a5565679.htm

This Amendment No. 1 (the “Amended Filing”) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 originally filed on November 9, 2007 (the “Original Filing”) is being filed solely to revise disclosure contained in Note 9 to the Registrant’s unaudited condensed consolidated financial statements contained in Part I, Item 1 of the Original Filing to: (i) correct a typographical error under the subheading “The ‘374 and ‘090 Patents” relating to the scheduled commencement date of the trial and (ii) to revise disclosure under the subheading “Reexamination Proceedings in PTO” to reflect that some of the 94 claims cancelled by the Registrant were asserted in the Amgen litigation and to note that some of the 8 added claims, if issued, could be asserted against Lilly or Amgen. Part II has also been amended to reflect the incorporation by reference in Part II, Item 1 of the revised disclosure in Note 9 and to reflect the required filing of new certifications of the principal executive officer and principal financial officer of the Registrant in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended.

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
*In thousands, except share and per share data*	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	68,875		$	31,728
Marketable securities		17,235			8,076
Amounts due under collaboration agreement		3,421			-
Inventory and other current assets		2,438			1,839

Total current assets		91,969			41,643

Property and equipment:
Leasehold improvements		18,172			18,126
Equipment and furniture		11,356			10,677

Total		29,528			28,803
Less accumulated depreciation and amortization		(24,837	)		(23,721	)

Property and equipment, net		4,691			5,082

Intangible and other assets, net		4,044			4,318

Total assets	$	100,704		$	51,043

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	4,295		$	1,920
Accounts payable		2,103			4,003
Accrued compensation and benefits		772			428
Accrued product development expenses		6,479			6,612
Other accrued expenses		5,061			1,841
Current portion of deferred executive compensation		456			528
Current portion of deferred revenue		5,859			452

Total current liabilities		25,025			15,784

Long-term debt					3,815

Deferred revenue		67,939			2

Deferred executive compensation		1,489			1,180

Stockholders’ equity:
Common stock, $.001 par value; authorized, 145,000,000 shares; issued and outstanding, 69,223,129 shares in 2007 and 65,391,347 shares in 2006		69			65
Additional paid-in capital		358,000			339,220
Accumulated other comprehensive income		14			3
Accumulated deficit		(351,832	)		(309,026	)

Total stockholders’ equity		6,251			30,262

Total liabilities and stockholders’ equity	$	100,704		$	51,043

ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
*In thousands, except share and per share data*	2007			2006			2007			2006

License and collaboration revenue	$	1,602		$	229		$	1,981		$	688


Operating expenses:
Research and development		8,242			10,564			29,805			32,382
General and administrative		5,006			5,244			16,307			17,231

Total operating expenses		13,248			15,808			46,112			49,613


Loss from operations		(11,646	)		(15,579	)		(44,131	)		(48,925	)


Other income (expense):
Interest income		878			482			1,609			1,720
Interest expense		(82	)		(123	)		(284	)		(369	)

Other income, net		796			359			1,325			1,351


Net loss	$	(10,850	)	$	(15,220	)	$	(42,806	)	$	(47,574	)


Net loss per share	$	(.16	)	$	(.25	)	$	(.63	)	$	(.77	)


Weighted-average number of shares ofcommon stock outstanding		69,160,289			62,120,381			67,870,622			62,013,462

	Nine Months Ended September 30,
*In thousands*	2007			2006

Cash flows from operating activities:
Net loss	$	(42,806	)	$	(47,574	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,765			3,476
Accretion of discount on marketable securities		(609	)		(1,313	)
Deferred executive compensation expense		745			669
Stock-based compensation		4,487			3,388
Increase (decrease) from:
Inventory and other current assets		(599	)		(93	)
Amounts due under collaboration agreement		(3,421	)
Other assets		(4	)		35
Accounts payable		(1,900	)		97
Accrued compensation and benefits		344			407
Accrued product development expenses		(133	)		(1,440	)
Other accrued expenses		3,220			901
Deferred revenue		73,344			(363	)
Deferred executive compensation paid		(508	)		(423	)

