. or Whitehead, as appropriate) shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Patent Rights, and, in furtherance of such right, LICENSEE hereby agrees that M.I.T. (or Whitehead) may include LICENSEE as a party plaintiff in any such suit, without expense to LICENSEE. The total cost of any such infringement action commenced or defended solely by M.I.T. (or Whitehead) shall be borne by M.I.T. (or Whitehead), and M.I.T. (or Whitehead) shall keep any recovery or damages for past infringement derived therefrom. No settlement, consent judgment or other voluntary final disposition of the suit maybe entered into without the consent of LICENSEE, which consent shall not unreasonable be withheld.
 
7.5           In the event that a declaratory judgment action alleging invalidity or noninfringement of any of the Patent Rights shall be brought against LICENSEE, M.I.T. (or Whitehead), at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense.
 
7.6           In any infringement suit as any party may institute to enforce the Patent Rights pursuant to this Agreement, the other parties hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.
 
7.7           LICENSEE, during the exclusive period of this Agreement, shall have the sole right in accordance with the terms and conditions herein to sublicense any alleged infringer for
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
11
 
future use of the Patent Rights. Any upfront fees paid to LICENSEE as part of such sublicense shall be handled in accordance with subparagraph 4.1(f).
 
 
8.1           LICENSEE shall at all times during the tern of this Agreement and thereafter, indemnify, defend and hold M.I.T. and Whitehead, their trustees, officers, employees and affiliates, harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the production, manufacture, sale, use, lease, consumption or advertisement of the Licensed Product(s) and/or Licensed Process(es) or arising from any obligation of LICENSEE hereunder.
 
8.2           LICENSEE shall obtain prior to the first use of a Licensed Product or Licensed Process on humans and carry in full force and effect liability insurance which shall protect LICENSEE, M.I.T. and Whitehead in regard to events covered by Paragraph 8.1 above.
 
8.3           EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, M.I.T. AND WHITEHEAD MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING.
 
 
It is understood that M.I.T. and Whitehead are subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the Export Administration Act of 1979), and that its obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency. M.I.T. neither represents that a license shall not be required nor that, if required, it shall be issued.
 
 
LICENSEE shall not use the names of the Massachusetts Institute of Technology nor of the Whitehead Institute nor any of their employees, nor any adaptation thereof, in any advertising, promotional or sales literature without prior written consent obtained from M.I.T. in each case, except that LICENSEE may state that it is licensed by Whitehead or M.I.T. under one or more of the patents and/or applications comprising the Patent Rights.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
12
 
 
The rights of ARIAD under this Agreement may not be assigned and the duties of ARIAD under this Agreement may not be delegated without the prior written consent of M.I.T. and Whitehead, except that ARIAD may assign this Agreement to an entity, acceptable to M.I.T. and Whitehead, with which it merges or consolidates or which ARIAD controls, or to which substantially all of its assets relating to the Patent Rights are sold or otherwise transferred or to a partnership of which ARIAD or any of its affiliates in the general partner.
 
 
12.1           Any and all claims, disputes or controversies arising under, out of, or in connection with this Agreement, including any dispute relating to patent validity or infringement, which have not been resolved by good faith negotiations between the parties, shall be resolved by final and binding arbitration in Boston, Massachusetts under the rules of the American Arbitration Association, or the Patent Arbitration Rules if applicable, then obtaining. The arbitrators shall have no power to add to, subtract from or modify any of the terms or conditions of this Agreement. Any award rendered in such arbitration may be enforced by either party in either the courts of the Commonwealth of Massachusetts or in the United States District Court for the District of Massachusetts, to whose jurisdiction for such purposes M.I.T., Whitehead and LICENSEE each hereby irrevocably consents and submits.
 
12.2           Notwithstanding the foregoing, nothing in this Article shall be construed to waive any rights or timely performance of any obligations existing under this Agreement.
 
 
13.1           If LICENSEE shall cease to carry on its business, this Agreement shall terminate upon notice by M.I.T.
 
13.2           Should LICENSEE fail to pay M.I.T. royalties due and payable hereunder, M.I.T. shall have the right to terminate this Agreement on thirty (30) days’ notice, unless LICENSEE shall pay M.I.T. within the thirty (30) day period, all such royalties and interest due and payable. Upon the expiration of the thirty (30) day period, if LICENSEE shall not have paid all such royalties and interest due and payable, the rights, privileges and license granted hereunder shall terminate.
 
