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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, DC 20549**

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**FORM 10-Q**

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**(Mark One)**

| **|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                      |
| **For the quarterly period ended September 30, 2003**                                                                                                                                                                                                                                    |
| **OR**                                                                                                                                                                                                                                                                                   |
| **|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                   |
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                      |
| **For the transition period from                      to                     .** |
|                                                                                                                                                                                                                                                                                          |
| **Commission file number 0-28494**                                                                                                                                                                                                                                                       |
| **MILLENNIUM PHARMACEUTICALS, INC.**                                                                                                                                                                                                                                                     |
| (Exact name of registrant as specified in its charter)                                                                                                                                                                                                                                   |

| **Delaware**                                                  |   | **04-3177038**                                |
|---------------------------------------------------------------|--------|-----------------------------------------------|
| (State or other jurisdictionof incorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

**75 Sidney Street, Cambridge, Massachusetts 02139**(Address of principal executive offices) (zip code)

**(617)  679-7000**(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

Number of shares of the registrant's Common Stock, $0.001 par value, outstanding on November 10, 2003: 301,289,794

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**MILLENNIUM PHARMACEUTICALS, INC.**

**FORM 10-Q**

**FOR THE QUARTER ENDED SEPTEMBER 30, 2003**

**TABLE OF CONTENTS**

|             |                                                                                                           | Page                       |   |
|------------------|----------------------------------------------------------------------------------------------------------------|----------------------------|--------|
| **PART I**  | **FINANCIAL INFORMATION**                                                                                      |                       |   |
|             |                                                                                                           |                       |   |
| Item 1.          | Condensed Consolidated Financial Statements                                                                    |                       |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Balance Sheets as ofSeptember 30, 2003 and December 31, 2002                            | 3      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Operations for thethree and nine months ended September 30, 2003 and 2002 | 4      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Cash Flows for thenine months ended September 30, 2003 and 2002           | 5      |   |
|             |                                                                                                           |                       |   |
|             | Notes to Condensed Consolidated Financial Statements                                                           | 6      |   |
|             |                                                                                                           |                       |   |
| Item 2.          | Management's Discussion and Analysis of FinancialCondition and Results of Operations                           | 15     |   |
|             |                                                                                                           |                       |   |
|             | Risk Factors That May Affect Results                                                                           | 29     |   |
|             |                                                                                                           |                       |   |
| Item 3.          | Quantitative and Qualitative Disclosures About Market Risk                                                     | 40     |   |
|             |                                                                                                           |                       |   |
| Item 4.          | Controls and Procedures                                                                                        | 41     |   |
|             |                                                                                                           |                       |   |
| **PART II** | **OTHER INFORMATION**                                                                                          |                       |   |
|             |                                                                                                           |                       |   |
| Item 6.          | Exhibits and Reports on Form 8-K                                                                               | 42     |   |
|             |                                                                                                           |                       |   |
|             | Signatures                                                                                                     | 43     |   |
|             |                                                                                                           |                       |   |
|             | Exhibit Index                                                                                                  | 44     |   |
|             |                                                                                                           |                       |   |

*The following Millenniumtrademarks are used in this Quarterly Report on Form 10-Q:* Millennium®, theMillennium “M” logo and design (registered), Millennium PharmaceuticalsTM,VELCADETM (bortezomib) for Injection, and INTEGRILIN® (eptifibatide) Injection.All are covered by registrations or pending applications for registration in the U.S.Patent and Trademark Office and many other countries. CAMPATH® is a registeredtrademark of ILEX Pharmaceuticals, L.P., ReoPro® is a trademark of Eli Lilly andCompany, Aggrastat® is a trademark of Merck & Co., Inc. and Thalomid®(thalidomide) is a registered trademark of Celgene Corporation. *Other trademarks usedin this Quarterly Report on Form 10-Q are the property of their respective owners.*

2

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**PART I     FINANCIAL INFORMATION**

**Item 1.    Condensed Consolidated Financial Statements**

**Millennium Pharmaceuticals, Inc.Condensed Consolidated Balance Sheets**

|                                                                                                                                                         | September 30, 2003 |   | December 31, 2002 |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------|-------------------|------------|
||
||
||
| Current assets:                                                                                                                                              |               |   |              |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                    |               |   | $                 | 75,719     |   | $ | 1,332,391 |   |
| Marketable securities                                                                                                                                        |               |   |              | 844,017    |   |   | 426,672 |   |
| Accounts receivable                                                                                                                                          |               |   |              | 29,170     |   |   | — |   |
| Due from strategic alliance partners                                                                                                                         |               |   |              | 104,387    |   |   | 44,869 |   |
| Inventory                                                                                                                                                    |               |   |              | 114,490    |   |   | 105,346 |   |
| Prepaid expenses and other current assets                                                                                                                    |               |   |              | 22,763     |   |   | 29,463 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total current assets                                                                                                                                         |               |   |              | 1,190,546  |   |   | 1,938,741 |   |
| Property and equipment, net                                                                                                                                  |               |   |              | 247,133    |   |   | 310,325 |   |
| Restricted cash                                                                                                                                              |               |   |              | 21,244     |   |   | 31,056 |   |
| Other assets                                                                                                                                                 |               |   |              | 20,386     |   |   | 33,168 |   |
| Goodwill                                                                                                                                                     |               |   |              | 1,201,246  |   |   | 1,200,510 |   |
| Developed technology, net                                                                                                                                    |               |   |              | 380,625    |   |   | 405,721 |   |
| Intangible assets, net                                                                                                                                       |               |   |              | 60,583     |   |   | 78,086 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total assets                                                                                                                                                 |               |   | $                 | 3,121,763  |   | $ | 3,997,607 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
|                                                                                                                                                         |               |   |              |       |   |   |   |   |
| **Liabilities and Stockholders' Equity**                                                                                                                     |               |   |              |       |   |   |   |   |
| Current liabilities:                                                                                                                                         |               |   |              |       |   |   |   |   |
| Accounts payable                                                                                                                                             |               |   | $                 | 19,972     |   | $ | 34,216 |   |
| Accrued expenses                                                                                                                                             |               |   |              | 150,391    |   |   | 181,318 |   |
| Current portion of deferred revenue                                                                                                                          |               |   |              | 90,871     |   |   | 118,008 |   |
| Current portion of capital lease obligations                                                                                                                 |               |   |              | 15,319     |   |   | 16,045 |   |
| Current portion of long term debt                                                                                                                            |               |   |              | —     |   |   | 599,960 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total current liabilities                                                                                                                                    |               |   |              | 276,553    |   |   | 949,547 |   |
| Deferred revenue, net of current portion                                                                                                                     |               |   |              | 13,427     |   |   | 1,704 |   |
| Capital lease obligations, net of current portion                                                                                                            |               |   |              | 91,019     |   |   | 61,338 |   |
| Long term debt, net of current portion                                                                                                                       |               |   |              | 105,461    |   |   | 83,325 |   |
|                                                                                                                                                         |               |   |              |       |
| Commitments and contingencies                                                                                                                                |               |   |              |       |   |   |   |   |
|                                                                                                                                                         |               |   |              |       |
| Stockholders' equity:                                                                                                                                        |               |   |              |       |   |   |   |   |
| Preferred Stock, $0.001 par value; 5,000 shares authorized,none issued                                                                                       |               |   |              | —     |   |   | — |   |
| Common Stock, $0.001 par value; 500,000 shares authorized:300,154 shares at September 30, 2003 and 291,094 shares atDecember 31, 2002 issued and outstanding |               |   |              | 300        |   |   | 291 |   |
| Additional paid-in capital                                                                                                                                   |               |   |              | 4,494,992  |   |   | 4,432,040 |   |
| Deferred compensation                                                                                                                                        |               |   |              | (613       | ) |   | (1,952 | ) |
| Accumulated other comprehensive income                                                                                                                       |               |   |              | 10,712     |   |   | 4,119 |   |
| Accumulated deficit                                                                                                                                          |               |   |              | (1,870,088 | ) |   | (1,532,805 | ) |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total stockholders' equity                                                                                                                                   |               |   |              | 2,635,303  |   |   | 2,901,693 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total liabilities and stockholders' equity                                                                                                                   |               |   | $                 | 3,121,763  |   | $ | 3,997,607 |   |
|                                                                                                                                                         |               |   |                   |            |   |  |  |   |

See notes to condensed consolidated financial statements.

3

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**Millennium Pharmaceuticals, Inc.Condensed Consolidated Statements of Operations(unaudited)**

|                                                                     | Three Months Ended September 30, |   | Nine Months Ended September 30, |    |
|--------------------------------------------------------------------------|---------------------------------------|--------|--------------------------------------|---------|
||
||
|                                                                     |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Net product sales                                |                                  |   | $                                    | 23,046  |   | $ | — |   |   |   | $ | 30,915 |   | $ | — |   |
|     Co-promotion revenue                             |                                  |   |                                 | 47,855  |   |   | 45,035 |   |   |   |   | 151,887 |   |   | 112,104 |   |
|     Revenue under strategic alliances                |                                  |   |                                 | 73,930  |   |   | 50,720 |   |   |   |   | 165,466 |   |   | 144,104 |   |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total revenues           |                                  |   |                                 | 144,831 |   |   | 95,755 |   |   |   |   | 348,268 |   |   | 256,208 |   |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Costs and expenses:                                                      |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Cost of goods sold                               |                                  |   |                                 | 17,763  |   |   | 14,309 |   |   |   |   | 49,024 |   |   | 33,891 |   |
|     Research and development                         |                                  |   |                                 | 119,741 |   |   | 140,522 |   |   |   |   | 377,126 |   |   | 364,264 |   |
|     Selling, general and administrative              |                                  |   |                                 | 43,018  |   |   | 41,844 |   |   |   |   | 122,223 |   |   | 125,084 |   |
|     Restructuring charges                            |                                  |   |                                 | 52,736  |   |   | — |   |   |   |   | 146,241 |   |   | — |   |
|     Acquired in-process research and development     |                                  |   |                                 | —  |   |   | — |   |   |   |   | — |   |   | 242,000 |   |
|     Amortization of intangibles                      |                                  |   |                                 | 9,676   |   |   | 9,810 |   |   |   |   | 29,028 |   |   | 25,107 |   |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total costs and expenses |                                  |   |                                 | 242,934 |   |   | 206,485 |   |   |   |   | 723,642 |   |   | 790,346 |   |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Loss from operations                                                     |                                  |   |                                 | (98,103 | ) |   | (110,730 | ) |   |   |   | (375,374 | ) |   | (534,138 | ) |
|                                                                     |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                  |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Investment income, net                           |                                  |   |                                 | 8,493   |   |   | 22,234 |   |   |   |   | 26,797 |   |   | 65,283 |   |
|     Interest expense                                 |                                  |   |                                 | (2,675  | ) |   | (10,383 | ) |   |   |   | (18,210 | ) |   | (27,624 | ) |
|     Gain on sale of equity interest in joint venture |                                  |   |                                 | —  |   |   | — |   |   |   |   | 40,000 |   |   | 40,000 |   |
|     Debt financing charge                            |                                  |   |                                 | —  |   |   | — |   |   |   |   | (10,496 | ) |   | (54,000 | ) |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Net loss                                                                 |                                  |   | $                                    | (92,285 | ) | $ | (98,879 | ) |   |   | $ | (337,283 | ) | $ | (510,479 | ) |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| *Amounts per common share:*                                              |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share, basic and diluted                                    |                                  |   | $                                    | (0.31   | ) | $ | (0.35 | ) |   |   | $ | (1.14 | ) | $ | (1.86 | ) |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Weighted average shares, basic and diluted                               |                                  |   |                                 | 299,030 |   |   | 285,091 |   |   |   |   | 296,424 |   |   | 274,013 |   |
|                                                                     |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |

See notes to condensed consolidated financial statements.

4

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**Millennium Pharmaceuticals, Inc.Condensed Consolidated Statements of Cash Flows(unaudited)**

|                                                                                                                 | Nine Months Ended September 30, |   |
|----------------------------------------------------------------------------------------------------------------------|--------------------------------------|--------|
||
||
|                                                                                                                 |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Operating Activities:**                                                                            |                                 |   |   |   |   |   |   |   |
| Net loss                                                                                                             |                                 |   | $ | (337,283 | ) | $ | (510,479 | ) |
| Adjustments to reconcile net loss to cash                                                                            |                                 |   |   |   |   |   |   |   |
| used in operating activities:                                                                                        |                                 |   |   |   |   |   |   |   |
| Acquired in-process research and development                                                                         |                                 |   |   | — |   |   | 242,000 |   |
| Depreciation and amortization                                                                                        |                                 |   |   | 78,809 |   |   | 61,408 |   |
| Restructuring charges                                                                                                |                                 |   |   | 79,202 |  |   | — |   |
| Amortization of deferred financing costs                                                                             |                                 |   |   | 12,083 |  |   | 2,688 |   |
| (Gain) loss on marketable securities, net                                                                            |                                 |   |   | (2,983 | ) |   | 4,549 |   |
| Stock compensation expense                                                                                           |                                 |   |   | 7,035 |   |   | 6,887 |   |
| Changes in operating assets and liabilities:                                                                         |                                 |   |   |   |   |   |   |   |
|   Accounts receivable                                                                                      |                                 |   |   | (29,170 | ) |   | — |   |
|   Due from strategic alliance partners                                                                     |                                 |   |   | (69,518 | ) |   | (45,493 | ) |
|   Prepaid expenses and other current assets                                                                |                                 |   |   | (3,467 | ) |   | 379 |   |
|   Restricted cash and other assets                                                                         |                                 |   |   | 25,339 |   |   | (5,957 | ) |
|   Accounts payable and accrued expenses                                                                    |                                 |   |   | 46,597 |   |   | 15,546 |   |
|   Deferred revenue                                                                                         |                                 |   |   | (15,414 | ) |   | (40,648 | ) |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
| Net cash used in operating activities                                                                                |                                 |   |   | (208,770 | ) |   | (269,120 | ) |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
|                                                                                                                 |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Investing Activities:**                                                                            |                                 |   |   |   |   |   |   |   |
| Investments in marketable securities                                                                                 |                                 |   |   | (977,860 | ) |   | (845,467 | ) |
| Proceeds from sales and maturities of marketable securities                                                          |                                 |   |   | 565,853 |   |   | 850,382 |   |
| Other investing activity                                                                                             |                                 |   |   | (4,111 | ) |   | (235 | ) |
| Purchase of property and equipment and other long term assets                                                        |                                 |   |   | (45,096 | ) |   | (101,225 | ) |
| Net cash acquired in COR Therapeutics, Inc. acquisition                                                              |                                 |   |   | — |   |   | 308,522 |   |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
| Net cash (used in) provided by investing activities                                                                  |                                 |   |   | (461,214 | ) |   | 211,977 |   |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
|                                                                                                                 |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Financing Activities:**                                                                            |                                 |   |   |   |   |   |   |   |
| Proceeds from sales of common stock                                                                                  |                                 |   |   | 28,571 |   |   | 81,976 |   |
| Net proceeds from employee stock purchases                                                                           |                                 |   |   | 27,737 |   |   | 13,830 |   |
| Repayment of principal of long-term debt obligations, including payment of debt premium                              |                                 |   |   | (629,880 | ) |   | (40 | ) |
| Repayment of notes receivable from officers                                                                          |                                 |   |   | — |   |   | 145 |   |
| Principal payments on capital leases                                                                                 |                                 |   |   | (13,639 | ) |   | (13,367 | ) |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
| Net cash (used in) provided by financing activities                                                                  |                                 |   |   | (587,211 | ) |   | 82,544 |   |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
| (Decrease) increase in cash and cash equivalents                                                                     |                                 |   |   | (1,257,195 | ) |   | 25,401 |   |
| Equity adjustment from foreign currency translation                                                                  |                                 |   |   | 523 |   |   | 1,421 |   |
| Cash and cash equivalents, beginning of period                                                                       |                                 |   |   | 1,332,391 |   |   | 35,993 |   |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
| Cash and cash equivalents, end of period                                                                             |                                 |   | $ | 75,719 |   | $ | 62,815 |   |
|                                                                                                                 |                                 |   |  |  |   |  |  |   |
|                                                                                                                 |                                 |   |   |   |   |   |   |   |
| **Supplemental Cash Flow Information:**                                                                              |                                 |   |   |   |   |   |   |   |
| Cash paid for interest                                                                                               |                                 |   | $ | 23,061 |   | $ | 29,286 |   |
|                                                                                                                 |                                 |   |   |   |   |   |   |   |
| **Supplemental Disclosure of Noncash Investing and Financing Activities:**                                           |                                 |   |   |   |   |   |   |   |
| Payment in ILEX stock of contingent consideration on sale of equity interest in Millennium & ILEX Partners, L.P. |                                 |   | $ | 10,000 |   | $ | — |   |
| Construction costs for laboratory and office space                                                                   |                                 |   |   | 6,748 |   |   | 27,645 |   |
| Equipment acquired under capital leases                                                                              |                                 |   |   | 1,598 |   |   | 6,155 |   |
| Acquisition of COR Therapeutics, Inc., including direct transaction costs                                            |                                 |   |   | — |   |   | 1,833,329 |   |
| Millennium & ILEX Partners, L.P. capital contribution                                                            |                                 |   |   | — |   |   | 270 |   |

See notes to condensed consolidated financial statements.

