May 20, 1999
RECOMMENDATION: BUY

ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA)

Exchange Symbol.....................ARIA (NASDAQ)
Price of Common Stock (05/19/99)............$1.44
30-Day Average Trading Volume.............101,000
Shares Outstanding.....................22 million
52-Week High/Low......................$4.50/$1.25

Address......................26 Landsdowne Street
.............................Cambridge, MA  02139
Telephone..........................(617) 494-0400
Chairman & CEO.............Harvey J. Berger, M.D.
EVP & CFO.........................Jay R. LaMarche

Summary Investment Considerations

ARIAD Pharmaceuticals has successfully created an integrated program of drug discovery focused on the identification of novel, orally delivered pharmaceuticals based on signal transduction (internal cell communication) technology. ARIA’s "gene-to-drug" platform encompasses its ability to identify and validate new molecular targets (functional genomics), to rationally design drugs that interact with these targets and then to optimize and evaluate the pharmaceutical properties of these drugs (medicinal chemistry and pharmacology). ARIA’s product programs are focused in two areas: 1) the development of small-molecule drugs that block signal transduction pathways that play a critical role in diseases such as osteoporosis, allergy/asthma and immune-related diseases, and 2) the development of orally administered drugs that control the production of therapeutic proteins such as EPO, Human Growth Hormone, Alpha Interferon or Beta Interferon.

Like many small-cap biotechnology companies, ARIA stock is currently trading near its 52-week low. Despite a multi-million dollar joint venture with Hoechst Marion Roussel (HMR), called the Hoechst-ARIAD Genomics Center, and innovative gene therapy technology called ARGENT, the stock has sold-off as investors have become impatient with small-cap healthcare technology companies in general. We believe ARIA has a unique collection of technology and product assets, and represents a unique investment opportunity at this time. We are initiating coverage with a BUY rating, and recommend purchase of ARIA shares for those investors tolerant of the risks associated with micro-cap and small-cap equity investments.

I. Broad, Proprietary Platform Technology; First Clinical Trial Underway

• ARIA has a broad intellectual property portfolio based on certain signal transduction pathways that it has leveraged into its partnership with HMR and into the development of a lead compound to treat osteoporosis.
• The advancement of ARIA’s ARGENT system, or the ability to turn "on and off" inserted genes by means of small molecule drugs, has already resulted in the successful completion of a Phase I clinical trial to treat Graft-versus-Host Disease (GvHD) in patients undergoing allogeneic bone marrow transplants. We believe ARGENT will be the driving force behind partnerships signed during 1999.
• In animal studies, ARGENT has demonstrated efficacy in successfully regulating a number of different protein genes, the most notable of which is erythropoietin (EPO). Due to these successes and following discussions with management, we believe ARIA will sign multiple partnerships over the next 12 months with biotechnology and pharmaceutical companies interested in specific therapeutic proteins.

II. Strong Corporate Partner in Hoechst Marion Roussel (HMR)

• Since 1995, HMR and ARIA have been collaborating to develop compounds to treat osteoporosis. ARIA has received several milestone payments from HMR from its osteoporosis program and we would expect to hear more from these programs in the coming years.
• In 1997, HMR and ARIA formed the Hoechst-ARIAD Genomics Center, a five-year, 50/50 joint venture to discover novel molecular targets and therapeutic proteins. Hoechst has already invested approximately $40 million in the joint venture and is committed to investing another $50 million over the next 3 years. ARIA has rights to 50% of the validated targets and proteins that emerge from the JV.

III. Coming Milestones — BUYing Opportunity

• Clinical: During 1999, we expect ARIA to commence a Phase II trial for its GvHD product and to hear of advancements in its osteoporosis and other product programs.
• Partnerships: We are expecting new partnerships during 1999 that should not only strengthen ARIA’s financial and strategic position but could also lead to significant stock appreciation.

Risk Considerations

This section of the document is provided to remind potential investors to undertake a prudent level of due diligence prior to making an investment in the securities of ARIAD Pharmaceuticals, Inc. For a complete description of risks and uncertainties to ARIA’s business, see the "Risk Factors" section in ARIA’s SEC filings, which can be accessed directly from the SEC Edgar filings at www.SEC.gov on the Internet. Other potential risks include:

• Market risk: Like many small-cap and micro-cap stocks, ARIA shares are trading near their 52-week low. Investors should consider technical risks common to many small-cap or micro-cap stock investments, including liquidity levels, small float, risk of dilution, dependence upon key personnel, dependence upon single products or technologies, and the strength of competitors that may be larger, better capitalized and hold dominant market positions.
• Business risk: ARIA has limited experience in the commercialization of pharmaceutical products. Many of its products are in the early stages of development. Additionally, ARIA intends to license rights to some of its products to other companies. There can be no assurance that these licensing agreements will be completed, or that the market will accept any products under development.
• Regulatory risk: There is no guarantee that future ARIA products will be approved by the US FDA or international regulatory bodies for marketing in the US or abroad.
• Competitive risk: The biotechnology industry is extremely competitive, in particular because of its large market potential. Many companies are developing products for the therapeutic indications targeted by ARIA.

Sources for Additional Information

The following are website addresses offering related information, and links to other sources of information.

www.ariad.com ARIAD’s corporate website

www.hoechst.com Hoecsht Marion Roussel corporate website

www.SmallCapsOnline.com SmallCaps Online’s site for company information and research

www.FDA.gov US Food and Drug Administration homepage

www.sec.gov US Securities and Exchange Commission, with links to EDGAR filings

The information in this report has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by SmallCaps Online LLC for the purchase or sale of any securities. SmallCaps Online LLC has performed investment banking, consulting or other services for or may solicit investment banking, consulting or other business from, AMBI Inc. SmallCaps Online LLC or persons associated with SmallCaps Online LLC may at anytime be long or short any of the securities referred to herein and may make purchases or sales thereof while this report is in circulation or posted on the SmallCaps Online LLC website at www.SmallCapsOnline.com. This material, or any portion thereof, may not be reproduced without prior permission from SmallCaps Online LLC. SmallCaps Online LLC is not responsible for the contents of this document that is intended for electronic transmission and could be thus subjected to tampering or alteration. Copyright © 1999 by SmallCaps Online LLC. All rights reserved.