<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 0-21696
ARIAD PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3106987
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26 LANDSDOWNE STREET, CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 494-0400
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report: Not Applicable
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of the Registrant's common stock outstanding as of August
1, 1998 was 21,882,270.
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ARIAD PHARMACEUTICALS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ -------
ITEM 1. UNAUDITED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - June 30, 1998
and December 31, 1997 ............................................. 1
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 1998 and 1997 .......... 2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 ........................... 3
Notes to Unaudited Condensed Consolidated
Financial Statements .............................................. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................... 6
PART II. OTHER INFORMATION
- --------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............... 11
ITEM 5. OTHER INFORMATION ................................................. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................................. 11
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,499,005 $ 13,858,910
Marketable securities 13,926,520 15,500,547
Prepaid expenses, inventory and other assets 2,653,880 758,463
------------ ------------
Total current assets 25,079,405 30,117,920
------------ ------------
Property and equipment:
Leasehold improvements 12,537,800 12,350,100
Equipment and furniture 4,620,519 5,549,127
------------ ------------
Total 17,158,319 17,899,227
Less accumulated depreciation and amortization 7,702,414 6,459,857
------------ ------------
Property and equipment, net 9,455,905 11,439,370
------------ ------------
Investment in Genomics Center 2,444,913 1,418,864
------------ ------------
Intangible and other assets, net 4,339,483 4,433,022
------------ ------------
Total $ 41,319,706 $ 47,409,176
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,838,304 $ 1,816,583
Accounts payable 3,086,912 3,299,168
Accrued liabilities 1,719,382 2,849,353
Advance from Genomics Center 2,918,312 2,502,921
Deferred revenue 1,444,448 3,111,114
------------ ------------
Total current liabilities 11,007,358 13,579,139
------------ ------------
Long-term debt 4,231,486 5,156,219
------------ ------------
Deferred revenue 300,000
------------
Stockholders' equity:
Series B convertible preferred stock, $.01 par value; authorized,
5,000,000 shares; issued and outstanding, 2,526,316 shares in
1998 and 1997 (liquidation preference, $24,000,000) 25,263 25,263
Common stock, $.001 par value; authorized, 60,000,000 shares;
issued and outstanding, 21,882,270 shares in 1998 and
19,308,605 shares in 1997 21,882 19,309
Additional paid-in capital 104,207,475 94,833,479
Net unrealized loss on marketable securities (40,497) (47,572)
Accumulated deficit (78,133,261) (66,456,661)
------------ ------------
Stockholders' equity 26,080,862 28,373,818
------------ ------------
Total $ 41,319,706 $ 47,409,176
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Research revenue
(principally related parties) $ 3,227,883 $ 2,489,209 $ 6,074,469 $ 4,462,542
Interest income 295,702 525,213 608,747 817,930
----------- ----------- ------------ -----------
Total revenue 3,523,585 3,014,422 6,683,216 5,280,472
----------- ----------- ------------ -----------
Operating expenses:
Research and development 8,989,688 4,273,087 16,725,643 8,530,228
General and administrative 677,020 725,817 1,376,049 1,483,882
Interest expense 127,542 54,038 258,124 111,513
----------- ----------- ------------ -----------
Total operating expenses 9,794,250 5,052,942 18,359,816 10,125,623
----------- ----------- ------------ -----------
Net loss $(6,270,665) $(2,038,520) $(11,676,600) $(4,845,151)
=========== =========== ============ ===========
Net loss per share (basic and diluted) $ (.30) $ (.11) $ (.58) $ (.25)
=========== =========== ============ ===========
Weighted average number of shares of
common stock outstanding 20,732,321 19,264,673 20,025,138 19,205,125
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
<PAGE> 5
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(11,676,600) $ (4,845,151)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,696,616 1,181,444
Deferred revenue (1,966,666) (1,666,666)
Stock-based compensation 35,151 35,151
Increase (decrease) from:
Prepaid expenses, inventory and other current assets (1,895,417) (69,399)
Accounts receivable-related party 2,000,000
Other assets 81,328 (84,630)
Accounts payable (212,256) 1,679,845
Accrued liabilities (1,129,971) 151,200
Advance from Genomics Center 415,391 1,205,272
------------ ------------
Net cash used in operating activities (14,652,424) (412,934)
------------ ------------
Cash flows from investing activities:
Acquisitions of marketable securities (10,373,591) (18,126,062)
Proceeds from sales and maturities of marketable securities 11,903,013 10,589,470
Investment in Genomics Center (3,043,992) (806,891)
Return of investment in Genomics Center 1,998,303
Investment in property and equipment, net (1,406,502) (3,574,819)
Acquisitions of licensed technology and patents (370,524) (258,272)
------------ ------------
Net cash used in investing activities (1,293,293) (12,176,574)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs 9,243,622
Proceeds from issuance of series B preferred stock 24,000,000
Repayment of borrowings (903,012) (983,122)
Proceeds from borrowings 6,000,000
Proceeds from sale/leaseback of equipment 2,147,410
Proceeds from exercise of stock options 97,792 123,224
------------ ------------
Net cash provided by financing activities 10,585,812 29,140,102
------------ ------------
Net (decrease) increase in cash and equivalents (5,359,905) 16,550,594
Cash and equivalents, beginning of period 13,858,910 2,906,851
------------ ------------
Cash and equivalents, end of period $ 8,499,005 $ 19,457,445
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE> 6
ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. MANAGEMENT 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 June 30, 1998 and December 31, 1997 and the
results of operations for the three-month and six-month periods ended June
30, 1998 and 1997.
The results of operations for the three-month and six-month periods ended
June 30, 1998 are not necessarily indicative of the results to be expected
for the full year.
2. MARKETABLE SECURITIES
The Company has classified its marketable securities as available for sale
and, accordingly, carries such securities at aggregate fair value. At June
30, 1998 and December 31, 1997, the Company's marketable securities
consisted of the following:
<TABLE>
<CAPTION>
Aggregate Amortized Gross Unrealized
1998 Fair Value Cost Basis Gains Losses
---- ---------- ---------- ----- ------
<S> <C> <C> <C> <C>
U.S. Government obligations $ 783,346 $ 801,436 $(18,090)
Corporate debt securities 13,143,174 13,165,581 $1,652 (24,059)
----------- ----------- ------ --------
Total $13,926,520 $13,967,017 $1,652 $(42,149)
=========== =========== ====== ========
1997
----
U.S. Government obligations $ 2,974,292 $ 3,006,012 $(31,720)
Corporate debt securities 12,526,255 12,542,107 $2,680 (18,532)
----------- ----------- ------ --------
Total $15,500,547 $15,548,119 $2,680 $(50,252)
=========== =========== ====== ========
</TABLE>
At June 30, 1998, approximately $11,320,000 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 June 30, 1998; the net unrealized loss of $40,497 is included
in stockholders' equity.
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 used for multiple
preclinical and clinical drug development programs and amounted to
$1,284,000 at June 30, 1998.
4
<PAGE> 7
4. NET 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, LLC
In March 1997, the Company entered into an agreement which established a
50/50 joint venture with Hoechst Marion Roussel ("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. 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 preferred stock over the five-year period,
including an initial investment of $24,000,000, which was completed in
March 1997. From the formation of the Genomics Center through June 30,
1998, the Company invested $6,500,000 in leasehold improvements and
equipment and funded $5,646,000 in operating and related costs. 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 2003 in cash or series B 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 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. Revenue recognized pursuant to the Services Agreements
amounted to $1,998,000 and $378,000 for the six months ended June 30, 1998
and June 30, 1997, respectively. The Genomics Center had total assets of
$4,481,000 at June 30, 1998 and incurred a net loss of $2,203,000 and
$4,114,000 for the three-months and six-months ended June 30, 1998,
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 $9.2 million
after deducting selling commissions and offering expenses. The shares were
registered under the Securities Act of 1933, as amended.
