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

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**FORM 10-Q**

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**(Mark One)**

| **|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                      |
| **For the quarterly period ended September 30, 2002**                                                                                                                                                                                                                                    |
| **OR**                                                                                                                                                                                                                                                                                   |
| **|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                   |
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                      |
| **For the transition period from                      to                     .** |
|                                                                                                                                                                                                                                                                                          |
| **Commission file number 0-28494**                                                                                                                                                                                                                                                       |
| **MILLENNIUM PHARMACEUTICALS, INC.**                                                                                                                                                                                                                                                     |
| (Exact name of registrant as specified in its charter)                                                                                                                                                                                                                                   |

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

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

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

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

The total number of shares of the registrant's Common Stock, $0.001 par value, outstanding on November 11, 2002, was 287,785,551.

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**MILLENNIUM PHARMACEUTICALS, INC.**

**FORM 10-Q**

**FOR THE QUARTER ENDED SEPTEMBER 30, 2002**

**TABLE OF CONTENTS**

|             |                                                                                                           | Page                       |   |
|------------------|----------------------------------------------------------------------------------------------------------------|----------------------------|--------|
|             |                                                                                                           |                            |   |
| **PART I**  | **FINANCIAL INFORMATION**                                                                                      |                       |   |
|             |                                                                                                           |                       |   |
| Item 1.          | Condensed Consolidated Financial Statements                                                                    |                       |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Balance Sheets as ofSeptember 30, 2002 and December 31, 2001                            | 3      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Operations for thethree and nine months ended September 30, 2002 and 2001 | 4      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Cash Flows for thenine months ended September 30, 2002 and 2001           | 5      |   |
|             |                                                                                                           |                       |   |
|             | Notes to Condensed Consolidated Financial Statements                                                           | 6      |   |
|             |                                                                                                           |                       |   |
| Item 2.          | Management's Discussion and Analysis of FinancialCondition and Results of Operations                           | 13     |   |
|             |                                                                                                           |                       |   |
|             | Risk Factors That May Affect Results                                                                           | 23     |   |
|             |                                                                                                           |                       |   |
| Item 3.          | Quantitative and Qualitative Disclosures about Market Risk                                                     | 32     |   |
|             |                                                                                                           |                       |   |
| Item 4.          | Controls and Procedures                                                                                        | 32     |   |
|             |                                                                                                           |                       |   |
| **PART II** | **OTHER INFORMATION**                                                                                          |                       |   |
|             |                                                                                                           |                       |   |
| Item 2.          | Changes in Securities and Use of Proceeds                                                                      | 33     |   |
|             |                                                                                                           |                       |   |
| Item 6.          | Exhibits and Reports on Form 8-K                                                                               | 33     |   |
|             |                                                                                                           |                       |   |
|             | Signatures                                                                                                     | 34     |   |
|             |                                                                                                           |                       |   |
|             | Certifications                                                                                                 | 35     |   |
|             |                                                                                                           |                       |   |
|             | Exhibit Index                                                                                                  | 37     |   |
|             |                                                                                                           |                       |   |

*The following Millennium trademarks are used in this Quarterly Report on Form 10-Q:*  DiagnomicsTM, Melastatin®, Millennium®,Millennium PharmaceuticalsTM,  VELCADETM (bortezomib) for Injection and INTEGRILIN® (eptifibatide) Injection. CAMPATH® is a registeredtrademark of ILEX Pharmaceuticals, L.P., TNKaseTM and Activase® are trademarks of Genentech, Inc., ReoPro® is a trademark of Eli Lillyand Company and Aggrastat® is a trademark of Merck & Co., Inc. *Other trademarks used in this Quarterly Report on Form 10-Q are theproperty of their respective owners.*

2

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**PART I     FINANCIAL INFORMATION**

**Item 1.    Condensed Consolidated Financial Statements**

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

|                                                                                                                                                                                                         | September 30, 2002 |   | December 31, 2001 |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------|-------------------|------------|
||
||
||
| Current assets:                                                                                                                                                                                              |               |   |              |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                    |               |   | $                 | 62,815     |   | $ | 35,993 |   |
| Marketable securities                                                                                                                                                                                        |               |   |              | 1,758,685  |   |   | 1,438,875 |   |
| Due from strategic alliance partners                                                                                                                                                                         |               |   |              | 36,892     |   |   | 18,360 |   |
| Inventory                                                                                                                                                                                                    |               |   |              | 105,095    |   |   | — |   |
| Prepaid expenses and other current assets                                                                                                                                                                    |               |   |              | 67,495     |   |   | 21,389 |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total current assets                                                                                                                                                                                         |               |   |              | 2,030,982  |   |   | 1,514,617 |   |
| Property and equipment, net                                                                                                                                                                                  |               |   |              | 277,437    |   |   | 168,600 |   |
| Restricted cash                                                                                                                                                                                              |               |   |              | 38,942     |   |   | 47,308 |   |
| Other assets                                                                                                                                                                                                 |               |   |              | 30,453     |   |   | 13,362 |   |
| Goodwill, net                                                                                                                                                                                                |               |   |              | 1,201,491  |   |   | 138,519 |   |
| Intangible assets, net                                                                                                                                                                                       |               |   |              | 493,616    |   |   | 25,328 |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total assets                                                                                                                                                                                                 |               |   | $                 | 4,072,921  |   | $ | 1,907,734 |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
|                                                                                                                                                                                                         |               |   |              |       |   |   |   |   |
| **Liabilities and Stockholders' Equity**                                                                                                                                                                     |               |   |              |       |   |   |   |   |
| Current liabilities:                                                                                                                                                                                         |               |   |              |       |   |   |   |   |
| Accounts payable                                                                                                                                                                                             |               |   | $                 | 25,697     |   | $ | 25,237 |   |
| Accrued expenses                                                                                                                                                                                             |               |   |              | 164,944    |   |   | 89,372 |   |
| Current portion of deferred revenue                                                                                                                                                                          |               |   |              | 136,935    |   |   | 71,018 |   |
| Current portion of capital lease obligations                                                                                                                                                                 |               |   |              | 16,942     |   |   | 17,536 |   |
| Current portion of long term debt                                                                                                                                                                            |               |   |              | 599,960    |   |   | — |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total current liabilities                                                                                                                                                                                    |               |   |              | 944,478    |   |   | 203,163 |   |
| Deferred revenue, net of current portion                                                                                                                                                                     |               |   |              | 5,767      |   |   | 17,902 |   |
| Capital lease obligations, net of current portion                                                                                                                                                            |               |   |              | 61,718     |   |   | 35,107 |   |
| Long term debt, net of current portion                                                                                                                                                                       |               |   |              | 83,325     |   |   | 83,325 |   |
|                                                                                                                                                                                                         |               |   |              |       |
| Commitments and contingencies                                                                                                                                                                                |               |   |              |       |   |   |   |   |
|                                                                                                                                                                                                         |               |   |              |       |
| Stockholders' equity:                                                                                                                                                                                        |               |   |              |       |   |   |   |   |
| Preferred Stock, $0.001 par value; 5,000 shares authorized, none    issued                                                                                                               |               |   |              | —     |   |   | — |   |
| Common Stock, $0.001 par value; 500,000 shares authorized:    286,990 shares at September 30, 2002 and 224,290 shares at    December 31, 2001 issued and outstanding |               |   |              | 287        |   |   | 224 |   |
| Additional paid-in capital                                                                                                                                                                                   |               |   |              | 4,398,353  |   |   | 2,477,334 |   |
| Deferred compensation                                                                                                                                                                                        |               |   |              | (2,512     | ) |   | (765 | ) |
| Notes receivable from officers                                                                                                                                                                               |               |   |              | (24        | ) |   | (315 | ) |
| Accumulated other comprehensive income                                                                                                                                                                       |               |   |              | 34,620     |   |   | 34,371 |   |
| Accumulated deficit                                                                                                                                                                                          |               |   |              | (1,453,091 | ) |   | (942,612 | ) |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total stockholders' equity                                                                                                                                                                                   |               |   |              | 2,977,633  |   |   | 1,568,237 |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |
| Total liabilities and stockholders' equity                                                                                                                                                                   |               |   | $                 | 4,072,921  |   | $ | 1,907,734 |   |
|                                                                                                                                                                                                         |               |   |                   |            |   |  |  |   |

See notes to condensed consolidated financial statements.

