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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 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 March 31, 2002**                                                                                                                                                                                                                                        |
| **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 |_|

The total number of shares of the registrant's Common Stock, $0.001 par value, outstanding on April 22, 2002, was 281,883,958.

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**MILLENNIUM PHARMACEUTICALS, INC.**

**FORM 10-Q**

**FOR THE QUARTER ENDED MARCH 31, 2002**

**TABLE OF CONTENTS**

|             |                                                                                              | Page                       |   |
|------------------|---------------------------------------------------------------------------------------------------|----------------------------|--------|
|             |                                                                                              |                            |   |
| **PART I**  | **FINANCIAL INFORMATION**                                                                         |                       |   |
|             |                                                                                              |                       |   |
| Item 1.          | Condensed Consolidated Financial Statements                                                       |                       |   |
|             |                                                                                              |                       |   |
|             | Condensed Consolidated Balance Sheets as ofMarch 31, 2002 and December 31, 2001                   | 3      |   |
|             |                                                                                              |                       |   |
|             | Condensed Consolidated Statements of Operations for thethree months ended March 31, 2002 and 2001 | 4      |   |
|             |                                                                                              |                       |   |
|             | Condensed Consolidated Statements of Cash Flows for thethree months ended March 31, 2002 and 2001 | 5      |   |
|             |                                                                                              |                       |   |
|             | Notes to Condensed Consolidated Financial Statements                                              | 6      |   |
|             |                                                                                              |                       |   |
| Item 2.          | Management's Discussion and Analysis of FinancialCondition and Results of Operations              | 12     |   |
|             |                                                                                              |                       |   |
|             | Risk Factors That May Affect Results                                                              | 20     |   |
|             |                                                                                              |                       |   |
| Item 3.          | Quantitative and Qualitative Disclosures about Market Risk                                        | 30     |   |
|             |                                                                                              |                       |   |
| **PART II** | **OTHER INFORMATION**                                                                             |                       |   |
|             |                                                                                              |                       |   |
| Item 2.          | Changes in Securities and Use of Proceeds                                                         | 31     |   |
|             |                                                                                              |                       |   |
| Item 4.          | Submission of Matters to a Vote of Security Holders                                               | 31     |   |
|             |                                                                                              |                       |   |
| Item 6.          | Exhibits and Reports on Form 8-K                                                                  | 31     |   |
|             |                                                                                              |                       |   |
|             | Signatures                                                                                        | 32     |   |
|             |                                                                                              |                       |   |
|             | Exhibit Index                                                                                     | 33     |   |

2

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**PART I     FINANCIAL INFORMATION**

**Item 1.    Condensed Consolidated Financial Statements**

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

|                                                                                                                                                     | March 31, 2002 |   | December 31, 2001 |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------|-------------------|------------|
||
||
||
| Current assets:                                                                                                                                          |           |   |              |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                |           |   | $                 | 175,901    |   | $ | 35,993 |   |
| Marketable securities                                                                                                                                    |           |   |              | 1,810,490  |   |   | 1,438,875 |   |
| Due from strategic alliance partners                                                                                                                     |           |   |              | 65,062     |   |   | 18,360 |   |
| Inventory                                                                                                                                                |           |   |              | 91,118     |   |   | — |   |
| Prepaid expenses and other current assets                                                                                                                |           |   |              | 24,252     |   |   | 21,389 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
| Total current assets                                                                                                                                     |           |   |              | 2,166,823  |   |   | 1,514,617 |   |
| Property and equipment, net                                                                                                                              |           |   |              | 208,515    |   |   | 168,600 |   |
| Restricted cash                                                                                                                                          |           |   |              | 45,822     |   |   | 47,308 |   |
| Other assets                                                                                                                                             |           |   |              | 29,820     |   |   | 13,362 |   |
| Goodwill, net                                                                                                                                            |           |   |              | 1,200,868  |   |   | 138,519 |   |
| Intangible assets, net                                                                                                                                   |           |   |              | 511,180    |   |   | 25,328 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
| Total assets                                                                                                                                             |           |   | $                 | 4,163,028  |   | $ | 1,907,734 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
|                                                                                                                                                     |           |   |              |       |   |   |   |   |
| **Liabilities and Stockholders' Equity**                                                                                                                 |           |   |              |       |   |   |   |   |
| Current liabilities:                                                                                                                                     |           |   |              |       |   |   |   |   |
| Accounts payable                                                                                                                                         |           |   | $                 | 47,227     |   | $ | 25,237 |   |
| Accrued expenses                                                                                                                                         |           |   |              | 131,172    |   |   | 89,372 |   |
| Current portion of deferred revenue                                                                                                                      |           |   |              | 154,635    |   |   | 71,018 |   |
| Current portion of capital lease obligations                                                                                                             |           |   |              | 17,400     |   |   | 17,536 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
| Total current liabilities                                                                                                                                |           |   |              | 350,434    |   |   | 203,163 |   |
| Deferred revenue, net of current portion                                                                                                                 |           |   |              | 13,502     |   |   | 17,902 |   |
| Capital lease obligations, net of current portion                                                                                                        |           |   |              | 32,132     |   |   | 35,107 |   |
| Long term debt                                                                                                                                           |           |   |              | 683,325    |   |   | 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:281,729 shares at March 31, 2002 and 224,290 shares atDecember 31, 2001 issued and outstanding |           |   |              | 282        |   |   | 224 |   |
| Additional paid-in capital                                                                                                                               |           |   |              | 4,329,407  |   |   | 2,477,334 |   |
| Deferred compensation                                                                                                                                    |           |   |              | (4,049     | ) |   | (765 | ) |
| Notes receivable from officers                                                                                                                           |           |   |              | (204       | ) |   | (315 | ) |
| Accumulated other comprehensive income                                                                                                                   |           |   |              | 4,672      |   |   | 34,371 |   |
| Accumulated deficit                                                                                                                                      |           |   |              | (1,246,473 | ) |   | (942,612 | ) |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
| Total stockholders' equity                                                                                                                               |           |   |              | 3,083,635  |   |   | 1,568,237 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |
| Total liabilities and stockholders' equity                                                                                                               |           |   | $                 | 4,163,028  |   | $ | 1,907,734 |   |
|                                                                                                                                                     |           |   |                   |            |   |  |  |   |

See notes to condensed consolidated financial statements.

3

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

|                                                                     | Three Months Ended March 31, |   |
|--------------------------------------------------------------------------|-----------------------------------|--------|
||
||
|                                                                     |                              |   |   |   |   |   |   |   |
| Revenues:                                                                |                              |   |   |   |   |   |   |   |
|     Product revenue                                  |                              |   | $ | 22,142 |   | $ | — |   |
|     Revenue under strategic alliances                |                              |   |   | 46,457 |   |   | 50,364 |   |
|                                                                     |                              |   |  |  |   |  |  |   |
|         Total revenues           |                              |   |   | 68,599 |   |   | 50,364 |   |
|                                                                     |                              |   |  |  |   |  |  |   |
|                                                                     |                              |   |   |   |   |   |   |   |
| Costs and expenses:                                                      |                              |   |   |   |   |   |   |   |
|     Research and development                         |                              |   |   | 101,312 |   |   | 92,521 |   |
|     Selling, general and administrative              |                              |   |   | 37,241 |   |   | 16,236 |   |
|     Cost of product revenue                          |                              |   |   | 7,728 |   |   | — |   |
|     Acquired in-process research and development     |                              |   |   | 242,000 |   |   | — |   |
|     Amortization of intangible assets                |                              |   |   | 5,543 |   |   | 16,267 |   |
|                                                                     |                              |   |  |  |   |  |  |   |
|         Total costs and expenses |                              |   |   | 393,824 |   |   | 125,024 |   |
|                                                                     |                              |   |  |  |   |  |  |   |
| Loss from operations                                                     |                              |   |   | (325,225 | ) |   | (74,660 | ) |
| Other income (expense):                                                  |                              |   |   |   |   |   |   |   |
|     Equity in operations of joint venture            |                              |   |   | — |   |   | (964 | ) |
|     Investment income                                |                              |   |   | 28,157 |   |   | 27,459 |   |
|     Interest expense                                 |                              |   |   | (6,793 | ) |   | (2,336 | ) |
|     Debt conversion expense                          |                              |   |   | — |   |   | (2,567 | ) |
|                                                                     |                              |   |  |  |   |  |  |   |
| Net loss                                                                 |                              |   | $ | (303,861 | ) | $ | (53,068 | ) |
|                                                                     |                              |   |  |  |   |  |  |   |
|                                                                     |                              |   |   |   |   |   |   |   |
| *Amounts per common share:*                                              |                              |   |   |   |   |   |   |   |
| Net loss per share, basic and diluted                                    |                              |   | $ | (1.20 | ) | $ | (0.25 | ) |
|                                                                     |                              |   |  |  |   |  |  |   |
|                                                                     |                              |   |   |   |   |   |   |   |
| Weighted average shares, basic and diluted                               |                              |   |   | 253,901 |   |   | 215,371 |   |
|                                                                     |                              |   |  |  |   |  |  |   |

See notes to condensed consolidated financial statements.

