(2)

This information is based solely on information contained in a Schedule 13G/A filed with the SEC on February 13, 2012 (2) This information is based solely on information contained in a Schedule 13G/A filed with the SEC on February 13, 2013 by Black Rock, Inc. (formerly known as Barclays Global Investors NA and Barclays Global Fund Advisors), according to which Black Rock, Inc. has sole voting and dispositive power with respect to all of the shares. (3) Includes 782,667 shares issuable upon exercise of stock options. Includes 27,457 shares of common stock held by the 2004 Edith Berger Revocable Trust, of which Harvey J. Berger, M.D. is trustee and has the right to vote and dispose of the shares; 1,714,286 shares owned by Ocean Capital Partners, LLC, an investment entity owned by Dr. Berger and his immediate family and for which Dr. Berger has the right to vote and dispose of the shares; and 515,050 shares owned by Dr. Berger’s spouse and daughters. Dr. Berger disclaims beneficial ownership of the shares held by the 2004 Edith Berger Revocable Trust. (3) This information is based solely on information contained in a Schedule 13G filed with the SEC on February 14, 2012 by Sectoral Asset Management Inc. according to which Sectoral Asset Management Inc. has sole voting and dispositive power with respect to all of the shares. (4) Includes 663,025 shares issuable upon exercise of stock options. Includes 32,857 shares of common stock held by the 2004 Edith Berger Revocable Trust, of which Harvey J. Berger, M.D. is trustee and has the right to vote and dispose of the shares; 1,714,286 shares owned by Ocean Capital Partners, LLC, an investment entity owned by Dr. Berger and his immediate family and for which Dr. Berger has the right to vote and dispose of the shares; and 65,050 shares owned by Dr. Berger’s spouse and daughters. Dr. Berger disclaims beneficial ownership of the shares held by the 2004 Edith Berger Revocable Trust. (5) Includes 290,167 (4) Includes 175,150 shares issuable upon exercise of stock options. (6) Includes 395,667 (5) Includes 345,333 shares issuable upon exercise of stock options. (7) Includes no (6) Includes 77,523 shares issuable upon exercise of stock options. (8) Includes 81,084 (7) Includes 116,834 shares issuable upon exercise of stock options. (9) Includes 85,000 shares issuable upon exercise of stock options and 6,696 (8) Includes 70,000 shares issuable upon exercise of stock options and [6,696] shares held by Mr. LaMarche’s spouse. (10) Includes 45,000 (9) Includes 20,000 shares issuable upon exercise of stock options. (11) (10) Includes 52,319 shares issuable upon exercise of stock options. (11) Includes 25,000 shares issuable upon exercise of stock options. (12) Includes 25,000 shares issuable upon exercise of stock options. (13) Includes 16,667 shares issuable upon exercise of stock options. (13) Includes 25,000 shares issuable upon exercise of stock options. (14) Includes 8,334 shares issuable upon exercise of stock options. (15) See notes 4 through 14 above. Also includes 532,868 (14) See notes 3 through 13 above. Also includes 480,826 shares issuable upon the exercise of stock options held by executive officers not listed in the table above. EXECUTIVE COMPENSATION Executive Officers The following table sets forth certain information regarding our executive officers not listed in the table above. EXECUTIVE OFFICERS The following table sets forth certain information regarding our executive officers, including their ages as of the upcoming Annual Meeting. Name Age Position Harvey J. Berger, M.D. 63 Chairman of the upcoming Annual Meeting.Board of Directors, Chief Executive Officer and President Timothy P. Clackson, Ph.D. Name   Age   Position 48 President of Research and Development and Chief Scientific Officer Edward M. Fitzgerald 58 Executive Vice President, Chief Financial Officer and Treasurer David L. Berstein, Esq. 61 Senior Vice President, Chief Intellectual Property Officer Daniel M. Bollag, Ph.D 52 Senior Vice President, Regulatory Affairs and Quality Maria E. Cantor 45 Senior Vice President, Corporate Affairs Pierre F. Dodion, M.D., M.B.A. 58 Senior Vice President, Corporate Development and Operations Martin J. Duvall 50 Senior Vice President, Commercial Operations Frank G. Haluska, M.D., Ph.D. 54 Senior Vice President, Clinical Research and Development and Chief Medical Officer Raymond T. Keane, Esq. 54 Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer For biographical information on Dr. Berger, see the section in this proxy statement entitled, “Board of Directors.” Timothy P. Clackson, Ph.D.has served as our President of Research and Development and Chief Scientific Officer since June 2010. Previously, he served as our Senior Vice President and Chief Scientific Officer from September 2003 to June 2010. Edward M. Fitzgerald has served as our Executive Vice President, Chief Financial Officer and Treasurer since June 2010. Previously, he served as our Senior Vice President, Chief Financial Officer and Treasurer from May 2002 to June 2010. David L. Berstein, Esq. has served as our Senior Vice President and Chief Intellectual Property Officer since May 2008. Previously, he served as our Senior Vice President and Chief Patent Counsel from June 2003 to June 2007. Daniel M. Bollag, Ph.D. has served as our Senior Vice President, Regulatory Affairs and Quality since January 2009. He previously was Vice President, Regulatory Affairs for Genzyme Corporation, a biotechnology company, from 2006 to 2008. Maria E. Cantor has served as our Senior Vice President, Corporate Affairs since January 2012. Previously, she served as our Vice President, Corporate Communications and Investor Relations since July 2008. Ms. Cantor held several positions of increasing responsibility at Genzyme Corporation from 2001 to 2008, most recently serving as Senior Director, Corporate Communications. Pierre F. Dodion, M.D.has served as our Senior Vice President, Corporate Development and Operations since February 2012 and Senior Vice President, Corporate Development from July 2010 to January 2012. Previously, he served as our Senior Vice President and Chief Medical Officer from April 2008 to June 2010 and as our Senior Vice President, Oncology from June 2007 to April 2008. Martin J. Duvallhas served as our Senior Vice President, Commercial Operations since September 2011. Previously, he served as Senior Vice President and General Manager of Merck and Company’s global oncology franchise. From 2009 to 2010, Mr. Duvall led global marketing and commercial operations at Abraxis Bioscience, Inc. From 2004 to 2009, Mr. Duvall held roles leading commercial operations, commercial development and oncology strategy for MGI Pharma, Inc. and its acquirer, Eisai Pharmaceuticals. Frank G. Haluska, M.D., Ph.D. has served as our Senior Vice President, Clinical Research and Development and Chief Medical Officer since January 2012, having held the position of Vice President and Chief Medical Officer since June 2010. Previously, he served as our Vice President, Clinical Affairs from May 2009 to June 2010, Vice President, Clinical Research from July 2008 to May 2009, and Senior Medical Director from October 2007 to July 2008. Raymond T. Keane, Esq. has served as our Senior Vice President, General Counsel, Secretary and Chief Compliance Officer since January 2009. Previously, he served as our Vice President, General Counsel and Chief Compliance Officer from May 2008 to January 2009. From 2003 to 2008, Mr. Keane led the Global Commercialization legal team at Bristol-Myers Squibb Company. EXECUTIVE COMPENSATION Compensation Discussion and Analysis Executive Summary OVERVIEW Our success in 2012 was made possible in large measure by our ability to attract, retain and motivate talented and experienced individuals across all areas of our business, including our named executive officers (“NEOs”): Harvey J. Berger, M.D. 62    Chairman of the Board of Directors, Chief Executive Officer and President Timothy P. Clackson, Ph.D. 47    President of Research and Development and Chief Scientific Officer Edward M. Fitzgerald 57    Executive Vice President, Chief Financial Officer and Treasurer David L. Berstein, Esq. 60 Senior Vice President, Chief Intellectual Property Officer Daniel M. Bollag, Ph.D 51 Senior Vice President, Regulatory Affairs and Quality Maria E. Cantor 44    Senior Vice President, Corporate Affairs Pierre F. Dodion, M.D., M.B.A. 57 Senior Vice President, Corporate Development and Operations Martin J. Duvall 50 Senior Vice President, Commercial Operations Frank G. Haluska, M.D., Ph.D. 53    Senior Vice President, Clinical Research and Development and Chief Medical Officer Raymond T. Keane, Esq. We believe that our compensation program has been and will continue to be successful in attracting, retaining and motivating the right executive team during this critical phase of ARIAD’s evolution from a research and development-stage enterprise to a fully integrated, commercial-stage global oncology company. Our compensation program for our named executive officers was supported by 93% of the “Say-on-Pay” advisory votes cast by shareholders at our 2012 annual meeting of shareholders. Based on the success of our compensation program and after consideration of last year’s “Say-on-Pay” advisory vote, the Compensation Committee determined to continue the same fundamental structure for our executive compensation program this year, with certain refinements discussed below. KEY COMPONENTS OF COMPENSATION AND RELATED PERFORMANCE PERIODS We provide three basic forms of direct compensation to our executive officers:base salary, bonuses (which we refer to as “annual performance awards”), and long-term equity incentive awards. Our Compensation Committee, with the assistance of Radford, our compensation consultant, and Dr. Berger, our Chief Executive Officer, reviews each of these compensation components annually for each of the nine executive officers on our Executive Leadership Team, including our NEOs, and adjusts each component based primarily on corporate and individual performance. In order to understand the compensation reported in this proxy statement, it is important to be aware of the fact that two separate fiscal years play a role in our compensation decisions. This is because the time periods over which performance is assessed vary depending on the particular component of compensation, and SEC disclosure rules require us to discuss awards determined based on 2012 performance in different fiscal years. Specifically, the performance review periods are as follows: •   53 Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer For biographical informationBase Salary – The Compensation Committee sets executive salaries in the first quarter of each fiscal year, effective as of January 1st of that year. Typically, a target percentage level of salary increase is established for the executive team, and each executive’s salary is then determined based on Dr. Berger, seean assessment of the sectioncorporate and individual performance objectives applicable to that executive during the preceding year. Thus, the salary amounts reported in the Summary Compensation Table later in this proxy statement entitled, “Board of Directors.”for fiscal 2012 were established based on 2011 corporate and individual performance. Salary amounts for fiscal 2013, which are based on 2012 performance, are briefly described below and will be set forth in the Summary Compensation Table next year. • Timothy P. Clackson, Ph.D.Annual Performance Awardshas served– These awards are determined after the completion of the fiscal year to which they apply, based on an evaluation of each executive’s performance in relation to corporate and individual objectives for that year. Therefore, unlike the 2012 salary amounts, which were based on 2011 performance, our executives’ annual performance awards for 2012, as our President of Research and Development and Chief Scientific Officer since June 2010. Previously, he served as our Senior Vice President and Chief Scientific Officer from September 2003 to June 2010, as our Senior Vice President, Science and Technology from June 2002 to September 2003, as our Vice President, Gene Therapy and Genomics from June 2000 to June 2002, andreported in a series of additional research and research management positions since joining us in December 1994. Dr. Clackson led the multi-disciplinary research group that discovered our product candidates, ponatinib, AP26113, and ridaforolimus. From 1991 to 1994, Dr. Clackson was a postdoctoral research fellow in protein engineering at Genentech, Inc., a biotechnology company. Dr. Clackson received his B.A. degree in Biochemistry from the University of Oxford, and his Ph.D. degree in Biology from the University of CambridgeSummary Compensation Table for research conducted at the MRC Laboratory of Molecular Biology that included the development of antibody phage display technology.fiscal 2012, were based on 2012 performance. • Edward M. FitzgeraldLong-term Equity Incentive Awards has served as our Executive Vice President, Chief Financial Officer and Treasurer since June 2010. Previously, he served as our Senior Vice President, Chief Financial Officer and Treasurer from May 2002 to June 2010. From 1998 to April 2002, he served as Senior Vice President, Chief Financial Officer and Secretary at AltaRex Corp., a biotechnology company. From 1992 to 1997, Mr. Fitzgerald held various management positions at BankBoston Corp., a financial services and commercial banking company. From 1989 to 1992, he was a partner at Arthur Andersen & Co.– These forward-looking awards are determined in the audit and business advisory practice. Previously, from 1978 to 1988, he also was at Arthur Andersen & Co. Mr. Fitzgerald received his B.S. degree in accounting and M.B.A. degree in finance from Babson College. David L. Berstein, Esq. has served as our Senior Vice President and Chief Intellectual Property Officer since May 2008. Mr. Berstein also served as our Senior Vice President and Chief Patent Counsel from June 2003 until June 2007 and our Vice President and Chief Patent Counsel from September 1993 to June 2000. From July 2007 until his return to our company in May 2008, Mr. Berstein was Senior Vice President and Chief Patent Counsel for Tempo Pharmaceuticals, Inc., a biotechnology company. During this time period, he was a consultant to usfirst quarter of each fiscal year, based on intellectual property matters. From 1990 through 1993, Mr. Berstein was Patent Counsel at BASF Bioresearch Corporation, a biotechnology company, where he was responsible for intellectual property matters, including patents and licensing. From 1985 to 1990, Mr. Berstein was a patent attorney at Genetics Institute, Inc., a biotechnology company, where he was involved in various aspects ofperformance during the patent process from patent procurement through litigation. Mr. Berstein joined Genetics Institute fromprevious year. Consequently, the law firm of Cooper & Dunham. Mr. Berstein received his B.S. degree from the University of Michigan and his J.D. degree from Fordham University School of Law. Daniel M. Bollag, Ph.D. has served as our Senior Vice President, Regulatory Affairs and Quality since January 2009. He previously served as Vice President, Regulatory Affairs for Genzyme Corporation, a biotechnology company, from 2006 to 2008. From 2002 to 2006, Dr. Bollag held multiple positions at Sanofi-Aventis Pharmaceuticals, including Associate Vice President, Global Regulatory Domain Head. Dr. Bollag also served as Director, Project Planning and Management at Bristol-Myers Squibb from 2000 to 2002. Earlier in his career, he held positions at Merck. Dr. Bollag received his B.S. degree in Science and B.A. degree in French at Pennsylvania State University and his Ph.D. degree in Biochemistry from Cornell University. He also completed a postdoctoral fellowship at Princeton University. Maria E. Cantorhas served as our Senior Vice President, Corporate Affairs since January 2012. Previously she served as our Vice President, Corporate Communications and Investor Relations since July 2008. Prior to joining our company, Ms. Cantor held several positions of increasing responsibility at Genzyme Corporation from 2001 to 2008, most recently serving as Senior Director, Corporate Communications. From 2000 to 2001, she held the position of Director, Public Relations and Marketing at St. Elizabeth’s Medical Center of Boston. From 1994 to 2000, Ms. Cantor held director positions in marketing and public relations at Optima Healthcare, Inc. and Catholic Medical Center. Prior to 1994, she was Assistant Press Secretary to former U.S. Congressman, Martin T. Meehan and served as News Anchor/Reporter at a Massachusetts broadcast station. She received her M.S. degree in communications management from Syracuse University and her B.S. degree from Emerson College. Pierre F. Dodion, M.D. has served as our Senior Vice President, Corporate Development and Operations since February 2012 and Senior Vice President, Corporate Development from July 2010 to January 2012. Previously, he served as our Senior Vice President and Chief Medical Officer from April 2008 to June 2010 and as Senior Vice President, Oncology from June 2007 to April 2008. From 2006 to 2007, Dr. Dodion served as Executive Director, Oncology at Pfizer Inc. From 2002 to 2006, he held senior positions at Novartislong-term equity incentive awards reported in the Oncology Business Unit, most recently as Executive Director, Global StrategySummary Compensation Table and Global Marketing. From 1997 to 2002, Dr. Dodion served as Medical DirectorGrant of Plan-Based Awards Table for fiscal 2012 were established based on 2011 performance. The long-term equity incentive awards granted in early 2013 based on 2012 performance are briefly described below and later as Senior Medical Director at Aventis. Prior to Aventis, he held medical and scientific positions at UBC S.A. and Roche Pharmaceuticals. Previously, he held positions at Institut Jules Bordet at the Free University of Brussels and the National Cancer Institute. Dr. Dodion received his M.D. degree from the Free University of Brussels in Belgium and his M.B.A. degree from St. Joseph University in Philadelphia, Pennsylvania. Martin J. Duvallhas served as our Senior Vice President, Commercial Operations since September 2011. Prior to joining our company, Mr. Duvall served as Senior Vice President and General Manager of Merck and Company’s global oncology franchise. From 2009 to 2010, Mr. Duvall led global marketing and commercial operations at Abraxis Bioscience, Inc. From 2004 to 2009, Mr. Duvall held roles leading commercial operations, commercial development and oncology strategy for MGI Pharma, Inc. and its acquirer, Eisai. Earlier in his career, from 1986 to 2004, he held numerous oncology marketing and sales roles at Sanofi-Aventis and its predecessor companies, including a leadership rolewill be set forth in the global development, commercializationSummary Compensation Table and strategic directionGrant of the company’s cytotoxic chemotherapy drugs. He received his B.S. degree in Chemistry from Muhlenberg College, his M.A. degree in Chemistry from the Johns Hopkins University and his M.B.A degree from the University of Kansas.Plan-Based Awards Table next year. We present below business highlights for our 2012 fiscal year to assist our shareholders in understanding the compensation decisions made with respect to reported 2012 annual performance awards, and business highlights for 2011 to facilitate an understanding of our reported 2012 salary determinations and long-term equity incentive awards. BUSINESS HIGHLIGHTS Fiscal 2012 Our 2012 fiscal year was one of tremendous success and progress at ARIAD: We received accelerated approval in the United States of Iclusig™ (ponatinib) 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. This approval followed completion of our NDA submission ahead of schedule. We recruited, hired and trained a complete commercial organization in the U.S. and were fully prepared for the U.S. commercial launch of Iclusig upon receipt of marketing approval from the FDA. All of the key functions in our U.S. commercial organization, including account specialists, market access, and marketing, are in place and implementing our commercial plans for Iclusig. In Europe, we submitted a Marketing Authorization Application (MAA) for Iclusig to the European Medicines Agency seeking marketing approval in the EU of Iclusig in adult patients with resistant or intolerant CML or Ph+ ALL. The Committee for Medicinal Products for Human Use granted ARIAD’s request for accelerated assessment of the MAA. We expect approval of Iclusig by the European Commission in the second quarter of 2013. In preparation for our planned commercial launch of Iclusig in Europe, we established our European headquarters in Lausanne, Switzerland, and recruited and hired our General Manager of European operations, along with other key members of our European leadership team. Medical science liaisons and sales representatives in each of other major markets in Europe are now being recruited, and we expect to be launch-ready in Europe by July 1, 2013. We also established early-access programs for Iclusig, established the supply chain in key markets and implemented initial pricing and reimbursement activities. We advanced the development of AP26113, our investigational dual inhibitor of EGFR and ALK, and presented positive clinical proof-of-concept data showing the promise of AP26113 as our next internally discovered cancer medicine that overcomes drug resistance. Compelling anti-tumor activity of AP26113 in patients with ALK-positive non-small cell lung cancer (NSCLC) and initial anti-tumor activity in patients with EGFR-mutant NSCLC were presented at the European Society of Medical Oncology meeting. Importantly, AP26113 showed clinical activity in ALK-positive NSCLC patients with brain metastases. We initiated the global, Phase 3 EPIC trial of Iclusig in patients with newly diagnosed CML. This trial compares Iclusig to imatinib and has a primary endpoint of major molecular response at 12 months of treatment. We initiated a Phase 1/2 clinical trial of Iclusig in resistant or intolerant CML and Ph+ ALL patients in Japan in the second half of 2012. The trial is designed to establish the recommended dose of Iclusig in Japanese patients, confirm its anti-leukemic activity in this patient population, and provide the necessary data required for regulatory approval of Iclusig in Japan. Our 2012 achievements positioned us to further strengthen our balance sheet at the beginning of 2013 through an underwritten public offering yielding net proceeds of $310 million. Fiscal 2011 Our 2011 fiscal year was also a year of great progress and success in pursuing our corporate objectives. Highlights included the following: We advanced Iclusig towards marketing authorization and commercialization by successfully completing full enrollment of approximately 450 patients in our pivotal PACE clinical trial. We presented positive preliminary data from this trial at a major medical meeting in December 2011. We developed and began implementing detailed plans for the launch of Iclusig in the United States and Europe. We continued to hire the key leadership in our commercial team, including our Senior Vice President, Commercial Operations, and other key areas throughout our Company to ensure readiness for launch. We initiated all required non-clinical and clinical pharmacology studies, as well as product stability studies of Iclusig and remained on schedule to support submissions for regulatory approval of this cancer medicine in the third quarter of 2012. We entered into an agreement with MolecularMD Corporation in the first quarter of 2011 under which MolecularMD was developing a commercial diagnostic test to identify the T315I mutation of the BCR-ABL gene in patients with CML and Ph+ALL. We introduced pre-approval programs in the United States and Europe to provide Iclusig to patients who have no effective treatment alternatives. We successfully completed all studies required to submit an investigational new drug application for AP26113, and submitted that application to the FDA in the second quarter of 2011. We initiated patient enrollment in our multicenter Phase 1/2 clinical trial of AP26113 in the third quarter of 2011. In December 2011, we raised $243 million in an underwritten public offering of our common stock and ended 2011 with $306 million in cash and cash equivalents on our balance sheet. The foregoing accomplishments were the products of exceptional efforts and coordination throughout our entire Company. To achieve these results, we more than doubled in size to approximately 300 employees during the past eighteen months, and we established critical new functions, augmented and enhanced many operational systems, and pursued and attained aggressive corporate goals while adapting to substantially greater organizational complexity. Led by our senior management team, we finished 2012 well on the way to transforming ARIAD into a sustainable, fully integrated global oncology company with the highly differentiated capability to discover, develop and deliver innovative cancer medicines. Our vision as a company to develop new, breakthrough therapies with the potential to transform the lives of patients with difficult-to-treat cancers requires the leadership, drive, dedication and skills of an extraordinarily talented team of executives to achieve. With the approval and launch of Iclusig in the United States, we have reached a major milestone in realizing that vision, but there is a great deal more to accomplish. As will be discussed below, our Compensation Committee and our Board believe that our compensation program has played, and will continue to play, a crucial role in motivating and incentivizing our management team to achieve our corporate objectives and fully transform our vision into a reality. The Philosophy and Important Features of Our Compensation Program The philosophy underlying our compensation program has three foundational objectives: First, we endeavor to attract and retain the best available executive talent to lead our Company, recognizing that we do so in a highly competitive environment. Thus, our Compensation Committee works closely with Radford to identify “peer group” and other companies within our competitive environment and then to align the components of our compensation program at levels that will reasonably position us to successfully compete. We discuss this below under the heading “Use of Competitive Market Compensation Data and Compensation Benchmark.” Second, we seek to motivate our executives to achieve ambitious corporate goals by placing a substantial portion of our executives’ compensation at risk and then rewarding high levels of performance in the pursuit of those goals. We consider this “pay-for-performance” philosophy to be central to our success to date and pivotal to our success in the future. Moreover, as described below under the heading “Targets and Performance Multipliers,” we believe that a system which provides substantially greater rewards for individual performance that “exceeds requirements” or is “outstanding” in comparison to performance that merely “meets requirements” creates a powerful incentive for executives to perform at extraordinary levels. Third, we strive to align the interests of our executive officers with those of our shareholders. We do this not only by paying for performance aimed at enhancing shareholder value, but also by structuring a substantial portion of our executives’ compensation as long-term equity compensation. In 2012, approximately 77% of the value of our Chief Executive Officer’s compensation consisted of long-term equity, including the value of performance share awards at the target level. USE OF COMPETITIVE MARKET COMPENSATION DATA AND COMPENSATION BENCHMARK Competitive Market Compensation Data As noted above, we draw upon a pool of executive talent that is highly sought after by similarly situated biotechnology companies, as well as larger pharmaceutical and biotechnology companies from which we frequently recruit, both within and outside our geographic area. We believe that the compensation practices of our peer group in particular, as well as of these larger companies and our industry in general, provide useful information to help us compete in this arena. Therefore, our Compensation Committee works closely with Radford and our management each year to review and update a comparator group of companies considered to be our peer group to ensure its continued relevance as ARIAD evolves as a company. The Compensation Committee also reviews broader life science industry data to further inform its decisions. With Radford’s assistance, our Compensation Committee uses two primary market frames of reference (which we collectively refer to as the “market”) against which to compare our executive compensation practices, as follows: Select Peer Group – A select group of national biotechnology companies at a similar stage of development as our Company, with similar headcount, market capitalization, short- and long-term growth objectives, and similar therapeutic targets. Radford Global Life Sciences Survey – A national survey of executive compensation levels and practices that covers approximately sixty executive positions in over 600 multinational life sciences organizations. We do not apply a specific weighting to either data source when making compensation comparisons. Instead, our Compensation Committee reviews composite market data synthesized by Radford from these two groups showing levels of cash, equity, and total compensation for all comparable officers relative to the elements of compensation paid to our officers. In October 2012, our Compensation Committee met with Radford and, after reviewing relevant factors and our prior year’s peer group, selected the following peer group of companies for compensation comparisons for 2012. This peer group consisted of public companies in the biopharmaceutical industry with a commercial branded drug or a drug candidate in advanced Phase 3 clinical development, with annual revenues generally less than $1 billion, and market capitalization and headcount targeted from one-third to three times the value and size, respectively, of ARIAD at the time of the review. Three companies from last year’s peer group were deleted from the list, because they fell below the updated market value criterion, and a fourth company was dropped because it had been acquired. Two new companies meeting the updated criteria were added. Accorda Therapeutics, Inc. Onyx Pharmaceuticals, Inc. Alkermes plc Questcor Pharmaceuticals, Inc. Auxilium Pharmaceuticals, Inc. Regeneron Pharmaceuticals, Inc. Biomarin Pharmaceutical Inc. Salix Pharmaceuticals, Ltd. Cubist Pharmaceuticals, Inc. Seattle Genetics, Inc. Incyte Corporation The Medicines Company Ironwood Pharmaceuticals, Inc. Theravance, Inc. Jazz Pharmaceuticals plc United Therapeutics, Inc. Medivation, Inc. ViroPharma Incorporated Compensation Benchmark In connection with our efforts to maintain a competitive compensation program, our Compensation Committee annually establishes a benchmark for our executive compensation packages relative to other companies in our market. This benchmark is expressed as a “percentile of the market.” We currently use a benchmark targeting our compensation components and total compensation at the 65th percentile of the market. This means that our Compensation Committee seeks to formulate a compensation package for each executive officer that targets his or her total compensation, as well as components of compensation, at the 65th percentile of the composite market compensation data prepared by our compensation consultant. In 2012, recognizing that ARIAD was transitioning from a clinical-stage biotechnology company into a commercial-stage enterprise and that our future success would depend even more on competitive compensation positioning, our Compensation Committee increased the target level of our compensation packages from the 60th percentile to the 65th percentile of the market. In 2013, the Compensation Committee determined to maintain our compensation benchmark at the 65th percentile of the market in recognition of the very competitive market for executive talent in which we operate and the critical importance of attracting and retaining such talent as we continue our evolution into a fully integrated, global oncology company. The benchmark is not intended to be a ceiling on each executive’s compensation. Rather, it represents the compensation that an executive can expect if his or her level of performance warrants receiving 100% of the compensation target. As discussed below under “Targets and Performance Multipliers,” if an executive substantially exceeds the corporate and individual performance objectives applicable to him or her, the executive may receive compensation above the 65th percentile of market. Alternatively, an executive may receive less than 100% of the compensation target depending on his or her performance. TARGETS AND PERFORMANCE MULTIPLIERS As noted above, each year our Compensation Committee analyzes the competitive market compensation data prepared by our compensation consultant and applies a selected benchmark – the 65th percentile of market for 2012 – to establish the following compensation parameters for each of our three levels of NEOs: A target percentage increase in base salary, A target annual cash performance award based on a percentage of base salary, and A target amount of long-term equity incentive award. With respect to our NEOs, the three officer tiers are as follows: Tier I – our Chief Executive Officer, Dr. Berger Tier II – our Executive Vice Presidents, Dr. Clackson and Mr. Fitzgerald Tier III – our Senior Vice Presidents, Ms. Cantor and Dr. Haluska Performance Multipliers We believe that one of the most important motivators for our executives is the opportunity to earn compensation greater than the established targets by exceeding applicable performance requirements. We accomplish this through a system of “performance multipliers,” which reward exceptional performance at substantially higher levels than performance that merely meets requirements of the position. Under our performance multiplier approach, the level of performance of each executive directly influences his or her increase in base salary, annual performance award and long-term equity incentive award relative to target awards, and such amounts may be greater or less than the target levels based on the assessment and rating of each officer’s performance. Our Compensation Committee establishes the performance multiplier scale, which ranged from 0% – 160% for salary and long-term equity awards for fiscal 2012, and 0% – 200% for annual cash performance awards for fiscal 2012. Each executive officer’s performance was rated on a scale from “unsatisfactory” to “outstanding” (although none of our executives achieved a rating less than “meets requirements”). As an example of the impact of our “performance multipliers” on 2012 annual performance awards, an executive whose performance “meets requirements” would receive only 50% of his or her target bonus, whereas an executive whose performance “exceeds requirements” could earn from 100% to 150% of his or her target bonus, and an executive whose performance is assessed as “outstanding” would receive up to 200% of his or her target bonus. Process for Determining Executive Compensation Our Compensation Committee is responsible for, among other duties, reviewing the performance of our Chief Executive Officer and reviewing and recommending his compensation for approval by the Board. The Compensation Committee is also responsible for reviewing the assessment of performance of our other executive officers conducted by our Chief Executive Officer and reviewing and approving their compensation in consultation with our Chief Executive Officer. While our Compensation Committee has ultimate authority and responsibility for approving all executive officer compensation, our Chief Executive Officer plays an active role in such decisions, except with respect to his own compensation where he participates in neither the deliberations nor the decision. At the beginning of each year, the Executive Leadership Team of the Company establishes annual corporate objectives, which are reviewed and discussed with the Compensation Committee and the Board and form the basis for our annual operating plan. The status of our corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the year. Based on the annual corporate objectives and the associated operating plan, each of the executive officers prepares objectives, which are reviewed and approved by our Chief Executive Officer early in the year. At the end of each year, each of the executive officers provides a detailed self-assessment of his or her performance relative to the established corporate and individual objectives, as well as to key leadership and management measures described below. In addition, each executive officer is evaluated on a confidential basis by several of his or her peers, subordinates, and in some instances, external colleagues, selected by our Chief Executive Officer. The Chief Executive Officer reviews and evaluates all of these assessments and completes an overall evaluation of performance for each officer for the year, taking into account his judgment regarding the Company’s overall progress, each officer’s contribution to the achievement of corporate objectives, his or her achievement of individual objectives, and his or her performance in relation to leadership and management measures. Specific numerical weightings or ratings are not applied to individual corporate or personal objectives; rather, the performance of the executive officer is evaluated as a whole in the context of his or her peers at the same level of management within the Company. The level of performance is then used by the Chief Executive Officer to guide his recommendations to the Compensation Committee regarding each executive officer’s performance rating. As part of this process, the Compensation Committee, with input from the Chief Executive Officer, reviews the overall performance of the Company relative to the key corporate objectives established at the beginning of the year. This assessment, along with the assessments made by the Chief Executive Officer regarding the individual officers, forms the basis for the decisions regarding the individual’s performance rating. Performance ratings can range from “unsatisfactory” to “meets requirements” to “exceeds requirements” to “outstanding”. The performance rating is then used to determine the performance multiplier applicable to the executive, which forms the basis for increases in salary, annual performance awards and long-term incentive awards. The Compensation Committee also undertakes a comprehensive review of the Chief Executive Officer’s performance based on its evaluation of our Company’s overall performance, the Chief Executive Officer’s individual contributions to achievement of key objectives, his strategic leadership of the Company and his demonstration of our vision and corporate values. His overall performance is rated, and his compensation is adjusted using the same performance scale as the other executive officers. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for subsequent approval. In addition to an evaluation of the level of achievement of our corporate and certain individual objectives, each executive officer is evaluated as to key leadership and management measures, including each individual’s: Contribution to the management team and development and application of leadership skills reflective and supportive of our corporate values, vision and mission, Ability to attract, hire, manage, retain, and motivate talent in support of the achievement of our objectives, Management of his or her functions and responsibilities within established financial budgets and forecasts, and Management of regulatory compliance requirements related to his or her responsibilities. There are no thresholds or maximum levels of achievement applicable to these individual objectives or the corporate objectives. In addition, no specific weight is given to any of these factors in determining base salary increases, annual performance awards or long-term equity incentive awards for any of our executive officers. Instead, as noted above, each executive officer’s performance is evaluated as a whole, taking into account all of these objectives and measures, encouraging collaboration among senior executives in achieving inter-dependent corporate objectives. Elements of Total Compensation As briefly described above, we provide three basic forms of direct compensation to our executive officers: base salary, annual performance awards, and long-term equity incentive awards. BASE SALARY Base salary is intended to provide all of our employees with a fair and competitive base level of compensation that reflects their job function, organizational level, experience and tenure, and sustained performance over time. Executive officer base salary levels are set using these criteria. On an annual basis, our executives are eligible for a salary increase. The amount of this increase, if any, is determined by our Compensation Committee, which establishes a target salary increase based on analysis of market compensation data and the recommendation of our compensation consultant. In 2012, the target salary increase was set at 3.5%. Each executive’s actual salary increase, if any, is determined based on the executive’s performance in achieving key corporate and individual objectives established at the beginning of each year, internal pay equity, and demonstrated levels of core job competency and effective leadership. As discussed above under “Targets and Performance Multipliers,” the executive’s performance rating leads to the application of a performance multiplier, which results in the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year and are paid retroactively to January 1 of that year. ANNUAL PERFORMANCE AWARDS Annual performance awards are intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives on an annual basis. Annual performance awards to our Chief Executive Officer have in past years been made, in whole or in part, in the form of shares of common stock, in order to conserve cash to fund our priority research and development programs and commercialization efforts. Annual performance awards to our other executive officers have been payable in cash, but deferred under our 2005 Executive Compensation Plan, as amended (the “2005 Executive Compensation Plan”), which also allowed us to conserve cash for operations. This year, in order to ensure that we offer a more competitive compensation package, our Compensation Committee determined to pay our 2012 annual performance awards to all of our executive officers in cash, consistent with our peers and the broader life-sciences marketplace. As discussed above under “Targets and Performance Multipliers,” our Compensation Committee annually establishes target annual performance awards for the different tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive through the application of a performance multiplier based on the individual executive’s performance rating for the year. LONG-TERM EQUITY INCENTIVE AWARDS Long-term equity incentive awards are also intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives. In addition, such awards are intended to align the interests of all of our executive officers with those of our stockholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive officers. As such, long-term equity incentive awards for our executive officers are made in the form of stock options, restricted stock units and performance shares. Stock options and restricted stock units vest annually over three years. Performance shares vest upon the achievement of one or more key corporate objectives or metrics and, once achieved, are subject in certain cases to further time-based vesting to provide further retention. The mix of types of equity awards provides various long-term incentives. Stock options align the interests of our executives with those of our stockholders in that value will only be realized from these awards if our stock price increases over time; restricted stock units provide some certainty of receiving some amount of compensation during periods of market volatility and provide the opportunity for our executives to maintain holdings of our common stock; and performance shares provide a direct link between achievement of key corporate objectives that we expect will drive long-term value for our stockholders. Long-term equity incentive awards are granted under our 2006 Long-Term Incentive Plan. The target long-term equity incentive awards for each officer are based on recommendations by Radford, taking into consideration the value of equity-based awards and total compensation of executives of companies in the composite market compiled by Radford, as described under “Competitive Market Compensation Data” above. For performance share awards granted in March 2012, the performance objective is regulatory approval by the European Medicines Agency of a Marketing Authorization Application (MAA) for Iclusig prior to the end of 2016, and if not obtained by then, the award will terminate and have no value. As set forth in the Grant of Plan-Based Awards table below, if the MAA is granted in 2013, then 160% of the target award will be earned, with 50% vesting immediately and 25% vesting on each of the next two anniversaries; if the MAA is granted in 2014, then 100% of the target award will be earned, with 50% vesting immediately and 50% vesting on the one year anniversary; and if the MAA is granted in 2015 or 2016, then 50% of the target award will be earned with all shares immediately vested. MIXOF DIRECT COMPENSATION COMPONENTS As our executive officers have increasing responsibility for and impact on our results, we place greater emphasis on variable, performance-based compensation and longer term compensation vehicles in the form of equity awards and deferred performance awards. We do not have specific policies nor do we use formulas to determine a mix of total compensation. We intend for total compensation to vary based on our progress towards achievement of corporate, departmental and team objectives, as well as individual performance goals. For fiscal 2012, our annual performance awards and long-term equity incentive awards, including the value of performance shares awarded at target level, represent over 80% of the total direct compensation (excluding benefits) on average for our named executive officers. BENEFITSAND PERQUISITES In addition to general benefits offered to all other salaried employees, we provide our executive officers with supplemental long-term disability insurance and long-term care insurance, tax return preparation services and an auto allowance in accordance with their employment agreements. These are the only perquisites we provided to our executive officers during 2012. Perquisites represent less than 2% of each named executive officer’s total compensation as set forth in the Summary Compensation Table below. We believe that our benefits and perquisites represent competitive market practices for executives at companies within our peer group. They are offered as a means to attract and retain our executive officers. EMPLOYMENT AGREEMENTS We have entered into employment agreements with our named executive officers. Each of these agreements provides for certain payments and other benefits if the executive’s employment terminates under certain circumstances other than for “cause,” including in connection with a “change in control.” See the subsection “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table” for a description of the agreement terms impacting current compensation and “Potential Payments upon Termination or Change in Control” for a description of applicable severance and change in control benefits. Our Compensation Committee periodically reviews the principal terms of our employment agreements with our named executive officers in light of our needs and evolving market conditions. Our Compensation Committee believes that change-in-control and severance arrangements are important parts of the overall compensation program for our named executive officers. Change-in-control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control, and to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination of their employment. COMPENSATION COMMITTEE POLICY REGARDING CHANGE IN CONTROL SEVERANCE PAYMENTS Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an executive officer with a severance payment following a change in control of our Company, except in the case of a termination event (i.e., a “double-trigger”). In addition, the policy also restricts our Company from entering into any future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances.Effective April 2013, our Compensation Committee revised this policy eliminating the exception to allow for an excise tax-gross in certain unusual circumstances. We have not entered into any agreements with any of our executive officers that provide for an excise tax gross-up, other than Dr. Berger’s employment agreement, which pre-dated the April 2010 policy. Factors Considered in the Determination of Executive Compensation 2011 PERFORMANCE CONSIDERED FOR 2012 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2012, our Compensation Committee made decisions regarding 2012 salary increases and the 2012 grants of long-term equity incentive awards based on 2011 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2011, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2011 corresponded to ARIAD’s 2011 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2011.” Briefly summarized: We advanced Iclusig towards marketing authorization and commercialization. We prepared the Company for commercialization of our first cancer medicine. We advanced AP26113 into first-in-man studies. We strengthened our balance sheet and built sustained shareholder value. Dr. Berger’s 2012 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s 2011 performance was rated as outstanding. He received a merit increase of 4.8%, which increased his 2012 base salary to $697,000. His long-term equity incentive awards of 92,000 performance shares, 102,000 restricted stock units and 213,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $5.3 million which amount includes the value of performance shares at the target level. Dr. Clackson’s 2012 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, had broad responsibilities for the management of our business. He had responsibility for leading multiple functions within our company, including discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. As evidenced by our Company’s accomplishments during 2011, it was a year of great progress in each of these areas. Based on the above, Dr. Clackson’s 2011 performance was rated as outstanding. His 2012 salary increase to $468,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 40,000 restricted stock units and 82,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $2.0 million, which amount includes the value of performance shares at the target level. Mr. Fitzgerald’s 2012 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, had broad responsibilities for numerous aspects of our operations and business. In particular, he led key aspects of our planning for the growth and international expansion of our business, led the planning and implementation of key systems necessary to support the needs of our business, managed diverse initiatives that provided additional funding for our programs, and effectively managed our spending in support of our key corporate objectives. Based on the above, Mr. Fitzgerald’s 2011 performance was rated as exceeding requirements. His 2012 salary increase to $438,000 reflects a merit increase of 3%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 25,000 restricted stock units and 51,000 stock options equate to approximately 100% of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.5 million, which amount includes the value of performance shares at the target level. Ms. Cantor’s 2012 Salary and Equity Awards Ms. Cantor was promoted from Vice President, Corporate Communications and Investor Relations to Senior Vice President, Corporate Affairs in January 2012. She was responsible in 2011 for developing and implementing a corporate communications and investor-relations strategy that supported the reputation of the Company and enhanced shareholder value. This strategy enhanced the advancement of our product pipeline in 2011 with a specific focus on providing timely and relevant information to the media and our investors. Based on the above, Ms. Cantor’s performance was rated as outstanding. Her salary increase to $306,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 10% to account for her promotion and align her base salary to the 65th percentile of market. Her long-term equity incentive awards of 20,000 performance shares, 22,000 restricted stock units and 46,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.1 million, which amount includes the value of performance shares at the target level. In addition, in connection with her promotion to Senior Vice President, Ms. Cantor also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. Dr. Haluska’s 2012 Salary and Equity Awards Dr. Haluska was promoted from Vice President, Chief Medical Officer to Senior Vice President, Chief Medical Officer in January 2012. He was responsible in 2011 for leading the Company’s teams that planned and executed an expanded access program for Iclusig consistent with the goals of the program, planned and conducted focused non-clinical, translational and external clinical studies of Iclusig to support the lead and follow-on indications, evaluated and prioritized additional clinical trials of Iclusig, and initiated the first-in-man Phase 1/2 clinical trial of AP26113. Based on the above, Dr. Haluska’s performance was rated as exceeding requirements. His salary increase to $400,000 reflects a merit increase of 3.9%, plus an adjustment of approximately 3% to account for his promotion and align his base salary to the 65th percentile of market. His long-term equity incentive awards of 20,000 performance shares, 18,000 restricted stock units and 38,000 stock options equate to approximately 100%, 130% and 130%, respectively, of each target award and had a grant date fair value of approximately $995,000, which amount includes the value of performance shares at the target level. In addition, in connection with his promotion to Senior Vice President, Dr. Haluska also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. 2012 PERFORMANCE CONSIDERED FOR 2012 ANNUAL PERFORMANCE AWARDS AND 2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2013, our Compensation Committee made decisions regarding our 2012 annual performance awards, as well as 2013 salary increases and 2013 grants of long-term equity incentive awards, in each case based on 2012 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2012, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2012 corresponded to ARIAD’s 2012 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2012.” Briefly summarized: We completed the regulatory submission of and obtained U.S. marketing approval for Iclusig. We established European operations in preparation for the European commercial approval and launch of Iclusig in 2013. We continued to advance the clinical development of AP26113. We enhanced our discovery efforts with the goal of designating our next development candidate. We managed substantial growth in personnel and internal systems. We positioned the Company to further strengthen our balance sheet through an underwritten public offering in early 2013. Dr. Berger’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s performance was rated outstanding. His 2012 annual performance award and 2013 salary and long-term equity awards are set forth in the tables below. Dr. Clackson’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our business, including leading our discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Clackson’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Mr. Fitzgerald’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of our operations and business. These included planning and overseeing the growth and international expansion of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant initiatives that provided additional funding for our programs, and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Fitzgerald’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Ms. Cantor’s 2012 Annual Performance Award and 2013 Salary and Equity Awards In her position as our Senior Vice President, Corporate Affairs, Ms. Cantor played a leading role during 2012 in communicating with shareholders about our corporate developments and performance. Her contributions included expanding and improving awareness and visibility of the Company among stakeholders in the United States and in key countries throughout Europe, as well as incorporating the use of social media tools across all functional areas to expand awareness of our Company, Iclusig and our other development-stage programs. Based on her contributions to the achievement of our key corporate objectives for 2012, as well as her performance in relation to individual objectives and leadership and management standards, Ms. Cantor’s performance was rated as exceeding requirements. Her 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Dr. Haluska’s 2012 Annual Performance Award and 2013 Salary and Equity Awards As our Senior Vice President, Chief Medical Officer, Dr. Haluska led the Company teams that completed major components of our NDA submission for Iclusig to the FDA in July 2012, and submitted our MAA to the European Medicines Agency in August 2012; initiated our global Phase 3 EPIC trial of Iclusig in newly diagnosed CML patients in June 2012; and continued to oversee progress in Phase 1/2 trial of AP26113. Based on his contributions to the achievement of our key corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Haluska’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. 2012 ANNUAL PERFORMANCE AWARDS During the Compensation Committee’s review process for determining 2012 annual performance awards, the Compensation Committee was advised by Radford that the annual cash performance award targets that it had previously established for all members of our Executive Leadership Team, including all of the NEOs, trailed market competitive levels and were below the 65% percentile. Based on Radford’s recommendation, the Compensation Committee therefore determined to increase the target annual performance awards for 2012 for all senior officers other than Dr. Berger. The revised performance award targets, which are formulated as a percentage of base salary, are set forth in the table below under the column entitled, “Revised Targets.” Concurrently with increasing the performance award targets for all other senior officers, the Compensation Committee approved an increase in Dr. Berger’s annual performance award target for 2013 from 70% to 85%. 2012 Annual Performance Awards Name    Revised Targets     Performance Multiplier     Actual Target Percentage     Actual Award   H. Berger      70 %      200 %      140 %    $ 976,000    T. Clackson      50 %      155 %      78 %    $ 365,000    E. Fitzgerald      50 %      150 %      75 %    $ 329,000    M. Cantor      45 %      150 %      68 %    $ 208,000    F. Haluska      45 %      155 %      70 %    $ 280,000    2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS In March 2013, the Compensation Committee approved 2013 salaries retroactive to January 1, 2013 and granted long-term equity incentive awards to our NEOs in consideration of their 2012 performance and their expected future performance as follows: Name    2013 Salary      Performance Shares at Target(#)      Restricted Stock Units(#)      Stock Options(#)      Grant Date Fair Value of Equity   H. Berger    $ 751,000         95,000         108,000         216,000       $ 7,071,760    T. Clackson    $ 493,000         35,000         32,500         65,000       $ 2,262,024    E. Fitzgerald    $ 466,000         35,000         32,500         65,000       $ 2,262,024    M. Cantor    $ 340,000         20,000         19,500         39,000       $ 1,336,324    F. Haluska    $ 427,000         20,000         19,500         39,000       $ 1,336,324    For the performance share awards granted in March 2013, the performance objective is tied to continued success in specific research and development initiatives through the end of 2016, with the number of shares earned ranging from 160% to 50% of target, and the vesting schedule varying, depending on the year in which such performance objective is obtained. If the performance objective is not obtained prior to the end of 2016, the award will terminate and have no value. 2013 TARGET ANNUAL PERFORMANCE AWARDS In March 2013, the Compensation Committee approved 2013 target annual performance awards as a percentage of 2013 salaries which annual performance awards will be paid in 2014 based on 2013 performance. The targets are as follows: Name Frank G. Haluska, M.D., Ph.D., has served as our Senior Vice President, Clinical Research and Development and Chief Medical Officer since January 2012, having held the position of Vice President and Chief Medical Officer since June 2010. Previously, he served as our Vice President, Clinical Affairs from May 2009 to June 2010, Vice President, Clinical Research from July 2008 to May 2009, and Senior Medical Director from October 2007 to July 2008. Prior to joining our company, Dr. Haluska served2013 Target Payout as a senior faculty member in the departments% of medicine and genetics at Tufts University School of Medicine from 2005 to 2007, where he also was Clinical Director and Deputy Director of the Tufts-New England Medical Center Cancer Center. From 1994 to 2005, he held positions in academia, medical research and clinical oncology at centers of excellence, including assistant professor of medicine at Harvard Medical School, and leader of the melanoma research programs at Dana-Farber Cancer Institute and Massachusetts General Hospital Cancer Center. Dr. 2013 Base Salary H. Berger 85 %  T. Clackson 50 %  E. Fitzgerald 50 %  M. Cantor 45 %  F. Haluska is Colonel in the Medical Corps of the United States Air Force and the Massachusetts Air National Guard. He completed a post-doctoral fellowship at the Massachusetts Institute of Technology, fellowship training in medical oncology at Dana Farber Cancer Institute, and his training in internal medicine at Massachusetts General Hospital. He received his M.D. degree and Ph.D. degree from the University of Pennsylvania School of Medicine and A.B. degree from Harvard University. 45 %  HEDGING TRANSACTIONS, PLEDGESOF STOCK,AND INSIDER TRADING POLICY Raymond T. Keane, Esq. has served as our Senior Vice President, General Counsel, Secretary and Chief Compliance Officer since January 2009. Previously, he was our Vice President, General Counsel and Chief Compliance Officer. Prior to joining our company in May 2008, Mr. Keane spent twenty years with Bristol-Myers Squibb Company (BMS), most recently as Senior Counsel, Worldwide Medicines and previously as lead counsel to various therapeutic divisions, including BMS Oncology/Immunology. While at BMS, he had primary legal responsibility for the commercialization and launch of seven BMS products. Before joining BMS in 1988, Mr. Keane was an associate with the law firms of Wilson, Elser, Moskowitz, Edelman & Dicker from 1987 to 1988 and Martin, Clearwater and Bell from 1984 to 1987. He received his J.D. degree from Fordham University School of Law and his B.A. degree in Economics from Fordham University. Compensation Committee Report The following report of the Compensation Committee should not be deemed “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act except to the extent that ARIAD specifically incorporates it by reference into that filing. The Compensation Committee of the Board has reviewed and discussed with members of management the Compensation Discussion and Analysis (“CD&A”) section included in this proxy statement, as required by Item 402(b) of Regulation S-K. Our insider trading policy expressly bars our executive officers, directors and employees from engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock. We also prohibit our executive officers, directors and employees from purchasing ARIAD stock on margin and pledging our stock as collateral. In addition, we prohibit our officers, directors and employees from purchasing or selling ARIAD securities while in possession of material, non-public information, or otherwise using such information for their personal benefit. We also permit and encourage our executives and directors to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates. TAX DEDUCTIBILITYOF COMPENSATION Section 162(m) of the Code limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief executive officer or chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and has been approved by shareholders. Our 2006 Long-Term Incentive Plan permits the issuance of performance-based stock awards that would be compliant with Section 162(m). In 2012, we have included performance-based stock awards that are intended to comply with Section 162(m) in our annual equity-based compensation awards to our officers. We have not adopted a policy that all executive compensation be fully deductible. Compensation Committee Report The Compensation Committee of the Board has reviewed and discussed with members of management the Compensation Discussion and Analysis (“CD&A”) section included in this proxy statement, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. Process for Determining Executive Compensation MembersOur Compensation Committee is responsible for, among other duties, reviewing the performance of our Chief Executive Officer and reviewing and recommending his compensation for approval by the Board. The Compensation Committee is also responsible for reviewing the assessment of performance of our other executive officers conducted by our Chief Executive Officer and reviewing and approving their compensation in consultation with our Chief Executive Officer. While our Compensation Committee has ultimate authority and responsibility for approving all executive officer compensation, our Chief Executive Officer plays an active role in such decisions, except with respect to his own compensation where he participates in neither the deliberations nor the decision. At the beginning of each year, the Executive Leadership Team of the Company establishes annual corporate objectives, which are reviewed and discussed with the Compensation Committee and the Board and form the basis for our annual operating plan. The status of our corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the year. Based on the annual corporate objectives and the associated operating plan, each of the executive officers prepares objectives, which are reviewed and approved by our Chief Executive Officer early in the year. Massimo Radaelli, Ph.D. (Chair) Athanase Lavidas, Ph.D. Robert M. Whelan, Jr. Compensation Discussion and Analysis Executive Summary This CD&A explains ourAt the end of each year, each of the executive compensation program as it relatesofficers provides a detailed self-assessment of his or her performance relative to the following “namedestablished corporate and individual objectives, as well as to key leadership and management measures described below. In addition, each executive officers” whose compensation informationofficer is presentedevaluated on a confidential basis by several of his or her peers, subordinates, and in some instances, external colleagues, selected by our Chief Executive Officer. The Chief Executive Officer reviews and evaluates all of these assessments and completes an overall evaluation of performance for each officer for the tables following this discussionyear, taking into account his judgment regarding the Company’s overall progress, each officer’s contribution to the achievement of corporate objectives, his or her achievement of individual objectives, and his or her performance in accordance with SEC rules: Name Position Harvey J. Berger, M.D. Chairman of the Board of Directors, Chief Executive Officer and President Timothy P. Clackson, Ph.D. President of Research and Development and Chief Scientific Officer Edward M. Fitzgerald Executive Vice President, Chief Financial Officer and Treasurer Martin J. Duvall Senior Vice President, Commercial Operations Frank G. Haluska, M.D., Ph.D. Senior Vice President, Clinical Research and Development and Chief Medical Officer The compensation of our executive officers for 2011 is based onrelation to leadership and management measures. Specific numerical weightings or ratings are not applied to individual corporate or personal objectives; rather, the performance of the executive officer is evaluated as a whole in the context of his or her peers at the same level of management within the Company. The level of performance is then used by the Chief Executive Officer to guide his recommendations to the Compensation Committee regarding each executive officer’s performance rating. As part of this process, the Compensation Committee, with input from the Chief Executive Officer, reviews the overall performance of the Company relative to the key corporate objectives established at the beginning of the year. This assessment, along with the assessments made by the Chief Executive Officer regarding the individual officers, forms the basis for the decisions regarding the individual’s performance rating. Performance ratings can range from “unsatisfactory” to “meets requirements” to “exceeds requirements” to “outstanding”. The performance rating is then used to determine the performance multiplier applicable to the executive, which forms the basis for increases in salary, annual performance awards and long-term incentive awards. The Compensation Committee also undertakes a comprehensive review of the Chief Executive Officer’s performance based on its evaluation of our Company’s overall performance, the Chief Executive Officer’s individual contributions to achievement of key objectives, his strategic leadership of the Company and his demonstration of our vision and corporate values. His overall performance is rated, and his compensation is adjusted using the same performance scale as the other executive officers. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for subsequent approval. In addition to an evaluation of the level of achievement of our corporate and certain individual executives duringobjectives, each executive officer is evaluated as to key leadership and management measures, including each individual’s: Contribution to the year. It is also consistent withmanagement team and development and application of leadership skills reflective and supportive of our compensation objectives —corporate values, vision and mission, Ability to focus our officers onattract, hire, manage, retain, and motivate talent in support of the achievement of key businessour objectives, and to align their interests with those of our stockholders. After successfully executing our key product development plans and strengthening our balance sheet in 2010, we again achieved all of our key corporate objectives in 2011, as discussed in detail in the section entitled “Factors Considered in the Determination of Executive Compensation for 2011” found elsewhere in this CD&A. We believe that these accomplishments are reflected in the increase of approximately 140% in the market price of our common stock from December 31, 2010 to December 31, 2011. Our compensation actions for our named executive officers related to 2011 performance reflect these achievements over this time period. In addition, based on our continued assessment of our compensation policies and practices, we took the following actions consistent with our overall compensation objectives: • We updated our executive compensation philosophy to target compensation at the 65th percentile of the market (as described below under “Data Used to Make Compensation Determinations”) in recognition of our advancement toward commercialization and the need to attract, retain and motivate executives who can lead a successful commercial oncology business. We refined our peer group to better reflect biopharmaceutical companies with products in late-stage development or early stages of commercialization to allow us to compete more effectively for executive talent.   We continued to align compensation actions closely with performance through our performance evaluation processManagement of his or her functions and the review of performance with our Compensation Committee. We ensured that all components of compensation directly reflected an individual executive’s performance by adjusting target base salary increases, bonusesresponsibilities within established financial budgets and long-term incentive awards to reflect the individual’s performance rating. We again used performance shares as a key component of our long-term incentive compensation for our executive officers making awards in March 2012 (related to 2011 performance) in which the number of shares to be issued and the vesting schedules are tied to the achievement of a key corporate objective, the approval by the European Medicines Agency (EMA) of ponatinib. These and other actions are discussed in greater detail in the sections that follow. Our Compensation Committee will continue to evaluate our overall compensation structure and awards to ensure that they are reflective of the performance of our executive officers and our Company and are consistent with our compensation objectives. We believe that our compensation program has been and will continue to be successful in attracting and retaining the right executive team during this critical phase of our evolution. Our compensation program for our named executive officers was supported by 98% of the “Say-on-Pay” advisory votes cast by shareholders at our 2011 annual meeting of shareholders. Based on the success of our compensation program and after consideration of last year’s “Say-on-Pay” advisory vote, we are continuing the same structure for our executive compensation program except for the changes to our target compensation and peer group noted above. The Objectives of Our Compensation Program The primary objectives of our compensation and benefits programs for our executive officers are to: Enable us to attract, retain and motivate the best available talent to lead our company by providing market-driven competitive compensation consistent with actual performance, Focus our executive officers on achieving key business objectives by providing the opportunity to earn annual performance awards depending upon corporate and individual performance that place a substantial portion of total annual compensation at risk,forecasts, and   AlignManagement of regulatory compliance requirements related to his or her responsibilities. There are no thresholds or maximum levels of achievement applicable to these individual objectives or the interestscorporate objectives. In addition, no specific weight is given to any of these factors in determining base salary increases, annual performance awards or long-term equity incentive awards for any of our executive officers with those of our stockholders through the use of equity compensation, including performance-based awards. More generally, we believe that our total compensation program should meet the following additional objectives: Maintain flexibility to address our future needsofficers. Instead, as noted above, each executive officer’s performance is evaluated as a global oncology company and to adjust to the changes in our industry and related employment markets, and Provide compensation opportunities across our company that are fundamentally fair and that recognize the contributionswhole, taking into account all of all our employees. We have refined our compensationthese objectives and practices as we evolve towards becoming a fully integrated commercial oncology company. Since our founding, we have strived to adjust compensation practices to reflect our stage of development and evolving practices within our industry, and we intend to continue to do so. We maintain compensation programs that are competitive at all levels and particularly reward exceptional employees for their achievement ofmeasures, encouraging collaboration among senior executives in achieving inter-dependent corporate and individual goals. This approach focuses our entire Company on making our product candidates available to the patients who need them. We have advanced ponatinib swiftly toward filing for regulatory approval and commercialization. In addition, we made the decision to commercialize ponatinib on our own and build a global oncology business. In recognition of this, we reviewed our compensation policy with the assistance of our compensation consultant, Radford, and updated our compensation philosophy to target the 65th percentile of the market for overall compensation. We believe that this philosophy will help ensure that we attract, retain and motivate executives who can lead the successful commercialization of our product candidates in a highly competitive market for executive talent.objectives. Elements of Total Direct Compensation WeAs briefly described above, we provide three basic forms of direct compensation to our executive officers: base salary, bonuses (which we refer to as annual performance awards),awards, and long-term equity incentive awards. BASE SALARY Base salary is intended to provide all of our employees with a fair and competitive base level of compensation that reflects their job function, organizational level, experience and tenure, and sustained performance over time. Executive-officerExecutive officer base salary levels are set using these criteria. On an annual basis, our executives are eligible for a salary increase. The amount of this increase, if any, is determined by our Compensation Committee, which establishes a target salary increase based primarily on analysis of market compensation data and the performancerecommendation of each executiveour compensation consultant. In 2012, the target salary increase was set at 3.5%. Each executive’s actual salary increase, if any, is determined based on the executive’s performance in achieving key corporate and individual objectives established at the beginning of each year, and internal pay equity, as well asand demonstrated levels of core job competency and effective leadership. Increases are considered withinAs discussed above under “Targets and Performance Multipliers,” the contextexecutive’s performance rating leads to the application of our overall budgetary parameters before more specific individual and market competitive factors and overall economic factors are considered. We do not apply specific formulas for individual actions.a performance multiplier, which results in the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year (prorated, as appropriate, for the length of time an individual is an executive officer during the year) but become effective as ofand are paid retroactively to January 1 of that year. ANNUAL PERFORMANCE AWARDS Annual performance awards are intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives on an annual basis. Annual performance awards to our Chief Executive Officer have previouslyin past years been made, in whole or in part, in the form of shares of common stock. Performancestock, in order to conserve cash to fund our priority research and development programs and commercialization efforts. Annual performance awards to our other executive officers have been payable in cash, but deferred under our 2005 Executive Compensation Plan, as amended (the “2005 Executive Compensation Plan”). Awards in past years have vested in equal installments beginning on the first anniversary of the date of the award and are payable in cash in installments on or after vesting, provided the executive continues to be employed with us, subject to later payment at the executive’s election. These arrangements, which also allowed us to conserve cash to fund our priority research and development programs and commercialization efforts and also supported the retention of our executive officers. The value of amounts deferred under the 2005 Executive Compensation Plan is increased or decreased over the vesting and payment periods based upon the actual total return of specified mutual funds. for operations. This year, in order to ensure that we offer a more competitive compensation package, designedour Compensation Committee determined to attract, retain and motivatepay our executive officers, we revised the form and terms of our annual performance awards. Our annual performance award to our Chief Executive Officer in 2012 for fiscal 2011 performance was paid as to 50% of the award in the form of shares of common stock and as to the remainder in the form of cash. Only the cash portion of the annual incentive is reflected in the Summary Compensation Table in accordance with SEC disclosure rules. Our annual performance awards to all of our other executive officers for fiscal 2011 performance were paid as to 50% of the award currently in cash, consistent with the remainder deferred under our 2005 Executive Compensation Plan for one year. The entire value of annual incentive is reflected in the Summary Compensation Table in accordance with SEC disclosure rules, as it is all payable in the form of cash. It is typical practice within our peer grouppeers and the broader life sciences marketplace to paylife-sciences marketplace. As discussed above under “Targets and Performance Multipliers,” our Compensation Committee annually establishes target annual performance awards all in cash atfor the datedifferent tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive through the determinationapplication of a performance multiplier based on the award amount. Therefore, we believe thatindividual executive’s performance rating for the changes we have made to our annual performance awards provide a more competitive compensation package to our executive officers.year. LONG-TERM EQUITY INCENTIVE AWARDS Long-term equity incentive awards are also intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives. In addition, such awards are intended to align the interests of all of our executive officers with those of our stockholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive officers. As such, long-term equity incentive awards for our executive officers are made in the form of stock options, restricted stock units and/orand performance shares. Stock options and restricted stock units vest annually over three years. Performance shares with vesting schedules over multiple years or, invest upon the case of performance shares, tied to achievement of one or more key corporate objectives or metrics. Long-termmetrics and, once achieved, are subject in certain cases to further time-based vesting to provide further retention. The mix of types of equity incentive awards are made under our 2006 Long-Term Incentive Plan. We include performance shares as a componentprovides various long-term incentives. Stock options align the interests of our long-term equity incentive awards to our executive officers to provide a direct link between a portion of their incentive compensation and the achievement of one or more key corporate objectives that will help drive long-term value for stockholders. We include stock options as a component of our long-term equity incentive awards to our executive officers to align their interestsexecutives with those of our stockholders in that our executive officersvalue will only realize valuebe realized from these stock optionsawards if our stock price increases over time. Restrictedtime; restricted stock units are used to provide our executive officers with an opportunity to increase their holdings of our common stock, as well as to provide some certainty as to the ability to receiveof receiving some amount of compensation during periods of market volatility thereby helping usand provide the opportunity for our executives to attract, retainmaintain holdings of our common stock; and motivate the best available talent to leadperformance shares provide a direct link between achievement of key corporate objectives that we expect will drive long-term value for our Company. stockholders. Long-term equity incentive awards are granted under our 2006 Long-Term Incentive Plan. The target long-term equity incentive awards to our executive officers made in March 2012 for 2011 performanceeach officer are based on recommendations by Radford, taking into consideration the value of equity-based awards and in March 2011 for 2010 performance weretotal compensation of executives of companies in the form of stock options, restricted stock units andcomposite market compiled by Radford, as described under “Competitive Market Compensation Data” above. For performance shares, divided approximately equally in terms of value among the three. The stock options and restricted stock units vest ratably over three years. The performance shares will vest only if we achieve the specific performance objective stated in the awards. For theshare awards made in March 2011, the performance objective is regulatory approval by the U.S. Food and Drug Administration (FDA), prior to the end of 2016, to market ponatinib, with the vesting schedule dependent on when prior to the end of 2016 such approval is obtained. For the awards madegranted in March 2012, the performance objective is regulatory approval by the EMA,European Medicines Agency of a Marketing Authorization Application (MAA) for Iclusig prior to the end of 2016, to market ponatinib in the European Union, with the number of shares and vesting schedule dependent on when prior to the end of 2016 such approval is obtained. As no amount was recorded on our financial statements for these awards as per ASC Topic 718, the Summary Compensation Table does not reflect the value of these equity awards. If approvals from the FDA or the EMA areif not obtained prior toby then, the end of 2016, these awardsaward will terminate and have no value. As set forth in the Grant of Plan-Based Awards table below, if the MAA is granted in 2013, then 160% of the target award will be earned, with 50% vesting immediately and 25% vesting on each of the next two anniversaries; if the MAA is granted in 2014, then 100% of the target award will be earned, with 50% vesting immediately and 50% vesting on the one year anniversary; and if the MAA is granted in 2015 or 2016, then 50% of the target award will be earned with all shares immediately vested. ElementsMIXOF DIRECT COMPENSATION COMPONENTS As our executive officers have increasing responsibility for and impact on our results, we place greater emphasis on variable, performance-based compensation and longer term compensation vehicles in the form of Indirect Compensationequity awards and deferred performance awards. We do not have specific policies nor do we use formulas to determine a mix of total compensation. We intend for total compensation to vary based on our progress towards achievement of corporate, departmental and team objectives, as well as individual performance goals. For fiscal 2012, our annual performance awards and long-term equity incentive awards, including the value of performance shares awarded at target level, represent over 80% of the total direct compensation (excluding benefits) on average for our named executive officers. BENEFITSAND PERQUISITES We provide our executive officers with generally the sameIn addition to general benefits as those providedoffered to all other salaried employees, such as health, dental and vision insurance, life insurance, short- and long-term disability, 401(k) plan with company match, and the ability to participate inwe provide our employee stock purchase plan. In addition, we also provide executive officers with