5

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**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements**

**1.    Basis of Presentation**

        Theaccompanying condensed consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes required bygenerally accepted accounting principles for complete financial statements. In the opinionof management, all adjustments, consisting of normal recurring accruals and revisions ofestimates, considered necessary for a fair presentation of the accompanying condensedconsolidated financial statements have been included. Interim results for the three andnine month periods ended September 30, 2003 are not necessarily indicative of the resultsthat may be expected for the year ended December 31, 2003. For further information, referto the financial statements and accompanying footnotes included in the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2002, which was filedwith the Securities and Exchange Commission (“SEC”) on March 7, 2003. 

**2.    Summary ofSignificant Accounting Policies**

*(a)  Cash Equivalents and Marketable Securities*

        Cashequivalents consist principally of money market funds and corporate bonds with maturitiesof three months or less at the date of purchase. Marketable securities consist primarilyof investment-grade corporate bonds, asset-backed debt securities and U.S. governmentagency debt securities.

        Managementdetermines the appropriate classification of marketable securities at the time of purchaseand reevaluates such designation at each balance sheet date. Marketable securities atSeptember 30, 2003 and December 31, 2002 are classified as“available-for-sale.” Available-for-sale securities are carried at fair value,with the unrealized gains and losses reported in a separate component ofstockholders’ equity. The cost of debt securities in this category is adjusted foramortization of premiums and accretion of discounts to maturity. Such amortization andaccretion are included in investment income. Realized gains and losses and declines invalue judged to be other-than-temporary on available-for-sale securities and otherinvestments are included in investment income. The cost of securities sold is based on thespecific identification method. Interest and dividends on securities classified asavailable-for-sale are included in investment income. 

        Duringthe three months ended September 30, 2003 and 2002, the Company recorded realized gains onmarketable securities of $3.0 million and $3.8 million, respectively, andrealized losses on marketable securities and other investments of $0.9 million and$3.3 million, respectively. During the nine months ended September 30, 2003 and 2002,the Company recorded realized gains on marketable securities of $6.1 million and $15.9million, respectively, and realized losses on marketable securities and other investmentsof $3.1 million and $20.4 million, respectively. 

*(b)  Inventory*

        Inventoriesare stated at the lower of cost (first in, first out) or market. Inventories are reviewedperiodically for slow-moving or obsolete status based on sales activity, both projectedand historical.

        Inventoryconsists of the following (in thousands): 

|            |   | **September 30, 2003** |    | **December 31, 2002** |
|-----------------|--------|------------------------|---------|-----------------------|
| Raw materials   |   | $                      | 76,523  |                  | $ | 65,039 |
| Work in process |   |                   | 4,932   |                  |   | 10,534 |
| Finished goods  |   |                   | 33,035  |                  |   | 29,773 |
|            |   |                        |    |                       |
|            |   | $                      | 114,490 |                  | $ | 105,346 |
|            |   |                        |    |                       |

6

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**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

*(c)  Goodwill andIntangible Assets*

        Intangibleassets consist of specifically identified intangible assets. Goodwill is the excess of anypurchase price over the estimated fair market value of net tangible assets acquired notallocated to specific intangible assets. Intangible assets consist of the following (inthousands):

|                                                                    | September 30, 2003 |
|-------------------------------------------------------------------------|--------------------|
||
| Amortized intangible assets                                             |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Developed technology                            |               | $ | 435,000 |   | $ | (54,375 | ) | $ | — |   | $ | — |   | $ | 380,625 |   |
|                                                                    |               |  |   |  |   |  |   |  |   |  |   |
|                                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Core technology                                 |               | $ | 18,712 |   | $ | (17,658 | ) | $ | — |   | $ | — |   | $ | 1,054 |   |
|     Other                                           |               |   | 16,560 |   |   | (2,461 | ) |   | (2,320 | ) |   | (11,250 | ) |   | 529 |   |
| Unamortized intangible assets                                           |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Trademark                                       |               |   | 59,000 |   |   | — |   |   | — |   |   | — |   |   | 59,000 |   |
|                                                                    |               |  |   |  |   |  |   |  |   |  |   |
|         Total intangible assets |               | $ | 94,272 |   | $ | (20,119 | ) | $ | (2,320 | ) | $ | (11,250 | ) | $ | 60,583 |   |
|                                                                    |               |  |   |  |   |  |   |  |   |  |   |
|                                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                    | December 31, 2002 |
|-------------------------------------------------------------------------|-------------------|
||
| Amortized intangible assets                                             |              |   |   |   |   |   |   |   |   |   |
|     Developed technology                            |              | $ | 435,000 |   | $ | (29,279 | ) | $ | 405,721 |   |
|                                                                    |              |  |   |  |   |  |   |
|                                                                    |              |   |   |   |   |   |   |   |   |   |
|     Core technology                                 |              | $ | 18,712 |   | $ | (14,149 | ) | $ | 4,563 |   |
|     Other                                           |              |   | 16,560 |   |   | (2,037 | ) |   | 14,523 |   |
| Unamortized intangible assets                                           |              |   |   |   |   |   |   |   |   |   |
|     Trademark                                       |              |   | 59,000 |   |   | — |   |   | 59,000 |   |
|                                                                    |              |  |   |  |   |  |   |
|         Total intangible assets |              | $ | 94,272 |   | $ | (16,186 | ) | $ | 78,086 |   |
|                                                                    |              |  |   |  |   |  |   |

        Amortization of intangibles is computed using the straight-line method over the useful lives of the respective assets asfollows:Developed technology13 yearsCore technology4 yearsOther2 to 4 years
        Asrequired by Financial Accounting Standards Board (“FASB”) Statement of FinancialAccounting Standards (“SFAS”) SFAS No. 142, “Goodwill and OtherIntangible Assets,” goodwill and indefinite lived intangible assets are not amortizedbut are reviewed annually for impairment, or more frequently if impairment indicatorsarise. Separable intangible assets that are not deemed to have an indefinite life areamortized over their useful lives and reviewed for impairment when events or changes incircumstances suggest that the assets may not be recoverable. The Company tests forgoodwill impairment annually, on October 1 and whenever events or changes in circumstancessuggest that the carrying amount may not be recoverable. 

*(d)  Reclassification*

        Inconnection with the launch of VELCADETM (bortezomib) for Injection in May 2003 and therecognition of related costs of sales, the Company reclassified certainINTEGRILIN® (eptifibatide) Injection related manufacturing expenses to costof goods sold so that cost of goods sold now includes manufacturing-related expensesassociated with the sales of INTEGRILIN and VELCADE. These reclassifiedmanufacturing-related
7

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

expenses were previously included in cost of co-promotion revenueand certain INTEGRILIN® (eptifibatide) Injection related advertising andpromotional expenses that were previously included in cost of co-promotion revenue havebeen reclassified to selling, general and administrative expenses.

        Priorperiod amounts have been adjusted to conform to the current year presentation. There wasno impact on net loss in any period. 

*(e)  Revenue Recognition*

*        Net product sales*

        TheCompany records product sales of VELCADETM (bortezomib) for Injection when deliveryhas occurred and title passes to the customer, collection is reasonably assured and theCompany has no further obligations. Allowances are recorded as a reduction to productsales for estimated returns and discounts at the time of sale. 

*        Co-promotion revenue*

        Co-promotionrevenue includes the Company’s share of profits from the sale of INTEGRILINin co-promotion territories by Schering-Plough Ltd. and Schering Corporation(collectively “SGP”). Also included in co-promotion revenue are reimbursementsfrom SGP of the Company’s manufacturing-related costs, advertising and promotionalexpenses associated with the sale of INTEGRILIN within co-promotion territories androyalties from SGP on sales of INTEGRILIN outside the co-promotion territory. The Companyrecognizes revenue when SGP ships INTEGRILIN to wholesalers and records it net ofallowances, if any. The Company defers certain manufacturing-related expenses until thetime SGP ships related product to its customers inside and outside co-promotionterritories. Deferred revenue also includes cash advances from SGP to the Company for theCompany’s prepayments to its manufacturers of INTEGRILIN. 

*        Revenue understrategic alliances*

        TheCompany recognizes revenue from non-refundable license payments and certain milestonepayments not specifically tied to a separate earnings process, ratably over the term ofthe research contract. When payments are specifically tied to a separate earnings process,revenue is recognized when the specific performance obligation associated with the paymentis completed. Performance obligations typically consist of significant milestones in thedevelopment life cycle of the related technology, such as initiation of clinical trials,filing for approval with regulatory agencies and approvals by regulatory agencies. Inaddition, when appropriate, the Company recognizes revenue from certain research paymentsbased upon the level of research services performed during the period of the researchcontract. 

*(f)  Net Loss Per CommonShare*

        Basicnet loss per common share is computed using the weighted average number of common sharesoutstanding during the period. Diluted net loss per common share is typically computedusing the weighted average number of common and dilutive common equivalent shares fromstock options, warrants and convertible debt using the treasury stock method. However, forall periods presented, diluted net loss per share is the same as basic net loss per shareas the inclusion of weighted average shares of common stock issuable upon the exercise ofstock options, warrants and convertible debt would be antidilutive. 

*(g)  Comprehensive Loss*

        Comprehensiveloss was $94.7 million and $82.2 million for the three months ended September 30, 2003 and2002, respectively and $330.7 million and $495.5 million for the nine months endedSeptember 30, 2003 and 2002, respectively. Comprehensive loss is composed of net loss,unrealized gains and losses on marketable securities and cumulative foreign currencytranslation adjustments. Unrealized gains and losses on marketable securities includes thereclassification to investment income, net for the nine months ended September 30, 2002 ofunrealized losses of $14.6 million due to declines in market value of investments inmarketable securities that were
8

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

deemed to be other than temporary. Accumulated othercomprehensive income at September 30, 2003 included $8.5 million of unrealized gains onmarketable securities and $2.2 million of cumulative foreign currency translationadjustments. Accumulated other comprehensive income at December 31, 2002 included $2.4million of unrealized gains on marketable securities and $1.7 million of cumulativeforeign currency translation adjustments.

*(h)  Stock-BasedCompensation*

        TheCompany follows Accounting Principles Board Opinion No. 25, “Accounting forStock Issued to Employees” (“APB 25”) and related interpretations, inaccounting for its stock-based compensation plans, rather than the alternative fair valueaccounting method provided for under SFAS No. 123, “Accounting for Stock-BasedCompensation” (“SFAS No. 123”). Under APB 25, when the exercise priceof options granted equals the market price of the underlying stock on the date of grant,no compensation expense is recognized. In accordance with Emerging Issues Task Force(“EITF”) 96-18, the Company records compensation expense equal to the fair valueof options granted to non-employees over the vesting period, which is generally the periodof service. 

        Thefollowing table illustrates the effect on net loss and loss per share if the Company hadapplied the fair value recognition provisions of SFAS No. 123 to stock-based employeecompensation (in thousands, except per share amounts): 
 Three Months EndedSeptember 30, Nine Months EndedSeptember 30,  2003 2002 2003 2002 Net loss$(92,285)$(98,879)$(337,283)$(510,479)Add: Stock-based compensation as included in theStatement of Operations 469  765  1,339  2,207 Deduct:  Total stock-based compensation expense determined under fair value based method for all awards (13,569) (31,834) (57,869) (106,185)     Pro forma net loss$(105,385)$(129,948)$(393,813)$(614,457)       Amounts per common share:            Basic and diluted - as reported$(0.31)$(0.35)$(1.14)$(1.86)Basic and diluted - pro forma$(0.35)$(0.46)$(1.33)$(2.24)
        Theweighted-average per share fair value of options granted during the three months endedSeptember 30, 2003 and 2002 was $9.64 and $7.93, respectively, and during the nine monthsended September 30, 2003 and 2002 was $7.23 and $13.16, respectively. 

        Thefair value of stock options and common shares issued pursuant to the stock option andstock purchase plans at the date of grant were estimated using the Black-Scholes modelwith the following weighted-average assumptions: 
 **Stock Options** **Stock Purchase Plan**  **Three Months EndedSeptember 30,** **Nine Months EndedSeptember 30,** **Three Months EndedSeptember 30,** **Nine Months EndedSeptember 30,** **2003** **2002** **2003** **2002** **2003** **2002** **2003** **2002**Expected life (years) 5.0 5.4 5.2 5.4 0.5 0.5 0.5 0.5Interest rate 2.00% 2.88% 2.27% 4.19% 1.02% 1.64% 1.17% 2.02%Volatility .85 .87 .85 .87 .85 .87 .85 .87
9

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

        TheCompany has never declared cash dividends on any of its capital stock and does not expectto do so in the foreseeable future.

*(i)  Segment Information*

        SFASNo. 131, “Disclosures about Segments of an Enterprise and Related Information”(“SFAS No. 131”), establishes standards for the way public business enterprisesreport information about operating segments in annual financial statements and requiresthat those enterprises report selected information about operating segments in interimfinancial reports. SFAS No. 131 also establishes standards for related disclosures aboutproducts and services, geographic areas, and major customers. 

        TheCompany operates in one business segment, which primarily focuses on the discovery,development and commercialization of proprietary therapeutic products. All of the Company’s product sales are currentlyrelated to sales of VELCADETM (bortezomib) for Injection. All of the Company’sco-promotion revenue is currently related to sales of INTEGRILIN®(eptifibatide) Injection. 

        Revenuesfrom Ortho Biotech Products, L.P. (“Ortho Biotech”) accounted for approximately26.9% and 11.2% of total revenues for the three and nine months ended September 30, 2003,respectively. Revenues from Bayer AG (“Bayer”) accounted for approximately 12.0%and 19.6% of total revenues for the three months ended September 30, 2003 and 2002,respectively and 14.9% and 21.5% of total revenues for the nine months ended September 30,2003 and 2002. Revenues from Aventis Pharmaceuticals, Inc. (“Aventis”) accountedfor approximately 8.8% and 10.4% of total revenues for the three months ended September30, 2003 and 2002, respectively and approximately 18.3% and 11.9% of total revenues forthe nine months ended September 30, 2003 and 2002. Revenues from Monsanto Company(“Monsanto”) accounted for approximately 11.3% and 12.7% of total revenues forthe three and nine months ended September 30, 2002, respectively.

*(j)*  *InformationConcerning Market and Source of Supply Concentration*

        Millenniumand SGP co-promote INTEGRILIN in the United States and share any profits and losses. SGPbooks and reports INTEGRILIN sales. INTEGRILIN has received regulatory approval in theEuropean Union and a number of other countries for various indications. The Company hasexclusively licensed to SGP rights to market INTEGRILIN outside the United States, and SGPpays the Company royalties based on these sales of INTEGRILIN. The Company has long-termsupply arrangements with two suppliers for the bulk product and with another twosuppliers, one of which is SGP, for the filling and final packaging of INTEGRILIN. 

*(k)  AccountingPronouncements*

        InJune 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exitor Disposal Activities” (“SFAS No. 146”). SFAS No. 146 requires that aliability for a cost associated with an exit or disposal activity be recognized andmeasured initially at its fair value in the period in which the liability is incurred,except for one-time termination benefits that meet certain requirements. The Company wasrequired to adopt SFAS No. 146 for activities that were initiated after December 31, 2002,with early application encouraged. The Company adopted SFAS No. 146 as of December 1, 2002in association with the discontinuation of certain discovery efforts in December 2002 (SeeNote 3). 

