<PAGE>
                                                                    Exhibit 10.1


                                 ALKERMES, INC.

                           1998 EQUITY INCENTIVE PLAN

1.   Purpose

          The purpose of the Alkermes, Inc. 1998 Equity Incentive Plan (the
"PLAN") is to attract and retain key employees and consultants of the Company
and its Affiliates, to provide an incentive for them to achieve long-range
performance goals, and to enable them to participate in the long-term growth of
the Company by granting Awards with respect to the Company's Common Stock.
Certain capitalized terms used herein are defined in Section 8 below.

2.   Administration

          The Plan shall be administered by the Committee. The Committee shall
select the Participants to receive Awards and shall determine the terms and
conditions of the Awards. The Committee shall have authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time consider advisable, and to
interpret the provisions of the Plan. The Committee's decisions shall be final
and binding.

3.   Eligibility

          All employees and consultants of the Company or any Affiliate capable
of contributing significantly to the successful performance of the Company,
other than a person who has irrevocably elected not to be eligible, are eligible
to be Participants in the Plan. Incentive Stock Options were granted only to
persons eligible to receive such Options under the Code.

4.   Stock Available for Awards

          (a)  Amount. Subject to adjustment under subsection (b), Awards may be
made under the Plan for up to 591,487 shares of Common Stock, of which shares,
Options to purchase 119,474 shares of Common Stock and 53,327 shares of
Restricted Stock were awarded prior to the assumption of the Plan, leaving
418,686 shares of Common Stock available for Awards. If any Award expires or is
terminated unexercised or is forfeited or settled in a manner that results in
fewer shares outstanding than were awarded, the shares subject to such Award, to
the extent of such expiration, termination, forfeiture or decrease, shall again
be available for award under the Plan. Common Stock issued through the
assumption or substitution of outstanding grants from an acquired company shall
not reduce the shares available for Awards under the Plan. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.

          (b)  Adjustment. In the event that the Committee determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of shares or
other transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits intended to be provided by the Plan, then the
Committee (subject in the case of Incentive Stock Options to any limitation
required under the Code) shall equitably adjust any or all of (i) the number and
kind of shares in respect of

<PAGE>

which Awards may be made under the Plan, (ii) the number and kind of shares
subject to outstanding Awards, (iii) the exercise price with respect to any of
the foregoing, provided that the number of shares subject to any Award shall
always be a whole number, and (iv) if considered appropriate, the Committee may
make provision for a cash payment with respect to an outstanding Award; provided
that in the case (i) or (ii) above the number of shares subject to any Award
shall always be a whole number.

5.   Stock Options

          (a)  Grant of Options. Subject to the provisions of the Plan, after
the assumption of the Plan by the Company the Committee may grant options
("OPTIONS") to purchase shares of Common Stock not intended to comply with the
requirements of Section 422 of the Code or any successor provision and any
regulations thereunder ("NONSTATUTORY STOCK OPTIONS"). The Committee shall
determine the number of shares subject to each Option and the exercise price
therefor. Prior to the date of the assumption of the Plan by the Company,
Options to purchase shares of Common Stock complying with the requirements of
Section 422 of the Code or any successor provision and any regulations
thereunder ("INCENTIVE STOCK OPTIONS") were granted as authorized under the Plan
and such granted Incentive Stock Options remain in full force and effect.
Incentive Stock Options had or shall have an exercise price of at least 100% of
the Fair Market Value of the Common Stock on the date of grant. No Incentive
Stock Option may be granted hereunder after the effective date of the assumption
of the Plan by the Company.

          (b)  Terms and Conditions. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Committee may specify in
the applicable grant or thereafter. The Committee may impose such conditions
with respect to the exercise of Options, including conditions relating to
applicable federal or state securities laws, as it considers necessary or
advisable.

          (c)  Payment. No shares shall be delivered pursuant to any exercise of
an Option until payment in full of the exercise price therefor is received by
the Company. Such payment for shares to be delivered pursuant to any exercise of
an Option may be made in whole or in part in cash or, to the extent permitted by
the Committee at or after the grant of the Option, by delivery of a note or
other commitment satisfactory to the Committee or shares of Common Stock owned
by the optionee, including Restricted Stock, or by retaining shares otherwise
issuable pursuant to the Option, in each case valued at their Fair Market Value
on the date of delivery or retention, or such other lawful consideration,
including a payment commitment of a financial or brokerage institution, as the
Committee may determine.

6.   Restricted Stock

          (a)  Grant of Restricted Stock. Subject to the provisions of the Plan,
the Committee may grant shares of Common Stock subject to forfeiture
("RESTRICTED STOCK") and determine the duration of the period (the "RESTRICTED
PERIOD") during which, and the conditions under which, the shares may be
forfeited to the Company and the other terms and conditions of such Awards.
Shares of Restricted Stock may be issued for no cash consideration, such minimum
consideration as may be required by applicable law or such other consideration
as the Committee may determine.

