1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X)[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998MARCH 31, 1999
OR
( )[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)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)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
---- -------- ---
The number of shares of the Registrant's common stock outstanding as of November 5, 1998May 12,
1999 was 21,927,504.
================================================================================22,005,149.
2
ARIAD PHARMACEUTICALS, INC.
TABLE OF CONTENTS
-----------------
Page No.
--------
PART I. FINANCIAL INFORMATION Page No.
- ---- ------------------------ --------
ITEM 1. UNAUDITED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - September 30, 1998March 31, 1999
and December 31, 1997 ............................................1998 ........................................... 1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and Nine Months Ended September 30, 1998 and 1997.......................... 2
Condensed Consolidated Statements of Cash Flows for the
NineThree Months Ended September 30,March 31, 1999 and 1998 and 1997........................................... 3
Notes to Unaudited Condensed Consolidated Financial Statements....Statements .. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...............................OPERATIONS ............................. 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...... 13
PART II. OTHER INFORMATION
- --------------------------ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ....................... 14
ITEM 5. OTHER INFORMATION ............................................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 128-K ................................ 15
3
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
SEPTEMBER 30,MARCH 31, DECEMBER 31,
1999 1998
1997
------------ ------------------------ -------------
Current assets:
Cash and cash equivalents $ 4,516,564 $13,858,9109,271,390 $ 6,501,648
Marketable securities 10,403,886 15,500,547
Prepaid expenses, inventory6,598,294 7,674,488
Inventory and other assets 2,491,120 758,463
----------- -----------1,788,945 2,018,846
Due from Genomics Center 394,401 332,571
------------- -------------
Total current assets 17,411,570 30,117,920
----------- -----------18,053,030 16,527,553
------------- -------------
Property and equipment:
Leasehold improvements 12,540,585 12,350,10012,560,210 12,555,301
Equipment and furniture 4,416,803 5,549,127
----------- -----------4,546,463 4,438,399
------------- -------------
Total 16,957,388 17,899,22717,106,673 16,993,700
Less accumulated depreciation and amortization 8,324,505 6,459,857
----------- -----------9,562,690 8,944,027
------------- -------------
Property and equipment, net 8,632,883 11,439,370
----------- -----------7,543,983 8,049,673
------------- -------------
Investment in Genomics Center 1,891,031 1,418,864
----------- -----------2,501,438 1,902,129
------------- -------------
Intangible and other assets, net 4,212,068 4,433,022
----------- -----------4,052,164 4,306,585
------------- -------------
Total $32,147,552 $47,409,176
=========== ===========$ 32,150,615 $ 30,785,940
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,849,5361,758,770 $ 1,816,5831,861,021
Accounts payable 2,954,042 3,299,1683,354,719 3,322,439
Accrued liabilities 2,925,793 2,849,3532,429,883 2,042,641
Advance from Genomics Center 1,345,845 2,502,9213,621,091 3,162,463
Deferred revenue 611,115 3,111,114
----------- -----------333,333 333,333
------------- -------------
Total current liabilities 9,686,331 13,579,139
----------- -----------11,497,796 10,721,897
------------- -------------
Long-term debt 3,764,796 5,156,219
----------- -----------
Deferred revenue 300,000
------------2,936,442 3,295,139
------------- -------------
Redeemable convertible preferred stock, at liquidation value 5,097,260 5,035,616
------------- -------------
Stockholders' equity:
Series B convertible preferred stock, $.01 par value; authorized,
5,000,000 shares; issued and outstanding, 3,004,436 shares in 1999 and
2,526,316 shares in 1998 and 1997 (liquidation preference, $24,000,000) 25,263$29,747,000) 30,044 25,263
Common stock, $.001 par value; authorized, 60,000,000 shares; issued and
outstanding, 21,920,40221,992,880 shares in 1999 and 21,938,754 shares in 1998 and
19,308,605 shares in 1997 21,920 19,30921,993 21,939
Additional paid-in capital 104,299,743 94,833,479
Net unrealized gain (loss) on marketable securities 9,942 (47,572)110,243,346 104,360,924
Accumulated other comprehensive loss (45,070) (34,381)
Accumulated deficit (85,660,443) (66,456,661)
----------- -----------(97,631,196) (92,640,457)
------------- -------------
Stockholders' equity 18,696,425 28,373,818
----------- -----------12,619,117 11,733,288
------------- -------------
Total $32,147,552 $47,409,176
=========== ===========$ 32,150,615 $ 30,785,940
============= =============
See notes to unaudited condensed consolidated financial statements.
1
4
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------------MARCH 31,
--------------------------------
1999 1998 1997 1998 1997
-----------
------------ ------------
-----------
Revenue:
Research revenue (principally related parties) $ 3,658,8014,582,897 $ 2,235,806 $ 9,733,270 $ 6,698,3482,846,586
Interest income 220,925 511,237 829,672 1,329,167
----------- -----------172,891 313,045
------------ -----------------------
Total revenue 3,879,726 2,747,043 10,562,942 8,027,515
----------- -----------4,755,788 3,159,631
------------ -----------------------
Operating expenses:
Research and development 10,661,808 4,666,954 27,387,451 13,197,1828,510,816 7,735,955
General and administrative 629,581 591,869 2,005,630 2,075,751730,247 699,029
Interest expense 115,519 152,676 373,643 264,189
----------- -----------105,781 130,582
------------ -----------------------
Total operating expenses 11,406,908 5,411,499 29,766,724 15,537,122
----------- -----------9,346,844 8,565,566
Equity in net loss of Genomics Center 338,039
------------ -----------------------
Net loss $(7,527,182) $(2,664,456) $(19,203,782) $(7,509,607)
=========== =========== ============ ===========(4,929,095) (5,405,935)
------------ ------------
Preferred stock dividends 61,644
------------ ------------
Net loss attributable to common stockholders $ (4,990,739) $ (5,405,935)
============ ============
Net loss per common share (basic and diluted) $ (.34)(.23) $ (.14) $ (.93) $ (.39)
=========== ===========(.28)
============ =======================
Weighted average number of shares
of common stock outstanding 21,886,079 19,297,504 20,645,620 19,235,91821,963,809 19,317,955
See notes to unaudited condensed consolidated financial statements.