supplemental long-term disability insurance and long-term care insurance. We offerinsurance, tax return preparation services to our executive officers to assist them in complying with their tax reporting obligations. Our executive officers also receiveand an auto allowance in accordance with their employment agreements. These are the only perquisites we provided to our executive officers during 2011.2012. Perquisites represent less than 2% of each named executive officer’s total compensation as set forth in the Summary Compensation Table located elsewhere in this proxy statement. below. We believe that our benefits and perquisites represent competitive market practices for executives at companies within our peer group. They are offered as a means to attract and retain our executive officers. EMPLOYMENT AGREEMENTS We have entered into employment agreements with our named executive officers. Each of these agreements provides for certain payments and other benefits if the executive’s employment terminates under certain circumstances other than for “cause,” including in connection with a “change in control.” See the subsection “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table” for a description of the agreement terms impacting current compensation and “Potential Payments upon Termination or Change in Control” for a description of applicable severance and change in control benefits. Our Compensation Committee periodically reviews the principal terms of our employment agreements with our named executive officers in light of our needs and evolving market conditions. Our Compensation Committee believes that change-in-control and severance arrangements are important parts of the overall compensation program for our named executive officers. Change-in-control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control, and to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination of their employment. COMPENSATION COMMITTEE POLICY REGARDING CHANGE IN CONTROL SEVERANCE PAYMENTS Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an executive officer with a severance payment following a change in control of our Company, except in the case of a termination event (i.e., a “double-trigger”). In addition, the policy also restricts our Company from entering into any future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances.Effective April 2013, our Compensation Committee revised this policy eliminating the exception to allow for an excise tax-gross in certain unusual circumstances. We have not entered into any agreements with any of our executive officers that provide for an excise tax gross-up, other than Dr. Berger’s employment agreement, which pre-dated the April 2010 policy. Factors Considered in the Determination of Executive Compensation 2011 PERFORMANCE CONSIDERED FOR 2012 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2012, our Compensation Committee made decisions regarding 2012 salary increases and the 2012 grants of long-term equity incentive awards based on 2011 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2011, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2011 corresponded to ARIAD’s 2011 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2011.” Briefly summarized: We advanced Iclusig towards marketing authorization and commercialization. We prepared the Company for commercialization of our first cancer medicine. We advanced AP26113 into first-in-man studies. We strengthened our balance sheet and built sustained shareholder value. Dr. Berger’s 2012 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s 2011 performance was rated as outstanding. He received a merit increase of 4.8%, which increased his 2012 base salary to $697,000. His long-term equity incentive awards of 92,000 performance shares, 102,000 restricted stock units and 213,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $5.3 million which amount includes the value of performance shares at the target level. Dr. Clackson’s 2012 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, had broad responsibilities for the management of our business. He had responsibility for leading multiple functions within our company, including discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. As evidenced by our Company’s accomplishments during 2011, it was a year of great progress in each of these areas. Based on the above, Dr. Clackson’s 2011 performance was rated as outstanding. His 2012 salary increase to $468,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 40,000 restricted stock units and 82,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $2.0 million, which amount includes the value of performance shares at the target level. Mr. Fitzgerald’s 2012 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, had broad responsibilities for numerous aspects of our operations and business. In particular, he led key aspects of our planning for the growth and international expansion of our business, led the planning and implementation of key systems necessary to support the needs of our business, managed diverse initiatives that provided additional funding for our programs, and effectively managed our spending in support of our key corporate objectives. Based on the above, Mr. Fitzgerald’s 2011 performance was rated as exceeding requirements. His 2012 salary increase to $438,000 reflects a merit increase of 3%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 25,000 restricted stock units and 51,000 stock options equate to approximately 100% of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.5 million, which amount includes the value of performance shares at the target level. Ms. Cantor’s 2012 Salary and Equity Awards Ms. Cantor was promoted from Vice President, Corporate Communications and Investor Relations to Senior Vice President, Corporate Affairs in January 2012. She was responsible in 2011 for developing and implementing a corporate communications and investor-relations strategy that supported the reputation of the Company and enhanced shareholder value. This strategy enhanced the advancement of our product pipeline in 2011 with a specific focus on providing timely and relevant information to the media and our investors. Based on the above, Ms. Cantor’s performance was rated as outstanding. Her salary increase to $306,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 10% to account for her promotion and align her base salary to the 65th percentile of market. Her long-term equity incentive awards of 20,000 performance shares, 22,000 restricted stock units and 46,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.1 million, which amount includes the value of performance shares at the target level. In addition, in connection with her promotion to Senior Vice President, Ms. Cantor also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. Dr. Haluska’s 2012 Salary and Equity Awards Dr. Haluska was promoted from Vice President, Chief Medical Officer to Senior Vice President, Chief Medical Officer in January 2012. He was responsible in 2011 for leading the Company’s teams that planned and executed an expanded access program for Iclusig consistent with the goals of the program, planned and conducted focused non-clinical, translational and external clinical studies of Iclusig to support the lead and follow-on indications, evaluated and prioritized additional clinical trials of Iclusig, and initiated the first-in-man Phase 1/2 clinical trial of AP26113. Based on the above, Dr. Haluska’s performance was rated as exceeding requirements. His salary increase to $400,000 reflects a merit increase of 3.9%, plus an adjustment of approximately 3% to account for his promotion and align his base salary to the 65th percentile of market. His long-term equity incentive awards of 20,000 performance shares, 18,000 restricted stock units and 38,000 stock options equate to approximately 100%, 130% and 130%, respectively, of each target award and had a grant date fair value of approximately $995,000, which amount includes the value of performance shares at the target level. In addition, in connection with his promotion to Senior Vice President, Dr. Haluska also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. 2012 PERFORMANCE CONSIDERED FOR 2012 ANNUAL PERFORMANCE AWARDS AND 2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2013, our Compensation Committee made decisions regarding our 2012 annual performance awards, as well as 2013 salary increases and 2013 grants of long-term equity incentive awards, in each case based on 2012 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2012, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2012 corresponded to ARIAD’s 2012 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2012.” Briefly summarized: We completed the regulatory submission of and obtained U.S. marketing approval for Iclusig. We established European operations in preparation for the European commercial approval and launch of Iclusig in 2013. We continued to advance the clinical development of AP26113. We enhanced our discovery efforts with the goal of designating our next development candidate. We managed substantial growth in personnel and internal systems. We positioned the Company to further strengthen our balance sheet through an underwritten public offering in early 2013. Dr. Berger’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s performance was rated outstanding. His 2012 annual performance award and 2013 salary and long-term equity awards are set forth in the tables below. Dr. Clackson’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our business, including leading our discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Clackson’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Mr. Fitzgerald’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of our operations and business. These included planning and overseeing the growth and international expansion of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant initiatives that provided additional funding for our programs, and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Fitzgerald’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Ms. Cantor’s 2012 Annual Performance Award and 2013 Salary and Equity Awards In her position as our Senior Vice President, Corporate Affairs, Ms. Cantor played a leading role during 2012 in communicating with shareholders about our corporate developments and performance. Her contributions included expanding and improving awareness and visibility of the Company among stakeholders in the United States and in key countries throughout Europe, as well as incorporating the use of social media tools across all functional areas to expand awareness of our Company, Iclusig and our other development-stage programs. Based on her contributions to the achievement of our key corporate objectives for 2012, as well as her performance in relation to individual objectives and leadership and management standards, Ms. Cantor’s performance was rated as exceeding requirements. Her 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Dr. Haluska’s 2012 Annual Performance Award and 2013 Salary and Equity Awards As our Senior Vice President, Chief Medical Officer, Dr. Haluska led the Company teams that completed major components of our NDA submission for Iclusig to the FDA in July 2012, and submitted our MAA to the European Medicines Agency in August 2012; initiated our global Phase 3 EPIC trial of Iclusig in newly diagnosed CML patients in June 2012; and continued to oversee progress in Phase 1/2 trial of AP26113. Based on his contributions to the achievement of our key corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Haluska’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. 2012 ANNUAL PERFORMANCE AWARDS During the Compensation Committee’s review process for determining 2012 annual performance awards, the Compensation Committee was advised by Radford that the annual cash performance award targets that it had previously established for all members of our Executive Leadership Team, including all of the NEOs, trailed market competitive levels and were below the 65% percentile. Based on Radford’s recommendation, the Compensation Committee therefore determined to increase the target annual performance awards for 2012 for all senior officers other than Dr. Berger. The revised performance award targets, which are formulated as a percentage of base salary, are set forth in the table below under the column entitled, “Revised Targets.” Concurrently with increasing the performance award targets for all other senior officers, the Compensation Committee approved an increase in Dr. Berger’s annual performance award target for 2013 from 70% to 85%. 2012 Annual Performance Awards Name    Revised Targets     Performance Multiplier     Actual Target Percentage     Actual Award   H. Berger      70 %      200 %      140 %    $ 976,000    T. Clackson      50 %      155 %      78 %    $ 365,000    E. Fitzgerald      50 %      150 %      75 %    $ 329,000    M. Cantor      45 %      150 %      68 %    $ 208,000    F. Haluska      45 %      155 %      70 %    $ 280,000    2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS In March 2013, the Compensation Committee approved 2013 salaries retroactive to January 1, 2013 and granted long-term equity incentive awards to our NEOs in consideration of their 2012 performance and their expected future performance as follows: Name    2013 Salary      Performance Shares at Target(#)      Restricted Stock Units(#)      Stock Options(#)      Grant Date Fair Value of Equity   H. Berger    $ 751,000         95,000         108,000         216,000       $ 7,071,760    T. Clackson    $ 493,000         35,000         32,500         65,000       $ 2,262,024    E. Fitzgerald    $ 466,000         35,000         32,500         65,000       $ 2,262,024    M. Cantor    $ 340,000         20,000         19,500         39,000       $ 1,336,324    F. Haluska    $ 427,000         20,000         19,500         39,000       $ 1,336,324    For the performance share awards granted in March 2013, the performance objective is tied to continued success in specific research and development initiatives through the end of 2016, with the number of shares earned ranging from 160% to 50% of target, and the vesting schedule varying, depending on the year in which such performance objective is obtained. If the performance objective is not obtained prior to the end of 2016, the award will terminate and have no value. 2013 TARGET ANNUAL PERFORMANCE AWARDS In March 2013, the Compensation Committee approved 2013 target annual performance awards as a percentage of 2013 salaries which annual performance awards will be paid in 2014 based on 2013 performance. The targets are as follows: Name 2013 Target Payout as a % of 2013 Base Salary H. Berger 85 %  T. Clackson 50 %  E. Fitzgerald 50 %  M. Cantor 45 %  F. Haluska 45 %  HEDGING TRANSACTIONS, PLEDGESOF STOCK,AND INSIDER TRADING POLICY Our insider trading policy expressly bars our executive officers, directors and employees from engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock. We also prohibit our executive officers, directors and employees from purchasing ARIAD stock on margin and pledging our stock as collateral. In addition, we prohibit our officers, directors and employees from purchasing or selling ARIAD securities while in possession of material, non-public information, or otherwise using such information for their personal benefit. We also permit and encourage our executives and directors to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates. TAX DEDUCTIBILITYOF COMPENSATION Section 162(m) of the Code limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief executive officer or chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and has been approved by shareholders. Our 2006 Long-Term Incentive Plan permits the issuance of performance-based stock awards that would be compliant with Section 162(m). In 2012, we have included performance-based stock awards that are intended to comply with Section 162(m) in our annual equity-based compensation awards to our officers. We have not adopted a policy that all executive compensation be fully deductible. Compensation Committee Report The Compensation Committee of the Board has reviewed and discussed with members of management the Compensation Discussion and Analysis (“CD&A”) section included in this proxy statement, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. Process for Determining Executive Compensation As discussed in the section titled “Compensation Committee” located elsewhere in this proxy statement, theOur Compensation Committee is responsible for, among other duties, reviewing the performance of our Chief Executive Officer and reviewing and recommending his compensation for approval by the full Board. The Compensation Committee is also responsible for reviewing the assessment of performance of our other executive officers conducted by our Chief Executive Officer and reviewing and approving their compensation as recommended byin consultation with our Chief Executive Officer. While our Compensation Committee has ultimate authority and responsibility for approving all executive officer compensation, our Chief Executive Officer plays an active role in such decisions, except with respect to his own compensation.compensation where he participates in neither the deliberations nor the decision. At the beginning of each year, the executive leadership teamExecutive Leadership Team of the Company establishes annual corporate objectives, which are reviewed and discussed with the Compensation Committee and the Board and form the basis for our annual operating plan. The status of our corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the year. Based on the annual corporate objectives and the associated operating plan, each of the executive officers prepares individual and departmental objectives, which are reviewed and approved by theour Chief Executive Officer early in the year. At the end of each year, each of the executive officers provides a detailed self-assessment of his or her performance relative to the established corporate and individual objectives, andas well as to key leadership and management measures. measures described below. In addition, each executive officer is evaluated on a confidential basis by several of his or her peers, subordinates, and in some instances, external colleagues, selected by theour Chief Executive Officer. The Chief Executive Officer reviews and evaluates all of these assessments and completes an overall evaluation of performance for each officer for the year, taking into account his judgment regarding the Company’s overall progress, each officer’s contribution to the achievement of corporate objectives, as well as his or her achievement of individual objectives, and his or her performance in relation to leadership and management measures. Specific numerical weightings or ratings are not applied to individual corporate or personal objectives; rather, the performance of the executive officer is evaluated as a whole in the context of his or her peers at the same level of management within the Company. Based on this evaluation, each executive officer’s performance is rated on a scale from “unsatisfactory” to “outstanding.” The mid-point of this range — “meets requirements “— reflects that an executive officer has generally met the requirements of his or her position. To obtain 100% of an executive’s target base salary increase, bonus award or long-term incentive award, the executive must be rated at least “exceeds requirements.” Each component of compensation is adjusted upwards or downwards from 0% to 160% of target based on the individual’s performance rating. The level of performance is then used by the Chief Executive Officer to guide his recommendations to the Compensation Committee regarding each of the components of executive compensation for the other executive officers. The Chief Executive Officer reviews and discusses such recommendations with the Compensation Committee.officer’s performance rating. As part of this process, the Compensation Committee, with input from the Chief Executive Officer, reviews the overall performance of the Company relative to the key corporate objectives established at the beginning of the year. This assessment, along with the assessments made by the Chief Executive Officer regarding the individual officers, forms the basis for the Compensation Committee’s assessment of eachdecisions regarding the individual’s performance rating. Performance ratings can range from “unsatisfactory” to “meets requirements” to “exceeds requirements” to “outstanding”. The performance rating is then used to determine the performance multiplier applicable to the executive, officer. Upon completion of its process,which forms the Compensation Committee approves basebasis for increases in salary, increasesannual performance awards and other awards for each of these officers.long-term incentive awards. The Compensation Committee also undertakes a comprehensive review of the Chief Executive Officer’s performance based on its evaluation of our Company’s overall performance, the Chief Executive Officer’s individual contributions to achievement of key objectives, his strategic leadership of the Company and his demonstration of our vision and corporate values. HeHis overall performance is rated, and his compensation is adjusted using the same metricsperformance scale as the other executive officers. The Compensation Committee uses this information to determine the annual adjustment to his base salary, if any, as well as the amount of his annual performance award and long-term equity incentive award, if any. The Chief Executive Officer’s annual performance award and long-term equity incentive award are based on the Compensation Committee’s assessment and rating of his performance and a target award established each year, with input from Radford, our compensation consultant. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for approval at a subsequent meeting.approval. Based on analysis of the market research data relating to our peer group prepared by Radford, the Compensation Committee determines the following parameters: The target percentage increase in base salary, The target annual performance awards for each level of officer, and The target levels for long-term equity incentive awards for each level of officer. In 2012 and 2011, the target base salary adjustment for officers was approximately 3%. The target annual performance award for each officer is based on a percentage of base salary. The target long-term equity incentive awards for each officer is based on recommendations by Radford, taking into consideration the value of equity-based awards and total compensation of executives of companies in our peer group (as described below under “Data Used to Make Compensation Determinations”). The target awards for our executive officers for 2012 and 2011 were as follows:      2012   2011      Chief Executive Officer   Executive Vice Presidents(1)   Other Executive Officers(2)   Chief Executive Officer   Executive Vice Presidents   Other Executive Officers Target annual performance awards, as a percentage of base salary:    70%   45%   40%   50%   30%   30% Target long-term equity incentive awards (in shares):              •  Stock options    133,000   51,000   29,000   125,000   48,300   31,700 •  Restricted stock units    64,000   25,000   14,000   71,400   27,600   18,100 •  Performance shares    92,000   35,000   20,000   71,400   27,600   18,100 (1) Dr. Clackson and Mr. Fitzgerald are classified as Executive Vice Presidents. (2) Mr. Duvall and Dr. Haluska are classified as Other Executive Officers. The level of performance of each executive officer, as determined above, directly influences his or her increase in base salary, annual performance award and long-term equity incentive award relative to target awards, and such amounts may be greater than or less than the target levels based on the assessment and rating of each officer’s performance. In order to achieve or exceed the target level of the annual performance or long-term equity incentive award, the executive officer’s performance must be rated at least “exceeds requirements.” In order to receive any award, the officer’s performance must be rated at least “meets requirements.” Executive officers who are rated “meets requirements” generally receive annual performance awards and long-term equity incentive awards of 50% to 85% of the target award for the level of the officer. Executive officers who are rated “outstanding” may receive annual performance awards and long-term equity incentive awards of up to 160% of the target award for 2011 performance, which percentages may change from year to year. The final amount of the award reflects the individual performance during the assessment period. The use of “performance multipliers” ensures that executives who demonstrate outstanding performance receive awards that are more than twice as large as those given to executives who only meet the requirements of the position. The number of performance shares ultimately issued to an executive officer may be greater than or less than the target awards listed in the table above based on the timing of the EMA approval of ponatinib. DATA USEDTO MAKE COMPENSATION DETERMINATIONS In making decisions regarding the compensation of our executive officers, the Compensation Committee generally considers compensation and survey data for similarly situated executives at a comparison group of companies it considers our peer group. These comparison data are primarily used to gauge the reasonableness and competitiveness of executive compensation decisions. We draw upon a pool of talent that is highly sought after by large and established pharmaceutical and biotechnology companies as well as by other development-stage life science companies, both within and outside our geographic area. We believe that the compensation practices of our industry in general and of our select peer group in particular provide useful information to help us establish compensation practices that allow us to attract, retain, and motivate a highly talented executive team. We believe we must offer a compensation package to all of our officers and our other employees that is competitive with our peer group, as well as larger pharmaceutical and biotechnology companies from whom we frequently recruit. In addition, the comparator companies should be aligned with our current stage of development and have similar short and long-term growth objectives. In 2011, we set the target level of total compensation, as well as the key elements of compensation, at the 60th percentile of our peer group, but then adjusted each of the elements based on an individual’s performance and contribution to our strategic objectives. At times, we need to adjust these levels to attract or retain specific individuals. In 2012, we set the target level at the 65th percentile of the market in recognition of the very competitive market for executive talent in which we operate and the critical importance of attracting and retaining such talent as we grow and prepare for potential commercial launch of one or more product candidates. Each year, we review the levels of cash, equity, and total compensation for all comparable officers in our peer group relative to the elements of compensation paid to our officers. In considering how these data relate to our existing compensation structure, we take into account our size, stage of development, performance, and geographic location as compared to these peer companies, as well as what we know about the comparable scope of responsibilities of our officers versus those of comparable executives at such peer group companies. With the assistance of our compensation consultant, Radford, we used two primary market frames of reference (which we refer to as the “market”) against which to compare our total executive compensation practices and levels and inform our decisions regarding compensation of our officers as follows: Select Peer Group — A select group of national biotechnology companies at a similar stage of development as our company with similar headcount, market capitalization and in most cases, similar therapeutic targets, and Radford Global Life Sciences Survey — A national survey of executive compensation levels and practices that covers approximately sixty executive positions in over 600 multinational life sciences organizations. We do not apply a specific weighting to either data source when making compensation comparisons. Instead, we work with Radford to develop competitive market guidelines using these data sources and in some cases, additional local and/or national market frames of reference. Our peer group is reviewed each year to ensure continued relevance as we grow and develop and is approved by the Compensation Committee prior to its adoption. The select peer group as of February 2012 analyzed by Radford and used to inform our decisions affecting executive compensation based on 2011 performance consisted of the following companies: Accorda Therapeutics, Inc. Pharmasset Inc. Alkermes plc Questcor Pharmaceuticals, Inc. Auxilium Pharmaceuticals, Inc. Regeneron Pharmaceuticals, Inc. Cubist Pharmaceuticals, Inc. Salix Pharmaceuticals, Ltd. Incyte Corporation Seattle Genetics, Inc. InterMune, Inc. The Medicines Company Ironwood Pharmaceuticals, Inc. Theravance, Inc. Jazz Pharmaceuticals plc United Therapeutics, Inc. Momenta Pharmaceuticals, Inc. Vertex Pharmaceuticals, Inc. Onyx Pharmaceuticals, Inc. Viropharma Incorporated This peer group consisted of public companies in the biopharmaceutical industry with product candidates generally in late-stage development or a product recently approved for marketing, annual revenues generally less than $600 million (mean of $259 million), and market capitalization of at least $750 million (mean of $2.9 billion). We believe that, as of February 2012, this list was representative of the companies with whom we generally compete for talent. FACTORS CONSIDEREDINTHE DETERMINATIONOF EXECUTIVE COMPENSATIONFOR 2011 In making decisions regarding the compensation of our executive officers, the Compensation Committee considers the assessment and rating of the performance of each executive officer relative to our key corporate objectives and each officer’s individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2011 and the key corporate accomplishments considered in the determination of executive compensation by the Compensation Committee for each objective were as follows: Advance ponatinib towards marketing authorization and commercialization We successfully completed full enrollment of about 450 patients in our pivotal PACE clinical trial of ponatinib, our investigational pan-BCR-ABL inhibitor, in patients with resistant or intolerant chronic myeloid leukemia (CML) and Philadelphia chromosome positive acute lymphoblastic leukemia (Ph+ALL) (PACE) approximately six months ahead of the expected timing. We presented positive preliminary data from this trial at a major medical meeting in December 2011. We reported long-term results from our on-going Phase 1 clinical trial of ponatinib in heavily pre-treated patients with resistant and refractory CML and Ph+ALL in the third quarter of 2011 at the International Chronic Myeloid Leukemia Foundation conference. These data showed an on-going improvement over time in the anti-leukemic activity and response rates among patients treated with ponatinib. We initiated all required non-clinical and clinical pharmacology studies, as well as product stability studies of ponatinib and remained on schedule to support submissions for regulatory approval of this product candidate in the third quarter of 2012. We entered into an agreement with MolecularMD Corporation in the first quarter of 2011 under which MolecularMD is developing a commercial diagnostic test to identify the T315I mutation of the BCR-ABL gene in patients with CML and Ph+ALL. We introduced pre-approval programs in the United States and Europe to provide ponatinib to patients who have no effective treatment alternatives. Prepare the Company for commercialization We have developed and are implementing detailed plans for the potential launch of ponatinib in the United States and Europe, having determined that we will commercialize ponatinib ourselves on a global basis. We continued to hire the key leadership in our commercial team, including our Senior Vice President, Commercial Operations, and other key areas throughout our Company to ensure readiness for launch. Advance AP26113 into first-in-man studies We successfully completed all studies required to submit an investigational new drug application for AP26113, our investigational dual inhibitor of EGFR and ALK, and submitted that application to the FDA in the second quarter of 2011. We initiated patient enrollment in our multicenter Phase 1/2 clinical trial of AP26113 in the third quarter of 2011. Strengthen the balance sheet and build sustained shareholder value In December 2011, we raised $243 million in an underwritten public offering of our common stock and ended 2011 with $306 million in cash and cash equivalents on our balance sheet. We realized an increase of 140% in the market price of our common stock during 2011, which we believe is attributable to the successful results of our product discovery and development programs and the strengthening of our balance sheet. Decisions regarding our Chief Executive Officer’s compensation, including annual performance awards, are based predominantly on our company’s level of achievement of these key corporate objectives, as well as the following measures: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Dr. Clackson, as President of Research and Development and Chief Scientific Officer, and Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, have broad responsibilities for the management of our business and the achievement of our key corporate objectives as described above. Decisions regarding their compensation are, therefore, based largely on the achievement of these key corporate objectives, the other measures associated with the Chief Executive Officer listed above, and their ability to effectively lead the Company in the execution of its annual operating plan. Decisions regarding compensation for each of our other executive officers are based on each individual’s contributions to the achievement of the key corporate objectives listed above as well as the level of achievement of individual objectives developed at the beginning of the year in support of these key corporate objectives. Mr. Duvall, our Senior Vice President, Commercial Operations, joined the Company in September 2011. As the senior leader of our commercial group, Mr. Duvall assumed responsibility for the key objectives we had established to prepare for potential commercial launch of ponatinib, including: Development and implementation of detailed plans for the anticipated launch of ponatinib in the United States and Europe, Building the commercial leadership team, particularly in the areas of oncology marketing, sales and market access, and Integration of commercial assessment into long-range product planning. Dr. Haluska was promoted from Vice President, Chief Medical Officer to Senior Vice President, Chief Medical Officer in January 2012. His key individual objectives in 2011 consisted of: Completion of patient enrollment in the pivotal Phase 2 clinical trial of ponatinib in patients with resistant or intolerant CML and Ph+ALL, Planning and execution of an expanded access program for ponatinib consistent with the goals of the program, Planning and conducting focused non-clinical, translational and external clinical studies of ponatinib to support the lead and follow-on indications, Evaluation and prioritization of additional clinical trials of ponatinib in addition to the lead indication, and Initiation of a first-in-man Phase 1/2 clinical trial of AP26113. In addition to an evaluation of the level of achievement of theseour corporate and certain individual objectives, each executive officer is evaluated as to key leadership and management measures, including each individual’s:   Contribution to the management team and development and application of leadership skills reflective and supportive of our corporate values, vision and mission,   Ability to attract, hire, manage, retain, and motivate talent in support of the achievement of our objectives,   Management of his or her functions and responsibilities within established financial budgets and forecasts, and   Management of regulatory compliance requirements related to his or her responsibilities. There are no thresholds or maximum levels of achievement applicable to these individual objectives or the corporate objectives. In addition, no specific weight is given to any of these factors in determining base salary increases, annual performance awards or long-term equity incentive awards for any of our executive officers. Instead, as noted above, each executive officer’s performance is evaluated as a whole, taking into account all of these objectives and measures, encouraging collaboration among senior executives in achieving inter-dependent corporate objectives. Elements of Total Compensation Actions As briefly described above, we provide three basic forms of direct compensation to our executive officers: base salary, annual performance awards, and long-term equity incentive awards. BASE SALARY Base salary is intended to provide all of our employees with a fair and competitive base level of compensation that reflects their job function, organizational level, experience and tenure, and sustained performance over time. Executive officer base salary levels are set using these criteria. On an annual basis, our executives are eligible for a salary increase. The following sections discuss the actions takenamount of this increase, if any, is determined by our Compensation Committee, which establishes a target salary increase based on analysis of market compensation data and Boardthe recommendation of our compensation consultant. In 2012, the target salary increase was set at 3.5%. Each executive’s actual salary increase, if any, is determined based on the executive’s performance in 2011achieving key corporate and individual objectives established at the beginning of each year, internal pay equity, and demonstrated levels of core job competency and effective leadership. As discussed above under “Targets and Performance Multipliers,” the executive’s performance rating leads to the application of a performance multiplier, which results in the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year and are paid retroactively to January 1 of that year. ANNUAL PERFORMANCE AWARDS Annual performance awards are intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives on an annual basis. Annual performance awards to our Chief Executive Officer have in past years been made, in whole or in part, in the form of shares of common stock, in order to conserve cash to fund our priority research and development programs and commercialization efforts. Annual performance awards to our other executive officers have been payable in cash, but deferred under our 2005 Executive Compensation Plan, as amended (the “2005 Executive Compensation Plan”), which also allowed us to conserve cash for operations. This year, in order to ensure that we offer a more competitive compensation package, our Compensation Committee determined to pay our 2012 relatedannual performance awards to compensationall of our executive officers in cash, consistent with our peers and the broader life-sciences marketplace. As discussed above under “Targets and Performance Multipliers,” our Compensation Committee annually establishes target annual performance awards for 2011the different tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive through the application of a performance multiplier based on the individual executive’s performance rating for the year. LONG-TERM EQUITY INCENTIVE AWARDS Long-term equity incentive awards are also intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives. In addition, such awards are intended to align the interests of all of our executive officers with those of our stockholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive officers. In determining base salaries for 2011 and 2012 and annual performance andAs such, long-term equity incentive awards granted in 2011 and 2012, the Compensation Committee considered the factors and criteria described under the headings “Elements of Total Direct Compensation” and “Process for Determining Executive Compensation” above, as well as the factors discussedour executive officers are made in the sections that follow, relating to each executive officer. COMPENSATIONOF OUR CHIEF EXECUTIVE OFFICER In March 2011, the Compensation Committee approved a merit increaseform of approximately 5% to Dr. Berger’s 2010 base salary (to $665,200 in 2011), effective as of January 1, 2011. In March 2012, the Compensation Committee approved a merit increase of approximately 5% to Dr. Berger’s 2011 base salary (to $697,000 in 2012), effective as of January 1, 2012. In determining each component of compensation, the Compensation Committee rated Dr. Berger’s performance in 2010 and 2011 as outstanding. In making this determination, the Compensation Committee considered Dr. Berger’s leadership and management of the Company and the management team and his contributions to the achievement of our key corporate objectives for each year. Based on its evaluation of Dr. Berger’s 2010 performance, in March 2011, the Compensation Committee recommended, and the Board approved, an annual performance award to Dr. Berger of 70,750 shares of common stock and a long-term equity incentive award of 125,000 performance shares, 125,000options, restricted stock units and 220,000performance shares. Stock options and restricted stock options.units vest annually over three years. Performance shares vest upon the achievement of one or more key corporate objectives or metrics and, once achieved, are subject in certain cases to further time-based vesting to provide further retention. The 70,750mix of types of equity awards provides various long-term incentives. Stock options align the interests of our executives with those of our stockholders in that value will only be realized from these awards if our stock price increases over time; restricted stock units provide some certainty of receiving some amount of compensation during periods of market volatility and provide the opportunity for our executives to maintain holdings of our common stock; and performance shares provide a direct link between achievement of common stock had akey corporate objectives that we expect will drive long-term value of approximately $553,000 on the date of determination by the Compensation Committee, which corresponds to approximately 88% of Dr. Berger’s base salary for 2010 or 175% of hisour stockholders. Long-term equity incentive awards are granted under our 2006 Long-Term Incentive Plan. The target award. The shares of common stock were subject to a right of repurchase by ARIAD until February 15, 2012. The long-term equity incentive awards for each officer are based on recommendations by Radford, taking into consideration the value of equity-based awards and total compensation of executives of companies in the composite market compiled by Radford, as described under “Competitive Market Compensation Data” above. For performance share awards granted in March 2012, the performance objective is regulatory approval by the European Medicines Agency of a Marketing Authorization Application (MAA) for Iclusig prior to the end of 2016, and if not obtained by then, the award will terminate and have no value. As set forth in the Grant of 125,000 performance shares, 125,000 restricted stock units and 220,000 stock options equated to approximately 175%Plan-Based Awards table below, if the MAA is granted in 2013, then 160% of the target award for Dr. Berger for 2010 performance,will be earned, with 50% vesting immediately and had a grant date fair value of approximately $3.2 million. The levels of these awards were within the range of awards related to his level of performance, as set forth in “Process for Determining Executive Compensation” above and reflected Dr. Berger’s leadership in the achievement of our key corporate objectives for 2010. Based25% vesting on its evaluation of Dr. Berger’s 2011 performance, in March 2012, the Compensation Committee recommended, and the Board approved, an annual performance award to Dr. Berger, consisting of a cash bonus of $372,000 and 25,000 shares of common stock, and a long-term equity incentive award of 92,000 performance shares, 102,000 restricted stock units and 213,000 stock options. The 25,000 shares of common stock had a value of approximately $376,000 on the date of determination by the Compensation Committee. The totaleach of the cash bonus plusnext two anniversaries; if the value of the 25,000 shares of common stockMAA is $748,000 which corresponds to approximately 112% of Dr. Berger’s base salary for 2011 or 160% of his target award. The long-term equity incentive award of 92,000 performance shares, 102,000 restricted stock units and 213,000 stock options equated to approximately 100%, 160% and 160%, respectively, of the target awards for Dr. Berger for 2011 performance, and had a grant date fair value of approximately $5.3 million. The number of performance shares ultimately issued to Dr. Berger may be greater than or less than this award based on the timing of EMA approval of ponatinib. The levels of these awards were within the range of awards related to his level of performance, as set forthgranted in “Process for Determining Executive Compensation” above and reflected Dr. Berger’s leadership in the achievement of our key corporate objectives for 2011, as described under the heading “Factors Considered in the Determination of Executive Compensation for 2011” above. COMPENSATIONOFTHE OTHER NAMED EXECUTIVE OFFICERS Dr. Clackson. In March 2011, the Compensation Committee approved a merit increase of approximately 7% to Dr. Clackson’s 2010 base salary (to $418,000 in 2011), effective as of January 1, 2011. In March 2012, the Compensation Committee approved an increase of approximately 12% to Dr. Clackson’s 2011 base salary (to $468,000 in 2012), effective as of January 1, 2012. This increase reflects a merit increase of approximately 5% related to his performance for 2011, plus a market adjustment of approximately 7% to align his base salary with that of our current peer group. The Compensation Committee determined that Dr. Clackson’s performance in 2010 exceeded requirements and in 2011 was outstanding, based upon his contributions to our key corporate objectives, the level of achievement of his individual objectives and his leadership and management qualities. In particular, Dr. Clackson has responsibility for leading multiple functions within our company, including discovery research, preclinical development, clinical development, manufacturing and program and alliance management. He has led the discovery of our product candidates which are in various stages of development. He also has led the significant development efforts related to ponatinib and AP26113, including the progress of ponatinib through the pivotal PACE clinical trial and preparations for commercial launch as well as the completion of pre-clinical studies and the initiation of clinical development of AP26113. Based on the assessment of his 2010 performance, in March 2011, the Compensation Committee approved an annual performance award of $165,000 and a long-term equity incentive award of 39,000 performance shares, 39,000 restricted stock units and 68,000 stock options for Dr. Clackson’s performance in 2010. Dr. Clackson’s annual performance award was 42% of his base salary in 2010, which was 140% of his target award. The long-term equity incentive award of 39,000 performance shares, 39,000 restricted stock units and 68,000 stock options equated to approximately 140% of the target award for Dr. Clackson for 2010 performance and had a grant date fair value of approximately $1.0 million. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the increased scope of his responsibilities as President of Research and Development and Chief Scientific Officer. Based on the assessment of his 2011 performance, in March 2012, the Compensation Committee approved an annual performance award of $300,000 and a long-term equity incentive award of 35,000 performance shares, 40,000 restricted stock units and 82,000 stock options for Dr. Clackson’s performance in 2011. Dr. Clackson’s annual performance award was approximately 72% of his base salary in 2011, which was 160% of his target award. The long-term equity incentive award of 35,000 performance shares, 40,000 restricted stock units and 82,000 stock options equated to approximately 100%, 160% and 160%, respectively, of the target awards for Dr. Clackson for 2011 performance and had a grant date fair value of approximately $2.0 million. The number of performance shares ultimately issued to Dr. Clackson may be greater than or less than this award based on the timing of EMA approval of ponatinib. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the scope of his responsibilities as President of Research and Development and Chief Scientific Officer. Mr. Fitzgerald. In March 2011, the Compensation Committee approved a merit increase of approximately 5% to Mr. Fitzgerald’s 2010 base salary (to $398,000 in 2011), effective as of January 1, 2011. In March 2012, the Compensation Committee approved an increase of approximately 10% to Mr. Fitzgerald’s 2011 base salary (to $438,000 in 2012), effective as of January 1, 2012. This increase reflects a merit increase of approximately 3% related to his performance for 2011, plus a market adjustment of approximately 7% to align his base salary with that of our current peer group. The Compensation Committee determined that Mr. Fitzgerald’s performance in 2010 and 2011 exceeded requirements, based upon his contributions to our key corporate objectives, the level of achievement of his individual objectives and his leadership and management qualities. In particular, Mr. Fitzgerald led key aspects of our planning for growth and international expansion of our business anticipated upon commercial launch of ponatinib, led the planning and implementation of key systems necessary to support the needs of our business, managed significant initiatives that provided additional funding for our programs, including two equity offerings (a $58 million public offering in 2010 and a $243 million equity offering in 2011), and effectively managed our spending in support of our key corporate objectives. Based on the assessment of his 2010 performance, in March 2011, the Compensation Committee approved an annual performance award of $160,000 and a long-term equity incentive award of 39,000 performance shares, 39,000 restricted stock units and 68,000 stock options to Mr. Fitzgerald. Mr. Fitzgerald’s annual performance award was approximately 42% of his base salary in 2010, which was approximately 140% of his target award. The long-term equity incentive award of 39,000 performance shares, 39,000 restricted stock units and 68,000 stock options equated to approximately 140% of the target award for Mr. Fitzgerald for 2010 performance and had a grant date fair value of approximately $1.0 million. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the increased scope of his responsibilities as an Executive Vice President in the management of our business. Based on the assessment of his 2011 performance, in March 2012, the Compensation Committee approved an annual performance award of $179,000 and a long-term equity incentive award of 35,000 performance shares, 25,000 restricted stock units and 51,000 stock options to Mr. Fitzgerald. Mr. Fitzgerald’s annual performance award was approximately 45% of his base salary in 2011, which was approximately 100% of his target award. The long-term equity incentive award of 35,000 performance shares, 25,000 restricted stock units and 51,000 stock options equated to approximately 100% of each target award for Mr. Fitzgerald for 2011 performance and had a grant date fair value of approximately $1.5 million. The number of performance shares ultimately issued to Mr. Fitzgerald may be greater than or less than this award based on the timing of EMA approval of ponatinib. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the scope of his responsibilities as an Executive Vice President in the management of our business. Mr. Duvall.Mr. Duvall joined the Company in September 2011 and was provided an annual base salary of $388,000. In addition, pursuant to the offer of employment to attract Mr. Duvall, we awarded him options to purchase 100,000 shares of the Company’s common stock at an exercise price of $10.28 per share, which vest ratably over four years, and 25,000 restricted stock units which vest as to 100% of the award on the second anniversary of the date of grant. The stock options had a grant date fair value of $738,620 and the restricted stock units had a grant date fair value of $257,000. The Compensation Committee determined that Mr. Duvall’s performance in 2011 exceeded requirements, based upon his contributions to our key corporate objectives, the level of achievement of his individual objectives and his leadership and management qualities. In particular, Mr. Duvall led the detailed planning for the anticipated commercial launch of ponatinib in the United States and Europe and hired the key leadership in the commercial team that will manage the expected launch of ponatinib in the United States. In addition, Mr. Duvall has contributed to the long-range planning of our product candidates through the integration into that planning process of key commercial considerations that impact the potential future value of our product candidates. Based on the assessment of his 2011 performance, in March 2012, the Compensation Committee approved an annual performance award of $51,000 and a long-term equity incentive award of 7,000 performance shares, 5,000 restricted stock units and 10,000 stock options to Mr. Duvall. These awards were all prorated for Mr. Duvall for the period of time during 2011 that he was employed by the Company. Mr. Duvall’s annual performance award on an annualized basis was approximately 40% of his base salary in 2011, which was approximately 100% of his target award. The long-term equity incentive award of 7,000 performance shares, 5,000 restricted stock units and 10,000 stock options equated on an annualized basis to approximately2014, then 100% of the target award for Mr. Duvall for 2011 performancewill be earned, with 50% vesting immediately and had a grant date fair value of approximately $290,000. The number of performance shares ultimately issued to Mr. Duvall may be greater than or less than this award based50% vesting on the timing of EMA approval of ponatinib. The levels of these awards were withinone year anniversary; and if the range of awards related to his level of performance, as set forthMAA is granted in the earlier section “Process for Determining Executive Compensation” and reflected the scope of his responsibilities as Senior Vice President, Commercial Operations. Dr. Haluska. In March 2011, the Compensation Committee approved a merit increase of approximately 8% to Dr. Haluska’s 2010 base salary (to $375,000 in 2011), effective as of January 1, 2011. In March 2012, the Compensation Committee approved an increase of approximately 7% to Dr. Haluska’s 2011 base salary (to $400,000 in 2012), effective as of January 1, 2012. This increase reflects a merit increase of approximately 5% related to his performance for 2011, plus a market adjustment of approximately 2% to align his base salary with that of the our current peer group. The Compensation Committee determined that Dr. Haluska’s performance in 2010 and 2011 exceeded requirements, based upon his contributions to our key corporate objectives, the level of achievement of his individual objectives and his leadership and management qualities. In particular, Dr. Haluska led the management of all aspects of our clinical trials, including the pivotal PACE clinical trial of ponatinib which will be the basis for the planned submission of a new drug application with the FDA and a marketing authorization application with the EMA in 2012. Based on the assessment of his 2010 performance, in March 2011, the Compensation Committee approved an annual performance award of $145,000 and a long-term equity incentive award of 25,500 performance shares, 25,500 restricted stock units and 44,500 stock options to Dr. Haluska. Dr. Haluska’s annual performance award was approximately 42% of his base salary in 2010, which was approximately 140% of his target award. The long-term equity incentive award of 25,500 performance shares, 25,500 restricted stock units and 44,500 stock options equated to approximately 140%2015 or 2016, then 50% of the target awards for Dr. Haluska for 2010 performance and had a grant date fair value of approximately $650,000. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the scope of his responsibilities as Senior Vice President, Clinical Research and Development and Chief Medical Officer Based on the assessment of his 2011 performance, in March 2012, the Compensation Committee approved an annual performance award of $195,000 and a long-term equity incentive award of 20,000 performancewill be earned with all shares 18,000 restricted stock units and 38,000 stock options to Dr. Haluska. Dr. Haluska’s annualimmediately vested. performance award was approximately 52% of his base salary in 2011, which was approximately 130% of his target award. The long-term equity incentive award of 20,000 performance shares, 18,000 restricted stock units and 38,000 stock options equated to approximately 100%, 130% and 130%, respectively, of the target awards for Dr. Haluska for 2011 performance and had a grant date fair value of approximately $995,000. The number of performance shares ultimately issued to Dr. Haluska may be greater than or less than this award based on the timing of EMA approval of ponatinib. The levels of these awards were within the range of awards related to his level of performance, as set forth in the earlier section “Process for Determining Executive Compensation” and reflected the scope of his responsibilities as Senior Vice President, Clinical Research and Development and Chief Medical Officer. TAX DEDUCTIBILITYOF COMPENSATION Section 162(m) of the Code limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief executive officer or chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan, which is performance related, non-discretionary and has been approved by shareholders. In its deliberations the Compensation Committee considers ways to maximize deductibility of executive compensation, but nonetheless retains the discretion to compensate executive officers at levels the Compensation Committee considers commensurate with their responsibilities and achievements. Our 2006 Long-Term Incentive Plan permits the issuance of performance-based stock awards that would be compliant with Section 162(m). In 2012, we have included performance-based stock awards that are intended to comply with Section 162(m) in our annual equity-based compensation awards to our officers. We have not adopted a policy that all executive compensation be fully deductible. MIXOF DIRECT COMPENSATION COMPONENTS As our executive officers have increasing responsibility for and impact on our results, we place greater emphasis on variable, performance-based compensation and longer term compensation vehicles in the form of equity awards and deferred performance awards. We do not have specific policies nor do we use formulas to determine a mix of total compensation. We intend for total compensation to vary based on our progress towards achievement of corporate, departmental and team objectives, as well as individual performance goals. For fiscal 2011,2012, our annual performance awards and long-term equity incentive awards, including the value of performance shares awarded at target level, represent over 70%80% of the total direct compensation (excluding benefits) on average for our named executive officers. TBOTALENEFITSAND DPIRECT COMPENSATION SUMMARYERQUISITES We believeIn addition to general benefits offered to all other salaried employees, we provide our executive officers with supplemental long-term disability insurance and long-term care insurance, tax return preparation services and an auto allowance in accordance with their employment agreements. These are the total direct compensation paidonly perquisites we provided to our executive officers supportsduring 2012. Perquisites represent less than 2% of each named executive officer’s total compensation as set forth in the Summary Compensation Table below. We believe that our compensation philosophybenefits and objectives, is positionedperquisites represent competitive market practices for executives at appropriate levels relative to our stage of development andcompanies within our peer companies,group. They are offered as a means to attract and providesretain our named executive officers with a competitive total compensation opportunity.officers. EMPLOYMENT AGREEMENTS We have entered into employment agreements with our named executive officers. These employment agreements provide for base salary, performance and long-term equity incentive awards, health, disability, life and other insurance coverage, and other benefits over specified terms of employment. Each of these agreements provides for certain payments and other benefits if the executive’s employment terminates under certain circumstances other than for “cause,” including in connection with a “change in control.” See the subsection “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table” for a description of the agreement terms impacting current compensation and “Potential Payments upon Termination or Change in Control” for a description of applicable severance and change in control benefits. Our Compensation Committee periodically reviews the principal terms of our employment agreements with our named executive officers in light of our needs and evolving market conditions. Our Compensation Committee believes that change-in-control and severance arrangements are important parts of the overall compensation program for our named executive officers. Change-in-control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control, and to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination of their employment. Compensation Committee Policy Regarding Change in Control Severance PaymentsCOMPENSATION COMMITTEE POLICY REGARDING CHANGE IN CONTROL SEVERANCE PAYMENTS Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an executive officer with a severance payment following a change in control of our Company, except in the case of a double trigger termination event.event (i.e., a “double-trigger”). In addition, the policy also restricts our Company from entering into any future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances wherecircumstances.Effective April 2013, our Compensation Committee revised this policy eliminating the exception to allow for an excise tax-gross in certain unusual circumstances. We have not entered into any agreements with any of our executive officers that provide for an excise tax gross-up, other than Dr. Berger’s employment agreement, which pre-dated the April 2010 policy. Factors Considered in the Determination of Executive Compensation 2011 PERFORMANCE CONSIDERED FOR 2012 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2012, our Compensation Committee made decisions regarding 2012 salary increases and the 2012 grants of long-term equity incentive awards based on 2011 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2011, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2011 corresponded to ARIAD’s 2011 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2011.” Briefly summarized: We advanced Iclusig towards marketing authorization and commercialization. We prepared the Company for commercialization of our first cancer medicine. We advanced AP26113 into first-in-man studies. We strengthened our balance sheet and built sustained shareholder value. Dr. Berger’s 2012 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s 2011 performance was rated as outstanding. He received a merit increase of 4.8%, which increased his 2012 base salary to $697,000. His long-term equity incentive awards of 92,000 performance shares, 102,000 restricted stock units and 213,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee believesand had a grant date fair value of approximately $5.3 million which amount includes the value of performance shares at the target level. Dr. Clackson’s 2012 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, had broad responsibilities for the management of our business. He had responsibility for leading multiple functions within our company, including discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. As evidenced by our Company’s accomplishments during 2011, it was a year of great progress in each of these areas. Based on the above, Dr. Clackson’s 2011 performance was rated as outstanding. His 2012 salary increase to $468,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 40,000 restricted stock units and 82,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $2.0 million, which amount includes the value of performance shares at the target level. Mr. Fitzgerald’s 2012 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, had broad responsibilities for numerous aspects of our operations and business. In particular, he led key aspects of our planning for the growth and international expansion of our business, led the planning and implementation of key systems necessary to support the needs of our business, managed diverse initiatives that accommodations haveprovided additional funding for our programs, and effectively managed our spending in support of our key corporate objectives. Based on the above, Mr. Fitzgerald’s 2011 performance was rated as exceeding requirements. His 2012 salary increase to be$438,000 reflects a merit increase of 3%, plus an adjustment of approximately 7% to align his base salary to the 65th percentile of market. His long-term equity incentive awards of 35,000 performance shares, 25,000 restricted stock units and 51,000 stock options equate to approximately 100% of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.5 million, which amount includes the value of performance shares at the target level. Ms. Cantor’s 2012 Salary and Equity Awards Ms. Cantor was promoted from Vice President, Corporate Communications and Investor Relations to Senior Vice President, Corporate Affairs in January 2012. She was responsible in 2011 for developing and implementing a corporate communications and investor-relations strategy that supported the reputation of the Company and enhanced shareholder value. This strategy enhanced the advancement of our product pipeline in 2011 with a specific focus on providing timely and relevant information to the media and our investors. Based on the above, Ms. Cantor’s performance was rated as outstanding. Her salary increase to $306,000 reflects a merit increase of 4.8%, plus an adjustment of approximately 10% to account for her promotion and align her base salary to the 65th percentile of market. Her long-term equity incentive awards of 20,000 performance shares, 22,000 restricted stock units and 46,000 stock options equate to approximately 100%, 160% and 160%, respectively, of the target awards established by the Compensation Committee and had a grant date fair value of approximately $1.1 million, which amount includes the value of performance shares at the target level. In addition, in connection with her promotion to Senior Vice President, Ms. Cantor also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. Dr. Haluska’s 2012 Salary and Equity Awards Dr. Haluska was promoted from Vice President, Chief Medical Officer to Senior Vice President, Chief Medical Officer in January 2012. He was responsible in 2011 for leading the Company’s teams that planned and executed an expanded access program for Iclusig consistent with the goals of the program, planned and conducted focused non-clinical, translational and external clinical studies of Iclusig to support the lead and follow-on indications, evaluated and prioritized additional clinical trials of Iclusig, and initiated the first-in-man Phase 1/2 clinical trial of AP26113. Based on the above, Dr. Haluska’s performance was rated as exceeding requirements. His salary increase to $400,000 reflects a merit increase of 3.9%, plus an adjustment of approximately 3% to account for his promotion and align his base salary to the 65th percentile of market. His long-term equity incentive awards of 20,000 performance shares, 18,000 restricted stock units and 38,000 stock options equate to approximately 100%, 130% and 130%, respectively, of each target award and had a grant date fair value of approximately $995,000, which amount includes the value of performance shares at the target level. In addition, in connection with his promotion to Senior Vice President, Dr. Haluska also received an option grant of 30,000 shares with a grant date fair value of approximately $314,000. 2012 PERFORMANCE CONSIDERED FOR 2012 ANNUAL PERFORMANCE AWARDS AND 2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS As described above under “Key Components of Compensation and Related Performance Periods,” in early 2013, our Compensation Committee made to recruit a newdecisions regarding our 2012 annual performance awards, as well as 2013 salary increases and 2013 grants of long-term equity incentive awards, in each case based on 2012 performance. The Compensation Committee determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2012, as well as each officer’s performance in relation to individual goals and leadership and management measures. Our key corporate objectives applicable to our executive officers for 2012 corresponded to ARIAD’s 2012 accomplishments described in the “Executive Summary” section above under “Business Highlights – Fiscal 2012.” Briefly summarized: We completed the regulatory submission of and obtained U.S. marketing approval for Iclusig. We established European operations in preparation for the European commercial approval and launch of Iclusig in 2013. We continued to advance the clinical development of AP26113. We enhanced our discovery efforts with the goal of designating our next development candidate. We managed substantial growth in personnel and internal systems. We positioned the Company. to further strengthen our balance sheet through an underwritten public offering in early 2013. Dr. Berger’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Our Chief Executive Officer’s salary increase and long-term equity incentive awards were based predominantly on our Company’s level of achievement of above-described key corporate accomplishments, as well as successfully demonstrating the following: Building long-term shareholder value, Building and retaining our senior management team, Exemplifying our corporate values, mission and vision, Developing and executing on our long-term strategy, and Providing long-term leadership for our company. Based on the above, Dr. Berger’s performance was rated outstanding. His 2012 annual performance award and 2013 salary and long-term equity awards are set forth in the tables below. Dr. Clackson’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Dr. Clackson, as President of Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our business, including leading our discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Clackson’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Mr. Fitzgerald’s 2012 Annual Performance Award and 2013 Salary and Equity Awards Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of our operations and business. These included planning and overseeing the growth and international expansion of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant initiatives that provided additional funding for our programs, and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Fitzgerald’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Ms. Cantor’s 2012 Annual Performance Award and 2013 Salary and Equity Awards In those circumstances,her position as our Senior Vice President, Corporate Affairs, Ms. Cantor played a leading role during 2012 in communicating with shareholders about our corporate developments and performance. Her contributions included expanding and improving awareness and visibility of the excise tax gross-upCompany among stakeholders in the United States and in key countries throughout Europe, as well as incorporating the use of social media tools across all functional areas to expand awareness of our Company, Iclusig and our other development-stage programs. Based on her contributions to the achievement of our key corporate objectives for 2012, as well as her performance in relation to individual objectives and leadership and management standards, Ms. Cantor’s performance was rated as exceeding requirements. Her 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. Dr. Haluska’s 2012 Annual Performance Award and 2013 Salary and Equity Awards As our Senior Vice President, Chief Medical Officer, Dr. Haluska led the Company teams that completed major components of our NDA submission for Iclusig to the FDA in July 2012, and submitted our MAA to the European Medicines Agency in August 2012; initiated our global Phase 3 EPIC trial of Iclusig in newly diagnosed CML patients in June 2012; and continued to oversee progress in Phase 1/2 trial of AP26113. Based on his contributions to the achievement of our key corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Haluska’s performance was rated as exceeding requirements. His 2012 annual performance award and 2013 salary and long-term equity incentive awards are set forth in the tables below. 2012 ANNUAL PERFORMANCE AWARDS During the Compensation Committee’s review process for determining 2012 annual performance awards, the Compensation Committee was advised by Radford that the annual cash performance award targets that it had previously established for all members of our Executive Leadership Team, including all of the NEOs, trailed market competitive levels and were below the 65% percentile. Based on Radford’s recommendation, the Compensation Committee therefore determined to increase the target annual performance awards for 2012 for all senior officers other than Dr. Berger. The revised performance award targets, which are formulated as a percentage of base salary, are set forth in the table below under the column entitled, “Revised Targets.” Concurrently with increasing the performance award targets for all other senior officers, the Compensation Committee approved an increase in Dr. Berger’s annual performance award target for 2013 from 70% to 85%. 2012 Annual Performance Awards Name    Revised Targets     Performance Multiplier     Actual Target Percentage     Actual Award   H. Berger      70 %      200 %      140 %    $ 976,000    T. Clackson      50 %      155 %      78 %    $ 365,000    E. Fitzgerald      50 %      150 %      75 %    $ 329,000    M. Cantor      45 %      150 %      68 %    $ 208,000    F. Haluska      45 %      155 %      70 %    $ 280,000    2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS In March 2013, the Compensation Committee approved 2013 salaries retroactive to January 1, 2013 and granted long-term equity incentive awards to our NEOs in consideration of their 2012 performance and their expected future performance as follows: Name    2013 Salary      Performance Shares at Target(#)      Restricted Stock Units(#)      Stock Options(#)      Grant Date Fair Value of Equity   H. Berger    $ 751,000         95,000         108,000         216,000       $ 7,071,760    T. Clackson    $ 493,000         35,000         32,500         65,000       $ 2,262,024    E. Fitzgerald    $ 466,000         35,000         32,500         65,000       $ 2,262,024    M. Cantor    $ 340,000         20,000         19,500         39,000       $ 1,336,324    F. Haluska    $ 427,000         20,000         19,500         39,000       $ 1,336,324    For the performance share awards granted in March 2013, the performance objective is tied to continued success in specific research and development initiatives through the end of 2016, with the number of shares earned ranging from 160% to 50% of target, and the vesting schedule varying, depending on the year in which such performance objective is obtained. If the performance objective is not obtained prior to the end of 2016, the award will terminate and have no value. 2013 TARGET ANNUAL PERFORMANCE AWARDS In March 2013, the Compensation Committee approved 2013 target annual performance awards as a percentage of 2013 salaries which annual performance awards will be limitedpaid in 2014 based on 2013 performance. The targets are as follows: Name 2013 Target Payout as a % of 2013 Base Salary H. Berger 85 %  T. Clackson 50 %  E. Fitzgerald 50 %  M. Cantor 45 %  F. Haluska 45 %  HEDGING TRANSACTIONS, PLEDGESOF STOCK,AND INSIDER TRADING POLICY Our insider trading policy expressly bars our executive officers, directors and employees from engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock. We also prohibit our executive officers, directors and employees from purchasing ARIAD stock on margin and pledging our stock as collateral. In addition, we prohibit our officers, directors and employees from purchasing or selling ARIAD securities while in possession of material, non-public information, or otherwise using such information for their personal benefit. We also permit and encourage our executives and directors to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates. TAX DEDUCTIBILITYOF COMPENSATION Section 162(m) of the Code limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief executive officer or chief financial officer). Generally, amounts paid in excess of $1,000,000 to a double trigger termination eventcovered executive cannot be deducted, unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and such provision will terminate no later than three years fromhas been approved by shareholders. Our 2006 Long-Term Incentive Plan permits the dateissuance of performance-based stock awards that would be compliant with Section 162(m). In 2012, we have included performance-based stock awards that are intended to comply with Section 162(m) in our annual equity-based compensation awards to our officers. We have not adopted a policy that all executive compensation be fully deductible. Compensation Committee Report The Compensation Committee of the agreement. The employment agreements forBoard has reviewed and discussed with members of management the hiringCompensation Discussion and Analysis (“CD&A”) section included in this proxy statement, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. Members of the new executives in 2011 comply with this policy.Compensation Committee Massimo Radaelli, Ph.D., Chair Athanase Lavidas, Ph.D. Norbert G. Riedel, Ph.D. Robert M. Whelan, Jr. Summary Compensation Table The following table sets forth the compensation paid to or accrued on behalf of our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers, whom we refer to collectively as our named executive officers, during the fiscal years ended December 31, 2009, 2010, 2011 and 2011.2012.   Name and Principal Position    Year    Salary      Bonus(1)      Stock Awards(2)      Option Awards(2)      All  Other Compensation(3)      Total   Harvey J. Berger, M.D.    2011    $ 663,923       $ 372,000       $ 1,530,765       $ 1,264,736         $  28,234            $ 3,859,658    Chairman, Chief Executive Officer, and President    2010      631,152         —         1,446,840         —         53,101              2,131,093       2009      607,500         —         513,500         —         80,590              1,201,590    Timothy P. Clackson, Ph.D.    2011      417,000         300,000         304,980         390,918         25,378              1,438,277    President of Research and Development, Chief Scientific Officer    2010      378,142         165,000         377,200         97,272         27,821              1,045,435       2009      350,000         168,000         120,120         44,613         30,559              713,291    Edward M. Fitzgerald    2011      397,308         179,000         304,980         390,918         23,163              1,295,369    Executive Vice President, Chief Financial Officer and Treasurer    2010      369,961         160,000         318,160         97,272         25,073              970,466       2009      348,000         143,000         102,960         —         32,191              626,152    Martin J. Duvall    2011      108,154         51,000         257,000         738,620         2,769              1,157,543    Senior Vice President, Commercial Operations                      Frank G. Haluska, M.D., Ph.D.    2011      373,885         195,000         199,410         255,822         14,469              1,038,765    Senior Vice President, Chief Medical Officer                      Name and Principal Position    Year      Salary      Bonus(1)      Stock Awards(2)      Option Awards(2)      All Other Compensation (3)      Total   Harvey J. Berger, M.D. Chairman, Chief Executive Officer, and President          2012 2011 2010             $     695,777 663,923 631,152             $     976,000 372,000 —               $     1,911,350 1,530,765 1,446,840             $     2,368,901 1,264,736 —               $     34,810 28,234 53,101             $     5,986,838 3,859,658 2,131,093          Timothy P. Clackson, Ph.D. President of Research and Development, Chief Scientific Officer          2012 2011 2010                   466,077 417,000 378,142                   365,000 300,000 165,000                   602,000 304,980 377,200                   911,971 390,918 97,272                   31,030 25,378 27,821                   2,376,078 1,438,277 1,045,435          Edward M. Fitzgerald Executive Vice President, Chief Financial Officer and Treasurer          2012 2011 2010                   436,461 397,308 369,961                   329,000 179,000 160,000                   376,250 304,980 318,160                   775,272 390,918 97,272                   29,636 23,163 25,073                   1,946,619 1,295,369 970,466          Maria E. Cantor Senior Vice President, Corporate Affairs      2012         304,462         208,000         331,100         825,295         28,704         1,697,560    Frank G. Haluska, M.D., Ph.D. Senior Vice President, Chief Medical Officer        2012 2011              399,039 373,885              280,000 195,000              270,900 199,410              736,322 255,822              23,498 14,649              1,709,759 1,038,765         (1) The amounts included under “Bonus”in this column for the years 2009 and 20102012 reflect deferred performance awards under our 2005 Executive Compensation Plan grantedcash payments made in April 2011March 2013 in respect of performance for the year ended December 31, 2010; and in March 2010 in respect of performance for the year ended December 31, 2009. The awards for 2010 and 2009 performance vest 33 1/3% on each anniversary of the award date, subject to the executive remaining employed on such date, and will be payable in installments on the second and third anniversary of the grant for the 2010 awards and the third and fourth anniversary of the grant date for the 2009 award, subject to later payments at the executive’s election. The amounts in this column for 2011 reflect awards granted in March 2012 in respect of performance for 2011, which are payable in the case of Dr. Berger as to 100% on April 10, 2012 and in the case of the other officers as to 50% on April 10, 2012 with the remaining 50% deferred under our 2005 Executive Compensation Plan, payable on April 10, 2013. See “Non-qualified Deferred Compensation in 2011” located elsewhere in this proxy statement for more details. 2012. (2) The amounts included under “Stock Awards” and “Option Awards” represent the aggregate grant date fair value for stock awards and option awards granted during fiscal years 2011, 2010, and 2009, respectively,the year, computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value of the stock awards and option awards granted in 2012 are set forth in the note 11 to our audited consolidated financial statements titled “Stock-Based Compensation” included in our Annual Report on Form 10-K for the respective fiscal year.year ended December 31, 2012. The grant date fair value of performance shares awarded in 20112012 was determined to be $0 and therefore is not included in the table. The grant date fair value of performance shares awarded in 2012, assuming the maximum potential value is achieved, is $997,500$2,215,360 for Dr. Berger; $304,980$842,800 for Dr. Clackson; $304,980$842,800 for Mr. Fitzgerald; $481,600 for Ms. Cantor and $199,410$481,600 for Dr. Haluska. Mr. Duvall did not receive a performance share award in 2011. (3) Amounts included under “All Other Compensation” for 20112012 consist of: (i) matching contributions to our defined contribution retirement savings plan ($7,3507,500 for each of Dr. Berger, Dr. Clackson, and Mr. Fitzgerald and Ms. Cantor and $0 for Mr. Duvall and Dr. Haluska); and (ii) other compensation ($20,88427,310 for Dr. Berger, $18,028$23,530 for Dr. Clackson, $15,813$22,136 for Mr. Fitzgerald, $2,769$21,204 for Mr. Duvall,Ms. Cantor, and $14,649$23,498 for Dr. Haluska) consisting of the cost of supplemental long-term disability and long-term care insurances, an annual auto allowance, and tax preparation services for each of the named executive officers. Grants of Plan-Based Awards in 20112012 The following table shows information regarding grants of equity awards that were made during the year ended December 31, 20112012 to each of our named executive officers. All awards were made under our 2006 Long-Term Incentive Plan. There were no grants of non-equity incentive plan awards to our named executive officers during 2011.2012.        