UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20132014

OR

For the transition period from                    to                    

Commission file number 001-36172

ARIAD Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (617) 494-0400

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the registrant’s common stock held by nonaffiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate), computed by reference to the price at which the common stock was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $3.1$1.1 billion.

As of February 24, 2014,January 31, 2015, the registrant had 186,323,396187,531,908 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required in Part III of this Annual Report on Form 10-K is incorporated from the Registrant’s Definitive Proxy Statement for the 20142015 Annual Meeting of Stockholders.

TABLE OF CONTENTS

PART I

ITEM 1: BUSINESS

The following Business Section contains forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain risks, uncertainties and other factors including the risk factors set forth in Part I, Item 1A of this annual report. Unless the content requires otherwise, references to “ARIAD,” “company,” “we,” “our,” and “us,” in this annual report refer to ARIAD Pharmaceuticals, Inc. and our subsidiaries.

Overview

ARIAD is a global oncology company whose vision is to transformfocused on transforming the lives of cancer patients with breakthrough medicines. Our mission is to discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest unmet medical need – aggressive cancers where current therapies are inadequate. We are focused on value-driving investments in commercialization, research and development, and new business development initiatives that we expect will lead to sustained profitability beginning in 2018 and increased shareholder value.

Our first approved cancer medicine, As described in further detail below, we are currently commercializing or developing the following three products and product candidates:

These products and product candidates complement our earlier discovery of ridaforolimus, which we have out-licensed for development in drug-eluting stents and other medical devices for cardiovascular indications, and rimiducid (AP1903), andwhich we have out-licensed for development in novel cellular immunotherapies. All of our product candidates AP26113 and ridaforolimus, were discovered internally by our scientists based on our expertise in computational chemistry and structure-based drug design. Ridaforolimus is being developed for cardiovascular indications by Medinol, Ltd., or Medinol, and ICON Medical Corp., or ICON, pursuant to license agreements entered into in 2005 and 2007, respectively.

Iclusig (ponatinib)

Iclusig is a tyrosine kinase inhibitor, or TKI, which is approved in the United States, Europe and EuropeAustralia for the treatment of adult patients with chronic myeloid leukemia, or CML, and Philadelphia chromosome-positive acute lymphoblastic leukemia, or Ph+ ALL.

Background of CML and Ph+ ALL

CML is a rare form of leukemia that is characterized by an excessive and unregulated production of white blood cells by the bone marrow due to a genetic abnormality that produces the BCR-ABL protein. After a chronic phase of production of too many white blood cells, CML typically evolves to the more aggressive phases referred to as accelerated phase and blast phase. Ph+ ALL is a subtype of acute lymphoblastic leukemia that carries the Ph+ chromosome that produces BCR-ABL. It has a more aggressive course than CML and is often treated with a combination of chemotherapy and tyrosine kinase inhibitors.TKIs. The BCR-ABL protein is expressed in both of these diseases.

According to the National Cancer Institute,

We estimate that currently there are approximately 5,00014,600 new cases of CML and 1,800 new cases of Ph+ ALL are diagnosed each year in the United States.States, Europe and Japan who are eligible for TKI therapy. CML and Ph+ ALL patients treated with TKIs can develop resistance or intolerance over time to these therapies. Iclusig was designed by ARIAD scientists to inhibit the BCR-ABL protein, including drug-resistant mutants that arise during treatment. Iclusig is the only approved TKI that is currently known to demonstrate activity against all resistant mutations, including the T315I gatekeeper mutation of BCR-ABL, the most common mutation occurring in approximately 10 percent of patients with drug resistance. Other TKIs currently approved to treat patients with CML and Ph+ ALL are imatinib, dasatinib, nilotinib and bosutinib. Based on the currently approved label in the United States and Europe, we estimate that there are approximately 4,000 patients with CML and Ph+ ALL in the United States and Europe who annually develop resistance or intolerance to other TKIs and are eligible for treatment with Iclusig.

United States

Initial Regulatory Approval in December 2012

On December 14, 2012, we obtained accelerated approval from the U.S. Food and Drug Administration, or FDA, to sell Iclusig. Iclusig was initiallyis approved in the United States for the treatment of adult patients with chronic,with:

The full prescribing information for Iclusig includes a boxed warning alerting patients and healthcare professionals to the risk of vascular occlusive events, heart failure and hepatotoxicity as well as warnings about hypertension, neuropathy, ocular toxicity, hemorrhage, fluid retention, cardiac arrhythmias, myelosuppression, pancreatitis and tumor lysis syndrome, compromised wound healing and gastrointestinal perforation and embryo-fetal toxicity. The prescribing information also includes recommendations regarding dose reductions based on disease response or intolerant to prior TKI therapy. We

commenced sales and marketing of Iclusig in the United States in the first quarter of 2013 through a limited number of specialty pharmacies and specialty distributors and we charged approximately $115,000, on a wholesale basis, for an annual supply of the approved dose of Iclusig.toxicity. The recommended dose of Iclusig is a 45mg tablet taken once daily, with or without food. As discussed below,

We employ an experienced and trained sales force and other professional staff, including account specialists, regional business directors, corporate account directors and medical science liaisons, who target the approximate 5,000 physicians who generate the majority of TKI prescriptions. We are currently distributing Iclusig in the United States through a single specialty pharmacy.

We initially obtained approval, on an accelerated basis, from the U.S. Food and Drug Administration, or FDA, to sell Iclusig in the United States in December 2012.

On October 31, 2013, we temporarily suspended marketing and commercial distribution of Iclusig in the United States due to safety concerns raised by the FDA, while we negotiated updates to the United States prescribing information for Iclusig and inimplementation of a risk mitigation strategy with the FDA. In December 2013, the FDA approved revised prescribing informationU.S. Prescribing Information, or USPI, and a Risk Evaluation and Mitigation Strategy, or REMS, for Iclusig. Iclusig that allowed for resumption of the marketing and commercial distribution of Iclusig, which we commenced in January 2014.

Europe

We resumedobtained marketing authorization for Iclusig in July 2013 from the European Commission, or EC, as an orphan medicinal product for the treatment of adult patients with:

In Europe, we are now selling Iclusig in Germany, the United Kingdom, Austria, the Netherlands, Norway, Sweden, and Italy. In addition, we are distributing Iclusig to patients in France prior to pricing and reimbursement approval as permitted under French regulations. Full pricing and reimbursement in France and other European countries is expected by mid-2015. In total, we anticipate that Iclusig will be available for sale in 16 European countries by the third quarter of 2015.

Following the temporary suspension of marketing and commercial distribution of Iclusig in the United States in October 2013, we engaged in discussions with the European Medicines Agency, or EMA, regarding potentially revised prescribing information for Iclusig. In November 2013, the EMA announced that Iclusig’s product information should be updated to include strengthened warnings for cardiovascular risk and guidance on optimizing patients’ cardiovascular therapy before starting treatment. In addition, the EMA commenced an in-depth review, known as an Article 20 referral, of the benefits and risks of Iclusig to better understand the nature, frequency and severity of events obstructing the arteries or veins, the potential mechanism that leads to these side effects and whether there needs to be a revision in the European prescribing information for Iclusig.

In October 2014, the Pharmacovigilance Risk Assessment Committee, or PRAC, of the EMA concluded its review of Iclusig under the Article 20 referral procedure and recommended that Iclusig continue to be used in Europe in accordance with its already approved indications. The PRAC also recommended that the Summary of Medicinal Product Characteristics, or SmPC, for Iclusig include (1) patient monitoring for response according to standard clinical guidelines, (2) consideration of Iclusig dose-reduction following achievement of major cytogenetic response with subsequent monitoring of response, and (3) consideration of Iclusig discontinuation if a complete haematologic response has not been achieved by three months. The PRAC also recommended that further information be provided in the Iclusig SmPC indicating that the risk of vascular occlusive events is likely dose-related, and recommend an update of the Warning and Precautions and Undesirable Effects sections. The PRAC’s recommendation was considered and adopted by the Committee for Medicinal Products for Human Use, or CHMP, of the EMA in October 2014. In January 2014.2015, the EC endorsed the final opinion adopted by the CHMP, which is binding throughout the European Union.

The FDA approvalWe have established headquarters for our European operations in Switzerland where we manage all aspects of our business in Europe, including sales and marketing, distribution and supply chain, regulatory, medical affairs and supporting functions. We also employ personnel in key countries in Europe to build company and brand awareness, manage the local country pricing and reimbursement process and sell Iclusig upon obtaining all necessary approvals. In order to provide for access to Iclusig in countries where we do not employ personnel, we enter into relationships with distributors in such countries. These distributorship arrangements provide for the exclusive right to sell and distribute Iclusig in a specific territory for a specified period of time in exchange for fees and payments related to purchase of Iclusig from us and/or sales of Iclusig in the territory. In December 2012 was2014, we entered into an agreement with Angelini Pharma, through its Austrian subsidiary, CSC Pharmaceuticals, to distribute Iclusig in countries in central and eastern Europe.

Other Markets

In territories outside the United States and Europe, we provide for the sale and distribution of Iclusig through partnership or distributorship arrangements. In December 2014, we entered into a co-development and commercialization agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, under which Otsuka has exclusive rights to commercialize Iclusig in Japan and nine other Asian countries and

will fund agreed-upon future clinical development in those countries. We expect to file for marketing approval in Japan in collaboration with Otsuka in the second half of 2015. In Australia, we obtained marketing approval for Iclusig in November 2014 and will distribute Iclusig through Specialised Therapeutics Australia Pty Ltd. under a distribution agreement we entered into in January 2014 that covers Australia and New Zealand. In Israel, we entered into a distribution agreement with Medison Pharma Ltd. in August 2014 and filed for marketing approval, which is expected in 2015. We have also filed a marketing authorization application for Iclusig in Canada, which is expected to be approved in 2015.

Ongoing Development of Iclusig

Initial approvals of Iclusig in the United States and Europe were based on results from the pivotal Phase 2 PACE (Ponatinib Ph+ALL andCMLEvaluation) trial in patients with CML or Ph+ ALL who were resistant or intolerant to prior TKI therapy, or who had the T315I mutation of BCR-ABL. In that trial, Iclusig demonstrated robust anti-leukemic activity, with 54 percent of chronic-phasechronic phase CML patients, including 70 percent of patients with the T315I mutation, achieving a major cytogenetic response, or MCyR, which was the primary endpoint of the PACE trial for chronic-phasechronic phase patients. A MCyR means that 35 percent or less of the cells in a patient’s bone marrow test positive for the Philadelphia chromosome. In patients with advanced disease, 52 percent of accelerated-phaseaccelerated phase CML patients, 31 percent of blast-phaseblast phase CML patients and 41 percent of Ph+ ALL patients achieved a major hematologic response, or MaHR, to Iclusig. MaHR was the primary endpoint in the trial for patients with advanced disease. A MaHR, as measured through the counting of white blood cells in blood and bone marrow, means that either a complete hematologic response has occurred or there is no evidence of leukemia. The most common non-hematologic adverse reactions reported (greater than or equal to 20 percent) were hypertension, rash, abdominal pain, fatigue, headache, dry skin, constipation, arthralgia, nausea, and pyrexia. Hematologic adverse reactions included thrombocytopenia, anemia, neutropenia, lymphopenia, and leukopenia.

AtWe continue to follow patients who remain on treatment in the time of its approvalPACE trial and, in December 2012,2014, in connection with a presentation at the full prescribing information for Iclusig included a boxed warning specifying that arterial thrombosis and hepatotoxicity had occurred in some patients during clinical trials56^th Annual Meeting of Iclusig. Specifically, the warning indicated that cardiovascular, cerebrovascular, and peripheral vascular thrombosis, including fatal myocardial infarction and stroke, occurred in Iclusig-treated patients; that serious arterial thrombosis occurred in 8 percentAmerican Society of Iclusig-treated patients; and that hepatotoxicity, liver failure and death occurred in Iclusig-treated patients.

Regulatory Actions in the Fourth Quarter of 2013

On October 9, 2013,Hematology, or ASH, we announced results of our review of updated clinicallong-term follow-up data from the PACE trial. The study now shows that with a median follow-up of approximately three years for chronic phase CML patients in the trial, Iclusig continues to demonstrate anti-leukemic activity in patients with limited treatment options. Deep and durable responses have been maintained in chronic phase CML patients with 83 percent of such patients who achieved a response estimated to remain in major cytogenetic response at three years. Additionally, the rate of maintenance of response in chronic phase CML patients was high (greater than 90 percent) in patients who underwent Iclusig dose reductions. Long-term safety data confirm that careful benefit-risk evaluations should guide the decision to use and then maintain Iclusig therapy, particularly in patients who may be at increased risk for arterial thrombotic events.

Also at the ASH Annual Meeting, we announced long-term follow-up data from our Phase 1 clinical trial of Iclusig and actionsin heavily pretreated patients with resistant or intolerant CML or Ph+ ALL. The study now shows that we were taking following consultations with the FDA. In the review of the clinical data, with a median follow upfollow-up of 24 months, serious arterial thrombosis occurredfour years in 11.8chronic phase CML patients, Iclusig continues to demonstrate anti-leukemic activity in patients with limited treatment options and that responses have been maintained in chronic phase CML patients with 72 percent of Iclusig-treated patients, compared to 8having an MCyR, 65 percent after 11 months of follow-up reflected in the then-current U.S. prescribing information. having a complete cytogenetic response, or CCyR, and 56 percent having a major molecular response, or MMR.

In addition, we announced at 24 months, serious venous occlusion occurredthe ASH Annual Meeting safety and efficacy follow-up data on Iclusig in 2.9 percent of Iclusig-treated patients, compared to 2.2 percent in the then-current U.S. prescribing information. Based upon our review and the FDA consultations, we paused patient enrollment in all clinical trials of Iclusig and the FDA placed a partial clinical hold on all additional patient enrollment in clinical trials of Iclusig. Except with respect to the Phase 3 EPIC clinical trial in adult patients with newly diagnosed CMLa baseline T315I mutation from our Phase 1 and PACE trials in the chronic phase, which was discontinued in October 2013 as discussed under “Pipeline” below,heavily pretreated patients receiving Iclusig in clinical trials continue on therapy and reductions in Iclusig dose from 45mg daily, the approved dosage, are being implementedwith resistant or considered on a trial-by-trial basis for patients. Before being able to restart enrollment, we expect that the eligibility criteria for Iclusig trials will be modified. We also sent a written communication to health care providers and informed the European Medicines Agency, or EMA, and other regulatory agencies of the actions described above.

The FDA issued several Drug Safety Communications during the fourth quarter of 2013, which noted an increasing frequency of reports of serious and life-threatening blood clots and severe narrowing of blood vessels (arteries and veins) of patients taking Iclusig, and recommended that health care professionals should consider for each patient whether the benefits of Iclusig treatment are likely to exceed the risks of treatment.

On October 31, 2013, we announced that we were temporarily suspending the marketing and commercial distribution of Iclusig in the United States while we negotiated updates to the United States prescribing information for Iclusig and implementation of a risk mitigation strategy with the FDA. Our actions were taken in response to a request by the FDA.

Re-approval and Resumption of Marketing and Commercial Distribution

On December 20, 2013, we announced that the FDA had approved revised U.S. Prescribing Information, or USPI, and a Risk Evaluation and Mitigation Strategy, or REMS, for Iclusig that allowed for immediate resumption of the marketing and commercial distribution of Iclusig. Iclusig is now approved in the United States for the treatment of adult patients with:

The FDA granted approvalapproved TKI therapy. Among patients with the T315I mutation, MCyR was achieved by 92 percent of chronic phase CML patients in the revised USPI based on its reviewPhase 1 trial and 72 percent of the Iclusig clinical trial data, including 24-month follow-up ofchronic phase CML patients in the PACE trial. The boxed warning has been revised to alerttrial; taken together, the combined MCyR rate for all T315I chronic phase CML patients and healthcare professionals to the risk of vascular occlusive events and includes a new warning for heart failure. In addition, neuropathy and ocular toxicity have been added as warnings, and dose reduction recommendations have been strengthened. We also agreed to additional post-marketing requirements as described further below. The starting dose of Iclusig remains 45mg daily. On January 17, 2014, we announced that we had resumed marketing and commercial distribution of Iclusig in the United States through an exclusive specialty pharmacy with a wholesale price of approximately $125,000 for an annual supply of the approved dose of Iclusig.was 75 percent.

On November 1, 2013, when marketing and commercial distribution of Iclusig was temporarily suspended in the United States, there were approximately 640 patients receiving Iclusig obtained through commercial channels in the United States. Between that time and January 17, 2014, when Iclusig was re-launched, the drug was made available through emergency and single-patient investigational new drug (IND) applications, which were reviewed and approved by the FDA on a case-by-case basis. The FDA approved more than 370 INDs during that period, and more than 300 patients received Iclusig at no cost through this process. We expect most of these patients, many of whom received a three-month supply of Iclusig, to transition from the IND program to commercial supply by the end of the first quarter of 2014. As of January 17, 2014, the Iclusig IND program was no longer accepting new patients.

In addition to focusing our efforts on the re-launch of Iclusig in the United States, in 2014,2015, we plan to invest in studies designed to better understand the safety profile of Iclusig in patients with resistant and intolerant CML andor Ph+ ALL, patients with the objective of improving the balance of benefit and risk for these patients, as post-marketing commitments. We expect that thesewell as studies will include designed to evaluate its use in earlier lines of therapy. These studies include:

In addition, Iclusig is being studied in variousAdditionally, 10 investigator-sponsored trials, or ISTs, in settings including first linethe ponatinib program are open to patient enrollment, and second line CML, acute myeloid leukemiathree additional ISTs are pending regulatory or AML,institutional review board approval. This includes two trials in RET-driven non-small cell lung cancer or NSCLC,(NSCLC) and one in medullary thyroid cancer, or MTC. The FDA’s partial clinical hold has been lifted on the MTC trial and we expect the clinical hold will be lifted on the otherfive trials in 2014.CML or Ph+ALL, two trials in acute myeloid leukemia (AML) and three in various other cancers with genetic aberrations in FGFR. We expect to initiatethat additional investigator-sponsored clinical trials will be initiated in 20142015 in indications including Ph+ ALL, blast phase CML, AMLvarious indications.

Pipeline

In addition to Iclusig, our product pipeline currently consists of three product candidates – brigatinib (previously known as AP26113), AP32788 and endometrial cancer.

AP26113Brigatinib (AP26113)

AP26113Brigatinib (AP26113) is an investigational inhibitor of anaplastic lymphoma kinase, or ALK. In non-clinicalALK was first identified as a chromosomal rearrangement in anaplastic large-cell lymphoma, or ALCL. Genetic studies AP26113 also demonstratedindicate that abnormal expression of ALK is a key driver of certain types of non-small cell lung cancer, or NSCLC, and neuroblastomas, as well as ALCL. Since ALK is generally not expressed in normal adult tissues, it can inhibit epidermal growth factor receptor,represents a highly promising molecular target for cancer therapy.

Brigatinib has received a Breakthrough Therapy designation from the FDA for the treatment of patients with ALK+ metastatic NSCLC whose tumors are resistant to crizotinib. This designation is based on results from the ongoing Phase 1/2 trial, described below, that show anti-tumor activity of brigatinib in patients with ALK+ NSCLC, including patients with active brain metastases. A Breakthrough Therapy designation is intended to expedite the development and FDA review of drugs for serious or EGFR,life-threatening conditions.

We estimate that currently there are approximately 18,000 ALK-positive patients with advanced and c-ros oncogene-1, or ROS1. All of these kinases are clinically validated targetsmetastatic NSCLC in NSCLC.the United States, Europe and Japan, based on healthcare information providers, who would be potentially eligible for treatment with brigatinib, if it were approved.

We initiated patient enrollment in a Phase 1/2 clinical trial of AP26113brigatinib in the third quarter of 2011. The protocol is designed to enroll approximately 50 to 60 patients in the Phase 1 portion of the trial and approximately 125 patients in the Phase 2 portion of the trial. We began enrollment in the Phase 2 portion of the trial in the second quarter of 2013. In September 2013,2014, we announced updated clinical results from the ongoing Phase 1/2 clinical trial.trial in which we had enrolled a total of 137 patients. The study results show robust anti-tumor activity in patients with TKI-naïve and crizotinib-resistant ALK-positive NSCLC, including in patients with brain metastases after crizotinib treatment. Crizotinib is the currently available first-generation ALK inhibitor.

Objective responses were observed in ALK+ NSCLC patients at the lowest dose tested in these patients (60 mg), and responses were observed in patients who were either TKI-naïve or resistant to crizotinib. Of the 72 ALK+ NSCLC patients evaluable for response, 52 (72 percent) demonstrated an objective response. The data demonstrated tumor shrinkage in nearly all ALK+ NSCLC patients, with 16 patients experiencing 100 percent shrinkage of the target lesion. The median duration of response was 49 weeks, and the median progression-free survival was 56 weeks.

Of the seven evaluable TKI-naïve ALK+ NSCLC patients treated with brigatinib, all demonstrated an objective response, including two complete responses. Of the 65 evaluable ALK+ NSCLC patients with prior crizotinib therapy treated with brigatinib, 45 (69 percent) demonstrated an objective response. Median progression-free survival was 47.3 weeks. In a subgroup analysis, 10 of 14 (71 percent) ALK+ NSCLC patients with active, untreated or progressing brain metastases had evidence of radiographic improvement in those metastases. Four of these patients demonstrated a complete response by independent review. Of the 10 patients who responded, six remained on study, with treatment durations up to 105 weeks. In addition, improvement in a patient with leptomeningeal metastasis was observed.

The most common adverse events, regardless of treatment relationship and including all grades, were nausea (45 percent), diarrhea (37 percent), and fatigue (37 percent). Adverse events, grade 3 or higher, occurring in three or more patients were dyspnea (4 percent), increased lipase (4 percent), hypoxia (4 percent), fatigue (3 percent), alanine aminotransferase (ALT) increased (2 percent) and amylase increased (2 percent). Serious adverse events occurring in three or more patients were dyspnea (7 percent), pneumonia (5 percent), hypoxia (4 percent), neoplasm progression (4 percent), pyrexia (2 percent) and pulmonary embolism (2 percent). Early onset pulmonary symptoms were observed in 13 of 137 (10 percent) patients enrolled in the study and occurred more frequently with starting doses of 180 mg per day and higher compared to the lower starting doses. These symptoms occurred within seven days of treatment initiation, and in some cases, included dyspnea, hypoxia, and new pulmonary opacities on chest imaging. To minimize the early-onset pulmonary symptoms observed, two additional dosing regimens were examined in the Phase 2 portion of the trial: 90 mg per day for one week followed by 180 mg per day (n=32) and 90 mg per day continuously (n=18). The incidence of early-onset pulmonary symptoms in these two dosing regimens was 0 of 32 and 2 of 18 patients, respectively. Overall, 2 out of 50 patients (4 percent) who began dosing at 90 mg per day had early-onset pulmonary symptoms and both continued on treatment.

We plan to commencecommenced a pivotal trial of AP26113brigatinib in the first quarter of 2014 in ALK-positivepatients with locally advanced or metastatic NSCLC patients who are resistantwere previously treated with crizotinib. The ALTA (ALK inLung CancerTrial ofAP26113) trial is designed to crizotinib, following confirmation ofdetermine the safety and efficacy profileof brigatinib in refractory ALK+ NSCLC patients. The trial will enroll approximately 220 patients including those with brain metastasis. Patients are being randomized 1:1 to receive either 90 mg of brigatinib once per day continuously or a lead-in dose of 90 mg per day for 7 days followed by 180 mg once per day continuously. We anticipate that the results of the selected dose of AP26113ALTA trial will form the basis for our application for initial regulatory approval. We expect to achieve full patient enrollment in the ongoing phase 1/2 clinical trial. We have decided to focus our development efforts on ALK-positive NSCLC patients, both treatment naïve and resistant, and those with CNS activity. We will no longer enroll EGFR, ROS1, or other patientsALTA trial in the ongoing Phase 1/2 clinical trial.

We estimate that currently there are approximately 14,200 ALK-positive patients with advancedthird quarter of 2015 and metastatic NSCLCto file for approval of brigatinib in the United States Europein 2016.

We are currently pursuing a corporate partnership to co-develop and Japan, based on healthcare information providers, who would be potentially eligibleco-commercialize brigatinib. We expect that such a partnership will allow us to continue to leverage our existing infrastructure and capabilities, as well as support a randomized, first-line trial of brigatinib vs. crizotinib in ALK+ NSCLC. A partnership may also support the exploration of new combination therapies in lung cancer that include brigatinib and other approved and unapproved medicines.

AP32788

At the end of 2014, we nominated our next internally discovered development candidate, AP32788. This orally active TKI has a unique profile against a validated class of mutated targets in non-small cell lung cancer and certain other solid tumors and may address an unmet medical need. We expect to file an investigational new drug (IND) application for treatment with AP26113, if it were approved.AP32788 in 2015 and to begin a Phase 1/2 proof-of-concept trial in 2016.