3

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

|                                                                     | Three Months Ended September 30, |   | Nine Months Ended September 30, |     |
|--------------------------------------------------------------------------|---------------------------------------|--------|--------------------------------------|----------|
||
||
|                                                                     |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
|     Revenue under strategic alliances                |                                  |   | $                                    | 50,720   |   | $ | 82,175 |   |   |   | $ | 144,104 |   | $ | 191,605 |   |
|     Copromotion revenue                              |                                  |   |                                 | 45,035   |   |   | — |   |   |   |   | 112,104 |   |   | — |   |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total revenues           |                                  |   |                                 | 95,755   |   |   | 82,175 |   |   |   |   | 256,208 |   |   | 191,605 |   |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
| Costs and expenses:                                                      |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
|     Research and development                         |                                  |   |                                 | 140,522  |   |   | 98,840 |   |   |   |   | 364,264 |   |   | 285,945 |   |
|     Selling, general and administrative              |                                  |   |                                 | 37,391   |   |   | 18,315 |   |   |   |   | 114,691 |   |   | 53,948 |   |
|     Cost of copromotion revenue                      |                                  |   |                                 | 18,762   |   |   | — |   |   |   |   | 44,284 |   |   | — |   |
|     Acquired in-process research and development     |                                  |   |                                 | —   |   |   | — |   |   |   |   | 242,000 |   |   | — |   |
|     Amortization of intangibles                      |                                  |   |                                 | 9,810    |   |   | 15,714 |   |   |   |   | 25,107 |   |   | 48,010 |   |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total costs and expenses |                                  |   |                                 | 206,485  |   |   | 132,869 |   |   |   |   | 790,346 |   |   | 387,903 |   |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
| Loss from operations                                                     |                                  |   |                                 | (110,730 | ) |   | (50,694 | ) |   |   |   | (534,138 | ) |   | (196,298 | ) |
|                                                                     |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                  |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
|     Investment income                                |                                  |   |                                 | 21,722   |   |   | 24,007 |   |   |   |   | 69,832 |   |   | 73,392 |   |
|     Realized gain on marketable securities           |                                  |   |                                 | 3,818    |   |   | 1,363 |   |   |   |   | 15,819 |   |   | 6,519 |   |
|     Realized loss on marketable securities           |                                  |   |                                 | (3,306   | ) |   | (169 | ) |   |   |   | (20,368 | ) |   | (760 | ) |
|     Interest expense                                 |                                  |   |                                 | (10,383  | ) |   | (2,366 | ) |   |   |   | (27,624 | ) |   | (7,020 | ) |
|     Gain on sale of equity interest in joint venture |                                  |   |                                 | —   |   |   | — |   |   |   |   | 40,000 |   |   | — |   |
|     Equity in operations of joint venture            |                                  |   |                                 | —   |   |   | 2,625 |   |   |   |   | — |   |   | 1,700 |   |
|     Debt financing charge                            |                                  |   |                                 | —   |   |   | — |   |   |   |   | (54,000 | ) |   | — |   |
|     Debt conversion expenses                         |                                  |   |                                 | —   |   |   | — |   |   |   |   | — |   |   | (2,567 | ) |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
| Net loss                                                                 |                                  |   | $                                    | (98,879  | ) | $ | (25,234 | ) |   |   | $ | (510,479 | ) | $ | (125,034 | ) |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
| *Amounts per common share:*                                              |                                  |   |                                 |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share, basic and diluted                                    |                                  |   | $                                    | (0.35    | ) | $ | (0.11 | ) |   |   | $ | (1.86 | ) | $ | (0.57 | ) |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |
| Weighted average shares, basic and diluted                               |                                  |   |                                 | 285,091  |   |   | 220,069 |   |   |   |   | 274,013 |   |   | 217,766 |   |
|                                                                     |                                  |   |                                      |          |   |  |  |   |   |   |  |  |   |  |  |   |

See notes to condensed consolidated financial statements.

4

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

|                                                                                      | Nine Months Ended September 30, |   |
|-------------------------------------------------------------------------------------------|--------------------------------------|--------|
||
||
|                                                                                      |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Operating activities:**                                                 |                                 |   |   |   |   |   |   |   |
| Net loss                                                                                  |                                 |   | $ | (510,479 | ) | $ | (125,034 | ) |
| Adjustments to reconcile net loss to cash used in operating activities:                   |                                 |   |   |   |   |   |   |   |
|     Acquired in-process research and development                      |                                 |   |   | 242,000 |   |   | — |   |
|     Depreciation and amortization                                     |                                 |   |   | 61,408 |   |   | 72,938 |   |
|     (Gain) on marketable securities                                   |                                 |   |   | (15,819 | ) |   | (6,519 | ) |
|     Loss on marketable securities                                     |                                 |   |   | 20,368 |   |   | 760 |   |
|     Stock compensation expense                                        |                                 |   |   | 6,887 |   |   | 3,214 |   |
|     Equity in operations of joint venture                             |                                 |   |   | — |   |   | (1,700 | ) |
|     Changes in operating assets and liabilities:                      |                                 |   |   |   |   |   |   |   |
|         Due from strategic alliance partners      |                                 |   |   | (5,493 | ) |   | (7,948 | ) |
|         Prepaid expenses and other current assets |                                 |   |   | (39,621 | ) |   | (1,194 | ) |
|         Restricted cash and other assets          |                                 |   |   | (3,269 | ) |   | 251 |   |
|         Accounts payable and accrued expenses     |                                 |   |   | (20,652 | ) |   | 9,848 |   |
|         Deferred revenue                          |                                 |   |   | (40,648 | ) |   | (54,065 | ) |
|                                                                                      |                                 |   |  |  |   |  |  |   |
| Net cash used in operating activities                                                     |                                 |   |   | (305,318 | ) |   | (109,449 | ) |
|                                                                                      |                                 |   |  |  |   |  |  |   |
|                                                                                      |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Investing activities:**                                                 |                                 |   |   |   |   |   |   |   |
| Investments in marketable securities                                                      |                                 |   |   | (845,467 | ) |   | (616,545 | ) |
| Proceeds from sales and maturities of marketable securities                               |                                 |   |   | 850,382 |   |   | 474,992 |   |
| Investment in joint venture                                                               |                                 |   |   | (235 | ) |   | (656 | ) |
| Purchase of property and equipment and other long term assets                             |                                 |   |   | (65,027 | ) |   | (36,158 | ) |
| Net cash used in Cambridge Discovery Chemistry Ltd. acquisition                           |                                 |   |   | — |   |   | (1,614 | ) |
| Proceeds from the sale of Cambridge Discovery Chemistry, Inc.                             |                                 |   |   | — |   |   | 946 |   |
| Net cash acquired in COR Therapeutics, Inc. acquisition                                   |                                 |   |   | 308,522 |   |   | — |   |
|                                                                                      |                                 |   |  |  |   |  |  |   |
| Net cash provided by (used in) investing activities                                       |                                 |   |   | 248,175 |   |   | (179,035 | ) |
|                                                                                      |                                 |   |  |  |   |  |  |   |
|                                                                                      |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Financing activities:**                                                 |                                 |   |   |   |   |   |   |   |
| Proceeds from sales of common stock and exercises of warrants                             |                                 |   |   | 81,976 |   |   | 178,573 |   |
| Net proceeds from employee stock purchases                                                |                                 |   |   | 13,830 |   |   | 16,118 |   |
| Repayment of principal of long-term debt obligations                                      |                                 |   |   | (40 | ) |   | — |   |
| Repayment of notes receivable from officers                                               |                                 |   |   | 145 |   |   | — |   |
| Principal payments on capital leases                                                      |                                 |   |   | (13,367 | ) |   | (10,793 | ) |
|                                                                                      |                                 |   |  |  |   |  |  |   |
| Net cash provided by financing activities                                                 |                                 |   |   | 82,544 |   |   | 183,898 |   |
|                                                                                      |                                 |   |  |  |   |  |  |   |
| Increase (decrease) in cash and cash equivalents                                          |                                 |   |   | 25,401 |   |   | (104,586 | ) |
| Equity adjustment from foreign currency translation                                       |                                 |   |   | 1,421 |   |   | (36 | ) |
| Cash and cash equivalents, beginning of period                                            |                                 |   |   | 35,993 |   |   | 166,086 |   |
|                                                                                      |                                 |   |  |  |   |  |  |   |
| Cash and cash equivalents, end of period                                                  |                                 |   | $ | 62,815 |   | $ | 61,464 |   |
|                                                                                      |                                 |   |  |  |   |  |  |   |
|                                                                                      |                                 |   |   |   |   |   |   |   |
| **Supplemental Cash Flow Information:**                                                   |                                 |   |   |   |   |   |   |   |
| Cash paid for interest                                                                    |                                 |   | $ | 29,286 |   | $ | 7,692 |   |
|                                                                                      |                                 |   |   |   |   |   |   |   |
| **Supplemental Disclosure of Noncash Investing and Financing Activities:**                |                                 |   |   |   |   |   |   |   |
| Acquisition of COR Therapeutics, Inc., including direct transaction costs                 |                                 |   | $ | 1,833,329 |   | $ | — |   |
| Construction costs for laboratory and office space                                        |                                 |   |   | 63,843 |   |   | 24,631 |   |
| Equipment acquired under capital leases                                                   |                                 |   |   | 6,155 |   |   | 15,427 |   |
| Millennium & ILEX Partners, L.P. capital contribution                                 |                                 |   |   | 270 |   |   | 4,189 |   |
| Conversion of subordinated debt to common stock                                           |                                 |   |   | — |   |   | 12,602 |   |
| Services due from the sale of Cambridge Discovery Chemistry, Inc.                         |                                 |   |   | — |   |   | 3,000 |   |
| Write off of capital assets                                                               |                                 |   |   | — |   |   | 558 |   |
| Reclassification of debt issuance costs to additional paid-in capital                     |                                 |   |   | — |   |   | 122 |   |

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 principlesgenerally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 ofRegulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accountingprinciples for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring accrualsand revisions of estimates, considered necessary for a fair presentation of the accompanying condensed consolidated financialstatements have been included.  Interim results for the three and nine month periods ended September 30, 2002 are not necessarilyindicative of the results that may be expected for the year ending December 31, 2002.  For further information, refer to thefinancial statements and accompanying footnotes included in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2001, which was filed with the Securities and Exchange Commission (SEC) on March 7, 2002.

**2.        Summary of Significant Accounting Policies**

*(a)        Cash Equivalents and Marketable Securities*

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

        Management determines the appropriate classification of marketable securities at the time of purchase and reevaluates suchdesignation at each balance sheet date. Marketable securities at September 30, 2002 and December 31, 2001 are classified as"available-for-sale." Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in aseparate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums andaccretion of discounts to maturity. Such amortization and accretion is included in investment income. Realized losses and declines invalue judged to be other-than-temporary on available-for-sale securities are included in realized loss on marketable securities. Thecost of securities sold is based on the specific identification method. Interest and dividends on securities classified asavailable-for-sale are included in investment income.