4

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

|                                                                       | Three Months Ended March 31, |   |
|----------------------------------------------------------------------------|-----------------------------------|--------|
||
||
| **Cash Flows from Operating activities:**                                  |                              |   |   |   |   |   |   |   |
| Net loss                                                                   |                              |   | $ | (303,861 | ) | $ | (53,068 | ) |
| Adjustments to reconcile net loss to cash                                  |                              |   |   |   |   |   |   |   |
| used in operating activities:                                              |                              |   |   |   |   |   |   |   |
| Acquired in-process research and development                               |                              |   |   | 242,000 |   |   | — |   |
| Depreciation and amortization                                              |                              |   |   | 15,526 |   |   | 24,269 |   |
| Gain on available-for-sale securities                                      |                              |   |   | (4,887 | ) |   | (2,196 | ) |
| Stock compensation expense                                                 |                              |   |   | 2,577 |   |   | 887 |   |
| Equity in operations of joint venture                                      |                              |   |   | — |   |   | 964 |   |
| Changes in operating assets and liabilities:                               |                              |   |   |   |   |   |   |   |
|   Prepaid expenses and other current assets                      |                              |   |   | (1,991 | ) |   | (486 | ) |
|   Due from strategic alliance partners                           |                              |   |   | (33,317 | ) |   | (19,052 | ) |
|   Restricted cash and other assets                               |                              |   |   | 1,850 |   |   | (140 | ) |
|   Accounts payable and accrued expenses                          |                              |   |   | (10,896 | ) |   | (3,217 | ) |
|   Deferred revenue                                               |                              |   |   | (1,652 | ) |   | (2,108 | ) |
|                                                                       |                              |   |  |  |   |  |  |   |
| Net cash used in operating activities                                      |                              |   |   | (94,651 | ) |   | (54,147 | ) |
|                                                                       |                              |   |  |  |   |  |  |   |
|                                                                       |                              |   |   |   |   |   |   |   |
| **Cash Flows from Investing activities:**                                  |                              |   |   |   |   |   |   |   |
| Investments in marketable securities                                       |                              |   |   | (305,947 | ) |   | (213,723 | ) |
| Proceeds from sales and maturities of marketable securities                |                              |   |   | 236,836 |   |   | 134,004 |   |
| Investment in joint venture                                                |                              |   |   | — |   |   | (656 | ) |
| Purchase of property and equipment and other long term assets              |                              |   |   | (31,113 | ) |   | (8,951 | ) |
| Net cash acquired in COR Therapeutics, Inc. acquisition                    |                              |   |   | 309,147 |   |   | — |   |
|                                                                       |                              |   |  |  |   |  |  |   |
| Net cash provided by (used in) investing activities                        |                              |   |   | 208,923 |   |   | (89,326 | ) |
|                                                                       |                              |   |  |  |   |  |  |   |
|                                                                       |                              |   |   |   |   |   |   |   |
| **Cash Flows from Financing activities:**                                  |                              |   |   |   |   |   |   |   |
| Net proceeds from sales of common stock                                    |                              |   |   | 24,804 |   |   | 50,000 |   |
| Net proceeds from employee stock purchases                                 |                              |   |   | 4,743 |   |   | 6,850 |   |
| Principal payments on capital leases                                       |                              |   |   | (3,677 | ) |   | (3,299 | ) |
|                                                                       |                              |   |  |  |   |  |  |   |
| Net cash provided by financing activities                                  |                              |   |   | 25,870 |   |   | 53,551 |   |
|                                                                       |                              |   |  |  |   |  |  |   |
| **Increase (decrease) in cash and cash equivalents**                       |                              |   |   | 140,142 |   |   | (89,922 | ) |
| Equity adjustment from foreign currency translation                        |                              |   |   | (234 | ) |   | 25 |   |
| **Cash and cash equivalents, beginning of period**                         |                              |   |   | 35,993 |   |   | 166,086 |   |
|                                                                       |                              |   |  |  |   |  |  |   |
| **Cash and cash equivalents, end of period**                               |                              |   | $ | 175,901 |   | $ | 76,189 |   |
|                                                                       |                              |   |  |  |   |  |  |   |
|                                                                       |                              |   |   |   |   |   |   |   |
| **Supplemental Cash Flow Information:**                                    |                              |   |   |   |   |   |   |   |
| Cash paid for interest                                                     |                              |   | $ | 3,396 |   | $ | 866 |   |
|                                                                       |                              |   |   |   |   |   |   |   |
| **Supplemental Disclosure of Noncash Investing and Financing Activities:** |                              |   |   |   |   |   |   |   |
| Acquisition of COR Therapeutics, Inc., including direct transaction costs  |                              |   | $ | 1,833,329 |   | $ | — |   |
| Construction costs for laboratory and office space                         |                              |   |   | 8,672 |   |   | — |   |
| Conversion of subordinated debt to common stock                            |                              |   |   | — |   |   | 12,582 |   |
| Equipment acquired under capital leases                                    |                              |   |   | — |   |   | 4,306 |   |
| Write off of capital assets                                                |                              |   |   | — |   |   | 558 |   |
| Reclassification of debt issuance costs to additional paid-in capital      |                              |   |   | — |   |   | 110 |   |

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**

        The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion ofmanagement, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the accompanying condensed consolidated financial statements have beenincluded. Interim results for the three month period ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to thefinancial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which was filed with the Securities and Exchange Commission (SEC) on March 7,2002.

**2.        Summary of Significant Accounting Policies**

*(a)        Cash Equivalents and Marketable Securities*

        Cash equivalents consist principally of money market funds and corporate bonds with original maturities of three months or less at the date of purchase. Marketable securities consist of high-grade corporatebonds, asset-backed and U.S. government agency securities.

        Management determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable securities at March 31, 2002 andDecember 31, 2001 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 of stockholders' equity. The costof debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in investment income. Realized gains and losses anddeclines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividendson securities classified as available-for-sale are included in investment income.

*(b)        Inventory*

        Inventory represents bulk materials used in the production of INTEGRILIN® and INTEGRILIN® finished goods inventory on hand, valued at cost.  Inventory consists of the following (in thousands):

|   |   | March 31, 2002 |   |
|--------|--------|----------------|--------|
| $      | 52,931 |           |
|   | 38,187 |           |
|        |
| $      | 91,118 |           |
|        |

*(c)        Goodwill and Intangible Assets*

        Intangible assets consist of specifically identified intangible assets. Goodwill is the excess of any purchase price over the estimated fair market value of net tangible assets acquired not allocated tospecific intangible assets. Amortization of intangibles is computed using the straight-line method over the useful lives of the respective assets. Accumulated amortization on intangible assets was $18.2 million and $12.7 million at March31, 2002 and December 31, 2001, respectively.

        In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142,

6

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

goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that are not deemed tohave an indefinite life will continue to be amortized over their useful lives. The Company adopted SFAS No. 142 effective January 1, 2002 and reclassified amounts to goodwill which were previously allocated to assembledworkforce. Upon adoption, the Company ceased the amortization of goodwill. The Company completed its transitional assessment of goodwill and no impairment loss was recognized.

        The following unaudited pro forma adjusted net losses have been prepared as if SFAS No. 142 had been applied retroactively:

|                                           | Three Months Ended March 31, |   |
|------------------------------------------------|------------------------------|--------|
|                                           | 2002                         |   | 2001 |   |
| (in thousands, except per share amounts)  |                         |   |
| Net loss                                       |                         |   | $ | (303,861 | ) | $ | (53,068 | ) |
| Add back: Goodwill amortization                |                         |   |   | — |   |   | 14,512 |   |
| Add back: Assembled workforce amortization     |                         |   |   | — |   |   | 295 |   |
|                                           |                         |   |  |  |   |  |  |   |
| Adjusted net loss                              |                         |   | $ | (303,861 | ) | $ | (38,261 | ) |
|                                           |                         |   |  |  |   |  |  |    |
| *Amounts per common share, basic and diluted:* |                         |   |   |   |   |   |   |    |
| Net loss                                       |                         |   | $ | (1.20 | ) | $ | (0.25 | ) |
| Add back: Goodwill amortization                |                         |   |   | — |   |   | 0.07 |   |
| Add back: Assembled workforce amortization     |                         |   |   | — |   |   | 0.00 |   |
|                                           |                         |   |  |  |   |  |  |   |
| Adjusted net loss                              |                         |   | $ | (1.20 | ) | $ | (0.18 | ) |
|                                           |                         |   |  |  |   |  |  |    |

*(d)        Revenue Recognition*

        Product revenue includes the Company's share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotion territories by Schering-Plough Ltd. and Schering Corporation (collectively"Schering"), as well as the reimbursement from Schering of the Company's costs of product revenue. The Company recognizes revenue when Schering ships INTEGRILIN® to wholesalers and records it net of allowances, if any.The Company's cost of product revenue consists of certain manufacturing-related expenses associated with the sale of INTEGRILIN® within copromotion territories. The Company defers certainmanufacturing-related expenses until the time Schering ships related product to its customers inside and outside copromotion territories. Also included in product revenue are reimbursements of certainmanufacturing-related expenses and royalties from Schering on sales of INTEGRILIN® outside the copromotion territory.

        Effective October 1, 2000, Millennium changed its method of accounting for revenue under strategic alliances in accordance with Staff Accounting Bulletin (SAB) No. 101 ("SAB 101"), Revenue Recognition inFinancial Statements. Previously, the Company had recognized revenue relating to non-refundable, up-front, license and milestone payments and certain research funding payments from its strategic partners in accordancewith the contract. Under the new accounting method adopted retroactively to January 1, 2000, the Company recognizes revenue from non-refundable, up-front, license and milestone payments, not specifically tied to aseparate earnings process, ratably over the term of the research contract.

        When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation associated with the payment is completed. Performance obligations typicallyconsist of significant milestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory agencies. Inaddition,

7

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

when appropriate, the Company recognizes revenue from certain research payments based upon the level of research services performed during the period of the research contract.

        The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which is included in the loss for the year ended December 31, 2000. The amount of revenue recognized in thethree months ended March 31, 2002 and 2001 that was included in the cumulative effect of change in accounting principle and was recognized in prior years was $11.1 million and $10.1 million, respectively.

*(e)        Segment Information*

        SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information about operating segmentsin annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes standards for related disclosures aboutproducts and services, geographic areas, and major customers.

        The Company operates in one business segment, which primarily focuses on the discovery, development and commercialization of proprietary therapeutic and diagnostic human healthcare products and services. Allof the Company's product revenue is currently related to sales of INTEGRILIN® (eptifibatide) Injection and revenues from its strategic alliances. Revenues from one strategic partner accounted for approximately 26% and30% of consolidated revenues in the three months ended March 31, 2002 and 2001, respectively. Revenues from a second and third partner accounted for approximately 16% and 22% and 15% and 20% of consolidatedrevenues in the three months ended March 31, 2002 and 2001, for the second and third partners respectively. There were no other significant customers during the three months ended March 31, 2002 and 2001, respectively.