5
<PAGE> 8
7. NEW ACCOUNTING PRONOUNCEMENTS
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 second quarter
of 1998 would include the net unrealized gain on marketable securities of
$7,075 for the six months ended June 30, 1998, resulting in a comprehensive
loss of $11,669,525.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which redefines how operating segments are determined and
requires disclosure of certain financial and descriptive information about
a company's operating segments, will be effective for the Company's
financial statements for the year ending December 31, 1998. The Company has
not yet completed its analysis of whether operating segment reporting will
be required.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
ARIAD Pharmaceuticals, Inc. (the "Company" or "ARIAD") is engaged in the
discovery and development of novel, orally administered pharmaceuticals
based on signal transduction technology. 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 forms the basis for
multiple business opportunities, each with a diversity of potential
products. ARIAD is currently focusing its drug discovery efforts on (i) the
development of orally administered drugs to block signal transduction
pathways that play a critical role in major diseases such as osteoporosis,
immune-related diseases and allergy/asthma, 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. In each area of drug discovery, as well
as in functional genomics, the Company has entered into a significant
strategic alliance with a collaborator to complement its gene and drug
discovery technologies or to support its commercialization efforts.
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 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, 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 June 30, 1998, the Company had an
accumulated deficit of $78,133,000.
6
<PAGE> 9
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS ENDED JUNE 30,
1997
REVENUE
The Company recognized research revenue of $3,228,000 for the quarter ended June
30, 1998 compared to $2,489,000 for the same period in 1997. Research revenue in
1998 is comprised principally of research revenue from services provided to the
Genomics Center and the Company's 1995 collaborative research and development
agreement with HMR (the "1995 HMR Osteoporosis Agreement"). The increase in
research revenue of $739,000 for the quarter ended June 30, 1998 compared to the
corresponding period in 1997 is a result of increased services provided to the
Genomics Center, which services commenced in the second quarter of 1997.
Research revenue resulting from the Services Agreements with the Genomics Center
is 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.
Interest income decreased by $229,000 to $296,000 for the quarter ended June 30,
1998 compared to $525,000 for the same period in 1997 primarily as a result of
lower levels of funds invested during the period.
OPERATING EXPENSES
Research and development expenses increased to $8,990,000 for the quarter ended
June 30, 1998 compared to $4,273,000 for the same period in 1997 due primarily
to 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. 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.
General and administrative expenses decreased to $677,000 for the quarter ended
June 30, 1998 compared to $726,000 for the corresponding period in 1997
primarily due to the nonrecurrence in 1998 of administrative expenses related to
the formation of the Genomics Center in 1997.
The Company incurred interest expense of $128,000 for the quarter ended June 30,
1998 compared to $54,000 for the corresponding period in 1997. The increase
resulted from a higher level of long-term debt during the period.
OPERATING RESULTS
The Company incurred losses of $6,271,000 for the quarter ended June 30, 1998
and $2,039,000 for the corresponding period in 1997, or $.30 and $.11 per share,
respectively. The Company expects that substantial operating losses will
continue for several more years, will 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.
7
<PAGE> 10
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1997
REVENUE
Revenue for the six months ended June 30, 1998 were $6,683,000 compared to
$5,280,000 for the corresponding period in 1997. Research revenue earned in 1998
increased by $1,612,000 over 1997 as a result of increased research and
administrative services provided to the Genomics Center. Interest income for the
six months ended June 30, 1998 decreased by $209,000 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 $16,726,000 for the six months
ended June 30, 1998 from $8,530,000 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.
General and administrative expenses decreased to $1,376,000 for the six months
ended June 30, 1998 compared to $1,484,000 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 $258,000 for the six months ended June
30, 1998 compared to $112,000 for the corresponding period in 1997 as a result
of a higher level of long-term debt.
OPERATING RESULTS
The Company incurred losses of $11,677,000 for the six months ended June 30,
1998 and $4,845,000 for the corresponding period in 1997, or $.58 and $.25 per
share, respectively. The Company expects that substantial operating losses will
continue for several more years, will 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 series B preferred stock to HMR, 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 June 30, 1998, the Company had cash, cash equivalents and marketable
securities totaling $22,426,000, and working capital of $14,072,000 compared to
cash, cash equivalents and marketable securities totaling $29,359,000 and
working capital amounting to $16,539,000 at December 31, 1997.
