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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, 2005**                                                                                                                                                                                                                                    |
| **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.) |

**40 Landsdowne Street, Cambridge, Massachusetts 02139**(Address of principal executive offices) (zip code)

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

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

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

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

Number of shares of the registrant's Common Stock, $0.001 par value, outstanding on November 4, 2005: 310,451,529

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**MILLENNIUM PHARMACEUTICALS, INC.**

**FORM 10-Q**

**FOR THE QUARTER ENDED SEPTEMBER 30, 2005**

**TABLE OF CONTENTS**

|             |                                                                                                           | Page                       |   |
|------------------|----------------------------------------------------------------------------------------------------------------|----------------------------|--------|
| **PART I**  | **FINANCIAL INFORMATION**                                                                                      |                       |   |
|             |                                                                                                           |                       |   |
| Item 1.          | Condensed Consolidated Financial Statements                                                                    |                       |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Balance Sheets as ofSeptember 30, 2005 and December 31, 2004                            | 3      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Operations for thethree and nine months ended September 30, 2005 and 2004 | 4      |   |
|             |                                                                                                           |                       |   |
|             | Condensed Consolidated Statements of Cash Flows for thenine months ended September 30, 2005 and 2004           | 5      |   |
|             |                                                                                                           |                       |   |
|             | Notes to Condensed Consolidated Financial Statements                                                           | 6      |   |
|             |                                                                                                           |                       |   |
| Item 2.          | Management's Discussion and Analysis of FinancialCondition and Results of Operations                           | 16     |   |
|             |                                                                                                           |                       |   |
|             | Risk Factors That May Affect Results                                                                           | 28     |   |
|             |                                                                                                           |                       |   |
| Item 3.          | Quantitative and Qualitative Disclosures About Market Risk                                                     | 39     |   |
|             |                                                                                                           |                       |   |
| Item 4.          | Controls and Procedures                                                                                        | 40     |   |
|             |                                                                                                           |                       |   |
| **PART II** | **OTHER INFORMATION**                                                                                          |                       |   |
|             |                                                                                                           |                       |   |
| Item 6.          | Exhibits                                                                                                       | 41     |   |
|             |                                                                                                           |                       |   |
|             | Signatures                                                                                                     | 42     |   |
|             |                                                                                                           |                       |   |
|             | Exhibit Index                                                                                                  | 43     |   |
|             |                                                                                                           |                       |   |

*The following Millenniumtrademarks are used in this Quarterly Report on Form 10-Q:*Millennium®, theMillennium “M” logo and design (registered), Millennium PharmaceuticalsTM,VELCADE® (bortezomib) for Injection, and INTEGRILIN® (eptifibatide) Injection. Allare covered by registrations or pending applications for registration in the U.S. Patentand Trademark Office and many other countries. Campath® is a registered trademark ofGenzyme Corporation or its subsidiaries, ReoPro® (abciximab) is a trademark of EliLilly & Company, Aggrastat® (tirofiban) is a trademark of Merck & Co., Inc.,Thalomid® (thalidomide) and Revlimid® are trademarks of Celgene Corporation andAngiomax® (bivalirudin) is a trademark of The Medicines Company. *Other trademarksused in this Quarterly Report on Form 10-Q are the property of their respectiveowners.*

2

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**PART I     FINANCIAL INFORMATION**

**Item 1.    Condensed Consolidated Financial Statements**

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

|                                                                                                                                                          | September 30, 2005 |   | December 31, 2004 |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------|-------------------|------------|
||
||
||
| Current assets:                                                                                                                                               |               |   |              |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                     |               |   | $                 | 60,412     |   | $ | 14,436 |   |
| Marketable securities                                                                                                                                         |               |   |              | 594,742    |   |   | 685,971 |   |
| Accounts receivable, net of allowances                                                                                                                        |               |   |              | 78,372     |   |   | 87,874 |   |
| Inventory                                                                                                                                                     |               |   |              | 16,936     |   |   | 97,274 |   |
| Prepaid expenses and other current assets                                                                                                                     |               |   |              | 17,496     |   |   | 16,057 |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|     Total current assets                                                                                                                  |               |   |              | 767,958    |   |   | 901,612 |   |
| Property and equipment, net                                                                                                                                   |               |   |              | 194,447    |   |   | 220,115 |   |
| Restricted cash                                                                                                                                               |               |   |              | 9,641      |   |   | 10,316 |   |
| Other assets                                                                                                                                                  |               |   |              | 14,395     |   |   | 15,325 |   |
| Goodwill                                                                                                                                                      |               |   |              | 1,210,218  |   |   | 1,208,328 |   |
| Developed technology, net                                                                                                                                     |               |   |              | 313,702    |   |   | 338,798 |   |
| Intangible assets, net                                                                                                                                        |               |   |              | 62,134     |   |   | 62,537 |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|     Total assets                                                                                                                          |               |   | $                 | 2,572,495  |   | $ | 2,757,031 |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|                                                                                                                                                          |               |   |              |       |   |   |   |   |
| **Liabilities and Stockholders' Equity**                                                                                                                      |               |   |              |       |   |   |   |   |
| Current liabilities:                                                                                                                                          |               |   |              |       |   |   |   |   |
| Accounts payable                                                                                                                                              |               |   | $                 | 15,275     |   | $ | 36,470 |   |
| Accrued expenses                                                                                                                                              |               |   |              | 68,077     |   |   | 89,125 |   |
| Advance from Schering-Plough                                                                                                                                  |               |   |              | —     |   |   | 49,250 |   |
| Current portion of restructuring                                                                                                                              |               |   |              | 32,674     |   |   | 34,242 |   |
| Current portion of deferred revenue                                                                                                                           |               |   |              | 35,571     |   |   | 21,294 |   |
| Current portion of capital lease obligations                                                                                                                  |               |   |              | 5,460      |   |   | 10,480 |   |
| Current portion of long term debt                                                                                                                             |               |   |              | 5,890      |   |   | — |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|     Total current liabilities                                                                                                             |               |   |              | 162,947    |   |   | 240,861 |   |
| Other long term liabilities                                                                                                                                   |               |   |              | 15         |   |   | 5,778 |   |
| Restructuring, net of current portion                                                                                                                         |               |   |              | 74,673     |   |   | 39,794 |   |
| Deferred revenue, net of current portion                                                                                                                      |               |   |              | 21,909     |   |   | 11,691 |   |
| Capital lease obligations, net of current portion                                                                                                             |               |   |              | 76,521     |   |   | 80,452 |   |
| Long term debt, net of current portion                                                                                                                        |               |   |              | 99,571     |   |   | 105,461 |   |
|                                                                                                                                                          |               |   |              |       |
| Commitments and contingencies                                                                                                                                 |               |   |              |       |   |   |   |   |
|                                                                                                                                                          |               |   |              |       |
| **Stockholders' equity:**                                                                                                                                     |               |   |              |       |   |   |   |   |
| Preferred Stock, $0.001 par value; 5,000 shares authorized, none issued                                                                                       |               |   |              | —     |   |   | — |   |
| Common Stock, $0.001 par value; 500,000 shares authorized:310,051 shares at September 30, 2005 and 306,399 shares at December 31, 2004 issued and outstanding |               |   |              | 310        |   |   | 306 |   |
| Additional paid-in capital                                                                                                                                    |               |   |              | 4,573,862  |   |   | 4,547,430 |   |
| Deferred compensation                                                                                                                                         |               |   |              | (4,518     | ) |   | — |   |
| Accumulated other comprehensive loss                                                                                                                          |               |   |              | (9,676     | ) |   | (5,953 | ) |
| Accumulated deficit                                                                                                                                           |               |   |              | (2,423,119 | ) |   | (2,268,789 | ) |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|     Total stockholders' equity                                                                                                            |               |   |              | 2,136,859  |   |   | 2,272,994 |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |
|     Total liabilities and stockholders' equity                                                                                            |               |   | $                 | 2,572,495  |   | $ | 2,757,031 |   |
|                                                                                                                                                          |               |   |                   |            |   |  |  |   |

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

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

|                                                                                                                            | Three Months Ended September 30, |   | Nine Months Ended September 30, |    |
|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|--------|--------------------------------------|---------|
||
||
|                                                                                                                            |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                                                                       |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Net product sales                                                                                       |                                  |   | $                                    | 50,942  |   | $ | 37,668 |   |   |   | $ | 139,629 |   | $ | 102,288 |   |
|     Co-promotion revenue                                                                                    |                                  |   |                                 | 33,037  |   |   | 62,557 |   |   |   |   | 123,524 |   |   | 159,034 |   |
|     Revenue under strategic alliances                                                                       |                                  |   |                                 | 105,186 |   |   | 9,749 |   |   |   |   | 160,368 |   |   | 86,537 |   |
|     Royalties                                                                                               |                                  |   |                                 | 12,514  |   |   | — |   |   |   |   | 12,514 |   |   | — |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total revenues                                                                  |                                  |   |                                 | 201,679 |   |   | 109,974 |   |   |   |   | 436,035 |   |   | 347,859 |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Costs and expenses:                                                                                                             |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Cost of sales (excludes amortization of       acquired intangible assets) |                                  |   |                                 | 89,020  |   |   | 18,630 |   |   |   |   | 120,281 |   |   | 52,462 |   |
|     Research and development                                                                                |                                  |   |                                 | 80,632  |   |   | 98,961 |   |   |   |   | 253,725 |   |   | 299,621 |   |
|     Selling, general and administrative                                                                     |                                  |   |                                 | 40,623  |   |   | 45,903 |   |   |   |   | 144,320 |   |   | 137,500 |   |
|     Restructuring                                                                                           |                                  |   |                                 | 58,791  |   |   | (414 | ) |   |   |   | 62,897 |   |   | 36,370 |   |
|     Amortization of intangibles                                                                             |                                  |   |                                 | 8,500   |   |   | 8,378 |   |   |   |   | 25,500 |   |   | 25,134 |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
|         Total costs and expenses                                                        |                                  |   |                                 | 277,566 |   |   | 171,458 |   |   |   |   | 606,723 |   |   | 551,087 |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Loss from operations                                                                                                            |                                  |   |                                 | (75,887 | ) |   | (61,484 | ) |   |   |   | (170,688 | ) |   | (203,228 | ) |
|                                                                                                                            |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                                                                         |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
|     Investment income, net                                                                                  |                                  |   |                                 | 4,902   |   |   | 1,115 |   |   |   |   | 24,081 |   |   | 13,650 |   |
|     Interest expense                                                                                        |                                  |   |                                 | (2,820  | ) |   | (2,725 | ) |   |   |   | (7,723 | ) |   | (8,012 | ) |
|     Gain on sale of equity interest in joint venture                                                        |                                  |   |                                 | —  |   |   | — |   |   |   |   | — |   |   | 40,000 |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Net loss                                                                                                                        |                                  |   | $                                    | (73,805 | ) | $ | (63,094 | ) |   |   | $ | (154,330 | ) | $ | (157,590 | ) |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| *Amounts per common share:*                                                                                                     |                                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss, basic and diluted                                                                                                     |                                  |   | $                                    | (0.24   | ) | $ | (0.21 | ) |   |   | $ | (0.50 | ) | $ | (0.52 | ) |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |
| Weighted average shares, basic and diluted                                                                                      |                                  |   |                                 | 308,848 |   |   | 305,202 |   |   |   |   | 307,675 |   |   | 304,445 |   |
|                                                                                                                            |                                  |   |                                      |         |   |  |  |   |   |   |  |  |   |  |  |   |