Grant Date   Date of Board Action   Estimated Future Payouts Under Equity Incentive Plan Awards: Target   All Other Stock Awards: Number of Shares of Stock or Units  (#)   All Other Option Awards: Number of Securities Underlying Options (#)   Exercise or Base Price of Option Awards ($/sh)   Grant Date Fair     Value of Stock     and Option     Awards(1)       Harvey J. Berger, M.D.   04/01/11   03/30/11       220,000(6)   $7.82   $ 1,264,736              04/01/11   03/30/11     125,000(2)       $ 977,500              04/01/11   03/30/11   125,000(3)           —              04/01/11   03/30/11     70,750(4)       $ 553,265            Timothy P. Clackson, Ph.D.   04/01/11   03/30/11       68,000(6)   $7.82   $ 390,918              04/01/11   03/30/11     39,000(2)       $ 304,980              04/01/11   03/30/11   39,000(3)           —            Edward M. Fitzgerald   04/01/11   03/30/11       68,000(6)   $7.82   $ 390,918              04/01/11   03/30/11     39,000(2)       $ 304,980              04/01/11   03/30/11   39,000(3)           —            Martin J. Duvall   09/19/11   09/19/11       100,000(7)   $10.28   $ 738,620              09/19/11   09/19/11     25,000(5)       $ 257,000            Frank G. Haluska, M.D., Ph.D.   04/01/11   03/30/11       44,500(6)   $7.82   $ 255,822              04/01/11   03/30/11     25,500(2)       $ 199,410              04/01/11   03/30/11   25,500(3)           —                 Grant Date      Estimated Future Payouts Under Equity Incentive Plan Awards:(3)      All Other Stock Awards: Number of Shares of Stock or Units (#)     All Other Option Awards: Number of Securities Underlying Options (#)     Exercise or Base Price of Option Awards ($/sh)      Grant Date Fair Value of Stock and Option Awards(1)         Threshold (#)      Target (#)      Maximum (#)             Harvey J. Berger      03/20/12                    213,000  (6)    $ 15.05       $ 2,368.901         03/20/12                  102,000  (2)         $ 1,535,100         03/20/12         46,000         92,000         147,200                —           03/20/12                  25,000  (4)         $ 376,250    Timothy P. Clackson      03/20/12                    82,000  (6)    $ 15.05       $ 911,971         03/20/12                  40,000  (2)         $ 602,000         03/20/12         17,500         35,000         56,000                —      Edward M. Fitzgerald      01/17/12                    20,000  (5)    $ 14.50       $ 208,070         03/20/12                    51,000  (6)    $ 15.05       $ 567,202         03/20/12                  25,000  (2)         $ 376,250         03/20/12         17,500         35,000         56,000                —      Maria E. Cantor      03/08/12                    30,000  (7)    $ 14.85       $ 313,701         03/20/12                  22,000  (2)         $ 331,100         03/20/12         10,000         20,000         32,000                —           03/20/12                    46,000  (6)    $ 15.05       $ 511,594    Frank G. Haluska      03/08/12                    30,000  (7)    $ 14.85       $ 313,701         03/20/12                  18,000  (2)         $ 270,900         03/20/12         10,000         20,000         32,000                —           03/20/12                    38,000  (6)    $ 15.05       $ 422,621      (1) The grant date fair values of the awards have been determined in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of these awards are set forth in Note 11 to our audited financial statements for the year ended December 31, 20112012 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2012.March 1, 2013. (2) These awards are in the form of restricted stock units that vest as to 33 1/3% of the awards on each of April 1, 2012,March 20, 2013, 2014 and 20142015 provided that the executive is then employed with us, at which times the underlying shares of common stock will be delivered to the recipient, subject to the terms of the recipient’s executive employment agreement. (3) These awards are in the form of performance shares that will vest upon obtaining regulatory approval from the FDA to market our product candidate, ponatinib,European Medicines Agency, prior to the end of 2016, to market our product, Iclusig, in the European Union, provided that the executive is then employed with us, with the number of shares and vesting schedules dependent on when prior to the end of 2016 such approval is obtained. (4) This fully vested stock award is in the form of common stock and was subjectissued to the right by ARIAD to repurchase such shares until February 15, 2012. These shares were earned by Dr. Berger based onin March 2012 as part of his performance in 2010.2011 bonus payment. (5) This award is in the form of restricted stock unitsoptions granted in recognition of ten years of service that vest as to 100% of the award on September 19, 2013 provided that the executive is then employed with us, at which time the underlying sharesdate of common stock will be delivered to the recipient.grant, January 17, 2012. (6) These awards are in the form of stock options that vest as to 33 1/3% of the awards on each of April 1, 2012,March 20, 2013, 2014 and 2014 provided that the executive is then employed with us.2015. (7) This award isThese awards are in the form of stock options that vest as to 25% of the awards on each of September 19, 2012,March 8, 2013, 2014, 2015 and 20152016 provided that the executive is then employed with us. Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table Employment agreements with our named executive officers provide for base salary as may be adjusted annually, annual bonus opportunities, participation in our benefit plans, the opportunity to receive equity awards, and post-termination benefits and obligations. Dr. Berger’s employment agreement, as currently in effect, has a term that expires on December 31, 2013, subject thereafter to automatic renewal for successive three-year terms absent notice to the contrary by either party, and following a change in control (as defined in the agreement), until the later of the expiration of the then current term or the second anniversary of the date on which the change in control occurs. The employment agreements with our other named executive officers provide for initial terms expiring on the dates indicated below, subject thereafter to automatic renewal for successive one-year terms absent notice to the contrary by either party.        Expiration of InitialCurrent Term of Employment Agreement Timothy P. Clackson, Ph.D.    June 30, 2013 Edward M. Fitzgerald    June 30, 2013 Martin J. DuvallMaria E. Cantor    December 31, 2013 Frank G. Haluska, M.D., Ph.D.    December 31, 20122013 Each employment agreement specifies a minimum level of base salary for the executive, but gives our Compensation Committee authority to increase the executive’s base salary from time to time. Dr. Berger’s employment agreement, as currently in effect, provides that we shall pay him a discretionary target cash bonus based on a target of not less than fifty percent of his then current salary, with the actual amount determined by our Board. As set forth in the Compensation Discussion and Analysis under the headings “Process for Determining Executive Compensation,” “Compensation Actions” and “Compensation of our Chief Executive Officer,” this target was increased to 75% inIn 2012, for performance in 2011 and we paid Dr. Berger in excess of these targets based on his performance. For 2009 and 2010, the Board awarded shares of our common stock to Dr. Berger instead of cash bonuses or deferred compensation awards. For 2011, the Board awarded half of the value of hisMr. Berger’s 2011 bonus in the form of shares of common stock and the remainderhalf in the form of cash. The employment agreements for the other named executive officers provide for discretionary bonuses based on a target of up to thirty percent of their then current salaries, payable in the form of stock options, stock awards, restricted stock units, deferred compensation or cash, as determined by our Board. AsThe annual targets are reviewed and established each year by the Compensation Committee. The target awards for 2012 are set forth in the Compensation Discussion and Analysis under the headingsheading “Process for Determining Executive Compensation,” “Compensation Actions” and “Compensation of the Other Named Executive Officers,” the Compensation Committee revised the target levels of such awards in 2012 for performance in 2011 to 45% for executive vice presidents and 35% for other executive officers and we paid each of our other named executive officers at or in excess of their target amount based on their performance. Payment of all bonuses awarded to such officers for 2009, 2010, and 2011 have been in cash with full or partial deferral under the terms of our 2005 Executive Compensation Plan, except that half of the bonus for 2011 performance was paid immediately.Compensation”. In 2011, we awarded performance shares to Dr. Berger, Dr. Clackson, Mr. Fitzgeraldeach of the named executive officers that would vest upon obtaining regulatory approval from the FDA to market Iclusig prior to the end of 2016. This objective was achieved in December 2012 and, Dr. Haluska. Thein accordance with the terms of the grant, 50% of the award vested in December 2012 and the remaining 50% will vest in December 2013. In 2012, we awarded performance shares to each of the named executive officers that will vest only if we obtain regulatory approval from the FDAEuropean Medicines Agency to market ponatinibIclusig in the European Union prior to the end of 2016. IfThe number of shares that will vest and the vesting schedule are dependent on when prior to the end of 2016 such approval is obtained on or before December 31, 2014, the performance shares will vest 50% on the date of approval and 50% one year thereafter. If such approval is obtained after December 31, 2014 but before December 31, 2016, the performance shares will vest 100% on the date of approval.obtained. If such approval is not obtained prior to December 31, 2016, thethese performance shares will terminate and have no value. The employment agreements also provide that each executive is entitled to, among other things, participation in any incentive, stock award or bonus plan, pension, group insurance, and fringe benefits on the same basis as executives at a comparable level; group health, disability and life insurance; paid vacation; an auto allowance of $750 per month (increased to $1,000 per month in 2012); standard tax preparation and planning services; reimbursement of business expenses; indemnification and directors’ and officers’ insurance coverage; and for executives who had received credit under our sabbatical policy prior to its termination in 2008, a lump sum payment upon termination of employment in good standing equal to three months of their base salary for each sabbatical that was fully earned under the policy. In addition, Dr. Berger’s employment agreement provides him with medical malpractice insurance with coverage reasonably satisfactory to Dr. Berger and legal costs to enforce the employment agreement on an as-incurred basis subject to repayment if we prevail. The employment agreements with our named executive officers also provide for severance payments upon termination of employment by us without cause, termination by the executive for material breach of the agreement by us, non-renewal (for Dr. Berger only) or termination in connection with a change in control. Dr. Berger’s agreement also provides for a tax gross-up in the event that any amounts payable by us or our successor are subject to excise taxes under Sections 280G and 4999 of the Code. See “Potential Payments upon Termination or Change in Control” for a description of these provisions in the employment agreements. Outstanding Equity Awards at December 31, 20112012 The following table lists the outstanding equity awards at December 31, 20112012 for each of the named executive officers:       Option Awards         Stock Awards   Name   Number of     Securities     Underlying      Unexercised     Options (#):     Exercisable(1)         Number of Securities Underlying Unexercised Options (#): Unexercisable(1)     Option Exercise Price ($)     Option Expiration Date          Number of     Shares or     Units of     Stock That     Have Not     Vested (#)         Market Value     of Shares or     Units of Stock     That Have     Not Vested     ($)(2)         Equity     Incentive     Plan Awards:     Number of     Unearned     Shares, Units     or Other     Rights That     Have Not     Vested (#)         Equity     Incentive     Plan Awards:     Market or     Payout     Values of     Unearned     Shares, Units     or Other     Rights that     Have Not     Vested ($)(2)       Harvey J. Berger, M.D.     24,691        —        4.05        06/13/12                  150,000        —        5.23        09/09/14                  150,000        —        7.56        10/04/15                  240,000        —        4.64        03/06/17                  25,000 (3)      —        4.49        04/16/17                    220,000 (4)      7.82        04/01/21                            160,000 (5)      1,960,000                      195,333 (6)      2,392,829                      125,000 (7)      1,531,250                      70,750 (8)      866,688                          125,000 (14)      1,531,250    Timothy P. Clackson, Ph.D.     25,000        —        4.05        06/13/12                  50,000        —        4.19        06/18/12                  33,000        —        3.90        08/15/13                  7,500        —        6.39        09/23/13                  20,000        —        7.44        06/23/14                  55,000        —        5.23        09/09/14                  57,500        —        7.56        10/04/15                  100,000        —        4.49        04/16/17                  25,000 (3)      —        2.62        12/18/19                  10,000        30,000 (9)      3.25        06/24/20                    68,000 (4)      7.82        04/01/21                            91,000 (5)      1,114,750                      76,666 (6)      939,159                      39,000 (7)      477,750                          39,000 (14)      477,750    Edward M. Fitzgerald     100,000        —        4.63        05/06/12                  33,000        —        3.90        08/15/13                  50,000        —        5.23        09/09/14                  60,000        —        7.56        10/04/15                  100,000        —        4.49        04/16/17                  10,000        30,000 (9)      3.25        06/24/20                    68,000 (4)      7.82        04/01/21                            78,000 (5)      955,500                      64,666 (6)      792,159                      39,000 (7)      477,750                          39,000 (14)      477,750    Martin J. Duvall     —        100,000 (10)      10.28        9/19/21          25,000 (11)      306,250        Frank G. Haluska, M.D., Ph.D.     40,000        —        4.34        12/12/17                  22,500        7,500 (12)      2.39        06/12/18                  3,750        11,250 (13)      3.25        06/24/20                    44,500 (4)      7.82        04/01/21                            30,000 (5)      367,500                      26,666 (6)      326,659                      25,500 (7)      312,375                          25,500 (14)      312,375         Option Awards     Stock Awards   Name   Number of Securities Underlying Unexercised Options: Exercisable (1)     Number of Securities Underlying Unexercised Options: Unexercisable (1)     Option Exercise Price     Option Expiration Date     Number of Shares or Units of Stock That Have Not Vested     Market Value of Shares or Units of Stock That Have Not Vested(2)     Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested     Equity Incentive Plan Awards: Market or Payout Values of Unearned Shares, Units or Other Rights that Have Not Vested(2)   Harvey J. Berger     150,000        $ 5.23        09/09/14                150,000        $ 7.56        10/04/15                240,000        $ 4.64        03/06/17                25,000  (3)      $ 4.49        04/16/17                73,334        146,666  (4)    $ 7.82        04/01/21                  213,000  (5)    $ 15.05        03/20/22                        97,667  (8)    $ 1,873,253                    83,333  (9)    $ 1,598,327                    62,500  (10)    $ 1,198,750                    102,000  (11)    $ 1,956,360                        92,000  (12)    $ 1,764,560    Timothy P. Clackson     4,766        $ 5.23        09/09/14                20,657        $ 7.56        10/04/15                100,000        $ 4.49        04/16/17                24,999  (3)      $ 2.62        12/08/19                10,000        20,000  (6)    $ 3.25        06/24/20                22,667        45,333  (4)    $ 7.82        04/01/21                  82,000  (5)    $ 15.05        03/20/22                        38,333  (8)    $ 735,227                    26,000  (9)    $ 498,680                    19,500  (10)    $ 374,010                    40,000  (11)    $ 767,200                        35,000  (12)    $ 671,300    Edward M. Fitzgerald     33,000        $ 3.90        08/15/13                50,000        $ 5.23        09/09/14                60,000        $ 7.56        10/04/15                100,000        $ 4.49        04/16/17                20,000        20,000  (6)    $ 3.25        06/24/20                22,667        45,333  (4)    $ 7.82        04/01/21                20,000  (3)      $ 14.50        01/17/22                  51,000  (5)    $ 15.05        03/20/22                        32,333  (8)    $ 620,147                    26,000  (9)    $ 498,680                    19,500  (10)    $ 374,010                    25,000  (11)    $ 479,500                        35,000  (12)      671,300         Option Awards     Stock Awards   Name   Number of Securities Underlying Unexercised Options: Exercisable (1)     Number of Securities Underlying Unexercised Options: Unexercisable (1)     Option Exercise Price     Option Expiration Date     Number of Shares or Units of Stock That Have Not Vested     Market Value of Shares or Units of Stock That Have Not Vested(2)     Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested     Equity Incentive Plan Awards: Market or Payout Values of Unearned Shares, Units or Other Rights that Have Not Vested(2)   Maria E. Cantor     31,500        $ 3.08        09/11/18                8,356        29,666  (4)    $ 7.82        04/01/21                  30,000  (7)    $ 14.85        03/08/22                  46,000  (5)    $ 15.05        03/20/22                        18,000  (8)    $ 345,240                    17,000  (9)    $ 326,060                    12,750  (10)    $ 244,545                    22,000  (11)    $ 421,960                        20,000  (12)      383,600    Frank G. Haluska     40,000        $ 4.34        12/12/17                19,500        $ 2.39        06/12/18                7,500        7,500  (6)    $ 3.25        06/24/20                14,834        29,666  (4)    $ 7.82        04/01/21                  30,000  (7)    $ 14.85        03/08/22                  38,000  (5)    $ 15.05        03/20/22                        13,333  (8)    $ 255,727                    17,000  (9)    $ 326,060                    12,750  (10)    $ 244,545                    18,000  (11)    $ 345,240                        20,000  (12)      383,600      (1) Options have ten-year terms. Unless otherwise indicated, the options reported in this table vest 25% per year over the four-year period following the date of grant, provided that the option holder is still an employee of ARIAD. (2) The market value of the stock awards is determined by multiplying the number of shares by $12.25,$19.18, the closing price of our common stock on The NASDAQ Global Market on December 30, 2011,2012, the last business day of our most recently completed fiscal year. (3) These options were granted pursuant to our program to grant options to employees and directors upon reaching ten, fifteen or fifteentwenty years of service with ARIAD. These options are fully vested upon grant and have a term of ten years. (4) These options vest as to 33 1/3 %50% of the balance of the award on each of April 1, 2012, 2013 and 2014. (5) These options vest as to 33% of the balance of the award on March 20, 2013, 2014 and 2015. (6) These options vest as to 50% of the balance of the award on June 24, 2013 and 2014. (7) These stock options vest as to 25% of the balance of the award on March 8, 2013, 2014, 2015 and 2016. (8) These restricted stock units vestedvest as to 100% of the balance of the award on March 10, 2012, at which time the underlying shares of common stock were delivered to the recipient.22, 2013. (6)(9) These restricted stock units vest as to 50% of the balance of the award on each of March 22,April 1, 2013 and 2014. (10) These performance shares relate to the approval by the FDA in December 2012 and 2013,to market Iclusig, at which timestime 50% of the underlying shares of common stock were delivered and will be deliveredaward vested with this remaining balance to the recipient so long as the recipient is still an employee of ARIAD.vest 100% on December 18, 2013. (7)(11) These restricted stock units vest as to 33 1/3% of the award on each of April 11, 2012, 2013 and 2014. (8) This restricted stock award vests as to 100% of the award on February 15, 2012. (9) These options vest as to 33 1/3% of the balance of the award on each of June 24, 2012, 2013 and 2014. (10) These options vest as to 25% of the balance of the award on each of September 19, 2012,March 20, 2013, 2014 and 2015. (11) These restricted stock units vest as to 100% of the award on September 19, 2013. (12) These options vest as to 100% of the balance of the award on June 12, 2012. (13) These options vest as to 33 1/3% of the balance of the award on each of June 24, 2012, 2013 and 2014. (14)(12) These performance shares vest only if we obtain regulatory approval prior to the end of 2016 from the FDAEMA to market Iclusig in the European Union. These amounts represent target awards with the final number of shares to be issued being dependent upon when, prior to December 31,the end of 2016, to market ponatinib in the United States.such approval is obtained. Option Exercises and Stock Vested in 20112012 The following table contains information regarding option exercises and stock awards that vested during the year ended December 31, 20112012 held by our named executive officers.        Option Awards    Stock Awards      Shares Acquired on     Exercise (#)        Value     Realized on     Exercise ($)(1)        Shares     Acquired on     Vesting (#)   Value     Realized on     Vesting ($)               Harvey J. Berger, M.D.    20,837    $165,446    104,000(2)   $807,040                97,667(3)     624,092     Timothy P. Clackson, Ph.D.    60,000    180,000      52,000(2)     403,520                38,334(3)     244,954     Edward M. Fitzgerald            52,000(2)     403,520                32,334(3)     206,614     Frank G. Haluska, M.D., Ph.D.            13,334(3)       85,204          Option Awards      Stock Awards        Shares Acquired on Exercise      Value Realized on Exercise(1)      Shares Acquired on Vesting     Value Realized on Vesting   Harvey J. Berger      24,691       $ 314,563                    160,000  (2)    $ 2,392,000               97,666  (3)    $ 1,531,403               41,667  (4)    $ 676,255               62,500  (5)    $ 1,261,250               70,750  (6)    $ 1,064,788               25,000  (7)    $ 376,250    Maria E. Cantor      13,500       $ 189,420                    35,000  (8)    $ 533,050               18,000  (3)    $ 282,240         6,478       $ 72,424                    8,500  (4)    $ 137,955               12,750  (5)    $ 257,295    Timothy P. Clackson.      25,000       $ 278,685              50,000       $ 548,988              33,000       $ 374,753              7,500       $ 72,075              20,000       $ 191,200              50,234       $ 734,120              36,843       $ 458,327                    91,000  (8)    $ 1,385,930         1       $ 18                    38,333  (3)    $ 601,061         10,000       $ 172,600                    13,000  (4)    $ 210,990               19,500  (5)    $ 393,510    Edward M. Fitzgerald      100,000       $ 1,114,400                    78,000  (8)    $ 1,187,940               32,333  (3)    $ 506,981               13,000  (4)    $ 210,990               19,500  (5)    $ 393,510    Frank G. Haluska      10,500       $ 139,182                    30,000  (8)    $ 456,900               13,333  (3)    $ 209,061               8,500  (4)    $ 137,955               12,750  (5)    $ 257,295      (1) Value represents the market value of a share of our common stock at the time of exercise minus the exercise price per share of the option, multiplied by the number of shares acquired upon exercise. (2) This represents shares of restricted stock units granted on April 11, 2008,March 10, 2009, which became fully vested on April 11, 2011.March 10, 2012. The value realized is calculated by multiplying the number of vested shares times $7.76,$14.95, the closing price of our common stock on April 11, 2011.March 10, 2012. (3) This represents shares of restricted stock units granted on March 22, 2010 that vested 33 1/3% on March 22, 2011.2012. The value realized is calculated by multiplying the number of shares times $6.39,$15.68, the closing price of our common stock on March 22, 2011.2012. (4) This represents shares of restricted stock units granted on April 1, 2011, that vested 33 1/3% on April 1, 2012. The value realized is calculated by multiplying the number of shares times $16.23, the closing price of our common stock on April 1, 2012. (5) This represents performance shares granted on April 1, 2011, that vested 50% on December 18, 2012. The value realized is calculated by multiplying the number of shares times $20.18, the closing price of our common stock on December 18, 2012. (6) This represents shares of restricted stock granted on April 1, 2011, that fully vested on February 15, 2012. The value realized is calculated by multiplying the number of shares times $15.05, the closing price of our common stock on February 15, 2012. (7) This represents shares of common stock granted on March 20, 2012, that fully vested on March 20, 2012. The value realized is calculated by multiplying the number of shares times $15.05, the closing price of our common stock on March 20, 2012. (8) This represents shares of restricted stock units granted on March 19, 2009, that fully vested on March 19, 2012. The value realized is calculated by multiplying the number of shares times $15.23, the closing price of our common stock on March  19, 2012. Non-qualifiedNon-Qualified Deferred Compensation in 20112012 The following table contains information about the participation of our named executive officers in our 2005 Executive Compensation Plan during and as of the year ended December 31, 2011.2012. Dr. Berger does not participate in this plan.   Name    Executive Contributions ($)    Registrant Contributions ($)(1)    Aggregate Earnings ($)(2)    Aggregate Withdrawals/ Distributions ($)   Aggregate     Balance at     Year End ($)     Timothy P. Clackson, Ph.D.       150,000    41,032    (106,948)   973,784   Edward M. Fitzgerald       89,500    37,182    (101,755)   835,473   Martin J. Duvall       25,500        —           —     25,500   Frank G. Haluska, M.D., Ph.D.       97,500    14,515           —   483,660   Name    Executive Contributions ($)      Registrant Contributions ($)      Aggregate Earnings  ($)(1)      Aggregate Withdrawals/ Distributions ($)     Aggregate Balance at Year End ($)   Timothy P. Clackson, Ph.D.      —           —           61,995         (185,656 )      850,123    Edward M. Fitzgerald      —           —           53,470         (178,882 )      710,060    Maria E. Cantor      —           —           24,733         —          385,611    Frank G. Haluska, M.D., Ph.D.      —           —           30,342         —          469,001      (1) Represents amounts awarded in April 2012 in respect of performance for the year ended December 31, 2011. These amounts are reported in the “Bonus” column of the Summary Compensation Table for fiscal year 2011, located elsewhere in this proxy statement, and are required to be deferred by their terms. (2) No portion of the amounts listed in the “Aggregate Earnings” column was reported as compensation in 20112012 in the Summary Compensation Table. The 2005 Executive Compensation Plan is an unfunded, non-qualified, deferred compensation plan and is intended to comply with the requirements of Section 409A of the Code. The Compensation Committee may from time to time in its sole discretion allow participants to defer payment of part of their compensation under the 2005 Executive Compensation Plan on a pre-tax basis. In addition, the Compensation Committee may elect to issue awards under the 2005 Executive Compensation Plan to participants either as performance-based awards or on anad hoc basis. Deferred amounts are subject to certain vesting requirements (other than for salary deferrals) and payment provisions as specified at the time of the deferral. Our Compensation Committee, in its sole discretion, determines the terms of awards, including the acceleration or modification of vesting terms. Amounts that are not vested as of the time of a participant’s separation from service are forfeited, subject to the terms of the participant’s executive employment agreement. Vesting of unvested amounts may be accelerated in connection with a change in control at the Compensation Committee’s discretion. The value of amounts deferred under the 2005 Executive Compensation Plan is increased or decreased over time based on the actual total return of specified mutual funds. Participants may choose to receive payment of their vested benefits in either a lump sum or annual installments (but not to exceed twenty years) at either a specified date, upon the first anniversary of their separation from service, or the earlier of these two dates. A participant may subsequently change the form of payment or elect to defer the timing of payment, within certain limits, provided the change is elected at least twelve months before the previously scheduled date for commencement of payment. Any changes to the timing of payment must be deferred for at least five additional years. Potential Payments upon Termination or Change in Control Chief Executive Officer The following is a summary of the severance and change in control benefits provided to Dr. Berger, our Chief Executive Officer, under the terms of his employment agreement as amended in April 2010. EMPLOYMENT TERMINATIONWITHOUT CAUSE If we terminate Dr. Berger’s employment without “cause” or Dr. Berger terminates his employment for “good reason,” each as defined below, we are obligated to:   Accelerate the vesting of all stock options, stock grants, and similar equity rights and provide for continued exercisability of all awards through their original terms with all rights, and   Make a cash lump sum payment equal to the sum of three times the executive’s then current annual salary and three times the bonus amount paid for the preceding year, provided that such bonus amount shall not be less than 50% of the executive’s salary. “Cause” for purposes of Dr. Berger’s employment agreement consists of:   Willful neglect of duties following written notice and a 30-day opportunity to correct,   Conviction of a felony involving moral turpitude, or   Any act of fraud or embezzlement involving us or any of our affiliates. Any determination of cause requires at least a two-thirds vote of the entire Board. Termination for “good reason” for purposes of Dr. Berger’s employment agreement consists of:   A material reduction of duties or authority that continues for 30 days, An uncured material breach of the employment agreement or any other material agreement with the Company that continues for 30 days,   A “Change in Control” (as defined below) occurs and Dr. Berger is not the chief executive officer of the surviving corporation,   Dr. Berger is no longer elected to our Board, named as Chairman and designated as our chief executive officer,   Dr. Berger ceases to be our highest ranking executive with the power to appoint and remove all other ARIAD employees,   A person other than Dr. Berger or a person designated by Dr. Berger is elected ARIAD’s president,   The retention of any senior executive officer by ARIAD, or an offer to pay compensation to any senior executive officer that in either case is unacceptable to Dr. Berger, in his reasonable judgment, or   We file for bankruptcy or similar proceedings or an involuntary petition is commenced against us. NON-RENEWAL If we do not renew Dr. Berger’s employment agreement at the end of its term, we are obligated to make a lump sum cash payment equal to two times his then current annual salary and accelerate the vesting of all stock options, stock grants and similar equity rights and provide for continued exercisability of all awards through their original terms with all rights. Any determination not to renew Dr. Berger’s employment requires at least a two-thirds vote of the entire Board. MEDICAL COVERAGE Dr. Berger’s employment agreement requires us to continue providing medical coverage in all group health plans for the maximum COBRA continuation period at our expense following any termination of employment other than for death. CHANGEIN CONTROL Dr. Berger’s employment agreement provides that in the event of a “Change in Control” (as defined in this subsection), all stock, stock option, stock award and similar equity rights granted to him shall immediately vest and remain fully exercisable through their original term with all rights. In addition, Dr. Berger has the right to terminate his employment agreement for “good reason” if a Change in Control occurs and he is not the chief executive officer of the surviving corporation, in which case we will pay Dr. Berger the same benefits as if we had terminated his employment without cause. Dr. Berger’s agreement also provides that, following a Change in Control, his term of employment will continue until the later of the existing term or two years and one day following the Change in Control. A tax gross-up will be paid on Dr. Berger’s behalf if any amounts payable by us (or our successor) become subject to excise taxes under Sections 280G and 4999 of the Code. Generally, pursuant to Dr. Berger’s employment agreement, a Change in Control occurs if:   Any person makes a tender or exchange offer for our common stock pursuant to which such person acquires 40% or more of our issued and outstanding common stock,   A merger or consolidation of ARIAD, other than a merger or consolidation of ARIAD in which our voting securities prior to the transaction continue to represent more than 50% of the total voting power of the surviving corporation, or the sale or disposition of all or substantially all of our assets, or   Any person acquires more than 40% of our issued and outstanding voting securities. The following table sets out the estimated potential payments upon termination or a Change in Control for Dr. Berger, based on the assumptions discussed above and assuming such event occurred on December 31, 2011. Dr. Berger2012.   Payments and Benefits    Voluntary termination or termination for Cause      Non- Renewal      Termination by ARIAD Without Cause or by the Executive with Good Reason Absent a Change-in- Control      Death, Disability or Acceleration of Vesting upon Change- in-Control without Termination      Termination by ARIAD without Cause or by the Executive with Good Reason Following a Change-in- Control   Dr. Berger Payments and Benefits    Voluntary termination or termination for Cause      Non- Renewal      Termination by ARIAD Without Cause or by the Executive with Good Reason Absent a Change-in- Control      Death, Disability or Acceleration of Vesting upon Change- in-Control without Termination      Termination by ARIAD without Cause or by the Executive with Good Reason Following a Change-in- Control   Severance benefits:                               Lump sum payment    $ —       $ 1,330,400       $ 3,654,600         n/a       $ 3,654,600         —         $ 1,394,000       $ 4,335,000         n/a       $ 4,335,000    Healthcare benefits      33,432         33,432         33,432         n/a         33,432       $ 36,824         36,824         36,824         n/a         36,824    Acceleration of stock awards:                Market value of stock vesting on termination(1)      —         8,389,929         8,389,929         8,389,929         8,389,929    Acceleration of equity awards:                Market value of equity vesting on termination(1)      —           8,573,126         8,573,126         8,573,126         8,573,126    280G Tax Gross-Up(2)      n/a         n/a         n/a         n/a         1,820,682         n/a         n/a         n/a         n/a         2,131,103                                                                          Total Payment    $ 33,432       $ 9,753,761       $ 12,077,961       $ 8,389,929       $ 13,898,643       $ 36,824       $ 10,003,949       $ 12,944,949       $ 8,573,126       $ 15,076,053                                                                            (1) Amounts do not include the value associated with vested stock options. Information about all stock options and other unvested restricted sharesequity awards held by Dr. Berger as of December 31, 20112012 is included in the “Outstanding Equity Awards at December 31, 2011”2012” table. (2) Based on the assumptions set forth above, Dr. Berger’s payments will result in a tax gross-up payment to him.him, calculated above based on Dr. Berger’s taxable wages per Form W-2 for the years 2007 through 2011. For purposes of the calculation of the tax gross-up, Dr. Berger is assumed to be subject to the maximum federal and Massachusetts income and other payroll taxes, aggregating to a net combined effective tax rate of 44.8%. The amount of the tax gross-up, if any, that would arise would depend upon the facts and circumstances at the time of a change-in-control and any related employment termination. The acceleration of equity awards in the table above includes the value of unvested stock options and restricted stock units, as well as the value of performance share awards granted in 2011 the vesting of which is now time based as the performance objective has been achieved. The acceleration of equity awards does not include the value of performance share awards granted in 2012 for which the performance objective had not been achieved as of December 31, 2012. The values of equity awards included in the table above are based on the intrinsic value of such awards on December 31, 2012 (i.e. the difference between the market value of the Company’s common stock on that date and the exercise or purchase price, if any). The amounts in the table do not include the value of the lump sum payment ($498,800) we will make to Dr. Berger upon termination of employment in good standing for amounts previously earned under our now terminated sabbatical policy, as described in subsection “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.” Other Named Executive Officers The following is a description of the potential payments upon termination or change in control with respect to the named executive officers other than Dr. Berger: EMPLOYMENT TERMINATIONWITHOUT CAUSE If we terminate the employment of aour other named executive officer other than Dr. Bergerofficers without cause, we are obligated to continue payment of the executive’s then current salary for a period of twelve months following the effective date of termination (six months for Dr. Haluska);termination; accelerate vesting of all stock, stock options, stock awards, and similar equity awards and deferred compensation awards granted to the executive that would have otherwise vested during the remaining term of that executive’s contract, subject to the normal post termination exercise period; and continue payment of all benefits covered under COBRA for up to one year. “Cause” for purposes of the other named executive officers’ employment agreements consists of:   The officer’s failure to perform any of his material duties,   The conviction of the officer of any felony,   Commission of any crime related to the officer’s employment with the Company,   Violation of any law or regulation related to our business,   Conduct that could result in unfavorable publicity for us in a material way,   Unprofessional conduct inconsistent with the officer’s position with the Company,   Failure to comply with our written policies, or   Breach of the terms of the employment agreement. The executive officer has a right to cure any conduct that constitutes cause, if curable, within 30 days after receiving written notice. For purposes of determining payments upon termination, a termination of the employment agreement by the named executive officer due to an uncured breach by us of the employment agreement is treated as a termination of the executive’s employment without cause. NON-RENEWAL If we do not renew the employment agreement of aour other named executive officer other than Dr. Berger,officers, no severance benefit is payable. In addition, any unvested stock awards, stock options, restricted stock or restricted stock units, performance shares or unvested portions of past bonuses in the form of deferred compensation shall be forfeited to the Company. EMPLOYMENT TERMINATIONWITH CAUSE Any unvested stock awards, stock options, restricted stock or restricted stock units, performance shares or unvested portions of past bonuses in the form of deferred compensation shall be forfeited to the Company in the event the employment is terminated by the Company for Cause. CHANGEIN CONTROL In the event of a consummation of a “Change in Control” (as defined in this subsection), if within one year following such occurrence the Company terminates the executive officer’s employment without cause or the executive officer resigns for good reason, we are obligated to accelerate the vesting of all stock options, stock grants and similar equity rights and deferred compensation awards and provide for continued exercisability of all awards through their original terms with all rights. We are also obligated to continue to pay the named executive officer their then current salary for a period of 24 months from the effective date of termination (twelve months for Dr. Haluska).termination. Good reason means the involuntary relocation of more than 25 miles, the material breach of the employment agreement by the Company, or the material diminution of the officer’s responsibilities, which situation remains uncured within a specified timeframe after notice. The Change in Control definition with respect to the employment agreements for the other named executive officers is the same as the employment agreement for Dr. Berger.Berger except that the threshold for acquisition of shares of our common stock is 50% for the other named executive officers. The following tables set out the estimated potential payments upon termination or a change in control for Dr. Clackson, Mr. Fitzgerald, Mr. Duvall,Ms. Cantor, and Dr. Haluska, based on the assumptions following the table and assuming such event occurred on December 31, 2011.2012. The total of continued payments in the case of termination by ARIAD without cause in the tables below reflect the remaining terms of the employment agreements with each of these executives. The footnotes to all of the tables follow the last table. Dr. Clackson Dr. Clackson     Payments and benefits    Voluntary Termination or Termination for Cause      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach      Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:             Total of continued payments      —           —         $ 468,000       $ 936,000    Healthcare benefits      —         $ 24,899         24,899         37,348    Non-qualified benefits(1)      —           —           789,047         850,123    Acceleration of equity awards:             Market value of equity vesting on termination (2)      —           1,324,296         2,143,986         4,218,660                                        Total Payment      —         $ 1,349,194       $ 3,425,932       $ 6,042,131                                        Mr. Fitzgerald   Payments and benefits    Voluntary Termination or Termination for Cause      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach      Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:             Total of continued payments      —           —         $ 438,000       $ 876,000    Healthcare benefits      —         $ 24,561         24,561         36,842    Non-qualified benefits(1)      —           —           650,835         710,060    Acceleration of equity awards:             Market value of equity vesting on termination (2)      —           1,126,172         1,890,331         3,687,850                                        Total Payment      —         $ 1,150,733       $ 3,003,727       $ 5,310,751                                          Payments and benefits    Voluntary Termination or Termination for Cause(1)      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach     Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:            Total of continued payments    $ —         $ —         $ 418,000      $ 836,000    Healthcare benefits      —           22,626         22,626        33,938    Non-qualified benefits(2)      —           —           800,171        973,784    Acceleration of stock awards:            Market value of stock vesting on termination(3)      —           1,642,488         3,230,985 (4)      3,580,649 (5)                                     Total Payment    $ —         $ 1,665,113       $ 4,471,782      $ 5,424,371                                         Mr. Fitzgerald            Payments and benefits    