Net cash provided by (used in) operating activities		33,925			(42,233	)

Cash flows from investing activities:
Proceeds from maturities of marketable securities		43,377			70,766
Purchases of marketable securities		(51,916	)		(37,761	)
Investment in property and equipment		(725	)		(1,018	)
Investment in intangible assets		(371	)		(434	)

Net cash (used in) provided by investing activities		(9,635	)		31,553

Cash flows from financing activities:
Repayment of borrowings		(1,440	)		(1,440	)
Proceeds from the issuance of stock , net of issuance costs		12,300
Proceeds from issuance of stock pursuant to stock option and purchase plans		1,997			1,488

Net cash provided by financing activities		12,857			48

Net increase (decrease) in cash and cash equivalents		37,147			(10,632	)
Cash and cash equivalents, beginning of period		31,728			25,453

Cash and cash equivalents, end of period	$	68,875		$	14,821

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 September 30, 2007, the results of operations for the three-month and nine-month periods ended September 30, 2007 and 2006 and cash flows for the nine-month periods ended September 30, 2007 and 2006. The results of operations for the three-month and nine-month periods ended September 30, 2007 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, 2006, which includes consolidated financial statements and notes thereto for the years ended December 31, 2006, 2005 and 2004.

At September 30, 2007, the Company has cash, cash equivalents and marketable securities totaling $86.1 million. The Company believes that the combination of its cash, cash equivalents and marketable securities, together with funding pursuant to its collaboration with Merck & Co., Inc. (Note 3) and the availability of $37.5 million under its equity financing facility with Azimuth Opportunity Ltd. (Note 5), provide sufficient resources for the Company to satisfy its operating and capital requirements for more than twelve months.

The Company recognizes revenue in accordance with the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, SAB No. 104, Revenue Recognition, and Emerging Issues Task Force (“EITF”) No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured. Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. Consideration received is allocated to the separate units of accounting based on the fair value of each unit and the appropriate revenue recognition principles are applied to each unit.

Up-front and annual license fees associated with collaboration and license agreements are recorded as deferred revenue upon receipt and recognized as revenue on a systematic basis over the period of time they are earned in accordance with the terms of the agreements. Milestone payments are also recognized as revenue on a systematic basis over the remaining performance period of the agreements, commencing when the milestone has been achieved or is probable of achievement. Royalty payments are recognized as revenue based on contract terms and reported sales of licensed products, when reported sales are reliably measurable and collectibility is reasonably assured.

Under the terms of the Collaboration Agreement, Merck and the Company will conduct a broad-based development program in which clinical trials and biomarker studies will be conducted concurrently in multiple cancer indications, pursuant to a global development plan to be agreed upon by the Company and Merck. Each party will fund fifty percent (50%) of the global development costs, except that Merck will fund one-hundred percent (100%) of any cost of development that is specific to development or commercialization of the Product outside the United States. The Collaboration Agreement provides that, in certain circumstances, either party may opt out of conducting and funding certain late-stage clinical trials, which would result in changes in development and commercialization responsibilities and compensation arrangements. The Company will be responsible for supplying the active pharmaceutical ingredient used in the Product and Merck will be responsible for the formulation of the finished Product, all under a separate supply agreement to be negotiated by the parties.

The Collaboration Agreement provides that, in the United States, the Company and Merck will co-promote the Product, the Company will distribute and sell the Product for all cancer indications and record all sales, and each party will receive fifty percent (50%) of the profit from such sales. Outside the United States, Merck will distribute, sell and promote the Product and book all sales, and Merck will pay the Company tiered double-digit royalties on such sales. Royalties are payable by Merck, on a country by country basis, until the later of (i) the expiration of the last valid claim of any patent rights owned by either the Company or Merck that cover the Product, (ii) a specified number of years from first commercial sale, or (iii) the last date upon which the Company supplies active pharmaceutical ingredient to Merck under the Supply Agreement, subject to partial reduction in certain circumstances.

