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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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FORM 10-Q

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(Mark One)

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

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

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

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

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

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

Number of shares of the registrant's Common Stock, $0.001 par value, outstanding on August 8, 2003: 298,703,411

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MILLENNIUM PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS

|        |                                                                                                           | Page | 
|------- | --------------------------------------------------------------------------------------------------------- | ---- | 
|PART I  | FINANCIAL INFORMATION                                                                                     |      | 
|        |                                                                                                           |      | 
|Item 1. | Condensed Consolidated Financial Statements                                                               |      | 
|        |                                                                                                           |      | 
|        | Condensed Consolidated Balance Sheets as of
June 30, 2003 and December 31, 2002                           | 3    | 
|        |                                                                                                           |      | 
|        | Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 2003 and 2002 | 4    | 
|        |                                                                                                           |      | 
|        | Condensed Consolidated Statements of Cash Flows for thesix months ended June 30, 2003 and 2002            | 5    | 
|        |                                                                                                           |      | 
|        | Notes to Condensed Consolidated Financial Statements                                                      | 6    | 
|        |                                                                                                           |      | 
|Item 2. | Management's Discussion and Analysis of Financial
Condition and Results of Operations                     | 15   | 
|        |                                                                                                           |      | 
|        | Risk Factors That May Affect Results                                                                      | 27   | 
|        |                                                                                                           |      | 
|Item 3. | Quantitative and Qualitative Disclosures about Market Risk                                                | 38   | 
|        |                                                                                                           |      | 
|Item 4. | Controls and Procedures                                                                                   | 38   | 
|        |                                                                                                           |      | 
|PART II | OTHER INFORMATION                                                                                         |      | 
|        |                                                                                                           |      | 
|Item 4. | Submission of Matters to a Vote of Security Holders                                                       | 40   | 
|        |                                                                                                           |      | 
|Item 6. | Exhibits and Reports on Form 8-K                                                                          | 40   | 
|        |                                                                                                           |      | 
|        | Signatures                                                                                                | 42   | 
|        |                                                                                                           |      | 
|        | Exhibit Index                                                                                             | 43   | 
|        |                                                                                                           |      | 

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

2

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PART I     FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

Millennium Pharmaceuticals, Inc.Condensed Consolidated Balance Sheets

|                                                                                                                                                         | June 30, 2003 |  | December 31, 2002 |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- |  | ----------------- | ----------
|
|
|
|Current assets:                                                                                                                                          |               |  |                   |           
|Cash and cash equivalents                                                                                                                                |               |  | $                 | 43,493    
|Marketable securities                                                                                                                                    |               |  |                   | 922,326   
|Accounts receivable                                                                                                                                      |               |  |                   | 8,031     
|Due from strategic alliance partners                                                                                                                     |               |  |                   | 84,634    
|Inventory                                                                                                                                                |               |  |                   | 111,289   
|Prepaid expenses and other current assets                                                                                                                |               |  |                   | 70,332    
|                                                                                                                                                         |               |  |                   |           
|Total current assets                                                                                                                                     |               |  |                   | 1,240,105 
|Property and equipment, net                                                                                                                              |               |  |                   | 258,757   
|Restricted cash                                                                                                                                          |               |  |                   | 21,244    
|Other assets                                                                                                                                             |               |  |                   | 20,798    
|Goodwill                                                                                                                                                 |               |  |                   | 1,201,214 
|Developed technology, net                                                                                                                                |               |  |                   | 388,990   
|Intangible assets, net                                                                                                                                   |               |  |                   | 61,894    
|                                                                                                                                                         |               |  |                   |           
|Total assets                                                                                                                                             |               |  | $                 | 3,193,002 
|                                                                                                                                                         |               |  |                   |           
|                                                                                                                                                         |               |  |                   |           
|Liabilities and Stockholders' Equity                                                                                                                     |               |  |                   |           
|Current liabilities:                                                                                                                                     |               |  |                   |           
|Accounts payable                                                                                                                                         |               |  | $                 | 16,887    
|Accrued expenses                                                                                                                                         |               |  |                   | 154,273   
|Current portion of deferred revenue                                                                                                                      |               |  |                   | 115,910   
|Current portion of capital lease obligations                                                                                                             |               |  |                   | 15,660    
|Current portion of long term debt                                                                                                                        |               |  |                   |          
|                                                                                                                                                         |               |  |                   |           
|Total current liabilities                                                                                                                                |               |  |                   | 302,730   
|Deferred revenue, net of current portion                                                                                                                 |               |  |                   | 13,838    
|Capital lease obligations, net of current portion                                                                                                        |               |  |                   | 54,894    
|Long term debt, net of current portion                                                                                                                   |               |  |                   | 105,461   
|                                                                                                                                                         |               |  |                   |           
|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:298,198 shares at June 30, 2003 and 291,094 shares atDecember 31, 2002 issued and outstanding |               |  |                   | 298       
|Additional paid-in capital                                                                                                                               |               |  |                   | 4,481,526 
|Deferred compensation                                                                                                                                    |               |  |                   | (1,082    
|Accumulated other comprehensive income                                                                                                                   |               |  |                   | 13,140    
|Accumulated deficit                                                                                                                                      |               |  |                   | (1,777,803
|                                                                                                                                                         |               |  |                   |           
|Total stockholders' equity                                                                                                                               |               |  |                   | 2,716,079 
|                                                                                                                                                         |               |  |                   |           
|Total liabilities and stockholders' equity                                                                                                               |               |  | $                 | 3,193,002 
|                                                                                                                                                         |               |  |                   |           

See notes to condensed consolidated financial statements.

3

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

|                                                 | Three Months Ended June 30, |  | Six Months Ended June 30, |         
|------------------------------------------------ | --------------------------- |  | ------------------------- | --------
|
|
|                                                 |                             |  |                           |         
|Revenues:                                        |                             |  |                           |         
|Net product sales                                |                             |  | $                         | 7,869   
|Co-promotion revenue                             |                             |  |                           | 53,151  
|Revenue under strategic alliances                |                             |  |                           | 60,702  
|                                                 |                             |  |                           |         
|Total revenues                                   |                             |  |                           | 121,722 
|                                                 |                             |  |                           |         
|Costs and expenses:                              |                             |  |                           |         
|Cost of goods sold                               |                             |  |                           | 15,612  
|Research and development                         |                             |  |                           | 130,575 
|Selling, general and administrative              |                             |  |                           | 40,775  
|Restructuring charges                            |                             |  |                           | 65,310  
|Acquired in-process research and development     |                             |  |                           |        
|Amortization of intangibles                      |                             |  |                           | 9,676   
|                                                 |                             |  |                           |         
|Total costs and expenses                         |                             |  |                           | 261,948 
|                                                 |                             |  |                           |         
|Loss from operations                             |                             |  |                           | (140,226
|                                                 |                             |  |                           |         
|Other income (expense):                          |                             |  |                           |         
|Investment income, net                           |                             |  |                           | 8,697   
|Interest expense                                 |                             |  |                           | (5,118  
|Gain on sale of equity interest in joint venture |                             |  |                           | 40,000  
|Debt financing charge                            |                             |  |                           | (10,496 
|                                                 |                             |  |                           |         
|Net loss                                         |                             |  | $                         | (107,143
|                                                 |                             |  |                           |         
|Amounts per common share:                        |                             |  |                           |         
|Net loss per share, basic and diluted            |                             |  | $                         | (0.36   
|                                                 |                             |  |                           |         
|Weighted average shares, basic and diluted       |                             |  |                           | 297,231 
|                                                 |                             |  |                           |         

See notes to condensed consolidated financial statements.

4

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

|                                                                                       | Six Months Ended June 30, | 
|-------------------------------------------------------------------------------------- | ------------------------- | 
|
|
|                                                                                       |                           | 
|Cash Flows from Operating Activities:                                                  |                           | 
|Net loss                                                                               |                           | 
|Adjustments to reconcile net loss to cash                                              |                           | 
|used in operating activities:                                                          |                           | 
|Acquired in-process research and development                                           |                           | 
|Depreciation and amortization                                                          |                           | 
|Restructuring charges                                                                  |                           | 
|Amortization of deferred financing costs                                               |                           | 
|(Gain) loss on available-for-sale securities, net                                      |                           | 
|Stock compensation expense                                                             |                           | 
|Changes in operating assets and liabilities:                                           |                           | 
|Accounts receivable                                                                    |                           | 
|Due from strategic alliance partners                                                   |                           | 
|Inventory                                                                              |                           | 
|Prepaid expenses and other current assets                                              |                           | 
|Restricted cash and other assets                                                       |                           | 
|Accounts payable and accrued expenses                                                  |                           | 
|Deferred revenue                                                                       |                           | 
|                                                                                       |                           | 
|Net cash used in operating activities                                                  |                           | 
|                                                                                       |                           | 
|                                                                                       |                           | 
|Cash Flows from Investing Activities:                                                  |                           | 
|Investments in marketable securities                                                   |                           | 
|Proceeds from sales and maturities of marketable securities                            |                           | 
|Purchases of property and equipment and other long term assets                         |                           | 
|Net cash acquired in COR Therapeutics, Inc. acquisition                                |                           | 
|Other investing activities                                                             |                           | 
|                                                                                       |                           | 
|Net cash (used in) provided by investing activities                                    |                           | 
|                                                                                       |                           | 
|                                                                                       |                           | 
|Cash Flows from Financing Activities:                                                  |                           | 
|Proceeds from sales of common stock                                                    |                           | 
|Net proceeds from employee stock purchases                                             |                           | 
|Repayment of principal of long-term debt obligations, including payment ofdebt premium |                           | 
|Repayment of notes receivable from officers                                            |                           | 
|Principal payments on capital leases                                                   |                           | 
|                                                                                       |                           | 
|Net cash (used in) provided by financing activities                                    |                           | 
|                                                                                       |                           | 
|Decrease (increase) in cash and cash equivalents                                       |                           | 
|Equity adjustment from foreign currency translation                                    |                           | 
|Cash and cash equivalents, beginning of period                                         |                           | 
|                                                                                       |                           | 
|Cash and cash equivalents, end of period                                               |                           | 
|                                                                                       |                           | 
|                                                                                       |                           | 
|Supplemental Cash Flow Information:                                                    |                           | 
|Cash paid for interest                                                                 |                           | 
|                                                                                       |                           | 
|Supplemental Disclosure of Noncash Investing and Financing Activities:                 |                           | 
|Construction costs for laboratory and office space                                     |                           | 
|Equipment acquired under capital leases                                                |                           | 
|Acquisition of COR Therapeutics, Inc., including direct transaction costs              |                           | 

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 accounting principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In the opinion
of management, 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 been included. Interim results for the three and
six month periods ended June 30, 2003 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2003. For further information, refer to
the financial statements and accompanying footnotes included in the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, which was filed with the
Securities and Exchange Commission (SEC) on March 7, 2003.

2.    Summary of Significant Accounting Policies

(a)  Cash Equivalents and Marketable Securities

Cash
equivalents consist principally of money market funds and corporate bonds with maturities
of three months or less at the date of purchase. Marketable securities consist primarily
of investment-grade corporate bonds, asset-backed debt securities and U.S. government
agency debt 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 June
30, 2003 and December 31, 2002 are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized gains and
losses reported in a separate component of stockholders equity. The cost of 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 and declines in value judged to be other-than-temporary on
available-for-sale securities and other investments are included in investment income. The
cost of securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in investment
income.

During
the three months ended June 30, 2003 and 2002, the Company recorded realized gains on
marketable securities of $3.1 million and $4.8 million, respectively, and
realized losses on marketable securities and other investments of $2.1 million and
$14.7 million, respectively. During the six months ended June 30, 2003 and 2002, the
Company recorded realized gains on marketable securities of $3.1 million and $12.0
million, respectively, and realized losses on marketable securities and other investments
of $2.2 million and $17.1 million, respectively.