2
5
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINETHREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------MARCH 31,
--------------------------------
1999 1998 1997
------------ ------------
Cash flows from operating activities:
Net loss $(19,203,782) $ (7,509,607)(4,929,095) $ (5,405,935)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,556,336 1,813,7291,096,830 842,336
Deferred revenue (2,799,999) (2,499,999)(833,333)
Stock-based compensation 50,529 52,72618,346 19,773
Increase (decrease) from:
Prepaid expenses, inventoryInventory and other current assets (1,732,657) (523,487)
Accounts receivable - related party 2,000,000229,901 (1,047,442)
Due from Genomics Center (61,830)
Other assets 138,123 (311,094)117,110 (9,910)
Accounts payable (345,126) 2,407,27432,280 (402,802)
Accrued liabilities 76,440 253,072387,242 (1,036,208)
Advance from Genomics Center (1,157,076) 2,103,163458,628 459,534
------------ ------------
Net cash used in operating activities (22,417,212) (2,214,223)(2,650,588) (7,413,987)
------------ ------------
Cash flows from investing activities:
Acquisitions of marketable securities (14,042,569) (23,881,266)(3,625,867)
Proceeds from sales and maturities of marketable securities 19,104,065 13,277,9401,044,000 5,201,488
Investment in Genomics Center (4,320,652) (1,255,836)(2,655,369) (1,186,020)
Return of investment in Genomics Center 3,819,0251,920,936 956,253
Investment in property and equipment, net (1,486,036) (7,109,953)
Acquisitions(188,377) (1,109,613)
Acquisition of licensed technology and patents (486,717) (1,939,704)intangible assets (184,229) (252,547)
------------ ------------
Net cash provided by (used in)used in investing activities 2,587,116 (20,908,819)(63,039) (16,306)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs 9,226,060
Proceeds from issuance of series B preferred stock 24,000,0005,747,000
Repayment of borrowings (1,358,470) (1,328,296)
Proceeds from borrowings 6,000,000(460,948) (450,208)
Proceeds from sale/leaseback of equipment 2,427,875 1,148,02675,404 1,425,209
Proceeds from exerciseissuance of stock options 192,285 183,068pursuant to stock option and
purchase plans 121,913 77,949
------------ ------------
Net cash provided by financing activities 10,487,750 30,002,7985,483,369 1,052,950
------------ ------------
Net (decrease) increase in cash and equivalents (9,342,346) 6,879,7562,769,742 (6,377,343)
Cash and equivalents, beginning of period 6,501,648 13,858,910 2,906,851
------------ ------------
Cash and equivalents, end of period $ 4,516,5649,271,390 $ 9,786,6077,481,567
============ ============
See notes to unaudited condensed consolidated financial statements.
3
6
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. MANAGEMENT STATEMENTManagement Statement
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of September 30, 1998 and DecemberMarch 31, 19971999 and the results of operations
for the three-month and nine-month periods ended September 30,March 31, 1999 and 1998. These financial
statements should be read in conjunction with the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, which includes
consolidated financial statements and 1997.notes thereto for the years ended
December 31, 1998, 1997 and 1996.
The results of operations for the three-month and nine-month periodsperiod ended September 30, 1998March 31, 1999
are not necessarily indicative of the results to be expected for the full
year.
2. MARKETABLE SECURITIESMarketable Securities
The Company has classified its marketable securities as available for sale
and, accordingly, carries such securities at aggregate fair value. At
September 30,
1998March 31, 1999 and December 31, 1997,1998, the Company's marketable securities
consisted of the following:
Aggregate Amortized Gross Unrealized
19981999 Fair Value Cost Basis Gains Losses
- --------------- ----------- ----------- ---------- ---------
U.S. Government obligations $ 301,486574,034 $ 300,061602,311 $ 2,084 $ (659)(28,277)
Corporate debt securities 10,102,400 10,093,883 27,987 (19,470)6,024,260 6,041,253 $ 1,813 (18,606)
----------- ----------- ---------- -------------------- -----------
Total $10,403,886 $10,393,944 $ 30,0716,598,294 $ (20,129)6,643,364 $ 1,813 $ (46,883)
=========== =========== ========== =========
1997
- ----=========== ===========
1998
U.S. Government obligations $ 2,974,292583,720 $ 3,006,012603,222 $ (31,720)(19,502)
Corporate debt securities 12,526,255 12,542,1077,090,768 7,105,647 $ 2,680 (18,532)3,772 (18,651)
----------- ----------- ---------- -------------------- -----------
Total $15,500,547 $15,548,119 $ 2,6807,674,488 $ (50,252)7,708,869 $ 3,772 $ (38,153)
=========== =========== ========== ====================
At September 30, 1998,March 31, 1999, approximately $9,319,000$5,625,000 of investments in marketable
securities had contractual maturities of one year or less. Realized gains
and losses on sales of marketable securities were not material during the
quarter ended September 30, 1998;March 31, 1999; the net unrealized gainloss of $9,942$45,070 is
included in stockholders' equity.
At September 30, 1998, marketable securities amounting to $5,824,000 were
pledged through November 12, 1998 to secure the principal amounts of the
Company's bank term note and capital lease obligation with its principal bank.
As a result of pledging these securities, under the terms of the agreement,
the interest rate on the note was adjusted downward to 90-day LIBOR plus 1.25%
from prime plus 1%.
3. INVENTORY
Inventories are carried at cost using the first-in, first-out method and are
charged to research and development expense when consumed. Inventory consisted
of bulk pharmaceutical material to be
4
7
used for multiple preclinical and clinical drug development programs and
amounted to $892,000 at September 30, 1998.
4. NET LOSS PER SHARENet Loss Per Share
Net loss per share amounts have been computed based on the weighted
average number of shares outstanding during each period. Because of the
net loss reported in each period, diluted and basic per share amounts are
the same.
5. HOECHST-ARIAD GENOMICS CENTER,4
7
4. Hoechst-ARIAD Genomics Center, LLC
In March 1997, the Company entered into an agreement which established a
50/50 joint venture with Hoechst Marion Roussel, Inc. ("HMR") to pursue
functional genomics with the goal of identifying genes that encode novel
therapeutic proteins and small-molecule drug targets (the "1997 HMR
Genomics Agreement"). The joint venture, named the Hoechst-ARIAD Genomics
Center, LLC (the "Genomics Center"), is located at the Company's research
facilities in Cambridge, Massachusetts. Under the terms of the 1997 HMR
Genomics Agreement, the Company and HMR agreed to commit $85,000,000 to
the establishment of the Genomics Center and its first five years of
operation. The Company and HMR agreed to jointly fund $78,500,000 of
operating and related costs, and ARIAD agreed to invest up to $6,500,000
in leasehold improvements and equipment for use by ARIAD in conducting
research on behalf of the Genomics Center. From the formation of the
Genomics Center through March 31, 1999, the Company has invested
$6,500,000 in leasehold improvements and equipment and funded $11,494,000
in operating and related costs. HMR committed to provide ARIAD with
capital adequate to fund ARIAD's share of such costs through the purchase
of up to $49,000,000 of ARIAD series B convertible preferred stock over
the five-year period, including an initial investment of $24,000,000,
which was completed in March 1997. From the formation1997 and a subsequent investment of
the Genomics Center through September 30, 1998, the
Company invested $6,500,000$5,747,000 which was completed in leasehold improvements and equipment and funded
$7,146,000 in operating and related costs.January 1999. Should ARIAD and HMR
determine that the Genomics Center requires funds in excess of those
committed, ARIAD may fund its share of the excess through a loan facility
made available by HMR. Funds borrowed by ARIAD pursuant to such loan
facility, if any, will bear interest at the ninety (90) day LIBOR rate
plus 0.25% and are repayable by June 30, 2003 in cash or series B
convertible preferred stock, at the Company's option.
The Company also entered into agreements with the Genomics Center to
provide research and administrative services (the "Services Agreements")
to the Genomics Center on a cost reimbursement basis. ARIAD's costs of
providing the research and administrative services to the Genomics Center
are charged to research and development expense and general and
administrative expense in the condensed consolidated financial statements.