        InNovember 2002, the EITF of the FASB issued EITF 00-21, “Revenue Arrangements withMultiple Deliverables,” (“EITF 00-21”) which addressed certain aspects ofthe accounting for arrangements that involve the delivery or performance of multipleproducts, services and/or rights to use assets. Under EITF 00-21, revenue arrangementswith multiple deliverables should be divided into separate accounting units if thedeliverables meet certain criteria, including whether the fair value of the delivereditems can be determined and whether there is evidence of fair value of the undelivereditems. In addition, the consideration should be allocated among the separate units ofaccounting based on their fair values, and the applicable revenue recognition criteriashould be considered separately for each of the separate units of accounting. EITF 00-21is effective for revenue arrangements entered into after June 30, 2003. 

10

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

        InDecember 2002, the FASB issued SFAS No. 148, “Accounting for Stock BasedCompensation—Transition and Disclosure” (“SFAS No. 148”).SFAS 148 provides two additional transition methods for entities that adopt the fairvalue method of accounting for stock based compensation. Further, the statement requiresdisclosure of comparable information for all companies regardless of whether, when, or howan entity adopts the fair value based method of accounting. These disclosures are nowrequired for interim periods in addition to the traditional annual disclosure. SFAS 148 iseffective for fiscal periods ending after December 15, 2002. The Company has providedthe new disclosures in *Stock-Based Compensation* in Note 2. 

        InJanuary 2003, the FASB issued Interpretation No. 46, “Consolidation of VariableInterest Entities, an Interpretation of Accounting Research Bulletin No. 51”(“FIN 46”). FIN 46 provides a new consolidation model which determines controland consolidation based on potential variability in gains and losses. The provisions ofFIN 46 are effective for enterprises with variable interests in variable interestentities created after January 31, 2003. For public companies with variable interest invariable interest entities created before February 1, 2003 the provisions of FIN 46 were tobe applied no later than July 1, 2003. As of September 30, 2003, the Company has notinvested in any variable interest entities after January 31, 2003. 

        InOctober 2003, the FASB issued Staff Position No. FIN 46-6, “Effective Date of FASBFIN 46, Consolidation of Variable Interest Entities.” This FASB StaffPosition deferred the effective date for applying the provisions of Interpretation 46 forinterests held by public entities in variable interest entities or potential variableinterest entities created before February 1, 2003. A public entity need not apply theprovisions of FIN 46 to an interest held in a variable interest entity orpotential variable interest entity until the end of the first interim or annual periodending after December 15, 2003 if both of the following apply: 
 • The variable interest entity wascreated before February 1, 2003.     • The public entity has not issued financial statements reporting interests in variableinterest entities in accordance with FIN 46, other than certain requireddisclosures.
        TheCompany will implement the provisions of FIN 46 for its financial statementsfor the year ending December 31, 2003 for any variable interest entities created beforeFebruary 1, 2003. The Company is currently evaluating what impact, if any, FIN 46 willhave on the financial position or results of operations of the Company. 

        InMay 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instrumentswith Characteristics of both Liabilities and Equity” (“SFAS No. 150”). SFASNo. 150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and have characteristics ofboth liabilities and equity. SFAS No. 150 is effective for all financial instrumentscreated or modified after May 31, 2003, and otherwise effective at the beginning of thefirst interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did nothave a material impact on the financial position or results of operations of the Company.

**3.    Restructuring**

        InDecember 2002, the Company announced the first in a series of steps to realign theCompany’s resources to become a commercially-focused biopharmaceutical company. TheCompany discontinued certain discovery research efforts, reduced headcount in itsdiscovery group and began reallocating other resources to enhance its commercialcapabilities. These actions resulted in the recognition of restructuring charges in thefourth quarter of 2002 and first quarter of 2003. 

        InJune 2003, the Company announced a broad, accelerated restructuring plan to focus theCompany’s resources on development and commercialization.  The plan includesconsolidation of research and development facilities, overall headcount reduction fromapproximately 2,300 employees to approximately 1,700 employees by the end of 2004 andstreamlining of the number of discovery and development projects.  Certain of theseactions resulted in the recognition of restructuring charges in the second and thirdquarters of 2003, including the termination of 711 employees and the vacating of severalof the Company’s facilities.

11

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

        Thesecosts are included in restructuring charges in the statements of operations and accruedexpenses on the balance sheet at September 30, 2003. The following table displays therestructuring activity and liability balance included in accrued expenses (in thousands): 
 Nine Month Period Ending September 30, 2003 Balance at December 31, 2002 Charges Payments Asset Impairment Stock Compensation Balance atSeptember 30, 2003 Termination benefits $2,710 $22,547 $(10,259)$— $(953)$14,045 Facilities  —  29,703  (4,454) —  —  25,249 Asset impairment  —  78,249  —  (78,249) —  — Contract termination  —  15,448  (5,096) —  —  10,352 Other associated costs  82  294  (256) —  —  120              Total $2,792 $146,241 $(20,065)$(78,249)$(953)$49,766         
        Costsof termination benefits relate to severance packages, out-placement services and careercounseling for employees affected by the initiative. Charges related to facilities includeestimated remaining rental obligations, net of estimated sublease income, for facilitiesthat the Company no longer occupies. The Company’s decisions to vacate certainfacilities and abandon the related leasehold improvements as well as terminate certainresearch programs were deemed to be impairment indicators under SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result ofperforming the impairment evaluations, asset impairment charges were recorded to adjustthe carrying value of the related long-lived assets to their net realizable values. Thefair values of the assets were estimated based upon anticipated future cash flows,discounted at a rate commensurate with the risk involved.   

**4.    COR Therapeutics,Inc. Acquisition**

        OnFebruary 12, 2002, the Company acquired COR Therapeutics, Inc. (“COR”) for anaggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares ofMillennium common stock pursuant to the merger agreement between the Company and COR. Thetransaction was recorded as a purchase for accounting purposes and the Company’sconsolidated financial statements include COR’s operating results from the date ofthe acquisition. The purchase price was allocated to the assets purchased and theliabilities assumed based upon their respective fair values, with the excess of thepurchase price over the estimated fair value of net tangible assets allocated to specificintangible assets, including developed technology and trademark, and goodwill. Developedtechnology is being amortized over the remaining patent life, or thirteen years. At thedate of the acquisition, the Company recorded a one-time, non-cash charge to operationsduring the nine months ended September 30, 2002 of $242.0 million for acquired in-processresearch and development. The valuation of acquired in-process research and developmentrepresents the estimated fair value related to incomplete projects that, at the date ofthe acquisition, had no alternative future use and for which technological feasibility hadnot been established. 

**5.    Revenues andStrategic Alliances**

        Historically,the Company has formed strategic alliances with major participants in marketplaces whereits discovery expertise and technology platform are applicable. These agreements includealliances based on the transfer of technology platforms, alliances which combinetechnology transfer with a focus on a specific disease or therapeutic approach, anddisease-focused programs under which the Company conducts research funded by its partners.The Company’s disease-based alliances and alliances which combine technology transferwith a disease focus are generally structured as research collaborations. Under thesearrangements, the Company performs research in a specific disease area aimed atdiscoveries leading to novel pharmaceutical (small molecule) products. These alliancesgenerally provide research funding over an initial period, with renewal provisions,varying by agreement. Under these agreements, the Company’s partners may makeup-front payments, additional payments upon the achievement of specific research andproduct development milestones, ongoing research funding and/or pay
12

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

royalties to or insome cases share profits with the Company based upon any product sales resulting from thecollaboration. In certain alliances, the Company also may receive equity investments fromits collaborators.

*Strategic Alliances*

*        New strategicalliance:*

        OnJune 30, 2003, the Company entered into an agreement with Ortho Biotech, a wholly ownedsubsidiary of Johnson & Johnson, to collaborate on the commercialization and continuedclinical development of VELCADETM (bortezomib) for Injection. Under the terms of theagreement, the Company retains all commercialization rights to and profits from VELCADE inthe U.S. Subject to obtaining regulatory approvals of VELCADE outside the U.S., OrthoBiotech and its affiliate, Janssen-Cilag, will commercialize VELCADE outside of the U.S.The Company is entitled to royalties from Ortho Biotech and its affiliate Janssen-Cilag onsales, if any, of VELCADE outside of the U.S. The Company also retains an option toco-promote VELCADE at a future date in certain European countries. 

        TheCompany and Ortho Biotech and its research affiliate, Johnson & Johnson PharmaceuticalResearch & Development, L.L.C., will jointly engage in an extensive global program forfurther clinical development of VELCADE with the purpose of maximizing the clinical andcommercial potential of VELCADE. This program will investigate the potential ofVELCADE to treat multiple forms of solid andhematological cancers, including continued clinical development of VELCADE for multiplemyeloma. Ortho Biotech will be responsible for 40 percent of the joint development coststhrough 2005 and for 45 percent of such costs thereafter.

        Duringthe three months ended September 30, 2003, the Company recognized a $30.0 millionmilestone payment as revenue under this alliance upon the achievement of target enrollmentof the 612th patient in the Company’s Phase III APEX trial for VELCADE inpatients with multiple myeloma. In addition, the Company may receive payments for achieving clinical development milestones, for achievingregulatory milestones outside of the U.S. and for achieving agreed-upon sales levels of VELCADE.

*        Modifications toexisting strategic alliances:*

        OnOctober 31, 2003, the research phase of the Company’s strategic alliance with Bayerended. On October 10, 2003, Bayer and Millennium amended the agreement to provide bothparties access to the balance of identified targets for a period of seven years. If Bayersuccessfully develops and commercializes any of these targets discovered in the alliance,Bayer will make success and royalty payments to Millennium on the sale of productsgenerated from the alliance. 

        Revenuesrecognized under the research phase of the Bayer alliance were approximately $13.2 millionand $15.0 million for the three months ended September 30, 2003 and 2002, respectively andapproximately $41.2 million and $45.1 million for the nine months ended September 30, 2003and 2002, respectively. The Company recognized the research funding portion of thealliance on a percentage-of-completion basis. The percentage-of-completion is determinedat each measurement date based upon the actual full-time equivalents to date as comparedto management’s estimate of the total full-time equivalents needed to complete thedeliverables required by the alliance. In September 2001, the Company revised the estimateof total full-time equivalents required to complete the project downward as a result ofproductivity improvements made at the Company and changes to the program requirements madeby Bayer. During each subsequent reporting period, the Company continued to monitor thefull-time equivalent estimate necessary to complete the deliverables and compared theestimate to the actual effort put forth. No further adjustments have been necessary andthe accounting estimates used approximated actual efforts from September 2001 to the endof the research phase of the agreement, October 31, 2003. 

        OnAugust 8, 2003, the Company and Abbott Laboratories (“Abbott”) agreed toterminate their alliance covering joint discovery, development and commercialization ofcertain metabolic disease products in connection with the Company’s June 2003restructuring plan. Included in restructuring charges for the three months ended September30, 2003 are restructuring charges specifically related to the discontinuation ofmetabolic research and development, which include termination benefits and costsassociated with the Abbott separation agreement. In the nine months ended September 30,2003 Abbott invested the final $28.6 million of a $250.0 million commitment in Millenniumcommon stock pursuant to the March 2001 Investment Agreement between the Company andAbbott. 

13

**Millennium Pharmaceuticals, Inc.                               Notes to Condensed Consolidated Financial Statements (continued)**

        OnApril 22, 2003, Aventis exercised its optionto terminate the Technology Transfer Agreement between the Company and Aventis effectiveon the third anniversary of the Agreement, July 21, 2003. Pursuant to the terms of theAgreement, upon providing this notice to the Company, Aventis paid the Company $40.0million in consideration for future use of certain Millennium technology transferred toAventis. Approximately $9.3 million and $40.0 million of this termination fee are includedin revenue under strategic alliances for the three and nine months, respectively endedSeptember 30, 2003.

**6.    Commitments**

**Lease Commitments**

        OnAugust 4, 2000, the Company entered into lease agreements, relating to two buildingsfor laboratory and office space in Cambridge, Massachusetts. The rent obligation for thefirst of these buildings began in July 2002 and the rent obligation on the secondbuilding began in July 2003. The Company was responsible for a portion of the constructioncosts for both buildings and was deemed to be the owner during the construction period ofeach building under EITF 97-10, “The Effect of Lessee Involvement in AssetConstruction.” In July 2002 and July 2003, upon completion of the constructionperiod of the buildings, respectively, the Company recorded the leases as capital leases. 

**7.    Convertible Debt**

        TheCompany currently had the following convertible notes outstanding at September 30, 2003: 
 • $16.3 million of principal of 5.0% convertible subordinated notes due March 1, 2007,that are convertible into Millennium common stock at any time prior to maturity at a priceequal to $34.21 per share (the “5.0% notes”);      • $5.9 million of principal of 4.5% convertible senior notes due June 15, 2006, thatare convertible into Millennium common stock at any time prior to maturity at a priceequal to $40.61 per share (the “4.5% notes”); and     • $83.3 million of principal of 5.5% convertible subordinated notes due January 15,2007, that are convertible into Millennium common stock at any time prior to maturity at aprice equal to $42.07 per share (the “5.5% notes”).
        Underthe terms of these notes, the Company is required to make semi-annual interest payments onthe outstanding principal balance of the 5.0% notes on March 1 and September 1of each year, of the 4.5% notes on June 15 and December 15 of each year and ofthe 5.5% notes on January 15 and July 15 of each year. All required interestpayments to date have been made. 

        InApril 2002, the Company amended the 4.5% notes and 5.0% notes to add put optionspermitting noteholders to require the Company on April 29, 2003, to repurchase the4.5% notes for cash at a price of $1,095 per $1,000 of principal amount and the 5.0% notesfor cash at a price of $1,085 per $1,000 of principal amount, resulting in a maximumaggregate payment obligation of $654.0 million. These put options on the notes werederivative instruments. SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities” requires derivative instruments to be recorded in the balancesheet at fair value. The fair value of this derivative, or $54.0 million at March 31, 2003was recorded in the balance sheet. 

        OnApril 29, 2003, the Company completed the repurchase of $577.8 million of aggregateprincipal amount of the outstanding 4.5% notes and 5.0% notes for an aggregate payment ofapproximately $637.1 million, including principal, accrued interest and put premium.Approximately $22.1 million of aggregate principal amount of these notes were not tenderedin the offer and remain outstanding as of September 30, 2003. As a result of therepurchase, the Company recorded a charge of approximately $10.5 million which representsthe write-off of approximately $12.4 million of unamortized original debt issuance costsassociated with the 4.5% notes and 5.0% notes, offset by $1.9 million relating to theexpired put premium on the untendered notes.

14

**Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations**

        Ourmanagement’s discussion and analysis of our financial condition and results of ouroperations include the identification of certain trends and other statements that maypredict or anticipate future business or financial results that are subject to importantfactors that could cause our actual results to differ materially from those indicated. See“Risk Factors That May Affect Results.”

**Overview**

        Weare a leading biopharmaceutical company focused on developing and commercializing productsin multiple disease areas. We currently have a cancer product and a cardiovascular diseaseproduct on the market. We also have other potential products in various stages ofpreclinical and clinical development in both of those areas and in the inflammatorydisease area. 

        Ourstrategy is to advance multiple products in several focus areas through clinical trialsand regulatory approvals and to be involved in the marketing and sale of many of theseproducts. A key element of our strategy in the disease areas on which we are focused is tobuild a sustainable pipeline of innovative new treatments based on our understanding ofhow particular molecular pathways that are involved in specific disease areas affect theinstigation and progression of specific diseases. 

        Weplan to develop and commercialize many of our products on our own, but will seekdevelopment and commercial partners when we believe that doing so will maximize productvalue. For example, we have entered into sales and marketing alliances with majorpharmaceutical companies for VELCADE outside of the United States and INTEGRILIN**and plan to do so in the future for products in disease areas that require large salesforces or to address markets outside the United States. 

*VELCADETM(bortezomib) for Injection*

        VELCADEwas approved for marketing in the United States in May 2003 as a treatment for patientswith multiple myeloma who have received at least two prior therapies and demonstrateddisease progression on the last therapy. We commercially launched VELCADE in the UnitedStates shortly after receiving marketing approval. We have recruited an oncology salesforce which is currently marketing VELCADE in the United States. In February 2003, wesubmitted a complete Marketing Authorization Application to the European Agency for theEvaluation of Medicinal Products for the approval of VELCADE. 