13.3           Upon any material breach or default of this Agreement by LICENSEE, other than those occurrences set out in Paragraphs 13.1 and 13.2 hereinabove, which shall always take precedence in that order over any material breach or default referred to in this Paragraph 13.3, M.I.T. shall have the right to terminate this Agreement and the rights, privileges and license granted hereunder by ninety (90) days’ notice to LICENSEE. Such termination shall become effective unless LICENSEE shall have cured any such breach or default prior to the expiration of the ninety (90) day period.
 
13.4           LICENSEE shall have the right to terminate this Agreement at any time on six (6) months’ notice to M.I.T., and upon payment of all amounts due M.I.T. through the effective date of the termination.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
13
 
13.5           Upon termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination. LICENSEE and any sublicensee thereof may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that LICENSEE shall pay to M.I.T. the royalties thereon as required by Article IV of this Agreement and shall submit the reports required by Article V hereof on the sales of Licensed Products.
 
13.6           Upon termination of this Agreement for any reason, any sublicensee not then in default shall have the right to seek a license from M.I.T.
 
13.7           LICENSEE shall have the right, upon written notice to M.I.T., to separately terminate its license to any independent patent application or patent of the Patent Rights.
 
 
Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent to such party by certified first class mail, postage prepaid, addressed to it at its address below or as it shall designate by written notice given to the other party:
 
In the case of M.I.T.:
 
Director
Technology Licensing Office
Massachusetts Institute of Technology
Room E32-300
Cambridge, Massachusetts 02139
 
In the case of WHITEHEAD:
 
Vice President
Whitehead Institute
Nine Cambridge Center
Cambridge, MA 02142
 
In the case of LICENSEE:
 
Harvey J. Berger, M.D.
Chairman and Chief Executive Officer
ARIAD Pharmaceuticals, Inc.
687 Wetherby Lane
Devon, PA 19333
 
or as amended in writing from time to time by any party.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
14
 
 
15.1           This Agreement shall be construed, governed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts, U.S.A., except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent was granted.
 
15.2           The parties hereto acknowledge that this Agreement sets forth the entire Agreement and understanding of the parties hereto as to the subject matter hereof, and shall not be subject to any change or modification except by the execution of a written instrument subscribed to by the parties hereto.
 
15.3           The provisions of this Agreement are severable, and in the event that any provisions of this Agreement shall be determined to be invalid or unenforceable under any controlling body of the Law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof.
 
15.4           LICENSEE agrees to mark the Licensed Products sold in the United States with all applicable United States patent numbers. All Licensed Products shipped to or sold in other countries shall be marked in such a manner as to conform with the patent laws and practice of the country of manufacture or sale.
 
15.5           The failure of any party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other parties.
 
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly executed this Agreement the day and year set forth below.
 

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

By
/s/ John T. PrestoN
Name
John T. Preston
Title
Director, Technology Licensing Office
Date
8-26-91


WHITEHEAD INSTITUTE

By
/s/ John Pratt
Name
John Pratt
Title
Vice President
Date
8/28/91

 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
15
 
ARIAD PHARMACEUTICALS, INC.

By
/s/ Harvey Berger, M.D.
Name
Harvey J. Berger, M.D.
Title
Chairman & Chief Executive Officer
Date
8/19/91
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
16
 
 
M.I.T. Case No. [***]
U.S.S.N. [***] (Filed [***])
(Owned by M.I.T. and the Whitehead Institute, jointly)
 
FOREIGN FILING(S)
 
M.I.T. Case No. [***]:

European Application No. [***] (Filed [***])
(Claiming Austria, Belgium, Switzerland/Liechtenstein, Germany, France, Great Britain, Italy, Luxembourg, Netherlands, Sweden)

Japanese Application No. PCT/[***] (Filed [***])

M.I.T. Case No. [***]:

Canadian Application No. [***] (Filed [***])
European Application No. [***] (Filed [***])
(Claiming Austria, Belgium, Switzerland/Liechtenstein, Germany, France, Great Britain, Italy, Luxembourg, Netherlands, Sweden)
Japanese Application No. PCT/[***] (Filed [***])

M.I.T. Case No. [***] (Whitehead No. [***])
[***]
U.S.S.N. [***] (Filed [***])
(Owned by The Whitehead Institute)

FOREIGN FILING(S)

[***]