Under the Services Agreements, ARIAD bills the Genomics Center for 100% of
its costs of providing the research and administrative services; however,
because ARIAD is providing 50% of the funding of the Genomics Center,
ARIAD recognizes as revenue only 50% of the billings to the Genomics
Center. The remaining 50% is accounted for as a return of ARIAD's
investment in the Genomics Center. Under the Services Agreements, the
Company bills the Genomics Center in advance for the next quarter's
projected services. At March 31, 1999, the balance sheet advance amount of
$3,621,091 represents the projected amount for the second quarter of 1999.
Revenue recognized pursuant to the Services Agreements amounted to
$3,717,000$1,583,000 and $696,000$956,000 for the nine monthsquarters ended September 30,March 31, 1999 and 1998, and 1997,
respectively. The Genomics Center had total assets of $3,671,000$5,832,000 and
$2,969,000 at September 30,March 31, 1999 and 1998 respectively, and incurred a net
loss of $8,073,000$3,836,000 and $1,377,000$1,913,000 for the nine monthsquarter ended September 30,March 31, 1999 and
1998 and 1997, respectively.
6. STOCKHOLDERS' EQUITY
On May 11, 1998, the Company completed a private placement of 2,537,500 shares
of common stock to a group of institutional investors at a price of $4.00 per
share and received net proceeds of approximately $9,200,000 after deducting
selling commissions and offering expenses. The shares were registered under the
Securities Act of 1933, as amended.
5
8
7. NEW ACCOUNTING PRONOUNCEMENTSThe major components of the Genomics Center's financial position and
results of operations are as follows:
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
Advance to ARIAD $ 3,621,000 $ 3,162,000
Other assets 2,211,000 804,000
----------- -----------
Total assets $ 5,832,000 $ 3,966,000
=========== ===========
Total liabilities-due to ARIAD $ 791,000 $ 400,000
Equity 5,041,000 3,566,000
----------- -----------
Total liabilities and equity $ 5,832,000 $ 3,966,000
=========== ===========
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
------------ ------------
Revenues $ - $ -
Operating expenses:
ARIAD 3,166,000 1,913,000
Other 670,000 -
------------ ------------
Net Loss $ (3,836,000) $ (1,913,000)
============ ============
ARIAD's 50% share of net loss $ (1,918,000) $ (956,000)
Elimination of intercompany transactions 1,580,000 956,000
------------ ------------
ARIAD's equity in the net (loss) of
Genomics Center $ (338,000) $ -
============ ============
5. Comprehensive Net Loss
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which requires businesses to disclose comprehensive
income and its components in their general-purpose financial statements.
In accordance with SFAS No. 130, the comprehensive loss for the nine months ended
September 30, 1998first
quarter of 1999 would include the net unrealized gainloss on marketable
securities of $57,514,$10,689 for the three months ended March 31, 1999 resulting
in a comprehensive loss of $19,146,268.
SFAS No. 131, Disclosures about Segments$5,001,428.
6. Accounting Change
In April 1998, the American Institute of an Enterprise and Related
Information,Certified Public Accountants
issued Statement of Position ("SOP") 98-5, Reporting on the Cost of
Start-Up Activities, which redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information about a company's
operating segments,will require that all organizational costs will
be effective for the Company's financial statements for
the year ending December 31, 1998.expensed as incurred. The Company has not yet completed its
analysisadopted this SOP effective January 1,
1999 and recorded charges of whether operating segment reporting will be required.$364,000 to research and development
expenses.
6
9
7. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities,
effective for fiscal years beginning after June 15, 1999. The new standard
requires that all companies record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting
from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. Management is currently assessing the impact of SFAS No. 133
on the consolidated financial statements of the Company. The Company will
adopt this accounting standard on January 1, 2000, as required.
8. SUBSEQUENT EVENT
On November 12, 1998, the Company announced that it had completed a private
placement of 5,000 shares of Series C Convertible Preferred Stock ("Series C
Stock") to a group of institutional investors (the "Investors") and received
proceeds of approximately $5,000,000. Each share of Series C Stock has a stated
value of $1,000, plus an accrual amount equal to 5% per annum, and is
convertible into common stock of the Company beginning on a date approximately
three months after the initial closing, subject to acceleration in certain
instances (the "Convertibility Date") at a conversion price equal to the lower
of a variable conversion price (the "Variable Price") or a maximum conversion
price (the "Maximum Price"). Subject to certain adjustments, the Variable Price
for any given conversion will be based on the average of the four lowest
closing bid prices for the common stock during the 22 trading days preceding
the date of conversion. Subject to certain adjustments, the Maximum Price for
all conversions will be 120% of the Variable Price at a date to be selected by
the Company on or prior to the Convertibility Date.
Under the Securities Purchase Agreement, dated as of November 9, 1998, between
the Company and the Investors (the "Purchase Agreement"), subject to certain
conditions and limitations, the Company will be required to sell and the
Investors will be required to purchase an additional aggregate of up to 5,000
shares of Series C Stock no later than the Convertibility Date. Also under the
Purchase Agreement, the Investors will have the right, commencing approximately
seven months after the Convertibility Date, to purchase one additional share of
Series C Stock for each share then held by such Investor and each share that
had been converted prior to such time at the Maximum Price, if any, up to an
aggregate of 10,000 shares of Series C Stock. The Purchase Agreement further
provides that, during a six-month period commencing approximately seven months
after the Convertibility Date and subject to certain conditions, the Company
will have the right to require the Investors to purchase up to an aggregate of
5,000 additional shares of Series C Stock. Under certain circumstances and at
certain prices, the Company may elect to redeem any shares of Series C Stock
that are presented for conversion.
The offer and sale of the Series C Stock was made pursuant to Regulation D of
the Securities Act of 1933, as amended (the "Act"), and was therefore exempt
from registration under the Act. The Company has agreed to register for resale
the shares of common stock issuable upon conversion of the Series C Stock.
6
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
ARIAD Pharmaceuticals, Inc. (the "Company" or "ARIAD") is engaged inThe Company focuses on the discovery and development of novel orally administered pharmaceuticalsand proprietary
drugs based on signal transduction technology.its understanding of the inner-workings of cells and the genes