*(b)        Inventory*

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

|           |   | **September 30, 2002** |
|----------------|--------|------------------------|
| Bulk materials |   | $                      | 54,602 |
| Finished goods |   |                   | 50,493 |
|           |   |                        |
|           |   | $                      | 105,095 |
|           |   |                        |

*(c)        Goodwill and Intangible Assets*

        Intangible assets consist of specifically identified intangible assets.  Goodwill is the excess of any purchase price over theestimated fair market value of net tangible assets acquired not allocated to specificintangible assets.  Amortization of intangibles is computed using the straight-line method over the useful lives of the respectiveassets. Accumulated amortization on intangible assets was $35.6 million and $12.7 million at September 30, 2002 and December 31,2001, respectively.

6

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

        In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longeramortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assetsthat are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company adopted SFASNo. 142 effective January 1, 2002 and reclassified amounts to goodwill which were previously allocated to assembled workforce. Uponadoption, the Company ceased the amortization of goodwill.  The Company completed its transitional assessment of goodwill in thefirst quarter of 2002 and no impairment loss was recognized.  The Company will continue to test for goodwill impairment annually, onOctober 1.

        On October 1, 2002, the Company performed its annual goodwill impairment test and determined that no impairment existed on thatdate.  However, since the date of the Company's acquisition of COR Therapeutics, Inc. ("COR") which generated a significant amount ofgoodwill (see Note 3), the Company has experienced a significant decline in market capitalization due to a decline in stock price.While a decline in stock price is not specifically cited as an impairment indicator, the Company continually monitors business andmarket conditions to assess whether an impairment indicator exists.  If the Company were to determine that an impairment indicatorexists, it would be required to perform an impairment test which might result in a material impairment charge to the statement of operations.

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

|                                           | Three Months Ended September 30, |    | Nine Months Ended September 30, |   |
|------------------------------------------------|----------------------------------|---------|---------------------------------|--------|
||
| (in thousands, except per share amounts)  |                             |
| Net loss                                       | $                                | (98,879 | )                               | $      | (25,234 | ) | $ | (510,479 | ) | $ | (125,034 | ) |
| Add back: Goodwill amortization                |                             | —  |                            |   | 14,307 |   |   | — |   |   | 43,093 |   |
| Add back: Assembled workforce amortization     |                             | —  |                            |   | 295 |   |   | — |   |   | 885 |   |
|                                           |                                  |         |                            |        |  |   |  |  |   |  |  |   |
| Adjusted net loss                              | $                                | (98,879 | )                               | $      | (10,632 | ) | $ | (510,479 | ) | $ | (81,056 | ) |
|                                           |                                  |         |                            |        |  |    |  |  |   |  |  |    |
| *Amounts per common share, basic and diluted:* |                             |    |                            |   |   |   |   |   |   |   |   |   |
| Net loss                                       | $                                | (0.35   | )                               | $      | (0.11 | ) | $ | (1.86 | ) | $ | (0.57 | ) |
| Add back: Goodwill amortization                |                             | —  |                            |   | 0.07 |   |   | — |   |   | 0.20 |   |
| Add back: Assembled workforce amortization     |                             | —  |                            |   | 0.00 |   |   | — |   |   | 0.00 |   |
|                                           |                                  |         |                            |        |  |   |  |  |   |  |  |   |
| Adjusted net loss                              | $                                | (0.35   | )                               | $      | (0.04 | ) | $ | (1.86 | ) | $ | (0.37 | ) |
|                                           |                                  |         |                            |        |  |    |  |  |   |  |  |    |
| Shares                                         |                             | 285,091 |                            |   | 220,069 |   |   | 274,013 |   |   | 217,766 |   |
|                                           |                                  |         |                            |        |  |    |  |  |   |  |  |    |

*(d)        Revenue Recognition*

        Copromotion revenue includes the Company's share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotionterritories by Schering-Plough Ltd. and Schering Corporation (collectively "Schering").  Also included in copromotion revenue arereimbursements from Schering of the Company's cost of copromotion revenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory.  The Company recognizes revenue when Schering ships INTEGRILIN towholesalers and records it net of allowances, if any.  The Company's costs of copromotion revenue consist of certainmanufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN within copromotionterritories.  The Company defers certain manufacturing-related expenses until the time Schering ships related product to its customersinside and outside copromotion territories.  Advertising and promotional expenses are expensed as incurred.  Deferred revenueincludes payments from Schering received prior to the period in which the related contract revenues are earned.  Deferred revenuealso includes cash

7

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

advances from Schering to the Company for the Company's prepayments to its manufacturers of INTEGRILIN®(eptifibatide) Injection.

        Effective October 1, 2000, Millennium changed its method of accounting for revenue under strategic alliances in accordance withStaff Accounting Bulletin (SAB) No. 101 ("SAB 101"), *Revenue Recognition in Financial Statements*. Previously, the Company hadrecognized revenue relating to non-refundable, up-front, license and milestone payments and certain research funding payments fromits strategic partners in accordance with the contract. Under the new accounting method adopted retroactively to January 1, 2000, theCompany recognizes revenue from non-refundable, up-front, license and milestone payments, not specifically tied to a separateearnings 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 performanceobligation associated with the payment is completed. Performance obligations typically consist of significant milestones in thedevelopment life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agenciesand approvals by regulatory agencies. In addition, when appropriate, the Company recognizes revenue from certain research paymentsbased upon the level of research services performed during the period of the research contract.

        The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which was included in theloss for the year ended December 31, 2000.  The amount of revenue recognized in the three and nine months ended September 30, 2002that was included in the cumulative effect of change in accounting principle and was recognized in prior years was $8.4 million and$30.5 million, respectively.   The amount of revenue recognized in the three and nine months ended September 30, 2001 that wasincluded in the cumulative effect of change in accounting principle and was recognized in prior years was $10.6 million and $32.8million, respectively.

*(e)        Segment Information*

        SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), establishes standards forthe way that public business enterprises report information about operating segments in annual financial statements and requires thatthose enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishesstandards 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 ofproprietary therapeutic and diagnostic human healthcare products and services.   All of the Company's copromotion revenue iscurrently related to sales of INTEGRILIN.  Revenues from one strategic partner accounted for approximately 19.6% and 50.4% of totalrevenues for the quarters ended September 30, 2002 and 2001, respectively and 21.5% and 38.7% of total revenues for the nine monthsended September 30, 2002 and 2001, respectively.  Revenues from a second strategic partner accounted for approximately 11.3% and13.2% of total revenues for the quarters ended September 30, 2002 and 2001, respectively and 12.7% and 17.0% of total revenues for thenine months ended September 30, 2002 and 2001, respectively. Revenues from a third strategic partner accounted for approximately10.4% and 12.2% of total  revenues for the quarters ended September 30, 2002 and 2001, respectively and 11.9% and 15.7% of totalrevenues for the nine months ended September 30, 2002 and 2001, respectively.  There were no other significant strategic partnersduring the three and nine months ended September 30, 2002 and 2001, respectively.

*(f)        Information Concerning Market and Source of Supply Concentration*

        Millennium and Schering copromote INTEGRILIN in the United States and share any profits and losses.Together with Schering and Genentech, Inc., the Company also copromotes INTEGRILIN for use with Genentech's fibrinolytic, orclot-dissolving, drugs TNKaseTM and Activase® across the United States.  INTEGRILIN has received regulatory approval in the EuropeanUnion and a number of other countries for various indications.  The Company has exclusively licensed to Schering rights to marketINTEGRILIN outside the United States, and Schering pays the Company royalties based on these sales of INTEGRILIN.  The 

8

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

Company haslong-term supply arrangements with two suppliers for the bulk product and with another two suppliers, one of which is Schering, forthe filling and final packaging of INTEGRILIN® (eptifibatide) Injection.

*(g)        Net Loss Per Common Share*

        Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period.Diluted net loss per common share is typically computed using the weighted average number of common and dilutive common equivalentshares from stock options, warrants and convertible debt using the treasury stock method. However, for all periods presented, dilutednet loss per share is the same as basic net loss per share because the Company reported a net loss and therefore the inclusion ofweighted average shares of common stock issuable upon the exercise of stock options, warrants and convertible debt would beantidilutive.

*(h)        Comprehensive Loss*

        Comprehensive loss was $82.2 million and $4.5 million for the three months ended September 30, 2002 and 2001, respectively, and$495.5 million and $91.9 million for the nine months ended September 30, 2002 and 2001, respectively.  Comprehensive loss is composedof net loss, unrealized gains and losses on marketable securities and cumulative foreign currency translation adjustments.Unrealized gains and losses on marketable securities include the reclassification to realized losses on marketable securities in thecondensed consolidated statement of operations for the nine months ended September 30, 2002 of unrealized losses of $14.6 million dueto a decline in the market value of an investment in marketable securities that was deemed to be other than temporary.  Accumulated othercomprehensive income at September 30, 2002 included $33.8 million of unrealized gains on marketable securities with the balanceattributable to cumulative foreign currency translation adjustments.

**3.        COR Acquisition**

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

        The total cost of the merger was determined as follows (in thousands):
Fair value of Millennium shares (calculated using $30.57 per share average fair value for the three days prior to and after announcement of the merger)$1,685,334  Value of COR options assumed net of intrinsic value of unvested options127,714  Millennium transaction costs, consisting primarily of financial advisory, legal and accounting fees20,281  $1,833,329 
        The fair value of options assumed was determined using the Black-Scholes method assuming expected lives ranging from one to fiveyears, a risk-free rate of 4.35%, volatility of 86.88% and no expected dividends. In accordance with FASB Interpretation No. 44, orFIN 44, Accounting for Certain Transactions Involving

9

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

Stock Compensation--an Interpretation of APB 25, a portion of the intrinsicvalue of unvested options of COR has been allocated to deferred stock compensation. Deferred stock compensation will be amortized ona straight-line basis over the estimated remaining vesting period of the related options.