Ridaforolimus

Ridaforolimus is an investigational inhibitor of the mammalian target of rapamycin, or mTOR, that we discovered and developed internally and later licensed in 2010 to Merck & Co., Inc., or Merck, for oncology applications. Under the license agreement, Merck iswas responsible for all activities and fundsfunding of all of the costs related to the development, manufacturing and commercialization of ridaforolimus in oncology. In the third quarter of 2011, Merck filed in the United States and Europe for regulatory approval of ridaforolimus as a maintenance therapy for patients with metastatic soft-tissue and bone sarcomas who had a favorable response to chemotherapy. In June 2012, the FDA issued a complete response letter regarding the New Drug Application, or NDA, filed by Merck, stating that the FDA could not approve the application in its present form and that additional clinical trial(s) would need to be conducted to further assess safety and efficacy of ridaforolimus in this indication. In November 2012, Merck announced that it had formally notified the EMA of Merck’s decision to withdraw the marketing authorization application, or MAA, for ridaforolimus, because the data available to date and provided in the MAA were not sufficient to permit licensure of ridaforolimus in the European Union for the maintenance treatment of patients with soft tissue sarcoma or primary malignant bone tumor. In its announcement, Merck stated that it was studying ridaforolimus in combination with other drugs in other tumor types and that it is committed to the ongoing clinical trials of ridaforolimus. On February 20, 2014, we received notice from Merck that it iswas terminating the license agreement. Per the terms of the license agreement, this termination will becomebecame effective nine months from the date of the noticein November 2014 at which time all rights to ridaforolimus in oncology licensed to Merck will bewere returned to us.

Potential Cardiovascular Indications of Ridaforolimus At the current time, we have no plans to develop ridaforolimus internally for oncology indications.

As an mTOR inhibitor, ridaforolimus has also been shown in preclinical studies to block the proliferation and migration of vascular smooth muscle cells, the primary cause of narrowing and blockage of injured arteries, and is an analog of sirolimus, another mTOR inhibitor that has been approved for use in drug-eluting stents. Clinical studies have found lower reblockage rates in patients treated with stents that deliver small-molecule drugs, such as sirolimus, everolimus or paclitaxel, a cytotoxic agent, locally to the site of vascular injury. Such stents have become the standard of care for many patients undergoing interventional procedures to open narrowed coronary arteries.

We have entered into a non-exclusive license agreementagreements with Medinol Ltd., or Medinol, a leading innovator in stent technology, in January 2005, pursuant to which Medinol agreedand ICON Medical Corp., or ICON, an emerging medical device company, to develop and commercialize stents and other medical devices to deliver ridaforolimus to prevent restenosis, or reblockage, of injured vessels following interventions in which stents are used in conjunction with balloon angioplasty. In January 2014, weangioplasty, as further described below under the caption “Our Licenses and Medinol announced the initiation of two registration trials in the United States and other countries of Medinol’s NIRsupreme^TM Ridaforolimus-Eluting Coronary Stent System incorporating ridaforolimus. The two NIRsupreme clinical trials are randomized, single-blind, global studies which will take place in the United States, Europe, Israel and Canada and plan to enroll approximately 2,200 patientsCollaborations with coronary artery disease. Drug-eluting stents are now implanted in over 425,000 patients yearly in the United States.Third Parties”.

The commencement of patient enrollment in Medinol’s clinical trials, along with the submission of an investigational device exemption, or IDE, to the FDA, triggers milestone payments to us of $3.8 million, expected in 2014. We are eligible to receive additional regulatory, clinical and commercial milestones of up to $34.8 million, if two products are developed, plus royalties on worldwide sales of approved products. We are responsible for supplying ridaforolimus to Medinol, and Medinol is responsible for the development and commercialization of the medical devices delivering ridaforolimus.

We also entered into a license agreement with ICON Medical Corp., or ICON, an emerging medical device company, in October 2007, to also develop and commercialize stents and other medical devices to deliver ridaforolimus to prevent restenosis, or reblockage, of injured vessels following interventions in which stents are used in conjunction with balloon angioplasty. We have retained the right to enter into one additional non-exclusive license agreement, in addition to the licenses granted to Medinol and ICON, to develop and commercialize medical devices delivering ridaforolimus for use in vascular disease. ICON is still involved in the preclinical stages of development of these medical devices. There can be no assurance that we will receive any additional payments under these agreements.

Our Discovery Programs

Our research and development programs are focused on discovering and developing small-molecule drugs that regulate cell signaling for the treatment of cancer. Many of the critical functions of cells, such as cell growth, differentiation, gene transcription, metabolism, motility and survival, are dependent on signals carried back and forth from the cell surface to the nucleus and within the cell through a system of molecular pathways. When disrupted or over-stimulated, such pathways may trigger diseases such as cancer. Our research focuses on exploring cell-signaling pathways, identifying their role in specific cancers and cancer subtypes, and discovering drug candidates to treat those cancers by interfering with the aberrant signaling pathways of cells. The specific cellular proteins blocked by our product candidates have been well characterized and validated as cancer targets. Iclusig and our product candidates, AP26113brigatinib, AP32788 and ridaforolimus, have been developed in-houseby us through the integrated use of structure-based drug design and computational chemistry, and their targets have been validated with techniques such as functional genomics, proteomics, and chemical genetics.

Our Intellectual Property

Patents and other intellectual property rights are essential to our business. In general, we file patent applications to protect our technology, inventions and improvements to our inventions that we consider to be patentable and important to our business.

We solely own the following patents and patent applications for our product candidates:

In addition to the composition of matter patents and patent applications mentioned above, we also own other patents and patent applications covering manufacturing processes, polymorphs, formulations and uses that may provide additional protection of the respective product or product candidate.

The remainder of our patent portfolio is focused primarily on inventions involving additional classes of chemical compounds, the mTOR gene, and the components, configurations and use of our ARGENT regulation technologies, which we out-licensed in 2011 and are no longer pursuing internally.

We also rely on unpatented trade secrets and proprietary know-how, some of which is not believed to be adequately protectable through patents. In order to protect our trade secrets, we enter into confidentiality agreements with our employees, consultants, investigators, clinical trial sites, contractors, collaborators and other third parties to whom we disclose confidential information, although protection of trade secrets is generally recognized as challenging.

Our Licenses toand Collaboration Agreements with Third Parties

Our Iclusig Commercialization and Co-Development Agreement with Otsuka

In December 2014, we entered into an agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, for the commercialization and co-development of Iclusig in Japan and nine other Asian countries. Under the terms of the agreement, we will lead the completion of the Japanese New Drug Application, or JNDA, for Iclusig, and, based on current plans, Otsuka will file in 2015 the JNDA on behalf of both companies for regulatory approval in resistant and intolerant CML and Ph+ALL. The countries that are included in the agreement are Japan, China, South Korea, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

Under the terms of the agreement, Otsuka was granted an exclusive license to market Iclusig in the specified territory and will perform certain development activities, at its expense. Otsuka will promote Iclusig as its sole tyrosine kinase inhibitor in the territory and, in connection therewith, has agreed to end its co-promotion arrangements for dasatinib in Japan. In addition, Otsuka will purchase Iclusig from us in bulk form, or potentially in final packaged form for certain countries, in dosage strengths approved in the territory.

In consideration for the exclusive license and other rights contained in the agreement, Otsuka paid us an upfront payment of $77.5 million, less a refundable Japan withholding tax of $15.8 million, and has agreed to pay us a milestone payment upon regulatory approval in Japan for patients with resistant and intolerant Philadelphia-positive leukemias, and additional milestone payments for approval in other indications. We will also be entitled to receive royalties and other payments representing a substantial share of net product sales. Following approvals in each country in the territory, Otsuka will conduct sales activities and record sales.

We have agreed to continue to fund the completion of our ongoing pivotal trial of Iclusig that will form the basis of the filing for regulatory approval in Japan, while Otsuka has agreed to fund additional agreed-upon clinical studies in the territory. For ARIAD-sponsored global studies that include sites in Japan, Otsuka has the option to contribute to the funding and gain access to the data for use in its territory.

Unless terminated earlier, the agreement has a term that continues until the later of (x) the expiration of all royalty obligations in the territory, or (y) the last sale by Otsuka or its sub-licensees of a product in the territory under approvals obtained under the agreement. The agreement may be terminated (i) by either party based on insolvency or uncured breach by the other party or an unresolved, extended force majeure event affecting the other party, (ii) by Otsuka at its discretion on 180 days prior written notice, or (iii) by us upon the failure of Otsuka to submit an application for marketing authorization or launch Iclusig in Japan within specified dates, assuming such failure is not due to our failure to meet certain obligations, or other reasons beyond Otsuka’s control.

We and Otsuka have established a joint development and commercialization committee to oversee clinical development and commercialization of Iclusig in the territory, including approval of any development or commercialization plans. Each party has ultimate decision making authority with respect to a specified limited set of issues, and for all other issues, the matter must be resolved by consensus or by an expedited arbitration process.

For additional information on our agreement with Otsuka, please see Note 2 to our consolidated financial statements included in this report.

Our Ridaforolimus Collaboration and License Agreements with Merck

In July 2007, we entered into a collaboration agreement with Merck for the joint global development, manufacture and commercialization of ridaforolimus for use in cancer, referred to as the Collaboration Agreement. Under the Collaboration Agreement, Merck paid us an initial upfront fee of $75 million in 2007 and milestone payments of $53.5 million through the second quarter of 2010.

In May 2010, we entered into an amended and restated agreement with Merck, referred to as the License Agreement, which replaced the Collaboration Agreement, and a related supply agreement.

Under the terms of the License Agreement, we granted Merck an exclusive license to develop, manufacture and commercialize ridaforolimus in oncology, and Merck assumed responsibility for all activities related to the development, manufacture and commercialization of ridaforolimus and agreed to fund 100 percent of all ridaforolimus costs incurred after January 1, 2010. The License Agreement provided that Merck would develop ridaforolimus in multiple oncology indications. If ridaforolimus received regulatory approval, Merck would be responsible for selling ridaforolimus worldwide and would pay us tiered double-digit royalties on global net sales.

Under the License Agreement, Merck paid us an initial up-frontupfront fee of $50 million in the second quarter of 2010 and a $25 million milestone payment in the third quarter of 2011, for acceptance of an MAA in Europe, which was subsequently withdrawn by Merck in November 2012. On2011.

In February 20, 2014, we received notice from Merck that it iswas terminating the license agreement. Per the termsLicense Agreement, effective in November 2014. Upon termination of the licensethis agreement, this termination will become effective nine months from the date of the notice at which time all rights to ridaforolimus in oncologythat we had licensed to Merck will bewere returned to us.

Our Ridaforolimus Stent Collaborations

In January 2005, we entered into a license agreement with Medinol and in October 2007 we entered into a license agreement with ICON, to develop and commercialize ridaforolimus-eluting stents and other medical devices to prevent restenosis, or reblockage, of injured vessels following interventions in which stents are used in conjunction with balloon angioplasty. Under these agreements, we granted to each of Medinol and ICON a non-exclusive, world-wide, royalty-bearing license, under our patents and

technology relating to ridaforolimus, to develop, manufacture and sell the stents and certain other medical devices that deliver ridaforolimus. We are responsible for supplying Medinol and ICON with, and they have agreed to purchase from us, certain quantities of ridaforolimus for use in its development, manufacture and sale of the stents and other medical devices.

The agreement with Medinol provides for the payment by Medinol to us of up to $39.3 million, which includes an upfront license fee and payments based upon achievement of development, regulatory and commercial milestones, if two products are developed. Through December 31, 2013,2014, we havehad received an upfront fee of $750,000 under the agreement. Withand milestone payments of $3.8 million following the initiation of two registration trials and the filing of an IDE with the FDA announced in January 2014, we expect to receive, during 2014, $3.8 million in milestone payments under the agreement.2014. In addition, we are eligible to receive tiered single-digit royalties based on various minimum levels of stents or other medical devices sold under the agreement. As of December 31, 2013,2014, no products have been approved by regulatory authorities for sale under this agreement.

The agreement with ICON provides for the payment by ICON to us of up to $27.4 million based upon achievement of certain clinical, regulatory and commercial milestones, if two products are developed. Through December 31, 2013,2014, we have received no such payments under the agreement. In addition, we are eligible to receive single-digit royalties based on net sales of stents or other medical devices sold under the agreement. As of December 31, 2013,2014, no products have been approved by regulatory authorities for sale under this agreement. Concurrent with the execution of the license agreement with ICON, we received shares of ICON common stock equal to an ownership interest in ICON of less than 10 percent and certain other rights, including maintenance, anti-dilution and registration rights.

The terms of both the Medinol and ICON agreements extend to the later to occur of the expiration of our patents relating to the rights licensed to Medinol or ICON under the agreement or 15 years after the first commercial sale of a product. The agreements may be terminated by either party for breach following the failure to cure after a 90-day cure period. In addition, either Medinol or ICON may terminate their respective agreementsits agreement upon 30 days’ notice to us upon certain events, including if it determines, in its reasonable business judgment, that it is no longer in its business interest to continue the development of a medical device to deliver ridaforolimus. We may terminate the agreements upon 30 days’ notice to Medinol or ICON, if we determine that it is no longer in our business interest to continue our development and regulatory approval efforts with respect to ridaforolimus.

Licenses Related to ARGENT Technology

In 2011, we executed three exclusive out-license agreements for separate aspects of our ARGENT cell-signaling regulation technology, which we are no longer pursuing internally. The licenses to these non-core assets provide us with a combination of equity ownership in the licensees, upfront payments, ongoing fees for supply of certain research reagents, and potential milestone and royalty payments linked to clinical, regulatory and sales achievements of the licensees. These out-license arrangements allow us to focus primarily on the development and commercialization

Under one of our core compounds, and we do not currently believe that these license agreements, are materialBellicum Pharmaceuticals, Inc., or Bellicum, is developing cell therapies to treat cancers and other chronic and life-threatening diseases. Bellicum’s proprietary cell-based therapies utilize our ARGENT technology and our small-molecule drug rimiducid (AP1903), under the terms of the license agreement. In October 2014, we and Bellicum entered into an Omnibus Amendment Agreement, or the Omnibus Agreement, that restructures the previous license agreement. Under the terms of the Omnibus Agreement, we received $15 million upon execution of the agreement and were entitled to receive two payments of $20 million and $15 million by specified dates in the future in exchange for granting Bellicum a fully paid-up license to this technology and return of shares of Bellicum common stock owned by us. The second and third installment payments could be accelerated under certain circumstances and prepaid at any time. On December 23, 2014, Bellicum completed its initial public offering, and on December 29, 2014, Bellicum paid the $20 million and $15 million payments owed to us under the agreement and we returned the shares of Bellicum common stock owned by us.

The Omnibus Agreement gives Bellicum a worldwide exclusive license, with the right to sublicense, to our businesscell-signaling technology for broad use in human cell therapies for all diseases on a royalty- and milestone-free basis. The Omnibus Agreement can be terminated by either party upon a specified uncured material breach of the license agreement or that any payments that could be received under these agreements would be material to our results of operations or financial position.the Omnibus Agreement.

The ARGENT technology platform combines chemistry and genetics to allow specific cell-signaling and gene-expression events to be chemically activated in whole animals and cultured cells. The

technology platform includes a portfolio of distinct small-molecule “dimerizer” compounds optimized for specific applications. Dimerizers bring specific proteins together in cells. The technology allows intracellular processes to be controlled with small molecules, which may be useful in the development of therapeutic vaccines and gene and cell therapy products, and which provide versatile tools for applications in cell biology, functional genomics and drug-discovery research. The technology is being developed to treat human disease through cancer vaccines, cell therapy and gene therapy, in each case featuring small-molecule regulation of cellular activation.

Initial clinical proof of concept has already been demonstrated by the licensees for two product candidates, which utilize our small-molecule dimerizer drug AP1903, in patients with prostate cancer and in patients with hematologic malignancies who have undergone hematopoietic stem cell transplants. AP1903 was discovered and developed by ARIAD scientists.

Research and Development Spending

During each of the three years ended December 31, 2013, 2012 and 2011, we spent approximately $162.9 million, $144.7 million and $77.7 million, respectively, on our research and development activities.

Manufacturing

Iclusig and our drug candidates and preclinical compounds are small molecules that can be readily synthesized by processes that we have developed. We are able to manufacture in-house the quantities of our product candidates necessary for certain preclinical studies. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of Iclusig or our product candidates. We contract with third-party manufacturers to assist in the development and optimization of our manufacturing processes and methods and to supply our product candidates in sufficient bulk quantities and in suitable dosage forms for use in our clinical trials. We also expect to continue to depend on third-party manufacturers for the supply of our products for commercialization in the United States, Europe and other territories in which we may sell Iclusig.

Iclusig and AP26113brigatinib are produced by an established manufacturing processprocesses using conventional organic chemical synthesis. The production of Iclusig and AP26113brigatinib is based on technology that we believe is proprietary to us. We have established relationships with third parties for the manufacture of Iclusig clinical and commercial supply and have existing agreements for our supply of drug substance, drug product and distribution.

Ridaforolimus is produced by an established manufacturing process using conventional synthetic and natural-product fermentation techniques. The production of ridaforolimus is based in part on technology that we believe is proprietary to us. Pursuant to our License Agreement with Merck, Merck is responsible for supplying the active pharmaceutical ingredient used in ridaforolimus drug product and the finished drug product. Merck may sub-license this technology to contract manufacturers to enable them to manufacture ridaforolimus for Merck’s and our use, including use by our medical device collaborators. Upon termination of the license agreement with Merck in November 2014, all rights to ridaforolimus will bewere returned to us and we will be responsible for all manufacturing required for any continued development of the drug candidate. We have established relationships with third parties for the manufacture of ridaforolimus drug substance for our use, including any use by our medical device collaborators.

Contract manufacturers are subject to extensive governmental regulation and we depend on them to manufacture Iclusig and our product candidates in accordance with the FDA’s current good manufacturing practice regulations, or cGMPs. We have an established quality assurance program designed to ensure that our contract manufacturers produce our compounds in accordance with cGMPs, and other applicable domestic and foreign regulations. We believe that our current contractors comply with such regulations.

Competition

The pharmaceutical and biotechnology industries are intensely competitive. We compete directly and indirectly with other pharmaceutical companies, biotechnology companies and academic and research

organizations, many of whom have greater resources than us.we do. We compete with companies who have products on the market or in development in the same class or for the same indications as our product candidates. We may also compete with organizations that are developing similar technology platforms.

In the area of oncology, pharmaceutical and biotechnology companies such as Amgen Inc., AstraZeneca PLC, Bristol-Myers Squibb Company, Celgene Corporation, Eli Lilly and Company, the Roche Group, GlaxoSmithKline plc, Johnson & Johnson, Merck, Merck KGaA, Novartis AG, Pfizer, Inc., Sanofi-Aventis, Takeda Pharmaceutical Co., Ltd., and Teva Pharmaceutical Industries Ltd. are developing and marketing drugs to treat cancer.

Bristol-Myers Squibb, Novartis and Pfizer are currently marketing TKIs for the treatment of patients with CML that compete with Iclusig. Novartis’ imatinib is marketed in the first-line setting, and Bristol-Myers Squibb’s dasatinib and Novartis’ nilotinib are marketed for patients in the first-line setting, as well as in those patients who have failed imatinib therapy.therapy; and Pfizer’s bosutinib is marketed for patients for whom therapy with other TKIs has failed. These drugs generated nearlyapproximately $6 billion in revenues during 2013,2014, according to reported results from Bristol-Myers Squibb, Novartis and Novartis.Pfizer. In the resistance/intolerance market, Teva’s omacetaxine mepesuccinate, a non-TKI, was recently approvedis also marketed in the United States and Pfizer’s bosutinib was recently approved in the United States and the European Union. Thesefor patients for whom therapy with other TKIs has failed. Other than imatinib, all of these products compete with Iclusig.Iclusig in the resistance/intolerance market. In Asia,January 2012, Il-Yang Pharmaceutical recently gained approval in South Korea for radotinib, a locally developed TKI for the treatment of CML patients.

Pfizer, Novartis and Roche/Chugai have launched ALK inhibitors that will compete with brigatinib should it gain marketing approval. In addition, there are several other ALK inhibitors in various stages of development that could also compete with brigatinib. In August 2011, Pfizer obtained US approval for and is currently marketing crizotinib for patients with ALK-positive non-small cell lung cancer. In 2012, crizotinib was approved for marketing in Japan and the European Union. In April 2014, Novartis obtained US approval for ceritinib and filed for approval in the European Union. In September 2014, Chugai Pharmaceutical Co. obtained approval for alectinib in Japan. Tesaro, Ignyta and Xcovery also have ALK inhibitors in development and Pfizer is developing a follow-on compound to crizotinib.

We cannot be certain that Iclusig or brigatinib, if approved, will be commercially successful. In addition to the other challenges related to a company launching its first commercial drug, we will face competition from these other TKIs and ALK inhibitors that are currently approved for the treatment of patients with CML patientsand NSCLC, respectively, and any new products that may be approved. While we believe that Iclusig has aand brigatinib have competitive commercial profileprofiles compared to the existing TKI therapies on the market and products in late-stage development, our current estimates of the potential competitiveness of Iclusig and brigatinib compared to existing TKI therapies and the revenues that Iclusig and brigatinib, if approved, could generate in future periods are subject to various risks and uncertainties, including those set forth in “Risk Factors” in Part I, Item 1A of this Annual Report under the caption “Risks relating to the development and commercialization of our products and product candidates.”

Several companies have ALK inhibitors in various stages of development that could compete with AP26113. Pfizer has obtained approval for and is currently marketing crizotinib for patients with ALK-positive non-small cell lung cancer. Novartis, Chugai Pharmaceutical Co., the Roche Group, Tesaro, Xcovery and Astellas also have ALK inhibitors in development.

Pfizer and Novartis are developing mTOR inhibitors for use in cancer that could compete with ridaforolimus. Pfizer’s mTOR inhibitor, temsirolimus, and Novartis’ mTOR inhibitor, everolimus, are both approved to treat patients with advanced kidney cancer. In addition, everolimus is approved to treat patients with several additional types of cancer, including advanced neuroendocrine tumors of pancreatic origin, subependymal giant cell astrocytoma associated with tuberous sclerosis, and advanced hormone receptor-positive, HER2-negative breast cancer in postmenopausal women in combination with exemestane, after failure of treatment with letrozole or anastrozole.

We may also experience competition from companies that have acquired or may acquire technology from companies, universities, and other research institutions. As these companies develop their technologies, they may develop proprietary positions that may materially and adversely affect us.

Government Regulation and Product Approval

Governmental authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of products such as Iclusig and thoseothers we are developing. Our product candidates must be approved by the FDA through the new drug application, or NDA, process before they may be legally marketed in the United States and by the EMA through the marketing authorization application, or MAA, process before they may be legally marketed in Europe. Our product candidates will be subject to

similar requirements in other countries prior to marketing in

those countries. The process of obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, requires the expenditure of substantial time and financial resources.

United States Drug Development Process

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Failure to comply with the applicable U.S. requirements at any time during the product development process or approval process, or after approval, may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on the applicant. These sanctions could include:

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

As part of the IND, an IND sponsor must submit to the FDA the results of preclinical tests, which may include laboratory evaluations and animal studies, together with manufacturing information and analytical data, and the proposed clinical protocol for the first phase of the clinical trial of the drug. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a “clinical hold” because of safety concerns or perceived procedural deficiencies. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials may begin. A clinical hold may be imposed by the FDA at any time during the life of an IND, and may affect one or more specific studies or all studies conducted under the IND.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP’s. They must be conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must timely report to FDA serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reactionreactions over thatthose listed in the protocol or investigationinvestigators’ brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk into humans exposed to the drug. An institutional review board, or IRB, must also review and approve each new clinical protocol and patient informed consent form prior to commencement of the corresponding clinical trial at

each institution where a trial is to be performed. Protocols detail, among other things, the objectives of the study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor patient safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Human clinical trials are inherently uncertain and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

During the development of a new drug, sponsors are given an opportunity to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development. Sponsors typically use the end-of-Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug.

Concurrent with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing commercial quantities of the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug and the manufacturer must develop methods for testing the quality, purity and potency of the drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its proposed shelf-life.

If a drug is intended to treat a serious or life threatening condition for which there is an unmet medical need, a company may request that the FDA consider the drug for a fast track development program at the time of submitting its IND or at any time prior to receiving marketing approval. The fast track program is designed to facilitate the development and expedite the review of a new drug for the treatment of specific conditions. If the FDA agrees that the drug meets the criteria for fast track development for treatment of one or more conditions, it will grant fast track status.

Orphan Drug Designation and Approval

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition which is defined as one affecting fewer than 200,000 individuals in the United States or more than 200,000 individuals where there is no reasonable expectation that the product

development cost will be recovered from product sales in the United States. Orphan drug designation must be requested before submitting an NDA and does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If an orphan drug-designated product subsequently receives the first FDA approval for the disease for which it was designed, the product will be entitled to seven years of product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Early in 2013, we received orphan drug exclusivity approval of Iclusig for the treatment of adult patients with chronic, accelerated or blast phase CML, who are resistant or intolerant to prior TKI therapy, and the treatment of adult patients with Ph+ ALL who are resistant or intolerant to prior TKI therapy. This seven year exclusivity period began on December 14, 2012, the date of approval of our NDA.

United States Drug Review and Approval Processes

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product.

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

Once the submission is accepted for filing, the FDA begins an in-depth and substantive review. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant. The FDA may seek advice and a recommendation from an external advisory committee as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured and tested. The FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require submission of additional clinical or other data and information which, upon agency review and interpretation, may or may not be deemed by the FDA to satisfy the criteria for approval. The FDA may also issue a “complete response” letter, which may require additional clinical or other data or impose other conditions that must be met in order to secure final approval of the NDA.

NDAs receive either standard or priority review. A drug representing a significant improvement in treatment, prevention or diagnosis of disease may receive priority review. In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. In such a situation, a drug may be approved based on a Phase 2 pivotal trial, as was the case with Iclusig. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. Priority review and accelerated approval do not change the standards for approval, but may expedite the approval process.