Under the terms of the Collaboration Agreement, Merck paid the Company an initial up-front payment of $75 million in July 2007, and has agreed to pay up to $452 million in milestone payments based on the successful development of the Product in multiple cancer indications, and up to $200 million based on achievement of specified Product sales thresholds. Merck has also agreed to provide the Company with up to $200 million in interest-bearing, repayable, development cost advances to cover a portion of the Company’s share of global development costs, after the Company has paid $150 million in global development costs. All amounts to be paid to the Company by Merck, with the exception of any development cost advances, are non-refundable.

The Collaboration Agreement may be terminated (i) by either party based on insolvency or uncured breach by the other party, (ii) by Merck on or after the third anniversary of the effective date by providing at least twelve (12) months prior written notice, (iii) by Merck upon the failure of the Product to meet certain developmental and safety requirements, or (iv) after discussions between the parties, in the event Merck concludes it is not advisable to continue the development of deforolimus for use in a cancer indication. Upon termination of the Collaboration Agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of the Product and continuing royalty obligations.

Under the terms of the Collaboration Agreement, the Company and Merck have established a series of joint committees which are responsible for the development and commercialization of the Product. Under the committee structure, if the committees are unable to reach a decision, the matter is referred to senior executives of the parties. Each party has ultimate decision making authority with respect to a specified limited set of issues, and for all other issues, the matter must be resolved by consensus of the parties. Either party may choose not to appoint members to any of the joint committees and such a determination by either party has no impact on the financial or other terms of the collaboration.

The up-front payment of $75 million received by the Company has been deferred and is being recognized as revenue on a straight-line basis through 2023, the estimated expiration of the patents related to the underlying technology. The Company has also deemed as probable the expected receipt of the first milestone payment of $13.5 million, related to the start of the Phase 3 clinical trial of deforolimus in patients with metastatic sarcomas, and therefore began recognizing revenue related to such milestone in the third quarter of 2007 on the same basis as the up-front payment.

Development costs under the Collaboration Agreement are aggregated and split between the Company and Merck in accordance with the terms of the agreement. The Company’s share of such development costs are reflected in operating expenses in the Company’s statement of operations. Any amounts due to or from Merck in respect of such development costs are recorded as such on the Company’s balance sheet. At September 30, 2007, the Company has recorded an amount due from Merck under the collaboration agreement of $3.4 million.

At September 30, 2007, the aggregate fair value and amortized cost of the Company’s marketable securities were $17,235,000 and 17,221,000, respectively. Gross unrealized gains and losses were $15,000 and $1,000, respectively, at September 30, 2007. The gross unrealized losses of $1,000 pertain to one marketable security with an aggregate fair value of $1,499,000, which has been in a continuous loss position for less than twelve months.

Realized gains and losses on investment security transactions are reported on the specific-identification method. There were no realized gains or losses on sales of marketable securities during the nine months ended September 30, 2007. Changes in market values resulted in a decrease in net unrealized gains of $11,000 for the nine-month period ended September 30, 2007.

On February 14, 2007, the Company entered into an agreement with Azimuth Opportunity Ltd. (“Azimuth”) under which the Company may offer and sell, at the Company’s sole discretion, and Azimuth is committed to purchase, subject to the terms and conditions set forth in the agreement, up to $50 million of the Company’s common stock, or the number of shares which is one less than twenty percent of the issued and outstanding shares of the Company’s common stock as of the date of the agreement, whichever is fewer. The per share purchase price for these shares will equal the daily volume weighted average price of the Company’s common stock on such date, less a discount ranging from 3.5% to 5.5%. The agreement expires in August 2008. Upon each sale of common stock to Azimuth, the Company will pay to Reedland Capital Partners a placement fee equal to 1.0% of the aggregate dollar amount received by the Company from such sale.