        The transaction was recorded as a purchase for accounting purposes and the Company's consolidated financial statements includeCOR's operating results from the date of the acquisition.  The purchase price was allocated to the assets purchased and theliabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair value ofnet tangible assets allocated to specific intangible assets and goodwill as follows (in thousands):
Net tangible assets acquired$37,585In-process research and development 242,000Identifiable intangible assets(primarily developed  technology--13 year useful life and  trademark--indefinite life) 494,000Goodwill 1,059,744   $1,833,329  
        The Company recorded a one-time, noncash charge to operations in the quarter ended March 31, 2002 and the nine months endedSeptember 30, 2002 of $242.0 million for acquired in-process research and development.  The valuation of acquired in-process researchand development represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had noalternative future use and for which technological feasibility had not been established.

        The income approach was used to establish the fair values of developed technology, trademark and acquired in-process researchand development.  This approach establishes the fair value of an asset by estimating the after-tax cash flows attributable to theasset over its useful life and then discounting these after-tax cash flows back to a present value.  The discounting process uses arate of return commensurate with the time value of money and investment risk factors.

        The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of COR hadoccurred as of January 1, 2001:
 Three Months Ended September 30, Nine Months Ended September 30,  2002 2001 2002 2001 **(in thousands, except per share amounts)**              Total revenues$95,755 $115,198 $273,733 $285,471                   Net loss$(98,879)$(33,378)$(279,623)$(150,550)                  *Amounts per common share:*            Net loss, basic and diluted$(0.35)$(0.12)$(1.02)$(0.55)             Weighted average shares, basic and diluted 285,091  275,197  274,013  272,894      
        The pro forma net loss and net loss per share amounts for each period above exclude the acquired in-process research anddevelopment charge.   The pro forma consolidated results do not purport to be indicative of results that would have occurred had theacquisition been in effect for the periods presented, nor do they purport to be indicative of the results that will be obtained inthe future.

**4.        Revenues and Strategic Alliances**

        The Company has formed strategic alliances with major participants in marketplaces where its discovery expertise and technologyplatform are applicable. These agreements include alliances based on the transfer of 

10

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

technology platforms, alliances that combinetechnology-transfer with a focus on a specific disease or therapeutic approach, and disease-focused programs under which the Companyconducts research funded by its partners. The Company's disease-based alliances and alliances that combine technology-transfer with adisease focus are generally structured as research collaborations. Under these arrangements, the Company performs research in aspecific disease area aimed at discoveries leading to novel pharmaceutical (small molecule) products. These alliances generallyprovide research funding over an initial period, with renewal provisions, varying by agreement. Under these agreements, the Company'spartners may make up-front payments, additional payments upon the achievement of specific research and product developmentmilestones, ongoing research funding and/or royalty payments or in some cases profit-sharing payments to the Company based upon anyproduct sales resulting from the collaboration.

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

**5.        Convertible Debt**

        The Company currently has the following outstanding convertible notes:
 • 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");     • 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     • 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").
        At September 30, 2002, the Company had an aggregate of approximately $600.0 million of principal of the 5.0% and 4.5% notesoutstanding after the Company completed a cash repurchase offer to the noteholders in April 2002.  In April 2002, the Company amendedthe terms of these 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% notes for cash at a price of $1,085 per $1,000 ofprincipal amount, resulting in a maximum aggregate payment obligation of $654.0 million.   These put options on the notes arederivative instruments.  Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments andHedging Activities" requires us to record all derivative instruments in the balance sheet at fair value.  The Company determined thefair value of these derivative instruments to be $54.0 million in the aggregate and the Company recorded a liability on the balancesheet and a non-cash charge in the quarter ended June 2002.  Changes in the fair value of these derivatives are recognized inincome.

        At September 30, 2002, the Company had $83.3 million of principal of 5.5% notes outstanding.  During the nine months endedSeptember 30, 2001, the Company paid $2.6 million in cash to certain holders of the 5.5% notes in order to induce the conversion of$12.6 million of their notes into approximately 0.3 million shares of Millennium common stock.   These cash payments were expensedduring the nine months ended September 30, 2001.  Interest accrued through the date of conversion was charged to interest expense andwas paid upon conversion.

        Under the terms of these notes, the Company is required to make semi-annual interest payments on the outstanding principalbalance 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 ofthe 4.5% notes on June 15 and December 15 of each year.  All required interest payments to date have been made.

11

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

**6.        Commitments**

**Lease Commitments**

        The Company has lease obligations relating to two buildings for laboratory and office space in Cambridge, Massachusetts. Therent obligation for the first of these buildings began in July 2002.  The rent obligation for the second building is expected tocommence on the earlier of (a) October 1, 2003 or (b) the date on which the Company commences occupancy of the building. Rent iscalculated on an escalating scale ranging from approximately $7.6 million, per building per year, to approximately $9.7 million, perbuilding per year.  Each lease is for a term of seventeen years. The Company is responsible for a portion of the construction costsfor both buildings and was deemed to be the owner during the construction period of each building under Emerging Issues Task Force("EITF") 97-10, "The Effect of Lessee Involvement in Asset Construction."

12

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

**Overview**

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

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

*Revenues*

        Historically, we have derived our revenue from payments from our strategic alliances with major pharmaceutical companies. With the acquisition of COR Therapeutics, Inc. ("COR"), we began generating revenue based on sales of INTEGRILIN® (eptifibatide) Injection.   We expect that ourrevenue mix will continue to shift to product based revenue as we develop our product pipeline, bring additional products tocommercialization, evolve our partnerships and additional discovery-focused alliances terminate. 

*        INTEGRILIN*

        Beginning in the first quarter of 2002 in connection with our acquisition of COR, we beganrecognizing copromotion revenue that principally relates to our share of the profits from the sale of INTEGRILIN by Schering incopromotion territories.  Additionally, copromotion revenues include recognition of reimbursement from Schering of our cost ofcopromotion revenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory.  Our major productalliances include:
 • a collaboration agreement with Schering-Plough Ltd. and Schering Corporation (collectively "Schering") to jointly develop andcommercialize INTEGRILIN on a worldwide basis; and     • an agreement with Genentech to copromote INTEGRILIN with Genentech's fibrinolytic, or clot-dissolving drugs, TNKaseTM (tenecteplase) and Activase® (alteplase) in the United States.
*        Alliances*

        We have entered into research, development, technology-transfer and commercialization arrangements with major pharmaceuticaland biotechnology companies relating to a broad range of therapeutic and predictive medicine products and services. These alliancesprovide us with the opportunity to receive various combinations of equity investments, license fees and research funding, and mayprovide certain additional payments contingent upon our achievement of research and regulatory milestones and royalties and/or profitshares if our collaborations are successful in developing and commercializing products.

        Additional product alliances include:
 • a purchase and sale agreement between ILEX Oncology, Inc. and us for the sale of our interests in CAMPATH® (alemtuzumab) humanized monoclonol antibody; and     • a joint development agreement with BZL Biologics, L.L.C. for immunotoxin and radiolabeled products.    
13

        Our major discovery alliances include:
 • a March 2001 joint development and commercialization agreement with Abbott Laboratories in metabolic diseases;     • a June 2000 technology transfer agreement and joint development and commercialization agreement with Aventis Pharmaceuticals, Inc. in inflammatory disease;     • a February 1999 collaboration agreement with Becton, Dickinson and Company focused primarily on DiagnomicsTM products for specified cancers;     • a September 1998 research agreement with Bayer AG in cardiovascular disease, and certain areas of oncology, pain, hematology, atherosclerosis, thrombosis, urology and viral infections; and     • an October 1997 research alliance and technology transfer agreement with Monsanto Company in plant agriculture.
        These alliances are usually established for a fixed term, typically five years.  Upon expiration of the initial term, unlessrenewed, revenue funding under these agreements will cease.  We expect revenues from our discovery-focused alliances to decline as existing alliances expire and the current business environment may make it difficult to enter into new alliances.

*Ongoing Expansion of Operations*

        During 2002 and 2001, we have expanded and expect to continue to expand our operations through internal growth, additionalstrategic alliances and the COR acquisition. To build development and commercialization capabilities, in 2002 and 2001, we hiredstaff in critical functions, including global commercial operations, clinical research and operations, strategic product development,government relations and regulatory affairs, as well as in other support areas.

        We expect to incur increasing expenses and may incur increasing operating losses for at least the next several years, primarilydue to expansion of facilities and research and development programs and as a result of our efforts to advance acquired products orour own development programs to commercialization.  In particular, we anticipate significant expenditures related to the followingongoing initiatives:
 • continue developing, training, maintaining and managing our sales force for INTEGRILIN® (eptifibatide) Injection;     • expanding our commercial presence in the United States and the European Union; 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 may fluctuate from period to period or year to year.

*Financial Resources*

        As of September 30, 2002 we had approximately $1.8 billion in cash, cash equivalents and marketable securities. We primarilyinvest in high-grade corporate bonds, asset-backed and U.S. government agency securities.    Our objectives are to preserveprincipal, maintain a high degree of liquidity to meet operating needs and deliver competitive returns subject to prevailing market conditions and, consistent with these primary objectives, to realize gains through periodic sales of marketable securities in order to meet our earnings objectives.Income may decline as cash and marketable securities balances may decline and will fluctuate based upon market conditions.

14

        As of September 30, 2002 we had approximately $683.3 million in convertible notes outstanding. All three issues of notes requiresemi-annual interest payments through maturity. Certain notes have been amended to include put options resulting in an additional payment obligation of $54.0 million. See *Contractual Obligations* for further discussion of these convertible notes.