(b)  Inventory

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

Inventory
consists of the following (in thousands):

|                |  | June 30, 2003 |         | December 31, 2002
|--------------- |  | ------------- | ------- | -----------------
|Bulk materials  |  | $             | 66,441  |                  
|Work in process |  |               | 13,637  |                  
|Finished goods  |  |               | 31,211  |                  
|                |  |               |         |                  
|                |  | $             | 111,289 |                  
|                |  |               |         |                  

6

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

(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 to specific intangible assets. Intangible assets consist of the following (in
thousands):

|                              | June 30, 2003
|----------------------------- | -------------
|
|Amortized intangible assets   |              
|Developed technology          |              
|                              |              
|                              |              
|Core technology               |              
|Other                         |              
|Unamortized intangible assets |              
|Trademark                     |              
|                              |              
|Total intangible assets       |              
|                              |              

|                              | December 31, 2002
|----------------------------- | -----------------
|
|Amortized intangible assets   |                  
|Developed technology          |                  
|                              |                  
|                              |                  
|Core technology               |                  
|Other                         |                  
|Unamortized intangible assets |                  
|Trademark                     |                  
|                              |                  
|Total intangible assets       |                  
|                              |                  

Amortization
of intangibles is computed using the straight-line method over the useful lives of the
respective assets as follows:

|Developed technology | 13 years    
|-------------------- | ------------
|Core technology      | 4 years     
|Other                | 2 to 4 years

As
required by Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (SFAS) SFAS No. 142, Goodwill and Other
Intangible Assets, goodwill and indefinite lived intangible assets are not amortized
but are reviewed annually for impairment, or more frequently if impairment indicators
arise. Separable intangible assets that are not deemed to have an indefinite life are
amortized over their useful lives and reviewed for impairment when events or changes in
circumstances suggest that the assets may not be recoverable. The Company tests for
goodwill impairment annually, on October 1 and whenever events or changes in circumstances
suggest that the carrying amount may not be recoverable.

(d)  Reclassification

During
the three months ended June 30, 2003, in connection with the launch of VELCADE
(bortezomib) for Injection and the recognition of related costs of sales, the Company
reclassified certain INTEGRILIN® (eptifibatide) Injection related
manufacturing expenses to cost of goods sold so that cost of goods sold now includes
manufacturing-related expenses associated with the sales of INTEGRILIN and VELCADE. These
reclassified manufacturing-related expenses were previously included in cost of
co-promotion revenue and certain

7

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

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

Prior
period amounts have been adjusted to conform to the current year presentation. There was
no impact on net loss in any period.

(e)  Revenue Recognition

Net product sales

The
Company records product sales of VELCADE (bortezomib) for Injection when delivery
has occurred and title passes to the customer, collection is reasonably assured and the
Company has no further obligations. Allowances are recorded as a reduction to product
sales for estimated returns and discounts at the time of sale.

Co-promotion revenue

Co-promotion
revenue includes the Companys share of profits from the sale of INTEGRILINin co-promotion territories by Schering-Plough Ltd. and Schering Corporation
(collectively SGP). Also included in co-promotion revenue are reimbursements
from SGP of the Companys manufacturing-related costs, advertising and promotional
expenses associated with the sale of INTEGRILIN within co-promotion territories and
royalties from SGP on sales of INTEGRILIN outside the co-promotion territory. The Company
recognizes revenue when SGP ships INTEGRILIN to wholesalers and records it net of
allowances, if any. The Company defers certain manufacturing-related expenses until the
time SGP ships related product to its customers inside and outside co-promotion
territories. Deferred revenue also includes cash advances from SGP to the Company for the
Companys prepayments to its manufacturers of INTEGRILIN.

Revenue under
strategic alliances

The
Company recognizes revenue from non-refundable license payments and certain milestone
payments not specifically tied to a separate 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 typically consist 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. In
addition, 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.

(f)  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 typically computed
using the weighted average number of common and dilutive common equivalent shares from
stock options, warrants and convertible debt using the treasury stock method. However, for
all periods presented, diluted net loss per share is the same as basic net loss per share
as the inclusion of weighted average shares of common stock issuable upon the exercise of
stock options, warrants and convertible debt would be antidilutive.

(g)  Comprehensive Loss

Comprehensive
loss was $101.7 million and $79.8 million for the three months ended June 30, 2003 and
2002, respectively and $236.0 million and $413.3 million for the six months ended June 30,
2003 and 2002, respectively. Comprehensive loss is composed of net loss, unrealized gains
and losses on marketable securities and cumulative foreign currency translation
adjustments. Unrealized gains and losses on marketable securities includes the
reclassification to investment income, net for the three and six months ended June 30,
2002 of unrealized losses of $14.6 million due to declines in market value of investments
in marketable securities that were deemed to be

8

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

other than temporary. Accumulated other
comprehensive income at June 30, 2003 included $10.7 million of unrealized gains on
marketable securities and $2.4 million of cumulative foreign currency translation
adjustments. Accumulated other comprehensive income at December 31, 2002 included $2.4
million of unrealized gains on marketable securities and $1.7 million of cumulative
foreign currency translation adjustments.

(h)  Stock-Based
Compensation

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

The
following table illustrates the effect on net loss and loss per share if the Company had
applied the fair value recognition provisions of SFAS No. 123 to stock-based employee
compensation (in thousands, except per share amounts):

|                                                                                                        | Three Months EndedJune 30, |          | Six Months EndedJune 30, |  
|------------------------------------------------------------------------------------------------------- | -------------------------- | -------- | ------------------------ | -
|
|Net loss                                                                                                | $                          | (107,143 | )                        | $
|Add: Stock-based compensation as reported in the
Statement of Operations                                |                            | 426      |                          |  
|Deduct:  Total stock-based compensation expense determined under fair value based method for all awards |                            | (24,927  | )                        |  
|                                                                                                        |                            |          |                          |  
|Pro forma net loss                                                                                      | $                          | (131,644 | )                        | $
|                                                                                                        |                            |          |                          |  
|Amounts per common share:                                                                               |                            |          |                          |  
|Basic and diluted - as reported                                                                         | $                          | (0.36    | )                        | $
|Basic and diluted - pro forma                                                                           | $                          | (0.44    | )                        | $

The
weighted-average per share fair value of options granted during the three months ended
June 30, 2003 and 2002 was $9.38 and $12.38, respectively, and during the six months ended
June 30, 2003 and 2002 was $5.45 and $13.90, respectively.

The
fair value of stock options and common shares issued pursuant to the stock option and
stock purchase plans at the date of grant were estimated using the Black-Scholes model
with the following weighted-average assumptions:

|                      | Stock Options |                            | Stock Purchase Plan
|--------------------- | ------------- | -------------------------- | -------------------
|                      |               | Three Months EndedJune 30, |                    
|                      | 2003          |                            | 2002               
|Expected life (years) |               | 5.4                        |                    
|Interest rate         |               | 2.28%                      |                    
|Volatility            |               | .85                        |                    

9

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

The
Company has never declared cash dividends on any of its capital stock and does not expect
to do so in the foreseeable future.

(i)  Segment Information

SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS No. 131), establishes standards for the way public business enterprises
report information about operating segments in 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 about
products 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. All of the Companys product sales are currently
related to sales of VELCADE (bortezomib) for Injection. All of the Companys
co-promotion revenue is currently related to sales of INTEGRILIN®
(eptifibatide) Injection.

Revenues from one strategic partner accounted for approximately 33.6% and 11.3% of total revenues for the three
months ended June 30, 2003 and 2002, respectively and 25.1% and 12.7% of total revenues for the six months ended
June 30, 2003 and 2002.  Revenues from a second strategic partner accounted for approximately 14.0% and 20.4% of
total revenues for the three months ended June 30, 2003 and 2002, respectively and 17.0% and 22.6% of total
revenues for the six months ended June 30, 2003 and 2002.  Revenues from a third partner accounted for 11.8% and
13.5% of total revenues for the three and six months ended June 30, 2002.  There were no other significant
strategic partners during the three and six months ended June 30, 2003 and 2002.

(j)  Information
Concerning Market and Source of Supply Concentration

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



(k)  Accounting
Pronouncements

In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities (SFAS No. 146). SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized and
measured initially at its fair value in the period in which the liability is incurred,
except for one-time termination benefits that meet certain requirements. The Company was
required to adopt SFAS No. 146 for activities that were initiated after December 31, 2002,
with early application encouraged. The Company adopted SFAS No. 146 as of December 1, 2002
in association with the discontinuation of certain discovery efforts in December 2002 (See
Note 3).

In
November 2002, the EITF of the FASB issued EITF
00-21, Revenue Arrangements with Multiple Deliverables, (EITF
00-21) which addressed certain aspects of the accounting for arrangements that
involve the delivery or performance of multiple products, services and/or rights to use
assets. Under EITF 00-21, revenue arrangements with multiple deliverables should be
divided into separate accounting units if the deliverables meet certain criteria,
including whether the fair value of the delivered items can be determined and whether
there is evidence of fair value of the undelivered items. In addition, the consideration
should be allocated among the separate units of accounting based on their fair values, and
the applicable revenue recognition criteria should be considered separately for each of
the separate units of accounting. EITF 00-21 is effective for revenue arrangements entered
into after June 30, 2003.

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based
CompensationTransition and Disclosure (SFAS No. 148).
SFAS 148 provides two additional transition methods for entities that adopt the fair
value method of accounting for stock based compensation. Further, the statement requires
disclosure

10

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

of comparable information for all companies regardless of whether, when, or how
an entity adopts the fair value based method of accounting. These disclosures are now
required for interim periods in addition to the traditional annual disclosure. SFAS 148 is
effective for fiscal periods ending after December 15, 2002. The Company has provided
the new disclosures in Stock-Based Compensation in Note 2.

In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin No. 51
(FIN 46). FIN 46 provides a new consolidation model which determines control
and consolidation based on potential variability in gains and losses. The provisions of FIN 46 are effective for enterprises with variable interests in variable interest entities
created after January 31, 2003. For public companies with variable interest in variable
interest entities created before February 1, 2003 the provisions of FIN 46 are to be
applied no later than July 1, 2003. The Company has not invested in any variable interest
entities after January 31, 2003. The Company is currently evaluating what impact, if any,
FIN 46 will have on the financial position or results of operations of the Company.

3.    Restructuring

In
December 2002, the Company announced the first in a series of steps to realign the
Companys resources to become a commercially-focused biopharmaceutical company. The
Company discontinued certain discovery research efforts, reduced headcount in the
discovery group and began reallocating other resources to enhance its commercial
capabilities. Such actions resulted in the recognition of restructuring charges in the
fourth quarter of 2002 and first quarter of 2003.

In
June 2003, the Company announced a broad, accelerated restructuring plan to focus the
Companys resources on development and commercialization.  The plan includes
consolidation of research and development facilities, overall headcount reduction from
approximately 2,300 employees to approximately 1,700 employees by the end of 2004 and
streamlining of the number of discovery and development projects.  Certain of these
actions resulted in the recognition of restructuring charges in the second quarter of
2003, including the termination of 325 employees and the vacating of several of the
Companys facilities.

These
costs are included in restructuring charges in the statements of operations and accrued
expenses on the balance sheet at June 30, 2003. The following table displays the
restructuring activity and liability balance included in accrued expenses (in thousands):

|                       | Six Month Period Ending June 30, 2003
|---------------------- | -------------------------------------
|
|Termination benefits   |                                      
|Facilities             |                                      
|Asset impairment       |                                      
|Contract termination   |                                      
|Other associated costs |                                      
|                       |                                      
|                      
|Total                  |                                      
|                       |                                      

Costs
of termination benefits relate to severance packages, out-placement services and career
counseling for employees affected by the initiative. Charges related to facilities include
the estimated remaining rental obligation, net of estimated sublease income, for
facilities that the Company no longer occupies. The Companys decisions to vacate
certain facilities and abandon the related leasehold improvements as well as terminate
certain research programs were deemed to be impairment indicators under SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. As a result of
performing the impairment evaluations, asset impairment charges were recorded to adjust
the carrying value of the related long-lived assets to their net realizable values. The
fair values of the assets were estimated based upon anticipated future cash flows,
discounted at a rate commensurate with the risk involved.