          (b)  Restrictions. Shares of Restricted Stock (may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Committee, during the Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may

<PAGE>

determine. Any certificates issued in respect of shares of Restricted Stock
shall be registered in the name of the Participant and unless otherwise
determined by the Committee, deposited by the Participant, together with a stock
power endorsed in blank, with the Company. At the expiration of the Restricted
Period, the Company shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.

7.   General Provisions Applicable to Awards

          (a)  Documentation. Each Award under the Plan shall be evidenced by a
writing, delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.

          (b)  Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other Award. The terms of each type of Award
need not be identical, and the Committee need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of grant or at any time thereafter.

          (c)  Dividends and Cash Awards. In the discretion of the Committee,
any Award under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable (in cash or in the form of Awards under the Plan)
currently or deferred with or without interest and (ii) cash payments in lieu of
or in addition to an Award.

          (d)  Termination of Employment. The Committee shall determine the
effect on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.

          (e)  Change in Control. In order to preserve a Participant's rights
under an Award in the event of a "CHANGE IN CONTROL" (as defined by the
Committee) of the Company, the Committee in its discretion may, at the time an
Award is made or at any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise or payment of the Award, (ii) provide for payment to the Participant of
cash or other property with a Fair Market Value equal to the amount that would
have been received upon the exercise or payment of the Award had the Award been
exercised or paid upon the change in control, (iii) adjust the terms of the
Award in a manner determined by the Committee to reflect the change in control,
(iv) cause the Award to be assumed, or new rights substituted therefor, by
another entity, or (v) make such other provision as the Committee may consider
equitable to Participants and in the best interests of the Company.

          (f)  Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with the grant or exercise of any Award
under the Plan, which loans may be secured by any security, including Common
Stock, underlying or related to such Award (provided that the loan shall not
exceed the Fair Market Value of the security subject to such Award), and which
may be forgiven upon such terms and conditions as the Committee may establish at
the time of such loan or at any time thereafter.

<PAGE>

          (g)  Transferability. In the discretion of the Committee, any Award
may be made transferable upon such terms and conditions and to such extent as
the Committee determines, provided that Incentive Stock Options may be
transferable only to the extent permitted by the Code. The Committee may in its
discretion waive any restriction on transferability.

          (h)  Withholding Taxes. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Participant. In the Committee's discretion, such
tax obligations may be paid in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company and its Affiliates
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant.

          (i)  Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable laws.

          (j)  Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

8.   Certain Definitions

          "AFFILIATE" means any business entity in which the Company owns
directly or indirectly 50% or more of the total voting power or has a
significant financial interest as determined by the Committee.

          "AWARD" means any Option or Restricted Stock granted under the Plan,
provided, that after the date of the assumption of the Plan by the Company,
"Award" shall not mean granting of Incentive Stock Options.

          "BOARD" means the Board of Directors of the Company.

          "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor law.

          "COMMITTEE" means the Board or one or more committees and/or
subcommittees, each such committee or subcommittee to be comprised of two or
more members of the Board appointed by the Board to administer the Plan or a
specified portion thereof; provided, however, that notwithstanding the
foregoing, the term "Committee" also means a committee and/or a subcommittee
thereof comprised of one or more members of the Board appointed by the Board or
such committee, to which the Board or such committee has delegated the authority
to grant from time to time individual Options to purchase not more than 5,000
shares of Common Stock to any

<PAGE>

person eligible under Section 3 (who is not subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended).

          "COMMON STOCK" or "STOCK" means the Common Stock, par value $0.01, of
the Company.

          "COMPANY" means Alkermes, Inc., a Pennsylvania corporation.

          "COVERED EMPLOYEE" means a "covered employee" within the meaning of
Section 162(m) of the Code.

          "DESIGNATED BENEFICIARY" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, "DESIGNATED
BENEFICIARY" means the Participant's estate.

          "FAIR MARKET VALUE" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.

          "PARTICIPANT" means a person selected by the Committee to receive an
Award under the Plan.

9.   Miscellaneous

          (a)  No Right To Employment. No person shall have any claim or right
to be granted an Award. Neither the Plan nor any Award hereunder shall be deemed
to give any employee the right to continued employment or to limit the right of
the Company to discharge any employee at any time.

          (b)  No Rights As Shareholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.

          (c)  Effective Date. The Plan shall be effective as of April 1, 1998.

          (d)  Assumption Date. The outstanding Awards granted under the Plan
were assumed by the Company in connection with the merger transaction among the
Company, Advanced Inhalation Research, Inc. and Alkermes Acquisition Sub, Inc.
effective February 1, 1999, and the Plan was assumed by the Company on April 7,
1999.

          (e)  Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to such shareholder approval as
the Board determines to be necessary or advisable to comply with any tax or
regulatory requirement.

          (f)  Governing Law. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of Pennsylvania.