involved in disease. The Company has developed a product based on its gene
regulation technology to treat graft-versus-host disease, a complication of bone
marrow transplantation involving an attack by a patient's immune system on
healthy tissue. This product entered Phase 1 human clinical trials in December
1998. All of the Company's other drug candidates are in the pre-clinical stage.
ARIAD's comprehensive and integrated
drug-discovery platform spans from target identification and validation
(functional genomics), to structure-based drug design and combinatorial
chemistry, to medicinal chemistry and pharmacology. This "gene-to-drug" research and development capability formsprograms involve three areas: signal
transduction inhibitors, regulated gene therapy and functional genomics. Signal
transduction inhibitors are drugs designed to block specific molecular targets
in bone cells and white blood cells. In November 1995, the basisCompany entered into
an agreement with Hoechst Marion Roussel, Inc. ("HMR") to collaborate on the
discovery and development of such drugs to treat osteoporosis and other bone
diseases. The Company also has developed a system referred to as "ARIAD
Regulated Gene Expression Technology" or "ARGENT(TM)" which is designed to
control cellular activities using small molecule drugs. This system can be
applied in research for multiple business opportunities,
each with a diversitydiscovery of potentialnew drugs and new genes, in gene and cell
therapy, and in the manufacture of biological products. The leading application
of this system is the controlled production of protein drugs by regulated gene
therapy. Another use of this system is ARIAD's product to treat
graft-versus-host disease. This product may improve the safety and effectiveness
of certain types of bone marrow transplants by selectively killing the cells
responsible for graft-versus-host disease. In addition, the Company is working
in an area known as functional genomics, which involves the discovery of new
genes and the validation of molecular targets that may be useful in the
treatment of diseases. ARIAD is currently focusing its
drugdeveloping this information as a tool to
accelerate the discovery efforts on (i) the development of orally administerednew drugs to block signal transduction pathways that play a critical role in majortreat these diseases, such as
osteoporosis immune-related diseases(bones), atherosclerosis (heart and allergy/asthma,blood vessels) and (ii) the
development of orally active therapeutic proteins based on a system that
controls signal transduction pathways in genetically engineered cells. These
drug discovery efforts are based on validated small-molecule drug targets and
known therapeutic proteins. ARIAD is further building its gene-to-drug research
and development capability by expanding its functional genomics program. The
Company employs functional genomics to identify new drug targets for its signal
transduction inhibitor program and novel proteins for its orally active
therapeutic protein program.cancer. In
each area of drug discovery, as well as in
functional genomics,March 1997, the Company has entered intoestablished a significant strategic
alliancejoint venture with a collaboratorHMR, named the
Hoechst-ARIAD Genomics Center, LLC (the "Genomics Center"), to complement its gene and drug discovery
technologies or to support its commercialization efforts.pursue this area.
Since its inception in 1991, the Company has devoted substantially all of its
resources to its research and development programs. The Company receives no
revenue from the sale of
7
10
pharmaceutical products and substantially all revenue to date has been received
in connection with the Company's research collaborations. The Company has not
been profitable since inception and expects to incur substantial and increasing
operating losses for the foreseeable future, primarily due to the expansion of
its research and development programs, including the services the Company
provides to the Genomics Center pursuant to the Services Agreements,certain research and administrative
services agreements (the "Services Agreements"), which services are accounted
for on a cost reimbursement basis. The Company expects that losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial.
As of September 30,
1998,March 31, 1999, the Company had an accumulated deficit of $85,660,000.$97,631,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1997MARCH 31, 1998
REVENUE
The Company recognized research revenue of $3,659,000$4,583,000 for the quarter ended
September 30, 1998March 31, 1999 compared to $2,236,000$2,847,000 for the same period in 1997.1998. Research
revenue in 19981999 is comprised principally of research revenue from services
provided to the Genomics Center andrecognized under
the Company's 1995 collaborative research and development agreement with HMR
(the "1995 HMR Osteoporosis Agreement"). and the 1997 HMR Genomics Agreement. The
increase in research revenue of $1,423,000$1,736,000 for the quarter ended September 30,
1998March 31, 1999
when compared to the corresponding period in 19971998 is a result of increased
services provided to the Genomics Center which services commencedunder the Services Agreements, and the
achievement of the second milestone of $2,000,000 under the 1995 HMR
Osteoporosis Agreement offset by a reduction of $833,000 in deferred revenue
recognized in the second
quarter of 1997.prior year relating to this agreement. Research revenue
resulting from the Services Agreements with the Genomics Center is 7
10
expected to
increase over the next two years, and research revenue recognized
under the 1995 HMR Osteoporosis Agreement is expected to remain substantially
equivalent in 1998.years.
Interest income decreased by $290,000$140,000 to $221,000$173,000 for the quarter ended September 30, 1998March
31, 1999 compared to $511,000$313,000 for the same period in 19971998 primarily as a result
of lower levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses increased to $10,662,000$8,511,000 for the quarter ended
September 30, 1998March 31, 1999 compared to $4,667,000$7,736,000 for the same period in 19971998 due primarily
to increased research services provided to the Genomics Center under the
Services Agreements and increased expenses in the orally active protein therapy
program, including manufacturing development and other preclinical development
costs.Agreements. The Company expects its research and development expenses
to increase
substantially over the next two years as a result of research services to be
provided to the Genomics Center as well as increased manufacturing and
preclinical development costs associated with its drug candidates and, if such
preclinical studies are successful, the subsequent cost of human clinical
trials.Center.
General and administrative expenses increased slightly to $630,000$730,000 for the
quarter ended September 30, 1998March 31, 1999 compared to $592,000$699,000 for the corresponding period
in 1997
primarily due to increased expenses related to the operations of the Genomics
Center in 1998.
8
11
The Company incurred interest expense of $116,000$106,000 for the quarter ended September 30, 1998March
31, 1999 compared to $153,000$131,000 for the corresponding period in 1997.1998. The decrease
resulted from a lower level of long-term debt during the period.
OPERATING RESULTS
The Company incurred losses of $7,527,000$4,929,000 for the quarter ended September 30,
1998March 31, 1999
and $2,664,000$5,406,000 for the corresponding period in 1997,1998, or $.34$.23 and $.14$.28 per share,
respectively. The Company expects that substantial operating losses will
continue for several more years, will increase as its drugproduct development
activities expand and increased research services are provided to the Genomics
Center and will fluctuate as a result of differences in the timing and
composition of revenue earned and expenses incurred.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
REVENUE
Research revenue for the nine months ended September 30, 1998 was $9,733,000
compared to $6,698,000 for the corresponding period in 1997. Research revenue
earned in 1998 increased by $3,035,000 over 1997 as a result of increased
services provided to the Genomics Center. Interest income for the nine months
ended September 30, 1998 decreased by $499,000 over the corresponding period in
1997 primarily as a result of a lower level of funds invested.
OPERATING EXPENSES
Research and development expenses increased to $27,387,000 for the nine months
ended September 30, 1998 from $13,197,000 for the corresponding period in 1997,
primarily due to research services provided to the Genomics Center under the
Services Agreements and increased expenses incurred in the orally active protein
therapy program, including manufacturing development and other preclinical
development costs.
8
11
General and administrative expenses decreased to $2,006,000 for the nine months
ended September 30, 1998 compared to $2,076,000 for the corresponding period in
1997, primarily due to the nonrecurrence in 1998 of administrative expenses
incurred in connection with the formation of the Genomics Center in 1997.
The Company incurred interest expense of $374,000 for the nine months ended
September 30, 1998 compared to $264,000 for the corresponding period in 1997 as
a result of a higher level of long-term debt.