Pursuant to the terms of this agreement, on March 26, 2007, the Company sold to Azimuth 3,072,393 shares of its common stock at an aggregate purchase price of $12.5 million. The net proceeds from this transaction, after deducting issuance expenses, were approximately $12.3 million. Following this transaction, $37.5 million remains available to the Company under this equity financing facility.

The shares of common stock sold to Azimuth were registered under a shelf registration statement filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on January 30, 2007 and declared effective by the SEC on February 6, 2007 which registered for issuance a total of $100 million of securities. Following the sale of common stock to Azimuth, $87.5 million of securities remain available for issuance under this shelf registration statement.

The Company awards stock options and other equity-based instruments to its employees, directors and consultants and provides employees the right to purchase common stock (collectively “share-based payments”) pursuant to stockholder approved plans. The Company’s statement of operations included total compensation cost from share-based payments for the three-month and nine-month periods ended September 30, 2007 and 2006 as follows:

	Nine Months Ended September 30,
	2007						2006
	Shares		Weighted-Average Grant-Date Fair Value		Total Fair Value		Shares		Weighted-Average Grant-Date Fair Value		Total Fair Value
			*(Per Share)*		*(in 000’s)*				*(Per Share)*		*(in 000’s)*

Stock options		2,092,220	$	3.28	$	6,862		563,895	$	4.37	$	2,464
Stock and stock units		134,000		4.94		662		80,000		6.43		514
Purchases of commonstock at a discount		39,041		1.41		55		27,896		1.25		34
		2,265,261						671,791

Stock options are granted with an exercise price equal to the closing price of the Company’s common stock on the date of grant and have a term of ten years. Stock options generally vest 25% per year over four years. Stock options are valued using the Black-Scholes option valuation model and compensation expense is recognized based on such fair value, net of the impact of forfeitures, over the vesting period on a straight-line basis. The weighted average assumptions used in the Black-Scholes model to value stock options granted during the nine-month periods ended September 30, 2007 and 2006 were as follows:

Stock and stock unit grants are valued based on the closing price of the Company’s common stock on the date of grant and compensation expense is recognized over the requisite service period or period during which restrictions remain on the common stock or stock units granted. Compensation expense related to purchases of common stock by employees under the Company’s employee stock purchase plan is recognized in the period of grant.

Effective in October 2005, the Company adopted a new deferred executive compensation plan that defers the payment of annual bonus awards to future periods as specified in each award. The Company accrues a liability based on the fair value of the awards ratably over the vesting period. The recorded balances of such awards are increased or decreased based on the actual total return and quoted market prices of specified mutual funds. In April 2007, the Company made awards in the aggregate amount of $1,403,000 to eleven officers; there were no awards made in 2006. Total expense related to these plans amounted to $745,000 and $669,000 for the nine-month periods ended September 30, 2007 and 2006, respectively.

Net loss per share amounts have been computed based on the weighted-average number of common shares outstanding during each period. Because of the net loss reported in each period, diluted and basic net loss per share amounts are the same. For the nine months ended September 30, 2007 and 2006, options to purchase 7,416,794 and 6,836,781 shares of common stock, respectively, were not included in the computation of net loss per share, because the effect would be anti-dilutive.

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 (the “U.S. District Court“) against Eli Lilly and Company (“Lilly”) alleging infringement of certain claims (the “NF-κB ‘516 Claims”) of the Plaintiffs’ U.S. Patent No. 6,410,516 (the “‘516 Patent”), covering methods of treating human disease by regulating NF-κB cell-signaling activity through sales of Lilly’s osteoporosis drug, Evista^®, and Lilly’s septic shock drug, Xigris^®, and seeking monetary damages from Lilly.

Both a jury trial and a bench trial were held in this case. On May 4, 2007, following a trial, a jury rendered a verdict in favor of the Plaintiffs. The jury found that the NF-κB ‘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 of $65.2 million to the Plaintiffs, plus further damages equal to 2.3% of U.S. sales of Evista and Xigris from February 28, 2006 through the year 2019, when the patent expires. Final Judgment was entered on September 10, 2007, following a bench trial after which the U.S. District Court held that the four claims of the ‘516 Patent found infringed by the jury do not encompass unpatentable subject matter and the ‘516 Patent is not invalid due to inequitable conduct or prosecution laches.