Expedited Review and Approval

The FDA has various programs, including Fast Track, Breakthrough Therapy designation, priority review, and accelerated approval, which are intended to expedite or simplify the process for reviewing drugs,

and/or provide for the approval of a drug on the basis of a surrogate endpoint. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally, drugs that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious or life-threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a standard review time of ten months.

Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the application for a drug designated for priority review. Accelerated approval, which is described in Subpart H of 21 Code of Federal Regulations, or 21 CFR Part 314, provides for an earlier approval for a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint. A surrogate endpoint is a laboratoryclinical measurement or physical signother biomarker used as an indirect or substitute measurement representingto predict a clinically meaningful outcome. As a condition of approval, the FDA may require that a sponsor of a product candidate receiving accelerated approval perform post-marketing clinical trials. We received accelerated approval for Iclusig and are required to perform post-marketing clinical trials.

In the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law in July 2012, Congress encouraged the FDA to utilize innovative and flexible approaches to the assessment of products under accelerated approval. The law required the FDA to issue related draft guidance within a year after the law’s enactment and also promulgate confirming regulatory changes. In June 2013, the FDA

published a draft Guidance for Industry entitled, “Expedited Programs for Serious Conditions––Drugs and Biologics” which provides guidance on FDA programs that are intended to facilitate and expedite development and review of new drugs as well as threshold criteria generally applicable to concluding that a drug is a candidate for these expedited development and review programs. In addition to the Fast Track, accelerated approval and priority review programs discussed above, the FDA also provided guidance on a new program for Breakthrough Therapy designation. A Breakthrough Therapy designation is intended to expedite the development and FDA review of drugs for serious or life-threatening conditions. A request for Breakthrough Therapy designation should be submitted concurrently with, or as an amendment to an IND. The FDA has already granted this designation to over 30 new drugs. We filed forIn 2014, brigatinib received a Breakthrough Therapy designation from the FDA for AP26113 inthe treatment of patients with ALK-positive NSCLC. DueNSCLC whose tumors are resistant to the relatively short follow-up of many of the ALK-positive patients treated with AP26113 at that time, our request was not granted by the FDA.crizotinib.

Risk Evaluation and Mitigation Strategy

The Food and Drug Administration Amendments Act of 2007, or FDAAA, created a new section of the FDCA which authorizes the FDA to require a risk evaluation and mitigation strategy, or REMS, when necessary to ensure that the benefits of a drug outweigh the risks. The FDA may require, among other things, that an applicant develop a Medication Guide for distribution to each patient when the drug is dispensed, a communication plan to health care providers, and other elements to insure safe use, or ETASUs. Medication Guides may be safety-related, addressing serious risk(s) (relative to benefits) of which patients should be made aware, and/or efficacy-related, when patient adherence to directions for use is crucial to the drug’s effectiveness. Since the enactment of FDAAA, the FDA has considered any new Medication Guide (or safety-related changes to an existing Medication Guide) to be part of a REMS. However, the FDA has the authority to determine, based on the risks of a drug and public health concern, whether a Medication Guide should be required as part of a REMS and may decide the Medication Guide should be required as labeling but not part of a REMS if the FDA determines that a REMS is not necessary to ensure the benefits of the drug outweigh its risks. Depending on the known or anticipated risks, the ETASU may require prescribers to have specific experience, or require pharmacies, practitioners or healthcare settings that dispense the drug to be specially certified and patients receiving the drug to be regularly monitored or enrolled in a registry. In addition, the drug’s sponsor may be required to take reasonable steps to monitor and evaluate those in the healthcare system responsible for implementing ETASU measures. All REMS include a timetable for assessments and may be modified as necessary.

As part of our discussions with the FDA in December 2013 to allow us to resume marketing and commercial distribution of Iclusig in the United States, we have implemented a REMS for Iclusig.

Orphan Drug Designation and Approval

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition which is defined as one affecting fewer than 200,000 individuals in the United States or more than 200,000 individuals where there is no reasonable expectation that the product development cost will be recovered from product sales in the United States. Orphan drug designation must be requested before submitting an NDA and does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If an orphan drug-designated product subsequently receives the first FDA approval for the disease for which it was designed, the product will be entitled to seven years of product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. In 2013, we received orphan drug exclusivity approval of Iclusig for the treatment of adult patients with chronic, accelerated or blast phase CML, who are resistant or intolerant to prior TKI therapy, and the treatment of adult patients with Ph+ ALL who are resistant or intolerant to prior TKI therapy. This seven year exclusivity period began on December 14, 2012, the date of approval of our NDA.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of Iclusig and our product candidates, someSome of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for extension must be made prior to expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply

We have applied for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, as described above under the caption “Our Intellectual Property”. We may apply for restorations of patent terms for our other patents depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.

Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.ingredient. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.effectiveness or perform that work itself.

Pediatric Exclusivity and Pediatric Use

Under the Best Pharmaceuticals for Children Act, or BPCA, certain drugs may obtain an additional six months of exclusivity, if the sponsor submits information requested in writing by the FDA, or a Written Request, relating to the use of the active moiety of the drug in children. The FDA may not issue a Written Request for studies on unapproved or approved indications or where it determines that information relating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce health benefits in that population.

To receive the six-month pediatric market exclusivity, we would have to receive a Written Request from the FDA, conduct the requested studies in accordance with a written agreement with the FDA or, if there is no written agreement, in accordance with commonly accepted scientific principles, and submit reports of the studies. A Written Request may include studies for indications that are not currently in the labeling

if the FDA determines that such information will benefit the public health. The FDA will accept the

reports upon its determination that the studies were conducted in accordance with and are responsive to the original Written Request or commonly accepted scientific principles, as appropriate, and that the reports comply with the FDA’s filing requirements. We have not received a Written Request for such pediatric studies, although we may ask the FDA to issue a Written Request for such studies in the future.

In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most drugs and biologicals, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applications and supplements thereto, must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must address the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. After April 2013, the FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, to keep a deferral current or to submit a request for approval of a pediatric formulation.

As part of the FDASIA, Congress made a few revisions to BPCA and PREA, which were slated to expire on September 30, 2012, and made both laws permanent.

Approval or Clearance of Medical Devices

The basic regulatory requirements that manufacturers of medical devices distributed in the United States must comply with are:

The FDA classifies medical devices into one of three classes based on the perceived level of associated risk. Regulatory control and related requirements increase from Class I to Class III. Before most new devices can be introduced, their manufacturers must obtain marketing clearance through either a premarket notification under Section 510(k) of the FDCA or approval of a PMA.

Drug-eluting stents are classified as Class III devices and must be the subject of an approved PMA before they may be marketed. A PMA must be supported by more detailed scientific evidence including clinical data to demonstrate the safety and efficacy of the device. If the device is determined to present a significant risk, the manufacturer must submit an investigational device exemption, or IDE, prior to commencing clinical trials. If the FDA approves the IDE and the institutional review boards, or IRBs, at the institution at which the clinical trials will be performed approve the clinical protocol and related materials, clinical trials may begin. Upon completion of the clinical trials, and assuming that the results indicate that the product is safe and effective for its intended purpose, the sponsor will then submit a PMA.

PMA approval requires, among other things, the submission of valid scientific evidence in the form of preclinical and clinical data, and a preapproval inspection to determine if the manufacturing facility complies with quality systems/current good manufacturing practices, or QS/cGMP, under the regulation that governs the design and all elements of the manufacture, control and documentation of devices.

Post-Approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. Since October 2013, Iclusig has been subject to these types of post-approval restrictions and requirements, as described above under the caption “Iclusig (ponatinib)”

Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things:

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMP and other laws.

We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantitiessupplies of our products. Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.

Foreign Regulation

In addition to regulations in the United States, we are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is compulsory for medicines produced by biotechnology or those medicines intended to treat AIDS, cancer, neurodegenerative disorders or diabetes and optional for those medicines which are highly innovative, provides for the grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessments report, each member state must decide whether to recognize approval. If a member state does not recognize the marketing authorization, the disputed points are eventually referred to the European Commission, whose decision is binding on all member states.

As in the United States, the EMA may grant orphan drug status for specific indications if the request is made before an MAA is made. The EMA considers an orphan medicinal product to be one that affects less than five of every 10,000 people in the European Union. A company whose application for orphan drug designation in the European Union is approved is eligible to receive, among other benefits, regulatory assistance in preparing the marketing application, protocol assistance and reduced application fees. Orphan drugs in the European Union also enjoy economic and marketing benefits, including up to ten years of market exclusivity for the approved indication, unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan designated product.

ATU

In 2012, the French Health Products Safety Agency, or Afssaps, granted us an Autorisation Temporaire d’Utilisation, or Temporary Authorization for Use, or ATU, for Iclusig in France for the treatment of patients with CML and Ph+ ALL under a nominative program on a patient-by-patient basis. Under an ATU, the Afssaps allows the use of a drug in France before marketing approval has been obtained in France in order to treat serious or rare diseases for which no other treatment is available in that country. Afssaps will only grant an ATU where the benefit of the product outweighs the risk. An ATU is granted for one year and may be renewed. An ATU may be modified, suspended, or withdrawn for reasons of public health or if the conditions under which the ATU was granted are no longer met. The ATU for Iclusig automatically concluded on September 30, 2013, three months following the grant of marketing authorization of Iclusig by the EC. We continue to distribute Iclusig to patients in France under regulatory provisions that allow such use prior to pricing and reimbursement approval.

Reimbursement

Sales of Iclusig and any of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. These third-party payors are increasingly challenging the prices charged for medicalhealth care products and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA,“MMA,” imposes requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries. Under Part

D (the Medicare prescription drug benefit), Medicare beneficiaries may enroll in prescription drug plans offered by private entities which willthat provide coverage of outpatient prescription drugs.drugs not covered under Medicare Part B (fee-for-service medical insurance). Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and eachdrugs. Each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However,Federal regulations require Part D prescription drug formularies mustto include drugs within each therapeutic category and class of covered Part D drugs, thoughalthough not necessarily all the drugs in each category or class. Government

In general, government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA or other Medicare regulations may result in a similar reduction in payments from non-governmental payors.

The American Recovery and Reinvestment Act of 2009 provides for funding for the federal government to compare the effectiveness of different treatments for the same illness. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, such a result is a likely outcome of the law and thus it is unclear what if any effect the research will have on the sales of our product candidates, if any such product or the condition that it is intended to treat is the subject of a study.

The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 collectively,(collectively, the Affordable Care Act or ACA,“ACA,”) was enacted in March 2010 are expected to haveand has had a significant impact on the health care industry. The ACA is expected to expandmandated prescription drug coverage as one of ten essential health benefits that most health plans must offer, requiring coverage of at least one drug in every category and class. The ACA also expanded coverage for the uninsured while atthrough the same time containnew health insurance exchanges and a significant increase in the number of individuals eligible for Medicaid coverage. The ACA also prevents health insurers from charging more, denying, or limiting coverage for individuals with pre-existing conditions (i.e. individuals whose health care costs are typically higher).

Because of the significant increase in the number of individuals covered and the expansion of the coverage that must be provided to them, commercial insurers and government programs have increased their emphasis on cost controls to reduce overall healthcare costs. With regard to pharmaceutical products, among other things,spending. For example, the ACA is expected to expandexpanded and increaseincreased mandatory industry rebates for drugs covered under Medicaid. Pharmaceutical manufacturers are required to provide drug rebates to the federal government and most state governments in order to have the product eligible for Medicaid programs and makecoverage. In addition, commercial insurers offering Medicaid managed care products seek to negotiate additional rebates. The ACA also made changes to the drug coverage requirements under the Medicare Part D program. We cannot predictAlthough the changes have not yet been enacted, the Center for Medicine Services, or CMS, has proposed decreasing the number of categories and classes of drugs Part D plan sponsors must cover. Because of these cost controls, it is hard to determine what impact of ACAthe ACA’s expansion in coverage might have on pharmaceutical companies as many of the ACA reforms require the promulgation of detailed regulations implementing the statutory provisions which are currently being drafted. In addition, although the United States Supreme Court recently upheld the constitutionality of most of the ACA, some states have indicated that they intend to not implement certain sections of the ACA, and some members of the U.S. Congress are still working to repeal the ACA. These challenges add to the uncertainty of the legislative changes enacted as part of ACA.companies.

We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls and limit the growth of healthcarehealth care costs, including the cost of prescription drugs.drugs, while at the same time increasing access to health care services. At the present time, Medicare is prohibited from negotiating directly with pharmaceutical companies for drugs. TheThere have been legislative proposals seeking to allow such direct negotiation. It is possible that the adoption of other legislative or regulatory proposals could have a material adverse effect on our business, financial condition and profitability.results of operations.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the

medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the United States and generally tend to be significantly lower.

Other United States Regulations

Pharmaceutical companies also are subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws, and the reporting of payments to physicians and teaching hospitals.

Anti-Kickback Laws

U.S. federal laws prohibit fraud and abuse involving state and federal health care programs, such as Medicare and Medicaid. These laws are interpreted broadly and enforced aggressively by various state and federal agencies, including the Centers for Medicare & Medicaid Services, or CMS, the Department of Justice, the Office of Inspector General for the Department of Health and Human Services and various state agencies. TheseThe anti-kickback laws prohibit,law prohibits, among other things, knowingly and willfully offering, paying, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program. Remuneration is broadly defined to include anything of value, such as cash payments, gifts or gift certificates, discounts, or the furnishing of services, supplies or equipment. TheMany states have implemented their own health care anti-kickback laws, regulating similar conduct as the federal anti-kickback law. State anti-kickback laws can extend more broadly to services covered by private insurers or third party payors, as well as government payors. Anti-kickback laws are broad and prohibit many arrangements and practices that are lawful in businesses outside of the health care industry.

The penalties for violating the anti-kickback lawslaw can be severe. The sanctions include criminal and civil penalties, and possible exclusion from the federal health care programs. Many states have adopted laws similar to the federal anti-kickback laws, and some apply to items and services reimbursable by any payor, including third-party payors.

State and Federal Prohibitions on False Claims

The federal False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government. Under the False Claims Act, a person acts knowingly if he has actual knowledge of the information or acts in deliberate ignorance or in reckless disregard of the truth or falsity of the information. Specific intent to defraud is not required. Provisions of the False Claims Act allow a private individual to bring an action on behalf of the federal government and to share in any amounts paid by the defendant to the government in connection with the action. The number of filings under these provisions has increased significantly in recent years. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each false claim. Conduct that violates the False Claims Act may also lead to exclusion from the federal health care programs. Given the number of claims likely to be at issue, potential damages under the False Claims Act for even a single inappropriate arrangement could be significant. In addition, various states have enacted similar laws modeled after the False Claims Act that apply to items and services reimbursed under Medicaid and other state health care programs, and, in several states, such laws apply to claims submitted to all payors.

Federal Prohibitions on Health Care Fraud and False Statements Related to Health Care MattersHIPAA

Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and state laws, there are numerous regulations for protecting the privacy and security of protected health information. Additional administrative simplification provisions created the following new federal crimes: health care fraud, false statements relating to health care matters, theft or embezzlement in connection with a health benefit program and obstruction of criminal investigation of

health care offenses. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including a private insurer. The false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for health care benefits, items, or services. The theft or embezzlement statute prohibits knowingly and willfully

embezzling, stealing or otherwise converting or misapplying the money or property of a health care benefit program. The obstruction of criminal investigations of health care offenses statute prohibits willfully preventing, obstructing, misleading or delaying the communication of information and records relating to a violation of a federal health care offense to a criminal investigator. A violation of any of these laws is a felony and may result in fines, or exclusion from the federal health care programs.

HIPAA’s privacy and security regulations apply to “covered entities” or health care providers, health plans and health care clearinghouses and limit the permissible uses and disclosures of individually identifiable health information, also called “protected health information” or “PHI.” Amendments to HIPAA under the Health Information Technology for Economic and Clinical Health Act, or “HITECH,” require notification to the government and affected individuals of certain breaches of PHI that has not been secured in accordance with federal standards, such as encrypted. HIPAA does not directly regulate us, but it does limit the types of communications and data sharing that health care providers and plans may engage in with us. HITECH created liability for third parties in possession of PHI in violation of HIPAA, so we must ensure that our own uses or disclosures and requests for PHI are compliant. Penalties for HIPAA violations include fines, civil monetary penalties, criminal prosecution and imprisonment as well as significant reputational damage for reported breaches.

State Privacy and Data Security Laws

State laws governing the privacy and security of health and other personal information apply along with HIPAA and impose additional compliance obligations as well as breach notification requirements. Unlike HIPAA, state privacy and data security laws apply more broadly. In particular, state data security laws apply to any organization maintaining personal information, such as employee information. There is significant variability among state privacy and data security laws, and these laws are rapidly evolving. They typically apply based on the residence of the subject of the information, which means that multiple state laws and compliance requirements may be implicated at any given time. Failure to comply with these laws and an ensuing breach may lead to litigation, including class action lawsuits, fines, civil penalties and reputational damage.

The Physician Payment Sunshine Act

The Physician Payment Sunshine Act, or Sunshine Act, which was enacted as part of ACA, requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare Medicaid or the Children’s Health Insurance Program,and other programs to report annually to the Secretary of the Department of Health and Human Services payments or other transfers of value made by that entity, or by a third party as directed by that entity, to physicians and teaching hospitals, or to third parties on behalf of physicians or teaching hospitals, during the course of the preceding calendar year. The Final Rule implementing the Sunshine Act, published on February 8, 2013, requires data collection on payments to begin on August 1, 2013. The first annual report, comprised of data collected from August 1, 2013 to December 31, 2013, is due March 31, 2014. Failure to comply with the reporting requirements can result in significant civil monetary penalties ranging from $1,000 to $10,000 for each payment or other transfer of value that is not reported (up to a maximum per annual report of $150,000) and from $10,000 to $100,000 for each knowing failure to report (up to a maximum per annual report of $1 million).penalties. We are required to collect data on these payments and report such payments.

The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. In many countries, the health care professionals we regularly interact with may meet the definition of a foreign government official for purposes of the Foreign Corrupt Practices Act.

Financial Information and Significant Customers

Financial information about (i) our net product revenues and other revenues generated in the principal geographic regions in which we operate and our significant customers is set forth in Note 1, “Segment Reporting and Geographical Information” and “Concentration of Credit Risk,” to our consolidated financial statements included in this Annual Report on Form 10-K, (ii) net loss per share attributable to ARIAD common shareholders and our total assets are provided in our consolidated financial statements included in this Annual Report on Form 10-K and (iii) our research and development expenses in each of the last three fiscal years is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” A discussion of the risks attendant to our international operations is set forth in the “Risk Factors” section of this Annual Report on Form 10-K.

Our Employees

As of December 31, 2013,2014, we had 307379 employees, of whom more than half heldpost-graduate professional, medical or science degrees. Of these employees, 227264 were based in the United States and 80115 were based in Europe. During 2013, we hired new employees across the Company to support the commercial launch of Iclusig in the United States and Europe and expanded research and development activities. In November 2013, we eliminated approximately 155 positions in the United States as a consequence of the temporary suspension of marketing and commercial distribution of Iclusig in the United States. In January 2014, in connection with the resumption of marketing and commercial distribution of Iclusig in the United States, we began to hire additional personnel necessary to support commercial activities in the United States. We also expect to hire additional personnel in 2014 in Europe to support the expanding marketing and distribution of Iclusig in selected countries throughout Europe. We have entered into confidentiality, assignment of inventions and non-disclosure agreements with all of our employees and non-competition agreements with all of our senior level employees. None of our employees are covered by a collective bargaining agreement, and we consider relations with our employees to be good.

Our Company

ARIAD was organized as a Delaware corporation in April 1991. Our principal executive offices are located at 26 Landsdowne Street, Cambridge, Massachusetts 02139-4234, and our telephone number is (617) 494-0400.

Information Available on the Internet

We maintain an internet website at http://www.ariad.com, the contents of which are not incorporated herein. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and all amendments to such reports are made available free of charge through www.sec.gov and the Investor Relations section of our website as soon as reasonably practicable after they have been electronically filed with or furnished to the United States Securities and Exchange Commission, or SEC.

Trademarks

ARIAD, the ARIAD logo and Iclusig are our registered trademarks. ARGENT is our trademark. Other service marks, trademarks and trade names appearing in this report are the property of their respective owners.

ITEM 1A: RISK FACTORS

THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE MAY MATERIALLY AFFECT OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THEY MAY MATERIALLY HARM OUR BUSINESS, OUR FINANCIAL CONDITION AND OUR RESULTS OF OPERATIONS.

Risks relating to the development and commercialization of our products and product candidates

We depend heavily on the commercial success of our first newonly approved cancer medicine, Iclusig^® (ponatinib), which was approved for sale in the United States in December 2012 and the European Union in July 2013. Marketing and commercial distribution of Iclusig was temporarily suspended in the United States during the fourth quarter of 2013 as a result of safety concerns. Marketing and commercial distribution of Iclusig resumed in January 2014 with revised prescribing information and an updated boxed warning.. If we do not achieve commercial success with Iclusig, our business, results of operations and financial condition will suffer, and we will be dependent on the success of our other product candidates.

We obtained accelerated approval from the U.S. Food and Drug Administration, or FDA, onin December 14, 2012, to sell our first new cancer medicine, Iclusig, for the treatment of adult patients with chronic, accelerated or blast phase chronic myeloid leukemia (CML) that is resistant or intolerant to prior tyrosine kinase inhibitor (TKI) therapy or Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL) that is resistant or intolerant to prior TKI therapy. When Iclusig was approved by the FDA, its United States prescribing information, or USPI, included a boxed warning concerning arterial thrombosis, hepatotoxicity and other precautions. We commenced sales and marketing of Iclusig in the United States in January 2013.

In October 2013, we suspended marketing and commercial distribution of Iclusig in the United States based on the FDA’s concerns about updated safety data from the pivotal PACE trial of Iclusig. In addition, our clinical trials for Iclusig were placed on partial clinical hold and we discontinued our Phase 3 EPIC trial of Iclusig in adult patients with newly diagnosed CML in the chronic phase. In December 2013, the FDA approved revised USPI, a risk evaluation and mitigation strategy, and a revised box warning, allowing us to resume marketing and commercial distribution, which we commenced in January 2014. Iclusig is now indicated for adult patients with T315I-positive CML (chronic phase, accelerated phase, or blast phase) or T315I-positive Ph+ ALL, and chronic phase, accelerated phase, or blast phase CML or Ph+ ALL for whom no other TKI therapy is indicated.

Iclusig has also been approved for marketing and commercial distribution in the European Union. On July 2, 2013, we announced that the European Commission had granted marketing authorization for Iclusig in the European Union, and we commenced sales efforts in certain European countries in 2013. In Novemberfrom late 2013 through 2014, was subject to review by the European Medicines Agency, or EMA, announced the continued availability of Iclusig for certain adult patients with CML and Ph+ ALL with revised authorized indications and recommendations on measures to reduce safety risk, including the risk of occlusive vascular events. In addition, the EMA has commenced an in-depth review of the benefits and risks of Iclusig to better understand the nature, frequency and we expectseverity of events obstructing the results of thisarteries or veins, the potential mechanism that leads to these side effects and whether there needed to be a revision in the dosing recommendation, patient monitoring and a risk management plan for Iclusig. This review was completed in mid-2014.January 2015, with additional warnings in the product information but without any change in the approved indications.

Prior to the approval of Iclusig, we had not marketed a therapeutic product. We had no significant revenues from product sales in 2012, and $45.2 million in revenues from product sales in 2013.2013 and $55.7 million in revenues from product sales in 2014. We expect that a majority of our total revenues in the next several years will be attributable to sales of Iclusig. We cannot be certain that Iclusig will be commercially successful. In addition to the other challenges related to a company launching its first commercial drug, we have faced the challenges of having Iclusig removed from the market in the United States in the fourth quarter of 2013 and re-launching the drug in the first quarter of 2014 with revised prescribing information that reduces the addressable patient population and an updated box warning. In addition, we face intense competition from other TKIs that are currently approved for the treatment of patients with CML, such as nilotinib marketed by Novartis, dasatinib marketed by Bristol-Myers Squibb, bosutinib marketed by Pfizer and omacetaxine mepesuccinate

marketed by Teva Pharmaceutical Industries. Moreover, the FDA, EMA or other regulatory authorities could take additional actions in the future that could further reduce the commercial potential of Iclusig. If we do not achieve commercial success with Iclusig, our business, results of operations and financial condition will suffer, and we will be dependent on the success of our other product candidates.

The commercial success of Iclusig depends on numerous factors, some of which are outside our control. If one or more of these factors negatively affects sales of Iclusig, our business, results of operations and financial condition will be materially harmed.

Our future sales of Iclusig depend on numerous factors, including:

While we believe that Iclusig is an important medicine for patients with resistant or intolerant Philadelphia-positive leukemias, our current estimates of the net revenues that Iclusig couldmay generate in future periods have changed as a result of our announcements in the fourth quarter of 2013 concerning the safety, marketing and commercial distribution and further clinical development of Iclusig in the United States and may change further based upon the above factors, and could be wrong.lower than expected. If our revenues, market share and/or other indicators of market acceptance for Iclusig do not meet the expectations of investors or public market analysts, the market price of our common stock would likely decline, as occurred in October 2013, when our stock price declined by 87%, from $17.14 per share before our announcements to a low of

$2.15 per share following the announcements.decline. In addition, if one or more of the factors above negatively affects sales of Iclusig, our business, results of operations and financial condition will be materially harmed.