**Critical Accounting Policies**

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

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

        Copromotion revenue includes our share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotionterritories by Schering.  Also included in copromotion revenue are reimbursements to us by Schering of our cost of copromotionrevenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory.    We recognize revenue when Scheringships related product to wholesalers and record it net of allowances, if any.  Our costs of copromotion revenue consist of certainmanufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN within copromotionterritories.  We defer certain manufacturing-related expenses until the time Schering ships related product to its customers insideand outside copromotion territories.  Advertising and promotional expenses are expensed as incurred.  Deferred revenue includespayments from Schering received prior to the period in which the related contract revenues are earned.  Deferred revenue alsoincludes cash advances from Schering to us for our prepayments to our manufacturers of INTEGRILIN.

        Effective October 1, 2000, we changed our method of accounting for revenue recognition in accordance with Staff AccountingBulletin (SAB) No. 101 ("SAB 101"), *Revenue Recognition in Financial Statements*. Previously, we had recognized revenue relating tonon-refundable, up-front, license and milestone payments and certain research funding payments from our strategic partners inaccordance with the contract. Under the new accounting method adopted retroactively to January 1, 2000, we recognize revenue fromnon-refundable, up-front, license and milestone payments, not specifically tied to a separate earnings process, ratably over the termof the research contract. When the period of deferral cannot be specifically identified from the contract, management estimates theperiod based upon other critical factors contained within the contract. We continually review these estimates which could result in achange in the deferral period. When payments are specifically tied to a separate earnings process, revenue is recognized when thespecific performance obligation associated with the payment is completed. Performance obligations typically consist of significantmilestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval withregulatory agencies and approvals by regulatory agencies. In addition, when appropriate, we recognize revenue from certain researchpayments based upon the level of research services performed during the period of the research contract. The cumulative effect of thechange on prior years resulted in a charge to income of $107.7 million, which was included in the loss for the year endedDecember 31, 2000.

        In connection with our adoption of SAB 101, we began recognizing the research funding portion of our Bayer alliance on apercentage-of-completion basis. The percentage-of-completion is determined based upon

15

the actual level of work performed during theperiod as compared to management's estimate of the total work to be performed under the alliance. The estimates are continuallyreviewed and adjusted as necessary, as experience develops or new information becomes known.

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

        *Goodwill*—In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and indefinite lived intangible assets are nolonger amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangibleassets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. We adopted SFAS No. 142effective 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 noimpairment loss was recognized.  We will continue to test for goodwill impairment annually, on October 1.  We continually monitorbusiness and market conditions to assess whether an impairment indicator exists.  If we were to determine that an impairmentindicator exists, we would be required to perform an impairment test which might result in a material impairment charge to the statement ofoperations.

**Results of Operations**

**Quarters Ended September 30, 2002 and September 30, 2001**

        For the three months ended September 30, 2002 (the "2002 Quarterly Period"), we reported a net loss of $98.9 million or $0.35per basic and diluted share as compared to a net loss of $25.2 million or $0.11 per basic and diluted share for the three monthsended September 30, 2001 (the "2001 Quarterly Period").

        Revenues increased to $95.8 million for the 2002 Quarterly Period from $82.2 million for the 2001 Quarterly Period, and include$45.0 million of copromotion revenue based upon worldwide sales of INTEGRILIN and $50.7 million of strategic alliance revenue.  Theincrease is primarily attributable to our share of profits from INTEGRILIN copromoted by us and Schering.  As reported by Schering,sales of INTEGRILIN for the 2002 Quarterly Period were $76.9 million worldwide and U.S. sales were $72.2 million, an increase of 31percent of worldwide sales and 36 percent of U.S. sales from the same period last year.  Included in revenue for the quarterlyperiods presented in 2002 and 2001 is $8.4 million and $10.6 million, respectively, of revenue that was recognized in prior yearsrelating to the adoption of SAB 101. Revenue under strategic alliances decreased due to the termination of certain of our earlystrategic alliances.   We expect that our revenue mix will continue to shift to product-based revenue as we develop our productpipeline, evolve our partnerships and additional discovery-focused alliances terminate.

        Included in the 2001 Quarterly Period was $18.4 million of additional revenue from our Bayer alliance resulting from a change ofestimate to reflect our continued research productivity improvements.  Excluding the impact of this change in estimate, net lossattributable to common stockholders and the related earnings per share amounts for the three months ended September 30, 2001 was$43.7 million and $0.20 per share.

        Research and development expenses increased to $140.5 million in the 2002 Quarterly Period from $98.8 million for the 2001Quarterly Period.  The increase was primarily attributable to our continued investment in building a sustainable product pipeline,with increases in expenses relating to clinical trials, principally for VELCADETM (bortezomib) for Injection (formerly MLN341, LDP 341 andPS-341), and preclinical product candidates, personnel and facilities and consulting.

        In 2001, we initiated a Phase II trial of our lead oncology candidate, VELCADE, in patients with hematologic cancers andPhase I trials for potential treatment of patients with solid tumors. In June 2002, we received fast track designation from the Foodand Drug Administration for VELCADE and we initiated a pivotal Phase III clinical trial of VELCADE in patients with multiplemyeloma.

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        Also in 2001, we initiated Phase II trials of MLN977 in patients with asthma and MLN02 in patients with ulcerative colitis andCrohn's Disease.  During July 2002, we discontinued the development of our oral MLN977 program based upon the findings of amulti-center Phase II trial initiated in 2001 that showed the drug was clinically active in study patients, but that three patientsexperienced elevations in liver enzymes that were likely drug-related.  During September 2002, the analysis of a Phase II trial ofMLN02 in patients with Crohn's Disease showed the study did not meet its primary endpoint, but did reach the secondary endpoint whichwas remission.

        The radio-labeled version of our anti-PSMA (prostate specific membrane antigen) antibody, MLN591 is in Phase I trials inpatients with hormone-refractory prostate cancer. In November 2001, we initiated a Phase I trial of our first genomically-derivedmolecule, MLN4760, for the potential treatment of obesity. Completion of clinical trials may take several years or more, but thelength of time can vary substantially according to the type, complexity, novelty and intended use of a product candidate.

        CMR International estimates that clinical trials in our areas of focus are typically completed over the following timelines:
Clinical Phase Estimated CompletionPeriod                 Phase I 1-2 years                 Phase II 2-3 years                 Phase III 2-3 years 
        If we successfully complete Phase III trials, we intend to submit the results to the FDA to support regulatory approval ofthe product. However, we cannot be certain that any of our products will prove to be safe or effective, will receive regulatoryapprovals, or will be successfully commercialized.

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

        Selling, general and administrative expenses increased to $37.4 million for the 2002 Quarterly Period from $18.3 million forthe 2001 Quarterly Period. This increase represents a full quarter of expenses from our commercial organization acquired in largepart through the acquisition of COR as well as increased expenses due to the expansion of our business groups, facilities andinfrastructure necessary to support the development of our pipeline and growth in all areas of our business. Significant increaseswere primarily in personnel expenses, facility expenses and consulting.

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

        Amortization of intangible assets in the 2002 Quarterly Period relates to specifically identified intangible assets from theCOR, LeukoSite, Inc. ("LeukoSite") and Cambridge Discovery Chemistry Limited ("CDC") acquisitions.  Amortization of intangible assetsin the 2001 Quarterly Period relates to existing technology, assembled workforce and goodwill acquired through the acquisitions ofLeukoSite and CDC. Amortization expense decreased to $9.8 million in the 2002 Quarterly Period from $15.7 million in the 2001Quarterly Period due to the adoption of SFAS No. 142.  Following our adoption of SFAS 142 effectiveas of January 1, 2002, we continue to amortize specifically identifiable intangible assets and ceased amortizing goodwill andassembled workforce which was reclassified to goodwill.

        Investment income decreased to $21.7 million for the 2002 Quarterly Period from $24.0 million for the 2001 Quarterly Period.  Werecorded realized gains of $3.8 million and $1.4 million and realized losses of $3.3 million and $0.2 million for the 2002 QuarterlyPeriod and 2001 Quarterly Period, respectively. We expect to 

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continue to realize gains and losses as we manage our portfolio. Interest expense increased to $10.4 million for the 2002 Quarterly Period from $2.4million for the 2001 Quarterly Period primarily due to our assumption of COR's convertible notes consisting of  5.0% convertiblesubordinated notes due March 1, 2007, that are convertible into our 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 our common stockat any time prior to maturity at a price equal to $40.61 per share (the "4.5% notes").

**Nine Months Ended September 30, 2002 and September 30, 2001**

        For the nine months ended September 30, 2002 (the "2002 Nine Month Period"), we reported a net loss of $510.5 million or $1.86per basic and diluted share as compared to a net loss of $125.0 million or $0.57 per basic and diluted share for the nine monthsended September 30, 2001 (the "2001 Nine Month Period").

        Revenues increased to $256.2 million for the 2002 Nine Month Period from $191.6 million for the 2001 Nine Month Period.  Theincrease is primarily attributable to our share of profits from INTEGRILIN® (eptifibatide) Injection copromoted by us and Schering. Included in revenue for the nine month periods presented in 2002 and 2001 is $30.5 million and $32.8 million, respectively, ofrevenue that was recognized in prior years relating to the adoption of SAB 101.  Revenue under strategic alliances decreased due tothe termination of certain of our early strategic alliances.  We expect that our revenue mix will continue to shift to product-basedrevenue as we develop our pipeline, evolve our partnerships and additional discovery-focused alliance terminate.

        Included in the 2001 Nine Month Period was $18.4 million of additional revenue from our Bayer alliance resulting from a changeof estimate to reflect our continued research productivity improvements.  Excluding the impact of this change in estimate, net lossattributable to common stockholders and the related earnings per share amounts for the nine months ended September 30, 2001 was$143.5 million and $0.66 per share.