M.I.T. Case No. [***] (Whitehead No. [***])
[***]
U.S.S.N. [***] (Filed [***])
(Owned by The Whitehead Institute)

FOREIGN FILING(S)

European Application No. PCT/[***] (Filed [***])
(Claiming Austria, Belgium, Switzerland/Liechtenstein, Germany, France, Great Britain, Italy, Luxembourg, Netherlands, Sweden)


M.I.T. Case No. [***] (Whitehead No. [***])
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
17
 
[***]
U.S.S.N. [***] (Filed [***])
(Owned by The Whitehead Institute and Harvard University, jointly. Harvard University has given M.I.T. the authority to license Harvard’s rights on Harvard’s behalf and has given Whitehead full rights to prosecute and defend the Patent Rights.)

FOREIGN FILING (S)

[***]

M.I.T. Case [***] (Whitehead [***])
[***]
(Owned by The Whitehead Institute)
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
18

 
Foreign countries in which Patent Rights shall be filed, prosecuted and maintained in accordance with Article VI where legally possible:
 
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
19

 
  #l/LLN111/14/88
 
CentCollabResAgt
 
 
COLLABORATIVE RESEARCH AGREEMENT
 
This Agreement between Centocor, Inc. and the Massachusetts Institute of Technology (“M.I.T.”) defines the terms and conditions under which Centocor scientists will collaborate with Prof Phillip A. Sharp and colleagues in the Cancer Center at M.I.T. in the area of antibody gene expression (“The Collaboration”).
 
Centocor and M.I.T. hereby agree as follows:
 
1.             FIELD: The Field of the Collaboration is defined by the Work Statement attached hereto as Appendix A.
 
2.             DURATION: The Collaboration shall begin on December 1, 1988 and terminate on November 30, 1991, unless sooner terminated by either party notifying the other, in writing, that it wishes to terminate the Collaboration. The Collaboration may be extended by written mutual consent.
 
3.             EXCHANGE OF INFORMATION: During the Collaboration, each party shall provide the other with all data and other information that it develops under the Collaboration.
 
4.             M.I.T. TANGIBLE PROPERTY: M.I.T. shall provide to Centocor certain biological materials (“M.I.T.”) developed before the Collaboration, for Centocor’s use in the Collaboration. Centocor shall not give samples, progeny, or derivatives of such M.I.T. Tangible Property to any third party except with the written permission of M.I.T.
 
5.             BIOLOGICAL MATERIAL DEVELOPED UNDER THE COLLABORATION: Any biological material developed by one party under the Collaboration shall be provided to the other for its use under the Collaboration. Samples, progeny or derivatives of any biological materials developed under the Collaboration shall not be delivered to any third party without the written permission of the developing party, except as specified in Paragraph 8(c) below. Notwithstanding the foregoing, for hybridomas developed under this Collaboration which are of commercial value to Centocor and which are derived from hybridomas developed or obtained by Centocor outside of this Collaboration, Centocor shall not be requited to provide said hybridomas to MIT unless provision is specifically requested by MIT for specific purposes and, unless suitable cell line transfer agreements in the form of those contained in Appendix C are executed between the parties hereto.”
 
6.             PUBLICATION: Either party shall be free to publish any of the results it obtains under the Collaboration, and shall acknowledge the contribution of the other party, or include the other
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
20
 
party as co-author, as appropriate. The publishing party shall provide the other parry with a copy of manuscripts submitted for publication at least thirty days prior to publication, in order to allow the other party to identify potentially patentable material and request that a patent application be filed.
 
7.             INVENTIONS: Any inventions made by Centocor personnel shall belong to Centocor, inventions made by M.I.T. personnel shall be owned by M.I.T. Inventions made jointly by M.I.T. and Centocor personnel shall belong jointly to M.I.T. and Centocor. Each party shall promptly notify the other if it makes an invention during the Collaboration, and if it intends to file a patent application on any such inventions. Copies of any such patent applications which are filed by one party shall be promptly provided to the other party.
 
8.             PATENT AND LICENSING RIGHTS:
 
(a)            During the Collaboration, M.I.T. shall grant to Centocor a royalty-free nonexclusive license to the Patent Rights of the M.I.T. Cases listed in Appendix B and to the M.I.T. Tangible Property for internal research and development use in the field of use of “Expression of Antibodies”. If Centocor does not terminate this Agreement at any time prior to October 31, 1991, the internal research and development use license to the Patent Rights and the M.I.T. Tangible Property shall be in perpetuity.
 