OPERATING RESULTS
The Company incurred losses of $19,204,000 for the nine months ended September
30, 1998 and $7,510,000 for the corresponding period in 1997, or $.93 and $.39
per share, respectively. The Company expects that substantial operating losses
will continue for several more years, may increase as its drug development
activities expand and increased research services are provided to the Genomics Center and
will fluctuate as a result of differences in the timing and composition of
revenue earned and expenses incurred.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and investments in property and
equipment primarily through the private placement and public offering of its
securities, including the sale of seriesSeries B preferred stockConvertible Preferred Stock ("Series
B Preferred Stock") to HMR in connection with the formation and operation of the
Genomics Center in March 1997 and in January 1999, supplemented by the issuance
of long-term debt, sale/leaseback and capital lease transactions, interest
income, government-sponsored research grants and research revenue under the 1995
HMR Osteoporosis Agreement, and the 1997 HMR Genomics Agreement.
As of September 30, 1998,Agreement and the Services
Agreements.
At March 31, 1999, the Company had cash, cash equivalents and marketable
securities totaling $14,920,000 ,$15,870,000, and working capital of $7,725,000$6,555,000 compared to
cash, cash equivalents and marketable securities totaling $29,359,000$14,176,000 and
working capital amounting to $16,539,000$5,806,000 at December 31, 1997.1998.
The primary uses of cash during the ninethree months ended September 30, 1998March 31, 1999 were
$22,417,000$2,651,000 to finance the Company's operations and working capital requirements,
including an annual payment of $3,000,000 for access to various
genomics databases, $1,486,000$188,000 to purchase laboratory equipment, $1,358,000$461,000 to repay long-term debt,
$502,000$734,000 for net investment in the Genomics Center and $487,000$184,000 to acquire
intellectual property. The primary sources of cash during the nine monthsquarter ended
September 30, 1998March 31, 1999 were $9,226,000 in net proceeds$3,000,000 of research funding from the private placement1995 HMR
Osteoporosis Agreement, including $2,000,000 received upon the achievement of
common stock, $2,428,000the second research milestone under such agreement, $459,000 in advances from
the Genomics Center, $75,000 from the sale/leaseback of laboratory equipment and
$5,061,000$1,044,000 of net proceeds from the sale and maturity of marketable securities.
On May 11, 1998,securities
and $5,747,000 from the Company completed a private placement of 2,537,500 shares
of common stock to a group of institutional investors at a price of $4.00 per
share and received net proceeds of approximately $9,200,000 after deducting
selling commissions and offering expenses. The shares were registered under the
Securities Act of 1933, as amended.
On November 12, 1998, the Company announced that it had completed a private
placement of 5,000 sharessale of Series CB Convertible Preferred Stock to a group of
institutional investors and received proceeds of approximately $5,000,000.Stock.
In March 1997, the Company entered into a 50/50 joint venture with HMR to pursue
functional genomics with the goal of identifying genes that encode novel
therapeutic proteins and small-molecule drug targets. The Company and HMR agreed
to commit up to $85,000,000 to the establishment of the Genomics Center and its
first five years of operation. The Company and HMR agreed to jointly fund
$78,500,000 of operating and related costs, and ARIAD agreed to 9
12
fund up to
$6,500,000 in leasehold improvements and equipment for use by ARIAD in
conducting research on behalf of the Genomics Center. From the formation of the
Genomics
9
12
Center through March 31, 1999, the Company invested $6,500,000 in leasehold
improvements and equipment and funded $11,494,000 in operating and related
costs. HMR committed to provide ARIAD with capital adequate to fund ARIAD's
share of such costs through the purchase of up to $49,000,000 of seriesSeries B
preferred stockPreferred Stock over the five-year period, including an initial investment of
$24,000,000. From$24,000,000 and a subsequent investment of $5,747,000, each of which is
discussed below. The Company also entered into the formation ofServices Agreements with the
Genomics Center through September 30, 1998,to provide research and administrative services to the Company invested $6,500,000
in leasehold improvements and equipment and funded $7,146,000 in operating and
related costs.Genomics
Center on a cost reimbursement basis.
Pursuant to the 1997 HMR Genomics Agreement, on March 18, 1997, HMR purchased
2,526,316 shares of the Company's seriesSeries B preferred stockPreferred Stock for $24,000,000.
During the period from 1999 to 2002, to fund its commitment to the Genomics
Center, the Company may, at its option, require HMR to make additional purchases
of up to $25,000,000 of seriesSeries B preferred stock at purchase prices based on a
premium to the market price of the common stock at the time of each subsequent
purchase (unless the market price of the common stock exceeds a predetermined
ceiling, in which case the purchase price will be equal to the market price). On
January 5, 1999, HMR purchased 478,120 shares of Series B Preferred Stock for
$5,747,000 representing the amount of the subsequent purchase available to ARIAD
for 1999 under the agreement. Subsequent commitments by HMR to purchase Series B
Preferred Stock are $8,536,000 and $8,691,000 for each of the years ended
December 31, 2000 and 2001, respectively, and $2,026,000 for the three months
ended March 31, 2002. Should ARIAD and HMR determine that the Genomics Center
requires funds in excess of those committed, ARIAD may fund its share of the
excess through a loan facility made available by HMR. Funds borrowed by ARIAD
pursuant to such loan facility, if any, will bear interest at the ninety (90)
day LIBOR rate plus 0.25% and are repayable by June 30, 2003 in cash or series B
convertible preferred stock, at the Company's option.
In November 1995, the Company entered into an agreement with HMR to collaborate
on the discovery and development of drugs to treat osteoporosis and related bone
diseases, one of the Company's signal transduction inhibitor programs. Under the
terms of the 1995 HMR Osteoporosis Agreement, HMR made an initial cash payment
to the Company of $10,000,000, agreed to provide research funding in equal
quarterly amounts of $1,000,000 up to an aggregate of $20,000,000 over a
five-year period and agreed to provide an aggregate of up to $10,000,000 upon
the attainment of certain research milestones, including a payment of $2,000,000
which was received on February 23, 1999 following the achievement of the second
milestone. In addition, HMR has established a dedicated research group to
collaborate with the Company on the discovery of osteoporosis drugs and has
agreed to fund all of the preclinical and clinical development costs for
products that emerge from the collaboration. The 1995 HMR Osteoporosis Agreement
further provides for the payment of royalties to the Company based on product
sales. To date, revenue recognized under the 1995 HMR Osteoporosis Agreement has
amounted to $27,666,000.
The Company has substantial fixed commitments under various research and
licensing agreements, consulting and employment agreements, lease agreements and
long-term debt instruments. Such fixed commitments currently aggregate in excess
of $12,000,000 per year and may increase. The Company will require substantial
additional funding for its research and
10
13
product development programs, including preclinical development and clinical
trials, for operating expenses, for the pursuit of regulatory clearances and for
buildingestablishing manufacturing, salesmarketing and marketingsales capabilities. Adequate funds for
these purposes, whether obtained through financial markets or collaborative or
other arrangements with corporatecollaborative partners, or from other sources, may not
be available when needed or on terms acceptable to the Company.
The Company believes that its available cashexisting capital resources, plus interest income
and existingplanned research and development funding and other sources of funding,
including anticipated strategic alliances, will be adequate to satisfy its
capital and operating requirements for the next
six to nine months.through 1999. However, there can be no
assurance that changes in the Company's research and development plans or other
events affecting the Company's revenues or operating expenses will not result in
the Company depleting its funds earlier.