The accompanying notes are an integral part of these 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                                                                                 |                                 |   | $ | (154,330 | ) | $ | (157,590 | ) |
| Adjustments to reconcile net loss to cash used in operating activities:                  |                                 |   |   |   |   |   |   |   |
|     Depreciation and amortization                                    |                                 |   |   | 58,456 |   |   | 69,981 |   |
|     Restructuring charges (reversals), net                           |                                 |   |   | 1,255 |   |   | (255 | ) |
|     Amortization of deferred financing cost                          |                                 |   |   | 340 |  |   | 364 |   |
|     Realized loss on marketable securities, net                      |                                 |   |   | 2,249 |   |   | 3,751 |   |
|     Realized gain on sale of investment in TransForm Pharmaceuticals |                                 |   |   | (10,465 | ) |   | — |   |
|     Stock compensation expense                                       |                                 |   |   | 4,224 |   |   | 4,946 |   |
| Changes in operating assets and liabilities:                                             |                                 |   |   |   |   |   |   |   |
|     Accounts receivable                                              |                                 |   |   | 9,502 |   |   | (37,239 | ) |
|     Inventory                                                        |                                 |   |   | 80,338 |   |   | 9,623 |   |
|     Prepaid expenses and other current assets                        |                                 |   |   | 561 |   |   | 5,286 |   |
|     Restricted cash and other assets                                 |                                 |   |   | (5,611 | ) |   | 877 |   |
|     Accounts payable and accrued expenses                            |                                 |   |   | (6,931 | ) |   | (4,279 | ) |
|     Advance from Schering-Plough                                     |                                 |   |   | (49,250 | ) |   | — |   |
|     Deferred revenue                                                 |                                 |   |   | 24,494 |   |   | (22,402 | ) |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| Net cash used in operating activities                                                    |                                 |   |   | (45,168 | ) |   | (126,937 | ) |
|                                                                                     |                                 |   |  |  |   |  |  |   |
|                                                                                     |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Investing Activities:**                                                |                                 |   |   |   |   |   |   |   |
| Investments in marketable securities                                                     |                                 |   |   | (261,710 | ) |   | (345,580 | ) |
| Proceeds from sales and maturities of marketable securities                              |                                 |   |   | 347,611 |   |   | 442,241 |   |
| Proceeds from sale of investment in TransForm Pharmaceuticals                            |                                 |   |   | 10,585 |   |   | — |   |
| Purchases of property and equipment                                                      |                                 |   |   | (8,561 | ) |   | (34,519 | ) |
| Other investing activities                                                               |                                 |   |   | (5,282 | ) |   | 3,979 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| Net cash provided by investing activities                                                |                                 |   |   | 82,643 |   |   | 66,121 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
|                                                                                     |                                 |   |   |   |   |   |   |   |
| **Cash Flows from Financing Activities:**                                                |                                 |   |   |   |   |   |   |   |
| Net proceeds from employee stock purchases                                               |                                 |   |   | 17,043 |   |   | 22,050 |   |
| Principal payments on capital leases                                                     |                                 |   |   | (8,951 | ) |   | (11,389 | ) |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| Net cash provided by financing activities                                                |                                 |   |   | 8,092 |   |   | 10,661 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| Increase (decrease) in cash and cash equivalents                                         |                                 |   |   | 45,567 |   |   | (50,155 | ) |
| Equity adjustment from foreign currency translation                                      |                                 |   |   | 409 |   |   | (227 | ) |
| Cash and cash equivalents, beginning of period                                           |                                 |   |   | 14,436 |   |   | 55,847 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| Cash and cash equivalents, end of period                                                 |                                 |   | $ | 60,412 |   | $ | 5,465 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
|                                                                                     |                                 |   |   |   |   |   |   |   |
| **Supplemental Cash Flow Information:**                                                  |                                 |   |   |   |   |   |   |   |
| Cash paid for interest                                                                   |                                 |   | $ | 8,916 |   | $ | 8,858 |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |
| **Supplemental Disclosure of Noncash Investing and Financing Activities:**               |                                 |   |   |   |   |   |   |   |
| Issuance of restricted stock                                                             |                                 |   | $ | 4,784 |   | $ | — |   |
|                                                                                     |                                 |   |  |  |   |  |  |   |

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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MillenniumPharmaceuticals, Inc.Notes to Condensed Consolidated Financial Statements

**1.     Basis of Presentation**

        The accompanying condensed consolidated financial statements have been prepared inaccordance with generally accepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, theydo not include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements. In the opinion of management, alladjustments, consisting of normal recurring accruals and revisions of estimates,considered necessary for a fair presentation of the accompanying condensed consolidatedfinancial statements have been included. Interim results for the three and nine monthsended September 30, 2005 are not necessarily indicative of the results that may beexpected for the year ended December 31, 2005. For further information, refer to thefinancial statements and accompanying footnotes included in the Company’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2004, which was filed with theSecurities and Exchange Commission (“SEC”) on March 8, 2005. 

        Theinformation presented in the condensed consolidated financial statements and relatedfootnotes at September 30, 2005, and for the three and nine months endedSeptember 30, 2005 and 2004, is unaudited and the condensed consolidated balancesheet amounts and related footnotes at December 31, 2004, have been derived fromaudited financial statements. 

2.     Summary ofSignificant Accounting Policies 

Cash Equivalents,Marketable Securities and Other Investments 

        Cashequivalents consist principally of money market funds and corporate bonds with maturitiesof three months or less at the date of purchase. Marketable securities consist primarilyof investment-grade corporate bonds, asset-backed debt securities and U.S. governmentagency debt securities. Other investments represent ownership in private companies inwhich the Company holds less than a 20 percent ownership position and does not otherwiseexercise significant influence. The Company carries such investments at cost unless significant influence can be exercised over the investee, in which casesuch securities are recorded using the equity method. These investments are included inother long term assets at September 30, 2005 and December 31, 2004. 

        Managementdetermines the appropriate classification of marketable securities at the time of purchaseand reevaluates such designation at each balance sheet date. Marketable securities atSeptember 30, 2005 and December 31, 2004 are classified as“available-for-sale.” Available-for-sale securities are carried at fair value,with the unrealized gains and losses reported in a separate component of accumulated othercomprehensive loss in stockholders’ equity. The cost of debt securities in thiscategory is adjusted for amortization of premiums and accretion of discounts to maturity.Such amortization and accretion are included in investment income. Realized gains andlosses and declines in value judged to be other-than-temporary on available-for-salesecurities and other investments are included in investment income. The cost of securitiessold is based on the specific identification method. Interest and dividends on securitiesclassified as available-for-sale are included in investment income. 

        Duringthe three months ended September 30, 2005, the Company did not record any realized gainson marketable securities and recorded realized losses on marketable securities and otherinvestments of $0.9 million. During the three months ended September 30, 2004, the Companyrecorded realized gains on marketable securities and other investments of $0.5 million andrealized losses on marketable securities and other investments of $5.1 million. 

        Duringthe nine months ended September 30, 2005 and 2004, the Company recorded realized gains onmarketable securities of $0.1 million and $1.8 million, respectively, and realizedlosses on marketable securities and other investments of $2.4 million and $5.6million, respectively. 

6

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

        Duringthe nine months ended September 30, 2005, the Company recorded a realized gain ofapproximately $10.5 million from the sale of its cost method investment in TransFormPharmaceuticals, Inc. (“TransForm”). The Company expects to record an additionalrealized gain of up to approximately $2.8 million in the second half of 2006 upon thefinal settlement and receipt of the escrowed portion of the sale proceeds. TransForm, acompany specializing in the discovery of formulations and novel crystalline forms of drugmolecules, was acquired by Johnson & Johnson in a cash-for-stock transaction thatclosed in April 2005. 

Segment Information 

        Statementof Financial Accounting Standards (“SFAS”) No. 131, “Disclosures aboutSegments of an Enterprise and Related Information” (“SFAS No. 131”),establishes standards for the way that public business enterprises report informationabout operating segments in their financial statements. SFAS No. 131 also establishesstandards for related disclosures about products and services, geographic areas, and majorcustomers. 

        TheCompany operates in one business segment, which focuses on the research, development andcommercialization of therapeutic products. All of the Company’s product sales arecurrently related to sales of VELCADE® (bortezomib) for Injection. All of theCompany’s co-promotion revenue is related to sales and development of INTEGRILIN®(eptifibatide) Injection. The remainder of the Company’s total revenue is related toits strategic alliances and royalties. 

        Revenuesfrom Ortho Biotech Products, L.P. (“Ortho Biotech”), a member of the Johnson& Johnson family of companies, accounted for approximately five percent and sixpercent of total revenues for the three months ended September 30, 2005 and 2004,respectively, and 11 percent and 21 percent of total revenues for the nine months endedSeptember 30, 2005 and 2004, respectively. 

        Revenuesfrom Schering-Plough Ltd. and Schering Corporation (collectively “SGP”),excluding co-promotion revenue, accounted for approximately 46 percent and 21 percent oftotal revenues for the three and nine months ended September 30, 2005, respectively. 

        Therewere no other significant customers under strategic alliances and royalties in the threeand nine months ended September 30, 2005 and 2004, respectively. 

Information ConcerningMarket and Source of Supply Concentration 

        INTEGRILINhas received regulatory approvals in the United States, the countries of the EuropeanUnion and a number of other countries for various indications. The Company and SGPco-promoted INTEGRILIN in the United States and shared any profits and losses throughAugust 31, 2005. In September 2005, SGP acquired the exclusive development andcommercialization rights to INTEGRILIN in the United States. The Company will continue tomanage the supply chain for INTEGRILIN at the expense of SGP for products sold in the SGPterritories. In the European Union, GlaxoSmithKline plc (“GSK”) exclusivelymarkets INTEGRILIN. 