        OnJune 30, 2003, we entered into an agreement with Ortho Biotech Products, L.P., or Ortho Biotech, a whollyowned subsidiary of Johnson & Johnson, to collaborate on the commercialization andcontinued clinical development of VELCADE. Under the terms of the agreement, we retain allcommercialization rights to and profits from VELCADE in the United States. Subject toobtaining regulatory approvals of VELCADE outside the United States, Ortho Biotech and itsaffiliate, Janssen-Cilag, will commercialize VELCADE outside of the United States. We areentitled to royalties from Ortho Biotech and its affiliate Janssen-Cilag on sales ofVELCADE outside of the United States. We also retain an option to co-promote VELCADE at afuture date in certain European countries. 

*INTEGRILIN®(eptifibatide) Injection*

        Ourmarket-leading cardiovascular product, INTEGRILIN, has been marketed in the United Statessince 1998 and outside the United States since 1999. In the United States, we co-promoteINTEGRILIN with Schering-Plough Ltd. and Schering-Plough Corporation, togetherreferred to as SGP, and share profits and losses. Outside the United States, SGP sellsINTEGRILIN pursuant to a royalty-bearing license. 

***Revenues***

        Historically,we have derived our revenue from payments from our strategic alliances with majorpharmaceutical companies. With the February 2002 acquisition of COR Therapeutics, Inc., orCOR, we began generating co-promotion revenue based on sales of INTEGRILIN. In May 2003,we began recording product sales from VELCADE. We expect that our revenue mix willcontinue to shift to product-based revenue as we develop
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our product pipeline,commercialize additional products and enter into new commercial alliances, and ourdiscovery-focused alliances conclude. 
*        VELCADETM(bortezomib) for Injection Revenue*

        Werecord sales of VELCADE in the U.S., net of estimated product returns and discounts, asnet product sales. We will record royalty and milestone payments, if any, when earned asroyalty revenue and revenue under strategic alliances, respectively. We will record reimbursement ofdevelopment costs by Ortho Biotech as revenue under strategic alliancesin the period in which the related costs are incurred. 

*        INTEGRILIN®(eptifibatide) Injection Revenue*

        In thefirst quarter of 2002, we began recognizing co-promotion revenue that principally relatesto our share of the profits from the sale of INTEGRILIN by SGP in co-promotion territoriesunder our collaboration agreement with SGP to jointly develop and commercialize INTEGRILINon a worldwide basis. Co-promotion revenues also include recognition of reimbursement fromSGP of our manufacturing-related costs, advertising and promotional expenses associatedwith the sale of INTEGRILIN within co-promotion territories and royalties from SGP onsales of INTEGRILIN outside the co-promotion territory. 

*        Revenue underStrategic Alliances*

        Wehave entered into research, development, technology transfer and commercializationarrangements with major pharmaceutical and biotechnology companies relating to a broadrange of therapeutic products. These alliances provide us with the opportunity to receivevarious combinations of equity investments, license fees and research funding, and mayprovide certain additional payments contingent upon our achievement of research andregulatory milestones and royalties and/or share profits if our collaborations aresuccessful in developing and commercializing products. 

        Thesealliances are usually established for a fixed term, typically five years. Upon expirationof the initial term, unless renewed or earlier terminated, revenue funding under theseagreements ceases. We expect revenues from our discovery-focused alliances to continue todecline as our existing alliances expire. 

        Inaddition to our collaboration agreements with SGP and Ortho Biotech, our major alliancesfrom which we have or may recognize revenues include: 
 • a June 2000 joint development and commercialization agreement with Aventis Pharmaceuticals, Inc., or Aventis, in              inflammatory diseases; and     • a September 1998 research agreement with Bayer AG, or Bayer, in cardiovasculardiseases, and specified areas of oncology, pain, hematology, atherosclerosis, thrombosis,urology and viral infections.
        InApril 2003, Aventis exercised its option effective July 21, 2003 to terminate a technologytransfer agreement with us. Upon exercising this option, Aventis paid us $40.0 million inconsideration for future use of certain technology transferred to Aventis prior to thetermination date. Termination of the technology transfer agreement has no effect on theexisting five-year joint development and commercialization agreement in
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inflammation. Weexpect the joint development and commercialization agreement with Aventis in the field ofinflammatory disease to continue through 2005.

        InOctober 2003, the research phase of our five-year alliance with Bayer ended. Bayer andMillennium amended the agreement to provide both parties access to the balance ofidentified targets for a period of seven years. If Bayer successfully develops andcommercializes any of these targets discovered in the alliance, Bayer will owe us success and royalty payments on the sale of products generated from the alliance. 

        Wehave also entered into a number of arrangements for the commercialization of productsunder which we share the costs for the development and eventual commercialization ofspecified compounds and may receive or be obligated to make product revenue, royalty,milestone or other payments. In addition to operating expenses we incur as a result of ouralliances, we have also made commitments to purchase debt and equity securities of ouralliance partners under certain of these arrangements. These arrangements include: 
 • a December 2001 in-license and development agreement with Xenova Group, plc for novelcompounds for the treatment of solid tumors in cancer;     • an April 2001 in-license and development agreement with BZL Biologics, L.L.C. for biotherapeutic products in the cancer              area.
***Acquisitions***

        Aspart of our business strategy, we consider merger and acquisition opportunities that mayprovide us with products on the market, products in later stage development orcapabilities to accelerate our downstream drug discovery efforts. 

*        COR*

        OnFebruary 12, 2002, we acquired COR for an aggregate purchase price of$1.8 billion through the issuance of approximately 55.1 million shares of ourcommon stock. We recorded the transaction as a purchase for accounting purposes and ourconsolidated financial statements include COR’s operating results from the date ofthe acquisition. The purchase price was allocated, based upon an independent valuation, tothe assets purchased and liabilities assumed based upon their respective fair values, withthe excess of the purchase price over the estimated fair market value of net tangibleassets acquired allocated to in-process research and development, developed technology,trademark and goodwill. The charge to earnings in the nine months ended September 30, 2002for acquired in-process research and development was $242.0 million. Through themerger, we acquired INTEGRILIN® (eptifibatide) Injection and substantial researchcapabilities in the areas of cardiovascular disease and oncology. 

***Disposition of Investmentin Joint Venture***

        Throughour acquisition of LeukoSite, Inc., or LeukoSite, we became a party to a jointventure partnership, Millennium and ILEX Partners, L.P., or M&I, for development ofCAMPATH® (alemtuzumab) humanized monoclonal antibody. We accounted for our investmentin the joint venture under the equity method of accounting. On December 31, 2001,ILEX acquired our equity interest in M&I, which owns the CAMPATH product. In exchangefor our equity interest in M&I, ILEX paid us $20.0 million on December 31,2001 plus additional consideration contingent upon future sales of CAMPATH. We earned$40.0 million of such consideration in the second quarter of 2002.  We earned an additional $40.0million in the second quarter of 2003, $20.0 million of which ILEX paid to us, in the form of cash and stock,in the third quarter of 2003 and the remaining $20.0 million of which we expect ILEX to pay us, in cash, by December 31, 2003.These milestone payments are included in other income. Weare entitled to an additional payment of $40.0 million in 2004, a portion of whichILEX may pay to us in the form of their stock, if sales of CAMPATH in the U.S. meet aspecified threshold. In addition, we are entitled to additional payments from ILEX if U.S.sales of CAMPATH after 2004 exceed specified annual thresholds. 

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***Financial Resources***

        Wehave completed several financings in the past several years. The actual and planned usesof proceeds include: 
 • developing products, including conducting preclinical testing and clinical trials;     • manufacturing and marketing products that are approved for commercial sale;     • acquiring businesses and products that expand or complement our business;     • meeting our debt service obligations; and     • working capital.
        OnApril 29, 2003, we completed the repurchase of $577.8 million aggregate principal amountof the outstanding 5.0% convertible subordinated notes due March 1, 2007, that areconvertible into our common stock at any time prior to maturity at a price equal to $34.21per share (the “5.0% notes”) and 4.5% convertible senior notes due June 15,2006, that are convertible into our common stock at any time prior to maturity at a priceequal to $40.61 per share (the “4.5% notes”) for an aggregate payment ofapproximately $637.1 million, including principal, accrued interest and put premium.Approximately $22.1 million of the 5.0% notes and 4.5% notes in the aggregate were nottendered in the offer and remain outstanding as of September 30, 2003. As a result of therepurchase, we recorded a net charge of approximately $10.5 million which represents thewrite-off of approximately $12.4 million of unamortized original debt issuance costsassociated with the 5.0% notes and 4.5% notes, offset by $1.9 million relating to theexpired put premium on the untendered notes. 

        Duringthe nine months ended September 30, 2003 we received $28.6 million from AbbottLaboratories, or Abbott, for the final purchase of approximately 3.7 million shares of ourcommon stock under our equity investment agreement with Abbott. During the nine monthsended September 30, 2002, we received $85.8 million from Abbott for the purchase ofapproximately 5.1 million shares of our common stock under this agreement. 

        Asof September 30, 2003, we had approximately $919.7 million in cash, cash equivalents andmarketable securities. We primarily invest in investment-grade corporate bonds,asset-backed debt securities and U.S. government agency debt securities. Our investmentobjectives are to preserve principal, maintain a high degree of liquidity to meetoperating needs and obtain competitive returns subject to prevailing market conditions. Weexpect that income from these investments will decline as our cash and marketablesecurities balances decline and will fluctuate based upon market conditions. 

        Weare expanding our commercial operations through internal growth and by utilizing thecapabilities of our alliance partners. As our discovery-focused alliances expire, we areincreasingly focusing our efforts on entering into commercial alliances. We expect toconserve financial resources through workforce planning, facilities consolidation andproduct portfolio management. 

        Weexpect to incur increasing expenses and are likely to incur substantial operating lossesfor at least the next several years, primarily due to our efforts to advance acquiredproducts or our own development programs into commercialization. In particular, weanticipate significant expenditures related to the continued development, launch andcommercialization of VELCADETM (bortezomib) for Injection and increasing ourdevelopment capabilities for our clinical and preclinical product candidates. 

        Weexpect to continue to pursue additional alliances and to consider joint development,merger, or acquisition opportunities that may provide us with access to products on themarket or in later stages of commercial development. Our results of operations for anyperiod may not be indicative of future results as our revenues and expenses may fluctuatefrom period to period or year to year.

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***Reclassifications***

        Inconnection with the launch of VELCADETM (bortezomib) for Injection in May 2003 and therecognition of the related costs of sales, we reclassified certainINTEGRILIN® (eptifibatide) Injection related manufacturing expenses to costof goods sold so that cost of goods sold now includes manufacturing-related expensesassociated with the sales of INTEGRILIN and VELCADE. These reclassifiedmanufacturing-related expenses were previously included in cost of co-promotion revenueand certain INTEGRILIN related advertising and promotional expenses that were previouslyincluded in cost of co-promotion revenue have been reclassified to selling, general andadministrative expenses. 

        Priorperiod amounts have been adjusted to conform to the current year presentation. There wasno impact on net loss in any period. 

**Critical AccountingPolicies and Significant Judgments and Estimates**

        Ourmanagement’s discussion and analysis of our financial condition and results ofoperations are based on our consolidated financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States. Thepreparation of these financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements as well as thereported revenues and expenses during the reporting periods. On an ongoing basis, weevaluate our estimates and judgments, including those related to revenue recognition,inventory, intangible assets and goodwill. We base our estimates on historical experienceand on various other factors that are believed to be appropriate under the circumstances,the results of which form the basis for making judgments about the carrying value ofassets and liabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions. 

        Whileour significant accounting policies are more fully described in Note 2 to ourconsolidated financial statements included in our Form 10-K filed with the SEC on March 7,2003, we believe the following accounting policies are most critical to aid in fullyunderstanding and evaluating our reported financial results. 

        ***Revenue***
        Inconnection with our strategic alliances, we recognize revenue from non-refundable licensepayments and certain milestone payments not specifically tied to a separate earningsprocess, ratably over the term of the research contract. When the period of deferralcannot be specifically identified from the contract, management estimates the period basedupon other critical factors contained within the contract. We continually review theseestimates which could result in a change in the deferral period and might impact thetiming and the amount of revenue recognized. When payments are specifically tied to aseparate earnings process, revenue is recognized when the specific performance obligationassociated with the payment is completed. Performance obligations typically consist ofsignificant milestones in the development life cycle of the related technology, such asinitiation of clinical trials, filing for approval with regulatory agencies and approvalsby regulatory agencies. In addition, when appropriate, we recognize revenue from certainresearch payments based upon the level of research services performed during the period ofthe research contract. 

        OnOctober 31, 2003 the research phase of our alliance with Bayer ended. We recognize theresearch funding portion of our Bayer alliance on a percentage-of-completion basis. Thepercentage-of-completion is determined based upon the actual level of work performedduring the period as compared to our estimate of the total work to be performed under thealliance. We continually review these estimates and adjust as necessary, as experiencedevelops or new information becomes known. In September 2001, we revised the estimate ofthe total work to be performed downward as a result of productivity improvements. Nofurther adjustments were necessary and the accounting estimates used approximate actualefforts from September 2001 to the end of the research phase of the agreement. 

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        Werecognize co-promotion revenue when SGP ships INTEGRILIN®(eptifibatide) Injection to wholesalers. Co-promotionrevenue includes our share of the profits from the sales of INTEGRILIN, reimbursements ofour manufacturing-related costs, advertising and promotional expenses and royalties fromSGP on sales of INTEGRILIN outside the co-promotion territory. We communicate with SGP tocalculate our share of the profits from the sales of INTEGRILIN on a monthly basis. The calculation includes estimates of theamount of advertising and promotional expenses and other costs incurred on a monthlybasis. We also communicate with SGP to estimate royalties earned on sales outside theco-promotion territory. Adjustments to our estimates are based upon actual informationthat we receive subsequent to our reporting deadlines. Our estimates are adjusted on amonthly basis and historically have not been significant due to periodic communicationwith our partner. Significant adjustments in future reporting periods could impact thetiming and the amount of revenue to be recognized.

        Werecognize revenue from the sales of VELCADETM (bortezomib) for Injection in the U.S.when delivery has occurred and title has transferred to the wholesalers. Allowances arerecorded as a reduction to product sales for product returns and discounts at the time ofsale. The allowances are based primarily on historical trends in the pharmaceuticalindustry for similar products and discounts included in our agreements with wholesalers.As we continue to develop company specific experience, our estimates will be continuallyreviewed. If actual future results vary, we may need to adjust our estimates, which couldhave an impact on the timing and amount of revenue to be recognized. 

        ***Inventory***
        Inventoryconsists of currently marketed products and from time to time product candidates awaitingregulatory approval which were capitalized based upon management’s judgment ofprobable near term commercialization. Inventory primarily represents raw materials usedin production, work in process and finished goods inventory on hand, valued at cost. Inventories arereviewed periodically for slow-moving or obsolete status based on sales activity, bothprojected and historical. Our current sales projections provide for full utilization ofthe inventory balance. If product sales levels differ from projections or a launch of anew product is delayed, inventory may not be fully utilized and could be subject toimpairment, at which point we would record a reserve to adjust inventory to its netrealizable value. 

        AtSeptember 30, 2003 and December 31, 2002, inventory does not include any amounts forproducts that have not yet been approved for sale. 

        ***Intangible Assets***
        Wehave acquired significant intangible assets that we value and record. Those assets whichdo not yet have regulatory approval and for which there are no alternative uses areexpensed as acquired in-process research and development, and those that are specificallyidentified and have alternative future uses are capitalized. We use a discounted cash flowmodel to value intangible assets acquired. The discounted cash flow model requiresassumptions about the timing and amount of future cash inflows and outflows, risk, thecost of capital, and terminal values. Each of these factors can significantly affect thevalue of the intangible asset. We engage independent valuation experts who review ourcritical assumptions for significant acquisitions of intangibles. We review intangibleassets for impairment on a periodic basis using an undiscounted net cash flows approach.If the undiscounted cash flows of an intangible asset are less than the carrying value ofan intangible asset, the intangible asset is written down to the discounted cash flowvalue. Where cash flows cannot be identified for an individual asset, the review isapplied at the lowest group level for which cash flows are identifiable. 

        ***Goodwill***
        Weadopted the Financial Accounting Standards Board (“FASB”) SFAS No. 142,“Goodwill and Other Intangible Assets” effective January 1, 2002 andreclassified amounts to goodwill, which were previously allocated to assembled workforce.Upon adoption, we ceased the amortization of goodwill. We completed our transitionalassessment of goodwill in the first quarter of 2002 and no impairment loss was recognized.We test for goodwill impairment annually, on October 1. 