Yearearlier depletion of the Company's funds.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue relates to a complex ofnumerous potential problems arising from the ways
in which computer software can handle dates. Many older systems use a two-digit
date format, whichas opposed to four digits, to indicate the year. Some of the
Company's computer programs or other information systems that have
time-sensitive software or embedded microcontrollers may create ambiguities in passing intorecognize a new
century. As a result, certain computers will be unable to distinguish the year
2000 fromdate using
"00" as the year 1900 as "00" is all that will appearrather than the year 2000. This could result in the date field.a system
failure or miscalculations causing disruptions of operations.
The Company has a Year 2000 Plan, which it is actively pursuingCompany's plan to address the
Company's year 2000 issues. The Company's Year 2000 Plan focuses on each of the
Company's internal systems and third parties with which the Company has a
significant relationship.
The Company's Year 2000 Plan relating to its internal systemsissues consists of three phases:
assessment, testing and implementation. The Company is currently in the process of
completing an initial assessment phaseof its information technology infrastructure,
hardware and anticipates commencingsoftware which began in 1998. Based on this review, the testing phase during the first
quarter of 1999. The Company
believes that allthe costs and/or consequences associated with the year 2000 issue
are not expected to have a material effect on its business, operations or
financial condition.
A second, more in-depth analysis is also currently ongoing. Internally, this
review will include the testing of systems developed by the Company. Although
the internal portion of this analysis just recently commenced, the Company
believes that, with modifications to existing software and conversions to new
software and systems, the year 2000 issue will not pose significant operational
problems for its computer and other information systems. If required, the
Company will utilize additional internal and external resources to reprogram,
replace, and test the software and systems for year 2000 modifications.
Externally, the Company's preparations for the year 2000 issue will consist of
soliciting and, where feasible, obtaining certification of year 2000 compliance
from third-party software vendors and determining the readiness of its
significant suppliers. The Company is working with external suppliers and
service providers to ensure that they and their systems will be compliantable to support
our needs and, where necessary, interact with our server and hardware and
software infrastructure in preparation for the year 2000. This testing phase is
expected to be completed by September 30, 1999.
If any necessary modifications, conversions and/or replacements are not made,
are not completed timely, or if any of the Company's suppliers or customers do
not successfully deal with the year 2000 issue, such circumstances could have a
material adverse impact on the operations of the
11
14
Company. The Company's research and development efforts, which rely heavily on
the storage and retrieval of electronic information, could be interrupted
resulting in significant delays in any one or all of the Company's research and
development programs. The severity of these possible problems would depend on
the nature of the problem and how quickly it could be corrected or an
alternative implemented, which is unknown at this time. In the extreme, such
problems could disrupt a significant portion of the Company's operations.
While management has not yet specifically determined the costs associated with
its year 2000 readiness efforts, monitoring and managing the year 2000 issue
will result in additional direct and indirect costs to the Company. Direct costs
include potential charges by third-party software vendors for product
enhancements, costs involved in testing software products for year 2000
compliance and any resulting costs for developing and implementing contingency
plans for critical software products which are not enhanced. The Company
estimates the total cost for upgrading its computer system, hardware and
software is not likely to exceed $200,000. Indirect costs will principally
consist of the time devoted by existing employees in monitoring software vendor
progress, testing enhanced software products and implementing any necessary
contingency plans. Such costs have not been material to date. Both direct and
indirect costs of addressing the year 2000 issue will be charged to earnings as
incurred.
At the present time, a contingency plan has not been completed. After evaluating
its internal compliance efforts as well as the compliance of third parties as
described above, the Company expects to have contingency plans in place by
November 30, 1999 to address situations in which various systems of the Company,
or of third parties with which the Company does business, are not year 2000
compliant. Some risks of the year 2000 issue, however, are beyond the control of
the Company and its suppliers and customers. For example, no preparations or
contingency plan will protect the Company from a downturn in economic activity
caused by the possible ripple effect throughout the entire economy caused by the
year 2000 and that the cost to address this issue is not
material. Nevertheless, the Company will create contingency plans for certain
internal systems, if necessary.
All organizations dealing with the year 2000 must address the effect this issue
will have on their significant business relationships including both suppliers
and customers. The Company is undertaking steps to work with key third parties
to understand their ability to continue providing services and products through
the change to the year 2000. If any significant year 2000 problems are
identified with key third parties, contingency plans will be developed.
10
13issue.
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 that
involve risks and uncertainties, including but not limited to risks and
uncertainties regarding the receipt of revenues under the Company's 1995 HMR
Osteoporosis Agreement and the Services Agreements, the actual research and
development expenses and other costs associated with the Genomics Center, the
success of the Company's preclinical studies, the ability of the Company to
commence clinical studies, the ability of the Company to successfully resolve
the Year 2000 issue, the adequacy of the Company's capital resources and
the availability of additional funding, as well as general economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices, and other factors discussed
under the heading "Cautionary Statement Regarding Forward-Looking Statements" in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. As a result of these factors, actual events or results could differ
materially from those described herein.
1112
1415
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains an investment portfolio in accordance with its Investment
Policy. The primary objectives of the Company's Investment Policy are to
preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. The Company's Investment Policy specifies credit quality
standards for the Company's investments and limits the amount of credit exposure
to any single issue, issuer or type of investment.
The Company invests cash balances in excess of operating requirements in
short-term securities, generally with maturities of 90 days or less. The
Company's marketable securities consist of corporate debt and U.S. Government
securities primarily with maturities of one year or less, but generally less
than six months. 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 loss). Gains and losses on
investment 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. These investments are sensitive to interest rate risk. The Company
believes that the effect, if any, of reasonable possible near-term changes in
the interest rates on its financial position, results of operations and cash
flows would not be material due to the short-term nature of these investments.
At March 31, 1999, the Company has a bank term note at prime plus 1% and a
government sponsored term note at prime plus 2.75%. These notes are sensitive to
interest rate risk. In the event of a hypothetical 10% increase in the prime
rate, the Company would incur approximately $425,000 of additional interest
expense per year.
13
16
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) (1) Securities sold. (A) On January 5, 1999 the Company sold 478,120
shares (the "Preferred Shares") of Series B Convertible Preferred Stock.
(B) On February 12 and March 8, 1999 the Company issued an aggregate of
41,250 shares (the "Option Shares") of Common Stock, par value $.001 per
share (the "Common Stock"). (C) On January 5, 1999 the Company issued an
aggregate of 12,876 shares (the "Plan Shares") of Common Stock. (D) On
January 15, 1999 the Company issued an aggregate of 300 options (the
"Options") to purchase 300 shares of Common Stock.
(2) Underwriters and other purchasers. No underwriters were involved in
any of the transactions. (A) The Company sold the Preferred Shares to
Hoechst Marion Roussel, Inc. (B) The Company sold the Option Shares to an
aggregate of two employees upon the exercise of an aggregate of 41,250
stock options. (C) The Company sold the Plan Shares to an aggregate of 22
employees pursuant to the terms of the Company's 1997 Employee Stock
Purchase Plan. (D) The Company issued the Options to one employee pursuant
to the terms of the Company's 1991 Stock Option Plan for Employees and
Consultants.