The primary uses of cash during the six months ended June 30, 1998 were
$14,652,000 to finance the Company's operations and working capital
requirements, including an annual
8
<PAGE> 11
payment of $3,000,000 for access to various genomics databases, $1,407,000 to
purchase laboratory equipment, $903,000 to repay long-term debt, $1,046,000 for
net investment in the Genomics Center and $371,000 to acquire intellectual
property. The primary sources of cash during the six months ended June 30, 1998
were $9,244,000 in net proceeds from the private placement of common stock,
$4,985,000 in advances from the Genomics Center, $2,000,000 of research funding
from the 1995 HMR Osteoporosis Agreement, $2,147,000 from the sale/leaseback of
laboratory equipment and $1,529,000 of net proceeds from the sale and maturity
of marketable securities.
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 $9.2 million after deducting
selling commissions and offering expenses. The shares were registered under the
Securities Act of 1933, as amended.
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 fund up to
$6,500,000 in leasehold improvements and equipment for use by ARIAD in
conducting research on behalf of the Genomics Center. 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 series B preferred stock over the five-year
period, including an initial investment of $24,000,000. From the formation of
the Genomics Center through June 30, 1998, the Company invested $6,500,000 in
leasehold improvements and equipment and funded $5,646,000 in operating and
related costs.
Pursuant to the 1997 HMR Genomics Agreement, on March 18, 1997, HMR purchased
2,526,316 shares of the Company's series B preferred 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 series 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).
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 2003 in cash or series B preferred stock, at the
Company's option.
The Company will require substantial additional funding for its research and
product development programs, for operating expenses, for the pursuit of
regulatory clearances and for building manufacturing, sales and marketing
capabilities. Adequate funds for these purposes, whether obtained through
financial markets or collaborative or other arrangements with corporate
partners, or from other sources, may not be available when needed or on terms
acceptable to the Company.
The Company believes that its available cash and existing sources of funding
will be adequate to satisfy its capital and operating requirements for the next
nine months. However, there can be no assurance that changes in the Company's
research and development plans or other events affecting the Company's operating
expenses will not result in the Company depleting its funds earlier.
9
<PAGE> 12
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 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.
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<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on June 11, 1998. Of
21,878,868 shares issued and outstanding and eligible to vote as of
the record date of April 14, 1998, a quorum of 18,852,504 shares or
86.17% of the eligible shares were present in person or represented by
proxy.
The only action taken at such meeting was the reelection of the
following Class 1 Directors:
<TABLE>
<CAPTION>
Number of Shares
--------------------------------
For Withheld Authority
---------- ------------------
<S> <C> <C>
Joan S. Brugge, Ph.D. 18,751,957 100,547
John M. Deutch, Ph.D. 18,752,150 100,354
</TABLE>
Continuing Class 2 Directors (terms to expire 1999):
Philip Felig, M.D.
Jay R. LaMarche
Joel S. Marcus
Continuing Class 3 Directors (terms to expire 2000):
Harvey J. Berger, M.D.
Vaughn D. Bryson
Sandford D. Smith
Raymond S. Troubh
ITEM 5. OTHER INFORMATION
Stockholders who wish to have their proposals presented at the 1999
Annual Meeting of Stockholders must deliver such proposals in writing
to the Secretary of the Company at the Company's principal executive
offices no later than December 1, 1998 for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
Stockholders who do not wish to include their proposals in such proxy
statement and form of proxy but who wish to present proposals at the
Company's 1999 Annual Meeting of Stockholders must notify the
Secretary of the Company in writing at the Company's principal
executive offices no later than March 2, 1999 in order for their
proposals to be considered timely for purposes of Rule 14a-4 under the
Securities Exchange Act of 1934, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is filed herewith:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on April 29, 1998 to report
the private placement of 2,537,500 shares of common stock.
11
<PAGE> 14
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: August 6, 1998
12
<PAGE> 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)
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
<PAGE> 16
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.
(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.
14
<PAGE> 17
(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) FILED HEREWITH.
15
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