We have never marketed a drug prior to Iclusig, and if we are unable to maintain an effective and specialized sales force and marketing infrastructure, we will not be able to commercialize Iclusig successfully.

In order to successfully commercialize Iclusig, we have built a marketing organization and a specialized sales force for Iclusig and commenced marketing and commercial distribution of Iclusig in the United States in January 2013. In addition, in Europe, we have established operations with headquarters in Switzerland and have commenced sales efforts in certain European countries. However, in November 2013, we implemented a significant reduction in workforce, amounting to approximately 40% of our employees in the United States, including commercial sales force positions and other commercial positions in the United States, following the suspension of marketing and commercial distribution of Iclusig in the United States. As we begin to resume these activities, we have recruited and hired additional personnel to commercialize Iclusig in the United States.

Europe. Factors that may hinder our ability to successfully market and commercially distribute Iclusig include:

If we are unable to rebuildmaintain our sales force and marketing capability for Iclusig in the United States and further build and sustain our sales force for Iclusig in the European Union, we may not be able to generate sufficient product revenue, may generate increased expenses and may never become profitable.

We will need to continue to expend significant time and resources to train our Iclusig sales forces in the United States and the European Union to be credible, persuasive and compliant in discussing Iclusig with the specialists treating the patients indicated under the product’s label. We will also need to continue to train our sales force to ensure that a consistent and appropriate message about Iclusig is being delivered to our potential customers, including new information in response to the developments that we announced in the fourth quarter of 2013. In addition, if we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate potential customers about the benefits and risks of Iclusig and its proper administration, our ability to successfully commercialize Iclusig could be diminished, which would have a material adverse effect on our business, results of operations and financial condition.

If Iclusig and any of our product candidates are not accepted by patients, physicians and third-party payors, we will not be successful.

Our success is dependent on the commercial acceptance of Iclusig and any of our other product candidates that may be approved. Iclusig and any other approved product candidates may not achieve market acceptance among patients, physicians or third-party payors, even if we have obtained necessary regulatory and any applicable pricing and reimbursement approvals. Physicians and health care payors may conclude that Iclusig or our product candidates are not as safe and/or effective as competing therapies or are not as attractive based on a cost and risk/benefit analysis as alternative treatments. For example, physicians may elect not to prescribe our drugs, and patients may elect not to request or take them for a variety of reasons, including lower demonstrated or perceived clinical safety and efficacy compared to other drugs; prevalence and severity of adverse events or other side effects; lack of cost-effectiveness; lack of reimbursement availability from third-party payors; a decision to wait for the approval of other therapies that are believed to have significant advantages over our drugs and drug candidates; convenience and ease of administration; other potential advantages of alternative treatment methods; or ineffective marketing and distribution support. We expect that the revised prescribing information for Iclusig and our announcements in the fourth quarter of 2013 concerning Iclusig’s safety, marketing and commercial distribution may cause physicians and other health care providers to reduce the recommended use of Iclusig.

We believe that recommendations by physicians and acceptance by health care payors will be essential for market acceptance of Iclusig and our product candidates. If Iclusig fails to achieve market acceptance, or our product candidates are approved and fail to achieve market acceptance, we will not be able to generate revenues sufficient to be successful.

Competing drugs or technologies may render some or all of our products or future products noncompetitive or obsolete.

Many well-known pharmaceutical healthcare and biotechnology companies, which have substantially greater capital, research and development capabilities and experience than us, are presently engaged in one or more of the following activities:

Some of these entities already have competitive products on the market or product candidates in clinical trials or in more advanced preclinical studies than we do. Many of these entities also have substantially greater research, development, manufacturing and marketing resources and experience than us.

For example, Iclusig currently competes with existing therapies that are approved for the treatment of patients with CML who are resistant or intolerant to prior TKI therapies, such as nilotinib marketed by Novartis, dasatinib marketed by Bristol-Myers Squibb, bosutinib marketed by Pfizer and omacetaxine mepesuccinate marketed by Teva Pharmaceutical Industries. BasedAt this time, based on the revised USPI for Iclusig approved by the FDA in December 2013, Iclusig may only be promoted for treatment of adult patients with T315I-positive CML and Ph+ ALL and patients for whom no other TKI therapy is indicated, which we expect will result in lowerlimits the addressable patient population and therefore revenues that can be generated from sales of Iclusigthe drug.

In addition, Pfizer, Novartis and Roche/Chugai have launched ALK inhibitors that will compete with brigatinib should it gain marketing approval. Tesaro, Ignyta and Xcovery also have ALK inhibitors in future periods than we initially anticipated when the drug was approved in December 2012.development and Pfizer is developing a follow-on compound to its currently marketed product, crizotinib.

Competing drugs or technologies may render some or all of our products or future products noncompetitive or obsolete, and we may not be able to make the enhancements to our products necessary to compete successfully with newly emerging drug products. Competing products on the market or in development may also lead us and our collaborators to revise or cease development of our product candidates in one or more indications for commercial reasons, even where clinical data may be promising. If we are unable to successfully compete in our chosen markets, we will not become profitable.

In order to execute our business plan and achieve the full commercial potential of Iclusig, we intendwill need to seekobtain regulatory approval to commercialize Iclusig outside of the United Statesin additional markets and the European Union and to seek approval ofin additional therapeutic indications and lines of therapy. If we are not successful in these efforts, our business, results of operations and financial condition could be materially harmed.

Based on sales of existing TKIs for the treatment of CML, we believe that there are commercial opportunities for the use of Iclusig globally in additional therapeutic indications and in additional lines of therapy, and we are pursuing these opportunities. We have filed marking authorization applications forIn December 2014, we entered into a co-development and commercialization agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, under which Otsuka has exclusive rights to commercialize Iclusig in Switzerland (which was approvedJapan and nine other Asian countries and to fund future clinical trials in February 2014), Canada and Australia and planthose countries. We expect to file for marketing authorizationapproval in Japan in 2015. In Australia, we obtained marketing approval for Iclusig with regulatory authorities in Japan. However,November 2014 and will distribute Iclusig through a third party distributor that covers Australia and New Zealand. In addition, we are in discussions with the regulatory authorities regarding our announcements in the fourth quarter of 2013 concerning the safety of Iclusig, which could delay, limit or even potentially prevent thehave filed for marketing approval of Iclusig in these countries.Canada and Israel.

We also believe thatIn addition, Iclusig has potential applications beyondis being studied in various investigator-sponsored trials in settings including first line and second line CML, in other blood cancers and solid tumors, such as gastrointestinal stromal tumors, or GIST, acute myeloid leukemia, and certain forms ofor AML, non-small cell lung cancer, or NSCLC. In June 2013, we announced the initiation of a Phase 2 open-label, multicenter trial to evaluate the efficacyNSCLC, and safety of Iclusigmedullary thyroid cancer, or MTC. We expect that additional investigator-sponsored clinical trials will be initiated in adult patients with metastatic and/or unresectable GIST, following failure of prior TKI therapy. However, this trial remains on partial clinical hold following our announcements2015 in the fourth quarter of 2013 regarding additional safety data.

various indications. If we are not successful in obtaining regulatory approval of Iclusig in additional foreign countries and in additional indications and lines of therapy, our business, results of operations and financial condition could be materially harmed.

We may not succeed in developing, receivingobtaining regulatory approval and generating product revenues from our product candidate AP26113brigatinib (AP26113) or any other product candidates,candidate, which would materially harm our business, results of operations and financial condition.

As with all scientific endeavors, we face much trial and error, and we and our collaborators may fail at numerous stages along the way, which could prevent us and our collaborators from successfully developing, obtaining approval for and marketing our product candidate AP26113brigatinib (AP26113) and any

other product candidates.candidate. Factors that could affect the timing and the ability to obtain additional regulatory approvals and to achieve market acceptance and gain market share for AP26113brigatinib and any other product candidatescandidate include, among others:

We may not receive regulatory approvals within the timeframes we anticipate, or at all, and ultimately we may not succeed in developing or commercializing additional products which will generate revenues for our company. If we are not successful in developing our product candidates, obtaining regulatory approvals and marketing any approved products, our business, results of operations and financial condition will be materially harmed.

Positive results from earlier stage clinical trials may not be replicated in later-stage clinical trials, increased adverse events or safety issues could arise, or regulatory authorities may conclude that clinical data from later-stage clinical trials are not sufficient to support approval or that data from post-approval clinical trials are not sufficient to support broader use of drugs after approval. Regulatory authorities may require changes in the permitted usage of any approved products.

A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials or following regulatory approval even after achieving promising results in earlier-stage development. Accordingly, the results to date from preclinical studies and clinical trials for Iclusig and AP26113brigatinib may not be predictive of the results to be obtained from ongoing or future clinical trials. In addition, regulatory authorities may conclude that data generated from later-stage clinical trials are not sufficient to support approval, or that data obtained following approval may require changes to be made in the permitted usage of any approved products. For example, although we were able to obtain accelerated approval for Iclusig on the basis of data from our pivotal Phase 2 PACE trial without conducting a Phase 3 trial, and we believe that similar prospects for regulatory approval exist for AP26113,brigatinib, we may be required to conduct more clinical trials for AP26113brigatinib than we currently anticipate. Moreover, we announced in October 2013 updated data from the PACE trial, in which it was observed that with a median follow up of 24 months, serious arterial thrombosis occurred in 11.8%11.8 percent of Iclusig-treated patients, compared to 8%8 percent after 11 months of follow-up reflected in the then-current USPI. Based on this and other follow-up data, we suspended marketing and commercial distribution of Iclusig was suspended in October 2013 and, following discussions with the FDA, waswe were permitted to resume in December 2013 with revised prescribing information and a revised boxed warning. The updated prescribing information for Iclusigwarning that reduces the addressable patient population for whom Iclusig is indicated, which we expect will negatively impact future revenues associated with Iclusig compared to revenues anticipated based on the label that was initially approved in December 2012.indicated.

If positive results from earlier stage trials are not replicated in later-stage trials, if increased adverse events or safety issues arise, if we or our collaborators are required to conduct additional clinical trials or other testing of our product candidates beyond those currently contemplated, or if the permitted usage of Iclusig or any of our other product candidates that are approved is constrained or withdrawn by the FDA or other regulatory authorities, we or our collaborators may be delayed in obtaining, or may not be able to obtain or maintain, marketing approval for these products, and we may lose the opportunity to generate

product revenues or to earn additional development or regulatory milestones or royalties. Furthermore, potential competitive commercial factors and our resources may influence future decisions and directions by us or our collaborators on which clinical indications to pursue and when.

Risks relating to our financial position and capital requirements

We have incurred significant losses to date and may never be profitable.

We have incurred significant losses since our formation in 1991, and had an accumulated deficit of $1.1$1.2 billion at December 31, 2013.2014. Our losses have resulted principally from costs incurred in research and development of Iclusig and our product candidates, AP26113 and ridaforolimus (prior to our license agreement with Merck), from our discovery research activities and from general and administrative costs, including costs incurred to prosecute and protect our intellectual property. In addition, we have incurred

significant expenses in building a commercial organization to market, sell and distribute Iclusig and our other products upon potential regulatory approval in the United States, Europe and other select markets, worldwide. It is likely that we will incur significant operating losses for the foreseeable future, as we continue our research, development and development activities and re-build our sales and marketing organization to market Iclusig and in anticipation of obtaining regulatory approval to market AP26113, which approval may never occur.commercialization activities. If our losses continue and we and our existing collaborators or potential future collaborators are unable to successfully develop, commercialize, manufacture and market Iclusig, AP26113,brigatinib, ridaforolimus and any other product candidates and/or we are unable to enter into additional collaboration agreements or licenses for our intellectual property, we may never generate sufficient revenues to achieve profitability. Even if we and our collaborators are able to commercialize products and we are able to enter into collaboration agreements or licenses in the future, we may never generate sufficient revenues to have profitable operations.be profitable.

Insufficient funding may jeopardize our research and development programs and may require us to reduce our operations or prevent commercialization of our products and technologies.

We have fundedfinanced our operations and investments to date primarily through sales of equity securitiesour common stock and to a lesser extent, by the incurrence of debt from commercial lenders,convertible notes in public and private offerings, through the receipt of upfront and milestone payments from Merck since July 2007,collaborations and product revenues generatedlicenses with pharmaceutical and biotechnology companies and, to a lesser extent, through issuances of our common stock pursuant to our equity incentive and employee stock purchase plans, supplemented by the borrowing of long-term debt from commercial lenders. We sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. We seek to balance the level of cash, cash equivalents and marketable securities on hand with our projected needs and to allow us to withstand periods of uncertainty relative to the availability of funding on favorable terms.

With sales of Iclusig beginning in 2013.the United States from January through October 2013 and commencing again in January 2014, as well as sales in Europe since the second half of 2013, we have generated product revenues that have contributed to our cash flows. However, our cash flows generated from sales of Iclusig are not currently sufficient to fund operations and we will need to seek additional sources to fund our operations.

As of December 31, 2013,2014, we had cash and cash equivalents totaling $237.2$352.7 million. Of this amount, $15 million is maintained as minimum balance requirements related to our bank term loan and $17.1 million was in accounts held by our international subsidiaries. We expect that our cash and cash equivalents as of December 31, 20132014, together with estimated sales of Iclusig and funding we expect to receive from new collaborative agreements or strategic alliances, will be sufficient to fund our operations for the foreseeable future. The adequacy of our available funds to mid-2015. Wemeet our future operating and capital requirements will however, require substantial additionaldepend on many factors, including the amount of future revenue generated by Iclusig, our ability to enter into a partnership to co-develop and co-commercialize brigatinib and the amount of funding forgenerated from such partnership, the potential introduction of one or more of our other drug candidates to the market, and the number, breadth, cost and prospects of our research and development programs (including pre-clinical development and clinical trials), for the pursuitprograms. However, changes to our operating plan or assumptions, economic factors or strategic opportunities may require us to raise additional funds through one or more financings of regulatory approvals and for establishingequity or maintaining manufacturing, distribution, marketing and sales capabilities related to Iclusig, AP26113 and anydebt securities or other product candidates that may be approved. We will also require funding for our other operating expenses (including intellectual property protection and enforcement and litigation) as well as capital expenditures to maintain and improve our facilities, equipment and systems and provide for our business.transactions.

We mayhave from time to time accessaccessed funding by issuing common stock or other securities in private placements or public offerings. We are currently a “well-known seasoned issuer,” or WKSI, pursuant to rules of the U.S. Securities and Exchange Commission, or SEC, and have an active registration statement that allowswhich permits us to sell additionalfile registration statements for offerings of shares of our common stock and other securities.securities that are effective upon filing. We may also from time to time seek additional funding from technology licensing, or the issuance of debt or other structured funding alternatives. However, such additional funding may not be available at all, or on terms acceptable to us.

If we are not able to secure the significantadditional funding which isif or when required to maintainfund our operations or continue to fund current or futureincluding our research and development programs and commercialization activities at their current levels or at levels that may be required in the future, we may be required to reduce our operations or to delay, scale back, eliminate or terminate commercialization or further clinical development of Iclusig or clinical trials for one or more of our product candidates. In addition, we may be required to enter into licenses, settlements or other arrangements with third parties on terms that may be unfavorable to us or to sell, license or relinquish rights to develop or commercialize our product candidates, approved products, technologies or intellectual property.

Our ability to use net operating loss and tax credit carryforwards to offset future taxable income may be limited in the future if we do not have sufficient taxable income or due to ownership changes that have occurred or may occur in the future.

As of December 31, 2013,2014, we had tax assets, including net operating loss carryforwards, or NOLs, of $498.7$562.1 million in the United States and $122.0$194.9 million in foreign territories and U.S. federal research tax credits of $25.9$28.9 million, which could be used in certain circumstances to offset our future taxable income or

otherwise payable taxes and therefore reduce our federal and state income tax liabilities. Based on current income tax rates, if fully utilized, our NOLs and other carryforwards could provide a benefit to us of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon our ability to comply with the rules relating to the preservation and use of NOLs and the amount of our otherwise taxable income. If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOLs permanently. Consequently, our ability to use the tax benefits associated with our NOLs will depend significantly on our success in generating income from Iclusig and any other product candidates that may be approved.

Additionally, if we undergo an ownership change, the NOLs and tax credit carryforwards would be subject to an annual limit on the amount of the taxable income that may be offset by our NOLs generated prior to the ownership change, and we may be unable to use a significant portion or all of our NOLs to offset taxable income. In general, under Sections 382 and 383Our common stock is very actively traded on a daily basis. As a result of the Internal Revenue Codehigh trading volume, there may be a shift of 1986, as amended, or the Internal Revenue Code, a corporationownership among certain of our stockholders that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain other tax assets to offset future taxable income. In general,could result in an ownership change, occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years). An ownership changewhich could limit our ability to utilize our NOL and tax credit carryforwards for taxable years including or following such “ownership change”. Since our October 2013 announcements concerning the safety, marketing and commercial distribution and further clinical development of Iclusig in the United States, there has been an extremely high volume of trading of our stock, and a significant drop in the value of our stock. As a result of the high trading volume, there may be a shift of ownership amongst certain of our stockholders that could result in an ownership change, under Section 382applicable section of the Internal Revenue Code. Limitations imposed on the ability to use NOLs and tax credits to offset future taxable income could require us to pay U.S. federal income taxes earlier than would otherwise be required if such limitations were not in effect and could cause such NOLs and tax credits to expire unused, in each case reducing or eliminating the benefit of such NOLs and tax credits. Similar rules and limitations may apply for state income tax purposes. We have adopted a shareholder rights plan in the form of a Section 382 Rights Plan with the intention of reducing the likelihood of an ownership change. However, we have granted exemptions under the plan in limited circumstances and cannot be sure that these measuresthe plan will be effective in deterring or preventing such an ownership change. The plan was approved by our stockholders in June 2014, expires in October 2016 and may not be amended to extend the expiration date.

Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

We may seek to raise the additional capital necessary to fund our operations through public or private equity offerings, debt financings, and collaboration and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect our stockholders’ rights or, in the case of debt securities, require us to pay interest that would reduce our cash flows from operations or comply with certain covenants that could restrict our operations. If we raise additional funds through collaboration and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

Forecasting sales of Iclusig may be difficult and revenue recognition may be deferred. If our revenue projections are inaccurate or revenue is deferred, our business may be harmed and our future prospects may be adversely affected.

Our sales of Iclusig may notcan be adopted rapidly, or at all, by physicians.difficult to forecast. Factors that can affect the rate of adoption and that can increase the difficulty of forecasting sales of Iclusig include the following:

The extent to which any of these or other factors individually or in the aggregate may impact future sales of Iclusig is uncertain and difficult to predict. Our management must make forecasting decisions regarding future revenue in the course of business planning despite this uncertainty, and actual results of operations may deviate materially from projected results. This may lead to inefficiencies and increased difficulties in operational planning. If our revenues from Iclusig sales are lower than we anticipate or revenue is deferred, we will incur costs in the short term that will result in losses that are unavoidable. A shortfall in our revenue would have a direct impact on our cash flow and on our business generally. In addition, fluctuations in our quarterly results can adversely and significantly affect the market price of our common stock.

Our financial results depend onare impacted by management’s selection of accounting methods and certain assumptions and estimates.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying

many of these accounting policies and methods so they comply with generally accepted accounting principles and reflect management’s judgment of the most appropriate manner to report our financial condition and results. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet may result in our reporting materially different results than would have been reported under a different alternative.

Certain accounting policies are critical to the presentation of our financial condition and results of operations. The preparation of our financial statements requires us to make significant estimates, assumptions and judgments that affect the amounts of assets, liabilities, revenues and expenses and related disclosures. Significant estimates that may be made by us include assumptions used in the determination of revenue recognition, accrued product development expenses, inventory, leased buildings under construction and stock-based compensation. Although we base our estimates and judgments on historical experience, our interpretation of existing accounting literature and on various other assumptions that we believe to be reasonable under the circumstances, if our assumptions prove to be materially incorrect, actual results may differ materially from these estimates.

Significant additional losses or insufficient funding may cause us to default on certain covenants of our loan documents.

At December 31, 2013, we had $9.1 million outstanding under a term loan agreement with a bank. Pursuant to this loan agreement, we are required to maintain certain financial and non-financial covenants, including minimum cash, cash equivalents and investments of $15 million, a default of any of which would allow the bank to demand payment of its loan. We currently have sufficient liquidity to fund payment of this loan if demand for payment were made. However, if we do not receive sufficient revenues from our collaborations and licenses or from any sales of our products, or if we are unable to raise adequate financing to fund continuing operations or otherwise to refinance our loan, we may not be able to maintain compliance with loan covenants, may be required to pay off the loan and may be required to reduce our spending on operations.

Risks relating to our reliance on third parties

We depend on third-party manufacturers, including sole source suppliers, to manufacture Iclusig and our product candidates and the materials we require for our clinical trials. We may not be able to maintain these relationships and could experience supply disruptions outside of our control.

We rely on a network of third-party manufacturers to manufacture and supply Iclusig for commercial sale and post-approval clinical trials, and our drug candidates for clinical trials and any commercial sales if they are approved. As a result of our reliance on these third-party manufacturers and suppliers, including sole source suppliers of certain components of Iclusig and our product candidates, we could be subject to significant supply disruptions. Our supply chain for sourcing raw materials and manufacturing drug product ready for distribution is a multi-step endeavor. Third-party contract manufacturers supply us with raw materials, and contract manufacturers in the United States convert these raw materials into drug substance and convert the drug substance into final dosage form. Establishing and managing this supply chain requires a significant financial commitment and the creation and maintenance of numerous third-party contractual relationships. Although we attempt to effectively manage the business relationships with companies in our supply chain, we do not have control over their operations.

We require a supply of Iclusig for sale in the United States, Europe and Europe,Australia and we will require a supply of Iclusig for sale in other markets if we obtain additional marketing approvals. We currently rely, and expect to continue to rely, on sole source third-party manufacturers to produce starting materials, drug substance, and final drug product, and to package and label Iclusig and our product candidates, until we enter into arrangements with additional or alternative suppliers. While we have identified and expect to qualify and engage back-up third-party manufacturers as additional or alternative suppliers for the commercial supply of Iclusig, we currently do not have such arrangements in place. Moreover, some of these alternative manufacturers will have to be approved by the FDA before we can use them for

manufacturing Iclusig. It is also possible that supplies of materials that cannot be second-sourced can be managed with inventory planning. There can be no assurance, however, that failure of any of our original sole source third party manufacturers to meet our commercial demands for Iclusig in a timely manner, or our failure to engage qualified additional or back-up suppliers for the commercial supply of Iclusig, would not have a material adverse effect on commercialization of Iclusig and our business.

Supply disruptions may result from a number of factors, including shortages in product raw materials, labor or technical difficulties, regulatory inspections or restrictions, shipping or customs delays or any other performance failure by any third-party manufacturer on which we rely. Any supply disruptions could disrupt sales of Iclusig and/or the timing of our clinical trials, which could have a material adverse impact on our business. Furthermore, we may be required to modify our production methods to permit us to economically manufacture our drugs for sale and our drug candidates for clinical trials. These modifications may require us to re-evaluate our resources and the resources of our third-party manufacturers, which could result in abrupt changes in our production methods and supplies.

In the course of providing its services, a contract manufacturer may develop process technology related to the manufacture of our products or drug candidates that the manufacturer owns, either independently or jointly with us. This would increase our reliance on that manufacturer or require us to obtain a license from that manufacturer in order to have Iclusig or our drug candidates manufactured by other suppliers utilizing the same process.

The failure of our third party manufacturers to meet our commercial demands for Iclusig in a timely manner, or our failure to engage qualified additional or back-up suppliers for the commercial supply of Iclusig, would have a material adverse effect on our business, results of operations and financial position.

We rely on a solesingle specialty pharmacy for distribution of Iclusig in the United States, and the loss of that specialty pharmacy or its failure to distribute Iclusig effectively would adversely affect sales of Iclusig.

In January 2014 we announced that Biologics, Inc. will serve as the soleWe rely on a single specialty pharmacy for distribution of Iclusig in the United States. A specialty pharmacy is a pharmacy that specializes in the dispensing of medications for complex or chronic conditions, which often require a high level of patient education and ongoing management. The use of specialty pharmacies involves certain risks, including, but not limited to, risks that these specialty pharmacies will:

In addition, our agreement with Biologicsthe specialty pharmacy may be terminated by either party on 30 days’ notice. If our solesingle specialty pharmacy does not fulfill its contractual obligations to us, or refuses or fails to adequately serve patients, or the agreement is terminated without adequate notice, shipments of Iclusig, and associated revenues, would be adversely affected. In addition, we expect that it may take a significant amount of time if we were required to change our specialty pharmacy.

We have limited experience in conducting clinical trials and are dependent upon the ability of third parties, including contract research organizations, collaborative academic groups, clinical trial sites and investigators, to conduct or to assist us in conducting clinical trials for our product candidates.

Notwithstanding our successful development of Iclusig to date, we have limited experience compared to many other biopharmaceutical companies in designing, initiating, conducting and monitoring the clinical trials necessary to obtain regulatory approval of our product candidates. We are currently conducting clinical trials of Iclusig and of AP26113.brigatinib. We are dependent upon our ability and/or the ability of our collaborators, licensees, contract research organizations, clinical trial sites and investigators to successfully design, initiate, conduct and monitor clinical trials. Failure by us or any of these parties to timely and

effectively initiate, conduct and monitor our clinical trials could significantly delay or materially impair our ability to complete clinical trials and/or obtain regulatory approval of our product candidates and, consequently, could delay or materially impair our ability to generate revenues from them.