Voluntary Termination or Termination for Cause(1)      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach     Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:            Total of continued payments    $ —         $ —         $ 398,000      $ 796,000    Healthcare benefits      —           22,626         22,626        33,938    Non-qualified benefits(2)      —           —           682,139        835,473    Acceleration of stock and option awards:            Market value of stock and option vesting on termination(3)      —           1,437,398         2,924,735 (4)      3,274,399 (5)                                     Total Payment    $ —         $ 1,460,024       $ 4,027,500      $ 4,939,810                                       Mr. Duvall Ms. Cantor   Payments and benefits    Voluntary Termination or Termination for Cause      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach      Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:             Total of continued payments      —           —         $ 306,000       $ 612,000    Healthcare benefits      —         $ 24,899         24,899         37,348    Non-qualified benefits(1)      —           —           346,005         385,611    Acceleration of equity awards:             Market value of equity vesting on termination (2)      —           704,954         1,159,248         2,381,257                                        Total Payment      —         $ 729,853       $ 1,836,152       $ 3,416,217                                          Payments and benefits    Voluntary Termination or Termination for Cause (1)      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach     Termination by ARIAD without Cause or by the Executive for Good Reason within One  Year after a Change in Control            Severance benefits:            Total of continued payments    $ —       $ —       $ 388,000      $ 776,000    Healthcare benefits      —         22,626         22,626        33,938    Non-qualified benefits(2)      —         —         25,500        25,500    Acceleration of stock awards:            Market value of stock vesting on termination(3)      —         57,104         404,750 (4)      503,250 (5)                                     Total Payment    $ —       $   79,730       $    840,876      $ 1,338,688                                       Dr. Haluska Dr. Haluska   Payments and benefits    Voluntary Termination or Termination for Cause      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach      Termination by ARIAD without Cause or by the Executive for Good Reason within One Year after a Change in Control   Severance benefits:             Total of continued payments      —           —         $ 400,000       $ 800,000    Healthcare benefits      —         $ 8,889         8,889         13,334    Non-qualified benefits(1)      —           —           415,327         469,001    Acceleration of equity awards:             Market value of equity vesting on termination (2)      —           636,636         1,039,109         2,298,493                                        Total Payment      —         $ 645,525       $ 1,863,325       $ 3,580,828                                        Payments and benefits    Voluntary Termination or Termination for Cause (1)      Death or Disability      Termination by ARIAD Without Cause or by the Executive for ARIAD’s Material Breach     Termination by ARIAD without Cause or by the Executive for Good Reason within One  Year after a Change in Control            Severance benefits:            Total of continued payments    $ —       $ —       $ 187,500      $ 375,000    Healthcare benefits      —         8,085         8,085        12,128    Non-qualified benefits(2)      —         —         126,923        438,660    Acceleration of stock and option awards:            Market value of stock and option vesting on termination(3)      —         654,400         1,120,741 (4)      1,691,244 (5)                                     Total Payment    $ —       $ 662,485       $ 1,443,249      $ 2,517,032                                         (1) Does not includeAmounts are based on the value of vested non-qualified deferred compensation benefits under our deferred compensation plans. The value of these benefits as of December 31, 2011 is set forth in the section above entitled “Non-qualified Deferred Compensation in 2011.” (2) This amount represents the estimated valueand vesting schedule of unvested deferred compensation awards under our 2005 Executive Compensation Plan that would vest upon such a termination. (3) Reflects the market value of unvested stock options, restricted stock units and performance shares as ofat December 31, 2011 that would vest upon2012; no such a termination. Doesawards were made and deferred in 2013. (2) Amounts do not include the value associated with vested stock options. Information about all stock options and other unvested restricted stock unitsequity awards held by the named executive officers as of December 31, 20112012 is included in the “Outstanding Equity Awards at December 31, 2011”2012” table. The acceleration of equity awards in the tables above includes the value of unvested stock options and restricted stock units, as well as the value of performance share awards granted in 2011 the vesting of which is now time based as the performance objective has been achieved. In the case of termination by the Company without Cause or by the officer for the Company’s material breach, awards that would have vested during the remaining term of the officer’s employment agreement accelerate. In the case of termination by the Company without Cause or by the officer for good reason within one year of a Change in Control, all such outstanding awards immediately vest and remain exercisable according to their terms. Performance share awards granted in 2012 are not included in the above tables as the performance objective has not been achieved as of December 31, 2012. (4) Includes the market value at December 31, 2011 of performance shares assuming the performance objective is achieved within the remaining term of the executive’s employment. There can be no assurance that the performance objective will be achieved within the remaining term of employment in which case the value to the executive would be zero. (5) Includes the market value at December 31, 2011 of performance shares, the vesting of which would be accelerated upon a change in control. The amounts in the above tables do not include the value of the lump sum payments payable upon termination in good standing to Dr. Clackson ($104,500) and Mr. Fitzgerald ($99,500) for amounts previously earned under our now terminated sabbatical policy, as described in the “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table” above. The amounts in the above tables also do not reflect any reduction in payments related to the modified economic cutback provisions in the executive officers’ employment agreements that may apply on or after a change-in-control. Assumptions Regarding Post Termination Payment Tables Except as otherwise specifically noted above, the tables presented on the preceding pages were prepared as though each named executive officer’s employment was terminated on December 30, 201131, 2012 using the closing price of our common stock on that date ($12.25)19.18). We are required by the SEC to use these assumptions. With those assumptions taken as a given, we believe that the remaining assumptions listed below, which are necessary to produce these estimates and reflect solely our interpretation of our contractual obligations, are reasonable in the aggregate. However, the executives’ employment was not terminated on December 31, 2011,2012, and a change in control did not occur on that date. There can be no assurance that a termination of employment, a change in control or both would produce the same or similar results as those described if either or both of them occur on any other date or at any other price of our common stock, or if any assumption is not correct in fact. The following assumptions were used for these tables. Base amount calculations for Section 280G tax gross-up are based on Dr. Berger’s taxable wages (Form W-2, Box 1) for the years 2007 through 2011. Dr. Berger was assumed to be subject to the maximum federal and Massachusetts income and other payroll taxes, aggregating to a net combined effective tax rate of 39.6% when calculating the excise tax gross-up. For Dr. Berger, stock options and restricted stock units vested on December 31, 2011 with respect to a change in control or a termination of employment without cause by us, death or disability. Restricted stock, restricted stock units, stock options and performance shares that become vested due to a change in control or termination of employment are valued in the tables above based on their intrinsic value on December 30, 2011 (i.e., the difference between the stock’s fair market value and the exercise or purchase price, if any). EQUITY COMPENSATION PLAN INFORMATION The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of December 31, 2011:2012:   Plan Category    Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights   Weighted Average Exercise Price of Outstanding Options, Warrants  and Rights    Number of Securities Remaining Available for Future Issuance Under  Equity Compensation Plans (excluding securities reflected in first column) Equity Compensation Plans Approved by Securityholders        10,166,355 (1)     $ 3.79          3,402,503 (2) Equity Compensation Plans not Approved by Securityholders        N/A         N/A          N/A   Total        10,166,355 (1)            3,402,503 (2) Plan Category    Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights     Weighted Average Exercise Price of Outstanding Options, Warrants and Rights      Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in first column)   Equity Compensation Plans Approved by Securityholders      10,131,779      $ 8.28         13,307,824    Equity Compensation Plans not Approved by Securityholders      N/A        N/A         N/A                        Total      10,131,779  (1)         13,307,824  (2)                        (1) Consists of options to purchase 2,442,4131,130,399 shares of common stock granted under our 2001 Stock Plan, as amended, and options to purchase 4,938,9167,097,935 shares of common stock, and 2,785,0261,903,445 restricted stock units and performance share units for up to a maximum of 563,200 shares of common stock granted under our 2006 Long-Term Incentive Plan.Plan, as amended. (2) Consists of 2,818,83212,790,684 shares available for issuance under our 2006 Long-Term Incentive Plan, as amended, and 583,671517,140 shares available for issuance under our 1997 Employee Stock Purchase Plan, as amended. Does not include the additional 14,000,000 shares under the 2006 Long-Term Incentive Plan that would be available for issuance if Proposal 2 is approved at the Annual Meeting. At March 31, 2012, options to purchase 10,596,606 shares of common stock were outstanding under our 2001 Stock Plan and our 2006 Long-Term Incentive Plan, and an additional 193,068 shares were available for future awards under our 2006 Long-Term Incentive Plan. The weighted average exercise price for outstanding options and other stock grants at March 31, 2012 was $5.78. AUDIT COMMITTEE REPORT The following is the report of the Audit Committee with respect to ARIAD’s audited financial statements for the year ended December 31, 2011.2012. The information contained in this report should not be deemed “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act except to the extent that ARIAD specifically incorporates it by reference into that filing. Our executive management is responsible for our financial statements, financial reporting process and internal accounting, financial reporting, and disclosure controls. Our independent registered public accounting firm is responsible for performing an audit of our annual consolidated financial statements and expressing an opinion as to the fair presentation of such financial statements in conformity with generally accepted accounting principles, performing an audit of our system of internal control over financial reporting and expressing an opinion on the effectiveness thereof based on its audit, reviewing our quarterly consolidated financial statements, and other procedures as approved by the Audit Committee. The Audit Committee is responsible for overseeing and reviewing these processes. The Audit Committee is not, however, professionally engaged in the practice of accounting or auditing, and does not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or generally accepted accounting principles or as to auditor independence. The Audit Committee relies, without independent verification, on the information provided to it and on the presentations made by management and the independent registered public accounting firm. In connection with fulfilling its responsibilities with respect to our consolidated financial statements for the year ended December 31, 2011,2012, the Audit Committee reviewed and discussed the audited financial statements and related footnotes and other disclosures with management and the independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”). The Audit Committee also reviewed with management our financial reporting processes and internal accounting, financial reporting and disclosure controls, including those related to compliance with legal and regulatory requirements that affect its financial reporting and disclosure obligations. This review included discussion with Deloitte regarding the results of its audit of our consolidated financial statements and our system of internal control over financial reporting, as well as the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) AU380,Communications with Audit Committees,, and SEC Regulation S-X Rule 207,Communication with Audit Committees. The Audit Committee has also reviewed the written disclosures and letter from Deloitte regarding its communications with the Audit Committee concerning independence, as required by the PCAOB, and has discussed with Deloitte its independence from ARIAD. The Audit Committee has considered whether the provision of non-audit services by Deloitte to us is compatible with maintaining Deloitte’s independence. Based on these reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in our Annual Report on Form 10-K for the year ended December 31, 20112012 for filing with the SEC. Throughout 2011,2012, the Audit Committee met on a regular basis with management and Deloitte. In these meetings, in addition to the review of the quarterly consolidated financial statements to be included in Forms 10-Q, the Audit Committee reviewed and discussed the critical accounting policies and significant judgments made by management in the preparation of our financial statements, the ongoing review, testing and assessment of the adequacy of internal controls, proposed changes to auditing and accounting principles and practices, and the effect of regulatory and accounting initiatives that may affect us. The Audit Committee also reviewed and approved all audit and non-audit services and the fees related thereto, and addressed other matters as outlined in its charter. In addition, the Audit Committee reviewed and reassessed the adequacy of its charter. The Audit Committee has reviewed and evaluated the qualifications and performance of Deloitte as our independent registered public accounting firm. Based on this review and evaluation, the Audit Committee has selected Deloitte to serve as our independent registered public accounting firm through the audit of our consolidated financial statements for the year ending December 31, 20122013 and system of internal control over financial reporting as of December 31, 2012.2013. Members of the Audit Committee   Wayne Wilson, Chair    Jay R. LaMarche    Massimo Radaelli, Ph.D.    Robert M. Whelan, Jr. PROPOSALS TO BE VOTED UPON BY STOCKHOLDERS PROPOSAL 1 Election of Two Class 31 Directors to Hold Office until the 20152016 Annual Meeting Our certificateCertificate of incorporation,Incorporation, as amended, provides that our Board of Directors shall fix the number of directors. Our Board has seven members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Two directors are proposed to be elected at the 2012 annual meeting.2013 Annual Meeting. The terms of Harvey J. Berger, M.D.Athanase Lavidas, Ph.D. and Wayne WilsonMassimo Radaelli, Ph.D. expire this year, and our Board has nominated both of them for a three-year term that will expire at the annual meeting in 2015.2016. Dr. BergerLavidas and Mr. WilsonDr. Radaelli were last elected by stockholders at the 20092010 annual meeting to serve their terms through the 2012 annual meeting.2013 Annual Meeting. It is intended that, if no contrary specification is made, the persons named as proxies shall vote for the nominees named below.these nominees. Our Board of Directors believes that each of the nominees will be available and able to serve as directors, but if for any reason either of the nominees should not be available to stand for election or be able to serve, the proxies received will be voted for substitute nominees to be designated by the Board or, if the Board does not identify substitute nominees, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than two nominees. Vote Required A plurality of the votes cast by the stockholders entitled to vote and who are present in person or represented by proxy at the Annual Meeting will be required to elect the two nominees as Class 31 directors. Recommendation The Board of Directors recommends that you vote “FOR” the election of Harvey J. Berger, M.D.Athanase Lavidas, Ph.D. and Wayne Wilson,Massimo Radaelli, Ph.D., and proxies solicited by the Board of Directors will be voted in favor thereof, unless a stockholder has indicated otherwise on the proxy. PROPOSAL 2 Approval ofTo Approve an Amendment to the 2006 Long-Term Incentive PlanOur Certificate of Incorporation to Increase the Number of Authorized Shares of Our Common Stock from 240 million to 450 million Common Stock Available for Issuance under the Plan by 14,000,000 SharesBackground In 2006, our Board of Directors and our stockholders approved the 2006 Long-Term Incentive Plan (the “2006 Plan”). The 2006 Plan allows the Company, under the direction of the Compensation Committee, to make grants of stock options, restricted stock, restricted stock units, performance-based stock awards, stock appreciation rights and other equity-based awards to employees, directors and consultants. The purpose of awards under the 2006 Plan is to attract and retain key individuals, align employee and stockholder interests and closely link compensation with Company performance. In 2009, our Board of Directors and our stockholders approved amendments to the 2006 Long-Term Incentive Plan to increase the maximum number of shares of common stock available for issuance under the 2006 Plan and to remove the limitation on the number of full-value awards issuable under the 2006 Plan, and in 2011 our stockholders re-approved the performance objectives and other applicable provisions in the 2006 Plan for purposes of complying with Section 162(m) of the Code. Our Board of Directors has determined that it is advisable and in orderthe best interests of our stockholders to continueincrease our authorized common stock from 240 million to 450 million shares, and has voted to recommend that the stockholders adopt an amendment to our Certificate of Incorporation effecting the proposed increase. The proposed amendment amends and restates the first paragraph of Section 4 of the Certificate of Incorporation, as amended to date, by striking out the first paragraph of Section 4 in its policiesentirety and practices regarding our equity incentive programs,by substituting in lieu thereof the following: “4. Number of Shares. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 460 million shares, consisting of 450 million shares of common stock, $.001 par value per share (the “Common Stock”) and 10 million shares of preferred stock, $.01 par value per share (the “Preferred Stock”).” Our stockholders last approved the number of shares of common stock availableauthorized for issuance under our Certificate of Incorporation in January 2010. Our Certificate of Incorporation currently authorizes the 2006 Plan should be increased. Therefore, by written consent dated April 23, 2012, upon recommendationissuance of up to 240 million shares of our common stock. As of March 31, 2013, 184,578,718 shares of common stock were issued and outstanding, and 22,382,268 shares of common stock were reserved for issuance under our equity incentive and employee stock purchase plans. Accordingly, as of such date, 206,960,986 of our 240 million authorized common shares, or approximately 86.2% have been issued or reserved for issuance and thus relatively few shares are available to us for use in connection with our future corporate needs. Reasons for the Compensation Committee, theProposed Amendment The Board of Directors approved amendingbelieves it is in our best interest and the 2006 Planbest interests of our stockholders to have sufficient additional authorized but unissued shares of common stock available in order to provide flexibility for corporate action in the future. The Board of Directors believes that the availability of additional authorized shares of common stock is desirable in order to permit, for example, the issuance or reservation from time to time of shares of common stock in connection with possible acquisitions of other companies or assets, collaborations or licensing arrangements, financings, equity incentive and employee stock purchase plans, investment opportunities, stock splits or dividends or for other corporate purposes. For example, in recent years, we have sought shareholder approval of additional authorized shares under our equity incentive and our employee stock purchase plans, and we have also issued shares of common stock in registered equity offerings. We currently have no present intention, plan, arrangement or agreement, written or oral, to issue or reserve an additional 14,000,000 shares of our common stock for awards underany purpose. However, the 2006 Plan, subject to and effective upon approval by our stockholders atBoard of Directors believes that the Annual Meeting. An increasecurrently available number of unissued shares does not provide sufficient flexibility for corporate action in the number of shares reserved for issuance under the 2006 Plan is being requested at this time because only 193,068 shares remain available for future grants under the 2006 Plan as of March 31, 2012. future. The following table summarizes the award activity under the 2006 Plan since its inception in 2006 and the status of awards under the 2006 Plan as of March 31, 2012, prior to the impact of the proposed increase: Shares reserved 11,500,000 Shares transferred from 2001 Stock Plan 1,624,847 Stock options awarded (8,562,994 )  Stock grants awarded (6,308,758 )  Options and shares forfeited 1,939,973 Shares available for future grant 193,068 Stock options outstanding 6,245,847 Restricted stock units and performance share awards outstanding 2,470,697 Total number of shares of the Company’s common stock outstanding 165,474,108 Upon approval of the 2006 Plan by the stockholders in 2006, the 2001 Stock Plan was terminated so that no additional awards could then be made under the 2001 Stock Plan. Stock options outstanding under that plan at the time of its termination remained valid and outstanding stock options according to the terms of such awards. Any of such outstanding stock options that were or will be subsequently forfeited by the optionees are transferred to the 2006 Plan and become available for future awards. A total of 1,880,062 options currently remain outstanding under the 2001 Stock Plan as of March 31, 2012. The 2006 Plan contains a number of provisions that we believe are consistent with the interests of shareholders, sound corporate governance practices and our equity compensation philosophy: Continued broad-based eligibility for equity awards with reasonable annual dilution. Our gross annual burn rate, defined as the number of stock options or stock awards granted divided by total common shares outstanding, for 2011, 2010 and 2009 was 2.16%, 2.21% and 2.69%. On average, our three-year average burn rate was 2.35%. This is significantly below the average burn rate of 3.59% for Russell 3000 companies in our Global Industry Classification Standard Group, which covers companies in the pharmaceuticals and biotechnology industry. We intend to maintain responsible annual dilution levels related to our equity incentive plans, not including extraordinary events such as acquisitions. No annual “Evergreen” provision. The 2006 Plan authorizes a fixed number of shares, thereby requiring stockholder approval of any additional authorization of shares. No discounted stock options or stock appreciation rights. All stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our common stock on the date the stock option or stock appreciation right is granted. No stock option or stock appreciation right repricings, replacements or buyouts. The 2006 Plan prohibits direct and indirect repricing of stock options and stock appreciation rights and the replacing or buyout of underwater stock options and stock appreciation rights without the approval of our stockholders. No reload rights. Stock options granted under the 2006 Plan do not contain provisions entitling participants to automatic grantsavailability of additional stock options in connection with the exercise of the original option. Reasonable share counting provisions. In general,authorized shares of common stock reserved for awards granted under the 2006 Plan that lapse or are canceled are added back to the share reserve available for future awards. However, shares of common stock tendered in payment of the exercise price of a stock option or shares of common stock withheld for the exercise price of a stock option or taxes are not available again for grant. No automatic change in control acceleration.We have revised the 2006 Plan to delete the definition of “Change of Control,” as the 2006 Plan does not provide for any automatic acceleration upon a change in control event. Independent committee. As it relates to our employees, the 2006 Plan is governed by the Compensation Committee, which consists of “outside directors” within the meaning of Section 162(m) of the Code and “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act, and which meets the director independence criteria of NASDAQ. The following is a brief summary of the 2006 Plan. This summary is qualified in its entirety by reference to the text of the 2006 Plan, as proposed to be amended, a copy of which is attached as Appendix A to this proxy statement. Purpose of the 2006 Plan The 2006 Plan allows us, under the direction of the Compensation Committee, to make grants of stock options, restricted stock, restricted stock units, performance-based stock awards, stock appreciation rights and other equity-based awards (any of which may or may not require the satisfaction of performance objectives) to key employees, consultants and directors who,particularly important in the opinion of the Compensation Committee, are in a position to make a significant contribution to our long-term success. The purpose of these awards is to attract and retain key individuals, further align employee and stockholder interests, and to closely link compensation with Company performance. The 2006 Plan provides an essential component of our total compensation package, reflecting the importanceevent that we place on aligning the interests of key individuals with those of our stockholders. The 2006 Plan terminates on April 28, 2016. Types of Awards The 2006 Plan allowsneed to undertake any of the following types of awards, to be granted alone or in tandem with other awards; however, no more than 500,000 shares shall be granted to any participant in the 2006 Plan in any tax year:foregoing actions on an efficient and expedited basis. Stock Options. Stock options granted under the 2006 Plan may be either incentive stock options, which are intended to satisfy the requirements of Section 422Authority of the Code, or non-qualified stock options, which are not intendedBoard of Directors to meet those requirements.Issue Additional Shares of Common Stock The exercise price of a stock option may not be less than 100% ofIf the fair market value of our common stock on the date of grantproposed amendment is adopted and the term may not be longer than 10 years. If an incentive stock option is granted to an individual who owns more than 10% of the combined voting power of all classes of our capital stock, the exercise price may not be less than 110% of the fair market value of common stock on the date of grant and the term may not be longer than five years. Award agreements for stock options may include provisions for exercise of the stock options after termination of service. Options may not be exercised unless they are vested, and no option may be exercised after the end of the term set forth in the award agreement. If an award agreement does not have provisions for exercise after termination of service, the stock options will be exercisable for three months after termination of service for any reason other than death or total and permanent disability, and for 12 months after termination of service on account of death or total and permanent disability. Options, however, will not be exercisable if the termination of service was due to cause. Stock Appreciation Rights. A stock appreciation right entitles the grantee to receive, with respect to a specifiedauthorized number of shares of common stock any increase inis increased, then the value of the shares from the date the award is granted to the date the right is exercised. Under the 2006 Plan, all stock appreciation rights must be settled in common stock, except as otherwise determined by the Compensation Committee. Award agreements for stock appreciation rights may include provisions for exercise of the stock appreciation rights after termination of service. If an award agreement does not have provisions for exercise after termination of service, the stock appreciation rights will be exercisable for three months after termination of service for any reason other than death or total and permanent disability, and for 12 months after termination of service on account of death or total and permanent disability. Stock appreciation rights, however, will not be exercisable if the termination of service was due to cause. Restricted Stock. Restricted stock is common stock that is subject to restrictions, including a prohibition against transfer and a substantial risk of forfeiture, until the end of a “restricted period” during which the grantee must satisfy certain vesting conditions. If the grantee does not satisfy the vesting conditions by the end of the restricted period, the restricted stock is forfeited. During the restricted period, the holder of restricted stock has the rights and privileges of a regular stockholder, except that the restrictions set forth in the applicable award agreement apply. For example, the holder of restricted stock may vote and receive dividends on the restricted shares; but he or she may not sell the shares until the restrictions are lifted. Restricted Stock Units. A restricted stock unit entitles the grantee to receive common stock, or cash (or other property) based on the value of common stock, after a “restricted period” during which the grantee must satisfy certain vesting conditions. If the grantee does not satisfy the vesting conditions by the end of the restricted period, the restricted stock unit is forfeited. The Compensation Committee isadditional authorized (but not required) to grant holders of restricted stock units the right to receive dividends on the underlying common stock. Other Equity-Based Awards. The 2006 Plan also authorizes the Compensation Committee to grant other types of equity-based compensation. For example, the Compensation Committee may grant deferred stock units or shares of common stock upon the achievementmay be issued from time to time by action of the performance objectives.Board of Directors, without further stockholder approval, except as required by law, regulatory authorities or rules of The NASDAQ Stock Market or any other stock exchange on which our shares may then be listed, for such consideration as the Board of Directors determines to be adequate, or without consideration as a stock dividend or stock split. The additional shares of common stock to be authorized by adoption of the amendment to the Certificate of Incorporation would have rights identical to our currently outstanding shares of common stock. ConditionsPrincipal Effects on AwardsOutstanding Common Stock The 2006 Plan allows for the following conditions and restrictions on awards: Vesting and Performance Objectives.Awards under the 2006 Plan are forfeitable until they become vested. An awardproposed increase in authorized common stock will become vested only if the vesting conditions set forth in the award agreement (as determined by the Compensation Committee) are satisfied. The vesting conditions may include performance of services for a specified period, achievement ofnot have any of the performance objectives, or a combination of both. The Compensation Committee also has authority to provide for accelerated vesting, including upon the occurrence of an event such as a change of control. However, performance objectives may not be changed to accelerate the settlement of an award or to accelerate the lapse or removal of restrictions on restricted stock that would otherwise be due upon the attainment of a performance objective that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Transferability.In general, awards under the 2006 Plan may not be assigned or transferred except by will or the laws of descent and distribution. However, the Compensation Committee may allow the transfer of non-qualified stock options to members of a participant’s immediate family or to a trust, partnership, or corporation in which the parties in interest are limited to the participant and members of the participant’s immediate family. Federal Income Tax Consequences The material federal income tax consequences of the issuance and exercise of stock options and other awards under the 2006 Plan, basedeffect on the current provisionsrights of the Code and regulations, are as follows. Changes to these laws could alter the tax consequences described below. This summary assumes that all awards granted under the 2006 Plan are exempt from or comply with, the rules under Section 409A of the Code related to nonqualified deferred compensation. Stock Options. The grant of a stock option will have no tax consequences to the recipient or to ARIAD or its affiliates. In general, upon the exercise of an incentive stock option, the employee will not recognize income and the employer will not be entitled to a tax deduction.existing stockholders. However, the excess of the acquired shares’ fair market value on the exercise date over the exercise price is included in the employee’s income for purposes of the alternative minimum tax. Upon the exercise of a non-qualified stock option, the employee (or consultant or director, as applicable, hereinafter the “Employee”) will generally recognize ordinary income equal to the excess of the acquired shares’ fair market value on the exercise date over the exercise price, and ARIAD (or the affiliate that granted the option) will generally be entitled to a tax deduction in the same amount. If the acquired shares are restricted stock (i.e., they are not transferable and are subject to a substantial risk of forfeiture), the tax consequences for restricted stock (described below) will apply. If an Employee transfers non-qualified stock options to members of his or her immediate family or to a trust, partnership, or corporation (as described above), the transfer will not be a taxable event. Upon the exercise of the non-qualified stock options (by the family member, trust, partnership, or corporation), the Employee will recognize ordinary income. Stock Appreciation Rights. The grant of a stock appreciation right will have no tax consequences to the recipient or to ARIAD or its affiliates. Upon the exercise of a stock appreciation right, the Employee will recognize ordinary income equal to the received shares’ fair market value on the exercise date, and ARIAD (or the affiliate that granted the option) will generally be entitled to a tax deduction in the same amount. Restricted Stock, Restricted Stock Units, and Other Equity Awards. In general, the grant of restricted stock, a restricted stock unit, or other equity awards will have no tax consequences to the recipient or to ARIAD or its affiliates. When the award is settled (or, in the case of restricted stock, when the restrictions are lifted), the Employee will recognize ordinary income equal to the excess of (1) the applicable shares’ fair market value on the date the restrictions are lifted over (2) the amount, if any, paid for the shares by the Employee; ARIAD (or the affiliate that granted the award) will generally be entitled to a tax deduction in the same amount. If the award is settled in cash or other property, the Employee will recognize ordinary income equal to the net amount received, and ARIAD (or the affiliate that granted the award) will generally be entitled to a tax deduction in the same amount) subject to deduction limitations under Section 162(m) of the Code, to the extent the award did not qualify as “performance-based.” The grantee of a restricted stock award may elect to be taxed on the date of grant by filing a “Section 83(b) election” rather than on the date when the restrictions are lifted. Sale of Shares. When an Employee sells shares received under any award other than an incentive stock option, the Employee will recognize capital gain or loss equal to the difference between the sale proceeds and the employee’s (or director’s or consultant’s) basis in the shares. In general, the basis in the shares is the amount of ordinary income recognized upon receipt of the shares (or upon the lifting of restrictions, in the case of restricted stock) plus any amount paid for the shares. When an Employee disposes of incentive stock option shares, the difference between the amount realized by the employee and the exercise price will generally constitute a capital gain or loss, as the case may be. However, if the Employee does not hold the incentive stock option shares for more than one year after exercising the incentive stock option and for more than two years after the grant of the incentive stock option, then: (1) the excess of the incentive stock option shares’ fair market value on the exercise date over the exercise price will generally be treated as ordinary income for the Employee; (2) the difference between the sale proceeds and the incentive stock option shares’ fair market value on the exercise date will be treated as a capital gain or loss for the Employee; and (3) the employer will generally be entitled to a tax deduction equal to the amount of ordinary income recognized by the Employee. Deduction Limits. In general, under Section 162(m) of the Code, a corporation is denied a tax deduction for any compensation paid to its chief executive officer or to any of its four most highly compensated officers (other than the chief executive officer) to the extent that the compensation paid to the officer exceeds $1,000,000 in any year. “Performance-based compensation” is not subject to this deduction limit. The 2006 Plan permits the grant of awards that qualify as performance-based compensation–such as restricted stock and restricted stock units thatadditional authorized shares are conditioned on achievement of one or more performance objectives, and stock options and stock appreciation rights–and of awards that do not so qualify–such as restricted stock and restricted stock units that are not conditioned on achievement of performance objectives. Awards Not Nonqualified Deferred Compensation. Awards under the 2006 Plan are not intended to be nonqualified deferred compensation. The Compensation Committee is required to administer, interpret, and construe the 2006 Plan in a manner that is intended to not give rise to tax liability under Section 409A of the Code. Plan Benefits All awards to employees, directors and consultants under the 2006 Plan are made at the discretion of the Compensation Committee. Therefore, except as set forthissued in the table below for grants already made underfuture, the 2006 Plan,issuances would have the future benefits and amounts that will be received or allocated under the 2006 Plan are not determinable at this time. The following table sets forthnormal consequences associated with increasing the number of our shares outstanding, including diluting existing stockholder net tangible book value and voting power. Our stockholders do not have any preemptive right to purchase or subscribe for any part of common stock underlying outstanding stock options, restricted stock units and performance share awards underany new or additional issuance of our securities. Votes Required – Procedure for Amendment The affirmative vote of a majority of the 2006 Plan for each person or group named in the table as of March 31, 2012: Name and Position Number of Shares of Common Stock Underlying Outstanding  Awards Harvey J. Berger, M.D.,Chairman and Chief Executive Officer and nominee for Class 3 director 1,294,867   �� Timothy P. Clackson, Ph.D.,President, Research and Development and Chief Scientific Officer 527,333     Edward M. Fitzgerald,Executive Vice President, Chief Financial Officer and Treasurer 470,333     Martin J. Duvall,Senior Vice President, Commercial Operations 151,200     Frank G. Haluska, M.D., Ph.D.,Senior Vice President, Clinical Research and Development and Chief Medical Officer 304,333     Wayne Wilson,nominee for Class 3 Director 25,000     All current executive officers as a group 4,035,398     All current directors who are not executive officers as a group 217,139     All employees as a group (including officers who are not executive officers) 4,271,865     On March 30, 2012, the closing market price per shareshares of our common stock was $15.98 as reported by The NASDAQ Global Select Market. Vote Required A majority of the votes cast by the stockholdersoutstanding and entitled to vote and who are present in person or represented by proxy at the Annual meeting will beMeeting is required to approve the amendment to our 2006 Long-Term Incentive Plan,Certificate of Incorporation to effect the proposed increase in our authorized common stock. If the proposal is approved, we intend to file a certificate of amendment to our Certificate of Incorporation, as amended, shortly after the Annual Meeting. However, the Board of Directors may abandon the amendment without any further action by the stockholders at any time prior to increase the numberfiling of sharesthe certificate of common stock available for issuance underamendment. The amendment to the planCertificate of Incorporation will be effective immediately upon acceptance of filing by 14,000,000 shares.the Secretary of State of Delaware. Recommendation The Board of Directors recommends that you vote “FOR” the“FOR” approval of the amendment to the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan, as amended,our Certificate of Incorporation to increase the number of authorized shares of our common stock available for issuance under the plan by 14,000,000 shares,from 240 million to 450 million, and proxies solicited by the Board of Directors will be voted in favor thereof, unless a stockholder has indicated otherwise on the proxy. PROPOSAL 3 Ratification of Selection of Independent Registered Public Accounting Firm The Audit Committee of our Board of Directors has selected Deloitte & Touche LLP (“Deloitte”Deloitte”) to be our independent registered public accounting firm for the year ending December 