        TheCompany relies on third-party contract manufacturers for the clinical and commercialproduction of INTEGRILIN. The Company has two manufacturers that provide eptifibatide, theactive pharmaceutical ingredient necessary to make INTEGRILIN for both clinical trials andcommercial supply. Solvay, Societe Anonyme (“Solvay”), one of the currentmanufacturers, owns the process technology used by it and the other manufacturer for theproduction of the active pharmaceutical ingredient. The Company is seeking approval of itsown alternative process technology for the production of eptifibatide for approval in theUnited States, Europe and other countries, as required. The Company entered into anagreement with Solvay in January 2003 for an initial term of four years and one-yearrenewal periods thereafter. The Company has one manufacturer that currently performsfill/finish services for INTEGRILIN. The Company is qualifying a second fill/finishsupplier and has identified an alternative packaging supplier to serve as future sourcesof supply for the United States. The FDA or other regulatory agencies must approve theprocesses or the facilities that may be used for the manufacture of our marketed products.Some materials in process at these alternative suppliers are included in inventory. 

        VELCADEhas received approvals in the United States, the countries of the European Union and anumber of other countries for the treatment of certain multiple myeloma patients. TheCompany sells VELCADE in the United States through its oncology-specific sales force andOrtho Biotech and its affiliates sell VELCADE outside the United States in countries whereapprovals have been received. 

7

----

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

        TheCompany also relies on third-party contract manufacturers for the manufacturing,fill/finish and packaging of VELCADE for both commercial purposes and for ongoing clinicaltrials. The Company has established long-term supply relationships for the production ofcommercial supplies of VELCADE. The Company currently works with one manufacturer tocomplete fill/finish for VELCADE and the Company is qualifying a second fill/finishsupplier. 

        During2004, the Company began distributing VELCADE in the United States through a sole-sourcedistribution model where the Company sells directly to a third party, which in turndistributes to the wholesaler base. 

Inventory 

        Inventoryconsists of currently marketed products and from time to time, product candidates awaitingregulatory approval which were capitalized based upon management’s judgment ofprobable near term commercialization. The Company assesses the probability ofcommercialization based upon several factors including estimated launch date, time tomanufacture and shelf life. At September 30, 2005 and December 31, 2004, inventorydoes not include amounts for products that have not been approved for sale. 

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

        Inventoryconsists of the following (in thousands): 

|            |   | **September 30, 2005** |   | **December 31, 2004** |
|-----------------|--------|------------------------|--------|-----------------------|
| Raw materials   |   | $                      | 7,975  |                  | $ | 73,214 |
| Work in process |   |                   | 8,518  |                  |   | 8,507 |
| Finished goods  |   |                   | 443    |                  |   | 15,553 |
|            |   |                        |   |                       |
|            |   | $                      | 16,936 |                  | $ | 97,274 |
|            |   |                        |   |                       |

        OnSeptember 1, 2005, upon the transfer of the commercialization rights for INTEGRILIN toSGP, the Company sold all existing raw material and finished goods INTEGRILIN inventoriesto SGP. This one-time sale of approximately $71.4 million was included in revenue understrategic alliances for the three and nine months ended September 30, 2005. 

Goodwill and IntangibleAssets 

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

        Intangibleassets consist of the following (in thousands): 

|                                                        | September 30, 2005 |   | December 31, 2004 |
|-------------------------------------------------------------|--------------------|--------|-------------------|
||
| Developed technology                                        |               | $      | 435,000           |   | $ | (121,298 | ) |   |   |   | $ | 435,000 |   | $ | (96,202 | ) |
|                                                        |               |        |              |  |   |  |   |  |   |  |   |
| Core technology                                             |               | $      | 18,712            |   | $ | (18,712 | ) |   |   |   | $ | 18,712 |   | $ | (18,712 | ) |
| Other                                                       |               |   | 17,060            |   |   | (13,926 | ) |   |   |   |   | 20,060 |   |   | (16,523 | ) |
|                                                        |               |        |              |  |   |   |   |  |   |  |   |
|     Total amortizable intangible assets |               |   | 35,772            |   |   | (32,638 | ) |   |   |   |   | 38,772 |   |   | (35,235 | ) |
| Total indefinite-lived trademark                            |               |   | 59,000            |   |   | — |   |   |   |   |   | 59,000 |   |   | — |   |
|                                                        |               |        |              |  |   |   |   |  |   |  |   |
|     Total intangible assets             |               | $      | 94,772            |   | $ | (32,638 | ) |   |   |   | $ | 97,772 |   | $ | (35,235 | ) |
|                                                        |               |        |              |  |   |   |   |  |   |  |   |

        OnFebruary 12, 2002, the Company acquired COR Therapeutics, Inc. (“COR”)for an aggregate purchase price of $1.8 billion, primarily consisting of 55.1 millionshares of Millennium common stock. The transaction was recorded as a purchase foraccounting purposes. The purchase price was allocated to the assets purchased andliabilities assumed based upon their respective fair values, with the excess of thepurchase price over the estimated fair market value of net tangible assets acquiredallocated to in-process research and development, developed technology, trademark andgoodwill. 

8

----

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

        Duringthe year ended December 31, 2002, the Company recorded a one-time charge of$242.0 million for acquired in-process research and development representing theestimated fair value related to five incomplete projects that, at the time of the CORacquisition, had no alternative future use and for which technological feasibility had notbeen established. The most significant purchased research and development project that wasin-process at the date of the acquisition consisted of inhibitors of specified growthfactor receptors in the tyrosine kinase family. These inhibitors have the potential toreduce the narrowing of blood vessels. Cancers such as specified leukemias appear toharbor activated forms of some of these receptors. This project represented62 percent of the total in-process value and was in pre-clinical testing at the timeof the acquisition. The Company has advanced this project into phase I clinical testing.The Company discontinued the remaining four of the five in-process projects as part of its2003 restructuring efforts. 

        COR’sdeveloped technology consisted of an existing product, INTEGRILIN and related patents.This developed technology was determined to be separable from goodwill and was valued atapproximately $435.0 million. Because the INTEGRILIN name was well recognized in themarketplace and was considered to contribute to the product revenue, the trademark wasdetermined to be separable from goodwill. The INTEGRILIN trademark was valued atapproximately $59.0 million and is considered to have an indefinite life. 

        Intangibleassets that were not specifically identifiable, had indeterminate lives or were inherentin the continuing business and related to the Company as a whole were classified asgoodwill. The significant factors contributing to the existence of goodwill related tocompany management, a specialized cardiovascular sales force, market position andoperating experience. 

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

| Developed technology | 13 years      |
|----------------------|---------------|
| Core technology      | 4 years       |
| Other                | 2 to 12 years |

        Amortizationexpense for the three months ended September 30, 2005 and 2004 was approximately$8.5 million and $8.4 million, respectively. Amortization expense for the nine monthsended September 30, 2005 and 2004 was approximately $25.5 million and $25.1 million,respectively. During the nine months ended September 30, 2005, the Company retiredintangible assets of approximately $3.0 million that had been fully amortized. 

        Asrequired by SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwilland indefinite lived intangible assets are not amortized but are reviewed annually forimpairment, or more frequently if impairment indicators arise. Separable intangible assetsthat are not deemed to have an indefinite life are amortized over their useful lives andreviewed for impairment when events or changes in circumstances suggest that the assetsmay not be recoverable. The Company tests for goodwill impairment annually, onOctober 1, and whenever events or changes in circumstances suggest that the carryingamount may not be recoverable. 

        OnOctober 1, 2005, the Company performed its annual goodwill impairment test anddetermined that no impairment existed on that date. The Company continually monitorsbusiness and market conditions to assess whether an impairment indicator exists. If theCompany were to determine that an impairment indicator exists, it would be required toperform an impairment test, which might result in a material impairment charge to thestatement of operations. 

Revenue Recognition 

        TheCompany recognizes revenue from the sale of its products, co-promotion collaboration,strategic alliances and royalties. The Company’s revenue arrangements with multipleelements are divided into separate units of accounting if specified criteria are met,including whether the delivered element has stand-alone value to the customer and whetherthere is objective and reliable evidence of the fair value of the undelivered items. Theconsideration received is allocated among the separate units based on their respectivefair values, and the applicable revenue recognition criteria are applied to each of theseparate units. Advance payments received in excess of amounts earned are classified asdeferred revenue until earned. 

9

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

*Net product sales*

        TheCompany records product sales of VELCADE when delivery has occurred, title passes to thecustomer, collection is reasonably assured and the Company has no further obligations.Allowances are recorded as a reduction to product sales for estimated returns anddiscounts at the time of sale. Costs incurred by the Company for shipping and handling arerecorded in cost of sales. 

*Co-promotion revenue*

        ThroughAugust 31, 2005, co-promotion revenue included the Company’s share of profits fromthe sale of INTEGRILIN in co-promotion territories by SGP. Also included in co-promotionrevenue were reimbursements from SGP of the Company’s manufacturing-related costs,development costs, advertising and promotional expenses associated with the sale ofINTEGRILIN within co-promotion territories and royalties from SGP on sales of INTEGRILINoutside of the co-promotion territory other than Europe. The Company recognized revenuewhen SGP shipped INTEGRILIN to wholesalers and recorded it net of allowances, if any. TheCompany deferred specified manufacturing-related expenses until the time SGP shippedrelated product to its customers inside and outside of co-promotion territories andoutside of Europe. 

        BeginningSeptember 1, 2005 as a result of the Company’s transition from a co-promotion to aroyalty arrangement for INTEGRILIN in the United States, the Company no longer reportsco-promotion revenue. 

*Revenue under strategicalliances*

        TheCompany recognizes revenue from nonrefundable license payments, milestone payments andreimbursement of research and development costs and reimbursement of manufacturing-relatedcosts. Nonrefundable upfront fees for which no further performance obligations exist arerecognized as revenue on the earlier of when payments are received or collection isassured. 

        Nonrefundableupfront licensing fees and guaranteed, time-based payments that require continuinginvolvement in the form of research and development, manufacturing or othercommercialization efforts by the Company are recognized as revenue:

|   | • |   | ratably over the development period if development risk is significant;                                                                       |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                          |
|   | • |   | ratably over the manufacturing period or estimated product useful life if development risk has been substantially              eliminated; or |
|   |   |   |                                                                                                                                          |
|   | • |   | based upon the level of research services performed during the period of the research contract.                                               |

        Milestonepayments are recognized as revenue when the performance obligations, as defined in thecontract, are achieved. Performance obligations typically consist of significantmilestones in the development life cycle of the related technology or product candidate,such as initiation of clinical trials, filing for approval with regulatory agencies andapprovals by regulatory agencies. Reimbursements of research and development costs arerecognized as revenue as the related costs are incurred. 