*(f)        Information concerning market and source of supply concentration*

        Millennium and Schering copromote INTEGRILIN® in the United States and share any profits and losses. Together with Schering and Genentech, Inc., the Company also copromotes INTEGRILIN® for use with Genentech'sfibrinolytic, or clot-dissolving, drugs TNKaseTM and Activase® across the United States. INTEGRILIN® has received regulatory approval in the European Union and a number of other countries for various indications. TheCompany has exclusively licensed to Schering rights to market INTEGRILIN® outside the United States, and Schering pays the Company royalties based on these sales of INTEGRILIN®. The Company has long-term supplyarrangements with two suppliers for the bulk product and with another two suppliers, one of which is Schering, for the filling and final packaging of INTEGRILIN®.

*(g)        Net Loss Per Common Share*

        Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the weighted average number ofcommon and dilutive common equivalent shares from stock options, warrants and convertible debt using the treasury stock method. For all periods presented, diluted net loss per share is the same as basic net loss pershare as the inclusion of weighted average shares of common stock issuable upon the exercise of stock options, warrants and convertible debt would be antidilutive.

*(h)        Comprehensive Loss*

        Comprehensive loss was $333.6 million and $37.4 million for the three months ended March 31, 2002 and 2001, respectively. Comprehensive loss is composed of net loss, unrealized gains and losses on marketablesecurities and cumulative foreign currency translation adjustments. Accumulated other comprehensive income at March 31, 2002 included $5.5 million of unrealized gains on marketable securities and $0.8 million ofcumulative foreign currency translation adjustments.

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

**3.        COR Acquisition**

        On February 12, 2002, the Company acquired COR Therapeutics, Inc. ("COR") for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares of Millennium common stock pursuant to themerger agreement. This calculation is based on COR outstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 of a share of Millennium common stock for each share of outstanding COR common stock.In addition, options to purchase approximately 6.2 million shares of COR common stock with a weighted average exercise price of $12.90 were assumed by Millennium pursuant to the merger and converted into options topurchase approximately 6.1 million shares of Millennium common stock.

        The total cost of the merger was determined as follows (in thousands):
Fair value of Millennium shares (calculated using $30.57 per share average fair value for the three days prior to and after announcement of the merger)$1,685,334  Value of COR options assumed, net of intrinsic value of unvested options127,714  Millennium transaction costs, consisting primarily of financial advisory, legal and accounting fees20,281  $1,833,329 
        The fair value of options assumed was determined using the Black-Scholes method assuming expected lives ranging from one to five years, a risk-free rate of 4.35%, volatility of 86.88% and no expected dividends.In accordance with FASB Interpretation No. 44, or FIN 44, Accounting for Certain Transactions Involving Stock Compensation—an Interpretation of APB 25, a portion of the intrinsic value of unvested options of COR hasbeen allocated to deferred stock compensation. Deferred stock compensation will be amortized on a straight-line basis over the estimated remaining vesting period of the related options.

        The transaction was recorded as a purchase for accounting purposes and the consolidated financial statements include COR's operating results from the date of the acquisition. The purchase price was allocated tothe assets purchased and the liabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair value of net tangible assets allocated to specific intangibleassets and goodwill as follows (in thousands):
Net tangible assets acquired$37,585In-process research and development 242,000Identifiable intangible assets(primarily developed  technology--13 year useful life and  trademark--indefinite life) 494,000Goodwill 1,059,744   $1,833,329  
        The Company recorded a one-time, noncash charge to operations in the quarter ended March 31, 2002 related to $242.0 million for acquired in-process research and development. The valuation of acquired in-processresearch and development represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had no alternative future use and for which technological feasibility had not beenestablished.

        The income approach was used to establish the fair values of developed technology, trademark and acquired in-process research and development. This approach establishes the fair value of an asset byestimating the after-tax cash flows attributable to the asset over its useful life and then discounting these after-

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

tax cash flows back to a present value. The discounting process uses a rate of return commensuratewith the time value of money and investment risk factors.

        The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of COR had occurred on January 1, 2002 and 2001:
 Three Months Ended March 31,  2002 2001 **(in thousands, except per share amounts)**           Total revenues  $86,124 $73,144              Net loss  $(86,732)$(64,288)             *Amounts per common share:*        Net loss, basic and diluted  $(0.31)$(0.24)              Weighted average shares, basic and diluted   279,627  270,499      
        The pro forma net loss and net loss per share amounts for each period above exclude the acquired in-process research and development charge. The pro forma consolidated results do not purport to be indicativeof results that would have occurred had the acquisition been in effect for the periods presented, nor do they purport to be indicative of the results that will be obtained in the future.

**4.        Revenues and Strategic Alliances**

        The Company has formed strategic alliances with major participants in marketplaces where its discovery expertise and technology platform are applicable. These agreements include alliances based on the transferof technology platforms, alliances which combine technology transfer with a focus on a specific disease or therapeutic approach, and disease-focused programs under which the Company conducts research funded by itspartners. The Company's disease-based alliances and alliances which combine technology-transfer with a disease focus are generally structured as research collaborations. Under these arrangements, the Company performsresearch in a specific disease area aimed at discoveries leading to novel pharmaceutical (small molecule) products. These alliances generally provide research funding over an initial period, with renewal provisions,varying by agreement. Under these agreements, the Company's partners may make up-front payments, additional payments upon the achievement of specific research and product development milestones, ongoing research fundingand/or pay royalties or in some cases profit-sharing payments to the Company based upon any product sales resulting from the collaboration.

        In March 2002, Abbott Laboratories ("Abbott") made a $28.6 million purchase of Millennium common stock pursuant to the March 2001 Investment Agreement between the Company and Abbott.

**5.        Convertible Debt**

        In connection with the COR acquisition, the Company assumed COR's $600.0 million in convertible debt resulting from two offerings: the 5.0% convertible subordinated notes due March 1, 2007 and the 4.5%convertible senior notes due June 15, 2006. Under the terms of the notes, the Company is required to make semi-annual interest payments on the outstanding principal balance of the 5.0% notes on March 1 and September 1and of the 4.5% notes on June 15 and December 15 of each year, respectively. On March 14, 2002, the Company, as required by the terms of the notes, commenced cash repurchase offers to the noteholders in amounts equalto 100% of the principal amounts of the notes plus interest accrued and unpaid through April 28, 2002. These offers and the related withdrawal rights expired at 9:00 a.m., Eastern Time, on Monday, April 29, 2002.

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

        The Company has 5.5% convertible subordinated notes due January 15, 2007 that are convertible into Millennium common stock at any time prior to maturity at a price equal to $42.07 per share, subject toadjustment, unless previously repurchased or redeemed by the Company under certain circumstances. Under the terms of the notes, the Company is required to make semi-annual interest payments on the outstanding principalbalance of the notes on January 15 and July 15 of each year. All required interest payments to date have been made.

        During the three months ended March 31, 2001, the Company paid $2.6 million in cash to certain holders of Millennium's 5.5% convertible subordinated notes due January 15, 2007 in order to induce the conversion of$12.6 million of their notes into approximately 0.3 million shares of Millennium common stock. These cash payments were expensed during the three months ended March 31, 2001. Interest accrued through the date ofconversion was charged to interest expense and was paid upon conversion. At March 31, 2002, the Company had $83.3 million of outstanding 5.5% convertible subordinated notes due January 15, 2007.

**6.        Subsequent Events**

        On April 22, 2002, the Company announced it will amend the terms of the notes assumed in the merger with COR to induce noteholders to hold such notes until at least April 29, 2003 by offering a premiumredemption. Specifically, the Company has amended its 4.5% convertible senior notes due June 15, 2006 to permit noteholders to require the Company to repurchase these notes for cash at a price of $1,095 per $1,000 ofprincipal amount if such notes are held until April 29, 2003. The Company has amended the 5.0% convertible subordinated notes due March 1, 2007 to permit noteholders to require the Company to repurchase these notes forcash at a price of $1,085 per $1,000 of principal amount if such notes are held until April 29, 2003. 

        On April 29, 2002, the Company's cash repurchase offers to the noteholders of the outstanding 4.5% convertible senior notes due June 15, 2006 and 5.00% convertible subordinated notes due March 1, 2007 expired.  As of the expiration, $40,000 of these notes have been tendered and will be converted into cash and approximately $599.9 million of these notes remain outstanding. The cost of the redemption premium associated with these outstanding notes will be recognized in the second quarter 2002 statement of operations.

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

**Overview**

        We are a leading biopharmaceutical company focused on applying our comprehensive and integrated science and technology platform to discover and accelerate the development of breakthrough drugs and predictivemedicine products. We expect that these drugs and products ultimately will enable physicians to more closely customize medical treatment by combining knowledge of the genetic basis for disease and the geneticcharacteristics of a patient. We primarily focus our research and development and commercialization activities in four key disease areas: cardiovascular, oncology, inflammatory and metabolic. We view the pursuit ofmergers, acquisitions and product in-licensing as important in achieving our business goals.

        Our management's discussion and analysis of our financial condition and results of our operations are subject to important factors that could cause our future results to differ materially from those indicated.See "Risk Factors That May Affect Results."

*Alliances*

        We have entered into research, development, technology transfer and commercialization arrangements with major pharmaceutical and biotechnology companies relating to a broad range of therapeutic and predictivemedicine products and services. These alliances provide us with the opportunity to receive various combinations of equity investments, license fees and research funding, and may provide certain additional paymentscontingent upon our achievement of research and regulatory milestones and royalties and/or share profits if our collaborations are successful in developing and commercializing products. The alliances which we considermaterial to our business are:
 • a collaboration agreement with Schering-Plough Ltd. and Schering Corporation (collectively "Schering") to jointly develop andcommercialize INTEGRILIN® (eptifibatide) Injection on a worldwide basis;     • an agreement with Genentech to copromote INTEGRILIN® with Genentech's fibrinolytic, or clot-dissolving drugs, TNKaseTM (tenecteplase) and Activase® (alteplase) across the United States;     • an in-license and development agreement with Xenova Group, plc for novel compounds for thetreatment of solid tumors in cancer;     • a collaboration agreement with XOMA Ltd., pursuant to which XOMA has agreed to develop twobiotherapeutic agents;     • a joint development agreement with BZL Biologics, L.L.C. for immunotoxin and radiolabeledproducts;     • a joint development and commercialization agreement with Abbott Laboratories in metabolic diseases;     • a technology transfer agreement and joint development and commercialization agreement with AventisPharmaceuticals, Inc. in inflammatory disease;     • a collaboration agreement with Becton Dickinson focused primarily on Diagnomics® products forspecified cancers;     • a research agreement with Bayer, AG in cardiovascular disease, and certain areas of oncology, pain,hematology, atherosclerosis, thrombosis, urology and viral infections; and     • a research alliance and technology transfer agreement with Monsanto Company in plant agriculture.
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        Historically, we have primarily derived our revenue from payments from our strategic alliances with major pharmaceutical companies. Beginning in the first quarter of 2002 and in connection with our acquisitionof COR, we began recognizing product revenue which principally relates to our share of the profits from the sale of INTEGRILIN® (eptifibatide) Injection, in copromotion territories by Schering-Plough Ltd. and ScheringCorporation. Additionally, product revenues include recognition of reimbursement of certain manufacturing-related expenses and royalties from Schering on sales of INTEGRILIN® outside the copromotion territory.