11

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

4.    COR Therapeutics,
Inc. 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 the merger agreement between the Company and COR. The
transaction was recorded as a purchase for accounting purposes and the Companys
consolidated financial statements include CORs operating results from the date of
the acquisition. The purchase price was allocated to the 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
intangible assets, including developed technology and trademark, and goodwill. Developed
technology is being amortized over the remaining patent life, or thirteen years. At the
date of the acquisition, the Company recorded a one-time, non-cash charge to operations during
the six months ended June 30, 2002 of $242.0 million for acquired in-process research and
development. The valuation of acquired in-process research and development represents the
estimated fair value related to incomplete projects that, at the date of the acquisition,
had no alternative future use and for which technological feasibility had not been
established.

5.    Revenues and
Strategic Alliances

Historically,
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 transfer of 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 its partners.
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 performs 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, the Companys partners may make
up-front payments, additional payments upon the achievement of specific research and
product development milestones, ongoing research funding and/or pay royalties to or in
some cases share profits with the Company based upon any product sales resulting from the
collaboration. In certain alliances, the Company also may receive equity investments from
its collaborators.

New Strategic Alliance
and Modifications to Existing Strategic Alliances

In
the six months ended June 30, 2003 Abbott Laboratories (Abbott) invested the
final $28.6 million of a $250.0 million commitment in Millennium common stock pursuant to
the March 2001 Investment Agreement between the Company and Abbott.

On
June 30, 2003, the Company entered into an agreement with Ortho Biotech Products, L.P.
(Ortho Biotech), a wholly owned subsidiary of Johnson & Johnson, to
collaborate on the commercialization and continued clinical development of VELCADE
(bortezomib) for Injection. Under the terms of the agreement, the Company retains all
commercialization rights to and profits from VELCADE in the U.S. Subject to obtaining
regulatory approvals of VELCADE outside the U.S., Ortho Biotech and its affiliate,
Janssen-Cilag, will commercialize VELCADE outside of the U.S. The Company is entitled to
royalties from Ortho Biotech and its affiliate Janssen-Cilag on sales of VELCADE outside of the U.S. The Company also retains an option to co-promote VELCADE at a future date in certain European countries.

In
connection with the agreement, the Company received a non-refundable payment from Ortho
Biotech of $15.0 million in July 2003. In addition, the Company may receive payments for
achieving clinical development milestones, for achieving regulatory milestones outside of the U.S. and for achieving agreed-upon sales
levels of VELCADE.

The
Company and Ortho Biotech and its research affiliate, Johnson & Johnson Pharmaceutical
Research & Development, L.L.C., will jointly engage in an extensive global program
for further clinical development of VELCADE to maximize the clinical and commercial potential of VELCADE. This program will
investigate the

12

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

potential of VELCADE
(bortezomib) for Injection to treat multiple forms of solid and hematological
cancers, including continued clinical development of VELCADE for multiple myeloma. Ortho Biotech will be
responsible for 40 percent of the joint development costs through 2005 and for 45 percent
of such costs thereafter.

On
April 22, 2003, Aventis Pharmaceuticals, Inc. (Aventis) exercised its option
to terminate the Technology Transfer Agreement between the Company and Aventis effective
on the third anniversary of the Agreement, July 21, 2003. Pursuant to the terms of the
Agreement, upon providing this notice to the Company, Aventis paid the Company $40.0
million in consideration for future use of certain Millennium technology transferred to
Aventis. Approximately $30.7 million of this termination fee is included in revenue under
strategic alliances for the three and six months ended June 30, 2003. The remaining
approximately $9.3 million of this termination fee will be recognized as revenue in the
quarter ending September 30, 2003.

6.    Commitments

Lease Commitments



On
August 4, 2000, the Company entered into lease agreements, relating to two buildings
for laboratory and office space in Cambridge, Massachusetts. The rent obligation for the
first of these buildings began in July 2002 and the rent obligation on the second
building began in July 2003. The Company was responsible for a portion of the construction
costs for both buildings and was deemed to be the owner during the construction period of
each building under EITF 97-10, The Effect
of Lessee Involvement in Asset Construction. In July 2002 and July 2003, upon
completion of the construction period of the buildings, respectively, the Company recorded
the leases as capital leases.

7.    Convertible Debt

The
Company currently has the following outstanding convertible notes at June 30, 2003:

| |  |  | $16.3 million of principal of 5.0% convertible subordinated notes due March 1, 2007, that are
              convertible into Millennium common stock at any time prior to maturity at a price equal to $34.21
              per share (the 5.0% notes);   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                             
| |  |  | $5.9 million of principal of 4.5% convertible senior notes due June 15, 2006, that are convertible
              into Millennium common stock at any time prior to maturity at a price equal to $40.61 per share
              (the 4.5% notes); and      
| |   |  |                                                                                                                                                                                                                                                             
| |  |  | $83.3 million of principal of 5.5% convertible subordinated notes due January 15, 2007, that are
              convertible into Millennium common stock at any time prior to maturity at a price equal to $42.07
              per share (the 5.5% notes).

In
April 2002, the Company amended the 4.5% notes and 5.0% notes to add put options
permitting noteholders to require the Company on April 29, 2003, to repurchase the
4.5% notes for cash at a price of $1,095 per $1,000 of principal amount and the 5.0% notes
for cash at a price of $1,085 per $1,000 of principal amount, resulting in a maximum
aggregate payment obligation of $654.0 million. These put options on the notes are
derivative instruments. SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities requires us to record all derivative instruments in the balance
sheet at fair value, or $54.0 million at March 31, 2003.

On
April 29, 2003, the Company completed the repurchase of $577.8 million of aggregate
principal amount of the outstanding 4.5% notes and 5.0% notes for an aggregate payment of
approximately $637.1 million, including principal, accrued interest and the put premium.
Approximately $22.1 million of aggregate principal amount of these notes were not tendered
in the offer and remain outstanding as of June 30, 2003. As a result of the repurchase,
the Company recorded a charge of approximately $10.5 million which represents the
write-off of approximately $12.4 million of unamortized original debt issuance costs
associated with the 4.5% notes and 5.0% notes, offset by $1.9 million relating to the
expired premium put on the untendered notes.

13

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

Under
the terms of these notes, the Company is required to make semi-annual interest payments on
the outstanding principal balance of the 5.5% notes on January 15 and July 15 of
each year, of the 5.0% notes on March 1 and September 1 of each year and of the
4.5% notes on June 15 and December 15 of each year. All required interest
payments to date have been made.

8.    Subsequent Event

In
connection with its June 2003 restructuring plan, the Company has discontinued its efforts
in the metabolic disease area. As a result, the Company and Abbott agreed to terminate
their alliance covering joint discovery, development and commercialization of certain
metabolic disease products on August 8, 2003. In the third quarter of 2003, the Company expects to record approximately $15.0 million to $20.0 million in restructuring charges specifically related to the discontinuation of
metabolic research and development, which will include termination benefits and costs associated with the Abbott separation agreement.

14

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

Our
managements discussion and analysis of our financial condition and results of our
operations include the identification of certain trends and other statements that may
predict or anticipate future business or financial results that are subject to important
factors that could cause our actual results to differ materially from those indicated. See
Risk Factors That May Affect Results.

Overview

We
are a leading biopharmaceutical company focused on developing and commercializing
proprietary products in multiple disease areas. We currently have a cardiovascular disease
and a cancer product on the market. We also have other potential products in various
stages of development in each of those areas and in the inflammatory disease area.

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

We
plan to develop and commercialize many of our products on our own, but will seek
development and commercial partners when we believe that to do so will maximize product
value. For example, we have entered into sales and marketing alliances with major
pharmaceutical companies for INTEGRILIN and VELCADE and plan to do so in the future for
products in disease areas that require large sales forces or to address markets outside
the United States.

INTEGRILIN®
(eptifibatide) Injection

Our
market-leading cardiovascular product, INTEGRILIN, has been marketed in the United States
since 1998 and outside the United States since 1999. In the United States, we co-promote
INTEGRILIN with Schering-Plough Ltd. and Schering-Plough Corporation, together
referred to as SGP, and share profits and losses. Outside the United States, SGP sells
INTEGRILIN pursuant to a royalty-bearing license.

VELCADE
(bortezomib) for Injection

Our
other product, VELCADE, a novel, first-in-class cancer therapy, was approved for marketing in the United States by the U.S. Food and
Drug Administration (FDA) on May 13, 2003 as a treatment for multiple myeloma patients who have received at least two prior therapies and
demonstrated disease progression on the last therapy. We commercially launched VELCADE in
the United States shortly after receiving marketing approval. We have recruited an
oncology sales force which is currently marketing VELCADE in the United States. In
February 2003, we submitted a complete Marketing Authorization Application to the
European Agency for the Evaluation of Medicinal Products for approval to market VELCADE as
a treatment for multiple myeloma patients who have received at least two prior therapies
and demonstrated disease progression on the last therapy.

Revenues

Historically,
we have derived our revenue from payments from our strategic alliances with major
pharmaceutical companies. With the acquisition of COR Therapeutics, Inc., or COR, we began generating co-promotion
revenue based on sales of INTEGRILIN. In May 2003, we began recording product sales from
VELCADE. We expect that our revenue mix will continue to shift to product-based revenue as
we develop our product pipeline, commercialize additional products and enter into new
commercial alliances, and our discovery-focused alliances conclude.

VELCADE Revenue

We launched VELCADE on May 20, 2003. On June
30, 2003, we entered into an agreement with Ortho Biotech Products, L.P., or Ortho
Biotech, a wholly owned subsidiary of Johnson & Johnson, to collaborate on the

15

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commercialization and continued clinical development of VELCADE(bortezomib)
for Injection. Under the terms of the agreement, we retain all commercialization rights to
and profits from VELCADE in the U.S. Subject
to regulatory approvals of VELCADE outside the U.S., Ortho Biotech and its affiliate,
Janssen-Cilag, will commercialize VELCADE outside of the U.S. We are entitled to royalties
from Ortho Biotech and its affiliate Janssen-Cilag on VELCADE sales outside of the U.S. We
retain an option to begin co-promoting VELCADE at a future date in certain European
countries.

We
record sales of VELCADE in the U.S., net of estimated product returns and discounts, as
net product sales. Royalty and milestone payments, if any, will be recorded when earned as
royalty revenue and revenue under strategic alliances, respectively. Reimbursement of
development costs by Ortho Biotech will be recorded as revenue under strategic alliances
in the period in which the related costs are expensed.

INTEGRILIN®
(eptifibatide) Injection Revenue

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

Revenue under
Strategic 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 predictive medicine 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 payments contingent
upon our achievement of research and regulatory milestones and royalties and/or share
profits if our collaborations are successful in developing and commercializing products.

These
alliances are usually established for a fixed term, typically five years. Upon expiration
of the initial term, unless renewed or earlier terminated, revenue funding under these
agreements ceases. We expect revenues from our discovery-focused alliances to decline as
our existing alliances expire.

In
addition to our collaboration agreements with SGP and Ortho Biotech, our major alliances
from which we have or may recognize revenues include:

| |  |  | a June 2000 joint development and commercialization agreement with Aventis Pharmaceuticals, Inc.,
              or Aventis, in inflammatory diseases; and                                             
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                       
| |  |  | a September 1998 research agreement with Bayer AG, or Bayer, in cardiovascular
diseases, and specified areas of oncology, pain, hematology, atherosclerosis, thrombosis,
urology and viral infections.