(3) Consideration. (A) The Preferred Shares were sold for an aggregate
purchase price of $5,747,000. (B) The Option Shares were sold for an
aggregate exercise price of $66,000. (C) The Plan Shares were sold for an
aggregate purchase price of $18,413. (D) The Options were issued in
exchange for services to be rendered.
(4) Exemption from registration claimed. All of the Preferred Shares, the
Option Shares, the Plan Shares and the Options were issued in reliance
upon Section 4(2) of the Securities Act of 1933, as amended, because none
of the transactions involved any public offering by the Company.
(5) Terms of conversion or exercise. (A) Each Preferred Share is
convertible into one share of Common Stock. (B) Not applicable. (C) Not
applicable. (D) The Options vest equally over a period of 4 years and are
exercisable at a price of $2.09 per share until January 15, 2009.
(6) Use of Proceeds. Not applicable.
(d) Not applicable.
14
17
ITEM 5. OTHER INFORMATION
On April 30, 1999, the Board of Directors of the Company amended the Company's
By-laws to change the notification requirements for proposals to be submitted at
stockholders' meetings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit isexhibits are filed herewith:
Exhibit
No. Title
3.1 By-Laws, as amended.
10.1+ Executive Employment Agreement between the Company and
Laurie A. Allen, Esq., dated as of November 25, 1998.
10.2+ Executive Employment Agreement between the Company and Mark
Zoller, Ph.D., dated as of November 1, 1994, with First
Amendment to Employment Agreement, dated as of January 1,
1997, and Second Amendment to Employment Agreement, dated as
of November 1, 1998.
10.3+ Executive Employment Agreement between the Company and John
D. Iuliucci, Ph.D., dated as of May 1, 1992, with First
Amendment to Employment Agreement, dated as of March 2, 1994,
and Second Amendment to Employment Agreement, dated as of
January 1, 1997.
27.1 Financial Data ScheduleSchedule.
+ Management contract or compensatory plan, contract or arrangement
(b) Reports on Form 8-K
The Company filed one report on Form 8-K during the quarter
ended March 31, 1999, which report was filed on January 8,
1999 to report the sale of 478,120 shares of the Company's
Series B Convertible Preferred Stock for a total purchase
price of $5,747,000.
15
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARIAD Pharmaceuticals, Inc.
(Registrant)
By: /s/ Jay R. LaMarche
--------------------------------------
Jay R. LaMarche
Executive Vice President and
Chief Financial Officer
(Duly authorized Officer and Principal
Financial Officer)
Date: November 13, 1998
12
15
EXHIBIT INDEX
EXHIBIT NO. TITLE
3.1 CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED (1)
3.2 BY-LAWS OF THE COMPANY, AS AMENDED (1)
3.3 AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE COMPANY, DATED APRIL 8, 1994 (2)
3.4 AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE COMPANY, DATED OCTOBER 4, 1994 (5)
3.5 CERTIFICATE OF DESIGNATIONS IN RESPECT OF SERIES B PREFERRED STOCK OF THE COMPANY (8)
3.6 AMENDMENT OF BY-LAWS OF THE COMPANY, ADOPTED SEPTEMBER 16, 1994 (5)
3.7 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK OF
THE COMPANY (10)
4.1 FORM OF ARIAD PHARMACEUTICALS, INC. COMMON STOCK PURCHASE WARRANT (1)
4.2 PRINCIPAL STOCKHOLDERS' AGREEMENT, DATED AS OF JANUARY 5, 1992, AMONG ARIAD PHARMACEUTICALS, INC.,
DAVID BLECH, DAVID BLECH AS TRUSTEE OF THE BLECH FAMILY TRUST, MARK S. GERMAIN, HARVEY J. BERGER,
HARVEY J. BERGER AND WENDY S. BERGER AS TRUSTEES OF THE BERGER FAMILY TRUST, AVALON VENTURES AND
AVALON VENTURES IV. (1)
4.3 FORM OF WARRANT AGREEMENT (WITH FORM OF WARRANT). (3)
4.4 RIGHTS AGREEMENT, DATED AS OF DECEMBER 15, 1994, BETWEEN THE COMPANY AND STATE STREET BANK AND TRUST
COMPANY, WHICH INCLUDES THE CERTIFICATE OF DESIGNATIONS IN RESPECT OF THE SERIES A PREFERRED STOCK,
AS EXHIBIT A, THE FORM OF RIGHT CERTIFICATE AS EXHIBIT B AND THE SUMMARY OF RIGHTS TO PURCHASE SERIES A
PREFERRED STOCK AS EXHIBIT C. PURSUANT TO THE RIGHTS AGREEMENT, RIGHT CERTIFICATES WILL NOT BE MAILED
UNTIL AFTER THE SEPARATION DATE (AS DEFINED THEREIN). (4)
4.5 AMENDMENT, DATED AS OF APRIL 24, 1995, TO RIGHTS AGREEMENT, DATED AS OF DECEMBER 15, 1994, BETWEEN ARIAD
PHARMACEUTICALS, INC. AND STATE STREET BANK AND TRUST COMPANY. (6)
4.6 STOCK PURCHASE AGREEMENT, DATED AS OF APRIL 24, 1995, BETWEEN ARIAD PHARMACEUTICALS, INC. AND BIOTECH
TARGET S.A. (7)
10.1 LEASE AGREEMENT, DATED JANUARY 8, 1992, BETWEEN ARIAD PHARMACEUTICALS, INC. AND FOREST CITY CAMBRIDGE,
INC. (1)
10.2 EXECUTIVE EMPLOYMENT AGREEMENT, DATED AS OF JANUARY 1, 1992, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
HARVEY J. BERGER, M.D. (1)
10.3 EXECUTIVE EMPLOYMENT AGREEMENT, DATED AS OF JANUARY 3, 1992, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
JOAN S. BRUGGE, PH.D. (1)
10.4 EXECUTIVE EMPLOYMENT AGREEMENT, DATED AS OF JANUARY 1, 1992, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
CHARLES C. CABOT III. (1)
10.5 EXECUTIVE EMPLOYMENT AGREEMENT, DATED AS OF JANUARY 1, 1992, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
JAY R. LAMARCHE. (1)
10.6 EXECUTIVE EMPLOYMENT AGREEMENT, DATED AS OF OCTOBER 14, 1991, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
MANFRED WEIGELE, PH.D. (1)
10.7 LOAN AND SECURITY AGREEMENT, DATED SEPTEMBER 23, 1992, BY AND BETWEEN ARIAD PHARMACEUTICALS, INC., ARIAD
CORPORATION AND BAYBANK BOSTON, N.A. AND RELATED INSTRUMENTS AND DOCUMENTS. (1)
10.8 LOAN AGREEMENT, DATED OCTOBER 28, 1992, AMONG ARIAD CORPORATION, ARIAD PHARMACEUTICALS, INC. AND THE
MASSACHUSETTS BUSINESS DEVELOPMENT CORPORATION AND RELATED INSTRUMENTS AND DOCUMENTS. (1)
10.9 EQUIPMENT LEASE AGREEMENT, DATED DECEMBER 10, 1992, BY AND BETWEEN ARIAD CORPORATION AND GENERAL ELECTRIC
CAPITAL CORPORATION. (1)
10.10 MASTER LEASE AGREEMENT, DATED DECEMBER 21, 1992, BY AND BETWEEN ARIAD CORPORATION AND COMDISCO, INC. (1)
10.11 ARIAD PHARMACEUTICALS, INC. 1991 STOCK OPTION PLAN FOR EMPLOYEES, AS AMENDED. (5)
10.12 ARIAD PHARMACEUTICALS, INC. 1991 STOCK OPTION PLAN FOR DIRECTORS. (1)
10.13 ARIAD RETIREMENT SAVINGS PLAN. (1)
10.14 AMENDED AND RESTATED AGREEMENT DATED AS OF DECEMBER 12, 1997 BETWEEN THE BOARD OF TRUSTEES OF THE LELAND
STANFORD JUNIOR UNIVERSITY AND ARIAD GENE THERAPEUTICS, INC. (9)
10.15 AMENDMENT, DATED APRIL 19, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
HARVEY J. BERGER, M.D. (3)
13
May 17, 1999
16
EXHIBIT NO. TITLE
10.16 AMENDMENT, DATED MARCH 2, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
JOAN S. BRUGGE, PH.D. (3)
10.17 AMENDMENT, DATED MARCH 2, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
CHARLES C. CABOT III. (3)
10.18 AMENDMENT, DATED MARCH 2, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
JAY R. LAMARCHE. (3)
10.19 AMENDMENT, DATED MARCH 2, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
MANFRED WEIGELE, PH.D. (3)
10.20 UNIT PURCHASE AND TECHNOLOGY RIGHT OF FIRST NEGOTIATION AGREEMENT,
DATED MAY 5, 1994, AMONG GENENTECH, INC., ARIAD PHARMACEUTICALS, INC. AND
ARIAD GENE THERAPEUTICS, INC. (3)
