June 16, 1999
RECOMMENDATION: BUY

ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA)

ARIAD Presents Exciting Animal Data at 2^nd Annual American Society of Gene Therapy Conference; Reiterate BUY Recommendation

Exchange Symbol.....................ARIA (NASDAQ)
Price of Common Stock (06/15/99)............$1.28
30-Day Average Trading Volume.............123,818
Shares Outstanding.....................22 million
52-Week High/Low......................$4.25/$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

Last Friday, ARIA presented exciting new data in an animal model for diabetes. Using a novel gene therapy technology developed in conjunction with Memorial Sloan-Kettering Cancer Center and the University of Geneva, ARIA demonstrated the ability to control the production of insulin, and several other secreted proteins, in mice using a novel small-molecule drug. While still early in development, we believe this represents a large potential opportunity for ARIA both short-term, in its ability to partner the technology, and longer-term, through the multiple therapeutic applications this technology opens up. We continue to believe that ARIA stock is undervalued at current prices and are reiterating our BUY recommendation for those investors tolerant of the risks associated with micro-cap equity investments.

The Background: Unlike ARIA’s ARGENT technology, which uses an oral dimerizer drug to control the production of proteins at the gene transcription stage, this newly presented technology demonstrated the ability to control the release of secreted proteins already produced and stored within the cell. In the case of insulin, ARIA scientists engineered cells to produce insulin bound to a specific inert protein that prevented the insulin from being secreted from a storage compartment within the cell. These engineered cells were injected into diabetic mice that lack the ability to break down blood sugar. These hyperglycemic mice were then given ARIA’s small-molecule drug that cleaves the insulin from the binding protein and allows secretion of insulin into the bloodstream. Within thirty minutes, in response to the newly released insulin, the animals’ blood glucose levels began to fall, and within two hours, the mice were able to achieve normal glucose levels.

The Advantages: While it is still early stage, this technology appears to enable control of protein release much more quickly than with the ARGENT system. This is particularly important for those proteins that require frequent dosing by injection. If successful in humans, this technology could require infrequent gene therapy injections, and then dosing with an oral or sublingual drug perhaps several times per day. ARIA is now optimizing the delivery system used to deliver the genes and hopes to test the technology in larger animals by the end of the year.

The Implications: Although this new technology should be applicable to multiple types of secreted proteins, insulin control, we believe, would offer ARIA the largest commercial opportunity. With an estimated population in the U.S. of over 15 million diabetics, a technology such as this could easily open up licensing and partnering doors for ARIA and provide an additional source of funding to the company.

Conclusion: We continue to be impressed with the depth of ARIA’s technology. In addition, due to its multi-million deal with Hoechst-Marion Roussel in drug development, its involvement in the Hoechst-ARIAD Genomic Center, its ARGENT technology that we believe ARIA is close to partnering, and this additional gene therapy technology, we feel ARIA presents a unique investment opportunity at this time.

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 SmallCapsOnline LLC for the purchase or sale of any securities. SmallCapsOnline LLC and/or its affiliates have performed investment banking, consulting or other services for ARIA and may solicit investment banking, consulting or other business from any company mentioned in this report. SmallCapsOnline LLC or its affiliates or persons associated with SmallCapsOnline LLC or its affiliates 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 SmallCapsOnline LLC website at www.SmallCapsOnline.com. This material or any portion thereof, may not be reproduced without prior permission from SmallCapsOnline LLC. SmallCapsOnline 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 SmallCapsOnline LLC. All rights reserved.