In
April 2003, Aventis exercised its option effective July 21, 2003 to terminate a technology
transfer agreement with us. Upon exercising this option, Aventis paid us $40.0 million in
consideration for future use of certain technology transferred to Aventis prior to the
termination date. Termination of the technology transfer agreement has no effect on the
existing five-year joint development and commercialization agreement in inflammatory. We
expect the joint development and commercialization agreement with Aventis in the field of
inflammatory disease to continue through 2005.

In
2003, we expect the research phase of our five-year alliance with Bayer to terminate,
although Bayer has an option for an additional year. We expect Bayer to continue to
conduct research and development work on the targets discovered in the alliance, which may
result in success payments and royalties to us in the future.

16

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We
have also entered into a number of arrangements for the commercialization of products
under which we share the costs for the development and eventual commercialization of
specified compounds and may receive or be obligated to make product revenue, royalty,
milestone or other payments. In addition to operating expenses we incur as a result of our
alliances, we have also made commitments to purchase debt and equity securities of our
alliance partners under certain of these arrangements. These arrangements include:

| |  |  | a December 2001 in-license and development agreement with Xenova Group, plc for novel
compounds for the treatment of solid tumors in cancer;                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                      
| |  |  | a November 2001 collaboration agreement with XOMA Ltd., or XOMA, pursuant to which XOMA is
              developing two biotherapeutic agents in the cardiovascular disease area; and
| |   |  |                                                                                                                                                                                      
| |  |  | an April 2001 in-license and development agreement with BZL Biologics, L.L.C. for biotherapeutics
              products in the cancer area.                                         

Acquisitions

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

COR

On
February 12, 2002, we acquired COR for an aggregate purchase price of
$1.8 billion through the issuance of approximately 55.1 million shares of our
common stock. We recorded the transaction as a purchase for accounting purposes and our
consolidated financial statements include CORs operating results from the date of
the acquisition. The purchase price was allocated, based upon an independent valuation, to
the assets purchased and liabilities assumed based upon their respective fair values, with
the excess of the purchase price over the estimated fair market value of net tangible
assets acquired allocated to in-process research and development, developed technology,
trademark and goodwill. The charge to earnings in the six months ended June 30, 2002 for
acquired in-process research and development was $242.0 million. Through the merger,
we acquired INTEGRILIN® (eptifibatide) Injection for the treatment of
acute coronary syndromes and substantial research capabilities in the areas of
cardiovascular disease and oncology.

Disposition of Investment
in Joint Venture

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

17

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Financial Resources

We
have completed several financings in the past several years. The actual and planned uses
of proceeds include:

| |  |  | developing products, including conducting preclinical testing and clinical trials;
| | - |  | ----------------------------------------------------------------------------------
| |   |  |                                                                                   
| |  |  | manufacturing and marketing products that are approved for commercial sale;       
| |   |  |                                                                                   
| |  |  | acquiring businesses and products that expand or complement our business;         
| |   |  |                                                                                   
| |  |  | meeting our debt service obligations; and                                         
| |   |  |                                                                                   
| |  |  | working capital.                                                                  

On
April 29, 2003, we completed the repurchase of $577.8 million of the outstanding 5.0%
convertible subordinated notes due March 1, 2007, that are convertible into
Millennium common stock at any time prior to maturity at a price equal to $34.21 per share
(the 5.0% notes) and 4.5% convertible senior notes due June 15, 2006,
that are convertible into Millennium common stock at any time prior to maturity at a price
equal to $40.61 per share (the 4.5% notes) for an aggregate payment of
approximately $637.1 million, including principal, accrued interest and the put premium.
Approximately $22.1 million of the 5.0% notes and 4.5% notes were not tendered in the offer and
remain outstanding as of June 30, 2003. As a result of the repurchase, the Company
recorded a charge of approximately $10.5 million which represents the write-off of
approximately $12.4 million of unamortized original debt issuance costs associated with
the 5.0% notes and 4.5% notes, offset by $1.9 million relating to the expired premium put
on the untendered notes.

During
the six months ended June 30, 2003 we received $28.6 million from Abbott Laboratories, or
Abbott, for purchases of approximately 3.7 million shares of our common stock under our
equity investment agreement with Abbott. During the six months ended June 30, 2002, we
received $57.2 million from Abbott for purchases of approximately 2.8 million
shares of our common stock under this agreement.

As
of June 30, 2003, we had approximately $965.8 million in cash, cash equivalents and
marketable securities. We primarily invest in investment-grade corporate bonds,
asset-backed debt securities and U.S. government agency debt securities. Our objectives
are to preserve principal, maintain a high degree of liquidity to meet operating needs and
obtain competitive returns subject to prevailing market conditions. We expect that income
from these investments will decline as our cash and marketable securities balances decline
and will fluctuate based upon market conditions.

We
are expanding our commercial operations through internal growth and by utilizing the
capabilities of our alliance partners. As our discovery-focused alliances expire, we are
increasingly focusing our efforts on entering into commercial alliances. We expect to
conserve financial resources through workforce planning, facilities consolidation and
product portfolio management.

We
expect to incur increasing expenses and are likely to incur substantial operating losses
for at least the next several years, primarily due to our efforts to advance acquired
products or our own development programs to commercialization. In particular, we
anticipate significant expenditures related to the continued development, launch and
commercialization of VELCADE (bortezomib) for Injection and increasing our
development capabilities for our clinical and pre-clinical product candidates.

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 of commercial development. Our results of operations for any
period may not be indicative of future results as our revenues and expenses may fluctuate
from period to period or year to year.

18

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Reclassifications

During
the three months ended June 30, 2003, in connection with the launch of VELCADE
(bortezomib) for Injection and the recognition of the related costs of sales, we
reclassified certain INTEGRILIN® (eptifibatide) Injection related
manufacturing expenses to cost of goods sold so that cost of goods sold now includes
manufacturing-related expenses associated with the sales of INTEGRILIN and VELCADE. These
reclassified manufacturing-related expenses were previously included in cost of
co-promotion revenue and certain INTEGRILIN related advertising and promotional expenses
that were previously included in cost of co-promotion revenue have been reclassified to
selling, general and administrative expenses.

Prior
period amounts have been adjusted to conform to the current year presentation. There was
no impact on net loss in any period.

Critical Accounting
Policies and Significant Judgments and Estimates

Our
managements discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements as well as
the reported revenues and expenses during the reporting periods. On an ongoing basis, we
evaluate our estimates and judgments, including those related to revenue recognition,
inventory, intangible assets and goodwill. We base our estimates on historical experience
and on various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

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

Revenue

In
connection with our strategic alliances, we recognize revenue from non-refundable license
payments and certain milestone payments not specifically tied to a separate earnings
process, ratably over the term of 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 continually review these
estimates which could result in a change in the deferral period and might impact the
timing and the amount of revenue recognized. 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 typically consist 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. In addition, when appropriate, we recognize revenue from certain
research payments based upon the level of research services performed during the period of
the research contract.

We
recognize the research funding portion of our Bayer alliance on a percentage-of-completion
basis. The percentage-of-completion is determined based upon the actual level of work
performed during the period as compared to our estimate of the total work to be performed
under the alliance. We continually review these estimates and adjust as necessary, as
experience develops or new information becomes known. Any adjustments to these estimates
will impact the timing and the amount of revenue to be recognized.

We
recognize co-promotion revenue when SGP ships INTEGRILIN to wholesalers. Co-promotion
revenue includes our share of the profits from the sales of INTEGRILIN, reimbursements of
our manufacturing-related, advertising and promotional expenses and royalties from SGP on
sales of INTEGRILIN outside the co-promotion territory. We communicate with SGP to
calculate our share of the profits from the sales of INTEGRILIN on a monthly basis. The calculation includes estimates of
the amount of advertising and promotional expenses and other costs incurred on a monthly
basis. We also communicate with SGP to estimate royalties earned on sales outside the

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co-promotion territory. Adjustments to our estimates are based upon actual information
that we receive subsequent to our reporting deadlines. Our estimates are adjusted on a
monthly basis and historically have not been significant due to periodic communication
with our partner. Significant adjustments in future reporting periods could impact the
timing and the amount of revenue to be recognized.

We
recognize revenue from the sales of VELCADE (bortezomib) for Injection in the U.S.
when delivery has occurred and title has transferred to the wholesalers. Allowances are
recorded as a reduction to product sales for product returns and discounts at the time of
sale. The allowances are based primarily on historical trends in the pharmaceutical
industry for similar products and discounts included in our agreements with wholesalers.
As we continue to develop company specific experience, our estimates will be continually
reviewed. If actual future results vary, we may need to adjust our estimates, which could
have an impact on the timing and amount of revenue to be recognized.

Inventory

Inventory
consists of currently marketed products and product candidates awaiting regulatory
approval which were capitalized based upon managements judgment of probable near
term commercialization. Inventory primarily represents bulk materials used in production
and finished goods inventory on hand, valued at cost. Inventories are reviewed
periodically for slow-moving or obsolete status based on sales activity, both projected
and historical. Our current sales projections provide for full utilization of the
inventory balance. If product sales levels differ from projections or a launch of a new
product is delayed, inventory may not be fully utilized and could be subject to
impairment, at which point we would record a reserve to adjust inventory to its net
realizable value.

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

Intangible Assets

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

Goodwill

We
adopted the Financial Accounting Standards Board (FASB) SFAS No. 142,
Goodwill and Other Intangible Assets effective January 1, 2002 and
reclassified amounts to goodwill, which were previously allocated to assembled workforce.
Upon adoption, we ceased the amortization of goodwill. We completed our transitional
assessment of goodwill in the first quarter of 2002 and no impairment loss was recognized.
We will continue to test for goodwill impairment annually, on October 1.

On
October 1, 2002, we performed our annual goodwill impairment test and determined that
no impairment existed on that date. However, since the date of acquisition of COR, which
generated a significant amount of goodwill, we have experienced a significant decline in
market capitalization due to a decline in stock price. We continually monitor business and
market conditions to assess whether an impairment indicator exists. If we were to
determine that an impairment indicator exists, we would be required to perform an
impairment test which could result in a material impairment charge to our statement of
operations.

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Accounting
Pronouncements

In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities (SFAS No. 146). SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized and
measured initially at its fair value in the period in which the liability is incurred,
except for one-time termination benefits that meet certain requirements. We adopted SFAS
No. 146 as of December 1, 2002 in association with the discontinuation of certain
discovery efforts in December 2002.

In
November 2002, the Emerging Issues Task Force (EITF) of the FASB issued EITF
00-21, Revenue Arrangements with Multiple Deliverables, (EITF
00-21) which addressed certain aspects of the accounting for arrangements that
involve the delivery or performance of multiple products, services and/or rights to use
assets. Under EITF 00-21, revenue arrangements with multiple deliverables should be
divided into separate accounting units if the deliverables meet certain criteria,
including whether the fair value of the delivered items can be determined and whether
there is evidence of fair value of the undelivered items. In addition, the consideration
should be allocated among the separate units of accounting based on their fair values, and
the applicable revenue recognition criteria should be considered separately for each of
the separate units of accounting. EITF 00-21 is effective for revenue arrangements entered
into after June 30, 2003.

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based
CompensationTransition and Disclosure (SFAS No. 148).
SFAS 148 provides two additional transition methods for entities that adopt the fair
value method of accounting for stock based compensation. Further, the statement requires
disclosure of comparable information for all companies regardless of whether, when, or how
an entity adopts the fair value based method of accounting. These disclosures are now
required for interim periods in addition to the traditional annual disclosure. SFAS 148 is
effective for fiscal periods ending after December 15, 2002. We have provided the new
disclosures in Stock-Based Compensation in Note 2 to our condensed consolidated
financial statements.