10.21 AMENDMENT NO. 2, DATED JUNE 30, 1994, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC.
AND HARVEY J. BERGER, M.D. (5)
10.22 ARIAD PHARMACEUTICALS, INC. 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. (5)
10.23 COLLABORATIVE RESEARCH AND LICENSE AGREEMENT, DATED NOVEMBER 5, 1995, BETWEEN ROUSSEL UCLAF AND ARIAD
PHARMACEUTICALS, INC. (7)
10.24 LICENSE AGREEMENT DATED AS OF SEPTEMBER 12, 1996 BETWEEN MOCHIDA PHARMACEUTICALS CO., LTD. AND ARIAD
PHARMACEUTICALS, INC. (8)
10.25 JOINT VENTURE AGREEMENT DATED AS OF FEBRUARY 14, 1997 BETWEEN GENOVO, INC. AND ARIAD GENE THERAPEUTICS,
INC. (8)
10.26 JOINT VENTURE MASTER AGREEMENT DATED AS OF MARCH 4, 1997 BETWEEN HOECHST MARION ROUSSEL, INC. AND ARIAD
PHARMACEUTICALS, INC. (8)
10.27 STOCK PURCHASE, STANDSTILL AND REGISTRATION RIGHTS AGREEMENT DATED AS OF MARCH 4, 1997 BETWEEN HOECHST
MARION ROUSSEL, INC. AND ARIAD PHARMACEUTICALS, INC. (8)
10.28 COLLABORATIVE AGREEMENT DATED AS OF MARCH 4, 1997 BETWEEN INCYTE PHARMACEUTICALS, INC. AND ARIAD
PHARMACEUTICALS, INC. (8)
10.29 AMENDMENT, DATED JANUARY 1, 1997, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
HARVEY J. BERGER, M.D. (8)
10.30 AMENDMENT, DATED JANUARY, 1, 1997, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC.
AND JAY R. LAMARCHE (8)
10.31 AMENDMENT, DATED JANUARY 1, 1997, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
CHARLES C. CABOT III (8)
10.32 AMENDMENT, DATED JANUARY 1, 1997, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
MANFRED WEIGELE, PH.D. (8)
10.33 AMENDMENT, DATED JANUARY 1, 1997, TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ARIAD PHARMACEUTICALS, INC. AND
MICHAEL GILMAN, PH.D. (8)
10.34 CONSULTING AGREEMENT, DATED JULY 1, 1997, BETWEEN ARIAD PHARMACEUTICALS, INC. AND JOAN S. BRUGGE, PH.D. (8)
10.35 ARIAD PHARMACEUTICALS, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN (8)
10.36 AMENDMENT TO THE 1991 STOCK OPTION PLAN FOR EMPLOYEES AND CONSULTANTS (8)
10.37 AMENDMENT TO THE 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (8)
10.38 FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED JUNE 27, 1997 WITH BANKBOSTON, N.A. AS SUCCESSOR IN
INTEREST TO BAYBANK, N.A. (8)
10.39 LICENSE AGREEMENT, DATED JULY 17, 1997, BETWEEN ARIAD PHARMACEUTICALS, INC. AND
MITOTIX INC. (8)
10.40 TECHNOLOGY PURCHASE AND SALE AGREEMENT AND RELATED AGREEMENTS, DATED JULY 17, 1997, BETWEEN ARIAD
PHARMACEUTICALS, INC. AND MITOTIX, INC. (8)
10.41 ARIAD PHARMACEUTICALS, INC. 1997 EXECUTIVE COMPENSATION PLAN (9)
21.1 SUBSIDIARIES OF THE COMPANY. (3)
27.1 FINANCIAL DATA SCHEDULE (10)
---------------
(1) Incorporated by reference to Registration Statement on Form 10 of
the Company filed with the Securities and Exchange Commission on
June 25, 1993.
(2) Incorporated by reference to Form 10-K of the Company for the
fiscal year ended December 31, 1993 filed with the Securities and
Exchange Commission on April 15, 1994.
14
17
(3) Incorporated by reference to Registration Statement on Form S-1 of
the Company (No. 33-76414) filed with the Securities and Exchange
Commission on March 11, 1994.
(4) Incorporated by reference to Form 8-K of the Company filed with
the Securities and Exchange Commission on December 21, 1994.
(5) Incorporated by reference to Form 10-K of the Company for the
fiscal year ended December 31, 1994 filed with the Securities and
Exchange Commission on March 30, 1995.
(6) Incorporated by reference to Form 8-K of the Company filed with
the Securities and Exchange Commission on May 15, 1995.
(7) Incorporated by reference to Form 10-K of the Company for the
fiscal year ended December 31, 1995 filed with the Securities and
Exchange Commission on March 15, 1996.
(8) Incorporated by reference to Forms 10-Q of the Company filed with
the Securities and Exchange Commission on May 12, 1997, August 12,
1997 and November 12, 1997.
(9) Incorporated by reference to Form 10-K of the Company for the
fiscal year ended December 31, 1997 filed with the Securities and
Exchange Commission on March 6, 1998.
(10) Incorporated by reference to Form 8-K of the Company filed with
the Securities and Exchange Commission on November 12, 1998.
(11) Filed herewith.
15