        Research and development expenses increased to $364.3 million in the 2002 Nine Month Period from $285.9 million for the 2001Nine Month Period.  The increase was primarily attributable to our continued investment in building a sustainable product pipeline,with increases in expenses relating to clinical trials and preclinical product candidates, personnel and facilities.

        Selling, general and administrative expenses increased to $114.7 million for the 2002 Nine Month Period from $53.9 millionfor the 2001 Nine Month Period. The increase represents expenses from our commercial organization that were not present last year aswell as increased expenses due to the expansion of our business groups, facilities and infrastructure necessary to support thedevelopment of our pipeline and growth in all areas of our business. Significant increases were primarily in personnel expenses,consulting and facility expenses.

        Cost of copromotion revenue consists of certain manufacturing-related and advertising and promotional expenses associated withthe sale of INTEGRILIN within copromotion territories.  Cost of copromotion revenue fluctuates in relation to the domestic sales ofINTEGRILIN and as we incur more or less of the joint activities that we undertake in our collaboration with Schering.

        On February 12, 2002, we acquired COR for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 millionshares of Millennium common stock pursuant to the merger agreement between Millennium and COR. This calculation is based on CORoutstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 of a share of Millennium common stock for eachshare of outstanding COR common stock. In addition, options to purchase approximately 6.2 million shares of COR common stock with aweighted average exercise price of $12.90 were assumed by us pursuant to the merger agreement and converted into options to purchaseapproximately 6.1 million shares of Millennium common stock with a weighted average exercise price of $13.07.

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

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        We also recorded a one-time, non-cash charge to operations in the 2002 Nine Month Period of $242.0 million for acquiredin-process research and development.  The valuation of acquired in-process research and development represents the estimated fairvalue related to incomplete projects that, at the time of the COR acquisition, had no alternative future use and for whichtechnological feasibility had not been established.

        The income approach was used to establish the fair values of developed technology, trademark and acquired in-process researchand development.  This approach establishes the fair value of an asset by estimating the after-tax cash flows attributable to theasset over its useful life and then discounting these after-tax cash flows back to a present value.  The discounting process uses arate of return commensurate with the time value of money and investment risk factors.  Accordingly, for the purpose of establishingthe fair value of developed technology, trademark and acquired in-process research and development, revenues for each future periodwere estimated, along with costs, expenses, taxes and other charges.  Revenue estimates were based on estimates of relevant marketsizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by us and ourcompetitors.

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

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

        We believe that the assumptions used to value the acquired intangibles and in-process research and development were reasonableat the time of the acquisition.  No assurance can be given, however, that the underlying assumptions used to estimate expectedproject revenues, development costs or profitability, or the events associated with such projects, will transpire as estimated.  Forthese reasons, among others, actual results may vary from the projected results.

        Amortization of intangible assets in the 2002 Nine Month Period relates to specifically identified intangible assets from theCOR, LeukoSite and CDC acquisitions.  Amortization of intangible assets in the 2001 Nine Month Period relates to existing technology,assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense decreased to$25.1 million in the 2002 Nine Month Period from $48.0 million in the 2001 Nine Month Period due to the adoption of SFAS No. 142. Following our adoption of SFAS 142 effective as of January 1, 2002, we continue to amortizespecifically identifiable intangible assets and ceased amortizing goodwill and assembled workforce which was reclassified togoodwill.

        Investment income decreased to $69.8 million for the 2002 Nine Month Period from $73.4 million for the 2001 Nine MonthPeriod. We recorded realized gains of $15.8 million and $6.5 million for the 2002 Nine Month Period and 2001 Nine Month Period,respectively.  We recorded realized losses of $20.4 million during the 2002 Nine Month Period, including a $14.6 million write-downrelating to certain bond investments.  Our investments are made primarily in government and corporate bonds of high quality and asmall portion of our holdings have been affected by the sudden and dramatic changes in the fundamentals of some of our bondissuers.   We expect to continue to realize gains and losses as we manage our portfolio.   Interest expense increased to $27.6million for the 2002 Nine Month Period from $7.0 million for the 2001 Nine Month Period primarily due to our assumption of COR'sconvertible notes.

        We sold our equity interest in Millennium & ILEX Partners, L.P. ("M&I") and in consideration for the sale, we received an initialpayment of $20.0 million in December 2001.  During the 2002 Nine Month Period, we recorded an additional gain of $40.0 millionpayable in December 2002 on our sale of this equity interest based

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upon the achievement of a predetermined sales target of CAMPATH®(alemtuzumab) humanized monoclonal antibody for 2002 that entitles us to receive this additional payment under the terms of ouragreement with ILEX.

        During the 2002 Nine Month Period, we recorded a non-cash charge of $54.0 million relating to the fair value of the premium putplaced on COR's convertible notes that were assumed in the merger.   See *Contractual Obligations* for further discussion of the putoptions.

        During the 2001 Nine Month Period, we paid an aggregate of $2.6 million in cash to certain holders of our5.5% convertible subordinated notes due January 15, 2007, that are convertible into our common stock at any time prior to maturity ata price equal to $42.07 per share (the "5.5% notes") in order to induce the conversion of their notes into our common stock.

**Liquidity and Capital Resources**

        We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to pay debtservice, including principal and interest and capital lease payments. As described above under *Overview—Ongoing Expansion of Operations,* weexpect that our cash requirements for all of these uses will increase as the scale of our operations grows.

        Historically, we have funded our cash requirements primarily through the following:
 • payments from our strategic collaborators including license fees, milestone payments and researchfunding;     • equity investments by our strategic collaborators, including:      • $28.6 million from Abbott in each of March, June and September 2002 and $50.0 million and$28.6 million in April 2001 and                  September 2001; • $50.0 million from Aventis in both January and July 2001;     • equity and debt financings, including:     • our October 2000 secondary public common stock offering; • our January 2000 issuance of the 5.5% notes;     • property and equipment financings; and     • net cash acquired in connection with the COR acquisition of $308.5 million.
        In the future, we expect to continue to fund our cash requirements from some of these external sources as well as the salesof INTEGRILIN® (eptifibatide) Injection and other products. In particular, we are entitled to additional committed research anddevelopment funding under a number of our strategic alliances, Abbott has agreed to purchase an additional $57.0 million of ourcommon stock in two quarterly installments through 2003 and we may receive additional substantial payments from ILEX as a result ofour sale of our joint venture interest in M&I.  We believe that the key factors that could affect our internal and external sourcesof cash are:
 •  revenues and margins from sales of INTEGRILIN and other products and services for which weobtain marketing approval in the future;     • the success of our clinical and preclinical development programs;     • the receptivity of the capital markets to financings by biopharmaceutical companies;     • our ability to enter into additional strategic collaborations and to maintain existing and newcollaborations and the success of such collaborations;     •  the sales levels of CAMPATH; and
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     • our ability to gain regulatory approval and commercialize our clinical product candidates.
        As of September 30, 2002 and December 31, 2001, we had approximately $1.8 billion and $1.5 billion, respectively in cash,cash equivalents and marketable securities. This excludes $38.9 million of interest-bearing marketable securities classified asrestricted cash on our balance sheet as of September 30, 2002, which serve as collateral for letters of credit securing leasedfacilities.

         During the nine months ended September 30, 2001, we paid $2.6 million in cash to certain holders of the 5.5% notes in order toinduce the conversion of $12.6 million of these notes into approximately 0.3 million shares of Millennium common stock.   These cashpayments were expensed during the nine months ended September 30, 2001.  Interest accrued through the date of conversion was chargedto interest expense and was paid upon conversion.  At September 30, 2002, we had $83.3 million of outstanding 5.5% notes.

        During the nine months ended September 30, 2002, we received $85.8 million from Abbott for a purchase of approximately 5.1million shares of our common stock under an equity investment agreement.   During the nine months ended September 30, 2001, wereceived $100.0 million from Aventis and $78.6 million from Abbott for purchases of approximately 2.0 million and 2.5 million shares,respectively of our common stock under equity investment agreements.

*Cash Flows*

        We used $305.3 million of cash in operating activities in the 2002 Nine Month Period and $109.4 million in the 2001 NineMonth Period. The principal use of cash in operating activities in both 2002 and 2001 was to fund our net loss.

        In addition to operating expenses we incur as a result of our alliances with our strategic partners, we have also madecommitments to purchase debt and/or equity securities from certain of these partners.

        Investing activities provided net cash of $248.2 million in the 2002 Nine Month Period.  We used cash of $179.0 million ininvesting activities in the 2001 Nine Month Period.  The principal source of funds in the 2002 Nine Month Period is from the net cashacquired in the COR acquisition.  The principal uses in the 2002 and 2001 Nine Month Periods were purchases ofmarketable securities, property and equipment and other long term assets.

        Financing activities provided net cash of $82.5 million in the 2002 Nine Month Period and $183.9 million in the 2001 NineMonth Period. The principal sources of net cash from financing activities were the sales of common stock to Abbott in the 2002 and2001 periods and the sale of common stock to Aventis in the 2001 Period.

        On October 1, 2002, we performed our annual goodwill impairment test and determined that no impairment existed on that date.However, we have experienced a significant decline in market capitalization due to a decline in stock price.  While, a decline instock price is not specifically cited as an impairment indicator, we continually monitor business and market conditions to assesswhether an impairment indicators exists.  If we were to determine that an impairment indicator exists, we would be required toperform an impairment test which might result in a material impairment charge to our statement of operations.