*Royalties*

        Beginningon September 1, 2005, in conjunction with the closing of the Company’s restructuredrelationship with SGP, the Company began to record royalty income. Royalties arerecognized as revenue when earned. Royalties may include: 

|   | • |   | royalties earned on sales of INTEGRILIN in the United States and other territories around the world, as provided by SGP; |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                     |
|   | • |   | royalties earned on international sales of VELCADE, as provided by Ortho Biotech;                                        |
|   |   |   |                                                                                                                     |
|   | • |   | royalties earned on sales of INTEGRILIN in Europe, as provided by GSK; and                                               |
|   |   |   |                                                                                                                     |
|   | • |   | other royalties.                                                                                                         |

10

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

Advertising andPromotional Expenses 

        Advertising and promotional expenses are expensed as incurred. During the three monthsended September 30, 2005 and 2004, advertising and promotional expenses were$6.7 million and $7.7 million, respectively. During the nine months endedSeptember 30, 2005 and 2004, advertising and promotional expenses were $28.8 million and$26.4 million, respectively. 

Net Loss Per Common Share 

        Basicnet loss per common share is computed using the weighted-average number of common sharesoutstanding during the period. Diluted net loss per share is based upon the weightedaverage number of common shares outstanding during the period, plus additional weightedaverage common equivalent shares outstanding during the period when the effect is notanti-dilutive. Common equivalent shares result from the assumed exercise of outstandingstock options, warrants and unvested restricted shares of common stock (the proceeds ofwhich are then assumed to have been used to repurchase outstanding stock using thetreasury stock method), and the assumed conversion of convertible notes. However, for allperiods presented, diluted net loss per share is the same as basic net loss per share asthe inclusion of common equivalent shares would be anti-dilutive. 

Comprehensive Loss 

        Comprehensiveloss is composed of net loss, unrealized gains and losses on marketable securities andcumulative foreign currency translation adjustments. The following table displayscomprehensive loss (in thousands): 

|                                            | Three Months EndedSeptember 30, |    | Nine Months EndedSeptember 30, |   |
|-------------------------------------------------|---------------------------------|---------|--------------------------------|--------|
||
| Net loss                                        | $                               | (73,805 | )                              | $      | (63,094 | ) | $ | (154,330 | ) | $ | (157,590 | ) |
| Unrealized gain (loss) on marketable securities |                            | (2,781  | )                              |   | 2,478 |   |   | (4,132 | ) |   | (8,069 | ) |
| Cumulative translation adjustments              |                            | 269     |                           |   | 99 |   |   | 409 |   |   | (228 | ) |
|                                            |                                 |         |                           |        |  |   |  |  |   |  |  |   |
|     Comprehensive loss      | $                               | (76,317 | )                              | $      | (60,517 | ) | $ | (158,053 | ) | $ | (165,887 | ) |
|                                            |                                 |         |                           |        |  |    |  |  |   |  |  |    |

The components of accumulated othercomprehensive loss were as follows (in thousands): 

|                                                                     |   | **September 30, 2005** |   | **December 31, 2004** |   |
|--------------------------------------------------------------------------|--------|------------------------|--------|-----------------------|--------|
| Unrealized loss on marketable securities                                 |   | $                      | (9,505 | )                     | $      | (5,373 | ) |
| Cumulative translation adjustments                                       |   |                   | (171   | )                     |   | (580 | ) |
|                                                                     |   |                        |   |                       |
|       Accumulated other comprehensive loss |   | $                      | (9,676 | )                     | $      | (5,953 | ) |
|                                                                     |   |                        |   |                       |

Stock-Based Compensation 

        TheCompany follows the intrinsic value method under Accounting Principles Board OpinionNo. 25, “Accounting for Stock Issued to Employees” (“APB 25”) andrelated interpretations, in accounting for its stock-based compensation plans, rather thanthe alternative fair value accounting method provided for under SFAS No. 123,“Accounting for Stock-Based Compensation” (“SFAS No. 123”), asamended by SFAS No. 148, “Accounting for Stock-basedCompensation—Transition and Disclosure,” (“SFAS No. 148”). UnderAPB 25, when the exercise price of options granted equals the market price of theunderlying stock on the date of grant, no compensation expense is recognized. Restrictedstock awards are recorded as compensation cost over the requisite vesting periods based onthe market value on the date of grant.  In accordance with Emerging Issues Task Force(“EITF”) 96-18, the Company records compensation expense equal to the fair valueof options granted to non-employees over the vesting period, which is generally the periodof service. 

        Thefollowing information regarding net loss and net loss per share has been determined as ifthe Company had accounted for its employee stock options and employee stock plan under thefair value method prescribed by SFAS No. 123, as amended by SFAS No. 148. Theresulting effect on net loss and net loss per share pursuant to SFAS No. 123 is notlikely to be representative of the effects in future periods, due to subsequent additionaloption grants and periods of vesting. 

11

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

        Thefollowing table illustrates the effect on net loss and loss per share as if the Companyhad applied the fair value recognition provisions of SFAS No. 123 to stock-basedemployee compensation (in thousands, except per share amounts): 

|                                                                                                   | Three Months EndedSeptember 30, |    | Nine Months EndedSeptember 30, |   |
|--------------------------------------------------------------------------------------------------------|---------------------------------|---------|--------------------------------|--------|
||
| Net loss                                                                                               | $                               | (73,805 | )                              | $      | (63,094 | ) | $ | (154,330 | ) | $ | (157,590 | ) |
| Add: Stock-based compensation as reported in theStatement of Operations                                |                            | 550     |                           |   | — |   |   | 550 |   |   | 271 |   |
| Deduct: Total stock-based compensation expense determined under fair value based method for all awards |                            | (12,653 | )                              |   | (14,276 | ) |   | (46,664 | ) |   | (48,398 | ) |
|                                                                                                   |                                 |         |                           |        |  |   |  |  |   |  |  |   |
| Pro forma net loss                                                                                     | $                               | (85,908 | )                              | $      | (77,370 | ) | $ | (200,444 | ) | $ | (205,717 | ) |
|                                                                                                   |                                 |         |                           |        |  |    |  |  |   |  |  |    |
| Amounts per common share:                                                                              |                            |    |                           |   |   |   |   |   |   |   |   |   |
| Basic and diluted - as reported                                                                        | $                               | (0.24   | )                              | $      | (0.21 | ) | $ | (0.50 | ) | $ | (0.52 | ) |
| Basic and diluted - pro forma                                                                          | $                               | (0.28   | )                              | $      | (0.25 | ) | $ | (0.65 | ) | $ | (0.68 | ) |

        Theweighted-average per share fair value of options granted during the three months endedSeptember 30, 2005 and 2004 was $5.61 and $6.87, respectively, and during the nine monthsended September 30, 2005 and 2004 was $5.01 and $9.02, respectively. 

        Thefair value of stock options and common stock issued pursuant to the stock option and stockpurchase plans at the date of grant were estimated using the Black-Scholes model with thefollowing weighted-average assumptions: 

|                  | Stock Options |                            | Stock Purchase Plan |
|-----------------------|---------------|---------------------------------|---------------------|
|                  |          | Three Months EndedSeptember 30, |                | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |   | Nine Months EndedSeptember 30, |
|                  | 2005          |                            | 2004                |   | 2005 |   | 2004 |   | 2005 |   | 2004 |   | 2005 |   | 2004 |
| Expected life (years) |          | 5.5                             |                | 5.5 |   | 5.32 |   | 5.35 |   | 0.5 |   | 0.5 |   | 0.5 |   | 0.5 |
| Interest rate         |          | 4.06%                           |                | 2.89% |   | 4.09% |   | 2.79% |   | 3.65% |   | 2.88% |   | 3.46% |   | 1.98% |
| Volatility            |          | .60                             |                | .60 |   | .60 |   | .70 |   | .60 |   | .60 |   | .60 |   | .70 |

        TheBlack-Scholes model was developed for use in estimating the fair value of traded options,which have no vesting restrictions and are fully transferable. Option valuation modelsrequire the input of highly subjective assumptions including the expected stock pricevolatility. The Company’s employee stock options have characteristics significantlydifferent from those of traded options and changes in the subjective inputs assumptionscan materially affect the fair value estimate. 

        Throughthe end of the second quarter of 2004, the fair value of stock options granted wasdetermined utilizing a historical volatility rate. In the third quarter of 2004, theCompany reevaluated and subsequently changed its expected volatility assumption. TheCompany now uses the most recent three-year time period for purposes of calculating theexpected volatility. Additionally, the Company considered implied volatilities ofcurrently traded options to provide an estimate based upon current trading activity. Afterconsidering other such factors as its stage of development, the length of time the Companyhas been public and the impact of having two marketed products, the Company believes thisblended volatility rate better reflects the expected volatility of its stock. 

        TheCompany's 2000 Incentive Stock Plan (the “2000 Plan”) allows for the granting of incentiveand nonstatutory stock options, restricted stock awards and other stock-based awards,including the grant of shares based upon specified conditions, the grant of securitiesconvertible into common stock and the grant of stock appreciation rights. 

12

----

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

        Duringthe three months ended September 30, 2005, the Company issued 480,000 shares of restrictedstock to certain key executives. Restricted stock awards generally vest over four yearsfrom the grant date. The Company recorded $4.8 million of deferred compensation inconnection with the issuance of restricted stock and recognized approximately $0.3 millionof compensation expense during the three months ended September 30, 2005 related to theseawards. 

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

Accounting Pronouncements 

        In December 2004, the FASB issued SFAS No. 123R (revised 2004),“Share-Based Payment—An Amendment of FASB Statements No. 123 and 95”(“SFAS No. 123R”). SFAS No. 123R requires companies to calculate andrecord in the income statement the cost of equity instruments, such as stock options orrestricted stock, awarded to employees for services received. The cost of the equityinstrument is to be measured based on the fair value of the instruments on the date theyare granted and is required to be recognized over the period during which the employeesare required to provide services in exchange for the equity instruments. SFASNo. 123R is effective at the beginning of the first fiscal year beginning afterJune 15, 2005, or January 1, 2006. 

        SFASNo. 123R provides two alternatives for adoption: 

|   | • |   | a “modified prospective” method in which compensation cost is recognized for allawards granted subsequent to the effective date of the statement as well as for theunvested portion of awards outstanding as of the effective date; and               |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                            |
|   | • |   | a “modified retrospective” method which follows the approach in the“modified prospective” method, but also permits entities to restate priorperiods to record compensation cost calculated under SFAS No. 123 for pro formadisclosure. |

        TheCompany plans to adopt SFAS No. 123R using the modified prospective method. Aspermitted by SFAS No. 123, the Company currently accounts for share-based payments toemployees using APB 25 intrinsic value method and, as such, generally recognizes nocompensation cost for employee stock options. Accordingly, the adoption of SFASNo. 123R’s fair value method will have a significant impact on theCompany’s result of operations, although it will have no impact on its overallfinancial position. The Company cannot accurately estimate at this time the impact ofadopting SFAS No. 123R as it will depend on market price, assumptions used and levelsof share-based payments granted in future periods. However, had the Company adopted SFASNo. 123R in a prior period, the impact would approximate the impact of SFASNo. 123 as described in the disclosure of pro forma net loss and loss per share inNote 2 above. 