31, 2012.2013. Our Board of Directors has ratified this selection. Deloitte has served as our independent registered public accounting firm since 1991. Deloitte has advised us that it does not have any direct or indirect financial interest in ARIAD. Representatives of Deloitte are expected to attend the annual meetingAnnual Meeting and will be given the opportunity to make a statement if they so choose. They will also be available to respond to appropriate questions raised by those in attendance at the annual meeting.Annual Meeting. Before it selected Deloitte as our independent registered public accounting firm, our Audit Committee carefully considered the qualifications of Deloitte, including the firm’s performance in prior years, the competence of personnel assigned to our engagement and its reputation for integrity, quality, and competence in the fields of accounting and auditing. Our Audit Committee also considered whether Deloitte’s provision of non-audit services to ARIAD is compatible with that firm’s independence. Stockholders will be asked at the annual meetingAnnual Meeting to ratify the selection of Deloitte, although such ratification is not required under Delaware law or our Certificate of Incorporation, as amended, or our Amended and Restated By-Laws. If the stockholders ratify the selection of Deloitte, our Audit Committee may still, in its discretion, decide to appoint a different independent registered public accounting firm at any time during the year 2012,2013, if it concludes that such a change would be in the best interests of ARIAD and our stockholders. If the stockholders fail to ratify the selection, our Audit Committee will reconsider, but not necessarily rescind, the retention of Deloitte. Audit and Non-Audit Fees For the fiscal years ending December 31, 2012 and 2011, and 2010, we paid Deloitteincurred the following fees:fees for the services of Deloitte and its member firms:      2011      2010      2012      2011   Audit Fees    $ 518,324,       $ 471,937       $ 767,873       $ 518,324    Audit-Related Fees      35,655         94,405         20,397         35,655    Tax Fees      321,161         148,790         1,122,801         321,161    All Other Fees      36,544         0         6,700         36,544                                Total    $ 911,684       $ 715,132       $ 1,917,771       $ 911,684                                Audit Fees Audit Fees include fees for the audit of our annual financial statements, the reviews of our quarterly financial statements included in reports on Form 10-Q, and the audit of our system of internal control over financial reporting and fees related to statutory audit requirements of our subsidiaries, as well as fees for work that generally only our independent registered public accounting firm can providedprovide including reviews of registration statements that include the firm’s consent, the provision of comfort letters in connection with stock offerings and statutory audit work. Audit fees increased in 2012 because the growth and expansion of the Company as we prepared for regulatory approval and commercial launch of Iclusig required the expansion of audit procedures to support Deloitte’s reports on our consolidated financial statements. We expect that Audit Fees will increase in 2013 as we transition to a global commercial company and continue to expand our operations. Audit-Related Fees Audit-Related Fees include fees for services that are reasonably related to the auditsaudit or reviews of employee benefit planour consolidated financial statements and are not reported under Audit Fees above. These services include consultation on financial accounting and reporting matters which included in 2010 the reviewand, prior to 2012, audits of our accounting and reporting for our 2010 license agreement with Merck & Co., Inc. employee benefit plan financial statements. Tax Fees Tax Fees include fees for preparation of tax returns as well as general tax planning and advice. Fees for these recurring services totaled approximately $72,000 in 2012 and $71,000 in 2011. In addition to these recurring services, in 2011, Deloitte’s tax services included in addition to preparation of tax returns, assistance with our evaluation of various factors that impact or are impacted by our decision to commercialize our product candidate, ponatinib,Iclusig on our own, including assistance related to various international corporate structuring and various tax rules and regulations related to the establishment of operations outside the United States. Fees for these non-recurring services in 2011 totaled approximately $250,000. In 2012, we initiated operations in Europe, with headquarters in Switzerland, in preparation for expected approval of Iclusig for marketing by the European Medicines Agency in 2013. In connection with these actions, we engaged Deloitte, as well as other accounting and legal firms, to assist us in the assessment of the tax implications of our design and implementation of our international tax structure. These non-recurring services included: Transfer pricing analysis for tax purposes related to the transfer of certain intellectual property rights to our wholly-owned subsidiary in Switzerland (approximately $403,000); Analysis of the tax impacts in the United States of the transfer of intellectual property rights to our Swiss subsidiary (approximately $143,000); Preparation and submission of tax ruling requests with Swiss tax authorities, and analysis of tax regulations applicable to subsidiaries in Europe (approximately $337,000); and General advice on tax matters and review of documentation prepared by the Company, legal counsel and other consultants (approximately $167,000). We expect that, while fees for recurring tax return preparation and general tax planning and advice will increase in 2013, the services described above related to European business expansion have been completed, and therefore we expect total tax fees will decrease in 2013. In engaging Deloitte on these matters, management and the Audit Committee considered Deloitte’s significant expertise in corporate taxation, including Swiss taxation, their significant expertise in biotechnology/pharmaceutical business and taxation, and their deep knowledge of our history, business, strategy and operations. As such, we determined that the engagement of Deloitte would ensure high quality advice and input, pertinent to our business and consistent with our overall business strategy, and completion of the work in a timely and efficient manner. The Audit Committee also discussed and determined that the provision of these services was compatible with Deloitte’s independence from the Company in the conduct of its audit services. All Other Fees All Other Fees include fees associated with services not captured in the three preceding categories, which in 2011 consisted2012 included access to and usage of serviced provided by Deloitte Recap LLC, a consulting Deloitte’s accounting research database. unit of Deloitte, which provided data and analysis to support our assessment of potential business development transactions. Our Audit Committee pre-approved all of the services set forth above, pursuant to our pre-approval policy described below. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors Consistent with SEC policies regarding auditor independence, our Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, our Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. Prior to engagement of an independent registered public accounting firm for the next year’s audit and also on a quarterly basis, management submits a report to our Audit Committee for their approval, outlining the services planned or anticipated to be rendered by the independent registered public accounting firm, and the estimated fees for such services, within the following two calendar quarters.services. The services are outlined according to the four categories of services defined above, (i.e. Audit, Audit-Related, Tax and All Other).Other. Actual fees incurred relative to estimated fees are reported to our Audit Committee each quarter. Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm. To ensure prompt consideration of unexpected services, our Audit Committee has delegated authority to the Chair of our Audit Committee to pre-approve services to be rendered. Any such actions taken by the Chair must be reported to our Audit Committee at its next scheduled meeting. Vote Required A majority of the votes cast by the stockholders entitled to vote and who are present in person or represented by proxy at the Annual Meeting will be required to ratify the selection of Deloitte as our independent registered public accounting firm for 2012.2013. Recommendation The Board of Directors recommends that the stockholders vote “FOR” ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm, and proxies solicited by the Board of Directors will be voted in favor thereof, unless a stockholder has indicated otherwise on the proxy. PROPOSAL 4 Vote to Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers as as Disclosed in this Proxy Statement We are seeking your approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis section, the accompanying compensation tables and the related narrative disclosure of this proxy statement. Because your vote is advisory, it will not be binding on our Compensation Committee or our Board of Directors. However, the Compensation Committee and the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. Our compensation philosophy is designed to align each executive’s compensation with our short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate and retain key executives who are crucial to our long-term success. Consistent with this philosophy, a significant portion of the total compensation opportunity for each of our executives is directly related to performance factors that measure our progress against our key corporate objectives, as well as the level of achievement of individual goals developed at the beginning of the year in support of such objectives. Stockholders are urged to read the Compensation Discussion and Analysis section of this proxy statement, which discusses how our compensation policies and procedures implement our compensation philosophy, as well as the Summary Compensation Table and other related compensation tables and narrative disclosure which describe the compensation of our named executive officers in fiscal 2011.2012. The Compensation Committee and the Board of Directors believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving its goals and that the compensation of our named executive officers in fiscal 20112012 reflects and supports these compensation policies and procedures. We achieved all of our key corporate objectives in 2011, highlighted by:2012, as follows:   The completionCompleted regulatory submission of patient enrollment in the pivotal PACE trial of ponatinib, an investigational pan-BCR-ABL inhibitor, in patients with resistant or intolerant chronic myeloid leukemia (CML) and Philadelphia-chromosome positive acute lymphoblastic leukemia (Ph+ALL).obtained US approval for Iclusig (ponatinib);   The presentationCompleted regulatory submission of positive preliminary data on ponatinib from the PACE trial at a major medical conference in December 2011.Iclusig for EU market approval;   The advancement of AP26113, an investigational dual inhibitor of EGFR and ALK,Established European operations in patients with non-small cell lung cancer and other cancers, into a multicenter Phase 1/2 clinical trial.preparation for European marketing approval in 2013;   Initiated clinical trials of Iclusig in support of additional indications and approval in other countries; Advanced the clinical development of AP26113 and enhanced our other discovery efforts; and Supported corporate growth in expanding personnel and strengthening our balance sheet to support commercialization in US and Europe. The completionforegoing accomplishments were the products of an underwritten public offering of $243 million allowing usexceptional efforts and coordination throughout our entire Company. To achieve these results, we more than doubled in size to buildapproximately 300 employees during the past eighteen months, and we established critical new functions, augmented and enhanced many operational systems, and pursued and attained aggressive corporate goals while adapting to substantially greater organizational complexity. Led by our senior management team, we finished 2012 well on the way to transforming ARIAD into a commercialsustainable, fully integrated global oncology company with no plans for any future partnerships or product-license agreements.the highly differentiated capability to discover, develop and deliver innovative cancer medicines. WeOur vision as a company to develop new, breakthrough therapies with the potential to transform the lives of patients with difficult-to-treat cancers requires the leadership, drive, dedication and skills of an extraordinarily talented team of executives to achieve. With the approval and launch of Iclusig in the United States, we have reached a major milestone in realizing that vision, but there is a great deal more to accomplish. As will be discussed below, our Compensation Committee and our entire Board believe that these accomplishments are reflectedour compensation program has played, and will continue to play, a crucial role in the increase of 140% in the market price ofmotivating and incentivizing our common stock from December 31, 2010management team to December 31, 2011.achieve our corporate objectives and fully transform our vision into a reality. In accordance with the rules recently adopted by the SEC, the following resolution, commonly known as a “say-on-pay” vote, is being submitted for a stockholder vote at the 2012 annual meeting:2013 Annual Meeting: “RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 20122013 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20112012 Summary Compensation Table and the other related tables and disclosures.” Vote Required A majority of the votes cast by the stockholders entitled to vote and who are present in person or represented by proxy at the Annual Meeting will be required to approve this resolution. Although the advisory vote is non-binding, the Compensation Committee and the Board of Directors will take into consideration the advisory vote results when making decisions regarding executive compensation. Recommendation The Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our Named Executive Officersnamed executive officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure of this proxy statement, and proxies solicited by the Board of Directors will be voted in favor thereof, unless a stockholder has indicated otherwise on the proxy. OTHERADDITIONAL INFORMATION Voting Information Who May Vote Each share of our common stock entitles the holder to one vote on each matter. Only stockholders of record as of the close of business on April 25, 2013 (the “Record Date”) are entitled to receive notice to attend and to vote at the Annual Meeting. As of the Record Date, there were 184,690,184 shares of our common stock issued and outstanding held by stockholders of record. How to Vote We encourage stockholders to submit proxies in advance of the meeting by telephone, by Internet or by mail. You can ensure that your shares are voted at the meeting by following the instructions on the enclosed proxy or voting instruction form and submitting your votes by telephone or the Internet, or by completing, signing, dating and returning the proxy or voting instruction form provided. Submitting your instructions or proxy by any of these methods will not affect your right to attend and vote at the meeting in person or by executing a proxy designating a representative to vote for you at the meeting. Stockholders of Record.If your shares are registered directly in your name with our transfer agent, Computershare, you are considered the stockholder of record with respect to those shares, and we sent the Notice of Internet Available of Proxy Materials (the “Notice”) directly to you. To vote, please follow the instructions in the Notice. If you request printed copies of the proxy materials by mail, you will receive a proxy card and should complete and return it as instructed on the proxy card. Proxies submitted by the Internet or telephone must be received by 11:59 P.M. EDT on June 19, 2013. Beneficial Owners of Shares Held in Street Name.If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. If you request printed copies of the proxy materials by mail, you will receive a voting instruction form. If you hold your ARIAD stock in “street name,” your ability to vote by telephone or over the Internet depends upon your broker’s voting process. Please follow the instructions on your voting instruction form carefully. Even if you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy or by completing a voting instruction form. If you plan to vote in person at the meeting and you hold your ARIAD stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting. Quorum Requirement for the Annual Meeting The holders of one-third of the shares entitled to vote at the Annual Meeting must be present in person or represented by proxy at the Annual Meeting for the transaction of business. This is called a quorum. Abstentions and broker non-votes, as described below, are counted for purposes of determining whether a quorum is present. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained. Tabulation of Votes We will keep all the proxies, ballots, and voting tabulations private. We only allow the inspectors of election, our corporate secretary and a representative from Broadridge Financial Solutions, Inc., to examine these documents and count the votes represented by proxies cast by proxy card, ballot, telephone, and the Internet. The rest of our management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you make on the proxy card or elsewhere. Voting Standards and Board Recommendations Voting Item Voting Standard Treatment of Abstentions and Broker Non-Votes Board Recommendation Election of directors Plurality of votes cast, which is the greatest number of votes cast Not counted as votes cast and therefore no effect For Approval of Amendment to the Certificate of Incorporation Majority of outstanding shares of common stock Will count as a voteagainst the proposal For Auditor ratification Majority of votes cast Not counted as votes cast and therefore no effect For Advisory approval of our named executives’ compensation Majority of votes cast Not counted as votes cast and therefore no effect For Manner for Voting Proxies and Broker Non-Votes The shares represented by all valid proxies that are timely received by telephone, by Internet or by mail will be voted in the manner specified. When a proxy is received but specific choices are not indicated, the shares represented by all valid proxies received will be voted as follows. For shares held by stockholders of record, if you indicate that you will to vote as recommended by the Board or sign and return a proxy card without giving specific voting instructions, your shares will be voted in accordance with the Board’s recommendations. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” The approval of an amendment to our Certificate of Incorporation (Proposal No. 2) and the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2013 (Proposal No. 3) are matters considered routine under applicable rules. A broker or other nominee may generally vote on routine matters such as Proposals No. 2 and 3 if voting instructions are not provided by the beneficial owner. The election of directors (Proposal No. 1) and the approval, on an advisory basis, of the compensation of our named executive officers (Proposal No. 4) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters; therefore, there will be broker non-votes on Proposal No. 1 and Proposal No. 4 if voting instructions are not provided by the beneficial owner. Should any matter not described above be properly presented at the meeting, the persons named on the proxy form will vote in accordance with their judgment as permitted. Revocation of Proxies You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. Once you vote by proxy, you may vote again on a later date via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a new proxy card or vote instruction form with a later date, or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your proxy be revoked by delivering to our General Counsel at 26 Landsdowne Street, Cambridge, Massachusetts 02139-4234, a written notice of revocation prior to the Annual Meeting. Proxy Solicitation and Document Request Information Solicitation of Proxies Proxies will be solicited on behalf of the Board of Directors by mail, telephone, other electronic means or in person and we will pay the solicitation costs. Copies of proxy materials and 2012 Annual Report will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners. We are paying the costs of the solicitation of proxies. We must also pay brokerage firms, and other persons representing beneficial owners of shares held in street name, certain fees associated with: forwarding the Notice to beneficial owners, forwarding printed proxy materials by mail to beneficial owners who specifically request them, and obtaining beneficial owners’ voting instructions. In addition to soliciting proxies by mail, certain of our directors, officers, and regular employees, without additional compensation, may solicit proxies personally or by telephone, facsimile, or e-mail on our behalf. Electronic Access to Proxy Statement and Annual Report Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we intend to commence sending a Notice to our stockholders on or about May 6, 2013. All stockholders of record will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, stockholders of record may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. The Notice will provide you with instructions regarding how to: View our proxy materials for the Annual Meeting on the Internet, and Instruct us to send future proxy materials to you electronically by e-mail. Our proxy materials are available atwww.proxyvote.com as well as in the Investors/News section of our website athttp://investor.ariad.com under the heading “Proxy Materials.” We also offer our stockholders the opportunity to receive stockholder communications electronically. Choosing to receive future proxy materials electronically will save us the cost of printing and mailing documents to you and will reduce the impact that printing our Annual Meeting materials has on the environment. If you choose to receive future proxy materials electronically, you will receive an e-mail message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials electronically will remain in effect until you provide us with contrary instructions. If you have any questions about electronic delivery, please e-mail us atinvestor@ariad.com or call our investor relations office at 617-494-0400, extension 2208. Delivery of Documents to Stockholders Sharing an Address We are delivering a single copy of the Notice and, if applicable, the proxy materials to multiple stockholders who share the same address unless we have received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders will continue to be able to access and receive separate Notices, and, if requested, proxy cards. Upon written or oral request, we will promptly deliver a separate copy of the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. The Notice will provide you with instructions regarding how to request a separate copy of the Notice and, if applicable, the proxy materials. Stockholders who hold shares in “street name” may contact their brokerage firm, bank, broker-dealer, or other similar organization to request more information. If your household received a single Notice or, if applicable, a single set of proxy materials this year, but you would prefer to receive your own copy, please contact our transfer agent, Computershare, by calling their toll free number, 877-282-1168. If you would like to receive your own Notice or, if applicable, set of our proxy materials in future years, follow the instructions described below. Conversely, if you share an address with another ARIAD stockholder and together both of you would like to receive only a single Notice or, if applicable, set of proxy materials, follow these instructions: If your ARIAD shares are registered in your own name, please contact our transfer agent, Computershare, by calling them at 877-282-1168 or writing them at Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078. If a broker or other nominee holds your ARIAD shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number. Information About the 2013 Annual Meeting Admission to the Meeting Attendance at the Annual Meeting is limited to stockholders. Admission to the Annual Meeting will be on a first-come, first-served basis. Stockholders wishing to attend the meeting in person are requested to pre-register. To register for the meeting, please contact our investor relations office at 617-494-0400, extension 2208, or send an e-mail to investor@ariad.com. Registration will also be available the morning of the meeting beginning at 9:00 A.M. EDT. Each stockholder may be asked to present valid picture identification such as a driver’s license or passport and proof of stock ownership as of the Record Date. When you arrive, signs will direct you to the appropriate meeting room. The use of computers, cell phones, pagers, recording or photographic equipment is not permitted in the meeting room at the Annual Meeting. Directions to our offices can be found on our website atwww.ariad.com. Voting Results of the Annual Meeting The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of election and published by us on a Form 8-K, which we are required to file with the SEC by June 26, 2013. Once filed, the Form 8-K will be publicly accessible on the Investors/News section of our website athttp://investor.ariad.com under the heading “SEC Filings.” Viewing the Annual Meeting on the Internet If you cannot attend the Annual Meeting in person, you may view a live webcast of the Annual Meeting. If you choose to view the webcast, visit the Investors/News section of our website,http://investor.ariad.com, shortly before the meeting time and follow the instructions for accessing the webcast. If you miss the Annual Meeting, you can view a replay of the webcast athttp://investor.ariad.com until July 19, 2013. Other Information Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and officers, and persons who own more than 10% of our common stock, to file reports of securities ownership and changes in that ownership with the SEC. Officers, directors, and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely upon a review of the copies of the forms furnished to us and written representations that no other forms were required, we believe that all Section 16(a) filing requirements were timely met during the fiscal year ended December 31, 2011.2012. Future Stockholder Proposals Any stockholder proposal intended for inclusion in our proxy materials for the 20132014 annual meeting of stockholders should be sent to the Secretary and must be received by us at our offices at 26 Landsdowne Street, Cambridge, Massachusetts 02139-4234, by January 4, 2013.6, 2014. If a stockholder intends to present a proposal at the 20132014 annual meeting of stockholders without including it in our proxy materials, that stockholder must comply with the advance notice provisions of our By-Laws.Bylaws. Those provisions require that we receive the proposal at our offices at 26 Landsdowne Street, Cambridge, Massachusetts 02139-4234, attention Corporate Secretary, not earlier than January 22, 201321, 2014 and not later than February 21, 2013.20, 2014. Annual Report on Form 10-K At no charge, we are providing each person from whom a proxy is solicited a copy of, or access to, our Annual Report on Form 10-K for the year ended December 31, 2011.2012. The Annual Report is also available on the Investors/News section of our website athttp://investor.ariad.com under the heading “SEC Filings.” To receive a printed copy of the Form 10-K (excluding exhibits) at no charge, please write to Investor Relations, ARIAD Pharmaceuticals, Inc., 26 Landsdowne Street, Cambridge, Massachusetts 02139-4234 or by e-mail toinvestor@ariad.com. Exhibits will be provided upon written request and payment of an appropriate processing fee. Miscellaneous The Board, at the time of the preparation of this proxy statement, knows of no business to come before the Annual Meeting other than that referred to herein. If any other business should come before the Annual Meeting, the persons named in the enclosed proxy will have discretionary authority to vote all proxies received and not thereafter revoked in accordance with their best judgment.   By Order of the Board of Directors, Raymond T. Keane, Esq. Senior Vice President, General Counsel and Secretary April 30, 2012 Appendix A ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan, as amended (ASPROPOSEDTOBEAMENDEDONJUNE 21, 2012) ARTICLE 1. BACKGROUNDAND PURPOSE 1.1.Background. This 2006 Long-Term Incentive Plan (the “Plan”) permits the grant of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and other equity-based awards. 1.2.Purpose. The purposes of the Plan are (a) to attract, reward and retain highly competent persons as Employees, Directors, and Consultants of the Company; (b) to provide additional incentives to such Employees, Directors, and Consultants by aligning their interests with those of the Company’s shareholders; and (c) to promote the success of the business of the Company. 1.3.Eligibility. Service Providers who are Employees, Consultants determined by the Committee to be significantly responsible for the success and future growth and profitability of the Company, or Directors are eligible to be granted Awards under the Plan. However, Incentive Stock Options may be granted only to Employees. 1.4.Definitions. Capitalized terms used in the Plan and not otherwise defined herein shall have the meanings assigned to such terms in the attached Appendix. ARTICLE 2. SHARE LIMITS 2.1.Shares Subject to the Plan. (a)Share Reserve. Subject to adjustment under Section 2.3 of the Plan, Awards may be made under the Plan for up to 25,500,000 Shares plus 1,624,847 Shares previously authorized for issuance under the Company’s 2001 Stock Plan (i) that were not subject to outstanding awards on the date of the 2006 annual meeting of Company’ stockholders; or (ii) that became available for future award grants as a result of the subsequent forfeiture, lapse or expiration of awards granted pursuant to the 2001 Plan that were outstanding as of the date of the 2006 annual meeting of the Company’s stockholders. All of the available Shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options. At all times the Company will reserve and keep available a sufficient number of Shares to satisfy the requirements of all outstanding Awards made under the Plan and all other outstanding but unvested Awards made under the Plan that are to be settled in Shares. (b)Shares Counted Against Limitation. If an Award is exercised, in whole or in part, by tender or attestation of Shares under Section 5.4(b) or net exercise under Section 5.4(d), or if the Company’s tax withholding obligation is satisfied by withholding Shares under Section 10.7(b), the number of Shares deemed to have been issued under the Plan (for purposes of the limitation set forth in this Section 2.1) shall be the number of Shares that were subject to the Award or portion thereof so exercised, and not the net number of Shares actually issued upon such exercise. (c)Lapsed Awards. If an Award: (i) expires; (ii) is terminated, surrendered, or canceled without having been exercised in full; or (iii) is otherwise forfeited in whole or in part (including as a result of Shares constituting or subject to an Award being repurchased by the Company pursuant to a contractual repurchase right), then the unissued Shares that were subject to such Award and/or such surrendered, canceled, or forfeited Shares (as the case may be) shall become available for future grant or sale under the Plan (unless the Plan has terminated), subject however, in the case of Incentive Stock Options, to any limitations under the Code. (d)Substitute Awards. The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors, consultants or advisors of another company (an “Acquired Company”) in connection with a merger, consolidation or similar transaction involving such Acquired Company with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the Acquired Company. The Committee may direct that the substitute Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Any substitute Awards granted under the Plan shall not count against the share limitations set forth in Section 2.1(a) and 2.2. 2.2.Individual Share Limit. In any Tax Year, no Service Provider shall be granted Awards with respect to more than 500,000 Shares. The limit described in this Section 2.2 shall be construed and applied consistently with Section 162(m) of the Code, except that this limit shall apply to all Service Providers. (a)Awards not Settled in Shares. If an Award is to be settled in cash or any medium other than Shares, the number of Shares on which the Award is based shall count toward the individual share limit set forth in this Section 2.2. (b)Canceled Awards. Any Awards granted to a Participant that are canceled shall continue to count toward the individual share limit applicable to that Participant set forth in this Section 2.2. 2.3.Adjustments. The following provisions will apply if any extraordinary dividend or other extraordinary distribution occurs in respect of the Shares (whether in the form of cash, Shares, other securities, or other property), or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company or any similar, unusual or extraordinary corporate transaction (or event in respect of the Shares) or a sale of all or substantially all the assets of the Company occurs. The Committee will, in such manner and to such extent (if any) as it deems appropriate and equitable: (a) proportionately adjust any or all of (i) the number and type of Shares (or other securities) that thereafter may be made the subject of Awards (including the specific maximums and numbers of shares set forth elsewhere in the Plan), (ii) the number, amount and type of Shares (or other securities or property) subject to any or all outstanding Awards, (iii) the grant, purchase, or exercise price of any or all outstanding Awards, (iv) the securities, cash or other property deliverable upon exercise of any outstanding Awards or (v) the performance standards appropriate to any outstanding Awards (subject to the limitations for performance based compensation under Section 162(m) of the Code), or (b) in the case of an extraordinary dividend or other distribution, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split up, exchange, or spin off, make provision for (i) a cash payment, (ii) the substitution or exchange of any or all outstanding Awards, (iii) the cash, securities or property deliverable to the holder of any or all outstanding Awards based upon the distribution or consideration payable with respect to Shares upon or in respect of such event, (iv) all vested Options and Stock Appreciation Rights to be exercised by a date certain in connection with such event at which time these stock rights (whether or not then vested) shall terminate, provided Participants are provided advance written notice or (v) a combination of the foregoing, which may vary among Participants. The Committee shall value Awards as it deems reasonable in the event of a cash settlement and, in the case of Options, Stock Appreciation Rights or similar stock rights, may base such settlement solely upon the excess if any of the per Share amount payable upon or in respect of such event over the exercise price of the Award. The Committee’s determination with respect to any adjustments under this Section 2.3 shall be final and conclusive. The Committee may act under this Section 2.3 at any time to the extent that the Committee deems such action necessary to permit a Participant to realize the benefits intended to be conveyed with respect to the underlying Shares in the same manner as is or will be available to stockholders generally. In the case of any stock split or reverse stock split, if no action is taken by the Committee, the proportionate adjustments contemplated by Section 2.3(a) above shall nevertheless be made. ARTICLE 3. PLAN ADMINISTRATION 3.1.Administrator. The Plan shall be administered by the Committee. 3.2.Powers of the Committee. Subject to the provisions of the Plan, Applicable Law, and the specific duties delegated by the Board to the Committee, the Committee shall have the authority in its discretion: (a) to determine the Fair Market Value; (b) to select the Service Providers to whom Awards may be granted hereunder and the types of Awards to be granted to each; (c) to determine the number of Shares to be covered by each Award granted hereunder; (d) to determine whether, to what extent, and under what circumstances an Award may be settled in cash, Shares, other securities, other Awards, or other property; (e) to approve forms of Award Agreements; (f) to determine, in a manner consistent with the terms of the Plan, the terms and conditions of any Award granted hereunder, based on such factors as the Committee, in its sole discretion, shall determine; (g) to construe and interpret the terms of the Plan and Award Agreements; (h) to correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry out the purposes of the Plan; (i) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established pursuant to Section 12.1 of the Plan; (j) to authorize withholding arrangements pursuant to Section 10.7(b) of the Plan; (k) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Committee; (l) to accelerate the vesting of an Award; and (m) to make all other determinations and take all other action described in the Plan or as the Committee otherwise deems necessary or advisable for administering the Plan and effectuating its purposes. 3.3.Compliance with Applicable Law. The Committee shall administer, construe, interpret, and exercise discretion under the Plan and each Award Agreement in a manner that is consistent and in compliance with a reasonable, good faith interpretation of all Applicable Laws, and that avoids (to the extent practicable) the classification of any Award as “deferred compensation” for purposes of Section 409A of the Code, as determined by the Committee. Notwithstanding the foregoing, the failure to satisfy the requirements of Section 409A or Section 162(m) with respect to the grant of an Award under the Plan shall not affect the validity of the action of the Committee otherwise duly authorized and acting in the matter. 3.4.Effect of Committee’s Decision and Committee’s Liability. The Committee’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. Neither the Committee nor any of its members shall be liable for any act, omission, interpretation, construction, or determination made in good faith in connection with the Plan or any Award Agreement. 3.5.Delegation to Chief Executive Officer. To the extent permitted by Applicable Law, the Committee may delegate to the Chief Executive Officer the powers: (a) to designate Service Providers who are not Executive Officers as eligible to participate in the Plan; and (b) to determine the amount and type of Awards that may be granted to Service Providers who are not Executive Officers. 3.6.Awards may be Granted Separately or Together. In the Committee’s discretion, Awards may be granted alone, in addition to, or in tandem with any other Award or any award granted under another plan of the Company or an Affiliate. Awards granted in addition to or in tandem with other awards may be granted either at the same time or at different times. ARTICLE 4. VESTINGAND PERFORMANCE OBJECTIVES 4.1.General. The vesting schedule or Period of Restriction for any Award shall be specified in the Award Agreement. The criteria for vesting and for removing restrictions on any Award may include (i) performance of substantial services for the Company for a specified period; (ii) achievement of one or more Performance Objectives; or (iii) a combination of (i) and (ii), as determined by the Committee. 4.2.Period of Absence from Providing Substantial Services. Except as provided under Section 4.5 below with respect to Disability, to the extent that vesting or removal of restrictions is contingent on performance of substantial services for a specified period, a leave of absence (whether paid or unpaid) shall not count toward the required period of service unless the Award Agreement specifically provides otherwise. 4.3.Performance Objectives. (a)Possible Performance Objectives. Any Performance Objective shall relate to the Service Provider’s performance for the Company (or an Affiliate) or the Company’s (or Affiliate’s) business activities or organizational goals, and shall be sufficiently specific that a third party having knowledge of the relevant facts could determine whether the Performance Objective is achieved. The Performance Objectives with respect to any Award may be one or more of the following General Financial and/or Operational Objectives, as established by the Committee in its sole discretion: (i)General Financial Objectives: Increasing the Company’s net sales Achieving a target level of earnings (including gross earnings; earnings before certain deductions, such as interest, taxes, depreciation, or amortization; or earnings per Share) Achieving a target level of income (including net income or income before consideration of certain factors, such as overhead) or a target level of gross profits for the Company, an Affiliate, or a business unit Achieving a target return on the Company’s (or an Affiliate’s) capital, assets, or stockholders’ equity Maintaining or achieving a target level of appreciation in the price of the Shares Increasing the Company’s (or an Affiliate’s) market share to a specified target level Achieving or maintaining a Share price that meets or exceeds the performance of specified stock market indices or other benchmarks over a specified period Achieving a level of Share price, earnings, or income performance that meets or exceeds performance in comparable areas of peer companies over a specified period Achieving specified reductions in costs Achieving specified improvements in collection of outstanding accounts or specified reductions in non-performing debts (ii)Operational Objectives: Expanding one or more products into one or more new markets Acquiring a prescribed number of new customers in a line of business Achieving a prescribed level of productivity within a business unit Completing specified projects within or below the applicable budget Completing acquisitions of other businesses Expanding into other markets Achieving progress in research and development programs Achieving regulatory milestones related to development and approval of products (b)Stockholder Approval of Performance Objectives. The list of possible Performance Objectives set forth in Section 4.3(a), above, and the other material terms of Awards of Restricted Stock or Restricted Stock Units that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, shall be subject to reapproval by the Company’s stockholders at the first stockholder meeting that occurs in 2016. No Award of Restricted Stock or Restricted Stock Units that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code shall be made after that meeting unless stockholders have reapproved the list of Performance Objectives, or unless the vesting of the Award is made contingent on stockholder approval of the Performance Objectives and other material terms of such Awards. (c)Documentation of Performance Objectives. With respect to any Award, the Performance Objectives shall be set forth in writing no later than 90 days after commencement of the period to which the Performance Objective(s) relate(s) (or, if sooner, before 25% of such period has elapsed) and at a time when achievement of the Performance Objectives is substantially uncertain. Such writing shall also include the period for measuring achievement of the Performance Objectives, which shall be no greater than five consecutive years, as established by the Committee. Once established by the Committee, the Performance Objective(s) may not be changed to accelerate the settlement of an Award or to accelerate the lapse or removal of restrictions on Restricted Stock that otherwise would be due upon the attainment of the Performance Objective(s). (d)Committee Certification. Prior to settlement of any Award that is contingent on achievement of one or more Performance Objectives, the Committee shall certify in writing that the applicable Performance Objective(s) and any other material terms of the Award were in fact satisfied. For purposes of this Section 4.3(d), approved minutes of the Committee shall be adequate written certification. (e)Negative Discretion. The Committee may reduce, but may not increase, the number of Shares deliverable or the amount payable under any Award after the applicable Performance Objectives are satisfied. 