On September 20, 2007, Lilly filed a renewed motion for judgment as a matter of law, or, in the alternative, for a new trial. Following a ruling by the U.S. District Court on this motion, Lilly also has the right 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. If the Final Judgment is upheld, damages paid by Lilly will be applied first to reimburse the Company for any unreimbursed legal fees and expenses relating to the litigation. The Company will receive 91% of the remainder, and the co-plaintiffs will receive 9%.

On April 20, 2006, Amgen Inc. and certain affiliated entities (“Amgen“) filed a lawsuit against the Company in the U.S. District Court for the District of Delaware (the “Delaware Court“) 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^®. On April 13, 2007, the Company, together with the institutional patentees, filed a counterclaim against Amgen, and joining Wyeth in the action. The counterclaim against Amgen and Wyeth alleges infringement of the ‘516 Patent based on activities related to Enbrel and Kineret, as well as the Company’s answer to Amgen’s complaint, counter-claim and demand for jury trial.

On May 30, 2007, the Company and the institutional patentees filed a motion seeking to amend their counterclaims to assert claims against Amgen for infringement of U.S. Patent Nos. 5,804,374 (the “’374 Patent”) and 6,150,090 (the “’090 Patent”). On September 13, 2007, the Delaware Court issued an order granting the Company’s motion to amend its counterclaims asserted against Amgen to include infringement of the ‘374 Patent and the ‘090 Patent. The trial with respect to these counterclaims is scheduled to commence on March 23, 2008.

On April 4, 2005, Lilly filed a request in the United States Patent and Trademark Office (“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 granted and were merged by the PTO into a single reexamination proceeding.

The PTO issued its first office action on August 2, 2006. In this first office action, 160 of the 203 claims of the ‘516 Patent were rejected by the PTO, including the claims asserted by the Company in the Lilly litigation and claims which are or may be asserted by the Company in the Amgen litigation. The Company cancelled 8 of the 160 claims in its response to the first office action filed on November 9, 2006. On July 6, 2007, the PTO issued a final office action, rejecting 141 claims of the ‘516 Patent, including the claims asserted by the Company in the Lilly and Amgen litigations. The Company cancelled 94 of the 141 claims (none of which were asserted in the Lilly litigation and some of which were asserted in the Amgen litigation), and added 8 new claims (some of which, if issued, could be asserted against Lilly or Amgen), in its response to the final office action filed on October 22, 2007. The Company also filed both a petition to withdraw the finality of July 6 office action on July 25, 2007 and a request for continued reexamination on October 22, 2007.

The timing and ultimate outcome of the Lilly and Amgen litigations and the reexamination proceedings in the PTO cannot be determined at this time. Consequently, the Company cannot predict which of these proceedings will lead to a first appeal to the Court of Appeals for the Federal Circuit and no determination can be made with respect to allowance of the claims of the ‘516 Patent, nor can any final determination be made with respect to the validity or infringement of the claims asserted in the Lilly and the Amgen litigations, nor can the Company 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 in both the jury and bench trials in the Lilly litigation, the damages the Company was awarded by the jury may be eliminated or limited by an adverse finding on post-trial motions, upon appeal, or in the event that the claims of the ‘516 Patent are invalidated by the PTO.

The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainties in Income Taxes, on January 1, 2007. FIN 48 defines the threshold for recognizing the benefits of tax-return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authorities. FIN 48 also requires explicit disclosure about a company’s uncertainties related to their income tax position, including a detailed roll-forward of tax benefits taken that do not qualify for financial statement recognition. The adoption of FIN 48 did not have a material impact on the Company’s financial position or results of operations as of and for the period ended September 30, 2007.