*Acquisitions*

        As part of our business strategy, we continually consider joint development, merger and acquisition opportunities that may provide us with products on the market, products in later stage development oradditional capabilities necessary to accelerate our downstream drug discovery efforts.

        *COR.*        On February 12, 2002, we acquired COR Therapeutics, Inc. ("COR") through the issuance of approximately 55.1 million shares of our common stock. The number of shares of our common stock issued in theacquisition was calculated using the conversion ratio of 0.9873 of a share of our common stock for each share of COR common stock outstanding at the time of the merger. In addition, options to purchaseapproximately 6.2 million shares of COR common stock were assumed by us and converted into options to purchase approximately 6.1 million shares of our common stock. The transaction has been recorded as a purchase foraccounting purposes and the purchase price was allocated, based upon an independent valuation, to the assets purchased and liabilities assumed based upon their respective fair values. We allocated the excess of thepurchase price over the estimated fair market value of net tangible assets acquired to in-process research and development, developed technology and trademark and goodwill. Through the merger, we added approximately300 new employees, a facility in South San Francisco, California, acquired INTEGRILIN® for the treatment of acute coronary syndromes and substantial research capabilities in the areas of cardiovascular disease andoncology.

        In connection with the COR acquisition, we assumed COR's $600.0 million in convertible debt resulting from two offerings: the 5.0% convertible subordinated notes due March 1, 2007 and the 4.5% convertiblesenior notes due June 15, 2006. As a result, the noteholders have an option to convert to our common stock. On March 14, 2002, as required by the terms of the notes, we made a cash repurchase offer to the noteholdersin amounts equal to 100% of the principal amounts of the notes plus interest accrued and unpaid through April 28, 2002. These offers and the related withdrawal rights expired at 9:00 a.m., Eastern Time, on Monday, April29, 2002.

        On April 22, 2002, we amended the terms of the notes assumed in the merger with COR to induce noteholders to hold such notes until at least April 29, 2003 by offering a premium redemption. Specifically, weamended our 4.5% convertible senior notes due June 15, 2006 to permit noteholders to require the Company to repurchase these notes for cash at a price of $1,095 per $1,000 of principal amount if such notes are helduntil April 29, 2003. We amended the 5.0% convertible subordinated notes due March 1, 2007 to permit noteholders to require the Company to repurchase these notes for cash at a price of $1,085 per $1,000 of principalamount if such notes are held until April 29, 2003. The cost of this premium will be recognized in our second quarter 2002 statement of operations.

*Expansion of Operations*

        During 2002 and 2001, we have and will continue to expand our operations through internal growth, additional strategic alliances and the COR acquisition, which closed in February 2002. To build development andcommercialization capabilities, in 2001 we hired staff in critical functions, including global commercial operations, clinical research and operations, strategic product development, government relations and regulatoryaffairs, as well as in other support areas.

        As a result of the COR acquisition, we will incur additional significant expenses for research and development and to develop, train, maintain and manage our sales force for INTEGRILIN® (eptifibatide) Injection.

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        We expect to continue to pursue additional alliances and to consider joint development, merger, or acquisition opportunities that may provide us with access to products on the market or in later stages ofcommercial development than those represented within our current programs. We expect that we will incur increasing expenses and may incur increasing operating losses for at least the next several years, primarily due toexpansion of facilities and research and development programs and as a result of our efforts to advance acquired products or our own development programs to commercialization. Our results of operations for any periodmay not be indicative of future results as our revenues under strategic alliance and licensing arrangements and from product revenue may fluctuate from period to period or year to year.

**Critical Accounting Policies**

        In December 2001, the SEC requested that all registrants discuss their most "critical accounting policies" in management's discussion and analysis of financial condition and results of operations. The SECindicated that a "critical accounting policy" is one which is both important to the portrayal of the company's financial condition and results and requires management's most difficult, subjective or complex judgments,often as a result of the need to make estimates about the effect of matters that are inherently uncertain. While our significant accounting policies are more fully described in Note 2 to our consolidated financialstatements included in our Form 10-K, we believe the following accounting policies to be critical:

        *Revenue*—We have formed strategic alliances with major pharmaceutical companies. These agreements include alliances based on the transfer of technology, alliances which combine technology transfer with a focuson a specific disease or therapeutic approach, and disease-focused programs under which we conduct research funded by our partners. Several of our disease-based alliances and alliances which combine technology-transferwith a disease focus are generally structured as research collaborations. Under these arrangements, we perform research in a specific disease area aimed at discoveries leading to novel pharmaceutical (small molecule)products. These alliances generally provide research funding over an initial period, with renewal provisions, varying by agreement. Under these agreements, our partners may make up-front payments, additional paymentsupon the achievement of specific research and product development milestones, ongoing research funding and/or pay royalties or in some cases make profit-sharing payments to us based upon any product sales resulting fromthe collaboration.

        Product revenue includes our share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotion territories by Schering, as wellas the reimbursement from Schering of our costs of copromotion revenue. We recognize copromotion revenue when Schering ships related product to wholesalers and record it net of allowances, if any. Our costs of productrevenue consist of certain manufacturing-related expenses associated with the sale of INTEGRILIN® within copromotion territories. We defer certain manufacturing-related expenses until thetime Schering ships related product to its customers inside and outside copromotion territories. Also included in product revenue are reimbursements to us by Schering of certain manufacturing-related expenses formaterials used outside the copromotion territory and royalties from Schering on sales of INTEGRILIN® outside the copromotion territory.

        Effective October 1, 2000, we changed our method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101 ("SAB 101"), Revenue Recognition in Financial Statements.Previously, we had recognized revenue relating to non-refundable, up-front, license and milestone payments and certain research funding payments from our strategic partners in accordance with the contract. Under the newaccounting method adopted retroactively to January 1, 2000, we recognize revenue from non-refundable, up-front, license and milestone payments, not specifically tied to a separate earnings process, ratably over the termof the research contract. When the period of deferral cannot be specifically identified from the contract, management estimates the period based upon other critical factors contained within the contract. We continuallyreview these estimates which could result in a change in the deferral period. When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation associatedwith the payment is completed. Performance obligations typically consist of significant milestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval withregulatory agencies and approvals by regulatory agencies. In addition, when appropriate, we recognize revenue from certain research payments based upon the level of research services performed during the period of the

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research contract. The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which is included in the loss for the year ended December 31, 2000.

        In connection with our adoption of SAB 101, we began recognizing the research funding portion of our Bayer alliance on a percentage-of-completion basis. The percentage-of-completion is determined based upon theactual level of work performed during the period as compared to management's estimate of the total work to be performed under the alliance. The estimates are continually reviewed and adjusted as necessary, as experiencedevelops or new information becomes known.

        *Inventory*—Inventory represents bulk materials used in the production of INTEGRILIN® (eptifibatide) Injection and INTEGRILIN® finished goods inventory on hand, valued at cost. Inventories are reviewed periodically forslow-moving or obsolete status based on sales activity, both projected and historical. If product sales differ from projections, inventory may not be fully utilized and could be subject to impairment.

**Accounting Pronouncements**

        In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill andindefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that are not deemed to have anindefinite life will continue to be amortized over their useful lives. We adopted SFAS No. 142 effective January 1, 2002 and reclassified amounts to goodwill which were previously allocated to assembledworkforce. Upon adoption, we ceased the amortization of goodwill. We completed our transitional assessment of goodwill and no impairment loss was recognized.

**Results of Operations**

**Quarters Ended March 31, 2002 and March 31, 2001**

        In connection with our acquisition of COR in February 2002, results for the three months ended March 31, 2002 (the "2002 Period") include approximately six and one-half weeks of results from the acquired business.For the 2002 Period, we reported a net loss of $303.9 million or $1.20 per basic and diluted share as compared to a net loss of $53.1 million or $0.25 per basic and diluted share for the three months ended March 31,2001 (the "2001 Period").

        Revenues increased to $68.6 million for the 2002 Period from $50.4 million for the 2001 Period. The increase is attributable to our share of product revenue from INTEGRILIN® compromotedby us and Schering. Also included in product revenue are reimbursements of certain manufacturing-related expenses and royalties from Schering on sales ofINTEGRILIN® outside the copromotion territory.

        Included in revenue for the periods presented in 2002 and 2001 is $11.1 million and $10.1 million, respectively, of revenue that was recognized in prior years relating to the adoption of SAB 101.

        Research and development expenses increased to $101.3 million in the 2002 Period from $92.5 million for the 2001 Period. The increase was primarily attributable to our continued investment in building asustainable product pipeline, with increases in personnel and facilities, expenses relating to clinical trials and preclinical product candidates, and consulting.