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        OnOctober 1, 2003, we performed our annual goodwill impairment test and determined thatno impairment existed on that date. However, since the date of acquisition of COR, whichgenerated a significant amount of goodwill, we have experienced a significant decline inmarket capitalization due to a decline in stock price. We continually monitor business andmarket conditions to assess whether an impairment indicator exists. If we were todetermine that an impairment indicator exists, we would be required to perform animpairment test which could result in a material impairment charge to our statement ofoperations. 

**        AccountingPronouncements**

        InJune 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exitor Disposal Activities” (“SFAS No. 146”). SFAS No. 146 requires that aliability for a cost associated with an exit or disposal activity be recognized andmeasured initially at its fair value in the period in which the liability is incurred,except for one-time termination benefits that meet certain requirements. We adopted SFASNo. 146 as of December 1, 2002 in association with the discontinuation of certaindiscovery efforts in December 2002. 

        InNovember 2002, the Emerging Issues Task Force (“EITF”) of the FASB issued EITF00-21, “Revenue Arrangements with Multiple Deliverables,” (“EITF00-21”) which addressed certain aspects of the accounting for arrangements thatinvolve the delivery or performance of multiple products, services and/or rights to useassets. Under EITF 00-21, revenue arrangements with multiple deliverables should bedivided into separate accounting units if the deliverables meet certain criteria,including whether the fair value of the delivered items can be determined and whetherthere is evidence of fair value of the undelivered items. In addition, the considerationshould be allocated among the separate units of accounting based on their fair values, andthe applicable revenue recognition criteria should be considered separately for each ofthe separate units of accounting. EITF 00-21 is effective for revenue arrangements enteredinto after June 30, 2003. 

        InDecember 2002, the FASB issued SFAS No. 148, “Accounting for Stock BasedCompensation—Transition and Disclosure” (“SFAS No. 148”).SFAS 148 provides two additional transition methods for entities that adopt the fairvalue method of accounting for stock based compensation. Further, the statement requiresdisclosure of comparable information for all companies regardless of whether, when, or howan entity adopts the fair value based method of accounting. These disclosures are nowrequired for interim periods in addition to the traditional annual disclosure. SFAS 148 iseffective for fiscal periods ending after December 15, 2002. We have provided the newdisclosures in *Stock-Based Compensation* in Note 2 to our condensed consolidatedfinancial statements. 

        InJanuary 2003, the FASB issued Interpretation No. 46, “Consolidation of VariableInterest Entities, an Interpretation of Accounting Research Bulletin No. 51”(“FIN 46”). FIN 46 provides a new consolidation model which determines controland consolidation based on potential variability in gains and losses. We are required toapply the provisions of FIN 46 for variable interests in variable interest entitiescreated after January 31, 2003 immediately. We are required to apply the provisionsof FIN 46 no later than the first interim period ending after December 15, 2003 forvariable interests in variable interest entities created before February 1, 2003. As ofSeptember 30, 2003, we have not invested in any variable interest entities after January31, 2003. 

        InOctober 2003, the FASB issued Staff Position No. FIN 46-6, “Effective Date of FASBInterpretation No. 46, Consolidation of Variable Interest Entities.” This FASB StaffPosition deferred the effective date for applying the provisions of FIN 46 forinterests held by public entities in variable interest entities or potential variableinterest entities created before February 1, 2003. A public entity need not apply theprovisions of FIN 46 to an interest held in a variable interest entity orpotential variable interest entity until the end of the first interim or annual periodending after December 15, 2003 if both of the following apply: 
 • The variable interest entity wascreated before February 1, 2003.     • The public entity has not issued financial statements reporting interests in variableinterest entities in accordance with FIN 46, other than certain requireddisclosures.
        Wewill implement the provisions of FIN 46 for our financial statements for theyear ending December 31, 2003 for any variable interest entities created before February1, 2003. We are currently evaluating what impact, if any, FIN 46 will have on ourfinancial position or results of operations.

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        InMay 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instrumentswith Characteristics of both Liabilities and Equity” (“SFAS No. 150”). SFASNo. 150 establishes standards for classifying and measuring as liabilities certainfinancial instruments that embody obligations of the issuer and have characteristics ofboth liabilities and equity. SFAS No. 150 is effective for all financial instrumentscreated or modified after May 31, 2003, and otherwise effective at the beginning of thefirst interim period beginning after June 15, 2003. We adopted SFAS No. 150 and theadoption did not have a material impact on our financial position or results ofoperations.

**Results of Operations**

**Quarters Ended September30, 2003 and September 30, 2002**

        Forthe three months ended September 30, 2003 (the “2003 Quarterly Period”), wereported a net loss of $92.3 million, or $0.31 per basic and diluted share, comparedto a net loss of $98.9 million, or $0.35 per basic and diluted share for the threemonths ended September 30, 2002 (the “2002 Quarterly Period”). 

        Revenueincreased to $144.8 million for the 2003 Quarterly Period from $95.8 million forthe 2002 Quarterly Period. Net product sales of VELCADETM (bortezomib) for Injection,launched in May 2003, were $23.0 million in the 2003 Quarterly Period. Co-promotionrevenue, based on worldwide sales of INTEGRILIN® (eptifibatide) Injection, was $47.9million for the 2003 Quarterly Period compared to $45.0 million for the 2002 QuarterlyPeriod. Worldwide sales of INTEGRILIN in the 2003 Quarterly Period, as provided to us bySGP, were $79.2 million, a 3% percent increase over sales for the 2002Quarterly Period driven by increased volume and higher average selling prices. Revenueunder strategic alliances increased to $73.9 million in the 2003 Quarterly Periodfrom $50.7 million in the 2002 Quarterly Period. The increase in strategic alliancerevenue primarily relates to the $30.0 million clinical milestone earned under our OrthoBiotech alliance upon the achievement of target enrollment in our Phase III APEX VELCADEclinical trial in patients with multiple myeloma and$9.3 million of revenue recognized upon the April 2003 termination of the Aventistechnology transfer agreement. This increase in strategic alliance revenue is partiallyoffset by the decrease in revenue recognized under our research alliance and technologytransfer agreement with Monsanto Company, or Monsanto, which expired in 2002 at the end ofits original five-year term. In the fourth quarter of 2003, we expect strategic alliance revenueto be lower than it was in previous quarters due to the conclusion of the research phase of theBayer alliance and the Aventis technology transfer agreement.  In addition, we do not expect to earnany additional significant milestones in the fourth quarter of 2003.

        Includedin 2003 Quarterly Period revenue is $2.5 million of revenue that was recognized inprior years relating to the adoption of SAB 101. Included in 2002 Quarterly Period revenueis $8.4 million of revenue that was recognized in prior years relating to theadoption of SAB 101. 

        Costof goods sold includes manufacturing-related expenses associated with the sale ofINTEGRILIN and VELCADE. 

        Researchand development expenses decreased to $119.7 million for the 2003 Quarterly Periodfrom $140.5 million for the 2002 Quarterly Period. During the 2002 Quarterly Period,we made significant investments to support our lead oncology program, VELCADE as well ascertain one-time investments in development infrastructure, which were not necessary inthe 2003 Quarterly Period. In addition, the decrease in research and development expensesfor the 2003 Quarterly Period reflects the financial benefits of our restructuringefforts, including reduced personnel and personnel-related costs. 

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        Inaddition to our ongoing clinical trials of INTEGRILIN® (eptifibatide)Injection and VELCADETM (bortezomib) for Injection, we have eight drug candidates inclinical development. The following chart summarizes the INTEGRILIN and VELCADE clinicaltrials as well as the clinical trials of these eight drug candidates, the applicabledisease indication and the current trial status of the program. 
Product Description Disease Indication Current Trial Status       ***Cardiovascular Diseases***           MLN519 is a smallmolecule proteasomeinhibitor Stroke Phase I       ***Cancer***           VELCADE is a small moleculeproteasome inhibitor Multiple myelomaSolid tumorsNon-Hodgkin'slymphoma Phase IIIPhase IIPhase II       MLN2704 is a targetingmonoclonal antibodyvehicle Prostate cancer Phase I/Phase II       MLN518 is a smallmolecule that selectivelyinhibits F1t-3 Acute myeloid leukemia Phase I       MLN944 is a smallmolecule Solid tumors Phase I       MLN591RL is a de-immunized radio-labeledmurine monoclonalantibody that specificallyrecognizes the proteinPSMA (prostate specificmembrane antigen) Prostate cancer Phase I/Phase II       MLN576 is a smallmolecule with DNAbinding activity Solid and hematologicaltumors Phase I       ***Inflammatory Diseases***           MLN02 is a humanizedmonoclonal antibodydirected against the alpha4Beta7receptor Crohn's diseaseUlcerative colitis Phase IIPhase II       MLN1202 is a humanizedmonoclonal antibodydirected against CCR2 Rheumatoid arthritis Phase II       
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        Completionof clinical trials may take several years or more and the length of time can varysubstantially according to the type, complexity, novelty and intended use of a productcandidate. The types of cost incurred during a clinical trial vary depending upon the typeof product candidate and the nature of the study. 

        CMRInternational, an independent pharmaceutical data collection agency, estimates thatclinical trials in our areas of focus are typically completed over the followingtimelines:
 **Clinical Phase** **Objective** **Estimated Completion Period**                                 Phase I Establish safety in humans, study how the drug works, metabolizes and interacts with other drugs 1-2 years                                 Phase II Evaluate efficacy, optimal dosages and expanded evidence of safety 2-3 years                                 Phase III Confirm efficacy and safety of the product 2-3 years        
        Uponsuccessful completion of phase III clinical trials of a product candidate, we intend tosubmit the results to the FDA to support regulatory approval. However, we cannot becertain that any of our product candidates will prove to be safe or effective, willreceive regulatory approvals, or will be successfully commercialized. Our clinical trialsmight prove that our product candidates may not be effective in treating the disease ormay prove to have undesirable or unintended side effects, toxicities or othercharacteristics that require us to cease further development of the product candidate. Thecost to take a product candidate through clinical trials is dependent upon, among otherthings, the disease indications, the timing, the size and dosing schedule of each clinicaltrial, the number of patients enrolled in each trial and the speed at which patients areenrolled and treated. We could incur increased product development costs if we experiencedelays in trial enrollment, the evaluation of clinical trial results or regulatoryapprovals. 

        Productsthat are likely to result from our research and development projects are based on newtechnologies and new therapeutic approaches that have not been extensively tested inhumans. The regulatory requirements governing these types of products may be more rigorousthan for conventional products. As a result, it is difficult to estimate the nature andlength of the efforts to complete such products as we may experience a longer regulatoryprocess in connection with any products that we develop based upon these new technologiesor therapeutic approaches. In addition, ultimate approval for commercial manufacturing andmarketing of our products is dependent on the FDA or applicable approval body in thecountry for which approval is being sought, adding further uncertainty to estimated costsand completion dates. Significant delays could allow our competitors to bring products tomarket before we do and impair our ability to commercialize our product candidates. 

        Dueto the variability in the length of time necessary to develop a product, the uncertaintiesrelated to the estimated cost of the projects and ultimate ability to obtain governmentalapproval for commercialization, accurate and meaningful estimates of the ultimate cost tobring our product candidates to market are not available. 

        Webudget and monitor our research and development costs by type or category, rather than byproject on a comprehensive or fully allocated basis. Significant categories of costsinclude personnel, clinical, third party research and development services and laboratorysupplies. In addition, a significant portion of our research and development expenses isnot tracked by project as it benefits multiple projects or our technology platform.Consequently, fully loaded research and development cost summaries by project are notavailable. 

        Giventhe uncertainties related to development, we are currently unable to reliably estimatewhen, if ever, our product candidates will generate revenue and cash flows. We do notexpect to receive net cash inflows from any of our major research and development projectsuntil a product candidate becomes a profitable commercial product.

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        Selling,general and administrative expenses increased to $43.0 million for the 2003 QuarterlyPeriod from $41.8 million for the 2002 Quarterly Period. The increase reflects the netimpact of increased selling and marketing expenses related to the launch of VELCADETM (bortezomib) for Injection andthe expansion of the Millennium-SGP sales force for INTEGRILIN® (eptifibatide)Injection offset by decreased consulting and legal expenses. 

        InJune 2003, we announced a broad, accelerated restructuring plan to focus our resources ondevelopment and commercialization. The plan includes consolidation of research anddevelopment facilities, overall headcount reduction and streamlining of discovery anddevelopment projects. As a result, we have recorded restructuring charges of$52.7 million in the 2003 Quarterly Period related to remaining rental obligations onfacilities that we have vacated, contract termination, asset impairment and personnelcosts. Charges related to facilities include the estimated remaining rental obligation,net of estimated sublease income, for facilities that we no longer occupy. Our decisionsto vacate certain facilities and abandon the related leasehold improvements as well asterminate certain research programs were deemed to be impairment indicators under SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFASNo. 144. As a result of performing the impairment evaluations, we recorded assetimpairment charges to adjust the carrying value of the related long lived assets to fairvalue. Fair value of the assets was estimated based upon anticipated future cash flows,discounted at a rate commensurate with the risk involved. We anticipate additionalrestructuring charges in future periods as we continue to execute our restructuring plan.These charges will include additional facilities and personnel costs. 

        Amortizationof intangible assets in the 2003 Quarterly Period and 2002 Quarterly Period relates tospecifically identified intangible assets from the COR acquisition as well as ouracquisitions of LeukoSite in 1999 and Cambridge Discovery Chemistry Ltd., or CDC, in 2000. 

        Investmentincome decreased to $8.5 million in the 2003 Quarterly Period from $22.2 millionin the 2002 Quarterly Period. The decrease is primarily attributable to a lower averagebalance of invested funds in the 2003 Quarterly Period and less favorable marketconditions resulting in lower yields. 

        Interestexpense decreased to $2.7 million in the 2003 Quarterly Period from$10.4 million in the 2002 Quarterly Period, reflecting the April 2003 repurchase of$577.8 million aggregate principal amount of the 5.0% notes and 4.5 % notes. 

**Nine Months EndedSeptember 30, 2003 and September 30, 2002**

        Forthe nine months ended September 30, 2003 (the “2003 Nine Month Period”), wereported a net loss of $337.3 million, or $1.14 per basic and diluted share, comparedto a net loss of $510.5 million, or $1.86 per basic and diluted share for the ninemonths ended September 30, 2002 (the “2002 Nine Month Period”). 

        Revenueincreased to $348.3 million for the 2003 Nine Month Period from $256.2 millionfor the 2002 Nine Month Period. Net product sales of VELCADETM (bortezomib) forInjection were $30.9 million in the 2003 Nine Month Period. Co-promotion revenue, based onworldwide sales of INTEGRILIN, was $151.9 million for the2003 Nine Month Period compared to $112.1 million for the same period in 2002.Co-promotion revenue for the 2002 Nine Month Period is based upon worldwide sales ofINTEGRILIN from the date of the COR acquisition, or February 12, 2002. Revenue understrategic alliances increased to $165.5 million in the 2003 Nine Month Period from$144.1 million in the 2002 Nine Month Period. The increase is primarily due to the$30.0 million clinical milestone earned under the Ortho Biotech alliance and the $40.0million of revenue recognized from the Aventis termination payment. This increase ispartially offset by the decrease in revenue recognized under our research alliance andtechnology transfer agreement with Monsanto, which expired in 2002 at the end of itsoriginal five-year term. 

        Includedin 2003 Nine Month Period revenue is $7.5 million of revenue that was recognized inprior years relating to the adoption of SAB 101. Included in 2002 Nine Month Periodrevenue is $30.5 million of revenue that was recognized in prior years relating tothe adoption of SAB 101. The remaining amount of revenue to be recognized from thecumulative change is approximately $1.1 million, which will be recognized through December2003.

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        Researchand development expenses increased to $377.1 million for the 2003 Nine Month Periodfrom $364.3 million for the 2002 Nine Month Period. The research and developmentexpense categories with the most significant increases were personnel costs, followed byclinical trial costs and facilities expenses. 

        Selling,general and administrative expenses decreased to $122.2 million for the 2003 Nine MonthPeriod from $125.1 million for the 2002 Nine Month Period. The decrease was primarilyattributable to decreased consulting expenses partially offset by the increase in salesand marketing activities for the launch of VELCADETM (bortezomib) for Injection. 