3.     Restructuring 

*2005 Strategic Refinement*

        In October 2005, the Company announced its 2005 restructuring plan in support of a refinedstrategy focused on advancing key growth assets, including VELCADE, advancing theCompany’s clinical pipeline of eight novel oncology and inflammation molecules andbuilding a leading oncology-focused discovery organization. The Company is substantiallyreducing its effort in inflammation discovery and is reducing overall headcount, includingeliminating INTEGRILIN sales and marketing positions, positions in inflammation discoveryand various other business support groups. As a result of the headcount reductions, theCompany is also further consolidating its Cambridge, MA facilities. 

        TheCompany recorded restructuring charges of $28.2 million in September 2005 primarilyrelated to the remaining rental obligation, net of estimated sublease income, for afacility the Company vacated in September 2005 and termination benefits for approximately180 employees. 

        TheCompany expects to record additional restructuring charges for termination benefits foremployees notified in October 2005 and additional remaining rental obligations due tofacilities that will be vacated through 2006, as well as the write-down of leaseholdimprovements at such facilities. The total charges are expected to be between $75.0million and $85.0 million and will be recorded in 2005 and 2006, including the $28.2million recorded in the three months ended September 30, 2005. 

13

----

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

        Theactivity related to restructuring expense for the nine month period ended September 30,2005 is as follows (in thousands): 

|                          | Balance at December 31, 2004 |   | Charges |   | Payments |   | AssetImpairment |   | StockCompensation |   | Other  |   | Balance atSeptember 30, 2005 |   |
|-------------------------------|-----------------------------------|--------|---------|--------|----------|--------|-----------------|--------|-------------------|--------|--------|--------|------------------------------|--------|
| Termination benefits          |                              | $      | —  |   | $        | 3,058  |            | $      | (573              | )      | $      | — |                         | $      | (284 | ) | $ | (68 | ) | $ | 2,133 |   |
| Facilities                    |                              |   | —  |   |     | 23,554 |            |   | (753              | )      |   | — |                         |   | — |   |   | (233 | ) |   | 22,568 |   |
| Asset impairment              |                              |   | —  |   |     | 971    |            |   | —            |   |   | (971   | )                            |   | — |   |   | — |   |   | — |   |
| Contract termination          |                              |   | —  |   |     | 621    |            |   | —            |   |   | — |                         |   | — |   |   | (621 | ) |   | — |   |
|                          |                              |        |    |        |     |        |            |        |              |        |   |        |                         |        |   |
|     Total |                              | $      | —  |   | $        | 28,204 |            | $      | (1,326            | )      | $      | (971   | )                            | $      | (284 | ) | $ | (922 | ) | $ | 24,701 |   |
|                          |                              |        |    |        |     |        |            |        |              |        |   |        |                         |        |

*2003 Restructuring Plan*

        InDecember 2002 and June 2003, the Company took steps as part of its 2003restructuring plan to realign its resources to become a commercially-focusedbiopharmaceutical company. The Company discontinued specified discovery research efforts,reduced overall headcount, primarily in its discovery group and consolidated its researchand development facilities. Based upon a review of real estate market conditions, theCompany recorded an additional $30.6 million of restructuring expense reflecting changesin the Company’s estimates of the length of time it would take to sublease certainproperties vacated under the 2003 restructuring plan. 

        Theactivity related to restructuring expense for the nine month period ended September 30,2005 is as follows (in thousands): 

|                          | Balance at December 31, 2004 |   | Charges |   | Payments |   | Other  |   | Balance atSeptember 30, 2005 |   |
|-------------------------------|-----------------------------------|--------|---------|--------|----------|--------|--------|--------|------------------------------|--------|
| Termination benefits          |                              | $      | 728     |   | $        | — |   | $      | (484                         | )      | $ | (244 | ) | $ | — |   |
| Facilities                    |                              |   | 67,956  |   |     | 34,882 |   |   | (20,192                      | )      |   | — |   |   | 82,646 |   |
| Contract termination          |                              |   | 5,352   |   |     | (189   | )      |   | (5,163                       | )      |   | — |   |   | — |   |
|                          |                              |        |    |        |     |        |   |        |                         |        |   |
|                          |
|     Total |                              | $      | 74,036  |   | $        | 34,693 |   | $      | (25,839                      | )      | $ | (244 | ) | $ | 82,646 |   |
|                          |                              |        |    |        |     |        |   |        |                         |        |

        The Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit orDisposal Activities” (“SFAS No. 146”) in December 2002. SFASNo. 146 requires that a liability for a cost associated with an exit or disposalactivity be recognized and measured initially at its fair value in the period in which theliability is incurred, except for one-time termination benefits that meet specifiedrequirements. Costs of termination benefits relate to severance packages, out-placementservices and career counseling for employees affected by the restructuring. 

        Inaccordance with SFAS No. 146, the Company’s facilities related expenses andliabilities in both the 2005 and 2003 restructuring plans include estimates of theremaining rental obligations, net of estimated sublease income, for facilities the Companyno longer occupies. The Company validates its estimates and assumptions with independentthird parties having relevant expertise. The Company reviews its estimates and assumptionson a regular basis, until the outcome is finalized, and makes whatever modificationsmanagement believes necessary, based on the Company’s best judgment, to reflect anychanged circumstances. 

        Theprojected timing of payments of the remaining restructuring liabilities under both the2005 and the 2003 restructuring plans at September 30, 2005 is approximately $32.7 milliondue through September 30, 2006 and $74.7 million thereafter through 2022. The actualamount and timing of the payment of the remaining accrued liability is dependent upon theultimate terms of any potential subleases or lease restructuring.

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

4.     Revenueand Strategic Alliances 

        The Company has entered into research, development, technology transfer andcommercialization arrangements with major pharmaceutical and biotechnology companiesrelating to a broad range of therapeutic products. These alliances provide the Companywith the opportunity to receive various combinations of license fees, research funding,co-promotion revenue, distribution fees and may provide additional payments contingentupon its achievement of research and regulatory milestones and royalties and/or profitshares if the Company’s collaborations are successful in developing andcommercializing products. 

*Product Alliances*

          Duringthe three months ended September 30, 2005, the Company transferred to SGP the exclusivedevelopment and commercialization rights to INTEGRILIN in the United States. In exchangefor these rights, SGP paid the Company approximately $35.5 million in a nonrefundableupfront payment that the Company is recognizing as revenue ratably over the Company’speriod of involvement in managing the supply chain. In addition, SGP will pay the Companysignificant royalties on product sales of INTEGRILIN over the lifetime of the product,with the potential of receiving royalties beyond the 2014 patent expiration date. 

        Asof September 1, 2005, the Company no longer records co-promotion revenue. The Company nowrecords royalties on sales of INTEGRILIN in the United States and other territories, asearned on a quarterly basis over the life of the INTEGRILIN product. In each of 2006 and2007, minimum royalties are set at approximately $85.4 million. 

        Uponclosing, the Company recognized strategic alliance revenue of approximately $71.4 millionrelating to the Company’s sale to SGP of the existing raw materials and finishedgoods INTEGRILIN inventory. SGP will assume development obligations relating to theproduct. The Company will continue to manage the supply chain for INTEGRILIN at theexpense of SGP for products sold in the United States and other areas outside of theEuropean Union. 

        Duringthe nine months ended September 30, 2005, the Company recognized $20.0 million ofmilestone payments under its alliance with Ortho Biotech relating to VELCADE and theachievement of agreed-upon sales levels of VELCADE. 

        InJanuary 2005, the transition of the INTEGRILIN marketing authorization for theEuropean Union from SGP to GSK was completed and GSK began selling INTEGRILIN in thecountries of the European Union. During the three and nine months ended September 30,2005, the Company recognized approximately $6.9 million and $14.8 million, respectively,of strategic alliance revenue related to the payment of approximately $22.9 million fromGSK. 

5.     ConvertibleDebt 

        TheCompany had the following convertible notes outstanding at September 30, 2005, for a totalof $105.5 million, of which $5.9 million is included in current liabilities:

|   | • |   | $5.9 million of principal of 4.5% convertible senior notes due June 15, 2006, thatare convertible into the Company’s common stock at any time prior to maturity at aprice equal to $40.61 per share (the “4.5% notes”), included in current portionof long term debt at June 30, 2005; |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                       |
|   | • |   | $83.3 million of principal of 5.5% convertible subordinated notes due January 15,2007, that are convertible into the Company’s common stock at any time prior tomaturity at a price equal to $42.07 per share (the “5.5% notes”); and                                                  |
|   |   |   |                                                                                                                                                                                                                                                                                                       |
|   | • |   | $16.3 million of principal of 5.0% convertible subordinated notes due March 1, 2007,that are convertible into the Company’s common stock at any time prior to maturity ata price equal to $34.21 per share (the “5.0% notes”).                                                         |

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

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

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

Overview 

         We are a leading biopharmaceutical company focused on discovering, developing andcommercializing breakthrough products in the areas of cancer and inflammatory disease. Wecurrently market VELCADE, the market leader in the multiple myeloma relapsed setting, andwe have eight other potential therapeutic products in various stages of clinical andpreclinical development in our therapeutic areas of disease focus. 

        OnOctober 26, 2005, we announced a refinement in our strategy to focus on growing VELCADE inits existing indication and in new uses, accelerating the development of our oncology andinflammation molecules, and strengthening our oncology discovery organization. As part ofour refined strategy, we have taken and will continue to take a series of steps to reduceoperating expenses in 2006. These steps build on our restructured relationship withSchering Corporation and Schering-Plough Ltd., together referred to as SGP. We planto reduce the size of our company from 1,500 employees at the end of 2004 to approximately1,100 employees by the end of 2005, by managing attrition, eliminating INTEGRILIN salesand marketing positions, and reducing the number of positions in inflammation discoveryand in business support groups. In addition, we are further consolidating ourCambridge-based facilities. 

        Weexpect the restructuring charge resulting from this refined strategy to be betweenapproximately $75.0 million and $85.0 million, consisting primarily of facilities costsand employee termination benefits. Approximately one fourth of this charge is a non-cashasset impairment charge, primarily related to the write-down of leasehold improvements.The majority of this charge will be recorded in 2005 and 2006, including the $28.2 millionrecognized in the third quarter 2005. 