In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin No. 51
(FIN 46). FIN 46 provides a new consolidation model which determines control
and consolidation based on potential variability in gains and losses. We are required to
apply the provisions of FIN 46 for variable interests in variable interest entities
created after January 31, 2003 immediately. We are required to apply the provisions
of FIN 46 no later than July 1, 2003 for variable interests in variable interest entities
created before February 1, 2003. We have not invested in any variable interest entities
after January 31, 2003. We are currently evaluating what impact, if any, FIN 46 will have
on our financial position or results of operations.

Results of Operations

Quarters Ended June 30,
2003 and June 30, 2002

For
the three months ended June 30, 2003 (the 2003 Quarterly Period), we reported
a net loss of $107.1 million, or $0.36 per basic and diluted share, compared to a net
loss of $107.7 million, or $0.38 per basic and diluted share for the three months
ended June 30, 2002 (the 2002 Quarterly Period).

Revenue
increased to $121.7 million for the 2003 Quarterly Period from $91.9 million for
the 2002 Quarterly Period. Net product sales of VELCADE (bortezomib) for Injection,
launched in May 2003, were $7.9 million in the 2003 Quarterly Period. Co-promotion revenue,
based on worldwide sales of INTEGRILIN® (eptifibatide) Injection, was $53.2 million
for the 2003 Quarterly Period compared to $44.9 million for the same period in 2002.
Worldwide sales of INTEGRILIN in the 2003 Quarterly Period, as provided to us by SGP, were
$92.0 million, an 18% percent increase over sales for the 2002 Quarterly Period
driven by increased volume and higher average selling prices. Revenue under strategic
alliances increased to $60.7 million in the 2003 Quarterly Period from
$46.9 million in the 2002 Quarterly Period. The increase in strategic alliance
revenue relates to Aventis exercising its option to terminate our technology transfer
agreement effective July 21, 2003. Upon providing notice of exercising this option,
Aventis paid us $40.0 million in consideration for future use of certain technology
transferred to Aventis prior to the termination date. Approximately $30.7 million of this
termination fee is included in revenue under strategic alliances for the 2003 Quarterly
Period. This increase in strategic alliance revenue is partially offset by the

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decrease in
revenue recognized under our research alliance and technology transfer agreement with
Monsanto Company, or Monsanto, which expired in 2002 at the end of its original five-year
term.

Included
in 2003 Quarterly Period revenue is $2.5 million of revenue that was recognized in
prior years relating to the adoption of SAB 101. Included in 2002 Quarterly Period revenue
is $11.1 million of revenue that was recognized in prior years relating to the
adoption of SAB 101.

Cost
of goods sold includes manufacturing-related expenses associated with the sale of
VELCADE (bortezomib) for Injection and INTEGRILIN® (eptifibatide)
Injection.

Research
and development expenses increased to $130.6 million for the 2003 Quarterly Period
from $122.4 million for the 2002 Quarterly Period. The increase in research and
development expense is due to higher personnel costs, clinical trial costs and facilities
expenses. Our continued investment in building a sustainable product pipeline, including
increases in clinical costs related to advancing our lead oncology program, VELCADE, and
clinical investments made in INTEGRILIN are driving the growth in research and development
expenses.

As
of June 30, 2003, excluding INTEGRILIN and VELCADE, we had ten product candidates in
various stages of clinical trials. Completion of clinical trials may take several years or
more and the length of time can vary substantially according to the type, complexity,
novelty and intended use of a product candidate. CMR International, an independent
pharmaceutical data collection agency, estimates that clinical trials in our areas of
focus are typically completed over the following timelines:

|Clinical Phase |  | Estimated Completion Period | 
|-------------- |  | --------------------------- | 
|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 be safe or effective, will receive regulatory approvals, or will be
successfully commercialized.

Our
primary mechanism for budgeting and tracking these costs is by type of cost incurred
rather than by project. The types of costs include the following categories: personnel
costs, clinical costs, laboratory costs, technology license fees, research costs and
facilities costs. 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 in variability in our development
costs.

Selling,
general and administrative expenses decreased from $45.2 million for the 2002 Quarterly
Period to $40.8 million for the 2003 Quarterly Period. The decrease was primarily
attributable to inclusion in the 2002 Quarterly Period of consulting expenses to support
corporate operations partially offset by the increased resources devoted in the 2003
Quarterly Period to sales and marketing activities for the launch of VELCADE.

In
June 2003, we announced a broad, accelerated restructuring plan to focus our resources on
development and commercialization. The plan includes consolidation of research and
development facilities, overall headcount reduction and streamlining of discovery and
development projects. As a result, we have recorded a restructuring charge of
$65.3 million in the 2003 Quarterly Period related to remaining rental obligations on
facilities that we have vacated, asset impairment and personnel costs. Charges related to
facilities include the estimated remaining rental obligation, net of estimated sublease
income, for facilities that we no longer occupy. Our decisions to vacate certain
facilities and abandon the related leasehold improvements as well as terminate certain
research programs were deemed to be impairment indicators under SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, or SFAS No.
144. As a result of performing the impairment evaluations, we recorded asset impairment
charges to adjust the carrying value of the related long lived assets to fair value. Fair
value of the assets was estimated based upon anticipated future cash flows, discounted at
a rate commensurate with the risk involved.

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We anticipate additional restructuring charges
in future periods as we continue to execute our restructuring plan. These charges will
include additional facilities and personnel costs.

Amortization
of intangible assets in the 2003 Quarterly Period and 2002 Quarterly Period relates to
specifically identified intangible assets from the COR acquisition as well as our
acquisitions of LeukoSite in 1999 and Cambridge Discovery Chemistry Ltd., or CDC, in 2000.

Investment
income decreased to $8.7 million in the 2003 Quarterly Period from $14.9 million
in the 2002 Quarterly Period. The decrease is primarily attributable to a lower average
balance of invested funds in the 2003 Quarterly Period and unfavorable market conditions
resulting in lower yields.

Interest
expense decreased from $10.4 million in the 2002 Quarterly Period to
$5.1 million in the 2003 Quarterly Period, reflecting the April 2003 repurchase of
$577.8 million principal amount of the 5.0% notes and 4.5% notes.

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

During
the 2003 Quarterly Period, we recorded a non-cash charge of $10.5 million which represents
the write-off of approximately $12.4 million of unamortized original debt issuance costs
associated with the 5.0% notes and 4.5% notes assumed in the COR acquisition, offset by
$1.9 million relating to the expired premium put on the untendered notes as of April 29,
2003.

During
the 2002 Quarterly Period, we recorded a non-cash charge of $54.0 million relating to the
fair value of the premium put placed on the 5.0% notes and 4.5% notes. On April 22, 2002,
we amended the terms of the 5.0% notes and 4.5% notes to induce noteholders to hold such
notes until at least April 29, 2003. Specifically, we amended the 4.5% notes to permit
noteholders to require us to repurchase these notes for cash at a price of $1,095 per
$1,000 of principal amount on April 29, 2003, and we amended the 5.0% notes to permit
noteholders to require us to repurchase these notes for cash at a price of $1,085 per
$1,000 of principal amount on April 29, 2003. These put options placed on the notes are
derivative instruments. SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities requires all derivative instruments to be recorded in the balance
sheet at fair value. The fair value of these derivative instruments was determined to be
$54.0 million in aggregate and was recorded as a liability on the balance sheet and as a
non-cash charge to earnings in the 2002 Quarterly Period.

# Six Months Ended June
30, 2003 and June 30, 2002

For
the six months ended June 30, 2003 (the 2003 Six Month Period), we reported a
net loss of $245.0 million, or $0.83 per basic and diluted share, compared to a net
loss of $411.6 million, or $1.53 per basic and diluted share for the six months ended
June 30, 2002 (the 2002 Six Month Period).

Revenue
increased to $203.4 million for the 2003 Six Month Period from $160.5 million
for the 2002 Six Month Period. Net product sales of VELCADE (bortezomib) for
Injection were $7.9 million in the 2003 Six Month Period. Co-promotion revenue, based on
worldwide sales of INTEGRILIN® (eptifibatide) Injection, was $104.0 million for the
2003 Six Month Period compared to $67.1 million for the same period in 2002. Co-promotion
revenue for the 2002 Six Month Period is based upon worldwide sales of INTEGRILIN from the
date of the COR acquisition, or February 12, 2002. Revenue under strategic alliances
decreased from $93.4 million in the 2002 Six Month Period to $91.5 million in
the 2003 Six Month Period. Strategic alliance revenue decreased due to the termination of
certain of our discovery-focused alliances, including our research alliance and technology
transfer agreement with Monsanto which expired in 2002 at the end of its original
five-year term. This decrease is partially offset by the $30.7 million of revenue
recognized from the Aventis termination payment in April 2003.

Included
in 2003 Six Month Period revenue is $5.0 million of revenue that was recognized in
prior years relating to the adoption of SAB 101. Included in 2002 Six Month Period revenue
is $22.1 million of revenue that was

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recognized in prior years relating to the
adoption of SAB 101. The remaining amount of revenue to be recognized from the cumulative
charge is approximately $3.6 million, which will be recognized through December 2003.

Research
and development expenses increased to $257.4 million for the 2003 Six Month Period
from $223.7 million for the 2002 Six Month Period. The research and development
expense categories with the most significant increases were personnel costs, followed by
clinical trial costs and facilities expenses.

Selling,
general and administrative expenses decreased to $79.2 million for the 2003 Six Month
Period from $83.2 million for the 2002 Six Month Period. The decrease was primarily
attributable to inclusion in the 2002 Six Month Period of consulting expenses partially
offset by the increase in sales and marketing activities for the launch of VELCADE
(bortezomib) for Injection.

We
have recorded a restructuring charge of $93.5 million in the 2003 Six Month Period
related to facilities, asset impairment and personnel costs. Charges related to facilities
include the estimated remaining rental obligation, net of estimated sublease income, for
facilities that we no longer occupy. Our decisions to vacate certain facilities and
abandon the related leasehold improvements as well as terminate certain research programs
were deemed to be impairment indicators under SFAS No. 144. As a result of performing the
impairment evaluations, we recorded asset impairment charges to adjust the carrying value
of the related long lived assets to fair value. Fair value of the assets was estimated
based upon anticipated future cash flows, discounted at a rate commensurate with the risk
involved. We anticipate additional restructuring charges in future periods as we continue
to execute our restructuring plan. These charges will include additional facilities and
personnel costs.

We
recorded a one-time, non-cash charge to operations in the 2002 Six Month Period of
$242.0 million for acquired in-process research and development in connection with
the COR acquisition. The valuation of acquired in-process research and development
represents the estimated fair value related to five incomplete research and development projects that, at the time of
the COR acquisition, had no alternative future use and for which technological feasibility
had not been established. As we continue to prioritize our projects, we are currently allocating resources to two of the five research and
development projects acquired.  As of June 30, 2003, we expect to incur an additional $65.0 million to $340.0 million of
research and development expenses for each of the two projects and the projects are expected to reach completion in 2007 through 2009.

Amortization
of intangible assets in the 2003 Six Month Period and 2002 Six Month Period relates to
specifically identified intangible assets from the COR, LeukoSite and CDC acquisitions.
The increase in amortization expense is due to a full six months of amortization in the
2003 Six Month Period on the COR related intangible assets compared to amortization from
the date of the COR acquisition in February 2002 through June 30, 2002 in the 2002 Six
Month Period.

Investment
income decreased to $18.3 million in the 2003 Six Month Period from
$43.1 million in the 2002 Six Month Period. The decrease is primarily attributable to
a lower average balance of invested funds in the 2003 Six Month Period and unfavorable market
conditions resulting in lower yields.

Interest
expense decreased from $17.2 million in the 2002 Six Month Period to
$15.5 million in the 2003 Six Month Period. Decreased interest is due to the April
2003 repurchase of $577.8 million principal amount of the 5.0% notes and the 4.5% notes.