(b)            M.I.T. shall have the right to use any biological property and inventions developed by Centocor under the Collaboration for its own internal uses, royalty-free in perpetuity.
 
(c)            “Transferrable Property” is defined as any biological property developed by Centocor under the Collaboration, but excluding hybridomas developed by Centocor which produce antibody of commercial value to Centocor. “Licensable Centocor Patent .Rights” shall mean patent rights to inventions made by Centocor under the Collaboration, but excluding claims to hybridomas producing antibody of commercial value to Centocor. M.I.T. shall have the right to license to third parties, only in conjunction with the Patent Rights to Appendix B, any Transferrable Property and Licensable Centocor Inventions. M.I.T. shall pay to Centocor twenty-five percent (25%) of the Net Royalties it receives from such licenses. (“Net Royalties” is defined as Gross Royalties minus 15% for administration and marketing, and minus any unreimbursed out-of-pocket patenting costs.)
 
(d)            Centocor shall have a first option to an exclusive royalty-bearing license with suitable due diligence provisions, for certain Applications, to the M.I.T. Tangible Property, the Patent Rights of Appendix B, and any M.I.T. inventions or biological property developed under the Collaboration. An “Application” is defined as all hybridomas producing antibodies to a single antigen or directed to detection of a single disease state if all tests for that disease are based on the same antigen or set of antigens operating by the same basic mechanism in the disease state. The terms of Centocor’s option are as follows:
 
(i)            Centocor shall have a first option for an exclusive license to all Applications for one year following the beginning of the Collaboration and an option for a non-exclusive license until one year following the end of the Collaboration. Thereafter, Centocor’s option shall be only to Applications for which M.I.T. has not previously granted a license to a third party.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
21
 
(ii)           Centocor may exercise its option to an exclusive license for an Application only after Centocor demonstrates that it has developed a suitable hybridoma for that Application, or that it has an intensive development program in place specifically devoted to development of a hybridoma for that Application. In the latter event, Centocor’s license to the hybridoma shall terminate if a functional hybridoma is not developed by Centocor within two years of the effective date of the license.
 
(iii)          If Centocor exercises its option to an exclusive license to an Application, the royalties shall be as follows:
 
((a))      For Applications using known hybridomas whose efficiency of production of antibody is increased by use of the Patent Rights of Appendix B or the M.I.T. Tangible Property and/or M.I.T. patents or M.I.T. biological property developed under the Collaboration (together defined as “M.I.T. Intellectual and Material Property”), royalties shall include a License Issue Fee of $10,000 per Application, and a Running Royalty of one-half of one percent (0.5%) of Centocor’s sales of product produced and sold using the M.I.T. Intellectual and Material Property.
 
((b))      For Applications using new hybridomas which could not be practically developed without use of the M.I.T. Intellectual and Material Property, a License Issue Fee of $25,000 per Application, and a Running Royalty of 2.5% of product sales.
 
AGREED TO FOR:
 
MASSACHUSETTS INSTITUTE
CENTOCOR, INC.
OF TECHNOLOGY
  
 
By:
 /s/ John T. Preston
   By:
By: /s/ [Chairman of Board of Centocor]
  
           
Title:
Director, Technology Licensing Office
   Title:
Title: Chairman of the Board
  
           
Date:
Nov. 14, 1998
   Date:
Date: Nov. , 1998
  
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
22
 
APPENDIX A
 
WORK STATEMENT
 
As part of a continuing collaboration between MIT scientists (represented by Dr. Phillip Sharp and Centocor), the MIT scientists will isolate and characterize cDNA clones representing cellular factors involved .in the regulation of immunoglobulin gene expression. Said cDNA clones will then be sent to Centocor where they will be used in one or more of the following ways:
 
 
a)
The cDNA clones will be used as probes to determine the level of expression of said factors in hybridoma and other cell lines.
 
 
b)
the cDNA clones will be expressed in hybridoma or other mammalian cells in order to study their effects on immunoglobulin production.
 
 
c)
the cDNA clones will be expressed in E. coli in order to obtain large quantities for study and for production of antisera.
 
 
d)
Recombinants of the cDNAs and otter activator genes may also be tested in the course of these experiments.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
23

 
MASSACHUSETTS INSTITUTE OF TECHNOLOGY     Cambridge, Massachusetts 02139
 
Date: ________________________
 
 
Biomaterials Coordinator
  
Technology Licensing Office
Biology Department
Massachusetts Institute of Technology
Massachusetts Institute of Technology
Building E32-300
Building
77 Massachusetts Ave.
77 Massachusetts Ave.
Cambridge, MA 02139
Cambridge, MA 02139
 