        OnSeptember 1, 2005, SGP obtained the exclusive U.S. development and commercializationrights for INTEGRILIN products from us and paid us a nonrefundable upfront payment ofapproximately $35.5 million. We will also receive royalties on net product sales ofINTEGRILIN in the United States from SGP for so long as SGP is engaged in thecommercialization and sale of an INTEGRILIN product in the United States, with thepotential of receiving royalties beyond the 2014 patent expiration date. In 2006 and 2007,minimum royalty payments for each year are set at approximately $85.4 million. 

        Inaddition, at closing, we recognized strategic alliance revenue of approximately $71.4million in connection with the sale to SGP of our existing INTEGRILIN raw materials andfinished goods inventory and SGP assumed development responsibilities relating to theproduct. We will continue to manage the supply chain for INTEGRILIN at the expense of SGPfor products sold in the SGP territories. 

        Weexpect the new relationship to be at least financially equivalent to the former profitshare, including the expected revenues and costs savings, while allowing us to participatein the potential upside of the INTEGRILIN product. Strategically, we hope to increase thenear term certainty of revenues from INTEGRILIN with the guaranteed minimum royalties,while eliminating the need to further invest our resources into INTEGRILIN sales andmarketing and development activities. We expect these changes will enable us to streamlineand focus our resources on VELCADE and our pipeline, which are both critical to ourcontinued success. 

        Inaddition to our marketed product, VELCADE, we have a number of drug candidates indevelopment. Our business strategy is to develop and commercialize important new medicinesthrough clinical trials and regulatory approvals and to play a significant role in themarketing and sale of many of these products. We plan to develop and commercialize many ofour products on our own, but will also seek development and commercial collaborators onfavorable terms or when we otherwise believe that doing so would be advantageous to us. 

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Our Products 

***VELCADE® (bortezomib)for Injection***

        VELCADE,the first of a new class of medicines called proteasome inhibitors, is the first treatmentin more than a decade to be approved in the United States for patients with multiplemyeloma. We received accelerated approval from the Food and Drug Administration, or FDA,on May 13, 2003 to market VELCADE for the treatment of multiple myeloma patients whohave received at least two prior therapies and have demonstrated disease progression ontheir most recent therapy, commonly referred to as third line and beyond. 

        InMarch 2005, we received approval from the FDA of our supplemental New Drug Application, orsNDA, for VELCADE for the treatment of patients with multiple myeloma who have received atleast one prior therapy, commonly referred to as second line, based on our completed phaseIII APEX clinical trial. This regulatory decision marks the full approval of the drug andincreases the approved market potential of the drug. 

        TheEuropean Commission granted Marketing Authorization for VELCADE for the treatment ofmultiple myeloma patients who have received at least two prior therapies and havedemonstrated disease progression on their most recent therapy in Europe inApril 2004. Under this Authorization, a single license was granted to Millennium formarketing VELCADE in the 15 member states of the European Union, plus Norway and Iceland.VELCADE was also approved for marketing in the ten accession member countries when thosecountries officially joined the European Union on May 1, 2004. VELCADE has also beenapproved in a number of other countries, including Canada, Switzerland, Argentina, Israel,Bulgaria, Slovenia, South Korea and Mexico, bringing the total number of approvedcountries to more than 60. 

        InApril 2005, our collaborator, Ortho Biotech Products, L.P., a member of the Johnson &Johnson family of companies, or Ortho Biotech, received approval from the EuropeanCommission for VELCADE as a monotherapy for multiple myeloma patients who have received atleast one prior therapy and who have already undergone or are unsuitable for bone marrowtransplantation. 

        TheFDA granted VELCADE fast track designation for relapsed and refractory mantle celllymphoma, an aggressive form of non-Hodgkin’s lymphoma, in November 2004. Thisdesignation allows the FDA to accept on a rolling basis portions of a marketingapplication for review prior to the submission of a final document. 

***Ortho BiotechCollaboration***

        InJune 2003, we entered into an agreement with Ortho Biotech to collaborate on thecommercialization and continued clinical development of VELCADE. Under the terms of theagreement, we retain all commercialization rights to VELCADE in the United States. OrthoBiotech and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside ofthe United States and Janssen Pharmaceutical K.K. is responsible for Japan. We receivedistribution fees from Ortho Biotech and its affiliates from sales of VELCADE outside ofthe United States. We also retain an option to co-promote VELCADE with Ortho Biotech at afuture date in specified European countries. 

        Weare engaged with Ortho Biotech in an extensive global program for further clinicaldevelopment of VELCADE with the purpose of maximizing the commercial potential of VELCADE.This program is investigating the potential of VELCADE to treat multiple forms of solidand hematological tumors, including continued clinical development of VELCADE for multiplemyeloma. Ortho Biotech is responsible for 40% of the joint development costs through 2005and for 45% of those costs after 2005. In addition, we may receive payments from OrthoBiotech for achieving clinical development milestones, regulatory milestones outside ofthe United States or agreed-upon sales levels of VELCADE. 

***INTEGRILIN®(eptifibatide) Injection***

        ThroughAugust 31, 2005, we co-promoted INTEGRILIN in the United States in collaboration with SGP,and shared profits and losses. As of September 1, 2005, SGP markets INTEGRILIN in theUnited States and specified other areas outside of the European Union. GlaxoSmithKlineplc, or GSK, markets INTEGRILIN in the European Union under a license from us. 

17

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***SGP Collaboration***

        InApril 1995, COR Therapeutics, Inc., or COR, entered into a collaborationagreement with SGP to jointly develop and commercialize INTEGRILIN on a worldwide basis.We acquired COR in February 2002. 

        Underour amended collaboration agreement with SGP, we will receive royalties on sales ofINTEGRILIN in the United States and other specified territories outside of the EuropeanUnion. Additionally, SGP will reimburse us for manufacturing-related costs for INTEGRILIN. 

        Underour original agreement with SGP, we generally shared any profits or losses from sales inthe United States with SGP based on the amount of promotional efforts that each partycontributed. Since the United States launch of INTEGRILIN in June 1998, we agreed toshare promotional efforts in the United States equally with SGP, except for costsassociated with marketing programs specific to us. 

***GSK License Agreement***

        InJune 2004, we reacquired the rights to market INTEGRILIN in Europe from SGP andconcurrently entered into a license agreement granting GSK exclusive marketing rights toINTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketingauthorizations for the European Union from SGP to GSK was completed, and GSK began sellingINTEGRILIN in the countries of the European Union. GSK also markets INTEGRILIN in otherEuropean countries where it has received approval of the transfer from SGP to GSK of therelevant marketing authorizations. Our commercialization alliance with GSK is designed toprovide significant sales and marketing support from GSK to address market opportunitiesfor INTEGRILIN in Europe. Under the terms of the agreement, we are entitled to licensefees and royalties from GSK on INTEGRILIN sales in Europe subject to the achievement ofspecified objectives. 

        Underthe license agreement with GSK, decisions regarding the ongoing marketing of INTEGRILINare generally subject to the oversight of a joint steering committee with equal membershipfrom GSK and us. However, GSK has significant final decision-making authority with respectto European marketing issues. Our agreement with GSK continues until the later ofDecember 31, 2014, or as long as GSK continues to commercialize INTEGRILIN in anyEuropean country. 

Critical AccountingPolicies and Significant Judgments and Estimates 

         Ourmanagement’s discussion and analysis of our financial condition and results ofoperations are based on our consolidated financial statements, which have been prepared inaccordance with generally accepted accounting principles. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingent assets andliabilities at the date of the financial statements as well as the reported revenues andexpenses during the reporting periods. On an ongoing basis, we evaluate our estimates andjudgments, including those related to revenue recognition, inventory, intangible assetsand goodwill. We base our estimates on historical experience and on various other factorsthat are believed to be appropriate under the circumstances, the results of which form thebasis for making judgments about the carrying value of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. 

        While our significant accounting policies are more fully described in Note 2 to ourconsolidated financial statements included in our Form 10-K, filed with the SEC on March8, 2005, we believe the following accounting policies are most critical to aid in fullyunderstanding and evaluating our reported financial results. 

***Revenue***

        Werecognize revenue from the sale of our products, our co-promotion collaboration, ourstrategic alliances and from royalties based on net sales of licensed products. We divideour revenue arrangements with multiple elements into separate units of accounting ifspecified criteria are met, including whether the delivered element has stand-alone valueto the customer and whether there is objective and reliable evidence of the fair value ofthe undelivered items. We allocate the consideration we receive among the separate unitsbased on their respective fair values, and the applicable revenue recognition criteria areapplied to each of the separate units. We classify advance payments received in excess ofamounts earned as deferred revenue until earned. 

18

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        Werecognize revenue from the sales of VELCADE in the United States when delivery hasoccurred and title has transferred to the wholesalers. We record allowances as a reductionto product sales for product returns, chargebacks and discounts at the time of sale. AsVELCADE is a fairly new product, we estimate product returns based on historical returnpatterns as they become available. VELCADE returns are expected to be generally lowbecause the shelf life for the product is 18 months in the United States and weexpect wholesalers not to significantly stock inventory due to the expensive nature of theproduct. Additionally, we consider several factors in our estimation process including ourinternal sales forecasts, inventory levels as provided by wholesalers and third-partymarket research data. During the fourth quarter of 2004, we began distributing VELCADEthrough a sole-source distribution model. As we continually monitor actual product returnsand inventory levels in the domestic distribution channel, we have and may, from time totime, reduce our product returns estimate. Doing so would result in increased productsales at the time the return estimate is changed. If circumstances change or conditionsbecome more competitive in the market for therapeutic products that address multiplemyeloma, we may take actions to increase our product return estimates. Doing so wouldresult in an incremental reduction of product sales at the time the return estimate ischanged. Accruals for rebates, chargebacks, and other discounts are immaterial. 

        ThroughAugust 31, 2005, we recognized co-promotion revenue based on SGP’s reported shipmentsof INTEGRILIN to wholesalers. Co-promotion revenue included our share of the profits fromthe sales of INTEGRILIN, reimbursements of our manufacturing-related costs, developmentcosts and advertising and promotional expenses. We communicated with SGP to calculate ourshare of the profits from the sales of INTEGRILIN on a monthly basis. The calculationincluded estimates of the amount of advertising and promotional expenses and other costsincurred on a monthly basis. Adjustments to our estimates were based upon actualinformation that we received subsequent to our reporting deadlines. Our estimates wereadjusted on a monthly basis and historically have not been significant due to periodiccommunication with SGP. 