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

During
the 2003 Six Month Period, we recorded a non-cash charge of $10.5 million which represents
the write-off of approximately $12.4 million of unamortized original debt issuance costs
associated with the 5.0% notes and 4.5% notes assumed in the COR acquisition, offset by
$1.9 million relating to the expired premium put on the untendered notes as of April 29,
2003.

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During
the 2002 Six Month Period, we recorded a non-cash charge of $54.0 million relating to the
fair value of the premium put placed on the 5.0% notes and 4.5% notes. See Results of
Operations for the Quarters Ended June 30, 2003 and 2002 for further discussion.

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. We have also made strategic commitments to purchase debt and equity
securities from some of our alliance partners in accordance with our Board of Directors approved
policies and our business needs. These investment commitments are generally in smaller
companies. We may lose money in these investments and our ability to liquidate these
investments is in some cases very limited. We may also owe our partners milestone payments
and royalties. We have committed to fund development costs incurred by some of our
partners.

As
described above under OverviewFinancial Resources, 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:

| |  |  | our co-promotion relationship with SGP for the sale of INTEGRILIN® (eptifibatide) Injection;                            
| | - |  | ------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                         
| |  |  | payments from our strategic collaborators including license fees, milestone payments and research
              funding;
| |   |  |                                                                                                                         
| |  |  | equity investments by our strategic collaborators;                                                                      
| |   |  |                                                                                                                         
| |  |  | equity and debt financings in the public markets;                                                                       
| |   |  |                                                                                                                         
| |  |  | property and equipment financings; and                                                                                  
| |   |  |                                                                                                                         
| |  |  | net cash acquired in connection with acquisitions.                                                                      

In
the future, we expect to continue to fund our cash requirements from some of these
external sources as well as the sales of VELCADE (bortezomib) for Injection,
INTEGRILIN and other products. We are entitled to additional committed research and
development funding under a number of our strategic alliances and expect to receive
additional substantial payments from ILEX as a result of our sale of our joint venture
interest in M&I. We believe that the key factors that could affect our internal and
external sources of cash are:

| |  |  | revenues and margins from sales of VELCADE, INTEGRILIN and other products and services for
which we may obtain marketing approval in the future;                                                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                          
| |  |  | the success of our clinical and preclinical development programs;                                                                                                                                                        
| |   |  |                                                                                                                                                                                                                          
| |  |  | the receptivity of the capital markets to financings by biopharmaceutical companies;                                                                                                                                     
| |   |  |                                                                                                                                                                                                                          
| |  |  | our ability to enter into additional strategic collaborations and to maintain existing and new
              collaborations and the success of such collaborations; and                                                  
| |   |  |                                                                                                                                                                                                                          
| |  |  | the sales levels of CAMPATH® (alemtuzumab) humanized monoclonal antibody and other
products that may be sold in the future by companies that may owe us royalty, milestone or
other payments on account of such products.

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As
of June 30, 2003, we had approximately $965.8 million in cash, cash equivalents and
marketable securities. This excludes $21.2 million of interest-bearing marketable
securities classified as restricted cash on our balance sheet as of June 30, 2003, which
serve as collateral for letters of credit securing leased facilities.

Cash Flows

We
used $156.4 million of cash in operating activities in the 2003 Six Month Period and
$173.3 million in the 2002 Six Month Period. The principal use of cash in operating
activities in both 2003 and 2002 was to fund our net loss.

We
used $539.7 million of cash in investing activities in the 2003 Six Month Period.
Investing activities provided cash of $135.2 million in the 2002 Six Month Period. The
principal uses of funds in the 2003 Six Month Period and 2002 Six Month Period were
purchases of marketable securities and property and equipment and other long term assets.
The principal source of funds in the 2002 Six Month Period is from the sale of marketable
securities and the cash acquired in the COR acquisition.

In
the 2003 Six Month period, we used $593.5 million of cash in financing activities. The
primary use of cash was the repurchase of $577.8 million in principal of convertible notes
and the related put premium of $52.1 million. Financing activities provided net cash of
$56.4 million in the 2002 Six Month Period. The principal sources of net cash from
financing activities were the sales of common stock to Abbott and Millennium employees in
the 2003 and 2002 Six Month Periods.

We
believe that our existing cash and cash equivalents, internally generated funds and the
anticipated cash payments from our current strategic alliances will be sufficient to
support our expected operations, fund our debt service obligations and fund our capital
commitments for at least the next several years.

Contractual Obligations

Our
major outstanding contractual obligations relate to our facilities leases, convertible
notes, capital leases from equipment financings and commitments to purchase debt and
equity securities from certain partners.

As
of June 30, 2003, our convertible notes aggregated $105.5 million in principal amount
outstanding. All three issues of notes require semi-annual interest payments through
maturity. All required interest payments have been made to date. As of June 30, 2003, these notes consisted of:

| |  |  | $83.3 million of our 5.5% notes;   
| | - |  | -----------------------------------
| |   |  |                                    
| |  |  | $5.9 million of our 4.5% notes; and
| |   |  |                                    
| |  |  | $16.3 million of our 5.0% notes.   

In
February 2001, we entered into a lease agreement relating to a building for
laboratory and office space in Cambridge, England. The lease has a term of 20 years
and commenced in 2003. We were responsible for a portion of the construction costs, which
we estimate to be approximately $21.0 million. Rent is expected to be approximately
$2.7 million per year based upon foreign currency exchange rates at June 30, 2003 and
is subject to market adjustments at the end of the 5th, 10th and
15th years. We no longer plan to occupy this space and will abandon the related
leasehold improvements as part of consolidating our facilities in connection with our June
2003 restructuring plan. This decision was deemed to be an impairment indicator under SFAS
No. 144 and asset impairment charges were recorded to restructuring to adjust the carrying
value of the related long-lived assets to their net realizable values. Any rental expense,
net of estimated sub-leasing income, will be recorded as a restructuring charge once we
vacate the facility.

We
also have lease obligations relating to two new buildings for laboratory and office space
in Cambridge, Massachusetts. The rent obligation for the first of these buildings began in
July 2002 and the rent on the second building began in July 2003. Rent is calculated
on an escalating scale ranging from approximately $7.6 million, per building per
year, to approximately $9.7 million, per building per year. Each lease is for a term
of seventeen years. We were responsible for a portion of the construction costs for both
buildings and were deemed to be the owner

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during the construction period of each building
under EITF 97-10, The Effect of Lessee Involvement in Asset Construction. As a
result, during the 2003 Six Month Period, we recorded approximately $3.9 million and
during the 2002 Six Month Period, we recorded approximately $2.2 million of
additional non-cash construction costs under these leases.

There
have been no significant changes to our contractual obligations and commercial commitments
included in our Form 10-K as of December 31, 2002.

Subsequent Events

In
connection with our June 2003 restructuring plan, we have discontinued our efforts in the
metabolic disease area. As a result, we and Abbott agreed to terminate our alliance
covering joint discovery, development and commercialization of certain metabolic disease
products on August 8, 2003. In the third quarter of 2003, we expect to record approximately $15.0 million to $20.0 million
in restructuring charges specifically related to the discontinuation of metabolic research and development, which will include
termination benefits and costs associated with the Abbott separation agreement.

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 of products, 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
use the words believe, anticipate, plan,
expect, intend and similar expressions to help identify
forward-looking statements.

We
cannot assure investors that our assumptions and expectations will prove to have been
correct. Important factors could cause our actual results to differ materially from those
indicated or implied by forward-looking statements. Factors that could cause or contribute
to such differences include those factors discussed below. We undertake no intention or
obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Regulatory Risks

Our
business may be harmed if we do not obtain approval to market INTEGRILIN®
(eptifibatide) Injection and VELCADE (bortezomib) for Injection for additional
therapeutic uses.

INTEGRILIN
and VELCADE have been approved for specific therapeutic uses. Part of our strategy to grow
our business is to market INTEGRILIN and VELCADE for additional indications. To do so, we
will need to obtain the appropriate regulatory approvals. If we are unsuccessful in
obtaining authorizations for expanded uses of INTEGRILIN or VELCADE, our revenues may not
grow as expected and our business and operating results will be harmed.

We may not be able to obtain
approval in additional jurisdictions to market VELCADE.

We
have filed a Marketing Authorization Application with the European Agency for the
Evaluation of Medicinal Products for approval to market VELCADE. The EMEA may not grant
marketing approval for VELCADE within the time frame that we anticipate or at all. For
example, we filed our application for the approval of VELCADE by the EMEA based on phase
II clinical trial data. It is possible that the EMEA will not approve VELCADE for
marketing prior to our completion of the ongoing phase III clinical trials of VELCADE and
the filing of the results of such phase III trials with the EMEA.

If
we are not able to obtain approval to market VELCADE in additional jurisdictions, we will
lose the opportunity to make sales in those jurisdictions and will not be able to earn
potential milestone payments under our agreement with Ortho Biotech.

27

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

The
products that we are developing require research and development, extensive preclinical
studies and clinical trials and regulatory approval prior to any commercial sales. This
process is expensive and lengthy, and can often take a number of years. 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 receive under our strategic alliance
agreements.

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 to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining regulatory approval or prevent or limit
commercial use.

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 and periodic inspections by the Food and Drug Administration, or FDA,
and other regulatory bodies. In particular, the marketing approval that we received from
the FDA for VELCADE (bortezomib) for Injection requires that we satisfactorily
complete specified post-approval clinical trials of this product. Later discovery of
previously unknown problems with our products or manufacturing processes, or failure to
comply with regulatory requirements, may result in restrictions 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 development programs 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 for conventional 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.

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 and VELCADE (bortezomib) for
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, and VELCADE, which was approved by the FDA in May 2003 and commercially
launched in the United States shortly after that date. Because of the recent introduction
of VELCADE, we have very limited experience as to the sales levels of this product.
Marketing of INTEGRILIN outside the United States commenced in mid-1999. Demand for
GPIIb-IIIa inhibitors, such as INTEGRILIN, has been softening since the beginning of 2003.
Our business plan contemplates our receiving marketing authorization to sell VELCADE
outside the United States for the treatment of patients with multiple myeloma and both in
the United States and abroad for other indications. We will not achieve our business plan,
and we may be forced to scale back our operations and research and development programs,
if:

| |  |  | we do not obtain regulatory approval to sell INTEGRILIN for additional therapeutic uses;                                                  
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                           
| |  |  | physicians change their patterns for prescribing GP IIb-IIIa inhibitors, such as
INTEGRILIN, for the current indications of INTEGRILIN; or
| |   |  |                                                                                                                                           
| |  |  | the sales of VELCADE do not meet our expectations.                                                                                        

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We face substantial competition,
and others may discover, develop or commercialize products and services before or more
successfully than we do.

The
fields of biotechnology and pharmaceuticals are highly competitive. Many of our
competitors are substantially larger than we are, and these competitors have substantially
greater capital resources, research and development staffs and facilities than we have.
Furthermore, many of our competitors are more experienced than we are in drug discovery,
development and commercialization, obtaining regulatory approvals and product
manufacturing and marketing. As a result, our competitors may discover, develop and
commercialize pharmaceutical products or services before we do. 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.

Due
to the incidence and severity of cardiovascular diseases, the market for therapeutic
products that address these diseases is large, and we expect the already intense
competition in this field to increase. Our most significant competitors are major
pharmaceutical companies and biotechnology companies. The two products that compete
directly with INTEGRILIN® (eptifibatide) Injection in the GP IIb-IIIa market segment
are ReoPro® (abciximab), which is produced by Johnson & Johnson and sold by
Johnson & Johnson and Eli Lilly and Company, and Aggrastat® (tirofiban HCl),
which is produced and sold by Merck & Co., Inc. Other competitive factors
that could negatively affect INTEGRILIN include:

| |  |  | competition from drug-coated stents;                                                                                                                                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                       
| |  |  | expanded use of heparin replacement therapies in patients undergoing balloon angioplasty; and                                                                         
| |   |  |                                                                                                                                                                       
| |  |  | increased use of another class of anti-platelet drugs known as ADP inhibitors in patients
whose symptoms make them potential candidates for treatment with INTEGRILIN.