        As of March 31, 2002, we had ten product candidates in various stages of clinical trials. Completion of clinical trials may take several years or more, but the length of time can vary substantially according tothe type, complexity, novelty and intended use of a product candidate. In 2001, we initiated a Phase II trial of our lead oncology candidate, MLN341, in patients with hematologic cancers and Phase I trials for potentialtreatment of patients with solid tumors. Also in 2001, we initiated Phase II trials of MLN02 in patients with ulcerative colitis and of MLN977 in patients with asthma. The radio-labeled version of our anti-PSMA(prostate specific membrane antigen) antibody, MLN591 is in Phase I trial in patients with hormone-refractory prostate cancer. In November 2001, we initiated a Phase I trial of our first genomically-derived molecule,MLN4760, for the potential treatment of obesity. CMR International, an independent research organization, estimates that clinical trials in our franchise areas are typically completed over the following timelines:

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Clinical Phase  Estimated CompletionPeriod                 Phase I 1-2 years                 Phase II 2-3 years                 Phase III 2-3 years 
        Upon successful completion of Phase III trials, we intend to submit the results to the FDA to support regulatory approval of the product. However, we cannot be certain that any of our products will prove to besafe or effective, will receive regulatory approvals, or will be successfully commercialized.

        The duration and the cost relating to preclinical testing and clinical trials may vary significantly over the life of a project. Our joint development arrangements with our strategic partners also result invariability in our development costs. Our primary mechanism for budgeting and tracking these costs is by type of cost incurred. The types of costs include the following categories: personnel costs, clinical costs,laboratory costs, technology license fees, research costs and facilities costs.

        Selling, general and administrative expenses increased to $37.2 million for the 2002 Period from $16.2 million for the 2001 Period. The increase was largely due to the expansion of our commercial organization,other business groups, facilities and infrastructure necessary to support the development of our pipeline and growth in all areas of our business. Significant increases were primarily in personnel expenses, consultingand facility expenses.

        Cost of product revenue consists of certain manufacturing-related expenses associated with the sale of INTEGRILIN® (eptifibatide) Injection within copromotion territories. Cost ofproduct revenue fluctuates in relation to the domestic sales of INTEGRILIN® and as we incur more or less of the joint activities that we undertake in our collaboration withSchering.

        On February 12, 2002, we acquired COR for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares of Millennium common stock pursuant to the merger agreement. This calculation isbased on COR outstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 of a share of Millennium common stock for each share of outstanding COR common stock. In addition, options to purchaseapproximately 6.2 million shares of COR common stock with a weighted average exercise price of $12.90 were assumed by us pursuant to the merger and converted into options to purchase approximately 6.1 million shares ofMillennium common stock.

        The transaction was recorded as a purchase for accounting purposes and the consolidated financial statements include COR's operating results from the date of the acquisition. The purchase price was allocated tothe assets purchased and the liabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair value of net tangible assets allocated to specific intangibleassets and goodwill.

        We also recorded a one-time, noncash charge to operations in the quarter ended March 31, 2002 of $242.0 million for acquired in-process research and development. The valuation of acquired in-process researchand development represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had no alternative future use and for which technological feasibility had not been established.

        The income approach was used to establish the fair values of developed technology, trademark and acquired in-process research and development. This approach establishes the fair value of an asset by estimatingthe after-tax cash flows attributable to the asset over its useful life and then discounting these after-tax cash flows back to a present value. The discounting process uses a rate of return commensurate with the timevalue of money and investment risk factors. Accordingly, for the purpose of establishing the fair value of developed technology, trademark and acquired in-process research and development, revenues for each futureperiod were estimated, along with costs, expenses, taxes and other charges. Revenue estimates were based on 

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estimates of relevant market sizes and growth factors, expected trends in technology and the nature andexpected timing of new product introductions by us and our competitors.

        The in-process technology we acquired from COR consisted of five significant research and development projects with values assigned of $4.0 million to $149.0 million for each project. These pipelineproducts include therapeutics for the treatment of cardiovascular diseases, including acute myocardial infarction, restenosis, cirrhosis, pulmonary fibrosis, venous thrombosis, and stroke prevention, as well asoncology. Through the acquisition date, COR had spent approximately $80.0 million to $140.0 million on each of these five in-process research and development projects. We expect to incur an additional $86.0 million to$146.0 million of development expenses for each of these five significant projects. The five projects acquired, which are in various stages of preclinical through Phase II clinical trials, are expected to reach completionin 2003 through 2009.

        The major risk associated with the timely completion and commercialization of these products is the ability to confirm the safety and efficacy of the technology based on the data of long-term clinical trials.If these projects are not successfully developed, future results of operations may be adversely affected. Additionally, the value of the other intangible assets acquired may become impaired.

        We believe that the assumptions used to value the acquired intangibles and in-process research and development were reasonable at the time of the acquisition. No assurance can be given, however, that theunderlying assumptions used to estimate expected project revenues, development costs or profitability, or the events associated with such projects, will transpire as estimated. For these reasons, among others, actualresults may vary from the projected results.

        Amortization of intangible assets in the 2002 Period relates to specifically identified intangible assets from the COR, LeukoSite and CDC acquisitions. Amortization of intangible assets in the 2001 Periodrelates to existing technology, assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense decreased to $5.5 million in the 2002 Period from $16.3 million in the 2001Period due to the adoption of SFAS No. 142, "Goodwill and Intangible Assets." Following our adoption of SFAS 142 effective as of January 1, 2002, we continue to amortize specifically identifiable intangible assets andceased amortizing goodwill and assembled workforce which was reclassified to goodwill.

        Equity in operations of the M&I joint venture was a loss of $1.0 million for the 2001 Period. The loss is primarily attributable to pre-product launch marketing and sales activities of the joint venture. Wesold our interest in the partnership to ILEX on December 31, 2001.

        Investment income increased to $28.2 million for the 2002 Period from $27.5 million for the 2001 Period. Interest expense increased to $6.8 million for the 2002 Period from $2.3 million for the 2001 Periodprimarily due to our assumption of COR's convertible notes.

        During the 2001 Period, we paid an aggregate of $2.6 million in cash to certain holders of our convertible notes in order to induce the conversion of their notes into our common stock.

**Liquidity and Capital Resources**

        We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to pay debt service, including principal and interest and capital lease payments. As described aboveunder "Overview—Expansion of Operations," we expect that our cash requirements for all of these uses will increase as the scale of our operations grows.

        Historically, we have funded our cash requirements primarily through the following:
 • payments from our strategic collaborators including license fees, milestone payments and researchfunding;     • equity investments by our strategic collaborators, including: 
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 • $28.6 million from Abbott in March 2002; • $50.0 million from Aventis in January 2001;     • equity and debt offerings, including:     • our October 2000 secondary public; • our January 2000 issuance of our 5.5% convertible subordinated notes due January 15, 2007;and     • property and equipment financings.    
        We expect to continue to fund our cash requirements from these external sources in the future. In particular, we are entitled to additional committed research and development funding under a number of ourstrategic alliances, Abbott has agreed to purchase an additional $114.2 million of our common stock in four quarterly installments through 2003 and we may receive additional substantial payments from ILEX as a result ofour sale of our joint venture interest in M&I. In addition, we anticipate that product revenue relating to sales of INTEGRILIN® (eptifibatide) Injection in the U.S. will result in significant internally generated funds.

        We believe that the key factors that could affect our internal and external sources of cash are:
 •  revenues and margins from sales of INTEGRILIN® and other products and services for which weobtain marketing approval in the future;     • the success of our clinical and preclinical development programs;     • the receptivity of the capital markets to financings by biotechnology companies;     • our ability to enter into additional strategic collaborations and to maintain existing and newcollaborations and the success of such collaborations; and     • the sales levels of CAMPATH®.
        As of March 31, 2002 and December 31, 2001, we had approximately $1.9 billion and $1.5 billion in cash, cash equivalents and marketable securities. This excludes $45.8 million of interest-bearing marketablesecurities classified as restricted cash on our balance sheet, which serve as collateral for letters of credit securing leased facilities.

        During the three months ended March 31, 2001, we paid $2.6 million in cash to certain holders of our 5.5% convertible subordinated notes due January 15, 2007 in order to induce the conversion of $12.6 million ofour notes into approximately 0.3 million shares of Millennium common stock. These cash payments were expensed during the three months ended March 31, 2001. Interest accrued through the date of conversion was chargedto interest expense and was paid upon conversion. At March 31, 2002, we had $83.3 million of outstanding 5.5% convertible subordinated notes due January 15, 2007.

        During the first quarter of 2002, we received $28.6 million from Abbott for a purchase of approximately 1.4 million shares of our common stock under an equity investment agreement. During the first quarter of2001, we received $50.0 million from Aventis for a purchase of approximately 0.8 million shares of our common stock under an equity investment agreement.

*Cash Flows*

        We used $94.7 million of cash in operating activities in the 2002 Period and $54.1 million in the 2001 Period. The principal use of cash in both 2002 and 2001 was to fund our net loss.

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        Investing activities provided net cash of $208.9 million in the 2002 Period. We used cash of $89.3 million in investing activities in the 2001 Period. The principal source of funds in the 2002 Period is fromthe cash acquired in the COR acquisition. The principal uses in the 2002 and 2001 Periods were purchases of investments in marketable securities, property and equipment and other long term assets.

        Financing activities provided net cash of $25.9 million in the 2002 Period and $53.6 million in the 2001 Period. Principal sources of net cash from financing activities were the sale of commonstock to Abbott in the 2002 Period and the sales of common stock to Abbott and Aventis in the 2001 Period.

*Contractual obligations*

        Our major outstanding contractual obligations relate to our convertible notes, our capital leases from equipment financings and our facilities leases. Our facilities lease expense in future years will increasesignificantly over past years as a result of new lease arrangements entered into in 2000 and 2001 described below and the facilities leases assumed by us in the COR acquisition.

        Our convertible notes aggregate $683.3 million in principal amount outstanding. These notes consist of $83.3 million of 5.5% convertible subordinated notes due 2007, $300.0 million of 4.5% convertible seniornotes due June 15, 2006 assumed by us in the COR acquisition and $300.0 million of 5.0% convertible subordinated notes due March 1, 2007 assumed by us in the COR acquisition. All three issues of notes requiresemi-annual interest payments through maturity. On March 14, 2002, we, as required by the terms of the notes assumed by us in the COR acquisition, commenced cash repurchase offers to the noteholders in amounts equal to100% of the principal amounts of the notes plus interest accrued and unpaid through April 28, 2002.