If any collaborator or licensee terminates its agreement with us or fails to perform its obligations under its agreement with us, or fails to comply with applicable law, the development and commercialization of our product candidates could be delayed or terminated.

Our current or future collaborations and licenses may not result in product candidates that are scientifically or commercially successful or result in the development or commercialization of any product candidates. In addition, disputes may arise in the future with respect to the ownership of rights to technology or product candidates developed with collaborators and licensees, which could have an adverse effect on our ability to develop and commercialize any affected product candidate.

Our current collaboration and license agreements allow, and we expect that any future collaborations and licenses will allow, either party to terminate the agreement for specified material breaches by the other party. If a collaborator or licensee terminates its agreement with us, for breach or otherwise, it may be difficult for us to attract new collaborators or licensees and could adversely affect how we are perceived in the business and financial communities. In addition, a collaborator or licensee could determine that it is in its financial interest to:

If any of these events occur, the development and commercialization of one or more of our product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

Risks relating to our intellectual property

If our patents do not protect Iclusig or our product candidates, our exclusive commercial rights in the product or product candidate could be compromised, and if any of our approved drugs or product candidates infringe third-party patents, we could be subject to litigation and substantial liabilities.

We have numerous issued patents and patent applications pending in the United States, as well as counterparts in other countries. Our success will depend, in significant part, on our ability to obtain and maintain United States and foreign patent protection for Iclusig and our product candidates, their manufacture and uses; to preserve our trade secrets; and to operate without infringing the proprietary

rights of third parties. In particular, we believe that composition-of-matter claims are the most significant patent claims for companies in our segment of the pharmaceutical industry that focus on small molecule drug candidates that are new chemical compounds. While we have patents or patent applications with composition-of-matter claims for Iclusig and each of our product candidates, only a portion of these patents have been granted to date. We cannot be certain that any patents will issue from our patent applications or, even if patents issue or have issued, that the issued claims will provide us with any significant protection against competitive products or otherwise be valuable commercially.

Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to maintain, obtain and enforce patents is uncertain and involves complex legal and factual questions. U.S. and foreign patent applications typically are maintained in confidence for a period of time after they initially are filed with the applicable patent office. Similarly, publication of discoveries in the scientific literature often lag behind actual discoveries. Consequently, we cannot be certain that we or our licensors were the first to invent, or the first to file patent applications covering Iclusig, our product candidates or their manufacture or use.

Third parties, including a number of our competitors, have developed competing and/or complementary technologies upon which patent applications have been filed and patents have been granted. These third-party technologies concern in part compounds, compositions, methods of use and production of such compounds and compositions, targets, genes and gene mutations, and the use of such targets, genes and gene mutations to identify drug candidates and develop companion diagnostic methods and corresponding kits. Third-party intellectual property protecting such technologies that are related to our business may cover or conflict with our patent applications, technologies or product candidates as well as those of complementary businesses which our business relies upon. Such conflicts could limit the scope of the patents that we may be able to obtain or may result in the denial of our patent applications. If a third party were to obtain intellectual property protection for any of the foregoing, we may be required to challenge such protection, terminate or modify our programs impacted by such protection or obtain licenses from such third parties, which might not be available on acceptable terms. Also, if a third party were to introduce a product into the market which we believe infringes our patents, we may be required to enforce our patent rights or seek to obtain an injunction or other relief, which could be time-consuming and expensive.

Our patents may be challenged by third parties, in connection with a third party’s Abbreviated New Drug Application, or ANDA, or otherwise, resulting in the patent being deemed invalid, unenforceable or narrowed in scope, which could compromise the scope or duration of our exclusive rights in the relevant product. An ANDA can be filed as early as four years after FDA approval of a drug. Other challenges to a patent may be mounted without regard to the date of an FDA approval. Also, our pending patent applications may not issue, and we may not receive any additional patents. Our patents as issued or as subsequently limited by any litigation might not contain claims that are sufficiently broad to prevent others from circumventing our patent protection and utilizing our technologies. For instance, the issued patents relating to Iclusig and our product candidates may be limited to a particular molecule or molecules and may not cover similar molecules that have similar clinical properties. Consequently, our competitors may independently develop competing products that do not infringe our patents or other intellectual property.

The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and other companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business could be substantially harmed.

Because of the extensive time required for development, testing and regulatory review of a drug candidate, it is possible that, before any of our drug candidates can be commercialized, any related patent

may expire or remain in force for only a short period following commercialization of our drug candidates, thereby reducing any advantages of the patent. To the extent our approved drugs or drug candidates are not commercialized significantly ahead of the expiration date of any applicable patent, or to the extent we have no other patent protection on such approved drugs or drug candidates, those drugs and drug candidates would not be protected by patents, and we would then need to rely solely on other types of exclusivity, such as orphan drug exclusivity and other types of regulatory exclusivity available under the Food, Drug and Cosmetic Act.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how, technology, and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our employees, collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also have entered into confidentiality and invention or patent assignment agreements with our employees and our consultants. Any of these parties may breach the agreements and disclose our proprietary information, and we may not have adequate remedies for any such breach. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position could be harmed.

Risks relating to our operations

Our cost-reducing measures may not result in anticipated savings, could disrupt our business and could yield unintended consequences, which could have a material adverse effect on our business, results of operations and financial condition.

We have implemented significant cost savings measures to mitigate the financial impact of our announcements in the fourth quarter of 2013 concerning the safety, marketing and commercial distribution of, and revised prescribing information for, Iclusig. These measures included a substantial reduction of our workforce in November 2013, amounting to approximately 40% of our employees in the United States, and an ongoing realignment of our cost structure. As part of our reduction in workforce, we eliminated commercial sales force positions for Iclusig and also eliminated positions in research and development and support functions. Although we have recruited additional personnel to commercialize Iclusig in the United States in connection with our resumption of marketing and commercial distribution in January 2014, the earlier reduction in our workforce may limit our ability to complete all of our corporate objectives. In addition, we could be required to implement further workforce and expense reductions in the future. Further workforce and expense reductions could result in reduced progress on our internal programs.

The cost-reducing measures taken by us could yield unintended consequences, such as distraction of our management and employees, the inability to retain and attract new employees, business disruption, a negative impact on morale among remaining employees, attrition beyond our planned reduction in workforce and reduced employee productivity, any of which could have a material adverse effect on our business, results of operations and financial condition. In addition, employees, whether or not directly affected by a reduction, may seek future employment with our business partners or our competitors. Any failure to attract or retain qualified personnel could prevent us from successfully developing and commercializing Iclusig and our product candidates in the future. In addition, our reductions in personnel may subject us to risks of litigation, which could result in substantial cost. We cannot guarantee that the cost reduction measures, or other measures we may take in the future, will result in the expected cost savings, or that any cost savings will be unaccompanied by these or other unintended consequences.

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

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

We have also entered into a new lease to move our corporate headquarters and laboratory facilities to two buildings being constructed by the landlord at 75 Binney Street and 125 Binney Street in Cambridge, Massachusetts. We had planned to move into the new buildings in early 2015. However, in light of our announcements in the fourth quarter of 2013 concerning Iclusig, we re-assessed our current and future need for space in Cambridge and expect to require less space than previously planned. We could not terminate the new lease without substantial cost, and we would have been required to make substantial expenditures to make necessary improvements to our existing facilities. We are, re-assessing ourtherefore, planning to sub-lease approximately 170,000 square feet of the 386,000 square feet of the space comprising the new buildings. We are currently planning the fit-out of the space and expect the space to be ready for occupancy plans relatedin 2016. Due to this and our other properties. As a result, plans and drawings for the tenant improvements for the Binney Street facility have not been approved by us and have not, at this time, been completed and submitted in accordance with the timelines specifieddelays in the lease. If delaytiming of submissionthe fit-out and occupancy of plans and drawings in accordance with the timelines specified in the lease results in a delay in the occupancy date for the facility,buildings, we mayexpect to be required to commence rentlease payments for the facilityspace prior to occupancy. If we are unable to sub-lease the space in the buildings that we will not occupy, our cost of occupancy of the space we will use will increase. We are currently in discussionsdiscussion with the landlord regarding revisions to our revised plans the timelines related to submission of such plansand timing and other matters in the lease.

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

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

We are currently subject to securities class action litigation and derivative litigation and may be subject to similar or other litigation such as products liability litigation in the future.

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

In addition, in November and December 2013, purported derivative lawsuits were filed alleging that our directors and certain of our officers breached their fiduciary duties related to the clinical development and commercialization of Iclusig and by making misrepresentations regarding the safety and commercial marketability of Iclusig. The lawsuits also assert claims for unjust enrichment and corporate waste, and for misappropriation of information and insider trading by the officers named as defendants. The plaintiffs seek unspecified monetary damages, changes in our corporate governance policies and internal procedures, restitution and disgorgement from the individually named defendants, and an award of costs and expenses, including attorney’s fees.

While we believe we have meritorious defenses, we cannot predict the outcome of these lawsuits. We believe that there may be additional suits or proceedings brought in the future. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities, and we cannot predict how long it may take to resolve these matters. In addition, we may incur substantial legal fees and costs in connection with litigation. Although we have insurance, coverage could be denied or prove to be insufficient. We are not currently able to estimate the possible cost to us from these lawsuits, as they are currently at an early stage and we cannot be certain how long it may take to resolve these matters or the possible amount of any damages that we may be required to pay. We have not established any reserves for any potential liability relating to these lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages and could have a material adverse effect on our business, results of operations and financial condition. In addition, the uncertainty of the currently pending lawsuits could lead to more volatility in our stock price.

Likewise, ifOur business has a substantial risk of product liability claims. If we are unable to obtain appropriate levels of insurance, product liability claims could adversely affect our business.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. Prior to obtaining regulatory approval to market our products, we or our collaborators are required to test such products in human clinical trials at health care institutions pursuant to agreements which indemnify such institutions in case of harm caused to patients by our products. We may not be able to avoid significant product liability exposure resulting from use of our products.

If product liability lawsuits are brought against us for injuries or deaths allegedly due to patients’ adverse reactions to Iclusig, we may be subject to additional liability. In any event, a potential product liability lawsuit would require significant financial and management resources. Regardless of the outcome, product liability claims may result in injury to our reputation, withdrawal of clinical trial participants, significant costs, diversion of management’s attention and resources, substantial monetary awards, loss of revenue, and additional distractions from our efforts to resume marketing and commercial distribution of Iclusig in the United States. Although we have product liability insurance, coverage could be denied or prove to be insufficient. WeAlso, we may not be able to renew or retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, which could also impact the resumption of marketing and commercial distribution of Iclusig in the United States.

Our business has a substantial risk of product liability claims. If we are unable to obtain appropriate levels of insurance, product liability claims could adversely affect our business.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. Prior to obtaining regulatory approval to market our products, we or our collaborators are required to test such products in human clinical trials at health care institutions pursuant to agreements which indemnify such institutions in case of harm caused to patients by our products. We may not be able to avoid significant product liability exposure resulting from use of our products. We have product liability insurance and clinical trial insurance in amounts that we believe are adequate to cover this risk. However, our insurance may not provide adequate coverage against potential liabilities. If a claim is brought against us, we might be required to pay legal and other expenses to defend the claim, as well as pay uncovered damages awards resulting from a claim brought successfully against us and these damages could be significant and have a material adverse effect on our financial condition. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct significant financial and managerial resources to such defense, and adverse publicity is likely to result.

Risks associated with operating in foreign countries could materially adversely affect our business.

We have expanded our operations intoin Europe in order to market Iclusig internationally. In addition, we have distribution, manufacturing, collaborative and clinical trial relationships outside the United States. Consequently, we are, and will continue to be, subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:

These and other risks associated with our international operations could materially adversely affect our business.

In addition, our international operations are subject to regulation under United States law. For example, the Foreign Corrupt Practices Act prohibits United States companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. In many countries, the health care professionals we regularly interact with may meet the definition of a foreign government official for purposes of the Foreign Corrupt Practices Act. We are also subject to import and export control laws. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the possible delay in approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, the imposition of civil or criminal sanctions, the prosecution of executives overseeing our international operations and corresponding adverse publicity and negative perception of our company in foreign countries.

The loss of key members of our scientific and management staff could delay and may prevent the achievement of our research, development and business objectives.

We are substantially dependent on our key officerssenior management team and members of our staffother employees responsible for areas such as drug development, clinical trials, regulatory affairs, drug discovery, manufacturing, commercial operations, business development and intellectual property protection and licensing. As we continue to expand our capabilities in connection with the launch of Iclusig and in anticipation of the possible launch of any additional commercial products, aA loss of key personnel or a failure to properly integrate new personnel could be disruptive. While we have entered into employment agreements with all of our executive officers, these officers may terminate their

employment with us at any time. The value to employees of stock-related benefits that vest over time, such as options and restricted stock units, will be significantly affected by movements in our stock price that we cannot control, and may at any point in time be insufficient to counteract more lucrative offers from other companies. The loss of, and failure to promptly replace, any member of our senior management team could significantly delay and may prevent the achievement of our research, development and business objectives.

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research and development efforts involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and

disposing of these materials comply with the standards prescribed by state, federal and foreign regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We maintain insurance to cover pollution conditions or other extraordinary or unanticipated events relating to our use and disposal of hazardous materials that we believe is appropriate based on the small amount of hazardous materials we generate. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate any of these laws or regulations.

A breakdownSecurity breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or breachexpose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we collect and store sensitive data, including legally protected patient health information, credit card information, personally identifiable information about our employees, intellectual property, and proprietary business information. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business critical information including research and development information, commercial information and business and financial information.

The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology systemsand infrastructure may be vulnerable to attacks by hackers, or viruses, breaches or interruptions due to employee error, malfeasance or other disruptions, or lapses in compliance with privacy and security mandates. Any such virus, breach or interruption could subject uscompromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. We have measures in place that are designed to detect and respond to such security incidents and breaches of privacy and security mandates. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996, government enforcement actions and regulatory penalties. Unauthorized access, loss or interrupt the operationdissemination could also disrupt our operations, including our ability to bill payors or patients, provide customer support services, conduct research and development activities, process and prepare company financial information, manage various general and administrative aspects of our business.

We rely uponbusiness and damage our information technology systems and infrastructure for our business. The size and complexityreputation, any of our computer systems make them potentially vulnerable to breakdown, malicious intrusion and random attack. Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. There can be no assurance that our management or diligence efforts will prevent breakdowns or breaches in our systems thatwhich could adversely affect our business.

Risks relating to regulatory approvals, pricing and reimbursement

The manufacture, distribution and sale of Iclusig and our product candidates are subject to significant regulatory oversight and restrictions. Regulatory authorities may require the use of a risk mitigation strategy such as the Risk Evaluation and Mitigation Strategy (REMS) required by the FDA for Iclusig. These restrictions and requirements subject us to increased risks and uncertainties, any of which could negatively impact sales of Iclusig.

In connection with the approval to resume marketing and commercial distribution of Iclusig in the United States in December 2013, the FDA required us to implement a Risk Evaluation and Mitigation Strategy, or REMS. The objective of the REMS program is to inform prescribers of the risk of vascular occlusion associated with Iclusig and of the revised USPI. The REMS program includes letters to physicians and professional societies, a fact sheet and information that will be communicated through professional journals and displayed at scientific meetings. In addition, we have agreed to fulfillare fulfilling a series of post-marketing requirements beginning in 2014 to better understand the risks of vascular occlusion and to further explore various doses of Iclusig, including enhanced assessment and prospective observation of patients with vascular occlusive events, continued follow-up monitoring of patients from our Iclusig trials, and a randomized multi-arm trial to characterize a range of Iclusig doses and safe use.

Any REMS required by the FDA or other regulatory agencies may lead to increased costs to assure compliance with new post-approval regulatory requirements and potential requirements or restrictions on the sale of Iclusig, all of which could lead to lower sales volume and revenue. As required by the FDA and other regulatory agencies, the information that we collect while implementing our REMS could result in further required changes to the Iclusig label and prescribing information or require us to take other actions that could have an adverse effect on Iclusig’s commercial success, which would have a material adverse effect on our business, financial condition and results of operations.

Clinical trials for our product candidates are expensive and time consuming, may take longer than we expect or may not be completed at all, and their outcome is uncertain.

We and our collaborators are currently conducting multiple clinical trials for our clinical product candidates, and we and our collaborators expect to commence additional trials of Iclusig and our product candidates in the future. Each of our clinical trials requires the investment of substantial expense and time and the timing of the commencement, continuation and completion of these clinical trials may be subject to significant delays attributable to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay in or failure to obtain IRB approval to conduct a clinical trial at a prospective site, shortages of available drug supply, or the imposition of a clinical hold by regulatory agencies, such as the partial clinical hold the FDA imposed on additional patient enrollment in all clinical trials of Iclusig in October 2013. Patient enrollment is a function of many factors, including the size of the target patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative established or investigational treatments.

We depend on medical institutions and clinical research organizations, or CROs, to conduct our clinical trials in compliance with FDA and other applicable requirements and guidelines, often referred to as Good Clinical Practices, and to the extent they fail to enroll patients for our clinical trials, are delayed for a significant time in achieving full enrollment, or fail to follow proper procedures, we may be affected by increased costs, program delays or both, which may harm our business. In addition, we conduct clinical trials in foreign countries which may subject us to further delays and expenses as a result of increased drug shipment costs, additional regulatory requirements and the need to engage foreign CROs, as well as expose us to risks associated with less experienced clinical investigators who are unknown to the FDA, different standards of medical care, and fluctuating foreign currency exchange rates.

Clinical trials must be conducted in accordance with Good Clinical Practices and are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced under current Good Manufacturing Practices, or cGMP, conditions. We, the FDA, the EMA or other foreign governmental agencies could delay, suspend or halt our clinical trials of a product candidate for numerous reasons, including:

In addition, clinical trial results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse medical events, including patient fatalities that may be attributable to our product candidates, during a clinical trial could cause it to be redone or terminated. Further, some of our clinical trials may be overseen by an independent data monitoring committee, or DMC, and a DMC may recommend a delay or suspension in one or more of these trials due to safety or futility findings based on events occurring during a clinical trial.

If clinical trials of any of our product candidates fail, we or our collaborators may not be able to obtain marketing approval for the product candidate that is the subject of the failed clinical trials. The FDA and foreign regulatory agencies could also require additional clinical trials before or after granting of marketing approval for any products, which could result in increased costs and significant delays in the development and commercialization of such products and could result in the withdrawal of such products from the market after initially obtaining marketing approval. Our failure, or the failure of our collaborators, to adequately demonstrate the safety and efficacy of a product candidate in clinical

development could delay or prevent obtaining marketing approval of the product candidate and, after obtaining marketing approval, data from post-approval studies could result in the product being withdrawn from the market, either of which would likely have a material adverse effect on our business.

Iclusig and each of our product candidates will remain subject to ongoing regulatory review even if they receive marketing approval. If we or our collaborators or contractors fail to comply with applicable regulations, we or they may be subject to enforcement action that could adversely affect us.

We and our collaborators and contractors will continue to be subject to extensive regulation by the FDA and other regulatory authorities even after our product candidates are approved. We and our collaborators and contractors will continue to be subject to FDA requirements governing, among other things, the manufacture, packaging, sale, promotion, adverse event reporting, storage and recordkeeping of our approved products. For example, in October 2013, the FDA placed a partial clinical hold on all clinical trials of Iclusig and, at the request of the FDA, we suspended marketing and commercial distribution of Iclusig in the United States following our review of additional clinical data from the pivotal PACE trial of Iclusig. The FDA has also issued Drug Safety Communications concerning Iclusig and is investigating the drug to further understand its risks and potential patient populations in which the benefits of the drug may outweigh the risks. Additionally, the EMA and FDA announced in November 2013 and December 2013, respectively, thatrevised the approved indications and prescribing information for Iclusig should be narrowed and its product information should be updated to include strengthenedthe EMA has required additional safety warnings.

If we or any of our collaborators fails to comply with the requirements of the FDA and other U.S. or foreign governmental or regulatory authorities with jurisdiction over our products or operations or previously unknown problems with our products, manufacturers or manufacturing processes are discovered, we or our collaborator could be subject to administrative or judicially imposed sanctions, including warning letters; civil or criminal penalties; fines; injunctions; product seizures or detentions; import bans; voluntary or mandatory product recalls; suspension or withdrawal of regulatory approvals; total or partial suspension of production; and refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications.

We rely on third-party contractors for numerous services, and if those contractors fail to fulfill their contractual obligations to us, which affects our regulatory compliance, we could be adversely affected. For example, during 2014 we conducted a routine quality control audit of a third-party vendor and learned that this vendor did not meet its obligations to report to us all of the adverse events which its employees had become aware of while it performed patient support services for Iclusig during 2013. As a result, these adverse events in patients receiving Iclusig obtained pursuant to health care providers’ prescriptions were not reported to the FDA and other regulatory authorities as required. In response, we initiated a corrective action plan with the vendor to identify and report all adverse events from these patients, and we informed the FDA, the EMA and other regulatory authorities of these findings. We submitted a full report summarizing our review and findings to the regulatory authorities during the fourth quarter of 2014. We also accelerated quality control audits of all third-party contractors providing patient support services for us in the United States and Europe.

Based on our assessment to date of previously unreported adverse events, we do not expect any changes to the benefit/risk profile of Iclusig. Moreover, these adverse events were identified during commercial use of Iclusig, which are assessed separately from adverse events observed in clinical trials. However, it is too early to determine whether additional information may arise that could alter our assessment. In addition, the FDA or other regulatory authorities may conduct their own evaluation of the cases, may require additional changes to Iclusig’s prescribing information, or may take or require us to take other actions that could be costly or time-consuming and/or adversely affect our commercialization of Iclusig.

We may not be able to obtain government regulatory approval to market our product candidates.

Other than Iclusig, none of our product candidates has been approved for commercialization in any country. Prior to commercialization, each product candidate will be subject to an extensive and lengthy review process in the United States and in other countries. We or our collaborators may not be able to obtain regulatory approval for any product candidates, or even if approval is obtained, the labeling for

such products may place restrictions on their use that could materially impact the marketability and profitability of those products. Satisfaction of regulatory requirements, which includes satisfying the FDA and foreign regulatory authorities that the product is both safe and effective for its intended uses, typically takes several years or more depending upon the type, complexity, novelty and safety profile of the product and requires the expenditure of substantial resources. Uncertainty with respect to meeting the regulatory requirements governing our product candidates may result in excessive costs or extensive delays in the regulatory review process.

We will not be able to sell our product candidates if we or our third-party manufacturers fail to comply with current good manufacturing practice requirements.

Before approving any of our product candidates, the FDA will inspect the facility or facilities at which the drug product is manufactured and will not approve the drug candidate unless it is satisfied with our or our third-party manufacturer’s compliance with cGMPs. The manufacturing of our product candidates must comply with cGMP requirements of the FDA and similar requirements of regulatory agencies in other countries. These requirements govern, among other things, manufacturing, quality control and documentation procedures. We, or any third-party manufacturer of our product candidates, may not be able to comply with these requirements, which would prevent us from obtaining approval for commercialization of our products. Material changes to the manufacturing processes or a change in manufacturer of products after approvals have been granted are also subject to review and approval by the FDA or other regulatory agencies. Following approval, such facilities are subject to continuing FDA and foreign regulatory requirements including inspections and failure to comply with cGMPs or similar regulations could result in regulatory action including market withdrawals and recalls.

Government and other third-party payors seek to contain costs of health care through legislative and other means. If they fail to provide coverage and adequate reimbursement rates for our products, our revenues will be harmed.

In both domestic and foreign markets, sales of products depend in part upon the availability of reimbursement from third-party payors. Third-party payors include government health programs such as Medicare and Medicaid, managed care providers, and private health insurers. Governments and other third-party payors continually try to contain or reduce the costs of health care through various means. For example, in certain foreign markets, pricing of pharmaceutical products is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental control. The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, collectively, the Affordable Care Act or ACA, will require discounts under the Medicare drug benefit program and increases the rebates paid by pharmaceutical companies on drugs covered by Medicaid. In addition, the ACA imposes an annual fee, which will increase annually, on sales by branded pharmaceutical manufacturers. The financial impact of these discounts, increased rebates and fees and the other provisions of the ACA on our business is unclear, and there can be no assurance that our business will not be materially harmed by future implementation of the ACA.

In addition, third-party payors are increasingly attempting to contain health care costs by demanding price discounts or rebates and limiting both the types and variety of drugs that they will cover and the amounts that they will pay for drugs. As a result, they may not cover or provide adequate payment for our products. We may have to conduct post-marketing or competitive effectiveness studies in order to demonstrate the cost-effectiveness of Iclusig or any other of our future drugs to such payors’ satisfaction.

Such studies might require us to commit a significant amount of management’s time and financial and other resources. Our products might not ultimately be consideredproven to be cost-effective. Adequate third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that already are reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare or Medicaid data used to calculate these rates. Net prices for products are often reduced by mandatory discounts or rebates required by government health care programs or by privately-negotiated discounts. Moreover, the United States federal government, state governments and private payors frequently pursue actions against pharmaceutical companies alleging that the companies have overstated prices in order to inflate reimbursement rates. Any such action could adversely affect the pricing of and the commercial success of our products.

Any legislation or regulatory changes or relaxation of laws that restrict imports of drugs from other countries also could reduce the net price we receive for our products.