With
respect to VELCADE (bortezomib) for Injection, we face competition from Celgene
Corporations Thalomid® (thalidomide), a treatment for complications associated
with leprosy, which is increasingly used for multiple myeloma based on data published in
peer-reviewed publications. We also face competition for VELCADE from traditional
chemotherapy treatments, and there are other potentially competitive therapies for VELCADE
that are in late-stage clinical development for the treatment of multiple myeloma. In
addition, multiple myeloma therapies in development may reduce the number of patients
available for VELCADE treatment through enrollment of these patients in clinical trials of
these potentially competing products.

Sales of INTEGRILIN and possibly
VELCADE in particular reporting periods may be affected by fluctuations in buying
patterns.

A
significant portion of INTEGRILIN domestic pharmaceutical sales is made to major drug
wholesalers. These sales are affected by fluctuations in the buying patterns of these
wholesalers and the corresponding changes in inventory levels maintained by them. These
changes may not reflect underlying prescriber demand. Additionally, we expect that sales
from INTEGRILIN will generally be lower in the summer months because fewer medical
procedures are typically performed during these months. These fluctuations in sales of
INTEGRILIN may have a material adverse effect on our results of operations for particular
reporting periods. It is possible that sales of VELCADE will be similarly affected by
fluctuations in buying patterns.

Because discovering drugs based
upon genomics is new, it is possible that our 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 a
portion of our research on diseases that may be linked to several or many genes working in
combination. Both we and the general scientific and medical communities have only a
limited understanding of the role that genes play in these diseases. To date, we have not
commercialized any products discovered through 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 technological
development by us or others may result in compounds, products or processes becoming
obsolete before we recover our development expenses.

29

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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
demonstrating that our products are safe and effective before they can be approved for
commercial sale. Clinical development, 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 preclinical or 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
satisfactory to the FDA. Preclinical and clinical data can be interpreted in different
ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive
results from a preclinical study or clinical trial, adverse medical events during a
clinical trial or safety issues resulting from products of the same class of drug 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. For example, in
2002, we discontinued the development of MLN977 for the treatment of chronic asthma,
because three patients in a phase II clinical study experienced elevations in their liver
enzymes that were likely related to the use of the product. This adverse event is not
uncommon among similar therapeutic agents, but might substantially diminish the commercial
viability of MLN977 as an oral drug for the treatment of chronic asthma.

We
may not complete our planned preclinical or clinical trials on schedule or at all. We may
not be able to confirm the safety and efficacy of our potential drugs in long-term
clinical trials, which may result in a delay or failure to commercialize our products. In
addition, due to the substantial demand for clinical trial sites in the cardiovascular
area, we may have difficulty obtaining a sufficient number of appropriate patients or
clinician support to conduct our clinical trials as planned. As a result, we may have to
expend substantial additional funds to obtain access to resources or delay or modify 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 market before 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 and RNA
samples, required for our genetic studies, which could delay or impede our drug discovery
efforts.

Our
drug discovery strategy uses genetic studies of families and populations prone to
particular diseases. These studies require the collection of large numbers of DNA and RNA
samples from affected individuals, their families and other suitable populations as well
as animal models. The availability of DNA and RNA samples and other biological material is
important to our ability to discover the genes responsible for human diseases through
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 governmental actions. 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 DNA and RNA samples
necessary to support our human 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 we may obtain marketing
approval from the FDA or other regulatory authorities will depend upon their acceptance by
the medical community and third 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 difficult for 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 educate the 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. The safety,
efficacy, convenience and cost-effectiveness of our products as compared to competitive
products will also affect market acceptance.

30

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Ethical, legal and social issues
related to the use of genetic information and genetic testing may cause less demand for
our products.

Genetic
testing has raised issues regarding confidentiality and the appropriate uses of the
resulting information. This could lead to governmental authorities calling for limits on
or regulation of the use of genetic testing or prohibiting testing for genetic
predisposition to certain diseases. Any of these scenarios could hinder our ability to
enroll patients in clinical trials which are necessary for us to gain regulatory approval
of our products.

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 for at least the next several years. Prior
to our acquisition of COR Therapeutics, Inc., substantially all of our revenues resulted
from payments from collaborators, and not from the sale of products. In 2002, we
recognized significant investment income from our investment portfolio. We expect that
investment income will be lower in 2003 as a result of lower cash balances and lower
returns on investments.

We
expect to continue to incur significant expenses in connection with our research and
development programs and commercialization activities. As a result, we will need to
generate significant revenues 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 the sale of products and services
and from existing and potential future strategic alliances.

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

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 obligations to 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 VELCADE
(bortezomib) for 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 have to delay or
curtail our research and development programs or our product commercialization activities.
We could be required to seek funds through arrangements 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 and otherwise negatively affect our
operations.

At
June 30, 2003, we had approximately $105.5 million of outstanding convertible debt. During
each of the last five years, our earnings were insufficient to cover our fixed charges. We
will be required to make interest payments on our outstanding convertible notes totaling
approximately $17.0 million over the next three years, assuming our convertible debt
remains outstanding until maturity.

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

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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 to service our indebtedness, thereby reducing the amount of our expected cash
flow available for other purposes, including capital expenditures and research and
development;
| |   |  |                                                                                                                                                                                                                                                                          
| |  |  | limiting our flexibility in planning for, or reacting to, changes in our business and the
industry in which we compete; and                                                                                                                                              
| |   |  |                                                                                                                                                                                                                                                                          
| |  |  | placing us at a possible competitive disadvantage to less leveraged competitors and
competitors that have better access to capital resources.                                                                                                                            

We have sold our interest in
CAMPATH® (alemtuzumab) humanized monoclonal antibody; our financial plan assumes we
will receive future significant payments that are contingent on the achievement of sales
thresholds for the product.

On
December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in
Millennium & ILEX Partners, L.P., which owns the CAMPATH product. To date, we
have received payments of $60.0 million from ILEX related to CAMPATH. We are entitled
to a payment of $40.0 million in 2003, a portion of which ILEX may pay in the form of their stock, and will be entitled to a payment of $40.0 million
in 2004, a portion of which ILEX may pay in the form of their stock, if sales of CAMPATH
in the United States meet specified thresholds. In addition, we will be entitled to additional payments from ILEX if U.S. sales of CAMPATH
after 2004 exceed specified annual thresholds. If these thresholds are not achieved, we
will not receive any future additional payments related to CAMPATH. We have no ability to
influence the actions of the entity that owns CAMPATH. Therefore, we have no control over
the financial success of CAMPATH or our ability to earn additional revenues from the
product.

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

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

Risks Relating to
Collaborators

We depend significantly on our
collaborators to work with us to develop and commercialize products and services.

We
market and sell INTEGRILIN® (eptifibatide) Injection through an alliance with SGP and,
following regulatory approvals outside of the U.S., will develop and commercialize VELCADE
(bortezomib) for Injection outside of the U.S. through an alliance with Ortho Biotech Products, L.P., a wholly owned
subsidiary of Johnson & Johnson. We conduct substantial discovery and development
activities through strategic alliances. We expect to enter into additional alliances in
the future, especially in connection with product commercialization. The success of our
alliances depends heavily on the efforts and activities of our collaborators. Each of our
collaborators has significant discretion in determining the efforts and resources that it
will apply to the alliance. Our existing and any future alliances may not be
scientifically or commercially successful.

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The
risks that we face in connection with these alliances include the following:

| |  |  | All of our strategic alliance agreements are for fixed terms and are subject to
termination under various circumstances, including, in many cases, on short notice without
cause. For example, we agreed to end our joint development and commercialization agreement
with Abbott Laboratories in August 2003, our technology transfer alliance with Aventis
Pharmaceuticals, Inc. ended in July 2003 and we expect the research phase of our
five-year alliance with Bayer AG to terminate in October 2003.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |  | In our strategic alliance agreements, we generally agree not to conduct specified types of
research and development in the field that is the subject of the alliance. These
agreements may have the effect of limiting the areas of research and development that we
may pursue, either alone or in collaboration with third parties.                                                                                                                                                                       
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |  | Our collaborators may develop and commercialize, either alone or with others, products and
services that are similar to or competitive with the products and services that are the
subject of the alliance with us.                                                                                                                                                                                                                                                                                         
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |  | Our collaborators may change the focus of their development and commercialization efforts.
Pharmaceutical and biotechnology companies historically have re-evaluated their priorities
following mergers and consolidations, which have been common in recent years in these
industries. The ability of certain of our products to reach their potential could be
limited if our collaborators decrease or fail to increase spending related to such
products.                                               
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |  | We expect to rely on our collaborators to manufacture many products covered by our
alliances. For example, SGP is one of the manufacturers of INTEGRILIN® (eptifibatide)
Injection.                                                                                                                                                                                                                                                                                                                         

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 when we believe that doing so
will maximize product value. In some instances, if we are unsuccessful in reaching an
agreement with a suitable collaborator, we may fail to meet certain of our business
objectives for the applicable product or program. We face significant competition in
seeking 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 or other 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 be
successful.

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
may not 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                        

33

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| |  |  | 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 public policy 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 the scope 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 disclosures may 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 human clinical 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
products or services.

We
may not have rights under some patents or patent applications related to some of our
existing and proposed products, processes or services. Third parties may own or control
these patents and patent applications in the United States and abroad. Therefore, in some
cases, such as those described below, in order to develop, manufacture, sell or import
some of our existing and proposed products, processes or services, we or our collaborators
may choose to seek, or be 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 pay license 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 or services.

With
respect to our product candidate MLN01, we are aware of third-party patents and patent
applications which relate to anti-CD18 antibodies and their use in various methods of
treatment, including methods 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 patent applications that relate to
humanized or modified antibodies, products useful for making humanized or modified
antibodies and processes for making and using humanized or modified antibodies. We are
also aware of third-party patents and patent applications relating to manufacturing
processes for humanized or modified antibodies, products thereof and materials useful in
such processes. With respect MLN591RL and MLN2704, we are also aware of third-party patent
applications relating to anti-PSMA antibodies.

With
respect to VELCADE (bortezomib) for Injection and other proteasome inhibitors in the
treatment of myocardial infarctions, we are aware of the existence of a potentially
interfering patent application filed by a third party. In addition, on June 26, 2002,
Ariad Pharmaceuticals, Inc. sent to us and approximately 50 other parties a letter
offering a sublicense for the use of U.S. Patent No. 6,410,516, which is exclusively
licensed to Ariad. If this patent is valid and Ariad successfully sues us for
infringement, we would require a license from Ariad in order to manufacture and market
VELCADE.

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 development and 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 patent litigation 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.

34

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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 more effectively 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 on commercially 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 and other 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 we may be required to
incur significant costs and devote significant efforts to augment our existing
capabilities.

We
have limited sales, marketing and distribution experience and capabilities. These
capabilities consist primarily of the specialty cardiovascular sales force that markets
INTEGRILIN® (eptifibatide) Injection and a recently hired oncology-specific sales
force that markets VELCADE (bortezomib) for Injection. We are marketing and selling
VELCADE in the United States solely through our new oncology sales force and without a
collaborator. Our success in selling VELCADE will depend heavily on the performance of
this sales force.

Depending on the nature of the products and services for which we obtain
marketing approval, we may need to rely significantly on sales, marketing and distribution
arrangements with our collaborators and other third parties. For example, 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
distribution functions for these 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 we will be required to incur significant costs and devote
significant efforts to establish our own manufacturing facilities and capabilities.

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 and services, we will need to develop, contract for or otherwise
arrange for the necessary manufacturing capabilities. In particular, we are currently
seeking to establish long-term supply relationships for the production of commercial
supplies of VELCADE.

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 our collaborators, 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 finding manufacturers 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 not be
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 own business
priorities, at a time that is costly or inconvenient for us.