        In February 2001, we entered into a lease agreement relating to a building to be constructed for laboratory and office space in Cambridge, England. The lease has a term of 20 years and is expected to commence in2003 upon completion of construction. We are responsible for a portion of the construction costs, which we estimate to be approximately $21.0 million. Rent is expected to be approximately $2.4 million per year and issubject to market adjustments at the end of the 5th, 10th and 15th years.

        We also have lease obligations relating to two buildings to be constructed for laboratory and office space in Cambridge, Massachusetts. The rent obligation for each building is expected to commence on theearlier of (a) September 1, 2002 or October 1, 2003, respectively or (b) the date on which we commence occupancy of the respective building. Both leases are for a term of seventeen years. We are responsible for aportion of the construction costs for both buildings. Our cost to complete each of the buildings is expected to be approximately $37.9 and $42.0 million, respectively. Rent is calculated on an escalating scale rangingfrom approximately $7.6 million, per building per year, to approximately $9.7 million, per building per year.

        There have been no significant changes to our contractual obligations and commercial commitments included in our Form 10-K as of December 31, 2001, except for the $600.0 million of CORconvertible debt and the related interest payments we assumed as part of the COR acquisition.

        We believe that existing cash and cash equivalents, internally generated funds and the anticipated cash payments from our current strategic alliances will be sufficient to support our operations and fund ourcapital commitments for the near term. Our actual future cash requirements, however, will depend on many factors, including:
 • the progress of our disease research programs; • the number and breadth of these programs; • achievement of milestones under strategic alliance arrangements; • our ability to establish and maintain additional strategic alliance and licensing arrangements; • success of INTEGRILIN® (eptifibatide) Injection and additional products introduced into the market;and • the progress of our development efforts and the development efforts of our strategic partners.
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**Subsequent Event**

        On April 22, 2002, we amended the terms of the notes assumed in the merger with COR to induce noteholders to hold such notes until at least April 29, 2003 by offering a premium redemption. Specifically, weamended our 4.5% convertible senior notes due June 15, 2006 to permit noteholders to exchange these notes for cash at a price of $1,095 per $1,000 of principal amount if such notes are held until April 29, 2003. Weamended the 5.0% convertible subordinated notes due March 1, 2007 to permit noteholders to exchange these notes for cash at a price of $1,085 per $1,000 of principal amount if such notes are held until April 29, 2003.

        On April 29, 2002, our cash repurchase offers to the noteholders of our outstanding 4.5% convertible senior notes due June 15, 2006 and 5.00% convertible subordinated notes due March 1, 2007 expired.  As of the expiration, $40,000 of these notes have been tendered and will be converted into cash and approximately $599.9 million of these notes remain outstanding. The cost of the redemption premium associated with these outstanding notes will be recognized in our second quarter 2002 statement of operations.

**RISK FACTORS THAT MAY AFFECT RESULTS**

        This Quarterly Report on Form 10-Q and certain other communications made by us contain forward-looking statements, including statements about our growth and future operating results, discovery and development ofproducts, potential acquisitions, strategic alliances and intellectual property. For this purpose, any statement that is not a statement of historical fact should be considered a forward-looking statement. We often usethe words "believes," "anticipates," "plans," "expects," "intends" and similar expressions to help identify forward-looking statements.

        There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Factors that could cause or contribute to suchdifferences include those discussed below, as well as those discussed elsewhere in this Form 10-Q. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise.

**Risks Relating to COR Acquisition**

**We may face challenges in integrating COR and, as a result, may not realize the expected benefits of the merger.**

        We closed the acquisition of COR on February 12, 2002. Integrating the operations and personnel of COR with our other operations and personnel will be a complex process. We are uncertain that the integrationwill be completed rapidly or that we will achieve the anticipated benefits of the merger. The successful integration of COR will require, among other things, coordination of discovery and development efforts andintegration of COR's administration and sales and marketing groups into our existing groups. The inability to successfully integrate the operations and personnel of COR or any significant delays in achieving integrationcould have a material adverse effect on our business.

**As a result of our merger with COR, we are a substantially larger and broader organization; if our senior executive team is unable to successfully manage the combined company, our operating results will suffer.**

        As a result of our acquisition of COR, we face challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to develop appropriate systems,policies, benefits and compliance programs. In addition, COR has focused on developing products for treating and preventing cardiovascular diseases, while we have targeted oncology, inflammatory disease and metabolicdisease. We will need to manage the allocation of our resources to this additional focus area, which includes the FDA approved drug INTEGRILIN® (eptifibatide) Injection. In the event we do not effectively manage theallocation of resources among our programs, sales of INTEGRILIN® or our ability to successfully develop our other existing product candidates into revenue generating products could be materially adversely affected.

**Under the terms of the indentures for COR's convertible notes, which we have assumed, we are required to offer to repurchase the notes for cash.**

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        We have assumed the indentures governing COR's convertible notes aggregating $600 million in outstanding principal amount. As required by these indentures, as a result of our acquisition of COR, we haveinitiated an offer to repurchase the notes. In the event that the holders of large numbers of these notes accept the repurchase offer, the amount of our cash could be substantially diminished.

**The merger could cause us to lose key COR personnel and require us to incur substantial costs to recruit replacements for lost personnel.**

        As a result of our acquisition of COR, former COR employees could experience uncertainty about their future roles within our company. This uncertainty may adversely affect our ability to retain key CORmanagement, sales, marketing and technical personnel. Any failure to retain key personnel could have a material adverse effect on our business.

**Regulatory Risks**

**We may not be able to obtain marketing approval for products or services resulting from our development efforts or to market INTEGRILIN® (eptifibatide) Injection for additional therapeutic uses.**

        All of the products that we are developing will require additional research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. This processis lengthy, often taking a number of years, and expensive. In some cases, the length of time that it takes for us to achieve various regulatory approval milestones affects the payments that we are eligible to receiveunder our strategic alliance agreements. For example, a payment is due to us from Schering if INTEGRILIN® receives an expanded marketing authorization for the European Union.

        We may need to successfully address a number of technological challenges in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove tohave undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.

        INTEGRILIN® has been approved for a specific set of therapeutic uses. To grow our business, we may need to obtain regulatory approval to be able to promote INTEGRILIN® for additional therapeutic uses.

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

        Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data and promotional activities for such product, will be subject to continual review andperiodic inspections by the FDA and other regulatory bodies. Later discovery of previously unknown problems with our products or manufacturing processes, or failure to comply with regulatory requirements, may result inrestrictions on such products or manufacturing processes, withdrawal of the products from the market or the imposition of civil or criminal penalties.

**We have only limited experience in regulatory affairs, and some of our products may be based on new technologies; these factors may affect our ability or the time we require to obtain necessary regulatory approvals.**

        We have only limited experience in filing and prosecuting the applications necessary to gain regulatory approvals. Moreover, certain of the products that are likely to result from our research and developmentprograms may be based on new technologies and new therapeutic approaches that have not been extensively tested in humans. The regulatory requirements governing these types of products may be more rigorous than forconventional products. As a result, we may experience a longer regulatory process in connection with any products that we develop based on these new technologies or new therapeutic approaches.

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**Risks Relating to Our Business, Strategy and Industry**

**Our revenues over the next several years will be materially dependent on the commercial success of INTEGRILIN® (eptifibatide) Injection.**

        Our revenues over the next several years will be materially dependent on the commercial success of INTEGRILIN®, which has been on the market in the United States since June 1998. Marketing outside the UnitedStates commenced in mid-1999. Although sales of INTEGRILIN® have increased since its launch, if sales do not continue to increase over current levels, we will not achieve our business plan and may be forced to scaleback our operations and research and development programs.

**Because discovering drugs based upon genomics is new, it is possible that this discovery process will not result in commercial products or services.**

        The process of discovering drugs based upon genomics is new and evolving rapidly. We focus our genomics research primarily on diseases that may be linked to several or many genes working in combination. Both weand the general scientific and medical communities have only a limited understanding relating to the role of genes and their products in these diseases. To date, we have not commercialized any products discoveredthrough our genomics research, and we may not be successful in doing so in the future. In addition, relatively few products based on gene discoveries have been developed and commercialized by others. Rapid technologicaldevelopment by us or others may result in compounds, products or processes becoming obsolete before we recover our development expenses.

**We face substantial competition, particularly in the cardiovascular disease market, which may result in others discovering, developing or commercializing products and services before or more successfully than us.**

        The fields of genomics, biotechnology and pharmaceuticals are highly competitive. Many of our competitors are substantially larger than us and have substantially greater capital resources, research anddevelopment staffs and facilities than us. Furthermore, many of our competitors are more experienced than us in drug discovery, development and commercialization, obtaining regulatory approvals and product manufacturingand marketing. As a result, our competitors may identify genes associated with diseases or discover, develop and commercialize pharmaceutical products or services before us. In addition, our competitors may discover,develop and commercialize products or services that render non-competitive or obsolete the products or services that we or our collaborators are seeking to develop and commercialize.

        In particular due to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address these diseases is large, and competition is intense and expected to increase. Our mostsignificant competitors are major pharmaceutical companies and more established biotechnology companies. The two products that compete with INTEGRILIN® are ReoPro®, which is produced by Johnson & Johnson and sold byJohnson & Johnson and Eli Lilly & Co., and Aggrastat®, which is produced and sold by Merck & Co., Inc. These competitors operate large, well-funded cardiovascular research and development programs and have significantexpertise in manufacturing, testing, regulatory matters and marketing.

**If our clinical trials are unsuccessful, or if they experience significant delays, our ability to commercialize products will be impaired.**

        We must provide the FDA and foreign regulatory authorities with preclinical and clinical data that demonstrate that our products are safe and effective before they can be approved for commercial sale. Clinicaldevelopment, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage of testing. Interim results of preclinicalor clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be seen in later studies. Any preclinical or clinical test may fail to produce results satisfactoryto the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative

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or inconclusive results from a preclinical study or clinical trial oradverse medical events during a clinical trial could cause 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.

        We may not complete our planned preclinical or clinical trials on schedule or at all. In addition, due to the substantial demand for clinical trial sites in the cardiovascular area, we may have difficultyobtaining a sufficient number of appropriate patients or clinician support to conduct our clinical trials as planned. If so, we may have to expend substantial additional funds to obtain access to resources or delay ormodify our plans significantly. Our product development costs will increase if we experience delays in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to marketbefore we do and impair our ability to commercialize our products or potential products.