        Werecognize nonrefundable upfront licensing fees and guaranteed, time-based payments thatrequire continuing involvement in the form of research and development, manufacturing orother commercialization efforts by us as strategic alliance revenue: 

|   | • |   | ratably over the development period if development risk is significant;                                                                       |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                          |
|   | • |   | ratably over the manufacturing period or estimated product useful life if development risk has been substantially              eliminated; or |
|   |   |   |                                                                                                                                          |
|   | • |   | based upon the level of research services performed during the period of the research contract.                                               |

        Whenthe period of deferral cannot be specifically identified from the contract, managementestimates the period based upon other critical factors contained within the contract. Wecontinually review these estimates which could result in a change in the deferral periodand might impact the timing and the amount of revenue recognized. 

        Milestonepayments are recognized as strategic alliance revenue when the performance obligations, asdefined in the contract, are achieved. Performance obligations typically consist ofsignificant milestones in the development life cycle of the related technology, such asinitiation of clinical trials, filing for approval with regulatory agencies and approvalsby regulatory agencies. Reimbursements of research and development costs are recognized asstrategic alliance revenue as the related costs are incurred. 

        Weare entitled to receive royalty payments under license agreements with a number of thirdparties that sell products based on technology we have developed or to which we haverights. These license agreements provide for the payment of royalties to us based on salesof the licensed product. Beginning September 1, 2005, upon closing the amendedcollaboration agreement with SGP, we record royalty revenues based on estimates of salesfrom interim data provided by licensees. Revenue is recorded in the period in which it isearned. Going forward, we will perform an analysis of historical royalties we have beenpaid, adjusted for any changes in facts and circumstances, as appropriate. Differencesbetween actual royalty revenues and estimated royalty revenues will be adjusted for in theperiod which they become known, typically the following quarter. We do not expect theseadjustments to be significant. To the extent we do not have sufficient ability toaccurately estimate royalty revenue, we will record royalties on a cash basis. 

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***Inventory***

        Inventoryconsists of currently marketed products and from time to time product candidates awaitingregulatory approval which were capitalized based upon management’s judgment ofprobable near-term commercialization. We assess the probability of commercialization basedupon several factors including estimated launch date, time to manufacture and shelf life.At September 30, 2005 and December 31, 2004, inventory does not include amounts forproducts that have not been approved for sale. Inventories primarily represent rawmaterials used in production, work in process and finished goods inventory on hand, valuedat cost for VELCADE, raw material used in production and work in process for INTEGRILIN tosupply GSK and limited amounts of work in process for INTEGRILIN to supply SGP.Inventories are reviewed periodically for slow-moving or obsolete status based on salesactivity, both projected and historical. Our current sales projections provide for fullutilization of the inventory balance. If product sales levels differ from projections or alaunch of a new product is delayed, inventory may not be fully utilized and could besubject to impairment, at which point we would record a reserve to adjust inventory to itsnet realizable value. 

***Intangible Assets***

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

***Goodwill***

        OnOctober 1, 2005, we performed our annual goodwill impairment test and determined thatno impairment existed on that date. However, since the date of acquisition of COR, whichgenerated a significant amount of goodwill, we have experienced a significant decline inmarket capitalization due to a decline in stock price. We continually monitor business andmarket conditions to assess whether an impairment indicator exists. If we were todetermine that an impairment indicator exists, we would be required to perform animpairment test which could result in a material impairment charge to our statement ofoperations. 

Accounting Pronouncements

        InDecember 2004, the FASB issued SFAS No. 123R (revised 2004), “Share-BasedPayment—An Amendment of FASB Statements No. 123 and 95,” or SFASNo. 123R. SFAS No. 123R requires companies to calculate and record in the incomestatement the cost of equity instruments, such as stock options or restricted stock,awarded to employees for services received. The cost of the equity instrument is to bemeasured based on the fair value of the instruments on the date they are granted and isrequired to be recognized over the period during which the employees are required toprovide services in exchange for the equity instruments. SFAS No. 123R is effectiveat the beginning of the first fiscal year beginning after June 15, 2005, or January1, 2006. 

        SFASNo. 123R provides two alternatives for adoption: 

|   | • |   | a “modified prospective” method in which compensation cost is recognized for allawards granted subsequent to the effective date of the statement as well as for theunvested portion of awards outstanding as of the effective date; and               |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                            |
|   | • |   | a “modified retrospective” method which follows the approach in the“modified prospective” method, but also permits entities to restate priorperiods to record compensation cost calculated under SFAS No. 123 for pro formadisclosure. |

        Weplan to adopt SFAS No. 123R using the modified prospective method. As permitted bySFAS No. 123, we currently account for share-based payments to employees using APB 25intrinsic value method and, as such, generally recognize no compensation cost for employeestock options. Accordingly, the adoption of SFAS No. 123R’s fair value methodwill have a significant impact on our result of operations, although it will have noimpact on our overall financial position. We cannot

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accurately estimate at this time theimpact of adopting SFAS No. 123R as it will depend on our market price, ourassumptions used and levels of share-based payments granted in future periods. However,had we adopted SFAS No. 123R in a prior period, the impact would approximate theimpact of SFAS No. 123 as described in the disclosure of pro forma net loss and lossper share in Note 2 to our condensed consolidated financial statements. 

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Results of Operations 

(dollars in thousands, except pershare amounts) 

***Net Loss and Loss perShare***

|                                  | Three Months EndedSeptember 30, |   | Nine Months EndedSeptember 30, |
|---------------------------------------|--------------------------------------|--------|-------------------------------------|
||
|                                  |                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                              |                                 |   | $                                   | (73,805 | ) | $ | (63,094 | ) | 17% |   |   | $ | (154,330 | ) | $ | (157,590 | ) | (2)% |
|                                  |                                 |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |
| Amounts per common share:             |                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share, basic and diluted |                                 |   | $                                   | (0.24 | ) | $ | (0.21 | ) | 14% |   |   | $ | (0.50) |   | $ | (0.52 | ) | (4)% |
|                                  |                                 |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |

        Netloss and loss per share for the three months ended September 30, 2005, or the 2005 ThreeMonth Period, increased from the comparable period in 2004 primarily due to largerrestructuring charges, partially offset by increased product-related revenue and decreasedresearch and development expenses. Net loss and loss per share for the nine months endedSeptember 30, 2005, or the 2005 Nine Month Period, decreased slightly from the comparableperiod in 2004 primarily due to decreased research and development expense and higherproduct-related revenue, partially offset by the 2004 gain on sale of equity investment ina joint venture and increased restructuring charges. 

***Revenues***

|                                                           | Three Months EndedSeptember 30, |   | Nine Months EndedSeptember 30, |
|----------------------------------------------------------------|--------------------------------------|--------|-------------------------------------|
||
|                                                           |                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                      |                                 |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Net product sales                      |                                 |   | $                                   | 50,942 |   | $ | 37,668 |   | 35% |   |   | $ | 139,629 |   | $ | 102,288 |   | 37% |
|     Co-promotion revenue                   |                                 |   |                                | 33,037 |   |   | 62,557 |   | (47) |   |   |   | 123,524 |   |   | 159,034 |   | (22) |
|     Revenue under strategic alliances      |                                 |   |                                | 105,186 |   |   | 9,749 |   | 979 |   |   |   | 160,368 |   |   | 86,537 |   | 85 |
|     Royalties                              |                                 |   |                                | 12,514 |   |   | — |   | — |   |   |   | 12,514 |   |   | — |   | — |
|                                                           |                                 |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |
|         Total revenues |                                 |   | $                                   | 201,679 |   | $ | 109,974 |   | 83% |   |   | $ | 436,035 |   | $ | 347,859 |   | 25% |
|                                                           |                                 |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |

        Totalrevenues increased 83% to $201.7 million during the 2005 Three Month Period and 25%to $436.0 million during the 2005 Nine Month Period, from the comparable periods in 2004.The increases are primarily due to one-time payments from certain of our collaborators,including the one-time sale of existing INTEGRILIN inventory to SGP and increased netproduct sales of VELCADE. 

        Netproduct sales of VELCADE increased 35% to $50.9 million in the 2005 Three MonthPeriod and 37% in the 2005 Nine Month Period from the comparable periods in 2004. Reservesfor product returns, chargebacks and discounts represent approximately 5.0% to 6.0% ofgross product sales for all periods presented. Product sales from VELCADE representapproximately 25% of our total revenues in the 2005 Three Month Period and 32% of totalrevenue in the 2005 Nine Month Period. 

        Co-promotionrevenue, based on sales of INTEGRILIN, decreased 47% in the 2005 Three Month Period and22% in the 2005 Nine Month Period from the comparable periods in 2004. Co-promotionrevenue includes only two months of activity in the 2005 Three Month Period and eightmonths of activity for the 2005 Nine Month Period. As of September 1, 2005, we are nolonger reporting co-promotion revenue due to our restructured relationship with SGP. 

        Revenueunder strategic alliances increased to $105.2 million during the 2005 Three Month Periodand to $160.4 million during the 2005 Nine Month Period from the comparable periods in2004 primarily due to the one-time sale of existing INTEGRILIN inventory to SGP ofapproximately $71.4 million and several other milestones and reimbursements under certainof our strategic alliances. 

        Weexpect revenue under strategic alliances to fluctuate depending on the level of revenuesearned for ongoing development efforts, the level of milestones achieved and the number ofalliances we may enter into in the future with major pharmaceutical companies. 

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        Beginning,September 1, 2005, in connection with the closing of our transaction with SGP, we nowrecord royalty revenue. Royalty revenue may include royalties earned upon sales ofINTEGRILIN in the United States and other territories around the world as provided by SGP,royalties earned upon sales of INTEGRILIN in Europe as provided by GSK, distribution feesearned upon sales outside of the United States of VELCADE as provided by Ortho Biotech andany royalties earned under certain of our early discovery alliances. During the 2005 ThreeMonth Period, we recorded $12.5 million of royalty revenue which primarily includedroyalties from SGP and Ortho Biotech. 