If we market any of our products in a manner that violates federal or state health care laws, including fraud and abuse laws, laws prohibiting off-label promotion, disclosure laws or other similar laws, we may be subject to civil or criminal penalties.

We are subject to health care “fraud and abuse” laws, such as the federal False Claims Act and the anti-kickback provisions of the federal Social Security Act, laws prohibiting off-label product promotion and other similar state and federal laws and regulations. While we have a corporate compliance program designed to actively identify, prevent and mitigate risk through the implementation of compliance policies and systems and the promotion of a culture of compliance, if we are found not to be in full compliance with these laws our business could be materially harmed.

The federal anti-kickback law prohibits knowingly and willfully offering, paying, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the ordering, furnishing, arranging for or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program, such as Medicare or Medicaid. The federal statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, patients, purchasers and formulary managers on the other hand, and therefore constrains our marketing practices and our various service arrangements with physicians, including physicians who make clinical decisions to use our products. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practicesnarrowly. Practices that involve remuneration intended to induceand that can be construed as inducements for prescribing, purchasing, or recommending our products may be subject to scrutiny or penalty if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, known as “off-label” uses, that caused claims to be submitted to Medicaid for non-covered off-label uses; and submitting inflated “best price” information to the Medicaid Rebate Program.

Although physicians are permitted to, based on their medical judgment, prescribe products for indications other than those cleared or approved by the FDA, manufacturers are prohibited from promoting their products for such off-label uses. We market Iclusig for the treatment of adult patients with T315I-positive

CML (chronic phase, accelerated phase, or blast phase) or T315I-positive Ph+ ALL and chronic phase, accelerated phase, or blast phase CML or Ph+ ALL for whom no other TKI therapy is indicated, and provide promotional materials to physicians regarding the use of Iclusig in these patient populations. If the FDA determines that our promotional materials or other activities constitute off-label promotion, it could request that we modify our promotional materials or other activities or subject us to regulatory

enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. It also is possible that other federal, state or foreign enforcement authorities might take action if they believe that the alleged improper promotion led to the submission and payment of claims for an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Even if it is later determined we were not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our actions and have to divert significant management resources from other matters.

Also applicable to some of our practices is the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters and which also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information.

The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. In addition, certain states have laws governing the privacy and security of certain health information and personal data, which may differ from each other in significant ways and often are not preempted by HIPAA and are rapidly evolving, complicating compliance efforts. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a pharmaceutical manufacturer’s products from reimbursement under government programs and criminal fines. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business.

In recent years, several states and localities, including California, the District of Columbia, Maine, Massachusetts, Minnesota, Nevada, New Mexico, Vermont and West Virginia, have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, health care provider, or HCP payments and other activities. Similar legislation is being considered in other states. Additionally, as part of the ACA, the federal government has enacted the Physician Payment Sunshine provisions. The Physician Payment Sunshine provisions, which were enacted in February 2013 and require pharmaceutical manufacturers to publicly report gifts and payments made to physicians and teaching hospitals beginning in March 2014. Many of these requirements are new and the penalties for failure to comply with these requirements will be significant. If we are found not to be in full compliance with these laws, we could face enforcement action, fines and other penalties, and could receive adverse publicity.

The ACA also includes various provisions designed to strengthen significantly fraud and abuse enforcement, such as increased funding for enforcement efforts and the lowering of the intent requirement of the federal anti-kickback statute and criminal health care fraud statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.

If our past or present operations are found to be in violation of any such laws or any other governmental regulations that may apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from federal health care programs and/or the curtailment or restructuring of our operations. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are subject to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

The sales and marketing practices of our industry have been the subject of increased scrutiny from federal and state government agencies, and we believe that this trend will continue. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

Future health care reform measures could hinder or prevent commercial success of our drugs and drug candidates.

The U.S. federal government and other governments have shown significant interest in pursuing health care reform. Any government-adopted reform measures could adversely affect the pricing of health care products, including our approved productIclusig and/or any future product candidates approved for sale. The continuing efforts of governments, insurance companies, managed care organizations and other payors for health care products to contain or reduce health care costs may adversely affect our ability to set prices we believe are fair for our productsIclusig or any drugs we may develop and commercialize.

New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, relating to health care availability, methods of delivery or payment for drugs, or sales, marketing or pricing, may limit our potential revenues, and we may need to revise our research and development or commercialization programs. The pricing and reimbursement environment may change in the future and become more challenging for any of several reasons, including policies advanced by the U.S. government, new health care legislation or fiscal challenges faced by government health administration authorities. Specifically, in the United States and in some foreign jurisdictions there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect our ability to sell products. Some of these proposed and implemented reforms could result in reduced reimbursement rates for our current or future products, which would adversely affect our business, operations and financial results. As discussed above, the recently enacted ACA may have far reaching consequences for companies like us. As a result of this new legislation, substantial changes could be made to the current system for paying for health care in the United States, including changes made in order to extend medical benefits to those who currently lack health insurance coverage. Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursement. If reimbursement for our products is substantially less than we expect in the future, or rebate obligations associated with them are substantially increased, our business could be materially and adversely affected.

Further federal and state proposals and health care reforms in and outside of the United States could limit the prices that can be charged for our products and may further limit our commercial opportunity. Our results of operations could be materially adversely affected by the ACA, by the Medicare prescription drug coverage legislation, by the possible effect of such current or future legislation on amounts that private insurers will pay and by other health care reforms that may be enacted or adopted in the future.

Risks relating to our convertible senior notes and related hedge transactions

We have indebtedness in the form of convertible senior notes. The indebtedness created by the sale of the notes and any future indebtedness we incur expose us to risks that could adversely affect our business, results of operations and financial condition.

In June 2014, we completed an offering of $200 million of 3.625 percent convertible senior notes due 2019, or the Notes. As a result of the issuance of the Notes, we incurred $200 million principal amount of indebtedness, the principal amount of which we may be required to pay at maturity on June 15, 2019, or upon the occurrence of a fundamental change (as defined in the indenture). There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all. In addition, this indebtedness could have significant negative consequences for our business, results of operations and financial condition, including:

Conversion of the Notes may affect the price of our common stock.

The conversion of some or all of the Notes may dilute the ownership interest of existing stockholders to the extent we deliver shares of common stock upon conversion. Holders of the outstanding Notes will be able to convert them only upon the satisfaction of certain conditions prior to the close of business on the business day immediately preceding December 15, 2018. Upon conversion, holders of the Notes will receive cash, shares of common stock or a combination of cash and shares of common stock, at our election. Any sales in the public market of shares of common stock issued upon conversion of such notes could adversely affect the trading price of our common stock. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of common stock, or the perception that such issuances and sales may occur, could adversely affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity or convertible debt securities.

We may incur substantially more debt or take other actions which would intensify the risks discussed above; and we may not generate cash flow from operations in the future sufficient to satisfy our obligations under the Notes and any future indebtedness we may incur.

We and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in any debt instruments that we enter into in the future, some of which may be secured debt. We are not restricted under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Notes that could have the effect of diminishing our ability to make payments on the Notes when due.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, regulatory, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under the Notes and any future indebtedness we may incur, as well as to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying our research, development or commercialization efforts, investments or capital expenditures, selling or licensing assets, refinancing or obtaining additional debt or equity financing on terms that may be onerous or highly dilutive. Our ability to refinance the Notes or future indebtedness will depend on the capital markets and our financial condition at such time.

In addition, agreements that govern any future indebtedness that we may incur may contain financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of some or all of our debt.

We may not be able to raise the funds necessary to settle conversions of the Notes or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100 percent of the principal amount of the Notes to be repurchased,plus accrued and unpaid interest, if any. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than

paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or Notes being converted.

In addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture governing the Notes or to pay any cash payable on future conversions of the Notes as required by the indenture governing the Notes would constitute a default under the indenture governing the Notes. A default under the indenture governing the Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions of the Notes.

The Notes contain a conditional conversion feature, which, if triggered, may adversely affect our financial condition and operating results.

The Notes contain a conditional conversion feature. If such feature is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our working capital.

The convertible note hedge and warrant transactions we entered into in connection with our issuance of the Notes may affect the value of the Notes and our common stock.

In connection with our offering of the Notes, we entered into a convertible note hedge transaction with a financial institution, or the hedge counterparty. We entered into this convertible note hedge transaction with the expectation that it will reduce the potential dilution to our common stock and/or offset potential cash payments in excess of the principal amount of the Notes, as the case may be, upon conversion of the Notes. In the event that the hedge counterparty fails to deliver shares to us or potential cash payments, as the case may be, as required under the convertible note hedge document, we would not receive the benefit of such transaction. Separately, we also entered into a warrant transaction with the hedge counterparty. The warrant transaction could separately have a dilutive effect to the extent that the market price per share of our common stock as measured over the valuation period at the maturity of the warrants exceeds the strike price of the warrants.

In connection with hedging this transaction, the hedge counterparty and/or its affiliates may enter into various derivative transactions with respect to our common stock, and may enter into, or may unwind, various derivative transactions and/or purchase or sell our common stock or other securities of ours in secondary market transactions prior to maturity of Notes (and are likely to do so during any conversion period related to any conversion of the Notes). These activities could have the effect of increasing or preventing a decline in, or could have a negative effect on, the value of our common stock.

In addition, we intend to exercise options under the convertible note hedge transaction whenever the Notes are converted. Depending upon the method we elect to exercise such options, in order to unwind its hedge position with respect to the options we exercise, the hedge counterparty and/or its affiliates may sell shares of our common stock or other securities in secondary market transactions or unwind various derivative transactions with respect to our common stock. The effect, if any, of any of these transactions

and activities on the trading price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of our common stock and the value of the Notes. The derivative transactions that the hedge counterparty and/or its affiliates expect to enter into to hedge this transaction may include cash-settled equity swaps referenced to our common stock. In certain circumstances, the hedge counterparty and/or its affiliates may have derivative positions that, when combined with the hedge counterparty’s and its affiliates’ ownership of our common stock, if any, would give them economic exposure to the return on a significant number of shares of our common stock.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. APB 14-1,Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20,Debt with Conversion and Other Options (“ASC 470-20”). Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes. We will report lower net income or higher net loss in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which will adversely affect our reported or future financial results. The trading price of our common stock and the trading price of the Notes may also be adversely affected.

In addition, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are, where the issuer has the intent to settle such instruments partly in a cash amount equal to the principal amount, currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected. We expect to use the “if converted” method to compute earnings per share, which could be more dilutive than using the “treasury stock” method.

Certain provisions in the Notes and the indenture could delay or prevent an otherwise beneficial takeover or takeover attempt of us and, therefore, the ability of holders to exercise their rights associated with a fundamental change.

Certain provisions in the Notes and the indenture could make it more difficult or more expensive for a third party to acquire us. For example, if an acquisition event constitutes a fundamental change, holders of the Notes will have the right to require us to purchase their Notes in cash. In addition, if an acquisition event constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their Notes in connection with such make-whole fundamental change. Accordingly, our obligations under the Notes and the indenture as well as provisions of our organizational documents and other agreements could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

Risks relating to our common stock

Results of our operations, new clinical and safety data, FDA and other regulatory actions, general market conditions for biotechnology stocks and other factors could result in a sudden change in the value of our stock.

As a biopharmaceutical company, we continue to experience significant volatility in the price of our common stock. In the twelve months ended December 31, 2013,2014, our stock price ranged from a high of $23.00$9.83 per share to a low of $2.15$4.90 per share. In connection with our October 2013 announcements concerning the safety, marketing and commercial distribution and further clinical development of Iclusig in the United States, our stock price declined by 87%,87 percent, from a closing price of $17.14 per share before on the day the first announcements to a low of $2.15 per share following the announcements. Some of the many factors that could contribute to such volatility include:

The stock markets, and the markets for biotechnology stocks in particular, have experienced volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Investors may not be able to sell when they desire due to insufficient buyer demand and may realize less than, or lose all of, their investment.

A potential proxy contest for the election of directors at our 2015 annual meeting could distract our management, divert our resources and adversely impact our business and financial condition

Sarissa Capital Domestic Fund LP and its affiliates (collectively, “Sarissa”) submitted notices of its intention to nominate three individuals for election to our Board of Directors at our 2015 annual meeting of stockholders. Sarissa has also stated that it is seeking the imminent retirement of Harvey J. Berger, M.D., the Chairman of our Board of Directors, as the company’s Chief Executive Officer.

If Sarissa does not withdraw its nominations and we are unable to reach an agreement with Sarissa relating to our 2015 annual meeting, a proxy contest is likely to occur. A proxy contest could adversely affect our business and financial condition because:

The market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above.

Anti-takeover provisions of Delaware law, provisions in our charter and bylaws and our shareholder rights plan could delay, discourage or make more difficult a third-party acquisition of control of us.

Because we are a Delaware corporation, the certain provisions of Delaware law could delay, discourage or make more difficult a third-party acquisition of control of us, even if the change in control would be beneficial to stockholders or the stockholders regard it as such. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which prohibits certain “business combination” transactions (as defined in Section 203) with an “interested stockholder” (defined in Section 203 as a 15 percent or greater stockholder) for a period of three years after a stockholder becomes an “interested stockholder”, unless the attaining of “interested stockholder” status or the transaction is pre-approved by our board of directors, the transaction results in the attainment of at least an 85 percent ownership level by an acquirer or the transaction is later approved by our board of directors and by our stockholders by at least a 66 2/3 percent vote of our stockholders other than the “interested stockholder”, each as specifically provided in Section 203.

In addition, because our board of directors is a classified board, as described below, Section 141(k)(1) of the DGCL provides that directors may only be removed by the stockholders and then only for “cause”. Further, Section 242(b)(1) of the DGCL provides that amendment of our certificate of incorporation requires that the amendment be determined by the board of directors to be advisable and be submitted by our board of directors to our stockholders for action by them and then approved by our stockholders holding a majority of the outstanding shares of our common stock.

Our certificate of incorporation and our bylaws, each as currently in effect, also contain certain provisions that may delay, discourage or make more difficult a third-party acquisition of control of us:

We have adopted a shareholder rights plan in the form of a Section 382 Rights Plan, designed to help protect and preserve our substantial tax attributes primarily associated with our NOLs and research tax credits under Sections 382 and 383 of the Internal Revenue Code and related U.S. Treasury regulations. The plan was approved by our stockholders in June 2014, expires in October 2016 and may not be amended to extend the expiration date. Although this is not the purpose of the Section 382 Rights Plan, it could have the effect of making it uneconomical for a third party to acquire us on a hostile basis.

These provisions of the DGCL, our certificate of incorporation and bylaws, and our Section 382 Rights Plan may delay, discourage or make more difficult certain types of transactions in which our stockholders might otherwise receive a premium for their shares over the current market price, and might limit the ability of our stockholders to approve transactions that they think may be in their best interest.

ITEM 1B: UNRESOLVED STAFF COMMENTS

None.

ITEM 2: PROPERTIES

We have leased approximately 100,000 square feet of laboratory and office space at 26 Landsdowne Street, Cambridge, Massachusetts through July 2019, with two five-year renewal options. In May 2012, we entered into a three-year operating lease agreement for an additional 26,000 square feet of office space in Cambridge, Massachusetts.Massachusetts which now extends to July 2017. We have also have a short-term lease forleased approximately 4,50022,000 square feet of office space in a building in Lausanne, Switzerland.Switzerland which we occupied in 2014 and which serves as our European headquarters. We believe that any additional space that we may require will be available on commercially reasonable terms.

We have entered into a long-term lease for approximately 386,000 square feet of laboratory and office space in two adjacent, connected buildings under construction in Cambridge, Massachusetts, which is expected to be available for occupancy in early 2015.Massachusetts. The lease has a term of 15 years with options to renew for three terms of five years each. We had planned to move into the new buildings in early 2015. However, in light of our announcements in the fourth quarter of 2013 concerning Iclusig, we re-assessed our current and future need for space in Cambridge and expect to require less space than previously planned. We could not terminate the new lease without substantial cost, and we would have been required to make substantial expenditures to make necessary improvements to our existing facilities. We are, therefore, planning to sub-lease approximately 170,000 square feet of the 386,000 square feet of the space comprising the new buildings.

Construction of the core and shell of the buildings is expected to be completed in the first half of 2015, at which time construction of tenant improvements in the building will commence. Construction of the tenant improvements is expected to be completed in the first half of 2016, at which time we expect to occupy the buildings. In connection with this lease, the landlord is providing a tenant improvement allowance for the costs associated with the design, engineering, and construction of tenant improvements for the leased facility. The tenant improvements will be in accordance with our plans and include fit-out of the buildings to construct appropriate laboratory and office space, subject to approval by the landlord. Given our involvementDue to delays in the design of tenant improvements for the leased facility, the lease establishes dates by which we are required to submit plansfit-out and drawings for tenant improvements consistent with the timeline for completion of the construction, including tenant improvements, and readinessoccupancy of the facility, for occupancy. In connection with the partial clinical hold of Iclusig imposed by the FDA and the temporary suspension of marketing and commercial distribution of Iclusig in the United States in October 2013, plans and drawings for the tenant improvements for this facility have not been approved by us and have not, at this time, been completed and submitted in accordance with the timelines specified in the lease. If delay of submission of plans and drawings in accordance with the timelines specified in the lease results in a delay in the occupancy date for the facility, we mayexpect to be required to commence rent payments for the facility prior to occupancy. We are currently in discussions with the landlord regarding revisions to our plans, the timelinestiming related to submissionsuch plans and the completion of such planstenant improvements and other matters in the lease.

We have also entered into a long-term lease for approximately 22,000 square feet of office space in a building in Lausanne, Switzerland, which we occupied in early 2014 and will serve as our European headquarters. We believe that any additional space we may require will be available on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

On October 10, 2013, October 17, 2013, December 3, 2013 and December 6, 2013, purported shareholder class actions, styledJimmy Wang v. ARIAD Pharmaceuticals, Inc., et al.,James L. Burch v. ARIAD Pharmaceuticals, Inc., et al.,Greater Pennsylvania Carpenters’ Pension Fund v. ARIAD Pharmaceuticals, Inc., et al, andNabil Elmachtoub v. ARIAD Pharmaceuticals, Inc., et al, respectively, were filed in the United States District Court for the District of Massachusetts (the District Court), naming us and certain of our officers as defendants. The lawsuits allege that we made material misrepresentations and/or omissions of material fact regarding clinical and safety data for Iclusig in our public disclosures during the period from December 12, 2011 through October 8, 2013 or October 17, 2013, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. On January 9, 2014, the District Court consolidated the actions and appointed lead plaintiffs. On February 18, 2014, the

lead plaintiffs filed an amended complaint as contemplated by the order of the District Court. The amended complaint extends the class period for the Securities Exchange Act claims through October 30, 2013. In addition, plaintiffs allege that certain of our officers, present and former directors and certain underwriters made material misrepresentations and/or omissions of material fact regarding clinical and safety data for Iclusig in connection with our January 24, 2013 follow-on public offering of common stock in violation of Sections 11 and 15 of the Securities Act of 1933, as amended. The plaintiffs seek unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees. On April 14, 2014, the defendants and the underwriters filed separate motions to dismiss the amended complaint. On June 10, 2014, the District Court heard oral argument on the motion to dismiss. The court has not yet ruled on the motion.

On November 6, 2013, a purported derivative lawsuit, styledYu Liang v. ARIAD Pharmaceuticals, Inc., et al.,was filed in the United States District Court for the District of Massachusetts (the District Court), on behalf of us naming our directors and certain of our officers as defendants. On December 6, 2013, an additional purported derivative lawsuit, styledArkady Livitz v. Harvey J. Berger, et al, was filed in the District Court. The lawsuits allege that our directors and certain of our officers breached their fiduciary duties related to the clinical development and commercialization of Iclusig and by making misrepresentations regarding the safety and commercial marketability of Iclusig. The lawsuits also assert claims for unjust enrichment and corporate waste, and for misappropriation of information and insider trading by the officers named as defendants. On January 23, 2014, the District Court consolidated the actions. On February 3, 2014, plaintiffs designated theYu Liang complaint as the operative complaint as contemplated by the order of the District Court. The plaintiffs seek unspecified monetary damages, changes in our corporate governance policies and internal procedures, restitution and disgorgement from the individually named defendants, and an award of costs and expenses, including attorney fees.

Additional complaints may be On March 5, 2014, the defendants filed against us and our directors and officers relateda motion to our disclosures and announcements concerningdismiss the safety, marketing and commercial distribution and further clinical development of Iclusig incomplaint. In response, on March 26, 2014, the United States.plaintiffs filed an amended complaint. On April 23, 2014, the defendants filed a motion to dismiss the amended complaint. On July 23, 2014, the District Court heard oral argument on the motion to dismiss. The court recently scheduled supplemental oral argument for March 2, 2015.

We believe that these actions are without merit. At this time, no assessment can be made aswe have not recorded a liability related to damages in connection with these matters because we believe that any potential loss is not currently probable or reasonably estimable under U.S. generally accepted accounting principles. In addition, due to the likely outcomeearly stages of the matters described above, we cannot reasonably estimate the possible loss or range of loss, if any, that may result from these lawsuitsmatters.

From time to time, we may be subject to various claims and legal proceedings. If the potential loss from any claim, asserted or whetherunasserted, or legal proceedings is considered probable and the outcomeamount is reasonably estimated, we will be material to us.accrue a liability for the estimated loss.

ITEM 4: MINE SAFETY DISCLOSURES

None.

PART II

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol “ARIA”. The following table sets forth the high and low sales prices of our common stock as quoted on this market for the periods indicated.

On February 24, 2014,17, 2015, the last reported sale price of our common stock was $8.63$7.36 per share.

Stock Performance Graph

The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock since December 31, 2008,2009, with the total cumulative return of the NASDAQ Biotechnology Index and the Russell 3000^® Index, in each of which ARIAD is listed. The Russell 3000 Index measures the stock performance of the largest 3,000 U.S. companies representing approximately 98 percent of the investable U.S. equity market. Since the Russell 3000 Index is specifically designed to provide a comprehensive, unbiased and stable barometer of the broad stock market, we believe it is a meaningful index against which to compare our stock price performance.

The price of a share of common stock is based upon the closing price per share as quoted on NASDAQ on the last trading day of the year shown. The graph lines merely connect year-end values and do not reflect fluctuations between those dates. The comparison assumes $100 was invested on December 31, 20082009 in our common stock and in each of the foregoing indices. We did not declare or pay any dividends during the comparison period. The stock price performance as shown in the graph below is not necessarily indicative of future stock price performance.

The performance graph shall not be deemed to be incorporated by reference by means of any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such acts.

Stockholders

As of February 24, 2014,17, 2015, the approximate number of holders of record of our common stock was 333.323.

Dividends

We have not declared or paid dividends on our common stock in the past and do not intend to declare or pay such dividends in the foreseeable future. Our long-term debt agreement prohibits the payment of cash dividends.

Unregistered Sales of Securities

Not applicable.

Issuer Purchases of Equity Securities

Not applicable.

ITEM 6:

SELECTED FINANCIAL DATA

The selected financial data set forth below as of December 31, 2014, 2013, 2012, 2011 2010 and 20092010 and for each of the years then ended have been derived from theour audited consolidated financial statements, of the Company, of which the financial statements as of December 31, 20132014 and 20122013 and for the years ended December 31, 2014, 2013 2012 and 20112012 are included elsewhere in this Annual Report on Form 10-K. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements, and the notes thereto, and other financial information included herein.

(2)

In 2009, we issued warrants that were accounted for as a derivative liability. The change in fair value of outstanding warrants was recorded in our consolidated statements of operations. Upon exercise of all remaining warrants in January and February 2012, the balance of the warrant liability was credited to stockholders’ equity and the liability was eliminated. See Note 11 to the consolidated financial statements.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information set forth below should be read in conjunction with the audited consolidated financial statements, and the notes thereto, and other financial information included herein.

Overview

ARIAD is a global oncology company whose vision is to transformfocused on transforming the lives of cancer patients with breakthrough medicines. Our mission is to discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest and most urgent unmet medical need – aggressive cancers where current therapies are inadequate. We are focused on value-driving investments in commercialization, research and development, and new business development initiatives that we expect will lead to sustained profitability beginning in 2018 and increased shareholder value.

Our first approved cancer medication, We are currently commercializing or developing the following three products and product candidates:

These products and product candidates complement our earlier discovery of ridaforolimus, which we have out-licensed for development in drug-eluting stents and other medical devices for cardiovascular indications, and rimiducid (AP1903), andwhich we have out-licensed for development in novel cellular immunotherapies. All of our product candidates AP26113 and ridaforolimus, were discovered internally by our scientists based on our expertise in computational chemistry and structure-based drug design. Ridaforolimus is being developed for cardiovascular indications by Medinol, Ltd., or Medinol, and ICON Medical Corp., or ICON, pursuant to license agreements entered into in 2005 and 2007, respectively.

Iclusig (ponatinib)

United StatesCommercialization

On December 14, 2012, we obtained accelerated approval from the U.S. Food and Drug Administration, or FDA, to sell our first new cancer medicine, Iclusig.As noted above, Iclusig is a tyrosine kinase inhibitor, or TKI, that was initially approved in the United States, Europe and other territories for the treatment of adultcertain patients with chronic, accelerated or blast phase chronic myeloid leukemia, or CML, who were resistant or intolerant to prior TKI therapy, and the treatment of adult patients with Philadelphia chromosome-positive acute lymphoblastic leukemia, or Ph+ ALL, who were resistant or intolerant to prior TKI therapy. The approvedALL.