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

        Our gene identification strategy includes genetic studies of families and populations prone to particular diseases. These studies require the collection of large numbers of DNA samples from affected individuals,their families and other suitable populations as well as animal models. The availability of DNA samples and other biological material is important to our ability to discover the genes responsible for human diseasesthrough human genetic approaches and other studies. Competition for these resources is intense. Access to suitable populations, materials and samples could be limited by forces beyond our control, including governmentalactions. Some of our competitors may have obtained access to significantly more family and population resources and biological materials than we have obtained. As a result, we may not be able to obtain access to DNAsamples necessary to support our human gene discovery programs.

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

        The commercial success of any of our products and services for which it may obtain marketing approval from the FDA or other regulatory authorities will depend upon their acceptance by the medical community andthird party payors as clinically useful, cost-effective and safe. Many of the products and services that we are developing are based upon new technologies or therapeutic approaches. As a result, it may be more difficultfor us to achieve market acceptance of our products and services, particularly the first products and services that we introduce to the market based on new technologies and therapeutic approaches. Our efforts to educatethe medical community on these potentially unique approaches may require greater resources than would be typically required for products and services based on conventional technologies or therapeutic approaches. Thesafety, efficacy, convenience and cost-effectiveness of our products as compared to competitive products will also affect market acceptance.

**Risks Relating to Our Financial Results and Need for Financing**

**We have incurred substantial losses and expect to continue to incur losses. We will not be successful unless we reverse this trend.**

        We have incurred losses in all but two of the years since our inception. We expect to continue to incur substantial operating losses in future periods. Prior to our acquisition of COR, substantially all of ourrevenues resulted from payments from collaborators, and not from the sale of products.

        We expect to increase our spending significantly as we continue to expand our infrastructure, research and development programs and commercialization activities. As a result, we will need to generate significantrevenues to pay these costs and achieve profitability. We cannot be certain whether or when we will become profitable because of the significant uncertainties with respect to our ability to generate revenues from thesale of products and services and from existing and potential future strategic alliances.

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**We may need additional financing, which may be difficult to obtain. Our failure to obtain necessary financing or doing so on unattractive terms could adversely affect our discovery and development programs and otheroperations.**

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

        If we are unable to obtain adequate funding on a timely basis, we may be required to significantly curtail one or more of our discovery or development programs. We could be required to seek funds througharrangements with collaborators or others that may require us to relinquish rights to certain of our technologies, product candidates or products which we would otherwise pursue on our own.

**Our indebtedness and debt service obligations may adversely affect our cash flow.**

        At March 31, 2002 we had approximately $683 million of outstanding debt. During each of the last five years, our earnings were insufficient to cover our fixed charges. During each of the next three years, wewill be required to make interest payments on our outstanding convertible notes totaling approximately $33.1 million. In addition, we recently amended the convertible notes assumed upon our acquisition of COR to providenoteholders the right to put these notes to us, on April 29, 2003, for cash at a premium to face value. The aggregate amount of this premium is approximately $54 million. If we are unable to generate sufficient cash tomeet these obligations and have to use existing cash or investments, we may have to delay or curtail our research and development programs.

        We intend to fulfill our debt service obligations both from cash generated by our operations and from our existing cash and investments. We may add additional lease lines to finance capital expenditures and mayobtain additional long-term debt and lines of credit.

        Our indebtedness could have significant additional negative consequences, including:
 • increasing our vulnerability to general adverse economic and industry conditions;     • limiting our ability to obtain additional financing;     • requiring the dedication of a substantial portion of our expected cash flow from operations toservice our indebtedness, thereby reducing the amount of our expected cash flow available forother purposes, including capital expenditures;     • limiting our flexibility in planning for, or reacting to, changes in our business and the industry inwhich we compete; and     • placing us at a possible competitive disadvantage to less leveraged competitors and competitorsthat have better access to capital resources.    
**We have sold our interest in CAMPATH®; as a result, we will no longer have control over the financial success of that product.**

        On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX Partners, L.P., which owns the CAMPATH® product. In exchange for our equity interest in Millennium & ILEX Partners,ILEX paid us $20 million on December 31, 2001 and is obligated to pay us up to an additional

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$120.0 million over the next three years if sales of CAMPATH® in the U.S. meet specified sales thresholds. In addition, wewill be entitled to additional payments from ILEX based on U.S. sales of CAMPATH® after 2004. There can be no assurance that we will receive any of the payments that are dependent on sales of CAMPATH®. In addition, wewill have no ability to influence the actions of the entity that owns CAMPATH® and, therefore, will have no control over the financial success of CAMPATH®.

**Risks Relating to Collaborators**

**We depend significantly on our collaborators to develop and commercialize products and services based on our work. Our business may suffer if any of our collaborators breaches its agreement or fails to support orterminates its alliance with us.**

        We conduct most of our discovery and development activities through strategic alliances and market and sell INTEGRILIN® (eptifibatide) Injection through an alliance with Schering. The success of our alliancesdepends heavily on the efforts and activities of our collaborators. Each of our collaborators has significant discretion in determining the efforts and resources that they will apply to the alliance. Our existing andany future alliances may not be scientifically or commercially successful.

        The risks that we face in connection with these alliances include:
 • all of our strategic alliance agreements are subject to termination under various circumstances,including, in many cases, on short notice without cause;     • 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. These agreements mayhavethe effect of limiting the areas of research and development we may pursue, either alone orin 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 the subject ofthe alliance with us;     • our collaborators may change the focus of their development and commercialization efforts.Pharmaceutical and biotechnology companies historically have re-evaluated their prioritiesfollowingmergers and consolidations, which have been common in recent years in theseindustries; and     • we will rely on our collaborators to manufacture most products covered by our alliances. Forexample, Schering is one of the manufacturers of INTEGRILIN® and Becton Dickinson has thesoleright to develop, manufacture and commercialize our Melastatin® gene detection product.    
**We may not be successful in establishing additional strategic alliances, which could adversely affect our ability to develop and commercialize products and services.**

        An important element of our business strategy is entering into strategic alliances for the development and commercialization of products and services based on our discoveries. We face significant competition inseeking appropriate collaborators. Moreover, these alliance arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to establish additional strategic alliances orother alternative arrangements. The terms of any additional strategic alliances or other arrangements that we establish may not be favorable to us. Moreover, such strategic alliances or other arrangements may not besuccessful.

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**Risks Relating to Intellectual Property**

**If we are unable to obtain patent protection for our discoveries, the value of our technology and products will be adversely affected. If we infringe patent or other intellectual property rights of third parties, we maynot be able to develop and commercialize our products and services or the cost of doing so may increase.**

        Our patent positions, and those of other pharmaceutical and biotechnology companies, are generally uncertain and involve complex legal, scientific and factual questions.

        Our ability to develop and commercialize products and services depends in significant part on our 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.    
**There is significant uncertainty about the validity and permissible scope of patents in our industry, which may make it difficult for us to obtain patent protection for our discoveries.**

        The validity and permissible scope of patent claims in the pharmaceutical and biotechnology fields, including the genomics field, involve important unresolved legal principles and are the subject of publicpolicy debate in the United States and abroad. For example, there is significant uncertainty both in the United States and abroad regarding the patentability of gene sequences in the absence of functional data and thescope of patent protection available for full-length genes and partial gene sequences. Moreover, some groups have made particular gene sequences available in publicly accessible databases. These and other disclosuresmay adversely affect our ability to obtain patent protection for gene sequences claimed by us in patent applications that we file subsequent to such disclosures. There is also some uncertainty as to whether humanclinical data will be required for issuance of patents for human therapeutics. If such data are required, our ability to obtain patent protection could be delayed or otherwise adversely affected.

**Third parties may own or control patents or patent applications and require us to seek licenses, which could increase our development and commercialization costs, or prevent us from developing or marketing our productsor services.**

        We may not have rights under some patents or patent applications related to our proposed products, processes or services. Third parties may own or control these patents and patent applications in the UnitedStates and abroad. Therefore, in some cases, such as those described below, to develop, manufacture, sell or import certain of our proposed products, processes or services, we or our collaborators may choose to seek, orbe required to seek, licenses under third party patents issued in the United States and abroad or those that might issue from United States and foreign patent applications. In such event, we would be required to paylicense fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products, processes orservices.

        With respect to our product candidate MLN01, we are aware of third party patents and patent applications which relate to certain anti-CD18 antibodies and their use in various methods of treatment includingmethods of reperfusion therapy and methods of treating focal ischemic stroke. In addition, our MLN01 and MLN02 product candidates are humanized monoclonal antibodies. We are aware of third party patents and patentapplications that relate to certain humanized or modified antibodies, products useful for making humanized or modified antibodies

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and processes for making and using humanized or modified antibodies. We are also aware ofthird party patents and patent applications relating to certain manufacturing processes, products thereof and materials useful in such processes. We are also aware of third party patent applications and a potentiallyinterfering patent application relating to anti-PSMA antibodies.

        Our product candidates MLN341 and MLN519 are small molecule drug candidates. With respect to MLN341, we are aware of third party patents or patent applications that relate to either intermediates or syntheticprocesses used in the synthesis of this compound. Additionally, for the use of MLN341 and MLN519 in the treatment of infarctions, we are aware of the existence of a potentially interfering patent application filed byone of our former consultants. We are also aware of third party patents relating to assays relating to the NFkB pathway.

**We may become involved in expensive patent litigation or other proceedings, which could result in our incurring substantial costs and expenses or substantial liability for damages or require us to stop our developmentand commercialization efforts.**

        There has been substantial litigation and other proceedings regarding the patent and other intellectual property rights in the pharmaceutical and biotechnology industries. We may become a party to patentlitigation or other proceedings regarding intellectual property rights. For example, we believe that we hold patent applications that cover genes that are also claimed in patent applications filed by others.Interference proceedings before the United States Patent and Trademark Office may be necessary to establish which party was the first to invent these genes.