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We
may in the future elect to manufacture certain of our products in our own manufacturing
facilities. We would need to invest substantial additional funds and recruit qualified
personnel in order to build or lease 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 that perform fill/finish and packaging. If we 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.

SGP,
one of the manufacturers that performs fill/finish and packaging of INTEGRILIN, had
suspended performing these services at its Manati facility in Puerto Rico. SGP has
restarted the fill/finish and packaging of INTEGRILIN at this facility for European sales,
but not for sales to the United States. We are working with SGP to identify alternative
fill/finish and packaging suppliers to serve as future sources of supply. Although we
believe that the fill/finish and packaging performed by our primary manufacturer is
sufficient to meet our requirements for INTEGRILIN supply in the United States for the
foreseeable future, our inability to resolve the issues relating to the Manati facility
could adversely affect the supply of INTEGRILIN and, thereby, harm our results of
operations.

We
expect to improve or modify our existing process technologies and manufacturing
capabilities for INTEGRILIN® (eptifibatide) Injection. We cannot quantify the time or
expense that may ultimately be required to improve or modify our existing 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
manufacturing plans and commercialization strategy for INTEGRILIN include the addition of
extra capacity for the manufacture of INTEGRILIN. This will require us to establish
multiple third-party manufacturing arrangements on commercially reasonable terms. We may
not be able to do so, and, even if such arrangements are established, they may not
continue to be available to us on commercially reasonable terms. If we are unable to
obtain contract manufacturing on commercially acceptable terms, we may not be able to
produce INTEGRILIN in sufficient quantities to meet future market demand.

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

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 to contain 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 prescription
pharmaceuticals 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 or VELCADE (bortezomib) for Injection. If they do, pricing levels or sales
volumes of INTEGRILIN or VELCADE may decrease. In addition, if we fail to comply with the
rules applicable to the Medicaid and Medicare programs, we could be subject to the
imposition of civil or criminal penalties or exclusion from these programs.

In
foreign markets, a number of different governmental and private entities determine the
level at which hospitals will be reimbursed for administering INTEGRILIN and VELCADE to
insured patients. If these levels are set, or reset, too low, it may not be possible to
sell INTEGRILIN or VELCADE at a profit in these markets.

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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 for adoption of these proposals affects or will affect our
ability to raise capital, obtain additional collaborators and market our products.

In
addition, we believe that the increasing emphasis on managed care in the United States has
and will continue to put pressure on the price and usage of our present and future
products, which may adversely affect product sales. Further, when a new therapeutic
product is approved, the availability of governmental or private reimbursement for that
product is uncertain, as is the amount for which that product will be reimbursed. We
cannot predict the availability or amount of reimbursement for our product candidates, and
current reimbursement policies for INTEGRILIN® (eptifibatide) Injection or VELCADE (bortezomib) for Injection could change at any time.

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 and VELCADE are administered to patients with serious diseases who have a high
incidence of mortality. Although we have product liability insurance that we believe is
appropriate, this insurance is subject to deductibles, co-insurance requirements and
coverage limitations and the market for such insurance is becoming more restrictive. 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 against
potential 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 our product 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 foundations and 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 or organizations 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 in decreased use of our products.

Risks Relating to an
Investment in Our Common Stock

The trading price of our
securities could be subject to significant fluctuations.

The
trading price of our common stock has been volatile, and may be volatile in the future.
Between January 1, 2003 and June 30, 2003, our common stock traded as high as $18.36 per
share and as low as $6.24 per share. Factors such as announcements of our or our
competitors operating results, changes in our prospects and market conditions for
biotechnology stocks in general could have a significant impact on the future trading
prices of our common stock.

In
particular, the trading price of the common stock of many biotechnology companies,
including ours, has experienced extreme price and volume fluctuations, which have at times
been unrelated to the operating performance of such companies whose stocks were affected.
Some of the factors that may cause volatility in the price of our securities include:

| |  |  | product revenues;                                  
| | - |  | ---------------------------------------------------
| |   |  |                                                    
| |  |  | clinical trial results and regulatory developments;
| |   |  |                                                    
| |  |  | quarterly variations in financial results;         
| |   |  |                                                    
| |  |  | business and product market cycles;                
| |   |  |                                                    
| |  |  | fluctuations in customer requirements;             

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| |  |  | availability and utilization of manufacturing capacity;
| | - |  | -------------------------------------------------------
| |   |  |                                                        
| |  |  | timing of new product introductions; and               
| |   |  |                                                        
| |  |  | our ability to develop and implement new technologies. 

The
price of our securities may also be affected by the estimates and projections of the
investment community, general economic and market conditions, and the cost of operations
in our product markets. While we cannot predict the individual effect that these factors
may have on the price of our securities, these factors, either individually or in the
aggregate, could result in significant variations in price during any given period of
time. There can be no assurance that these factors will not have an adverse effect on the
trading price of our common stock.

We have anti-takeover defenses
that could delay or prevent an acquisition and could adversely affect the price of our
common stock.

Provisions
of our certificate of incorporation and bylaws and of Delaware law could have the effect
of delaying, deferring or preventing an acquisition of our company. For example, we have
divided our board of directors into three classes that serve staggered three-year terms,
we may issue shares of our authorized blank check preferred stock and our
stockholders are limited in their ability to call special stockholder meetings. In
addition, we have issued preferred stock purchase rights that would adversely affect the
economic and voting interests of a person or group that seeks to acquire us or a 15% or
more interest in our common stock without negotiations with our board of directors.

Item 3.    Quantitative
and Qualitative Disclosures About Market Risk

We
manage our fixed income investment portfolio in accordance with our Policy for Securities
Investments, or Investment Policy, that has been approved by our Board of Directors. The
primary objectives of our Investment Policy are to preserve principal, maintain a high
degree of liquidity to meet operating needs, and obtain competitive returns subject to
prevailing market conditions. Investments are made primarily in high-grade corporate bonds
with effective maturities of three years or less, asset-backed debt securities and U.S.
government agency debt securities. These investments are subject to risk of default, changes in
credit rating and changes in market value. These investments are also 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 an approximate $14.3 million
decrease in the fair value of our investments as of June 30, 2003. However, due to the
conservative nature of our investments and relatively short effective maturities of debt
instruments, interest rate risk is mitigated. Our Investment Policy specifies credit
quality standards for our investments and limits the amount of exposure from any single
issue, issuer or type of investment. We do not own derivative financial instruments in our
investment portfolio.

As
of June 30, 2003, the fair value of our 4.5% notes, 5.0% notes and 5.5% notes approximates their
carrying value.

The
interest rates on our convertible 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 June 30, 2003 we did not have any financing arrangements that were not reflected in our
balance sheet.

Item 4.    Controls and
Procedures

Our
management, with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2003. In designing
and evaluating our disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and our management necessarily applied
its judgment in

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evaluating the cost-benefit relationship of possible controls and
procedures. Based on this evaluation, our chief executive officer and chief financial
officer concluded that as of June 30, 2003, our disclosure controls and procedures were
(1) designed to ensure that material information relating to us is made known to our chief
executive officer and chief financial officer by others, particularly during the period in
which this report was prepared and (2) effective, in that they provide reasonable
assurance that information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.

No
change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2003
that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

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PART II OTHER INFORMATION



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

At
our Annual Meeting of Stockholders held on April 30, 2003, our stockholders voted on three
matters, as follows:

| | 1. |  | The stockholders elected Ginger L. Graham, Vaughn M. Kailian, Edward D. Miller,
          Jr., and Norman C. Selby to serve as Class I directors for a term of three years
          by the following votes:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |  |                                                                                                                                                                                                             

|                      | Number of Shares
|--------------------- | ----------------
|Name                  |                 
|                     
|Ginger L. Graham      |                 
|Vaughn M. Kailian     |                 
|Edward D. Miller, Jr. |                 
|Norman C. Selby       |                 

| |  |  |                                                                                                                                                                                                                                                     
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | The
other directors whose terms of office as a director continue after the meeting are as
follows: Eugene Cordes, Shaun R. Coughlin, A. Grant Heidrich, III, Charles J. Homcy, Raju
S. Kucherlapati, Eric S. Lander, Mark Levin, and Kenneth E. Weg.



| | 2. |  | The stockholders approved an amendment to our 1996 Employee Stock Purchase Plan
          that reserves an additional 3,000,000 shares of our common stock for issuance
          under the plan to employees by the following vote:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |  |                                                                                                                                                                                                                                     

|For:     | 240,929,205
|-------- | -----------
|Against: | 3,969,556  
|Abstain: | 1,034,350  

| |    |  |                                                                                                                                                                
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. |  | The stockholders approved our 2003 Employee Stock Purchase Plan for Employees
          of Non-U.S. Subsidiaries and Affiliated Entities by the following vote:
| |    |  |                                                                                                                                                                

|For:     | 241,337,100
|-------- | -----------
|Against: | 4,208,669  
|Abstain: | 387,342    

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 during the three months ended June 30, 2003.

| | 1. |  | A Current Report on Form 8-K was filed with the Securities and Exchange
          Commission on April 15, 2003, to furnish, pursuant to Item 9, our press release dated April 15, 2003 reporting our financial results for the quarter
          ended March 31, 2003.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 2. |  | A Current Report on Form 8-K was filed with the Securities and Exchange
          Commission on April 22, 2003, to report, pursuant to Item 5, that Aventis
          Pharmaceuticals, Inc. (Aventis) provided us notice of exercise of
          Aventiss option to terminate the three to five-year Technology Transfer
          Agreement between us and Aventis dated June 22, 2000, effective on the third
          anniversary of the Agreement, July 21, 2003.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | 3. |  | A Current Report on Form 8-K was filed with the Securities and Exchange
          Commission on May 16, 2003, to report, pursuant to Item 9, that an abstract
          entitled A Randomized Controlled Trial of a Humanized alpha4beta7 Antibody
          in Ulcerative Colitis was published on the website of Digestive Disease
          Week 2003 (www.ddw.org).
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |  |                                                                                                                                                                                                                                                                                                                                                                          

| | 4. |  | A Current Report on Form 8-K was filed with the Securities and Exchange
          Commission on June 6, 2003 to report, pursuant to Item 5, that we issued a press
          release to announce a restructuring initiative.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 its
behalf by the undersigned, thereunto duly authorized.

|                       |  | MILLENNIUM PHARMACEUTICALS, INC.(Registrant)
|---------------------- |  | --------------------------------------------
|Dated: August 12, 2003 |  | By                                          
|                       |  |                                             
|                       |  |                                             
|                       |  |                                             
|                       |  |                                             
|                       |  |                                             
|                       |  |                                             
|                       |  |                                             

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EXHIBIT INDEX

|Exhibit No. |       | Description |                                                                                                                                                                                                            
|----------- | ----- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            | 10.1 |             | Second Amendment effective as of December 22, 2002 dated April 22, 2003 to Collaboration
and License Agreement dated June 22, 2000 by and between the Company and Aventis
Pharmaceuticals, Inc., as amended
|            |       |             |                                                                                                                                                                                                            
|            | 10.2 |             | Collaboration, Distribution and License Agreement by and between the Company and Ortho
                           Biotech Products, L.P. dated June 30, 2003                                               
|            |       |             |                                                                                                                                                                                                            
|            | 31.1  |             | Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities Exchange Act of 1934, as amended                                                                       
|            |       |             |                                                                                                                                                                                                            
|            | 31.2  |             | Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of
the                                 Securities Exchange Act of 1934, as amended                                       
|            |       |             |                                                                                                                                                                                                            
|            | 32.1  |             | Statement Pursuant to 18 U.S.C. §1350                                                                                                                                                                      
|            |       |             |                                                                                                                                                                                                            
|            | 32.2  |             | Statement Pursuant to 18 U.S.C. §1350                                                                                                                                                                      

 Confidential treatment
requested as to certain portions, which portions have been separately filed with the
Securities and Exchange Commission.

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