In the United States, prescribing information, or USPI, includedwe are distributing Iclusig through a boxed warning specifyingsingle specialty pharmacy. We employ an experienced and trained sales force and other professional staff, including account specialists, regional business directors, corporate account directors and medical science liaisons, who target the approximate 5,000 physicians who generate the majority of TKI prescriptions in the United States.

In Europe, we are now selling Iclusig in Germany, the United Kingdom, Austria, the Netherlands, Norway, Sweden, and Italy. In addition, we are distributing Iclusig to patients in France prior to pricing and reimbursement approval as permitted under French regulations. Full pricing and reimbursement in France and other European countries is expected by mid-2015. In total, we anticipate that arterial thrombosis and hepatoxicity had occurredIclusig will be available for sale in some patients during clinical trials16 European countries by the third quarter of Iclusig. 2015.

We commencedhave established headquarters for our European operations in Switzerland where we manage all aspects of our business in Europe, including sales and marketing, distribution and supply chain, regulatory, medical affairs and supporting functions. We employ personnel in key countries in Europe to build company and brand awareness, manage the local country pricing and reimbursement process and sell Iclusig upon obtaining all necessary approvals.

In order to provide for access to Iclusig in countries where we do not employ personnel, we enter into relationships with distributors in such countries. These distributorship arrangements provide for the exclusive right to sell and distribute Iclusig in a specific territory for a specified period of time in exchange for fees and payments related to purchase of Iclusig from us and/or sales of Iclusig in the territory. In December 2014, we entered into an agreement with Angelini Pharma, through its Austrian subsidiary, CSC Pharmaceuticals, whereby it will distribute Iclusig in countries in central and eastern Europe.

In territories outside the United States and Europe, we provide for the sale and distribution of Iclusig through partnership or distributorship arrangements. In December 2014, we entered into a co-development and commercialization agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, under which Otsuka has exclusive rights to commercialize Iclusig in Japan and nine other Asian countries and to fund future clinical development in those countries. We expect to file for marketing approval in Japan in collaboration with Otsuka in the second half of 2015. In Australia, we obtained marketing approval for Iclusig in November 2014 and will distribute Iclusig through Specialised Therapeutics Australia Pty Ltd, under a distribution agreement we entered into in January 2014 that covers Australia and New Zealand. In Israel, we entered into a distribution agreement with Medison Pharma Ltd. in August 2014 and filed for marketing approval which is expected in 2015. We have also filed a marketing authorization application for Iclusig in Canada which is expected to be approved in 2015.

Ongoing Development of Iclusig

Initial approval of Iclusig in the United States in the first quarter of 2013 through a limited number of specialty pharmacies and specialty distributors and we charged approximately $115,000,Europe was based on a wholesale basis, for an annual supply of the approved dose of Iclusig.

On October 9, 2013, we announced results of our review of updated clinical data from the pivotal Phase 2 PACE (Ponatinib Ph+ALL andCMLEvaluation) trial in patients with CML or Ph+ ALL who were resistant or intolerant to prior TKI therapy, or who had the T315I mutation of BCR-ABL. The PACE trial is fully enrolled and we continue to treat and follow patients in this trial who continue to respond to treatment. We also continue to treat and follow patients in our first, Phase 1 clinical trial of Iclusig and our actions following consultationsin heavily pre-treated patients with the FDA. In the review of the clinical data, with a median follow up of 24 months, serious arterial thrombosis occurred in 11.8% of Iclusig-treated patients, compared to 8% after 11 months of follow-up reflected in the previously approved USPI. In addition, at 24 months, serious venous occlusion occurred in 2.9% of Iclusig-treated patients, compared to 2.2% in the previously approved USPI. Based upon our review and the FDA consultations, we paused patient enrollment in all clinical trials of Iclusig and the FDA placed a partial clinical hold on all additional patient enrollment in clinical trials of Iclusig.

On October 31, 2013, in response to a request by the FDA, we announced that we temporarily suspended the marketing and commercial distribution of Iclusig in the United States while we negotiated updates to the USPI for Iclusig and the implementation of a risk mitigation strategy with the FDA.

On December 20, 2013, we announced that the FDA had approved revised USPI and a Risk Evaluation and Mitigation Strategy,resistant or REMS, that allowed for the immediate resumption of the marketing and commercial distribution of Iclusig. Iclusig is now approved in the United States for the treatment of adult patients with:

The FDA granted approval of the revised USPI based on its review of the Iclusigwhich was initiated in 2008; our Phase 2 clinical trial data, including 24-month follow-up of the PACE trial. The boxed warning has been revised to alertin CML patients in Japan; and healthcare professionals to the risk of vascular occlusive events and includes a new warning for heart failure.our Phase 2 clinical trial in patients with gastrointestinal stromal tumors. In addition, neuropathyIclusig is being studied in ongoing investigator-sponsored trials in settings including first line and ocular toxicity have been added as warnings,second line CML, acute myeloid leukemia, or AML, non-small cell lung cancer, or NSCLC, and dose reduction recommendations have been strengthened. We also agreed to additional post-marketing requirements as described further below. The starting dosemedullary thyroid cancer, or MTC. Our development of Iclusig remains 45mg daily. On January 17, 2014, we announced that we had resumed marketingalso includes ongoing activities in manufacturing, quality, safety and distribution of Iclusig in the United States through an exclusive specialty pharmacy with a wholesale price of approximately $125,000 for an annual supply of the approved dose of Iclusig.regulatory functions.

In addition to focusing our efforts on the re-launch of Iclusig in the United States, in 2014,2015, we plan to invest ininitiate studies designed to better understand the safety profile of Iclusig in resistant and intolerant CML and Ph+ ALL patients, with the objective of improving the balance of benefit and risk for these patients as post-marketing commitments. We expect that thesecommitments, as well as studies will include designed to evaluate its use in earlier lines of therapy. These studies include:

Based upon the announcements and actions taken in October 2013 concerning the safety, marketing and commercial distribution, and further clinical development of Iclusig in the United States, we engaged in discussions with the European Medicines Agency, or EMA, regarding revised prescribing information for Iclusig. On November 8, 2013, the EMA announced that Iclusig’s product information should be updated to include strengthened warnings for cardiovascular risk and guidance on optimizing the patient’s cardiovascular therapy before starting treatment. In addition, the EMA has commenced an in-depth review, known as an Article 20 referral, of the benefits and risks of Iclusig to better understand the nature, frequency and severity of events obstructing the arteries or veins, the potential mechanism that leads to these side effects and whether there needs to be a revision in the dosing recommendation for Iclusig. We expect the results of this review in mid-2014.

We have also filed marketing authorization applications for Iclusig in Switzerland (which was approved in February 2014), Canada and Australia and plan to file for marketing authorization for Iclusig with regulatory authorities in Japan. Each of these regulatory authorities has its own processes and timelines for the review and approval of marketing authorization applications and such reviews are ongoing at this time. We are discussing the announcements regarding updated Iclusig clinical data with these other foreign regulatory agencies.

Other Development Matters

In July 2012, we initiated

In addition, Iclusig is being studied in various investigator-sponsored trials in indications including first line and second line CML, acute myeloid leukemia or AML, non-small cell lung cancer or NSCLC, and medullary thyroid cancer or MTC. The FDA’s partial clinical hold has been lifted on the MTC trial and we expect the clinical hold will be lifted on the other trials in 2014. We expect to initiatethat additional investigator-sponsored clinical trials will be initiated in 20142015 in indications including Ph+ ALL, blast phase CML, AML and endometrial cancer.various indications.

AP26113Brigatinib (AP26113)

AP26113Brigatinib (AP26113) is an investigational inhibitor of anaplastic lymphoma kinase, or ALK. In non-clinicalALK was first identified as a chromosomal rearrangement in anaplastic large-cell lymphoma, or ALCL. Genetic studies AP26113 also demonstratedindicate that abnormal expression of ALK is a key driver of certain types of non-small cell lung cancer, or NSCLC, and neuroblastomas, as well as ALCL. Since ALK is generally not expressed in normal adult tissues, it inhibits epidermal growth factor receptor, or EGFR, and c-ros oncogene-1, or ROS1. All of these kinases are clinically validated targets in NSCLC.represents a highly promising molecular target for cancer therapy.

We initiated patient enrollment inare currently conducting a Phase 1/2 clinical trial of AP26113brigatinib, which we initiated in the third quarter of 2011. The protocol was designed to enroll approximately 50 to 60 patients inprimary objectives of the Phase 1 portion of the trial were to determine the maximum tolerated dose and approximately 125 patients in the Phase 2 portionrecommended dose for further study and to characterize its safety and preliminary anti-tumor activity. The primary purpose of the trial. We began enrollment in the Phase 2 portion of the trial is to evaluate the efficacy of brigatinib in the second quarterpatients with TKI-naïve and crizotinib-resistant ALK-positive NSCLC, including in patients with brain metastases after crizotinib treatment. Results of 2013. In September 2013, we announced updated clinical results from the ongoing Phase 1/2 clinical trial. The study resultsthis trial to date show robust anti-tumor activity in patients with TKI-naïve and crizotinib-resistant ALK-positive NSCLC, including in patients with brain metastases after crizotinib treatment. Crizotinib is the currently available first-generation ALK inhibitor.

We plan to commencecommenced a pivotal trial of AP26113brigatinib in the first quarter of 2014 in ALK-positivepatients with locally advanced or metastatic NSCLC patients who are resistantwere previously treated with crizotinib. The ALTA (ALK inLung CancerTrial ofAP26113) trial is designed to crizotinib, following confirmation ofdetermine the safety and efficacy profileof brigatinib in refractory ALK+ NSCLC patients. We anticipate that the results of the selected dose of AP26113ALTA trial will form the basis for our application for initial regulatory approval. We expect to achieve full patient enrollment in the ongoing phase 1/2 clinical trial. We have decided to focus our development efforts on ALK-positive NSCLC patients, both treatment naïve and resistant, and those with CNS activity. We will no longer enroll EGFR, ROS1, or other patientsALTA trial in the ongoingthird quarter of 2015 and to file for approval of brigatinib in the United States in 2016.

Our development of brigatinib also includes key product and process development activities to support our clinical trials as well as the anticipated filing of an NDA and potential commercial launch of the product, quality and stability studies and pharmacovigilance and regulatory activities.

We are currently pursuing and a partnership to co-develop and co-commercialize brigatinib. We expect that such a partnership will allow us to continue to leverage our existing infrastructure and capabilities, as well as support a randomized, first-line trial of brigatinib vs. crizotinib in ALK+ NSCLC. A partnership may also support the exploration of new combination therapies in lung cancer that include brigatinib and other approved and unapproved medicines.

AP32788

At the end of 2014, we nominated our next internally discovered development candidate, AP32788. This orally active TKI has a unique profile against a validated class of mutated targets in non-small cell lung cancer and certain other solid tumors and may address an unmet medical need. We are currently performing pharmacology, toxicology and other studies necessary to support the filing of an investigational new drug (IND) application for AP32788 in 2015. We expect to begin a Phase 1/2 clinical trial.

Ridaforolimusproof-of-concept trial in 2016.

Ridaforolimus is an investigational inhibitor of the mammalian target of rapamycin, or mTOR, that we discovered and developed internally and later licensed in 2010 to Merck & Co., Inc., or Merck. Under the license agreement, Merck was responsible for all activities related to the development, manufacture and commercialization of ridaforolimus and funds 100 percent of all ridaforolimus costs incurred after January 1, 2010. The agreement provided that Merck would develop ridaforolimus in multiple oncology indications. On February 20, 2014, we received notice from Merck that it is terminating the license agreement, which termination will become effective nine months from the date of the notice and at which time all rights to ridaforolimus in oncology licensed to Merck will be returned to us.

We also have entered into license agreements with Medinol and ICON underpursuant to which these companiesthey are pursuing the development ofdeveloping drug-eluting stents and other medical devices to deliver ridaforolimus to prevent restenosis, or reblockage, of injured vessels following interventions in which stents are used in connectionconjunction with balloon angioplasty.

We are responsible for supplying In 2014, Medinol and ICON with, and they have agreed to purchase from us, certain quantities of ridaforolimus for use in their development, manufacture and sale of the stents and other medical devices. Each of these licenses provide for potential milestone payments to us based on achievement of specified development, regulatory and/or sales objectives as well as royalty payments upon commercialization of products. There can be no assurance that any future payments will be received under these license agreements.

On January 14, 2014, we jointly announced with Medinol the initiation ofinitiated two registration trials of Medinol’s stent system that incorporates ridaforolimus. The two trials are randomized, single-blind, global studies. The studies will enroll approximately 2,200 patients with coronary artery disease. Under the terms of our agreement with Medinol, the commencement of enrollment in the clinical trials, along with the submissionUnited States and other countries of its NIRsupreme^TM Ridaforolimus-Eluting Coronary Stent System incorporating ridaforolimus and submitted an investigational device exemption, or IDE, withto the FDA, will triggerFDA. These actions triggered milestone payments to us of $3.8 million expected in 2014.

In 2010, we had licensed ridaforolimus to Merck & Co., Inc., or Merck, for oncology applications. In February 2014, we received notice from Merck that it was terminating the license agreement. Per the terms of the license agreement, this termination became effective in November 2014 at which time all rights to ridaforolimus in oncology licensed to Merck were returned to us.

Our Discovery Programs

Our research and development programs are focused on discovering and developing small-molecule drugs that regulate cell signaling for the treatment of cancer. Many of the critical functions of cells, such as cell growth, differentiation, gene transcription, metabolism, motility and survival, are dependent on signals carried back and forth from the cell surface to the nucleus and within the cell through a system of molecular pathways. When disrupted or over-stimulated, such pathways may trigger diseases such as cancer. Our research focuses on exploring cell-signaling pathways, identifying their role in specific cancers and cancer subtypes, and discovering drug candidates to treat those cancers by interfering with the potential for additional regulatory, clinicalaberrant signaling pathways of cells. The specific cellular proteins blocked by our product candidates have been well characterized as cancer targets. Iclusig and sales milestones,our product candidates brigatinib, AP32788 and ridaforolimus, have been developed in-house through the integrated use of structure-based drug design and computational chemistry, and their targets have been validated with techniques such as well as royalties on product sales.

Critical Accounting Policies and Estimates

Our financial position and results of operations are affected by subjective and complex judgments, particularly in the areas of revenue recognition, accrued product development expenses, inventory, leased buildings under construction and stock-based compensation.

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. When the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met.

Product Revenue, net

We commercially launched Iclusig in the United States on January 3, 2013 and in certain European countries in the second half of 2013. As noted above, in the fourth quarter of 2013, we temporarily suspended the marketing and commercial distribution of Iclusig in the United States. In January 2014, we resumed marketing and commercial distribution of Iclusig in the United States under the revised USPI and the REMS program.

Through October 31, 2013, we sold Iclusig in the United States through a limited number of specialty distributors and specialty pharmacies. Title and risk of loss transferred upon receipt of Iclusig by these customers. Specialty pharmacies dispensed Iclusig directly to patients in fulfillment of prescriptions. Specialty distributors sold Iclusig to hospital pharmacies and community practice pharmacies, referred to as healthcare providers, for treatment of patients. We provided the right of return to customers in the United States for unopened product for a limited time before and after its expiration date. Iclusig’s shelf-life in the United States is eighteen months for 15mg tablets and twelve months for 45mg tablets, measured from date of manufacture. In the United States, we deferred the recognition of revenue until Iclusig was sold to the healthcare providers or dispensed to the patients. Revenue recognition was deferred due to the inherent uncertainties in estimating future returns of Iclusig from our United States customers, due to factors such as estimated product demand and the limited shelf lifeshelf-life of Iclusig. Upon the temporary suspension of marketing and commercial distribution in the United States in the fourth quarter of 2013, we terminated our existing contracts with these specialty distributors and specialty pharmacies and we accepted product returns of Iclusig from these customers. The majority of these product returns related to product held by specialty distributors and specialty pharmacies that had not yet been sold to healthcare

providers or dispensed to patients orand thus not yet recognized as revenue. As a result, these returns were recorded as a reduction of accounts receivable and deferred revenue. For customers that had already paid for delivered product, a liability was recorded in other current liabilities. Upon receiving approval to resume marketing and commercial distribution in the United States, we revised our distribution strategy and plan to sell Iclusig through one exclusivea single specialty pharmacy who will distributewhich dispenses Iclusig to customers.patients. Title and risk of loss transfers to the specialty pharmacy upon its receipt of Iclusig.

In Europe, we sell Iclusig to retail pharmacies and hospital pharmacies that dispense product directly to patients. These customers are provided with a limited right of return, such as instances of damaged product, and the criteria for revenue recognition is metrecognized at the time of shipment to these customers provided all other revenue recognition criteria are met.

Product revenues are recorded net of estimated gross to net deductions, including government-mandated rebates and chargebacks, distribution fees and other deductions. Reserves are established for these deductions and actual amounts incurred are offset against applicable reserves. We reflect these reserves as either a reduction in the related account receivable from the customer or as an accrued liability, depending on the nature of the deduction. These reserves are based on management’s estimates that consider payor mix in target markets, industry benchmarks and experience to date. These estimates involve a high degree of judgment and are periodically reviewed and adjusted as necessary.

We have individual contracts or standard terms of sale with our customers and delivery occurs when a customer receives Iclusig. We evaluate the creditworthiness of each of our customers to determine whether collection is reasonably assured and have determined that all of our customers are creditworthy. In order to conclude that the price is fixed or determinable, we must be able to calculate our gross product revenues from our customers and reasonably estimate our net product revenues. Our gross product revenues are based on the fixed wholesale acquisition cost for Iclusig that we charge our customers. We estimate our net product revenues by deducting from our gross product revenues (i) trade allowances, such as invoice discounts for prompt payment and customer fees, (ii) estimated government and private payor rebates, chargebacks and discounts, such as Medicare and Medicaid reimbursements in the United States, and (iii) estimated costs of incentives offered to certain indirect customers including patients. These gross to net deductions, and in particular the estimates for rebates, chargebacks and discounts, require us to make significant judgments that materially affect our recognition of net product revenues related to Iclusig.

Trade Allowances: We provide invoice discounts on Iclusig sales to certain of our customers for prompt payment and pay fees for certain services, such as fees for certain data that customers provide to us. We expect our customers to earn these discounts and fees, and therefore deduct these discounts and fees from our gross product revenues when revenue is recognized.

Rebates, Chargebacks and Discounts: In the United States, we contract with Medicare, Medicaid, other government agencies and various private organizations (collectively, payors) to make Iclusig, when commercially available, eligible for purchase by, or for partial or full reimbursement from, such payors. We estimate the rebates, chargebacks and discounts we will provide to payors and deduct these estimated amounts from our gross product revenue at the time the revenue is recognized. We estimate rebates, chargebacks and discounts based on (1) the contractual terms of agreements in place with payors, (2) the government-mandated discounts applicable to government-funded programs, and (3) the estimated payor mix. Government rebates that are invoiced directly to us are recorded in accrued liabilities on our consolidated balance sheet. For qualified programs that can purchase our product at a lower contractual government or commercial price, the customers charge back to us the difference between their acquisition cost and the lower contractual government or commercial price, which we record as an allowance against accounts receivable on our consolidated balance sheet. In Europe, we are subject to mandatory rebates and discounts in markets where government-sponsored healthcare systems are the primary payers for healthcare. These rebates and discounts are recorded when revenue is recognized and included in accrued liabilities on our consolidated balance sheet.

The value of the rebates, chargebacks and discounts provided to third-party payors per course of treatment vary significantly and are based on government-mandated discounts and our arrangements with other third-party payors. In the United States, typically, government-mandated discounts are significantly larger than discounts provided to other third-party payors. In order to estimate our total rebates, chargebacks and discounts, we estimate the percentage of prescriptions that will be covered by each third-party payor, which is referred to as the payor mix. In order to estimate the payor mix for Iclusig, we used both (i) information obtained from our customers and third parties regarding the payor mix for Iclusig, and (ii) historical industry information regarding the payor mix for competitive products.products, and (iii) our actual history since our commercial launch of Iclusig. We track available information regarding changes, if any, to the payor mix for Iclusig, to our contractual terms with third-party payors and to applicable governmental programs and regulations. If necessary, we adjust our estimated rebates, chargebacks and discounts based on new information, including information regarding actual rebates, chargebacks and discounts for Iclusig, as it becomes available. If we increased our estimate of the percentage of patients receiving Iclusig covered by third-party payors entitled to government-mandated discounts by five percentage points, our United States net product revenues would have decreased by approximately 1.2%1 percent in 2013.2014. In the European countries where we currently sell Iclusig, rebates, as applicable, are fixed percentages of product sales.

Other Incentives: Other incentives that we offer include co-pay assistance for our patients and distribution fees offered to our customers. Our co-pay assistance programs assist commercially insured patients who have coverage for Iclusig and who reside in states that permit co-pay assistance programs. Our co-pay assistance program is intended to reduce each participating patient’s portion of the financial responsibility for Iclusig’s purchase price to a specified dollar amount. In each period, we record the amount of co-pay assistance provided to eligible patients based on the terms of the program.

PatientsIn 2012, prior to obtaining marketing authorization for Iclusig in Europe, are also being treated with Iclusig in the framework of clinical trials and related studies and in named patient programs. In 2012, the French regulatory authority granted anAutorisation Temporaire d’Utilisation (ATU), or Temporary Authorization for Use, for Iclusig for the treatment of patients with CML and Ph+ ALL under a nominative program on a patient-by-patient basis. We began shipping Iclusig under this program during the year ended December 31, 2012. Until all revenue recognition criteria are met (including a fixed or determinable price), all amounts received under this program (approximately $8.8 million as of December 31, 2013) have not been recorded as revenue. This program concluded on September 30, 2013 and all outstanding amounts due from customer under this program ($7.7 million) have been received. Upon completion of this program, we became eligible to ship Iclusig directly to customers in France as of October 1, 2013. These shipments totaled $10.6 million for the period from October 1, 2013 to December 31, 2014, of which $17.1 million was received as of December 31, 2014. Shipments under these programs have not met the criteria for revenue recognition as the price for these shipments is not yet fixed or determinable. TheseThe price of Iclusig in France will become fixed or determinable upon completion of pricing and reimbursement negotiations, which is expected in the first half of 2015. At that time, we will record revenue related to cumulative shipments totaled $4.1 millionas of that date in France, net of amounts that will be refunded to the health authorities based on the results of the pricing and reimbursements negotiations.

License Revenue

We generate revenue from license and collaboration agreements with third parties related to use of our technology and/or development and commercialization of products. Such agreements typically include payment to us of non-refundable upfront license fees, regulatory, clinical and commercial milestone payments, payment for services or supply of product and royalty payments on net sales. Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price of each deliverable and the appropriate revenue recognition principles are applied to each unit. For arrangements with multiple elements, where we determine there is one unit of accounting, revenue associated will be recognized over the period beginning with the commencement of the final deliverable in the arrangement and over a period reflective of our longest obligation period within the arrangement on a straight-line basis.

At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether:

In making this assessment, we evaluate factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required, and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement. We recognizes revenues related to substantive milestones in full in the period in which $1.8 million was received asthe substantive milestone is achieved. If a milestone payment is not considered substantive, we recognize the applicable milestone over the remaining period of December 31, 2013. performance.

We will record these shipments, as well as shipments underrecognize royalty revenue, if any, based upon actual and estimated net sales by the ATU program, as revenue oncelicensee of licensed products in licensed territories, and in the price is fixed or determinable.period the sales occur.

Accrued Product Development Expenses

We accrue expenses for our product development activities based on our estimates of services performed or progress achieved pursuant to contracts and agreements with multiple vendors including research laboratories, contract manufacturers, contract research organizations and clinical sites. These estimates are recorded in research and development expenses in our consolidated statements of operations and are reflected in accrued product development expenses on our consolidated balance sheet. At December 31, 2013,2014, we reported accrued product development expenses of $16.7$14.0 million on our consolidated balance sheet.

Our estimates of services performed or progress achieved are based on all available information we have from reports, correspondence and discussions with our vendors. Our estimates of accrued expenses based on such information require judgment. Actual costs may vary from such estimates. When such variances become known, we adjust our expenses accordingly.

Inventory

Inventory costs consist of costs related to the manufacturing of Iclusig, which are primarily the costs of contract manufacturing. We value our inventory at the lower of cost or market. We determine the cost of our inventory on a specific identification basis. IfWe evaluate our inventory on a quarterly basis and, if we identify excess, obsolete or unsalable items, inventory, is written downwe adjust the carrying value of such inventory to net realizable value in the period in which it is identified. Estimates of excess inventory consider inventory levels, our projected sales of the product for the foreseeable future and the estimated shelf-lives of our inventory components. At the time of launch in the United States, Iclusig 15mg tablets had a shelf-life of twelve months, which has subsequently been extended to eighteen months, and Iclusig 45mg tablets have a shelf-lifeshelf life of twelve months. In Europe, the shelf-life of both 15mg and 45mg tablets is twenty-four months. Inventory that is not expected to be used within one year is recorded as a non-current asset.

Prior to receiving approval from the FDA in December 2012 to sell Iclusig, we expensed all costs incurred related to the manufacture of Iclusig as research and development costs because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history for our Company of regulatory approval of drug candidates. Accordingly,

the manufacturing costs for Iclusig included in our cost of product revenue for 2013 areand 2014 were significantly lower than full manufacturing cost, as most of these costs havehad been recorded as research and development expenses in prior periods.