4.5.Effect of Termination of Service for Death or Disability on Vesting. Except as provided to the contrary in an Award Agreement, in the event that the Participant’s Termination of Service is the result of death or Disability, a pro-rata portion of the Award that would have vested had the Participant not died or become Disabled, as applicable, as of the next following vesting date shall vest, with such pro-rata number to be calculated using a fraction, the numerator of which is the number of days the Participant remained a Service Provider since the immediately preceding vesting date, and the denominator of which is the total number of days between the immediately preceding vesting date and the next following vesting date. ARTICLE 5. STOCK OPTIONS 5.1.Terms of Option. Subject to the provisions of the Plan, the type of Option, term, exercise price, vesting schedule, and other conditions and limitations applicable to each Option shall be as determined by the Committee and shall be stated in the Award Agreement. 5.2.Type of Option. (a) Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Non-Qualified Option. (b) Neither the Company nor the Committee shall have liability to a Participant or any other party if an Option (or any part thereof) which is intended to be an Incentive Stock Option does not qualify as an Incentive Stock Option. In addition, the Committee may make an adjustment or substitution described in Section 2.3 of the Plan that causes the Option to cease to qualify as an Incentive Stock Option without the consent of the affected Participant or any other party. 5.3.Limitations. (a)Maximum Term. No Option shall have a term in excess of 10 years measured from the date the Option is granted. In the case of any Incentive Stock Option granted to a 10% Stockholder (as defined in Section 5.3(e), below), the term of such Incentive Stock Option shall not exceed five years measured from the date the Option is granted. (b)Minimum Exercise Price. Subject to Section 2.3(b) of the Plan, the exercise price per share of an Option shall not be less than 100% of the Fair Market Value per Share on the date the Option is granted. In the case of any Incentive Stock Option granted to a 10% Stockholder (as defined in Section 5.3(e), below), subject to Section 2.3(b) of the Plan, the exercise price per share of such Incentive Stock Option shall not be less than 110% of the Fair Market Value per Share on the date the Option is granted. (c)Repricing Prohibited. Except as provided in Section 2.3, the Committee shall not amend any outstanding Option to reduce its exercise price. (d)$100,000 Limit for Incentive Stock Options. Notwithstanding an Option’s designation, to the extent that Incentive Stock Options are exercisable for the first time by the Participant during any calendar year with respect to Shares whose aggregate Fair Market Value exceeds $100,000 (regardless of whether such Incentive Stock Options were granted under the Plan, the 2001 Plan, or any other plan of the Company or any Affiliate), such Options shall be treated as Non-Qualified Options. For purposes of this Section 5.3(d), Fair Market Value shall be measured as of the date the Option was granted and Incentive Stock Options shall be taken into account in the order in which they were granted consistent with Applicable Law. (e)10% Stockholder. For purposes of this Section 5.3, a “10% Stockholder” is an individual who, immediately before the date an Award is granted, owns (or is treated as owning) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or an Affiliate), determined under Section 424(d) of the Code. 5.4.Form of Consideration. The Committee shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Committee shall determine the acceptable form of consideration at the time of grant. To the extent approved by the Committee, the consideration for exercise of an Option may be paid in any one, or any combination, of the forms of consideration set forth in subsections (a), (b), (c), and (e) below. (a)Cash Equivalent. Consideration may be paid by cash, check, or other cash equivalent approved by the Committee. (b)Tender or Attestation of Shares. Consideration may be paid by the tendering of other Shares to the Company or the attestation to the ownership of the Shares that otherwise would be tendered to the Company in exchange for the Company’s reducing the number of Shares issuable upon the exercise of the Option. Shares tendered or attested to in exchange for Shares issued under the Plan must be held by the Service Provider for at least six months prior to their tender or their attestation to the Company and may not be Shares of Restricted Stock at the time they are tendered or attested to. The Committee shall determine acceptable methods for tendering or attesting to Shares to exercise an Option under the Plan and may impose such limitations and prohibitions on the use of Shares to exercise Options as it deems appropriate. For purposes of determining the amount of the Option price satisfied by tendering or attesting to Shares, such Shares shall be valued at their Fair Market Value on the date of tender or attestation, as applicable. (c)Broker-Assisted Cashless Exercise. Subject to the Committee’s approval, consideration may be paid by the Participant’s (i) irrevocable instructions to the Company to deliver the Shares issuable upon exercise of the Option promptly to a broker (acceptable to the Company) for the Participant’s account, and (ii) irrevocable instructions to the broker to sell Shares sufficient to pay the exercise price and upon such sale to deliver the exercise price to the Company. A Participant may use this form of exercise only if the exercise would not subject the Participant to liability under Section 16(b) of the Exchange Act or would be exempt pursuant to Rule 16b-3 promulgated under the Exchange Act or any other exemption from such liability. The Company shall deliver an acknowledgement to the broker upon receipt of instructions to deliver the Shares, and the Company shall deliver the Shares to such broker upon the settlement date. Upon receipt of the Shares from the Company, the broker shall deliver to the Company cash sale proceeds sufficient to cover the exercise price and any applicable withholding taxes due. Shares acquired by a cashless exercise shall be deemed to have a Fair Market Value on the Option exercise date equal to the gross sales price at which the broker sold the Shares to pay the exercise price. (d)Net Share Issuance. Subject to the Committee’s approval, to retain from the Shares otherwise issuable to the Participant upon the exercise of the Option, such number of Shares as is necessary in order for the Participant to pay the Option price as set forth in the applicable Award Agreement. For purposes of determining the amount of the Option price satisfied by netting Shares, such Shares shall be valued at their Fair Market Value on the date of exercise. (e)Other Methods. Consideration may be paid using such other methods of payment as the Committee, at its discretion, deems appropriate from time to time. 5.5.Exercise of Option. (a)Procedure for Exercise. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. An Option shall be deemed exercised when the Committee receives: (i) written or electronic notice of exercise from the person entitled to exercise the Option and (ii) full payment for the Shares (in a form permitted under Section 5.4 of the Plan) with respect to which the Option is exercised. (b)Termination of Relationship as a Service Provider. Except as otherwise provided in the Award Agreement, in the event of Termination of Service before exercise of an Option, the following rules shall apply: (i) If the Participant’s Termination of Service is for Cause, no portion of the Option may be exercised, and the Option will immediately expire upon the Termination of Service; (ii) An Option may be exercised after the Participant’s Termination of Service only to the extent that the Option was vested as of the Termination of Service; (iii) An Option may not be exercised after the expiration of the term of such Option as set forth in the Award Agreement; (iv) Unless a Participant’s Termination of Service is the result of the Participant’s death or Disability, the Participant may not exercise the vested portion of an Option more than three months after such Termination of Service; (v) If a Participant’s Termination of Service is the result of the Participant’s death or Disability, the Participant may exercise the vested portion of an Option up to 12 months after Termination of Service; and (vi) After the Participant’s death, his Beneficiary may exercise an Option only to the extent that the deceased Participant was entitled to exercise such Incentive Stock Option as of the date of his death. If the Committee determines, subsequent to a Participant’s Termination of Service but before exercise of an Option, that either before or after the Participant’s Termination of Service the Participant engaged in conduct that constitutes “Cause,” then the Participant’s right to exercise any Option is forfeited immediately. (c)Rights as a Stockholder. Shares subject to an Option shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the Option exercise date. Until such Option exercise date, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to the Option. In the event that the Company effects a split of the Shares by means of a stock dividend and the exercise price of, and number of Shares subject to, an Option are adjusted as of the date of distribution of the dividend (rather than as of the record date for such dividend), then a Participant who exercises such Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the Shares subject to the Option. No other adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued. (d)Notice of Disqualifying Disposition.If an Option is designated as an Incentive Stock Option, the Participant must give prompt notice to the Company of any disposition or other transfer of any Shares acquired under the Award Agreement if such disposition or transfer is made (a) within two years from the date of grant with respect to such Shares or (b) within one year after the transfer of such Shares to the Participant. The notice must specify the date of disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer. 5.6.Repurchase Rights. The Committee shall have the discretion to grant Options which are exercisable for unvested Shares. If the Participant ceases to be a Service Provider while holding such unvested Shares, the Company shall have the right to repurchase any or all of those unvested Shares at a price per share equal to the lower of (i) the exercise price paid per Share, or (ii) the Fair Market Value per Share at the time of repurchase. The terms upon which such repurchase right shall be exercisable by the Committee (including the period and procedure for exercise and the appropriate vesting schedule for the purchased Shares) shall be established by the Committee and set forth in the document evidencing such repurchase right. ARTICLE 6. STOCK APPRECIATION RIGHTS 6.1.Terms of Stock Appreciation Right. The term, base amount, vesting schedule, and other conditions and limitations applicable to each Stock Appreciation Right shall be as determined by the Committee and shall be stated in the Award Agreement. Except as otherwise provided by the Committee, all Awards of Stock Appreciation Rights shall be settled in Shares issuable upon the exercise of the Stock Appreciation Right. Except as provided in Section 2.3, the Committee shall not amend any outstanding Stock Appreciation Right to reduce its base amount. 6.2.Exercise of Stock Appreciation Right. (a)Procedure for Exercise. Any Stock Appreciation Right granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. A Stock Appreciation Right shall be deemed exercised when the Committee receives written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Stock Appreciation Right. (b)Termination of Relationship as a Service Provider. Following a Participant’s Termination of Service, the Participant (or the Participant’s Beneficiary, in the case of Termination of Service due to death) may exercise his or her Stock Appreciation Right within such period of time as is specified in the Award Agreement to the extent that the Stock Appreciation Right is vested as of the Termination of Service. In the absence of a specified time in the Award Agreement, the Stock Appreciation Right shall remain exercisable for three months following the Participant’s Termination of Service for any reason other than Disability or death, and for 12 months after the Participant’s Termination of Service on account of Disability or death. However, if the Participant’s Termination of Service is for Cause, no portion of the Stock Appreciation Right may be exercised, and the Stock Appreciation Right will immediately expire upon the Termination of Service. If the Committee determines, subsequent to a Participant’s Termination of Service but before exercise of a Stock Appreciation Right, that either before or after the Participant’s Termination of Service that the Participant engaged in conduct that constitutes “Cause,” then the Participant’s right to exercise any Stock Appreciation Right is forfeited immediately. (c)Rights as a Stockholder. Shares subject to a Stock Appreciation Right shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the date the Stock Appreciation Right is exercised. Until such date, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to the Stock Appreciation Right. If the Company effects a split of the Shares by means of a stock dividend and the exercise price of, and number of Shares subject to, a Stock Appreciation Right are adjusted as of the date of distribution of the dividend (rather than as of the record date for such dividend), then a Participant who exercises such Stock Appreciation Right between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the Shares subject to the Stock Appreciation Right. No other adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued. ARTICLE 7. RESTRICTED STOCK 7.1.Terms of Restricted Stock. Subject to the provisions of the Plan, the Period of Restriction, the number of Shares granted, and other conditions and limitations applicable to each Award of Restricted Stock shall be as determined by the Committee and shall be stated in the Award Agreement. Unless the Committee determines otherwise, Shares of Restricted Stock shall be held by the Company as escrow agent until the restrictions on such Shares have lapsed. 7.2.Transferability. Except as provided in this Article 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. 7.3.Other Restrictions. The Committee, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate. 7.4.Removal of Restrictions. Except as otherwise provided in this Article 7, and subject to Section 10.5 of the Plan, Shares of Restricted Stock covered by an Award of Restricted Stock made under the Plan shall be released from escrow, and shall become fully transferable, as soon as practicable after the Period of Restriction ends, and in any event no later than 2 1/2 months after the end of the Tax Year in which the Period of Restriction ends. 7.5.Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement. 7.6.Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. (a) If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions (and shall therefore be forfeitable to the same extent) as the Shares of Restricted Stock with respect to which they were paid. (b) If any such dividends or distributions are paid in cash, the Award Agreement may specify that the cash payments shall be subject to the same restrictions as the related Restricted Stock, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Shares of Restricted Stock vest or are forfeited. Alternatively, the Award Agreement may specify that the dividend equivalents or other payments shall be unrestricted, in which case they shall be paid as soon as practicable after the dividend or distribution date. In no event shall any cash dividend or distribution be paid later than 2 1/2 months after the Tax Year in which the dividend or distribution becomes nonforfeitable. 7.7.Right of Repurchase of Restricted Stock. If, with respect to any Award of Restricted Stock, (a) a Participant’s Termination of Service occurs before the end of the Period of Restriction, (b) any Performance Objectives are not achieved by the end of the period for measuring such Performance Objectives or (c) the Participant has engaged in conduct either before or after Termination of Service that constitutes Cause, then the Company shall have the right to repurchase forfeitable Shares of Restricted Stock from the Participant at their original issuance price (or to require forfeiture of such Shares if issued at no cost). ARTICLE 8. RESTRICTED STOCK UNITS 8.1.Terms of Restricted Stock Units. Subject to the provisions of the Plan, the Period of Restriction, number of underlying Shares, and other conditions and limitations applicable to each Award of Restricted Stock Units shall be as determined by the Committee and shall be stated in the Award Agreement. 8.2.Settlement of Restricted Stock Units. Subject to Section 10.5 of the Plan, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of the underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Period of Restriction, and in any event no later than 2 1/2 months after the end of the Tax Year in which the Period of Restriction ends. 8.3.Dividend and Other Distribution Equivalents. The Committee is authorized to grant to holders of Restricted Stock Units the right to receive payments equivalent to dividends or other distributions with respect to Shares underlying Awards of Restricted Stock Units. The Award Agreement may specify that the dividend equivalents or other distributions shall be subject to the same restrictions as the related Restricted Stock Units, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Restricted Stock Units are paid or forfeited. Alternatively, the Award Agreement may specify that the dividend equivalents or other distributions shall be unrestricted, in which case they shall be paid on the dividend or distribution payment date for the underlying Shares, or as soon as practicable thereafter. In no event shall any unrestricted dividend equivalent or other distribution be paid later than 2 1/2 months after the Tax Year in which the record date for the dividend or distribution occurs. 8.4.Deferral Election. Notwithstanding anything to the contrary in Sections 8.2 or 8.3, a Participant may elect in accordance with the terms of the Award Agreement and Section 409A of the Code to defer receipt of all or any portion of the Shares or other property otherwise issuable to the Participant pursuant to a Restricted Stock Unit Award to the extent permitted by the Committee. 8.5.Forfeiture. If, with respect to any Award, (a) a Participant’s Termination of Service occurs before the end of the Period of Restriction, (b) any Performance Objectives are not achieved by the end of the period for measuring such Performance Objectives or (c) the Participant has engaged in conduct either before or after Termination of Service that constitutes Cause, then the Restricted Stock Units granted pursuant to such Award shall be forfeited and the Company (and any Affiliate) shall have no further obligation. ARTICLE 9. OTHER EQUITY-BASED AWARDS 9.1.Other Equity-Based Awards. The Committee shall have the right to grant other Awards based upon or payable in Shares having such terms and conditions as the Committee may determine, including deferred stock units, the grant of Shares upon the achievement of a Performance Objective and the grant of securities convertible into Shares. ARTICLE 10. ADDITIONAL TERMSOF AWARDS 10.1.No Rights to Awards. No Service Provider shall have any claim to be granted any Award under the Plan, and the Company is not obligated to extend uniform treatment to Participants or Beneficiaries under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant. 10.2.No Effect on Employment or Service. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company; nor shall they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without Cause, to the extent permitted by Applicable Laws and any enforceable agreement between the Service Provider and the Company. 10.3.No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. 10.4.Transferability of Awards. Unless otherwise determined by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. Subject to the approval of the Committee in its sole discretion, Non-Qualified Options may be transferable to members of the immediate family of the Participant and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only stockholders. “Members of the immediate family” means the Participant’s spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. To the extent that any Award is transferable, such Award shall contain such additional terms and conditions as the Committee deems appropriate. 10.5.Conditions On Delivery of Shares and Lapsing of Restrictions. The Company shall not be obligated to deliver any Shares pursuant to the Plan or to remove restrictions from Shares previously delivered under the Plan until (a) all conditions of the Award have been met or removed to the satisfaction of the Committee, (b) subject to approval of the Company’s counsel, all other legal matters (including any Applicable Laws) in connection with the issuance and delivery of such Shares have been satisfied, and (c) the Participant has executed and delivered to the Company such representations or agreements as the Committee may consider appropriate to satisfy the requirements of Applicable Laws. 10.6.Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance or sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 10.7.Withholding. (a)Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to the grant, exercise, vesting, or settlement of an Award, the Company shall have the power and the right to deduct or withhold, or to require a Participant or Beneficiary to remit to the Company, an amount sufficient to satisfy any federal, state, and local taxes (including the Participant’s FICA obligation) that the Company determines is required to be withheld to comply with Applicable Laws. The Participant or Beneficiary shall remain responsible at all times for paying any federal, state, and local income or employment tax due with respect to any Award, and the Company shall not be liable for any interest or penalty that a Participant or Beneficiary incurs by failing to make timely payments of tax. (b)Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant or Beneficiary to satisfy such tax withholding obligation, in whole or in part, by (i) electing to have the Company withhold otherwise deliverable Shares, or (ii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required by Applicable Law to be withheld. The Fair Market Value of the Shares to be withheld or delivered, or with respect to which restrictions are removed, shall be determined as of the date that the taxes are required to be withheld. 10.8.Other Provisions in Award Agreements. In addition to the provisions described in the Plan, any Award Agreement may include such other provisions (whether or not applicable to the Award of any other Participant) as the Committee determines appropriate, including provisions to comply with Applicable Laws. 10.9.Section 16 of the Exchange Act. It is the intent of the Company that Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the Awards, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. The Company shall have no liability to any Participant or other person for Section 16 consequences of Awards or events in connection with Awards if an Award or related event does not so qualify. 10.10.Not Benefit Plan Compensation. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s compensation for purposes of determining the Participant’s benefits under any other employee benefit plans or arrangements provided by the Company or an Affiliate, except where the Committee expressly provides otherwise in writing. ARTICLE 11. TERM, AMENDMENT,AND TERMINATIONOF PLAN 11.1.Term of Plan. The Plan shall become effective on the Effective Date. 11.2.Termination. The Plan shall terminate upon the earliest to occur of (i) April 28, 2016; (ii) the date on which all Shares available for issuance under the Plan have been issued as fully vested Shares; or (iii) the date determined by the Board pursuant to its authority under Section 11.3 of the Plan. 11.3.Amendment. The Board or the Committee may at any time amend, alter, suspend, or terminate the Plan, without the consent of the Participants or Beneficiaries. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws. In addition, the Company shall not allow either (a) the cancellation of outstanding Options or Stock Appreciation Rights and the grant in substitution therefore of any new Award having a lower exercise or base price or (b) the amendment of outstanding Options or Stock Appreciation Rights to reduce the exercise or base price thereof without stockholder approval. 11.4.Effect of Amendment or Termination. Except as provided in Section 11.5 of the Plan, no amendment, alteration, suspension, or termination of the Plan shall impair the rights of any Participant or Beneficiary under an outstanding Award, unless required to comply with an Applicable Law or mutually agreed otherwise between the Participant and the Committee; any such agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 11.5.Adjustments of Awards Upon the Occurrence of Unusual or Nonrecurring Events. The Committee may, in its sole discretion (but subject to the limitations and conditions expressly stated in the Plan, such as the limitations on adjustment of Performance Objectives), adjust the terms and conditions of Awards during the pendency or in recognition of (a) unusual or nonrecurring events affecting the Company or an Affiliate (such as a capital adjustment, reorganization, or merger) or the financial statements of the Company or an Affiliate, or (b) any changes in Applicable Laws or accounting principles. By way of example, the power to adjust Awards shall include the power to suspend the exercise of any Option or Stock Appreciation Right. ARTICLE 12. MISCELLANEOUS 12.1.Authorization of Sub-Plans. The Committee may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities, and/or tax laws of various jurisdictions. The Committee shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations as the Committee deems necessary or desirable, and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Committee shall deem necessary or desirable. All sub-plans adopted by the Committee shall be deemed to be part of the Plan, but each sub-plan shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any sub-plans to Participants in any jurisdiction which is not the subject of such sub-plan. 12.2.Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under any state’s applicable principles of conflicts of laws. 12.3.Committee Manner of Action. Unless otherwise provided in the bylaws of the Company or the charter of the Committee: (a) a majority of the members of a Committee shall constitute a quorum, and (b) the vote of a majority of the members present who are qualified to act on a question assuming the presence of a quorum or the unanimous written consent of the members of the Committee shall constitute action by the Committee. The Committee may delegate the performance of ministerial functions in connection with the Plan to such person or persons as the Committee may select. 12.4.Expenses. The costs of administering the Plan shall be paid by the Company. 12.5.Severability. If any provision of the Plan or any Award Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person or Award, such provision shall be construed or deemed to be amended to resolve the applicable infirmity, unless the Committee determines that it cannot be so construed or deemed amended without materially altering the Plan or the Award, in which case such provision shall be stricken as to such jurisdiction, person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. 12.6.Construction. Unless the contrary is clearly indicated by the context, (a) the use of the masculine gender shall also include within its meaning the feminine and vice versa; (b) the use of the singular shall also include within its meaning the plural and vice versa; and (c) the word “include” shall mean to include, but not to be limited to. 12.7.No Trust or Fund Created. Neither the Plan nor any Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company (or an Affiliate) and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company (or an Affiliate) pursuant to an Award, such right shall be no more secure than the right of any unsecured general creditor of the Company (or the Affiliate, as applicable). 12.8.Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 12.9Complete Statement of Plan. This document is a complete statement of the Plan. APPENDIX As used in the Plan, the following terms shall have the following meanings: “2001 Plan” means the ARIAD Pharmaceuticals, Inc. 2001 Stock Plan, as Amended and Restated (Effective September 27, 2005). “Affiliate” means an entity in which the Company has a direct or indirect equity interest, whether now or hereafter existing; provided however, that with respect to an Incentive Stock Option, an Affiliate means a “parent corporation” (as defined in Section 424(e) of the Code) or a “subsidiary corporation” (as defined in Section 424(f) of the Code) with respect to the Company, whether now or hereafter existing. “Applicable Laws” means the requirements relating to, connected with, or otherwise implicated by the administration of long-term incentive plans under applicable state corporation laws, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, or other equity-based awards. “Award Agreement” means a written agreement setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement shall be subject to the terms and conditions of the Plan. “Beneficiary” means the personal representative of the Participant’s estate or the person(s) to whom an Award is transferred pursuant to the Participant’s will or in accordance with the laws of descent or distribution. “Board” means the board of directors of the Company. “Cause”, as used in connection with the termination of a Participant’s services, means (1) with respect to any Participant employed under a written employment agreement with the Company which agreement includes a definition of “cause,” “cause” as defined in that agreement or, if that agreement contains no such definition, a material breach by the Participant of that agreement, or (2) with respect to any other Participant, any of the following: (a) the failure of the Participant to perform any of his or her material duties to the Company, including, without limitation, breach of the Company’s code of ethics, conflict of interest or employment policies; (b) the Participant’s conviction (including any pleas of guilty or nolo contendre) of any felony or other crime that the Committee reasonably determines adversely impacts the Participant’s ability to continue performing services with the Company; (c) any act or omission to act by the Participant (other than the Participant’s resignation or retirement) which would reasonably be likely to have the effect of injuring the reputation, business or business relationships of the Company or impairing the Participant’s ability to perform services for the Company; (d) acts of theft, embezzlement, fraud, dishonesty, misrepresentation or falsification of documents or records involving the Company; (e) violation of any law or administrative regulation related to the Company’s business and use of the Company’s facilities or premises to conduct unlawful or unauthorized activities or transactions and (f) conduct that could result in publicity reflecting unfavorably on the Company in a material way; (g) the Participant’s improper use of the Company’s confidential or proprietary information; or (h) a breach of the terms of any employment agreement, confidentiality agreement, non-competition agreement and non-solicitation agreement or any other agreement between the Participant and the Company , after giving effect to the notification provisions, if any, and the mechanisms to remedy or cure a breach, if appropriate, as described in any such agreement. The Committee shall determine whether conduct constituting “Cause” has occurred for purposes of the Plan. For purposes of this definition, the term “Company” includes any Affiliate of the Company and “Cause” is not limited to events that have occurred before a Participant’s Termination of Service, nor is it necessary that the Committee’s finding of “Cause” occur prior to Termination of Service. “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein shall be a reference to any regulations or other guidance of general applicability promulgated under such section, and shall further be a reference to any successor or amended section of such section of the Code that is so referred to and any regulations thereunder. “Committee” means the Compensation Committee of the Board. “Company” means ARIAD Pharmaceuticals, Inc., a Delaware corporation, or any successor thereto. “Consultant” means any natural person, including an advisor, engaged by the Company or an Affiliate to render services (other than in connection with the offer or sale of securities in a capital raising transaction or to promote or maintain a market for securities) to such entity. “Director” means a member of the Board. “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code. The Committee shall determine both whether Disability has occurred and the date of its occurrence. If requested, a Participant shall be examined by a physician selected or approved by the Committee. “Effective Date”means April 28, 2006; provided that the Plan and any Awards granted hereunder shall be null and void if the Plan is not approved by the Company’s stockholders before any compensation under the Plan is paid. “Employee” means any person who is an employee, as defined in Section 3401(c) of the Code, of the Company or any Affiliate or any other entity the employees of which are permitted to receive Incentive Stock Options under the Code. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Executive Officer” means an individual who is an “executive officer” of the Company (as defined by Rule 3b-7 under the Exchange Act) or a “covered employee” under Section 162(m) of the Code. “Fair Market Value” means, with respect to Shares as of any date (except in the case of a cashless exercise pursuant to Section 5.4(c)) the closing sale price per share of such Shares (or the closing bid, if no sales were reported) as reported in The Wall Street Journal or, if not reported therein, such other source as the Committee deems reliable. “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. “Non-Qualified Option” means an Option not intended to qualify as an Incentive Stock Option. “Option” means an option to purchase Shares that is granted pursuant to Article 5 of the Plan. An Option may be an Incentive Stock Option or a Non-Qualified Option. “Participant” means the holder of an outstanding Award granted under the Plan. “Performance Objective” means a performance objective or goal that must be achieved before an Award, or a feature of an Award, becomes nonforfeitable, as described in Section 4.3 of the Plan. “Period of Restriction” means the period during which Restricted Stock, the remuneration underlying Restricted Stock Units, or any other feature of an Award is subject to a substantial risk of forfeiture. A Period of Restriction shall be deemed to end when the applicable Award ceases to be subject to a substantial risk of forfeiture. “Plan”means this 2006 Long-Term Incentive Plan. “Restricted Stock” means Shares that, during a Period of Restriction, are subject to restrictions as described in Article 7 of the Plan. “Restricted Stock Unit” means an Award that entitles the recipient to receive Shares or cash after a Period of Restriction, as described in Article 8 of the Plan. “Service Provider”means an Employee, Director, or Consultant. “Share” means a share of the Company’s common stock, $.001 par value per share. “Stock Appreciation Right” means an Award that entitles the recipient to receive, upon exercise, the excess of (i) the Fair Market Value of a Share on the date the Award is exercised, over (ii) a base amount specified by the Committee which shall not be less than the Fair Market Value of a Share on the date the Award is granted, as described in Article 6 of the Plan. “Tax Year” means the Company’s taxable year. If an Award is granted by an Affiliate, such Affiliate’s taxable year shall apply instead of the Company’s taxable year. “Termination of Service” means the date an individual ceases to be a Service Provider in any capacity. Awards under the Plan shall not be affected by the change of a Participant’s status with in or among the Company and any Affiliates, so long as the Participant remains a Service Provider. Unless the Committee or a Company policy provides otherwise, a leave of absence authorized by the Company or the Committee (including sick leave or military leave) from which return to service is not guaranteed by statute or contract shall be characterized as a Termination of Service if the individual does not return to service within three months; such Termination of Service shall be effective as of the first day that is more than three months after the beginning of the period of leave. If the ability to return to service upon the expiration of such leave is guaranteed by statute or contract, but the individual does not return, the leave shall be characterized as a Termination of Service as of a date established by the Committee or Company policy. For purposes of the Plan and any Award hereunder, if an entity ceases to be an Affiliate, Termination of Service shall be deemed to have occurred with respect to each Participant in respect of such Affiliate who does not continue as a Service Provider in respect of the Company or another Affiliate after such giving effect to such Affiliate’s change in status.29, 2013   ARIAD PHARMACEUTICALS, INC. VOTE BY INTERNET - www.proxyvote.com 26 LANDSDOWNE STREET CAMBRIDGE, MA 02139    VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. EDT on June 20, 2012.19, 2013. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.        ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS      If you would like to reduce the costs incurred by ARIAD Pharmaceuticals, Inc. in mailing proxy materials, you can consent to receiving all future notices of availability of proxy materials or proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.        VOTE BY PHONE - 1-800-690-6903      Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. EDT on June 20, 2012.19, 2013. Have your proxy card in hand when you call and then follow the instructions.        VOTE BY MAIL      Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.       TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:       M46362-P25936M59270-P40158     KEEP THIS PORTION FOR YOUR  RECORDS — — — — — — — — — — — — — —  — — — — — — — — — — — — — — — — — — — —  — — — — — —         DETACH AND RETURN THIS PORTION ONLY     THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.           ARIAD PHARMACEUTICALS, INC.   For All   Withhold   All     For All Except       To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.                       The Board of Directors recommends you vote FOR the following proposal:                                 1.     Election of Directors       ¨     ¨     ¨                       Nominees                                       01)      Harvey J. Berger, M.D.Athanase Lavidas, Ph.D                                     02)      Wayne WilsonMassimo Radaelli, Ph.D.                                       The Board of Directors recommends you vote FOR proposals 2, 3 and 4:         For   Against   Abstain           2.       To approve an amendment to our 2006 Long-Term Incentive PlanCertificate of Incorporation to increase the number of authorized shares of common stock available for issuance under the plan by 14,000,000from 240 million to 450 million shares.   ¨   ¨   ¨           3.   To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2012.2013.   ¨   ¨   ¨           4.   To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in the proxy statement.   ¨   ¨   ¨           In their discretion, the proxies are authorized to vote on such other business as may properly come before the meeting or any adjournment thereof.                                                       For address change/comments, mark here. (see reverse for instructions)         ¨                           Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.                                                                                                                     Signature [PLEASE SIGN WITHIN BOX]   Date                       Signature (Joint Owners)   Date                 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Shareholder Letter are available atwww.proxyvote.com as well asproxy.ariad.com.       — — — — — — — — — — — — — —  — — — — — — — — — — — — — — — — — — — —  — — — — — —       M46363-P25936M59271-P40158                       ARIAD PHARMACEUTICALS, INC.                       26 Landsdowne Street                   Cambridge, Massachusetts 02139                   ANNUAL MEETING OF STOCKHOLDERS JUNE 21, 201220, 2013                     PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS                 The undersigned, revoking all prior proxies, hereby appoints Harvey J. Berger, M.D. and Raymond T. Keane, Esq., or either of them, as Proxies, with full power of substitution of each and authorizes them to represent and to vote all shares of the Common Stock of ARIAD Pharmaceuticals, Inc. (the “Company”) that the undersigned are entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Company’s offices at 26 Landsdowne Street, Cambridge, Massachusetts 02139 on Thursday, June 21, 201220, 2013 at 10:00 a.m., EDT, and at any adjournment or postponement thereof. The undersigned hereby directs the Proxies to vote in accordance with their judgment on any matters which may properly come before the Annual Meeting, all as indicated in the Notice of Annual Meeting of Stockholders, receipt of which is hereby acknowledged, and to vote on the matters set forth on the reverse side hereof, as specified by the undersigned.             This proxy, when properly executed, will be voted as directed herein by the undersigned stockholder(s). If no direction is given, this proxy will be voted “FOR” proposals 1, 2, 3 and 4.                             Address Changes/Comments:                                                     (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)                           Continued and to be marked, dated and signed on reverse side