        The cost 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 such litigation or proceedings moreeffectively than we can because of their substantially greater financial resources. If a patent litigation or other proceeding is resolved against us, we or our collaborators may be enjoined from developing,manufacturing, selling or importing our products, processes or services without a license from the other party and we may be held liable for significant damages. We may not be able to obtain any required license oncommercially acceptable terms or at all.

        Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation andother proceedings may also absorb significant management time.

**Risks Relating to Product Manufacturing, Marketing and Sales**

**Because we have limited sales, marketing and distribution experience and capabilities, we may be dependent on third parties to successfully perform these functions on our behalf or may be required to incur significantcosts and devote significant efforts to augment our existing capabilities.**

        We have limited sales, marketing and distribution experience and capabilities, primarily the specialty sales force that we acquired in the COR merger that markets INTEGRILIN® (eptifibatide) Injection. Dependingon the nature of the products and services for which we obtain market approval, we may need to rely significantly on sales, marketing and distribution arrangements with our collaborators and other third parties. Forexample, some types of pharmaceutical products require a large sales force and extensive marketing capabilities for effective commercialization. If in the future we elect to perform sales, marketing and distributionfunctions for such types of products ourselves, we would face a number of additional risks, including the need to recruit a large number of additional experienced marketing and sales personnel.

**Because we have limited manufacturing capabilities, we will be dependent on third-party manufacturers to manufacture products for us or will be required to incur significant costs and devote significant efforts toestablish our own manufacturing facilities and capabilities.**

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        We have limited manufacturing experience and no commercial scale manufacturing capabilities. In order to continue to develop products and services, apply for regulatory approvals and commercialize products andservices, we will need to develop, contract for or otherwise arrange for the necessary manufacturing capabilities.

        We currently rely upon third parties to produce material for preclinical testing purposes and expect to continue to do so in the future. We also expect to rely upon other third parties, including ourcollaborators, to produce materials required for clinical trials and for the commercial production of certain of our products.

        There are a limited number of manufacturers that operate under the FDA's good manufacturing practices regulations capable of manufacturing our products. As a result, we have experienced some difficulty findingmanufacturers for our products with adequate capacity for our anticipated future needs. If we are unable to arrange for third party manufacturing of our products, or to do so on commercially reasonable terms, we may notbe able to complete development of our products or market them.

        Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including reliance on the third party for regulatory compliance and quality assurance,the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreement by the third party, based on its ownbusiness priorities, at a time that is costly or inconvenient for us.

        We may in the future elect to manufacture certain of our products in our own manufacturing facilities. We need to invest substantial additional funds and need to recruit qualified personnel in order to build orlease and operate any manufacturing facilities.

**We face particular challenges in connection with the manufacture of INTEGRILIN® (eptifibatide) Injection; if we do not meet these challenges our revenues and income will be adversely affected.**

        With respect to INTEGRILIN®, we have two manufacturers that produce bulk product and two manufacturers, one of which is Schering at its Manati facility in Puerto Rico, that perform fill/finish and packaging. Ifwe do not have adequate supplies of INTEGRILIN® to meet market demand, we may lose potential revenues, and the healthcare community may turn to competing products. Fill/finish and packaging of INTEGRILIN® at theSchering Manati facility for sale in the United States is in abeyance pending resolution of issues to be addressed by us and Schering relating to production processes and procedures.

        Our manufacturing plans call for the addition of extra capacity for the manufacture of INTEGRILIN®. If we are not able to secure additional manufacturing capacity on favorable terms, we may not be able to expandcapacity sufficiently to meet future market demand.

        We expect to improve or modify our existing process technologies and manufacturing capabilities for INTEGRILIN®. We cannot quantify the time or expense that may ultimately be required to improve or modify ourexisting process technologies, 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.

        Our commercialization strategy for INTEGRILIN® (eptifibatide) Injection includes establishment of multiple third-party manufacturing sources on commercially reasonable terms. We may not be able to do so, and,even if such sources are established, they may not continue to be available to us on commercially reasonable terms. In the event that we are unable to obtain contract manufacturing on commercially acceptable terms, ourability to produce INTEGRILIN® and to conduct preclinical testing and clinical trials of product candidates would be impaired.

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**If we fail to obtain an adequate level of reimbursement for our products or services by third party payors, there may be no commercially viable markets for our products or services.**

        The availability and levels of reimbursement by governmental and other third party payors affect the market for any pharmaceutical product or healthcare service. These third party payors continually attempt tocontain or reduce the costs of healthcare by challenging the prices 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 our products and services profitably if reimbursement is unavailable or limited in scope or amount.

        In particular, third party payors could lower the amount that they will reimburse hospitals to treat the conditions for which the FDA has approved INTEGRILIN®. If they do, pricing levels or sales volumes ofINTEGRILIN® may decrease. In foreign markets, a number of different governmental and private entities determine the level at which hospitals will be reimbursed for administering INTEGRILIN® to insured patients. If theselevels are set, or reset, too low, it may not be possible to sell INTEGRILIN® at a profit in these markets.

        In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system. Further proposals are likely. The potential foradoption of these proposals affects or will affect our ability to raise capital, obtain additional collaborators and market our products.

        We expect to experience pricing pressures in connection with the sale of our future products and services due to the trend toward managed health care, the increasing influence of health maintenance organizationsand additional legislative proposals.

**Ethical, legal and social issues related to genetic testing may cause our diagnostic products to be rejected by customers or prohibited or curtailed by governmental authorities.**

        Diagnostic tests that evaluate genetic predisposition to disease raise issues regarding the use and confidentiality of the information provided by such tests. Insurance carriers and employers might discriminateon the basis of such information, resulting in a significant barrier to the acceptance of such tests by customers. This type of discrimination could cause governmental authorities to prohibit or limit the use of suchtests.

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

        Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing and marketing of human therapeutic products. In particular, INTEGRILIN® is administered to patientswith serious cardiovascular disease who have a high incidence of mortality. Although we have product liability and clinical trial liability insurance that we believe is appropriate, this insurance is subject todeductibles and coverage limitations. We may 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, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with ourproduct commercialization efforts.

**Guidelines and recommendations can affect the use of our products.**

        Government agencies promulgate regulations and guidelines directly applicable to us and to our products. In addition, professional societies, practice management groups, private health and science foundationsand organizations involved in various diseases from time to time may also publish guidelines or recommendations to the health care and patient communities. Recommendations of government agencies or these other groups ororganizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines that are followed by patients and health care providers could result indecreased use of our products.

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**Item 3.    Quantitative and Qualitative Disclosures About Market Risk**

        We maintain an investment portfolio in accordance with our Investment Policy. The primary objectives of our Investment Policy are to preserve principal, maintain proper liquidity to meet operating needs andmaximize yields. Although our investments are subject to credit risk, our Investment Policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issueror type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 100 basis point increase in interest rates would result in anapproximate $23.2 million decrease in the fair value of our investments as of March 31, 2002. However, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated. Wedo not own derivative financial instruments in our investment portfolio.

        The interest rates on our convertible subordinated notes and capital lease 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 to derivative or other financial instruments which would require disclosure under this item.

        As of March 31, 2002 we did not have any off-balance sheet arrangements.

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**PART II OTHER INFORMATION**

**Item 2.    Changes in Securities and Use of Proceeds**

        On March 7, 2002, we issued and sold to Abbott Laboratories 1,358,603 shares of our common stock for aggregate proceeds of approximately $28.6 million. These shares were issued in connection with acollaboration agreement between the parties and no person served as an underwriter with respect to this transaction. We relied on Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") forexemption from the registration requirements of the Securities Act.

**Item 4.    Submission of Matters to a Vote of Security Holders**

        At our Special Meeting of Stockholders held on February 12, 2002, our stockholders approved the issuance of shares of our common stock to the stockholders of COR Therapeutics, Inc. in the merger of our whollyowned subsidiary with and into COR by the following vote:
For Against Abstain119,080,033 6,682,667 1,522,298
**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
        The following Current Reports on Form 8-K were filed by us since January  1, 2002.

        1.        A Current Report on Form 8-K was filed with the Securities and Exchange Commission on January 18, 2002 pursuant to Item 5, to update the descriptionof the securities of Millennium Pharmaceuticals, Inc.

        2.        A Current Report on Form 8-K was filed with the Securities and Exchange Commission on January 22, 2002, to report, pursuant to Item 5, that we issued a press release on January 22, 2002, to announce our financialresults for the year ended December 31, 2001 and provide guidance on our financial expectations for the current fiscal year.

        3.        A Current Report on Form 8-K was filed with the Securities and Exchange Commission on February 13, 2002 to report, pursuant to Item 5, that on February 12, 2002, we closed our acquisition of COR Therapeutics, Inc.,a Delaware corporation pursuant to an Agreement and Plan of Merger dated as of December 5, 2001, by and among Millennium, PGM Corporation, a Delaware corporation and our wholly owned subsidiary, and COR.

        4.        A Current Report on Form 8-K was filed with the Securities and Exchange Commission on March 28, 2002, to report, pursuant to Item 5, the financial statements of COR for the fiscal year ended December 31, 2001 andrelated pro forma financial information for us and COR, in order to incorporate by reference such information into certain of our filings under the Securities Act of 1933, as amended.

        5.        A Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2002 to file, pursuant to Items 5 and 7, as exhibits the Third Supplemental Indenture, dated as of April 22, 2002, betweenus and U.S. Bank, N.A. (formerly known as Firstar Bank, N.A.), relating to our 4.5% Convertible Senior Notes due June 15, 2006 and the Third Supplemental Indenture, dated as of April 22, 2002, between us and U.S. Bank,N.A. (formerly known as Firstar Bank, N.A.), relating to our 5.0% Convertible Subordinated Notes due March 1, 2007 in order to incorporate by reference those documents into our filings under the Securities Act of 1933,as amended.

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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: April 30, 2002  By /s/  KEVIN P. STARR      Kevin P. Starr   *Chief Operating Officer and*   *Chief Financial Officer*   *(principal financial and*   *chief accounting officer)*
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**EXHIBIT INDEX**

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
Exhibit No. Description +10.1 Amendment No. 6 dated as of March 22, 2002 to Agreement dated as of  September 22, 1998 by and between Bayer AG and the Company. 
+        Confidential treatment requested as to certain portions.

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