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

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

        Our convertible notes aggregate $683.3 million in principal amount outstanding.  All three issues of notes requiresemi-annual interest payments through maturity.  These notes consist of:
 • $83.3 million of our 5.5% notes; • $300.0 million of our 4.5% notes; and • $300.0 million of our 5.0% notes.
        In April 2002, we amended the terms of the 4.5% notes and the 5.0% notes to add put options permitting noteholders to require uson 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% notes forcash 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.  Statement ofFinancial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" requires us to recordall derivative instruments in the balance sheet at fair value.  We determined the fair value of these derivative instruments to be$54.0 million in the aggregate and we recorded a liability on the balance sheet and a non-cash charge in the quarter ended June2002.  Changes in the fair value of these derivatives are recognized in income.

        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 is expected to commence in 2003 upon completion of construction. We are responsible fora portion of the construction costs, which we estimate to be approximately $21.0 million. Rent is expected to be approximately$2.6 million per year based upon foreign currency exchange rates at September 30, 2002 and is subject to market adjustments at the endof the 5th, 10th and 15th years.

        We also have lease obligations relating to two buildings for laboratory and office space in Cambridge, Massachusetts. The rentobligation for the first of these buildings began in July 2002.  The rent obligation for the second building is expected to commenceon the earlier of (a) October 1, 2003 or (b) the date on which we commence occupancy of the building. Rent is calculated on anescalating scale ranging from approximately $7.6 million, per building per year, to approximately $9.7 million, per building peryear.  Each lease is for a term of seventeen years. The Company is responsible for a portion of the construction costs for bothbuildings and was deemed to be the owner during the construction period of each building under Emerging Issues Task Force ("EITF")97-10, "The Effect of Lessee Involvement in Asset Construction."

        There have been no other significant changes to our contractual obligations and commercial commitments since we presented thoseamounts in our Form 10-K as of December 31, 2001, except for Amendment No. 6 dated as of March 22, 2002 to Agreement dated as ofSeptember 22, 1998 by and between Bayer AG and us filed as an exhibit to our Form 10-Q for the period ended March 31, 2002.

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**RISK FACTORS THAT MAY AFFECT RESULTS**

        This Quarterly Report on Form 10-Q and certain other communications made by us contain forward-looking statements, includingstatements about our growth and future operating results, discovery and development of products, potential acquisitions, strategicalliances and intellectual property. For this purpose, any statement that is not a statement of historical fact should be considereda forward-looking statement. We often use the words "believe," "anticipate," "plan," "expect," "intend" and similar expressions tohelp identify forward-looking statements.

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

**Regulatory Risks**

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

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

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

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

**If we fail to comply with regulatory requirements, or if we experience unanticipated problems with our approved products, ourproducts 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 andpromotional activities for such product, will be subject to continual review and periodic inspections by the FDA and other regulatorybodies. Later discovery of previously unknown problems with our products or manufacturing processes, or failure to comply withregulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the products from themarket 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 mayaffect 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 newtherapeutic approaches that have not been extensively tested in humans. The regulatory requirements governing these types of productsmay be more rigorous than for conventional products. As a result, we may experience a longer regulatory process in connection withany products that we develop based on these new technologies or new therapeutic approaches.

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

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

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

**Sales of INTEGRILIN 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 affectedby 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 belower in the summer months because fewer medical procedures are typically performed during these months. These fluctuations in salesof INTEGRILIN may have a material adverse effect on our results of operations for particular reporting periods.

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

        The process of discovering drugs based upon genomics is new and evolving rapidly. We focus our genomics research primarily ondiseases that may be linked to several or many genes working in combination. Both we and the general scientific and medicalcommunities have only a limited understanding of the role genes play in these diseases. To date, we have not commercialized anyproducts discovered through our genomics research, and we may not be successful in doing so in the future. In addition, relativelyfew products based on gene discoveries have been developed and commercialized by others. Rapid technological development by us orothers may result in compounds, products or processes becoming obsolete before we recover our development expenses.

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

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

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

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

        We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our productsare safe and effective before they can be approved for commercial sale. Clinical development, including preclinical testing, is along, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage oftesting. Interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results inearly studies might not be seen in later studies. Any preclinical or clinical test may fail to produce results satisfactory to theFDA. 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 or adverse medical events during a clinical trial couldcause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating tothe program are successful.

        We may not complete our planned preclinical or clinical trials on schedule or at all. In addition, due to the substantialdemand for clinical trial sites in the cardiovascular area, we may have difficulty obtaining a sufficient number of appropriatepatients or clinician support to conduct our clinical trials as planned. If so, we may have to expend substantial additional funds toobtain access to resources or delay or modify our plans significantly. Our product development costs will increase if we experiencedelays in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to market before wedo and impair our ability to commercialize our products or potential products.

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

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

**Because many of the products and services that we develop will be based on new technologies and therapeutic approaches, the marketmay 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 otherregulatory 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 therapeuticapproaches. As a result, it may be more difficult for us to achieve market acceptance of our products and services, particularly thefirst products and services that we introduce to the market based on new technologies and therapeutic approaches. Our efforts toeducate the medical community on these potentially unique approaches may require greater resources than would be typically requiredfor products and services based on conventional technologies or therapeutic approaches. The safety, efficacy, convenience andcost-effectiveness of our products as compared to competitive products will also affect market acceptance.

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**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 operatinglosses in future periods. Prior to our acquisition of COR, substantially all of our revenues resulted from payments fromcollaborators, and not from the sale of products.

        We expect to increase our spending significantly as we continue to expand our infrastructure, research and developmentprograms and commercialization activities. As a result, we will need to generate significant revenues to pay these costs and achieveprofitability. We cannot be certain whether or when we will become profitable because of the significant uncertainties with respectto 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 onunattractive terms could adversely affect our discovery and development programs and other operations.**

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

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

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

        At September 30, 2002 we had approximately $683.3 million of outstanding debt. During each of the last five years, ourearnings were insufficient to cover our fixed charges. During each of the next three years, we will be required to make interestpayments on our outstanding convertible notes totaling approximately $33.1 million. In addition, we amended the convertible notesassumed upon our acquisition of COR to provide noteholders the right to put these notes to us on April 29, 2003 for cash at a premiumto face value. The aggregate amount of this premium on the $600.0 million principal amount of these notes is approximately $54.0million. In the event that the holders of large numbers of these notes put these notes to us, the amount of our cash would besubstantially diminished. If we are unable to generate sufficient cash to meet these obligations and have to use existing cash orinvestments, we may have to delay or curtail our research and development programs.

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

        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;
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     • limiting our flexibility in planning for, or reacting to, changes in our business and the industry inwhich we compete; and     • placing us at a possible competitive disadvantage to less leveraged competitors and competitorsthat have better access to capital resources.
**We have sold our interest in CAMPATH® (alemtuzumab) humanized monoclonal antibody; as a result, we will no longer have control overthe financial success of that product.**

        On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX Partners, L.P., which owns theCAMPATH product. In exchange for our equity interest in Millennium & ILEX Partners, ILEX paid us $20 million on December 31, 2001 andis obligated to pay us up to an additional $120.0 million over the next three years if sales of CAMPATH in the U.S. meet specified sales thresholds. During the nine month period ended September 30, 2002, we recordedan additional gain of $40.0 million payable in December 2002.  In addition, we will be entitled to additional payments from ILEXbased on U.S. sales of CAMPATH after 2004. There can be no assurance that we will receive any of the payments that are dependent onsales of CAMPATH. In addition, we will have no ability to influence the actions of the entity that owns CAMPATH and, therefore, willhave no control over the financial success of CAMPATH.

**Risks Relating to Collaborators**

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

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

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

        An important element of our business strategy is entering into strategic alliances for the development and commercializationof products and services based on our discoveries. 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 toestablish additional strategic alliances or other alternative arrangements. The terms of any additional strategic alliances or otherarrangements that we establish may not be favorable to us. Moreover, such strategic alliances or other arrangements may not besuccessful.

**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 adverselyaffected. If we infringe patent or other intellectual property rights of third parties, we may not be able to develop andcommercialize 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 involvecomplex legal, scientific and factual questions.

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

        The validity and permissible scope of patent claims in the pharmaceutical and biotechnology fields, including the genomicsfield, involve important unresolved legal principles and are the subject of public policy debate in the United States and abroad. Forexample, there is significant uncertainty both in the United States and abroad regarding the patentability of gene sequences in theabsence 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 adverselyaffect our ability to obtain patent protection for gene sequences claimed by us in patent applications that we file subsequent tosuch disclosures. There is also some uncertainty as to whether human clinical data will be required for issuance of patents for humantherapeutics. 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 developmentand 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 our 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, to develop, manufacture, sell or import certain of our proposed products, processes or services, we orour collaborators may choose to seek, or be required to seek, licenses under third party patents issued in the United States andabroad or those that might issue from United States and foreign patent applications. In such event, we would be required to paylicense

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fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaboratorsmay 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 tocertain anti-CD18 antibodies and their use in various methods of treatment including methods of reperfusion therapy and methods oftreating focal ischemic stroke. In addition, our MLN01 and MLN02 product candidates are humanized monoclonal antibodies. We are awareof third party patents and patent applications that relate to certain humanized or modified antibodies, products useful for makinghumanized or modified antibodies and processes for making and using humanized or modified antibodies. We are also aware of thirdparty patents and patent applications relating to certain manufacturing processes, products thereof and materials useful in suchprocesses. We are also aware of third party patent applications and a potentially interfering patent application relating toanti-PSMA antibodies.

        Our product candidates VELCADETM (bortezomib) for Injection (formerly known as MLN341, LDP-341 and PS-341) and MLN519 aresmall molecule drug candidates. For the use of VELCADE and MLN519 in the treatment of infarctions, we are aware of the existence of apotentially interfering patent application filed by one of our former consultants. We are also aware of third party patents relatingto assays relating to the NFkB pathway.