In September 2006, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures related to fair value measurements. SFAS No. 157 is effective for the fiscal year that begins subsequent to November 15, 2007 and shall be applied prospectively as of the beginning of the fiscal year in which it is adopted. The Company has not yet determined the impact of adoption of SFAS No. 157 on its consolidated financial statements.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115. SFAS No. 159 allows companies to choose to measure many financial instruments and certain other items at fair value that are currently not required to be measured at fair value. The fair value option is applied instrument by instrument, is irrevocable and is applied only to an entire instrument. SFAS No. 159 is effective for the fiscal year that begins subsequent to November 15, 2007 and should not be applied retrospectively to fiscal years beginning prior to the effective date. The Company has not yet determined the impact of adoption of SFAS No. 159 on its consolidated financial statements.

In June 2007, the Emerging Issues Task Force (“EITF”) issued EITF No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities. EITF No. 07-3 states that nonrefundable advance payments for goods or services that will be used for future research and development activities should be deferred and capitalized and that such amounts should be recognized as an expense as the goods are delivered or the services are performed. EITF No. 07-3 is effective for the fiscal year that begins subsequent to December 15, 2007. The Company expects that the adoption of this EITF will not have a material impact on the Company’s consolidated financial statements.

On October 9, 2007, the Company entered into a non-exclusive license agreement with ICON Medical Corp. (“ICON”), a cardiovascular medical device company, to develop and commercialize drug-eluting stents that deliver the Company’s mTOR inhibitor, deforolimus, to prevent restenosis of injured vessels following interventions in which stents are used in conjunction with balloon angioplasty (the “Stent Products”).

Under the license agreement, the Company granted to ICON a non-exclusive, world-wide, royalty-bearing license, under its patents and technology, to develop, manufacture and sell the Stent Products. The term of the license agreement extends to the later to occur of the expiration of the Company’s patents relating to the rights granted to ICON under the license agreement or fifteen years after the first commercial sale of a Stent Product. ICON is required under the license agreement to use commercially reasonable efforts to develop the Stent Products. The license agreement provides that the Company will receive an equity stake in ICON pursuant to a stock purchase agreement, up to $27 million in payments based on achievement of certain clinical, regulatory and commercial milestones for two Stent Products and royalties based on worldwide sales of the Stent Products. The Company is required to use commercially reasonable efforts to supply deforolimus to ICON for use in the development, manufacture and sale of the Stent Products. The license may be terminated by either party for breach after a cure period of up to 90 days, by either party in the case of bankruptcy, by ICON upon 30 days prior written notice if it determines, in its reasonable business judgment, that it is not in its business interest to continue the development of any Stent Product, or by the Company upon 30 days prior written notice if it determines that it is not in its business interest to continue development and regulatory approval efforts with respect to deforolimus.

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.

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

PART I.	FINANCIAL INFORMATION	1

ITEM 1.	UNAUDITED FINANCIAL STATEMENTS	1

	Condensed Consolidated Balance Sheets – September 30, 2007 and December 31, 2006	1

	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2007 and 2006	2

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006	3

	Notes to Unaudited Condensed Consolidated Financial Statements	4


PART II.	OTHER INFORMATION	12

ITEM 1.	LEGAL PROCEEDINGS	12

ITEM 6.	EXHIBITS	12

	SIGNATURES	13

	EXHIBIT INDEX	14

	Nine Months Ended September 30,
	2007	2006

Expected life of options granted (in years)	7.60	7.07
Expected volatility	68.02%	70.59%
Risk free interest rate	4.47%	4.68%
Expected annual dividends	0%	0%

	ARIAD Pharmaceuticals, Inc.

	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
Date: December 12, 2007		(Principal financial officer and chief accounting officer)

	Three Months Ended September 30,				Nine Months Ended September 30,
*In thousands*	2007		2006		2007		2006

Compensation cost from:
Stock options	$	1,170	$	920	$	3,862	$	2,801
Stock and stock units		91		184		571		553
Purchases of common stock at a discount		18		12		54		34
	$	1,279	$	1,116	$	4,487	$	3,388