Subject:                     BIOLOGICAL MATERIAL TRANSFER AGREEMENT
 
Dear
 
This is to acknowledge your request for ___________________________________________ _____________________________________, which is owned by MASSACHUSETTS INSTITUTE OF TECHNOLOGY (M.I.T.). M.I.T. will provide this material to you, for your use in noncommercial scientific research only, under the following conditions:
 
 
1.
The Material covered by this Agreement includes_______________________, any additional progeny or derivatives which could not have been made but for the_______________________ and any related information and know-how which will be received under this agreement.
 
 
2.
The Material will be used only by you and by individuals working under your direct supervision in your Institution, and will not be transferred, distributed or released to any other person.
 
 
3.
The Material will be used only for noncommercial, publishable research purposes. It will not be used on any research to be used for the development of any commercial product, including drug screening or development for commercial purposes or on behalf of any commercial entity.
 
 
4.
You will be free to publish any research results using the Material. We would appreciate your acknowledging in such publication(s) MIT and its personnel as scientifically appropriate, and providing MIT with copies of such publication(s).
 
 
5.
The Material is made available for investigational use only in laboratory animals or in in vitro, experiments and will not be used in humans or for any other purpose.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
24
 
 
6.
All characteristics of the Material are not fully understood and its use may involve risks or dangers that are not known or fully appreciated. The Material is being provided without warranty of any sort, express or implied.
 
 
7.
You and your Institution will use the Material in compliance with all laws and governmental regulations and guidelines applicable to the Material and will comply with all NIH guidelines and other relevant NIH instructions. In particular:
 
 
A)
Your laboratory has been reviewed by its institutional biohazards committee (IBC) which has certified that facilities, procedures, and the training and expertise of the personnel involved are adequate;
 
 
B)
Your laboratory has received the appropriate approvals and has registered its rDNA program with the IBC; and
 
 
C)
A copy of this letter is on file with your laboratory’s IBC.
 
 
8.
You will hold MASSACHUSETTS INSTITUTE OF TECHNOLOGY (M.I.T.) and its employees harmless from any loss, claim, damage or liability, of any kind, which may arise from or in connection with this Agreement or the use, handling or storage of the Material. In no case shall M.I.T, or Professor ______________ be liable for any use by you, by individuals working under your direct supervision, or by your Institution, of the Material or any loss, claim, damage or liability, of any kind, which may arise from or in connection with this Agreement or the use, handling or storage of the Material.
 
 
9.
You understand that no other right or license to this Material or to its use is granted or implied as a result of our sending the Material to you.
 
 
10.
At the request of MASSACHUSETTS INSTITUTE OF TECHNOLOGY, unused Material will be returned to M.I.T. or destroyed.
 
Research Project: Studies on the activation and differentiation of monocytic cells.
 
If you agree to accept the Material under the above conditions, please sign the Agreement, have it signed by an authorized representative of your Institution and return it to:
 
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
25
 
The Material will be sent to you as soon as possible after the receipt of the signed agreement.
 
Sincerely,
 
 
Accepted:
 
REQUESTER
INSTITUTION ______________________________
 
By: _____________________________
By:_____________________________
(Signature)
(Signature)
   
By:_____________________________
By:_____________________________
(Printed Name)
(Authorized Representative’s
 
Printed Name)
   
Date:____________________________
Date:____________________________

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
26
 
FIRST AMENDMENT

This amendment, dated November 20, 1991, is to the License Agreement dated August 19, 1991 between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, the WHITEHEAD INSTITUTE, and ARIAD PHARMACEUTICALS, INC.

The parties agree that the License Agreement shall be amended as follows in order to acknowledge Harvard University’s ownership of certain Patent Rights:

 
1.
The following paragraph shall be added to the WITNESSETH section:
     
    “WHEREAS, M.I.T. Case No. [***] (Whitehead No. [***]) “[***] is jointly owned by Harvard University, and Harvard University (Harvard) has authorized M.I.T. to act as its sole and exclusive agent for the purposes of licensing Harvard’s rights in the Patent Rights and has authorized M.I.T. to enter into this licensing agreement on Harvard’s behalf;
 
 
2.
The word “Harvard” shall be added after “Whitehead,” in the first sentence of Paragraph 1.2.

 
3.
The words “and Harvard” shall be added after “Whitehead and M.I.T.” and “M.I.T. and Whithead” in Paragraph 2.7.

 
4.
The words “and/or Harvard” shall be added after the words “and/or Whitehead” in all instances in Paragraph 6.1.

 
5.
The words “and Harvard” shall be added after the words “M.I.T. and Whitehead” in Paragraphs 7.1 and 7.2. The words “or Harvard shall be added after the words “M.I.T. or Harvard” in Paragraph 7.2.