        Wehave recorded restructuring charges of $146.2 million in the 2003 Nine Month Periodrelated to asset impairment, facilities, personnel costs and contract terminations.Charges related to facilities include the estimated remaining rental obligation, net ofestimated sublease income, for facilities that we no longer occupy. Our decisions tovacate certain facilities and abandon the related leasehold improvements as well asterminate certain research programs were deemed to be impairment indicators under SFAS No.144. As a result of performing the impairment evaluations, we recorded asset impairmentcharges to adjust the carrying value of the related long lived assets to fair value. Fairvalue of the assets was estimated based upon anticipated future cash flows, discounted ata rate commensurate with the risk involved. We anticipate additional restructuring chargesin future periods as we continue to execute our restructuring plan. These charges willinclude additional facilities and personnel costs. 

        Werecorded a one-time, non-cash charge to operations in the 2002 Nine Month Period of$242.0 million for acquired in-process research and development in connection withthe COR acquisition. The valuation of acquired in-process research and developmentrepresents the estimated fair value related to five incomplete research and developmentprojects that, at the time of the COR acquisition, had no alternative future use and forwhich technological feasibility had not been established. 

        Amortizationof intangible assets in the 2003 Nine Month Period and 2002 Nine Month Period relates tospecifically identified intangible assets from the COR, LeukoSite and CDC acquisitions.The increase in amortization expense is due to a full nine months of amortization in the2003 Nine Month Period on the COR related intangible assets compared to amortization fromthe date of the COR acquisition in February 2002 through September 30, 2002 in the 2002Nine Month Period. 

        Investmentincome decreased to $26.8 million in the 2003 Nine Month Period from$65.3 million in the 2002 Nine Month Period. The decrease is primarily attributableto a lower average balance of invested funds in the 2003 Nine Month Period and lessfavorable market conditions resulting in lower yields. 

        Interestexpense decreased to $18.2 million in the 2003 Nine Month Period from $27.6 millionin the 2002 Nine Month Period. Decreased interest is due to the April 2003 repurchase of$577.8 million aggregate principal amount of the 5.0% notes and the 4.5% notes. 

        Wesold our equity interest in M&I and in consideration for the sale, we received aninitial payment of $20.0 million in December 2001. During each of the 2003 and 2002 NineMonth Periods, we recorded an additional gain of $40.0 million on our sale of this equityinterest based upon the achievement of predetermined sales targets of CAMPATH®(alemtuzumab) humanized monoclonal antibody for 2003 and 2002 that entitled us to thisadditional consideration under the terms of our agreement with ILEX. 

        Duringthe 2003 Nine Month Period, we recorded a non-cash net charge of $10.5 million whichrepresents the write-off of approximately $12.4 million of unamortized original debtissuance costs associated with the 5.0% notes and 4.5% notes assumed in the CORacquisition, offset by $1.9 million relating to the expired put premium on the untenderednotes as of April 29, 2003. 

        Duringthe 2002 Nine Month Period, we recorded a non-cash charge of $54.0 million relating to thefair value of the put premium placed on the 5.0% notes and 4.5% notes.

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**Liquidity and CapitalResources**

        Werequire cash to fund our operating expenses, to make capital expenditures, acquisitionsand investments and to pay debt service, including principal and interest and capitallease payments. We have also made strategic commitments to purchase debt and equitysecurities from some of our alliance partners in accordance with our Board ofDirectors’ approved policies and our business needs. These investment commitments aregenerally in smaller companies. We may lose money in these investments and our ability toliquidate these investments is in some cases very limited. We may also owe our partnersmilestone payments and royalties. We have committed to fund development costs incurred bysome of our partners. 

        Asdescribed above under “*Overview—Financial Resources*,” we expect thatour cash requirements for many of these uses will increase as the scale of our operationsgrows.

        Historically,we have funded our cash requirements primarily through the following:
 • our co-promotion relationship with SGP for the sale of INTEGRILIN® (eptifibatide) Injection;     • payments from our strategic collaborators including equity investments, license fees, milestone payments and research             funding;     • equity and debt financings in the public markets;     •  property and equipment financings; and     • net cash acquired in connection with acquisitions.
        Inthe future, we expect to continue to fund our cash requirements from some of theseexternal sources as well as the sales of VELCADETM (bortezomib) for Injection,INTEGRILIN and other products. We are entitled to additional committed research anddevelopment funding under a number of our strategic alliances and expect to receiveadditional substantial payments from ILEX as a result of our sale of our joint ventureinterest in M&I. We believe that the key factors that could affect our internal andexternal sources of cash are: 
 • revenues and margins from sales of VELCADE, INTEGRILIN and other products and services forwhich we may obtain marketing approval in the future;     • the success of our clinical and preclinical development programs;     • the receptivity of the capital markets to financings by biopharmaceutical companies;     • our ability to enter into additional strategic collaborations and to maintain existing and new collaborations and the              success of such collaborations; and     • the sales levels of CAMPATH® (alemtuzumab) humanized monoclonal antibody and otherproducts that may be sold in the future by companies that may owe us royalty, milestone orother payments on account of such products.
        Asof September 30, 2003, we had approximately $919.7 million in cash, cash equivalents andmarketable securities. This excludes $21.2 million of interest-bearing marketablesecurities classified as restricted cash on our balance sheet as of September 30, 2003,which serve as collateral for letters of credit securing leased facilities.

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        ***Cash Flows***
        Weused $208.8 million of cash in operating activities in the 2003 Nine Month Period and$269.1 million in the 2002 Nine Month Period. The principal use of cash in operatingactivities in both 2003 and 2002 was to fund our net loss. 

        Weused $461.2 million of cash in investing activities in the 2003 Nine Month Period.Investing activities provided cash of $212.0 million in the 2002 Nine Month Period. Theprincipal uses of funds in the 2003 Nine Month Period and 2002 Nine Month Period werepurchases of marketable securities and property and equipment and other long term assets.The principal source of funds in the 2002 Nine Month Period is from the sale of marketablesecurities and the cash acquired in the COR acquisition. 

        Inthe 2003 Nine Month period, we used $587.2 million of cash in financing activities. Theprimary use of cash was the repurchase of $577.8 million in principal of convertible notesand the related put premium of $52.1 million. Financing activities provided net cash of$82.5 million in the 2002 Nine Month Period. The principal sources of net cash fromfinancing activities were the sales of common stock to Abbott and Millennium employees inthe 2003 and 2002 Nine Month Periods. 

        Webelieve that our existing cash and cash equivalents, internally generated funds and theanticipated cash payments from our current strategic alliances will be sufficient tosupport our expected operations, fund our debt service obligations and fund our capitalcommitments for at least the next several years. 

        ***Contractual Obligations***
        Ourmajor outstanding contractual obligations relate to our facilities leases, convertiblenotes, capital leases from equipment financings and commitments to purchase debt andequity securities from certain partners. 

        Asof September 30, 2003, our convertible notes aggregated $105.5 million in principalamount outstanding. All three issues of notes require semi-annual interest paymentsthrough maturity. All required interest payments have been made to date. As of September30, 2003, these notes consisted of:
 • $83.3 million of our 5.5% notes;     • $16.3 million of our 5.0% notes; and     • $5.9 million of our 4.5% notes.
        InFebruary 2001, we entered into a lease agreement relating to a building forlaboratory and office space in Cambridge, England. The lease has a term of 20 yearsand commenced in 2003. We were responsible for a portion of the construction costs, whichwe estimate to be approximately $21.0 million. Rent is expected to be approximately$2.8 million per year based upon foreign currency exchange rates at September 30,2003 and is subject to market adjustments at the end of the 5th,10th and 15th years. In connection with our June 2003 restructuringplan, we no longer occupy this space and have abandoned the related leasehold improvementsas part of consolidating our facilities. This decision was deemed to be an impairmentindicator under SFAS No. 144 and asset impairment charges were recorded to restructuringto adjust the carrying value of the related long-lived assets to their net realizablevalues. Any rental expense, net of estimated sub-leasing income, will be recorded as arestructuring charge in the fourth quarter of 2003.

        Wealso have lease obligations relating to two new buildings for laboratory and office spacein Cambridge, Massachusetts. The rent obligation for the first of these buildings began inJuly 2002 and the rent on the second building began in July 2003. Rent is calculatedon an escalating scale ranging from approximately $7.6 million, per building peryear, to approximately $9.7 million, per building per year. Each lease is for a termof seventeen years. We were responsible for a portion of the construction costs for bothbuildings and were deemed to be the owner during the construction period of each buildingunder EITF 97-10, “The Effect of Lessee Involvement in Asset Construction.” As aresult, during the 2003 Nine Month Period, we recorded approximately $6.7 million andduring
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the 2002 Nine Month Period, we recorded approximately $27.6 million ofadditional non-cash construction costs under these leases.

        Therehave been no significant changes to our contractual obligations and commercial commitmentsincluded in our Form 10-K as of December 31, 2002. 

**RISK FACTORS THAT MAYAFFECT RESULTS**

        ThisQuarterly Report on Form 10-Q and certain other communications made by us containforward-looking statements, including statements about our growth and future operatingresults, discovery and development of products, potential acquisitions, strategicalliances and intellectual property. For this purpose, any statement that is not astatement of historical fact should be considered a forward-looking statement. We oftenuse the words “believe,” “anticipate,” “plan,”“expect,” “intend” and similar expressions to help identifyforward-looking statements. 

        Wecannot assure investors that our assumptions and expectations will prove to have beencorrect. Important factors could cause our actual results to differ materially from thoseindicated or implied by forward-looking statements. Factors that could cause or contributeto such differences include those factors discussed below. We undertake no intention orobligation to update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. 

**Regulatory Risks**

**Our business may be harmed if wedo not obtain approval to market INTEGRILIN® (eptifibatide) Injection andVELCADETM (bortezomib) for Injection for additional therapeutic uses.**

        INTEGRILINand VELCADE have been approved for specific therapeutic uses. Part of our strategy to growour business is to market INTEGRILIN and VELCADE for additional indications. To do so, wewill need to obtain the appropriate regulatory approvals. If we are unsuccessful inobtaining authorizations for expanded uses of INTEGRILIN or VELCADE, our revenues may notgrow as expected and our business and operating results will be harmed.

**We may not be able to obtainapproval in additional jurisdictions to market VELCADE.**

        Wehave filed a Marketing Authorization Application with the European Agency for theEvaluation of Medicinal Products, or EMEA, for approval to market VELCADE. The EMEA maynot grant marketing approval for VELCADE within the time frame that we anticipate or atall. For example, we filed our application for the approval of VELCADE by the EMEA basedon phase II clinical trial data. It is possible that the EMEA will not approve VELCADE formarketing prior to our completion of the ongoing phase III clinical trials of VELCADE andthe filing of the results of such phase III trials with the EMEA. 

        Ifwe are not able to obtain approval to market VELCADE in additional jurisdictions, we willlose the opportunity to sell in those jurisdictions and will not be able to earn potentialmilestone payments under our agreement with Ortho Biotech. 

**We may not be able to obtainmarketing approval for products or services resulting from our development efforts.**

        Theproducts that we are developing require research and development, extensive preclinicalstudies and clinical trials and regulatory approval prior to any commercial sales. Thisprocess is expensive and lengthy, and can often take a number of years. In some cases, thelength of time that it takes for us to achieve various regulatory approval milestonesaffects the payments that we are eligible to receive under our strategic allianceagreements. 

        Wemay need to successfully address a number of technological challenges in order to completedevelopment of our products. Moreover, these products may not be effective in treating anydisease or may prove to
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have undesirable or unintended side effects, toxicities or othercharacteristics that may preclude our obtaining regulatory approval or prevent or limitcommercial use.

**If we fail to comply withregulatory requirements, or if we experience unanticipated problems with our approvedproducts, our products could be subject to restrictions or withdrawal from the market.**

        Anyproduct for which we obtain marketing approval, along with the manufacturing processes,post-approval clinical data and promotional activities for such product, is subject tocontinual review and periodic inspections by the Food and Drug Administration, or FDA, andother regulatory bodies. In particular, the marketing approval that we received from theFDA for VELCADE requires that we satisfactorily complete specified post-approval clinicaltrials of this product. Later discovery of previously unknown problems with our productsor manufacturing processes, or failure to comply with regulatory requirements, may resultin restrictions on such products or manufacturing processes, withdrawal of the productsfrom the market or the imposition of civil or criminal penalties. 

**We have only limited experience inregulatory affairs, and some of our products may be based on new technologies; thesefactors may affect our ability or the time we require to obtain necessary regulatoryapprovals.**

        Wehave only limited experience in filing and prosecuting the applications necessary to gainregulatory approvals. Moreover, certain of the products that are likely to result from ourresearch and development programs may be based on new technologies and new therapeuticapproaches that have not been extensively tested in humans. The regulatory requirementsgoverning these types of products may be more rigorous than for conventional products. Asa result, we may experience a longer regulatory process in connection with any productsthat we develop based on these new technologies or new therapeutic approaches. 

**Risks Relating to OurBusiness, Strategy and Industry**

**Our revenues over the next severalyears will be materially dependent on the commercial success of INTEGRILIN®(eptifibatide) Injection and VELCADETM (bortezomib) for Injection.**

        Ourrevenues over the next several years will be materially dependent on the commercialsuccess of INTEGRILIN, which has been on the market in the United States since June 1998,and VELCADE, which was approved by the FDA in May 2003 and commercially launched in theUnited States shortly after that date. Because of the recent introduction of VELCADE, wehave very limited experience as to the sales levels of this product. Marketing ofINTEGRILIN outside the United States commenced in mid-1999. Demand for GP IIb-IIIainhibitors, such as INTEGRILIN, has been softening since the beginning of 2003. Ourbusiness plan contemplates our receiving marketing authorization to sell VELCADE outsidethe United States for the treatment of patients with multiple myeloma and both in theUnited States and abroad for other indications and we will be adversely affected if we do not receive such approvals. We will not achieve our business plan, andwe may be forced to scale back our operations and research and development programs, if: 
 • we do not obtain regulatory approval to sell INTEGRILIN for additional therapeutic uses;     • physicians change their patterns for prescribing GP IIb-IIIa inhibitors, such as INTEGRILIN, for the current indications of              INTEGRILIN; or     • the sales of VELCADE do not meet our expectations.
**We face substantial competition,and others may discover, develop or commercialize products and services before or moresuccessfully than we do.**

        Thefields of biotechnology and pharmaceuticals are highly competitive. Many of ourcompetitors are substantially larger than we are, and these competitors have substantiallygreater capital resources, research and development staffs and facilities than we have.Furthermore, many of our competitors are more experienced than we are in drug discovery,development and commercialization, obtaining regulatory approvals and productmanufacturing and marketing. As a result, our competitors may discover, develop andcommercialize pharmaceutical products or services before we do. In addition, ourcompetitors may discover, develop and
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commercialize products or services that rendernon-competitive or obsolete the products or services that we or our collaborators havedeveloped or are seeking to develop and commercialize.

        Dueto the incidence and severity of cardiovascular diseases, the market for therapeuticproducts that address these diseases is large, and we expect the already intensecompetition in this field to increase. Our most significant competitors are majorpharmaceutical companies and biotechnology companies. The two products that competedirectly with INTEGRILIN® (eptifibatide) Injection in the GP IIb-IIIa market segmentare ReoPro® (abciximab), which is produced by Johnson & Johnson and sold byJohnson & Johnson and Eli Lilly and Company, and Aggrastat® (tirofiban HCl), whichis produced and sold by Merck & Co., Inc. outside of the United States and by Guilford Pharmaceuticals, Inc. in the United States. Other competitive factors thatcould negatively affect INTEGRILIN include:
 • competition from drug-coated stents;     • expanded use of heparin replacement therapies in patients undergoing balloon angioplasty; and     • increased use of another class of anti-platelet drugs known as ADP inhibitors in patientswhose symptoms make them potential candidates for treatment with INTEGRILIN.
        Withrespect to VELCADETM (bortezomib) for Injection, we face competition from CelgeneCorporation’s Thalomid® (thalidomide), a treatment for complications associatedwith leprosy, which is increasingly used for multiple myeloma based on data published inpeer-reviewed publications. We also face competition for VELCADE from traditionalchemotherapy treatments, and there are other potentially competitive therapies for VELCADEthat are in late-stage clinical development for the treatment of multiple myeloma. Inaddition, multiple myeloma therapies in development may reduce the number of patientsavailable for VELCADE treatment through enrollment of these patients in clinical trials ofthese potentially competing products. 