As a result ofFollowing the temporary suspension of Iclusig in the United States and the revised USPI, which reducesreduced the addressable patient population for whom Iclusig is currently indicated, the current commercial opportunitywe revised our forecasts of demand for Iclusig has been reduced from what was expected underand have incorporated such revisions in our evaluations of the previously approved USPI. Due to this expected decrease in demand for Iclusig,carrying value of our inventory. Consequently, in the fourth quarter of 2013, we assessed the need for an inventory write-down for excess inventory for our inventory on hand at December 31, 2013. This review included all components of inventory, including raw materials, work-in-process and finished goods inventory. Inventory balances on hand were compared to the expected uses of inventory in the foreseeable future, taking into account the estimated future global demand for Iclusig as well as the estimated shelf-life of our inventory components. From this analysis, we determined that approximately $7.1 million of our inventory was excess at December 31, 2013 and we recorded a chargecharges to cost of product revenue to write down inventory for this amount in the fourth quarter of 2013. In connection with this review, we also charged $1.3$8.9 million of vendor advances to cost of product revenue as the advances relate to future inventory production that will result in excess inventory. In addition, during 2013 we also wrote down finished goods that will expire and not be sold. Our total charges for 2013 for excess inventory as well asand finished goods inventory that will expire before it is sold, was approximately $8.9 million.estimated to reach the end of its shelf life prior to sale. In 2014, we recoded an additional $4.2 million in charges for excess inventory. Based on our current inventory levels, projected production schedules and levels and updated forecasts of demand for Iclusig, we do not anticipate any material charges for excess inventory in the foreseeable future. Total inventory on hand at December 31, 2014 and 2013 was approximately$1.4 million and $3.4 million.

As we re-launch Iclusig in the United States in 2014, there is no assurance that we will be successful in commercializing Iclusig in the United States, in Europe or in other territories where we await regulatory approval or have yet to file for regulatory approval. In addition, the outcome of the EMA’s review of Iclusig is uncertain. We expect that the developments announced in October 2013 concerning the safety, marketing and commercial distribution and further clinical development of Iclusig in the United States and the EMA’s review will adversely impact our efforts to commercialize Iclusig in patients with CML and Ph+ ALL. Our ability to obtain product revenue from the sales of Iclusig will depend on our ability to continue to commercialize Iclusig in the United States and in Europe and other territories, as well as the success of our efforts to develop Iclusig in other patient populations and cancers. If we are not successful in generating sufficient levels of sales from Iclusig, additional inventory write-downs may be required. In addition, we may incur additional inventory costs as we complete planned production runs related to qualification of new manufacturing processes or vendors in the future.million, respectively.

Due to the inventory costs that were recorded as research and development expenses as well as the write-downwrite-downs of inventory, we expect that our cost of inventory sold in the future will be significantly less than full manufacturing cost. The time period over which this reduced-cost inventory is consumed will depend on a number of factors, including the amount of future sales of Iclusig in the United States and in Europe, the ultimate use of this inventory in either commercial sales, clinical development or other research activities and the ability to utilize inventory prior to its expiration date. We expect that as this reduced-cost inventory is used in the future, the cost of product revenue, before consideration of any future required inventory write-downs or reserves, will be in the low single digits as a percentage of net product revenue.

For 2013, our cost of product revenue would have been approximately $10.0 million, if the related costs were not previously expensed as research and development expenses prior to receiving FDA approval.

Leased Buildings Under Construction

In January 2013, we entered into a lease agreement for approximately 244,000 square feet of laboratory and office space in two adjacent, connected buildings which are under construction in Cambridge, Massachusetts. Construction is expected to be completed in early 2015. Under the terms of the original lease, we leased all of the rentable space in one of the two buildings and a portion of the available space in the second building. In September 2013, we entered into a lease amendment to lease all of the remaining space, approximately 142,000 square feet, in the second building, for an aggregate of 386,000 square feet in both buildings. The terms of the lease amendment were consistent with the terms of the original lease. Construction of the core and shell of the buildings is expected to be completed in the first half of 2015 at which time construction of tenant improvements in the buildings will commence. Construction of the tenant improvements is expected to be completed in the first half of 2016.

In connection with this lease, the landlord is providing a tenant improvement allowance for the costs associated with the design, engineering, and construction of tenant improvements for the leased facility. The tenant improvements will be in accordance with our plans and include fit-out of the buildingbuildings to construct appropriate laboratory and office space, subject to approval by the landlord. To the extent the stipulated tenant allowance provided by the landlord is exceeded, we are obligated to fund all costs incurred in excess of the tenant allowance. The scope of the planned tenant improvements do not qualify as “normal tenant improvements” under the lease accounting guidance. Accordingly, for accounting purposes, we are the deemed owner of the buildings during the construction period.

As construction progresses, we record the project construction costs incurred as an asset, which reflects estimated replacement cost, along with a corresponding facility lease obligation, on the consolidated balance sheet for the total amount of project costs incurred whether funded by us or the landlord. Upon completion of the buildings, we will determine if the asset and corresponding financing obligation should continue to be carried on our consolidated balance sheet under the accounting guidance. Based on the current terms of the lease, we expect to continue to be the deemed owner of the buildings upon completion of the construction period.

GivenFollowing our involvementannouncements in the designfourth quarter of tenant improvements2013 concerning Iclusig, we re-assessed our current and future need for space in Cambridge and expect to require less space than previously planned. We could not terminate the leased facility, thenew lease establishes dates by whichwithout substantial cost, and we arewould have been required to submit plansmake substantial expenditures to make necessary improvements to our existing facilities. We are, therefore, planning to sub-lease approximately 170,000 square feet of the 386,000 square feet of the space comprising the new buildings. We are now planning the fit-out of the buildings and drawingsexpect the space to be ready for tenant improvements consistent withoccupancy in the timeline forfirst half of 2016. Due to delays in completion of the construction including tenant improvements, and readinessoccupancy of the facility for occupancy. In connection with the partial clinical hold of Iclusig imposed by the FDA and the temporary suspension of marketing and commercial distribution of Iclusig in the United States in October 2013, plans and drawings for the tenant improvements for this facility have not been approved by us and have not at this time, been completed and submitted in accordance with the timelines specified in the lease. If delay of submission of plans and drawings in accordance with the timelines specified in the lease results in a delay in the occupancy date for the facility,buildings, we mayexpect to be required to commence rentlease payments for the facility prior to occupancy. We are currently in discussions with the landlord regarding revisions to our plans, the timelinestiming related to submissionconstruction of such planstenant improvements and occupancy of the buildings and other matters in the lease.

Stock-Based Compensation Expense

Stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award if performance and service conditions are expected to be achieved. We use the Black-Scholes option-pricing model to estimate the fair value of stock options. Option valuation models require the input of assumptions, including the expected life of the stock-based awards, the estimated stock price volatility, the risk-free interest rate, and the expected dividend yield. Estimated volatility is based on a combination of historical and implied volatility. Expected life is based on our historical experience. The risk-free interest rate is based on U.S. Treasury interest rates with terms consistent with the expected life of the stock-based award. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future. The forfeiture rate is based upon historical experience. We adjust the estimated forfeiture rate based upon our actual experience. In addition, we have performance based awards that are valued at the fair value of shares as of the grant date and compensation expense is recognized based on the number of shares expected to vest under the terms of the award under which

they are granted, if performance conditions are expected to be met. The determination of whether the performance condition will be met requires significant judgment, including estimating the probability and timing of future events. Compensation cost for certain awards may increase by up to 60%60 percent of the cost estimated at target award levels based upon the eventual outcome of the performance conditions. We recognized stock compensation expense of $2.6$5.0 million as of December 31, 20132014 for performance awards that are expected to vest in the future.

Results of Operations

For the Years Ended December 31, 2014 and 2013

Revenue

Our revenues for 2014, as compared to 2013, were as follows:

For the Years Ended December 31, 2013 and 2012

Revenue

Our revenues for 2013, as compared to 2012, were as follows:

The increase in product revenue, net reflects the commercial launch of Iclusig, our first approved cancer medicine, in the United States and in Europe in 2013. Prior to the temporary suspension of marketing and commercial distribution of Iclusig in the United States in the fourth quarter of 2013, we recognized revenue on a sell-through basis. In Europe, we generally recognize revenue upon shipment to our customers. Product revenue is reduced by certain gross to net deductions. In 2013, these gross to net deductions, as a percentage of gross revenue, were approximately 8.7%8.7 percent and related to reductions in the United States including government-related discounts, as well as government-mandated rebates in Europe.

We expect that our product revenue will increase in 2014 compared to 2013 due primarily to increasing sales of Iclusig in Europe as we obtain pricing and reimbursement approval in various countries in Europe during the year. Although we have resumed marketing and commercial distribution of Iclusig in the United States in January 2014, the revised USPI reduces the addressable patient population which we expect will adversely impact our sales of Iclusig in the United States. Our ability to obtain product revenue from sales of Iclusig will depend on the impact of the changes to the USPI and the implementation of a REMS program, the effectiveness of our commercial strategy for marketing Iclusig in the United States, including pricing and reimbursement strategies, the outcome of the EMA’s review of Iclusig, the acceptance of Iclusig by patients, the medical community and third party payors in the United States and Europe, as well as the success of our efforts to develop Iclusig in other patient populations and cancers. There can be no assurance that we will be successful in our continuing commercialization of Iclusig in the United States or Europe or the receipt of satisfactory pricing and reimbursement approvals in Europe, or that we will be able to obtain additional regulatory approvals and new sources of product revenue.

We recognized $296,000 of license revenue in 2013, pursuant to a license agreement related to our ARGENT technology in accordance with our revenue recognition policy.technology. Revenue in 2012 also consisted of $514,000 of license revenue related to our ARGENT technology.

Operating Expenses

Cost of Product Revenue

Our cost of product revenue relates to sales of Iclusig upon commercial launch in the United States commencing in January 2013 and in certain European countries in the second half of 2013. For 2013, our cost of product revenue totaled $9.6 million and included the following:

Prior to receiving regulatory approval for Iclusig from the FDA in December 2012, we expensed as research and development costs all costs incurred in the manufacturing of Iclusig to be sold upon commercialization. For Iclusig sold in 2013, the majority of manufacturing costs incurred had previously been expensed. Therefore, the cost of inventory sold included limited manufacturing costs and the cost of packaging and labeling for commercial sales. If product-related costs had not previously been expensed as research and development prior to receiving FDA approval, the cost to produce the Iclusig sold would have been approximately $594,000 and total cost of product revenue would have been approximately $10.0 million in 2013.

Due to the temporary suspension of U.S. marketing and commercial distribution and the expected decrease in demand for Iclusig, we assessed the need for an inventory write-down for excess inventory for our inventory on hand at December 31, 2013. This review included all components of inventory, including raw materials, work-in-process and finished goods inventory. Inventory balances on hand were compared to the expected uses of inventory in the foreseeable future, taking into account the estimated future global demand for Iclusig as well as the estimated shelf-life of our inventory components. From this analysis, we determined that approximately $7.1 million of our inventory was excess at December 31, 2013 and we recorded a charge to cost of product revenue to write down inventory in the fourth quarter of 2013. In connection with this review, we also charged $1.3 million of vendor advances to cost of product revenue as the advances relate to future inventory production that will result in excess inventory. In addition, during 2013 we also wrote down finished goods that will expire and not be sold. Our total charges for 2013 for excess inventory, as well as finished goods inventory that will expire before it is sold, was approximately $8.9 million.

Research and Development Expenses

Research and development expenses increased by $18.2 million, or 13 percent, to $162.9 million in 2013, compared to $144.7 million in 2012, for the reasons set forth below.

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

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

We group our research and development, or R&D, expenses into two major categories: direct external expenses and all other R&D expenses. Direct external expenses consist of costs of outside parties to conduct and manage clinical trials, to develop manufacturing processes and manufacture product candidates, to conduct laboratory studies and similar costs related to our clinical programs. These costs are accumulated and tracked by product candidate. All other R&D expenses consist of costs to compensate personnel, to purchase lab supplies and services, to lease, operate and maintain our facility, equipment and overhead and similar costs of our research and development efforts. These costs apply to our clinical programs as well as our preclinical studies and discovery research efforts. Product candidates are designated as clinical programs once we have filed an IND with the FDA, or a similar filing with regulatory agencies outside the United States, for the purpose of commencing clinical trials in humans.

Our R&D expenses for 2013, as compared to 2012, were as follows:

In 2013 and 2012, our clinical programs consisted of (i) Iclusig, our pan BCR-ABL inhibitor, and (ii) AP26113,brigatinib (AP26113), our ALK inhibitor.

Direct external expenses for Iclusig were $59.6 million in 2013, an increase of $5.0 million, or 9%,9 percent, as compared to 2012. The increase is due primarily to an increase in clinical trial costs of $13.6 million which was due to increases related to ongoing treatment of patients in existing and new trials, including the EPIC trial and the related comparator drug purchases, our Phase 2 GIST trial, our Phase 1/2 clinical trial of Iclusig in Japan, our pediatric trial of Iclusig, and increased costs associated with investigator-sponsored trials, offset by a decrease in costs related to our Phase 2 PACE clinical trial as treatment of patients and other related activities decreased in 2013 compared to 2012. As noted above, we announced the discontinuation of the EPIC trial in October 2013 and a pause on additional patient enrollment, as well as a partial FDA clinical hold, for all other Iclusig trials. The increase in the clinical trial costs was offset, in part, by a decrease in contract manufacturing costs of $5.9 million, and a decrease in other non-clinical support costs of $2.2 million. Contract manufacturing costs decreased as costs to manufacture Iclusig in 2013 are now being capitalized in inventory while such costs in 2012, prior to the FDA approval of Iclusig, were included in research and development expense. Non-clinical support costs decreased due primarily to the completion of the regulatory filings in support of the Iclusig NDA and in support of the initiation of the Phase 1/2 clinical trial in Japan.

Direct external expenses for AP26113brigatinib were $17.4 million in 2013, an increase of $11.4 million, or 189%,189 percent, as compared to 2012. The increase in expenses for AP26113brigatinib was due primarily to an increase in clinical trial costs related to the initiation of additional trials and an increase in contract manufacturing costs due to the manufacture of additional material to supply the Phase 1/2 clinical trial and readiness to support additional trials.

All other R&D expenses increased by $1.8 million, or 2%,2 percent, in 2013, as compared to 2012. This increase was primarily due to an increase in personnel costs of $7.4 million, due to higher compensation and related costs from an increase in the number of employees to support expanding R&D activities and costs associated with the employee workforce reduction in the fourth quarter of 2013, an

increase in lab expenses of $1.2 million, related to increased discovery efforts, and an increase in general and other expenses of $861,000 related to travel expenses and training costs. These increases were offset primarily by a decrease in professional fees of $3.9 million and a decrease in intellectual property costs of $3.6 million due primarily to an impairment charge recorded for ridaforolimus technology in 2012.

On November 7, 2013, we reduced our United States workforce, including personnel in research and development, following the temporary suspension of marketing and commercial distribution of Iclusig in the United States. As a result of these actions, our future research and development activities will focus on key research and development activities for Iclusig, AP26113 and discovery research. We expect that our direct external expenses for Iclusig will decrease in 2014 compared to 2013, primarily due to a reduction in clinical trial and manufacturing related costs. We expect direct external expenses for AP26113 will increase in 2014 compared to 2013 as we focus our resources primarily on the pivotal trial that is planned to begin in the first quarter of 2014. All other R&D expenses in 2014 compared to 2013 are expected to decrease due to the impact of our restructuring actions and as we focus our resources on key research and development activities and discovery research efforts.

The successful development of our product candidates is uncertain and subject to a number of risks. We cannot be certain that any of our products or product candidates will prove to be safe and effective or will meet all of the applicable regulatory requirements needed to receive and maintain marketing approval. Data from preclinical studies and clinical trials are susceptible to varying interpretations that could delay, limit or prevent regulatory approval or could result in label warnings related to or recalls of approved products. As noted above, in October 2013, we announced the results of our review of updated clinical data from the pivotal PACE trial of Iclusig and actions that we took following consultations with the FDA, including a pause in patient enrollment, a partial clinical hold by the FDA, product label changes, and the discontinuation of the EPIC trial. We expect that these developments will adversely impact our efforts to further develop and commercialize Iclusig in CML and Ph+ ALL patients, and our ability to obtain sources of product revenue from the successful development our product candidates will depend on, among other things, our efforts to develop Iclusig in other patient populations and cancers, as well as the success of AP26113 and any other product candidates. Other risks associated with our products and product candidates are described in the section entitled “Risk Factors” in this report.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $85.7 million, or 141 percent, to $146.6 million in 2013, compared to $60.9 million in 2012. This increase was due primarily to an increase in personnel costs of $43.4 million related primarily to compensation and related costs associated with an increase in the

number of employees, including sales and marketing related personnel to support the commercial launch of Iclusig, expanding business activities in the United States and in Europe during 2013 and costs associated with the employee workforce reduction that occurred in the fourth quarter of 2013; an increase in professional services of $23.5 million due to corporate and commercial development initiatives supporting the launch of Iclusig; an increase in general expenses of $10.4 million primarily related to increases in technology costs and travel costs in support of the launch of Iclusig; and an increase in overhead and other expenses of $6.1 million primarily related to increased office, overhead and administrative expenses incurred to support the commercial operations associated with the launch of Iclusig.

On November 7, 2013, as a consequence of our announcements and events in October 2013, as discussed above, we reduced our United States workforce including United States sales force positions and additional selling, general and administrative positions. We expect that selling, general and administrative costs will decrease in 2014 compared to 2013 as a result of the restructuring actions taken and other cost reduction initiatives, offset by costs that we will incur related to the re-launch of Iclusig.

We expect that operating expenses in total, will decrease in 2014 compared to 2013 as a result of these restructuring actions and other cost reduction initiatives. The actual amount of operating expenses will

depend on, among other things, costs related to the re-launch of Iclusig in the United States, the outcome of the EMA’s review of Iclusig, discussions with other regulatory agencies regarding our review of the PACE clinical data, the status of regulatory reviews and timing of potential pricing and reimbursement approvals of Iclusig in Europe, costs related to commercialization of Iclusig in Europe, cost savings from our restructuring efforts, the progress of our product development programs, including on-going and planned clinical trials, results of continuing non-clinical studies and the costs of product and process development activities and product manufacturing.

Other Income (Expense)

Interest Income/Expense

Interest income decreased to $130,000 in 2013 from $240,000 in 2012, as a result of a lower average balance of funds invested in 2013.

Interest expense decreased to $153,000 in 2013 from $199,000 in 2012 as a result of lower average borrowings in 2013.

Foreign Exchange Gain (Loss)

We recognized net foreign exchange transaction losses of $130,000 in 2013 compared to net foreign exchange gains of $71,000 in 2012. The gains and losses are a result of our expansion into Europe as we carry accounts denominated in foreign currencies.

Provision for Income Taxes

Our provision for income taxes for 2013 was $439,000 and reflects estimated taxes for state taxes and taxable income associated with certain foreign subsidiaries. There was no provision for income taxes in 2012.

Operating Results

We reported a loss from operations of $273.6 million in 2013 compared to a loss from operations of $205.1 million in 2012, an increase of $68.5 million, or 33 percent. We also reported a net loss of $274.2 million in 2013, compared to a net loss of $220.9 million in 2012, an increase in net loss of $53.3 million or 24 percent, and a net loss per share of $1.49 and $1.34, respectively. The increase in net loss is largely due to the increase in our operating expenses described above offset in part by product revenue related to the commercial launch of Iclusig in January 2013. Our results of operations for 2014 will vary from those of 2013 and actual results will depend on a number of factors, including our ability to successfully re-launch and commercialize Iclusig in the United States, the outcome of the EMA’s review of Iclusig, our discussions with other regulatory agencies regarding our review of the PACE clinical data, the status of pricing and reimbursement approvals and commercialization in Europe, the progress of our product development programs, ongoing employee and related personnel costs, the progress of our discovery research programs, the impact of any commercial and business development activities and other factors. The extent of changes in our results of operations will also depend on the sufficiency of funds on hand or available from time to time, which will influence the amount we will spend on operations and capital expenditures and the development timelines for our product candidates.

For the Years Ended December 31, 2012 and 2011

Revenue

We recorded total revenue of $558,000 for the year ended December 31, 2012, compared to $25.3 million for the year ended December 31, 2011. Total revenue in 2012 consisted primarily of license revenue pursuant to a license agreement related to our ARGENT technology. Total revenue in 2011 consisted

primarily of a $25 million milestone payment received pursuant to our license agreement with Merck for the acceptance of an application for regulatory approval in Europe of ridaforolimus for the treatment of patients with sarcoma, which was subsequently withdrawn by Merck in November 2012.

Operating Expenses

Research and Development Expenses

Our R&D expenses for 2012 as compared to 2011 were as follows:

In 2012 and 2011, our clinical programs consisted of (i) Iclusig, and (ii) AP26113, for which we filed an IND in June 2011 and commenced a Phase 1/2 clinical trial in the third quarter of 2011.

Direct external expenses for Iclusig were $54.6 million in 2012, an increase of $22.2 million, or 69 percent, compared to 2011 expenses of $32.4 million. The increase was due to an increase in clinical trial costs of $13.3 million, contract manufacturing costs of $3.3 million and supporting non-clinical costs of $5.6 million. Clinical trial costs increased primarily due to ongoing treatment of patients in our pivotal Phase 2 PACE clinical trial and increased enrollment and treatment of patients in our Phase 3 EPIC clinical trial in newly diagnosed CML patients, including purchases of the comparator drug, imatinib, for use in this trial, as well as costs related to initiation of a Phase 1/2 clinical trial of Iclusig in Japan, offset in part by a decrease in costs of our on-going Phase 1 clinical trial as treatment of patients and other activities in this trial decreased over this time period. Contract manufacturing costs increased due primarily to the conduct of product and process development and qualification initiatives to support regulatory filings for Iclusig, as well as the production of Iclusig for use in our clinical trials and provided for initial commercial supply in anticipation of regulatory approval of Iclusig. Supporting non-clinical costs increased due primarily to increased quality and stability studies and initiatives to develop and commercialize a companion diagnostic test to identify patients with the T315I mutation of the BCR-ABL gene. We collaborated with MolecularMD Corp. to establish this companion diagnostic test and MolecularMD filed a PreMarketing Approval (PMA) application with the FDA. In September 2012, we and MolecularMD announced the voluntary withdrawal of the PMA following advice from the FDA that the FDA no longer considered this test to be a companion diagnostic test for ponatinib.

Direct external expenses for AP26113 were $6.0 million for 2012, an increase of $1.9 million, or 46 percent, compared to 2011 expenses of $4.1 million, of which $2.2 million were included in clinical programs and $1.9 million were included in preclinical programs. The increase in expenses for AP26113 was due to an increase in clinical trial costs of $0.5 million and an increase of $2.0 million in contract manufacturing cost, offset in part by a decrease in supporting non-clinical costs of $0.6 million. The increase in clinical trial costs was due to costs of the Phase 1/2 clinical trial initiated in the third quarter of 2011. The increase in contract manufacturing costs was due to the manufacture of additional material to supply the Phase 1/2 clinical trial and investment in product and process development. The decrease in supporting non-clinical costs was due primarily to the completion in 2011 of toxicology studies required for filing of the IND.

All other R&D expenses increased by $42.9 million, or 104 percent, to $84.1 million in 2012, as compared to $41.2 million in 2011. This increase was primarily due to an increase in personnel costs of $19.8 million, related primarily to an increase in the number of employees to support expanding R&D activities, overall increases in compensation for employees and an increase in recruiting costs; an increase in professional services of $6.2 million due primarily to initiatives to upgrade systems and technology used in our

business; an increase in stock-based compensation expense of $6.1 million as a result of the impact of a significant increase in the market value of our common stock on the value of stock-based compensation awards in 2011 and 2012, as well as the vesting of previously awarded performance share units triggered by the approval of Iclusig by the FDA in December 2012; an impairment charge related to ridaforolimus intangible assets of $4.8 million; an increase in rent expense of $2.2 million as a result of an amendment to our existing building lease and a new lease agreement for additional space; an increase in general expenses of $2.6 million, including technology support costs and travel costs associated with our expanded R&D workforce; and an increase in lab expenses of $1.6 million.

General and Administrative Expenses

General and administrative expenses increased by $36.5 million, or 150 percent, to $60.9 million in 2012, compared to $24.4 million in 2011. This increase was due primarily to an increase in personnel costs of $15.7 million related primarily to an increase in the number of employees, including sales related personnel, to support expanding business activities and to prepare for commercial launch of Iclusig, overall increases in compensation for existing employees and an increase in recruiting costs; an increase in professional services of $10.2 million as a result of an increase in corporate and commercial development initiatives to plan and prepare for the commercial launch of Iclusig; an increase in stock-based compensation expense of $6.6 million due to the impact of a significant increase in the market value of our common stock on the value of stock-based compensation awards in 2011 and 2012, as well as the vesting of previously awarded performance share units triggered by the approval of Iclusig by the FDA in December 2012; an increase in general expenses of $2.4 million primarily related to increased travel costs as we prepared for regulatory approval and commercial launch of Iclusig; and an increase in overhead and other expenses of $1.8 million primarily related to insurance costs, taxes and other miscellaneous costs.

Other Income/Expense

Interest Income

Interest income increased by 44 percent to $240,000 in 2012 from $167,000 in 2011, as a result of a higher average balance of funds invested in 2012.

Interest Expense

Interest expense decreased by 14 percent to $199,000 in 2012 from $232,000 in 2011, as a result of lower average borrowings in 2012.

Revaluation of Warrant Liability