 
6.
The words “and Harvard” shall be added after the words “M.I.T. and Whitehead” in all instances in Paragraphs 8.1, 8.2 and 8.3.

 
7.
The words “nor of Harvard University” shall be added after “nor of the Whitehead Institute”, and the words “or Harvard” shall be added after the words “Whitehead or M.I.T. in Section X.
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
27


IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly executed this Agreement the day and year set forth below.



MASSACHUSETTS INSTITUTE OF TECHNOLOGY

By
/s/ John T. Preston
Name
John T. Preston
Title
Director, Technology Licensing Office
Date
11-11-91

WHITEHEAD INSTITUTE

By
/s/ John Pratt
Name
John Pratt
Title
Vice President
Date
11/20/91


ARIAD PHARMACEUTICALS, INC.

By
/s/ Harvey Berger
Name
Harvey J. Berger
Title
Chairman & CEO
Date
11/20/91

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
28

SECOND AMENDMENT TO LICENSE AGREEMENT

This Second Amendment to License Agreement (“Second Amendment to License Agreement”) is made and entered into as of this 2nd day of January, 2002, (the “Effective Date”) by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a corporation organized and existing under the laws of the Commonwealth of Massachusetts and having its principal offices at 77 Massachusetts Avenue, Cambridge, Massachusetts (hereinafter referred to as “M.I.T.”), and the WHITEHEAD INSTITUTE, a corporation organized and existing under the laws of Delaware and having its principal offices at Nine Cambridge Center, Cambridge, Massachusetts (hereinafter referred to as “Whitehead”) and ARIAD PHARMACEUTICALS, INC., a corporation duly organized under the laws of Delaware and having its principal offices at 20 Landsdowne Street, Cambridge, Massachusetts (hereinafter referred to as “LICENSEE”).

   WHEREAS, M.I.T., WHITEHEAD and LICENSEE entered into that certain License Agreement dated August 19, 1991, and amended same effective November 20, 1991 (collectively, the “Agreement”); and

WHEREAS, the parties to the Agreement desire to amend certain terms of the Agreement, to add certain terms to the Agreement and to confirm the validity and effectiveness of the remaining terms and conditions set forth in the Agreement, all as further set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations set forth herein, the parties hereby agree as follows.

ARTICLE 1

1.        Definitions. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Agreement.

ARTICLE 2

2.        Amendment of the Agreement. The Agreement is hereby amended as set forth in this Article 2.

2.1        Amendment of Article II - Grant. Article II of the Agreement is hereby amended as set forth herein.

2.1.1        Amendment of Paragraph 2.2. Paragraph 2.2 of the Agreement is hereby deleted and replaced with the following text:

“2.2 [RESERVED]”

2.1.3        Amendment of Paragraph 2.3. Paragraph 2.3 of the Agreement is hereby deleted and replaced with the following text:
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
29
 
“2.3 Except as otherwise specifically set forth herein, the rights granted under Paragraph 2.1 hereof shall be and remain exclusively granted to LICENSEE and shall continue until the end of the term or terms for which any Patent Rights are issued, unless sooner terminated as provided herein. Without limiting the generality of the foregoing, upon a failure of LICENSEE to pay the License Maintenance Fees due hereunder, the rights granted under Paragraph 2.1 hereunder shall convert to non-exclusive upon written notice from M.I.T. to LICENSEE. The right to convert the rights granted hereunder to non-exclusive shall not be in limitation of any other rights that M.I.T. may have hereunder or at law upon such a failure by LICENSEE to pay the License Maintenance Fees hereunder.”

  2.1.3        Amendment of Paragraph 2.4. Paragraph 2.4 of the Agreement is hereby deleted and replaced with the following text:

“2.4 [RESERVED]”

2.1.4        Amendment of Paragraph 2.8. Paragraph 2.8 of the Agreement is hereby deleted and replaced with the following text:

“2.8 LICENSEE shall have the right to enter into sublicenses for the rights, privileges and licenses granted hereunder. Such sublicenses shall contain provisions enabling LICENSEE to fulfill its obligations to M.I.T. hereunder.”