**Sales of INTEGRILIN and possiblyVELCADE in particular reporting periods may be affected by fluctuations in buyingpatterns.**

        Asignificant portion of INTEGRILIN domestic pharmaceutical sales is made to major drugwholesalers. These sales are affected by fluctuations in the buying patterns of thesewholesalers and the corresponding changes in inventory levels maintained by them. Thesechanges may not reflect underlying prescriber demand. Additionally, we expect that salesfrom INTEGRILIN will generally be lower in the summer months because fewer medicalprocedures are typically performed during these months. These fluctuations in sales ofINTEGRILIN may have a material adverse effect on our results of operations for particularreporting periods. It is possible that sales of VELCADE will be similarly affected byfluctuations in buying patterns. 

**Because discovering drugs basedupon genomics is new, it is possible that our discovery process will not result incommercial products or services.**

        Theprocess of discovering drugs based upon genomics is new and evolving rapidly. We focus aportion of our research on diseases that may be linked to several or many genes working incombination. Both we and the general scientific and medical communities have only alimited understanding of the role that genes play in these diseases. To date, we have notcommercialized any products discovered through our genomics research, and we may not besuccessful in doing so in the future. In addition, relatively few products based on genediscoveries have been developed and commercialized by others. Rapid technologicaldevelopment by us or others may result in compounds, products or processes becomingobsolete before we recover our development expenses. 

**If our clinical trials areunsuccessful, or if they experience significant delays, our ability to commercializeproducts will be impaired.**

        Wemust provide the FDA and foreign regulatory authorities with preclinical and clinical datademonstrating that our products are safe and effective before they can be approved forcommercial sale. Clinical development, including preclinical testing, is a long, expensiveand uncertain process. It may take us several years to complete our testing, and failurecan occur at any stage of testing. Interim results of preclinical or clinical studies do
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not necessarily predict their final results, and acceptable results in early studies mightnot be seen in later studies. Any preclinical or clinical test may fail to produce resultssatisfactory to the FDA. Preclinical and clinical data can be interpreted in differentways, which could delay, limit or prevent regulatory approval. Negative or inconclusiveresults from a preclinical study or clinical trial, adverse medical events during aclinical trial or safety issues resulting from products of the same class of drug couldcause a preclinical study or clinical trial to be repeated or a program to be terminated,even if other studies or trials relating to the program are successful. For example, in2002, we discontinued the development of MLN977 for the treatment of chronic asthma,because three patients in a phase II clinical study experienced elevations in their liverenzymes that were likely related to the use of the product. This adverse event mightsubstantially diminish the commercial viability of MLN977 as an oral drug for thetreatment of chronic asthma.

        Wemay not complete our planned preclinical or clinical trials on schedule or at all. We maynot be able to confirm the safety and efficacy of our potential drugs in long-termclinical trials, which may result in a delay or failure to commercialize our products. Inaddition, due to the substantial demand for clinical trial sites in the cardiovasculararea, we may have difficulty obtaining a sufficient number of appropriate patients orclinician support to conduct our clinical trials as planned. As a result, we may have toexpend substantial additional funds to obtain access to resources or delay or modify ourplans significantly. Our product development costs will increase if we experience delaysin testing or approvals. Significant clinical trial delays could allow our competitors tobring products to market before we do and impair our ability to commercialize our productsor potential products. 

**We may not be able to obtainbiological material, including human and animal DNA and RNA samples, required for ourgenetic studies, which could delay or impede our drug discovery efforts.**

        Ourdrug discovery strategy uses genetic studies of families and populations prone toparticular diseases. These studies require the collection of large numbers of DNA and RNAsamples from affected individuals, their families and other suitable populations as wellas animal models. The availability of DNA and RNA samples and other biological material isimportant to our ability to discover the genes responsible for human diseases throughhuman genetic approaches and other studies. Competition for these resources is intense.Access to suitable populations, materials and samples could be limited by forces beyondour control, including governmental actions. Some of our competitors may have obtainedaccess to significantly more family and population resources and biological materials thanwe have obtained. As a result, we may not be able to obtain access to DNA and RNA samplesnecessary to support our human discovery programs. 

**Because many of the products andservices that we develop will be based on new technologies and therapeutic approaches, themarket may not be receptive to these products and services upon their introduction.**

        Thecommercial success of any of our products and services for which we may obtain marketingapproval from the FDA or other regulatory authorities will depend upon their acceptance bythe medical community and third party payors as clinically useful, cost-effective andsafe. Many of the products and services that we are developing are based upon newtechnologies or therapeutic approaches. As a result, it may be more difficult for us toachieve market acceptance of our products and services, particularly the first productsand services that we introduce to the market based on new technologies and therapeuticapproaches. Our efforts to educate the medical community on these potentially uniqueapproaches may require greater resources than would be typically required for products andservices based on conventional technologies or therapeutic approaches. The safety,efficacy, convenience and cost-effectiveness of our products as compared to competitiveproducts will also affect market acceptance. 

**Ethical, legal and social issuesrelated to the use of genetic information and genetic testing may cause less demand forour products.**

        Genetictesting has raised issues regarding confidentiality and the appropriate uses of theresulting information. This could lead to governmental authorities calling for limits onor regulation of the use of genetic testing or prohibiting testing for geneticpredisposition to certain diseases. Any of these scenarios could hinder our ability toenroll patients in clinical trials which are necessary for us to gain regulatory approvalof our products. 

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**Risks Relating to OurFinancial Results and Need for Financing**

**We have incurred substantiallosses and expect to continue to incur losses. We will not be successful unless we reversethis trend.**

        Wehave incurred losses of $337.3 million for the nine months ended September 30, 2003 andlosses of $590.2 million for the year ended December 31, 2002, $192.0 million for the yearended December 31, 2001 and $355.3 million for the year ended December 31, 2000. We expectto continue to incur substantial operating losses for at least the next several years.Prior to our acquisition of COR Therapeutics, Inc., substantially all of our revenuesresulted from payments from collaborators, and not from the sale of products. In 2002, werecognized significant investment income from our investment portfolio. We expect thatinvestment income will be lower in 2003 as a result of lower cash balances and lowerreturns on investments. 

        Weexpect to continue to incur significant expenses in connection with our research anddevelopment programs and commercialization activities. As a result, we will need togenerate significant revenues to pay these costs and achieve profitability. We cannot becertain whether or when we will become profitable because of the significant uncertaintieswith respect to our ability to generate revenues from the sale of products and servicesand from existing and potential future strategic alliances. 

**We may need additional financing,which may be difficult to obtain. Our failure to obtain necessary financing or doing so onunattractive terms could adversely affect our business and operations.**

        Wewill require substantial funds to conduct research and development, including preclinicaltesting and clinical trials of our potential products. We will also require substantialfunds to meet our obligations to our collaborators and maximize the prospective benefitsto us from our alliances, manufacture and market products and services that are approvedfor commercial sale, including INTEGRILIN® (eptifibatide) Injection and VELCADETM(bortezomib) for Injection, and meet our debt service obligations. Additional financingmay not be available when we need it or may not be available on favorable terms. 

        Ifwe are unable to obtain adequate funding on a timely basis, we may have to delay orcurtail our research and development programs or our product commercialization activities.We could be required to seek funds through arrangements with collaborators or others thatmay require us to relinquish rights to certain of our technologies, product candidates orproducts which we would otherwise pursue on our own. 

**Our indebtedness and debt serviceobligations may adversely affect our cash flow and otherwise negatively affect ouroperations.**

        AtSeptember 30, 2003, we had approximately $105.5 million of outstanding convertible debt.During each of the last five years, our earnings were insufficient to cover our fixedcharges. We will be required to make interest payments on our outstanding convertiblenotes totaling approximately $16.8 million over the next three years, assuming ourconvertible debt remains outstanding until maturity. 

        Wemay in the future incur additional indebtedness, including long-term debt, credit linesand property and equipment financings to finance capital expenditures. We intend tosatisfy our current and future debt service obligations from cash generated by ouroperations, our existing cash and investments and, in the case of principal payments atmaturity, funds from external sources. We may not have sufficient funds and we may beunable to arrange for additional financing to satisfy our principal or interest paymentobligations when those obligations become due. Funds from external sources may not beavailable on acceptable terms, or at all. 

        Ourindebtedness could have significant additional negative consequences, including: 
 • increasing our vulnerability to general adverse economic and industry conditions;     • limiting our ability to obtain additional financing;
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 • requiring the dedication of a substantial portion of our expected cash flow fromoperations to service our indebtedness, thereby reducing the amount of our expected cashflow available for other purposes, including capital expenditures and research anddevelopment;     • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and     • placing us at a possible competitive disadvantage to less leveraged competitors andcompetitors that have better access to capital resources.
**We have sold our interest inCAMPATH® (alemtuzumab) humanized monoclonal antibody; our financial plan assumes wewill receive future significant payments that are contingent on the achievement of salesthresholds for the product.**

        OnDecember 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium &ILEX Partners, L.P. or M&I, which owns the CAMPATH product. In exchange for our equityinterest in M&I, ILEX paid us $20.0 million on December 31, 2001 plus additionalconsideration contingent upon future sales of CAMPATH. We earned $40.0 million of suchconsideration in the second quarter of 2002. We earned an additional $40.0million in the second quarter of 2003, $20.0 million of which ILEX paid to us, in the form of cash and stock,in the third quarter of 2003 and the remaining $20.0 million of which we expect ILEX to pay us, in cash, by December 31, 2003.We are entitled to an additional payment of $40.0 million in 2004, a portion of whichILEX may pay to us in the form of their stock, if sales of CAMPATH in the U.S. meet aspecified threshold.In addition, we will be entitled to additional payments from ILEX if United States salesof CAMPATH after 2004 exceed specified annual thresholds. If these thresholds are notachieved, we will not receive any future additional payments related to CAMPATH. We haveno ability to influence the actions of the entity that owns CAMPATH. Therefore, we have nocontrol over the financial success of CAMPATH or our ability to earn additional revenuesfrom the product.

**If we do not achieve theanticipated benefits of our recently announced restructuring, or if the costs of thisrestructuring exceed anticipated levels, our business could be harmed.**

        OnJune 5, 2003, we announced a restructuring designed to focus our resources on developmentand commercialization of product opportunities and achieving our goal of becomingprofitable in the future. We may not achieve the cost savings anticipated from therestructuring because such savings are difficult to predict and speculative in nature. Inaddition, during 2003, 2004 and 2005 we expect to record total charges relating to therestructuring of between $225.0 million and $250.0 million. While we believe this estimateto be reasonable, it is possible that the actual charges will exceed this range. Forexample, we may not be able to lease facilities that we plan to close in connection withthe restructuring as quickly or on as favorable terms as we anticipate. 

**Risks Relating toCollaborators**

**We depend significantly on ourcollaborators to work with us to develop and commercialize products and services.**

        Wemarket and sell INTEGRILIN® (eptifibatide) Injection through an alliance with SGP and,following any regulatory approvals outside of the United States, will develop andcommercialize VELCADETM (bortezomib) for Injection outside of the United Statesthrough an alliance with Ortho Biotech Products, L.P., a wholly owned subsidiary ofJohnson & Johnson. We conduct substantial discovery and development activities throughstrategic alliances. We expect to enter into additional alliances in the future,especially in connection with product commercialization. The success of our alliancesdepends heavily on the efforts and activities of our collaborators. 

        Eachof our collaborators has significant discretion in determining the efforts and resourcesthat it will apply to the alliance. Our existing and any future alliances may not bescientifically or commercially successful. 

        Therisks that we face in connection with these alliances include the following: 
 • All of our strategic alliance agreements are for fixed terms and are subject totermination under various circumstances, including, in many cases, on short notice withoutcause. For example, we agreed to end
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   our joint development and commercialization agreementwith Abbott Laboratories in August 2003, our technology transfer alliance with AventisPharmaceuticals, Inc. ended in July 2003 and the research phase of our five-year alliancewith Bayer AG ended in October 2003.      • In our strategic alliance agreements, we generally agree not to conduct specified types ofresearch and development in the field that is the subject of the alliance. Theseagreements may have the effect of limiting the areas of research and development that wemay pursue, either alone or in collaboration with third parties.     • Our collaborators may develop and commercialize, either alone or with others, products andservices that are similar to or competitive with the products and services that are thesubject of the alliance with us.     • Our collaborators may change the focus of their development and commercialization efforts.Pharmaceutical and biotechnology companies historically have re-evaluated their prioritiesfollowing mergers and consolidations, which have been common in recent years in theseindustries. The ability of certain of our products to reach their potential could belimited if our collaborators decrease or fail to increase spending related to suchproducts.      • We expect to rely on our collaborators to manufacture many products covered by ouralliances. For example, SGP is one of the manufacturers of INTEGRILIN® (eptifibatide)Injection.
**We may not be successful inestablishing additional strategic alliances, which could adversely affect our ability todevelop and commercialize products and services.**

        Animportant element of our business strategy is entering into strategic alliances for thedevelopment and commercialization of products and services when we believe that doing sowill maximize product value. In some instances, if we are unsuccessful in reaching anagreement with a suitable collaborator, we may fail to meet certain of our businessobjectives for the applicable product or program. We face significant competition inseeking appropriate collaborators. Moreover, these alliance arrangements are complex tonegotiate and time-consuming to document. We may not be successful in our efforts toestablish additional strategic alliances or other alternative arrangements. The terms ofany additional strategic alliances or other arrangements that we establish may not befavorable to us. Moreover, such strategic alliances or other arrangements may not besuccessful. 

**Risks Relating toIntellectual Property**

**If we are unable to obtain patentprotection for our discoveries, the value of our technology and products will be adverselyaffected. If we infringe patent or other intellectual property rights of third parties, wemay not be able to develop and commercialize our products and services or the cost ofdoing so may increase.**

        Ourpatent positions, and those of other pharmaceutical and biotechnology companies, aregenerally uncertain and involve complex legal, scientific and factual questions. 

        Ourability to develop and commercialize products and services depends in significant part onour ability to: 
 • obtain patents;     • obtain licenses to the proprietary rights of others on commercially reasonable terms;     • operate without infringing upon the proprietary rights of others;     • prevent others from infringing on our proprietary rights; and     • protect trade secrets.
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**There is significant uncertaintyabout the validity and permissible scope of patents in our industry, which may make itdifficult for us to obtain patent protection for our discoveries.**

        Thevalidity and permissible scope of patent claims in the pharmaceutical and biotechnologyfields, including the genomics field, involve important unresolved legal principles andare the subject of public policy debate in the United States and abroad. For example,there is significant uncertainty both in the United States and abroad regarding thepatentability of gene sequences in the absence of functional data and the scope of patentprotection available for full-length genes and partial gene sequences. Moreover, somegroups have made particular gene sequences available in publicly accessible databases.These and other disclosures may adversely affect our ability to obtain patent protectionfor gene sequences claimed by us in patent applications that we file subsequent to suchdisclosures. There is also some uncertainty as to whether human clinical data will berequired for issuance of patents for human therapeutics. If such data are required, ourability to obtain patent protection could be delayed or otherwise adversely affected. 

**Third parties may own or controlpatents or patent applications and require us to seek licenses, which could increase ourdevelopment and commercialization costs, or prevent us from developing or marketing ourproducts or services.**

        Wemay not have rights under some patents or patent applications related to some of ourexisting and proposed products, processes or services. Third parties may own or controlthese patents and patent applications in the United States and abroad. Therefore, in somecases, such as those described below, in order to develop, manufacture, sell or importsome of our existing and proposed products, processes or services, we or our collaboratorsmay choose to seek, or be required to seek, licenses under third-party patents issued inthe United States and abroad or those that might issue from United States and foreignpatent applications. In such event, we would be required to pay license fees or royaltiesor both to the licensor. If licenses are not available to us on acceptable terms, we orour collaborators may not be able to develop, manufacture, sell or import these products,processes or services. 

        Withrespect to our product candidate MLN01, we are aware of third-party patents and patentapplications which relate to anti-CD18 antibodies and their use in various methods oftreatment, including methods of reperfusion therapy and methods of treating focal ischemicstroke. In addition, our MLN01 and MLN02 product candidates are humanized monoclonalantibodies. We are aware of third-party patents and patent applications that relate tohumanized or modified antibodies, products useful for making humanized or modifiedantibodies and processes for making and using humanized or modified antibodies. We arealso aware of third-party patents and patent applications relating to manufacturingprocesses for humanized or modified antibodies, products thereof and materials useful insuch processes. With respect MLN591RL and MLN2704, we are also aware of third-party patentapplications relating to anti-PSMA antibodies. 