        On June 26, 2002, Ariad Pharmaceuticals, Inc. sent us and approximately 50 other parties a letter offering a sublicense forthe use of U.S. Patent No. 6,410,516 (which was issued and which is exclusively licensed to Ariad). We have seriousquestions concerning the validity of this patent. However, if Ariad sued us for infringement of this patent, and the patent was foundto be valid and we were found to be infringing, we could be required to pay royalties based on the U.S. sales of VELCADE, which wouldreduce our profits on these sales and which could have a material adverse effect on our business.

**We may become involved in expensive patent litigation or other proceedings, which could result in our incurring substantial costs andexpenses 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 inthe pharmaceutical and biotechnology industries. We may become a party to patent litigation or other proceedings regardingintellectual property rights. For example, we believe that we hold patent applications that cover genes that are also claimed inpatent applications filed by others. Interference proceedings before the United States Patent and Trademark Office may be necessaryto establish which party was the first to invent these genes.

        The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of ourcompetitors may be able to sustain the cost of such litigation or proceedings more effectively than we can because of theirsubstantially greater financial resources. If a patent litigation or other proceeding is resolved against us, we or our collaboratorsmay be enjoined from developing, manufacturing, selling or importing our products, processes or services without a license from theother party and we may be held liable for significant damages. We may not be able to obtain any required license on commerciallyacceptable terms or at all.

        Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a materialadverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significantmanagement 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 tosuccessfully perform these functions on our behalf or may be required to incur significant costs and devote significant efforts toaugment our existing capabilities.**

        We have limited sales, marketing and distribution experience and capabilities, primarily the specialty sales force that weacquired in the COR merger that markets INTEGRILIN® (eptifibatide) Injection. Depending on 

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the nature of the products and servicesfor which we obtain market approval, we may need to rely significantly on sales, marketing and distribution arrangements with ourcollaborators and other third parties. For example, some types of pharmaceutical products require a large sales force and extensivemarketing capabilities for effective commercialization. If in the future we elect to perform sales, marketing and distributionfunctions for such types of products ourselves, we would face a number of additional risks, including the need to recruit a largenumber 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 usor will be required to incur significant costs and devote significant efforts to establish our own manufacturing facilities andcapabilities.**

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

        We currently rely upon third parties to produce material for preclinical testing purposes and expect to continue to do so inthe future. We also expect to rely upon other third parties, including our collaborators, to produce materials required for clinicaltrials 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 ofmanufacturing our products. As a result, we have experienced some difficulty finding manufacturers for our products with adequatecapacity for our anticipated future needs. If we are unable to arrange for third party manufacturing of our products, or to do so oncommercially 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 manufacturingagreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreementby the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

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

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

        With respect to INTEGRILIN, we have two manufacturers that produce bulk product and two manufacturers, one of which isSchering at its Manati facility in Puerto Rico, that perform fill/finish and packaging. If we do not have adequate supplies ofINTEGRILIN to meet market demand, we may lose potential revenues, and the healthcare community may turn to competing products.Pending resolution of issues to be addressed by us and Schering relating to production processes and procedures, international supplyof INTEGRILIN from Schering's Manati facility has been temporarily halted and fill/finish and packaging of INTEGRILIN atthat facility for sale in the United States is in abeyance.  We are actively working with Schering to identify alternative fill/finishand packaging suppliers, including other Schering facilities, to serve as future sources of supply.    We believe that thefill/finish and packaging performed by our primary manufacturer is sufficient to meet our requirements for INTEGRILIN supply in theUnited States for the foreseeable future.

        Our manufacturing plans call for the addition of extra capacity for the manufacture of INTEGRILIN. If we are not able tosecure additional manufacturing capacity on favorable terms, we may not be able to expand capacity sufficiently to meet future marketdemand.

        We expect to improve or modify our existing process technologies and manufacturing capabilities for INTEGRILIN. We cannotquantify the time or expense that may ultimately be required to improve or modify 

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our existing process technologies, but it ispossible that such time or expense could be substantial. Moreover, we may not be able to implement any of these improvements ormodifications successfully.

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

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

        The availability and levels of reimbursement by governmental and other third party payors affect the market for anypharmaceutical product or healthcare service. These third party payors continually attempt to contain or reduce the costs ofhealthcare by challenging the prices charged for medical products and services. In certain foreign countries, particularly thecountries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. We may not be ableto 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 whichthe FDA has approved INTEGRILIN. If they do, pricing levels or sales volumes of INTEGRILIN may decrease. Inforeign markets, a number of different governmental and private entities determine the level at which hospitals will be reimbursedfor administering INTEGRILIN to insured patients. If these levels are set, or reset, too low, it may not be possible to sellINTEGRILIN at a profit in these markets.

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

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

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

        Diagnostic tests that evaluate genetic predisposition to disease raise issues regarding the use and confidentiality of theinformation provided by such tests. Insurance carriers and employers might discriminate on the basis of such information, resultingin a significant barrier to the acceptance of such tests by customers. This type of discrimination could cause governmentalauthorities to prohibit or limit the use of such tests.

**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 marketingof human therapeutic products. In particular, INTEGRILIN is administered to patients with serious cardiovascular disease who have ahigh incidence of mortality. Although we have product liability and clinical trial liability insurance that we believe isappropriate, this insurance is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequateprotection against potential liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect againstpotential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect ourbusiness and financial position. These liabilities could prevent or interfere with our product commercialization efforts.

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**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 variousdiseases from time to time may also publish guidelines or recommendations to the health care and patient communities. Recommendationsof government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administrationand use of concomitant therapies. Recommendations or guidelines that are followed by patients and health care providers could resultin decreased use of our products.

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

        We manage our investment portfolio in accordance with our Investment Policy. The primary account objectives of our Investment Policyare to preserve principal, maintain a high degree of liquidity to meet operating needs and deliver 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 and U.S.government agency securities.  These investments are subject to risk of default, changes in credit rating and changes in marketvalue.  These investments are also subject to interest rate risk and will decrease in value if market interest rates increase. Ahypothetical 100 basis point increase in interest rates would result in an approximate $27.4 million decrease in the fair value ofour investments as of September 30, 2002. However, due to the conservative nature of our investments and relatively short effectivematurities of debt instruments, interest rate risk is mitigated. Our Investment Policy specifies credit quality standards for ourinvestments and limits the amount of exposure from any single issue, issuer or type of investment.  We do not own derivativefinancial instruments in our investment portfolio.

        The interest rates on our convertible subordinated notes and capital lease obligations are fixed and therefore not subject tointerest rate risk.

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

        As of September 30, 2002 we did not have any financing arrangements that were not reflected in our balance sheet.

**Item 4.    Controls and Procedures**

(a)    Evaluation of disclosure controls and procedures.

        We have established and maintain disclosure controls and procedures to ensure that we record, process, summarize, and reportinformation we are required to disclose in our periodic reports filed with the Securities and Exchange Commission in the manner andwithin the time periods specified in the SEC's rules and forms.  Our chief executive officer and chief financial officer evaluatedthese controls and procedures--within 90 days of the filing date of this quarterly report--and concluded based upon thatevaluation, that they are effective in achieving this purpose.

(b)    Changes in internal controls.

        We maintain internal financial controls and procedures to ensure that we comply with applicable laws and our establishedfinancial policies.  There were no significant changes, including any corrective actions with regard to significant deficiencies andmaterial weaknesses, in our internal controls or in other factors that could significantly affect internal controls since the date ofthe most recent evaluation of these controls by our chief executive officer and chief financial officer.

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**PART II OTHER INFORMATION**

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

        On September 4, 2002, we issued and sold to Abbott Laboratories 2,269,375 shares of our common stock for aggregate proceedsof approximately $28.6 million. These shares were issued pursuant to an investment agreement dated March 9, 2001 between us andAbbott and no person served as an underwriter with respect to this transaction. We relied on Section 4(2) of the Securities Act of1933, as amended (the "Securities Act") for exemption from the registration requirements of the Securities Act.

**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 September 30, 2002.

        1.        A Current Report on Form 8-K filed with the Securities and Exchange Commission on July15, 2002 pursuant to Items 5 and 7 to report that we issued a press release on July 15, 2002 to announce that we will discontinue thedevelopment of our oral MLN977 program for the treatment of chronic asthma.
        2.        A Current Report on Form 8-K was filed with the Securities and Exchange Commission on August 13, 2002 pursuant toItems 5 and 7 to report that, although we were not included on the list of companies required to comply with SEC Order 4-460, ourprincipal executive officer and principal financial officer voluntarily signed statements under oath in the form required by theorder.

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**SIGNATURES**
        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.  MILLENNIUM PHARMACEUTICALS, INC.(Registrant)        Dated: November 12, 2002  By /s/  KEVIN P. STARR      Kevin P. Starr   *Chief Operating Officer*   *and Chief Financial Officer*   *(principal financial and chief accounting officer)*    
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**CERTIFICATIONS**

I, Mark J. Levin, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Millennium Pharmaceuticals, Inc.;

2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this quarterly report;

4.        The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

5.        The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant'sauditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant'sability to record, process, summarize and report financial data and have identified for the registrant's auditors any materialweaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal controls; and

6.        The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002 /s/  MARK J. LEVIN    Mark J. Levin  Chairperson, President and Chief Executive Officer    
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I, Kevin P. Starr, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Millennium Pharmaceuticals, Inc.;

2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this quarterly report;

4.        The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

5.        The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant'sauditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant'sability to record, process, summarize and report financial data and have identified for the registrant's auditors any materialweaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal controls; and

6.        The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002 /s/  KEVIN P. STARR    Kevin P. Starr  Chief Operating Officer and Chief Financial Officer    
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**EXHIBIT INDEX**

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
Exhibit No. Description  99.1 Statement Pursuant to 18 U.S.C. §1350  99.2 Statement Pursuant to 18 U.S.C. §1350 
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