2.1.5        Amendment of Paragraphs 2.9 and 2.10. Paragraphs 2.9 and 2.10 of the Agreement are hereby deleted and replaced with the following text:

“2.9 [RESERVED]

2.10 [RESERVED]” 

2.2        Amendment of Article III - DUE DILIGENCE. Article III of the Agreement is hereby amended as set forth herein.

2.2.1        Amendment of Paragraph 3.1. Paragraph 3.1 of the Agreement is hereby deleted and replaced with the following text:

“3.1 LICENSEE shall use reasonable commercial efforts to bring one or more Licensed Products to market through a thorough, vigorous and diligent program for exploitation of the Patent Rights. Commercially reasonable efforts by LICENSEE to grant sublicenses to companies that LICENSEE reasonably believes are engaged or will engage in such activities shall be sufficient to satisfy LICENSEE’s obligations hereunder.”

2.2.2        Amendment of Paragraph 3.2. Paragraph 3.2 of the Agreement is hereby deleted and replaced with the following text:
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
30
 
“3.2 [RESERVED]”

2.3        Amendment of Article VII - INFRINGEMENT. Article VII of the Agreement is hereby amended as set forth herein.

2.3.1        Amendment of Paragraph 7.5. Paragraph 7.5 of the Agreement is hereby deleted and replaced with the following text:

“7.5 In the event that a declaratory action alleging invalidity or noninfringement of any of the Patent Rights shall be brought against LICENSEE, and LICENSEE fails to take reasonable steps to defend such action in a timely manner, M.I.T. (or Whitehead), at its option, shall have the right to intervene and take over sole defense of such action at its own expense.”

ARTICLE 3
CONFIRMATION OF VALIDITY AND EFFECTIVENESS

3.        Confirmation of Validity and Effectiveness. Except as otherwise specifically set forth herein, the parties hereby confirm the validity and continued effectiveness of the Agreement.


IN WITNESS WHEREOF, the parties have hereunto set their hands and duly executed this Second Amendment to License Agreement as of the Effective Date.
 
MASSACHUSETTS INSTITUTE OF TECHNOLOGY

 
By:
 /s/ Lita L. Nelsen
 
Name:
 Lita L. Nelsen
 
Title:
 Director, Technology Office



WHITEHEAD INSTITUTE

 
By:
/s/ John Pratt
 
Name:
 John Pratt
 
Title:
 Vice President


ARIAD PHARMACEUTICALS, INC.

  /s/ Fritz Casselman
 
By:
Fritz Casselman
   
Senior Vice President and
   
Chief Business Officer
 
Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
 
31
 
 EX-31.1 3 a5144411ex31_1.htm EXHIBIT 31.1 Exhibit 31.1
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;
   
4.
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:
   
 
a) 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;
   
 
b) 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;
   
 
c) 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
   
 
d) 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 controls 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):
   
 
a) 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
   
 
b) 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.
 

 
By:
/s/ Harvey J. Berger, M.D.
Date: May 10, 2006
  
Chairman and Chief Executive Officer
 
27
 EX-31.2 4 a5144411ex31_2.htm EXHIBIT 31.2 Exhibit 31.2
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;
   
4.
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:
   
 
a) 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;
   
 
b) 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;
   
 
c) 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
   
 
d) 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 controls 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):
   
 
a) 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
   
 
b) 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.
 

 
By:
/s/ Edward M. Fitzgerald
   
Edward M. Fitzgerald
   
Senior Vice President, Finance and Corporate
Date: May 10, 2006
  
Operations and Chief Financial Officer
   
(Principal financial officer and chief accounting officer)
 
28
 EX-32.1 5 a5144411ex32_1.htm EXHIBIT 32.1 Exhibit 32.1
Exhibit 32.1


Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

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

The Quarterly Report on Form 10-Q for the period ended March 31, 2006 (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 information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.


 
Date: May 10, 2006
/s/ Harvey J. Berger, M.D
   
Harvey J. Berger, M.D.
   
Chairman and Chief Executive Officer
     
 
Date: May 10, 2006
/s/ Edward M. Fitzgerald
   
Edward M. Fitzgerald
   
Senior Vice President, Finance and Corporate Operations and
Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


 
 
29
 
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