        Withrespect to VELCADETM (bortezomib) for Injection and other proteasome inhibitors in thetreatment of myocardial infarctions, we are aware of the existence of a potentiallyinterfering patent application filed by a third party. In addition, on June 26, 2002,Ariad Pharmaceuticals, Inc. sent to us and approximately 50 other parties a letteroffering a sublicense for the use of United States Patent No. 6,410,516, which isexclusively licensed to Ariad. If this patent is valid and Ariad successfully sues us forinfringement, we would require a license from Ariad in order to manufacture and marketVELCADE. 

**We may become involved inexpensive patent litigation or other proceedings, which could result in our incurringsubstantial costs and expenses or substantial liability for damages or require us to stopour development and commercialization efforts.**

        Therehas been substantial litigation and other proceedings regarding the patent and otherintellectual property rights in the pharmaceutical and biotechnology industries. We maybecome a party to patent litigation or other proceedings regarding intellectual propertyrights. For example, we believe that we hold patent applications that cover genes that arealso claimed in patent applications filed by others. Interference proceedings before theUnited States Patent and Trademark Office may be necessary to establish which party wasthe first to invent these genes.

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        Thecost to us of any patent litigation or other proceeding, even if resolved in our favor,could be substantial. Some of our competitors may be able to sustain the cost of suchlitigation or proceedings more effectively than we can because of their substantiallygreater financial resources. If a patent litigation or other proceeding is resolvedagainst us, we or our collaborators may be enjoined from developing, manufacturing,selling or importing our products, processes or services without a license from the otherparty and we may be held liable for significant damages. We may not be able to obtain anyrequired license on commercially acceptable terms or at all. 

        Uncertaintiesresulting from the initiation and continuation of patent litigation or other proceedingscould have a material adverse effect on our ability to compete in the marketplace. Patentlitigation and other proceedings may also absorb significant management time. 

**Risks Relating toProduct Manufacturing, Marketing and Sales**

**Because we have limited sales,marketing and distribution experience and capabilities, we may be dependent on thirdparties to successfully perform these functions on our behalf, or we may be required toincur significant costs and devote significant efforts to augment our existingcapabilities.**

        Wehave limited sales, marketing and distribution experience and capabilities. Thesecapabilities consist primarily of the specialty cardiovascular sales force that marketsINTEGRILIN® (eptifibatide) Injection and a recently hired oncology-specific salesforce that markets VELCADETM (bortezomib) for Injection. We are marketing and selling VELCADE in the United Statessolely through our new oncology sales force and without a collaborator. Our success inselling VELCADE will depend heavily on the performance of this sales force. 

        Dependingon the nature of the products and services for which we obtain marketing approval, we mayneed to rely significantly on sales, marketing and distribution arrangements with ourcollaborators and other third parties. For example, some types of pharmaceutical productsrequire a large sales force and extensive marketing capabilities for effectivecommercialization. If in the future we elect to perform sales, marketing and distributionfunctions for these types of products ourselves, we would face a number of additionalrisks, including the need to recruit a large number of additional experienced marketingand sales personnel. 

**Because we have limitedmanufacturing capabilities, we will be dependent on third-party manufacturers tomanufacture products for us, or we will be required to incur significant costs and devotesignificant efforts to establish our own manufacturing facilities and capabilities.**

        Wehave limited manufacturing experience and no commercial-scale manufacturing capabilities.In order to continue to develop products and services, apply for regulatory approvals andcommercialize products and services, we will need to develop, contract for or otherwisearrange for the necessary manufacturing capabilities. In particular, we are currentlyseeking to establish long-term supply relationships for the production of commercialsupplies of VELCADE. 

        Wecurrently rely upon third parties to produce material for preclinical testing purposes andexpect to continue to do so in the future. We also expect to rely upon other thirdparties, including our collaborators, to produce materials required for clinical trialsand for the commercial production of certain of our products. 

        Thereare a limited number of manufacturers that operate under the FDA’s good manufacturingpractices regulations capable of manufacturing our products. As a result, we haveexperienced some difficulty finding manufacturers for our products with adequate capacityfor our anticipated future needs. If we are unable to arrange for third-partymanufacturing of our products, or to do so on commercially reasonable terms, we may not beable to complete development of our products or market them. 

        Relianceon third-party manufacturers entails risks to which we would not be subject if wemanufactured products ourselves, including reliance on the third party for regulatorycompliance and quality assurance, the possibility of breach of the manufacturing agreementby the third party because of factors beyond our control and the possibility oftermination or non-renewal of the agreement by the third party, based on its own businesspriorities, at a time that is costly or inconvenient for us.

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        Wemay in the future elect to manufacture certain of our products in our own manufacturingfacilities. We would need to invest substantial additional funds and recruit qualifiedpersonnel in order to build or lease and operate any manufacturing facilities. 

**We face particular challenges inconnection with the manufacture of INTEGRILIN® (eptifibatide) Injection; if we do notmeet these challenges, our revenues and income will be adversely affected.**

        Withrespect to INTEGRILIN, we have two manufacturers that produce bulk product and twomanufacturers that perform fill/finish and packaging. If we do not have adequate suppliesof INTEGRILIN to meet market demand, we may lose potential revenues, and the healthcarecommunity may turn to competing products. 

        We anticipate that by the end of 2003, SGP, one of the manufacturers that performs fill/finish and packaging ofINTEGRILIN, will stop performing these services at its Manati facility in Puerto Rico. Currently SGP is executinga production plan at the Manati facility to build up inventory of 75 mg/ 100mL sized vials of INTEGRILIN forcertain international markets. Based on SGP’s forecasts, this inventory buildup will provide supply for thosemarkets through at least the end of 2004.

        SGP’sHeist facility in Belgium is currently approved to perform fill/finish services for20mg/10mL sized vials of INTEGRILIN for sales in the European Union. We have identifiedalternative fill/finish and packaging suppliers to serve as future sources of supply forthe United States and international markets. Although we believe that the fill/finish andpackaging performed by our primary manufacturer is sufficient to meet our requirements forINTEGRILIN supply in the United States for the foreseeable future, the closure of theManati facility could adversely affect the supply of INTEGRILIN and, thereby, harm ourresults of operations.

        Weexpect to improve or modify our existing process technologies and manufacturingcapabilities for INTEGRILIN. We cannot quantify the time orexpense that may ultimately be required to improve or modify our existing processtechnologies, but it is possible that such time or expense could be substantial. Moreover,we may not be able to implement any of these improvements or modifications successfully. 

        Ourmanufacturing plans and commercialization strategy for INTEGRILIN include the addition ofextra capacity for the manufacture of INTEGRILIN as described above. We are currently engaged in finalizingmultiple third-party manufacturing arrangements on commercially reasonable terms. We maynot be able to do so, and, even if such arrangements are established, they may notcontinue to be available to us on commercially reasonable terms. If we are unable toobtain contract manufacturing on commercially acceptable terms, we may not be able toproduce INTEGRILIN in sufficient quantities to meet future market demand. 

        Wefrequently carry significant amounts of INTEGRILIN in inventory. If for some reason wewere unable to sell INTEGRILIN, our inventory could expire and we would be required towrite-off the value of the expired inventory. 

**If we fail to obtain an adequatelevel of reimbursement for our products or services by third-party payors, there may be nocommercially viable markets for our products or services.**

        Theavailability and levels of reimbursement by governmental and other third-party payorsaffect the market for any pharmaceutical product or healthcare service. These third-partypayors continually attempt to contain or reduce the costs of healthcare by challenging theprices charged for medical products and services. In certain foreign countries,particularly the countries of the European Union, the pricing of prescriptionpharmaceuticals is subject to governmental control. We may not be able to sell ourproducts and services profitably if reimbursement is unavailable or limited in scope oramount. 

        Inparticular, third-party payors could lower the amount that they will reimburse hospitalsto treat the conditions for which the FDA has approved INTEGRILIN® (eptifibatide)Injection or VELCADETM (bortezomib) for Injection. If they do, pricing levels or salesvolumes of INTEGRILIN or VELCADE may decrease. In addition, if we fail to comply with therules applicable to the Medicaid and Medicare programs, we could be subject to theimposition of civil or criminal penalties or exclusion from these programs. 

        Inforeign markets, a number of different governmental and private entities determine thelevel at which hospitals will be reimbursed for administering INTEGRILIN and VELCADE toinsured patients. If these levels are set, or reset, too low, it may not be possible tosell INTEGRILIN or VELCADE at a profit in these markets.

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        Inboth the United States and certain foreign jurisdictions, there have been a number oflegislative and regulatory proposals to change the healthcare system. Further proposalsare likely. The potential for adoption of these proposals affects or will affect ourability to raise capital, obtain additional collaborators and market our products. 

        Inaddition, we believe that the increasing emphasis on managed care in the United States hasand will continue to put pressure on the price and usage of our present and futureproducts, which may adversely affect product sales. Further, when a new therapeuticproduct is approved, the availability of governmental or private reimbursement for thatproduct is uncertain, as is the amount for which that product will be reimbursed. Wecannot predict the availability or amount of reimbursement for our product candidates, andcurrent reimbursement policies for INTEGRILIN® (eptifibatide)Injection or VELCADETM (bortezomib) for Injection could change at any time. 

**We face a risk of productliability claims and may not be able to obtain insurance.**

        Ourbusiness exposes us to the risk of product liability claims that is inherent in themanufacturing, testing and marketing of human therapeutic products. In particular,INTEGRILIN and VELCADE are administered to patients with serious diseases who have a highincidence of mortality. Although we have product liability insurance that we believe isappropriate, this insurance is subject to deductibles, co-insurance requirements andcoverage limitations and the market for such insurance is becoming more restrictive. Wemay not be able to obtain or maintain adequate protection against potential liabilities.If we are unable to obtain insurance at acceptable cost or otherwise protect againstpotential product liability claims, we will be exposed to significant liabilities, whichmay materially and adversely affect our business and financial position. These liabilitiescould prevent or interfere with our product commercialization efforts. 

**Guidelines andrecommendations can affect the use of our products.**

        Governmentagencies promulgate regulations and guidelines directly applicable to us and to ourproducts. In addition, professional societies, practice management groups, private healthand science foundations and organizations involved in various diseases from time to timemay also publish guidelines or recommendations to the health care and patient communities.Recommendations of government agencies or these other groups or organizations may relateto such matters as usage, dosage, route of administration and use of concomitanttherapies. Recommendations or guidelines that are followed by patients and health careproviders could result in decreased use of our products. 

**Risks Relating to anInvestment in Our Common Stock**

**The trading price of oursecurities could be subject to significant fluctuations.**

        Thetrading price of our common stock has been volatile, and may be volatile in the future.Between January 1, 2003 and September 30, 2003, our common stock traded as high as $18.36per share and as low as $6.24 per share. Factors such as announcements of our or ourcompetitors’ operating results, changes in our prospects and market conditions forbiotechnology stocks in general could have a significant impact on the future tradingprices of our common stock. 

        Inparticular, the trading price of the common stock of many biotechnology companies,including ours, has experienced extreme price and volume fluctuations, which have at timesbeen unrelated to the operating performance of such companies whose stocks were affected.Some of the factors that may cause volatility in the price of our securities include: 
 • product revenues;     • clinical trial results and regulatory developments;     • quarterly variations in financial results;
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 • business and product market cycles;     • fluctuations in customer requirements;     • availability and utilization of manufacturing capacity;     • timing of new product introductions; and     • our ability to develop and implement new technologies.
        Theprice of our securities may also be affected by the estimates and projections of theinvestment community, general economic and market conditions, and the cost of operationsin our product markets. While we cannot predict the individual effect that these factorsmay have on the price of our securities, these factors, either individually or in theaggregate, could result in significant variations in price during any given period oftime. There can be no assurance that these factors will not have an adverse effect on thetrading price of our common stock. 

**We have anti-takeover defensesthat could delay or prevent an acquisition and could adversely affect the price of ourcommon stock.**

        Provisionsof our certificate of incorporation and bylaws and of Delaware law could have the effectof delaying, deferring or preventing an acquisition of our company. For example, we havedivided our board of directors into three classes that serve staggered three-year terms,we may issue shares of our authorized “blank check” preferred stock and ourstockholders are limited in their ability to call special stockholder meetings. Inaddition, we have issued preferred stock purchase rights that would adversely affect theeconomic and voting interests of a person or group that seeks to acquire us or a 15% ormore interest in our common stock without negotiations with our board of directors.

**Item 3.    Quantitativeand Qualitative Disclosures About Market Risk**

        Wemanage our fixed income investment portfolio in accordance with our Policy for SecuritiesInvestments, or Investment Policy, that has been approved by our Board of Directors. Theprimary objectives of our Investment Policy are to preserve principal, maintain a highdegree of liquidity to meet operating needs, and obtain competitive returns subject toprevailing market conditions. Investments are made primarily in high-grade corporate bondswith effective maturities of three years or less, asset-backed debt securities and U.S.government agency debt securities. These investments are subject to risk of default,changes in credit rating and changes in market value. These investments are also subjectto interest rate risk and will decrease in value if market interest rates increase. Ahypothetical 100 basis point increase in interest rates would result in an approximate$13.9 million decrease in the fair value of our investments as of September 30, 2003.However, due to the conservative nature of our investments and relatively short effectivematurities of debt instruments, interest rate risk is mitigated. Our Investment Policyspecifies credit quality standards for our investments and limits the amount of exposurefrom any single issue, issuer or type of investment. We do not own derivative financialinstruments in our investment portfolio. 

        Asof September 30, 2003, the fair value of our 4.5% notes, 5.0% notes and 5.5% notesapproximates their carrying value. The interest rates on our convertible notes and capitallease obligations are fixed and therefore not subject to interest rate risk. 

        Accordingly,we do not believe that there is any material market risk exposure with respect toderivative or other financial instruments which would require disclosure under this item. 

        Asof September 30, 2003 we did not have any financing arrangements that were not reflectedin our balance sheet. 

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**Item 4.    Controls andProcedures**

        Ourmanagement, with the participation of our chief executive officer and chief financialofficer, evaluated the effectiveness of our disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2003. Indesigning and evaluating our disclosure controls and procedures, management recognizedthat any controls and procedures, no matter how well designed and operated, can provideonly reasonable assurance of achieving their objectives and our management necessarilyapplied its judgment in evaluating the cost-benefit relationship of possible controls andprocedures. Based on this evaluation, our chief executive officer and chief financialofficer concluded that as of September 30, 2003, our disclosure controls and procedureswere (1) designed to ensure that material information relating to us is made known to ourchief executive officer and chief financial officer by others, particularly during theperiod in which this report was prepared and (2) effective, in that they providereasonable assurance that information required to be disclosed by us in the reports wefile or submit under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms. 

        Nochange in our internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30,2003 that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting. 

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**PART II    OTHER INFORMATION**

**Item 6.    Exhibits and Reports on Form 8-K**
(a)    Exhibits      The exhibits listed in the Exhibit Index are included in this report.  (b)    Reports on Forms 8-K
        Thefollowing Current Reports on Form 8-K were filed or furnished by us during the three months endedSeptember 30, 2003.
 1. A Current Report on Form 8-K was filed with the Securities and Exchange               Commission on July 1, 2003, to report, pursuant to Item 5, that on June 30,               2003, we issued a press release to announce that we entered into a               Commercialization and Development Agreement with Ortho Biotech Products, L.P.               for VELCADETM (bortezomib) for Injection.     2. A Current Report on Form 8-K was furnished to the Securities and Exchange               Commission on July 22, 2003, to furnish, pursuant to Item 12, a press               release we issued on July 22, 2003 to report our financial results for the               quarter ended June 30, 2003.
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**SIGNATURES**
        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.  MILLENNIUM PHARMACEUTICALS, INC.(Registrant)        Dated: November 12, 2003  By /s/  KENNETH M. BATE      Kenneth M. Bate   *Executive Vice President,*   *Head of Commercial Operations and*   *Chief Financial Officer*   *(principal financial and chief accounting officer)*    
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**EXHIBIT INDEX**
Exhibit No. Description  10.1† Amended and Restated Agreement by and between Bayer Healthcare AG and the Company dated October 10, 2003.       31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) ofthe Securities Exchange Act of 1934, as amended       31.2 Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) ofthe                                 Securities Exchange Act of 1934, as amended       32.1 Statement Pursuant to 18 U.S.C. §1350       32.2 Statement Pursuant to 18 U.S.C. §1350 
† Confidential treatmentrequested as to certain portions, which portions have been separately filed with theSecurities and Exchange Commission.

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