***Costs and Expenses***

|                                                                     | Three Months Ended September 30, |   | Nine Months EndedSeptember 30, |
|--------------------------------------------------------------------------|---------------------------------------|--------|-------------------------------------|
||
|                                                                     |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                                      |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Cost of sales                                    |                                  |   | $                                   | 89,020 |   | $ | 18,630 |   | 378% |   |   | $ | 120,281 |   | $ | 52,462 |   | 129% |
|     Research and development                         |                                  |   |                                | 80,632 |   |   | 98,961 |   | (19) |   |   |   | 253,725 |   |   | 299,621 |   | (15) |
|     Selling, general and administrative              |                                  |   |                                | 40,623 |   |   | 45,903 |   | (12) |   |   |   | 144,320 |   |   | 137,500 |   | 5 |
|     Restructuring                                    |                                  |   |                                | 58,791 |   |   | (414 | ) | 14,301 |   |   |   | 62,897 |   |   | 36,370 |   | 73 |
|     Amortization of intangibles                      |                                  |   |                                | 8,500 |   |   | 8,378 |   | 1 |   |   |   | 25,500 |   |   | 25,134 |   | 1 |
|                                                                     |                                  |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |
|         Total costs and expenses |                                  |   | $                                   | 277,566 |   | $ | 171,458 |   | 62% |   |   | $ | 606,723 |   | $ | 551,087 |   | 10% |
|                                                                     |                                  |   |                                     |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |

***Cost of Sales***

        Costof sales increased in each of the 2005 Three and Nine Month Periods from the comparableperiods in 2004. Cost of sales includes manufacturing-related expenses associated with thesales of VELCADE and INTEGRILIN. The increase in both periods is primarily attributable tothe one-time sale of existing INTEGRILIN inventory to SGP on September 1, 2005. 

***Research and Development***

        Researchand development expenses decreased 19% in the 2005 Three Month Period and 15% in the 2005Nine Month Period from the comparable periods in 2004. The decreases in both periodsprimarily reflect the decreased spending in our discovery organization, a decrease indevelopment spending for INTEGRILIN and VELCADE, as well as our continued focus onresource management and allocation. In 2004, we were preparing for the sNDA filing forVELCADE in the multiple myeloma second-line treatment setting, which resulted in higherresearch and development spending. We expect research and development expenses to decreasein 2006 due to our 2005 strategy refinement. 

        Inaddition to our ongoing clinical trials of VELCADE, we have a number of drug candidates inlate preclinical and clinical development. In August 2005, as part of our annual portfolioreview, based on a variety of considerations to determine appropriate compound andresource prioritization, we decided to discontinue our phase I clinical trial of MLN2222.The following chart summarizes the applicable disease indication and the clinical orpreclinical trial status of these drug candidates. 

| Product Description                                                                                              |   | Disease Indication                                                         |   | Current Trial Status                                                     |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| ***Cancer***                                                                                                     |   |                                                                       |   |                                                                     |   |
| MLN2704 is a targeting monoclonal antibody vehicle conjugated to toxin DM1                                       |   | Prostate cancer                                                            |   | phase I/phase II                                                         |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| MLN518 is a small molecule inhibitor of the Receptor Tyrosine Kinases, or RTK, including FLT-3, PDGF-R and c-KIT |   | Acute myeloid leukemia                                                     |   | phase I/phase II                                                         |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| MLN8054 is a small molecule inhibitor of the Aurora kinase                                                       |   | Advanced malignancies                                                      |   | phase I                                                                  |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| ***Inflammatory Diseases***                                                                                      |   |                                                                       |   |                                                                     |   |
| MLN1202 is a humanized monoclonal antibody directed against CCR2                                                 |   | Rheumatoid arthritisMultiple sclerosisSecondary atherosclerosisScleroderma |   | phase IIaphase IIaphase IIaphase IIa planned                             |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| MLN3897 is a small molecule CCRI inhibitor                                                                       |   | Chronic inflammatory diseases such as rheumatoid arthritis                 |   | phase I with phase IIa planned                                           |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |
| MLN02 is a humanized monoclonal antibody directed against the alpha4ß7 receptor                            |   | Crohn's diseaseUlcerative colitis                                          |   | preclinical with prior phase II datapreclinical with prior phase II data |   |
|                                                                                                             |   |                                                                       |   |                                                                     |   |

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| Product Description                                           |   | Disease Indication                                         |   | Current Trial Status             |   |
|---------------------------------------------------------------|--------|------------------------------------------------------------|--------|----------------------------------|--------|
|                                                          |   |                                                       |   |                             |   |
| MLN3701 is a small molecule CCR1 inhibitor, backup to MLN3897 |   | Chronic inflammatory diseases such as rheumatoid arthritis |   | preclinical with phase I planned |   |
|                                                          |   |                                                       |   |                             |   |
| MLN0415 is a small molecule inhibitor of IKKB                 |   | Inflammatory diseases                                      |   | preclinical                      |   |

        Completionof clinical trials may take several years or more and the length of time can varysubstantially according to the type, complexity, novelty and intended use of a productcandidate. The types of costs incurred during a clinical trial vary depending upon thetype of product candidate and the nature of the study. 

        Weestimate that clinical trials in our areas of focus are typically completed over thefollowing timelines: 

|   | **Clinical Phase**                                                                                                                                        |   | **Objective**                                                                                    |   | **Estimated Completion Period** |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|   |                                                                                                                                                      |   |                                                                                             |   |                            |   |
|   |                         Phase I   |   | Establish safety in humans, study how the drug works, metabolizes and interacts with other drugs |   | 1-2 years                       |   |
|   |                                                                                                                                                      |   |                                                                                             |   |                            |   |
|   |                         Phase II  |   | Evaluate efficacy, optimal dosages and expanded evidence of safety                               |   | 2-3 years                       |   |
|   |                                                                                                                                                      |   |                                                                                             |   |                            |   |
|   |                         Phase III |   | Confirm efficacy and safety of the product                                                       |   | 2-3 years                       |   |
|   |                                                                                                                                                      |   |                                                                                             |   |                            |   |

        Uponsuccessful completion of phase III clinical trials of a product candidate, we intend tosubmit the results to the FDA to support regulatory approval. However, we cannot becertain that any of our product candidates will prove to be safe or effective, willreceive regulatory approvals, or will be successfully commercialized. Our clinical trialsmight prove that our product candidates may not be effective in treating the disease orhave undesirable or unintended side effects, toxicities or other characteristics thatrequire us to cease further development of the product candidate. The cost to take aproduct candidate through clinical trials is dependent upon, among other things, thedisease indications, the timing, the size and dosing schedule of each clinical trial, thenumber of patients enrolled in each trial and the speed at which patients are enrolled andtreated. We could incur increased product development costs if we experience delays inclinical trial enrollment, delays in the evaluation of clinical trial results or delays inregulatory approvals. 

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

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

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

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

***Selling, General andAdministrative***

        Selling,general and administrative expenses decreased 12% in the 2005 Three Month Period from thecomparable period in 2004. The decrease is primarily the result of reduced sales andmarketing expenses associated with the transfer of the U.S.

24

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commercialization rights toINTEGRILIN to SGP. Selling, general and administrative expenses increased 5% in the 2005Nine Month Period from the comparable period in 2004. This increase is primarily theresult of our investment to improve our commercial productivity and growth prospects,including increased sales and marketing spending associated with the launch of VELCADE inits new indication, partially offset by the decreased sales and marketing expensessubsequent to September 1, 2005 described above. 

***Restructuring***

        OnOctober 26, 2005, we announced our 2005 strategy refinement focused on growing VELCADE inits existing indication and in new uses, accelerating the development of our oncology andinflammation molecules, and strengthening our oncology discovery organization. As part ofour refined strategy, we have taken and will continue to take a series of steps, buildingon our restructured relationship with SGP, which together are expected to reduce operatingexpenses in 2006. We plan to reduce the size of our company from 1,500 employees at theend of 2004 to approximately 1,100 employees by the end of 2005, by managing attrition,eliminating INTEGRILIN sales and marketing positions, and reducing the number of positionsin inflammation discovery and in business support groups. In addition, we are furtherconsolidating our Cambridge-based facilities. 

        InDecember 2002 and June 2003, we took steps as part of our 2003 restructuring plan to focusour resources on drug development and commercialization. Our restructuring plan includedconsolidation of research and development facilities, overall headcount reduction andstreamlining of discovery and development projects. 

        Weadopted SFAS No. 146, “Accounting for Costs Associated with Exit or DisposalActivities” (“SFAS No. 146”) in December 2002. SFAS No. 146requires that a liability for a cost associated with an exit or disposal activity berecognized and measured initially at its fair value in the period in which the liabilityis incurred, except for one-time termination benefits that meet specified requirements.Costs of termination benefits relate to severance packages, out-placement services andcareer counseling for employees affected by the restructuring. 

        Inaccordance with SFAS No. 146, our facilities related expenses and liabilities under boththe 2005 and 2003 restructuring plans include estimates of the remaining rentalobligations, net of estimated sublease income, for facilities we no longer occupy. Wevalidate our estimates and assumptions with independent third parties having relevantexpertise. We review our estimates and assumptions on a regular basis, until the outcomeis finalized, and make whatever modifications we believe necessary, based on our bestjudgment, to reflect any changed circumstances. It is possible that such estimates couldchange in the future resulting in additional adjustments, and the effect of any suchadjustments could be material. 

        Duringthe 2005 Three Month Period, we recorded a total of $58.8 million of restructuring chargesunder the 2005 strategy refinement and our 2003 restructuring plan. We recordedrestructuring charges of approximately $28.2 million under the 2005 restructuring planprimarily related to the remaining rental obligation, net of sublease income, of afacility we vacated during September 2005 and employee termination benefits forapproximately 180 employees affected by the transfer of the U.S. commercialization rightsto SGP. Based upon our continuing review of current real estate market conditions, werecorded an additional $30.6 million primarily reflecting changes in our estimate of thelength of time it would take to sublease certain properties vacated under the 2003restructuring plan. 

        Underthe 2005 restructuring plan, we expect to record additional restructuring charges fortermination benefits for employees notified in October 2005 and remaining rentalobligations due to facilities that will be vacated through 2006, as well as the write-downof leasehold improvements at such facilities. We expect total restructuring charges underthe 2005 restructuring plan to be between approximately $75.0 million and $85.0 million,including the $28.2 million recorded in the 2005 Three Month Period. 

***Amortization ofIntangibles***

        Amortizationof intangible assets was $8.5 million in the 2005 Three Month Period and $25.5 million inthe 2005 Nine Month Period, relatively unchanged from the comparable periods in 2004.Amortization in 2005 and 2004 primarily relates to specifically identified intangibleassets from the COR acquisition. We will continue to amortize the specifically identifiedintangible assets from our COR acquisition through 2015. We expect to incur amortizationexpense of approximately $35.0 million for each of the next five years. 

25

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***Other income (expense)***

|                                                                         | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|------------------------------------------------------------------------------|---------------------------------------|--------|--------------------------------------|
||
|                                                                         |                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                      |                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Investment income, net                               |                                  |   | $                                    | 4,902 |   | $ | 1,115 |   | 340% |   |   | $ | 24,081 |   | $ | 13,650 |   | 76% |
|     Interest expense                                     |                                  |   |                                 | (2,820 | ) |   | (2,725 | ) | 3 |   |   |   | (7,723 | ) |   | (8,012 | ) | (4) |
|     Gain on sale of equity interest in joint venture     |                                  |   |                                 | — |   |   | — |   | — |   |   |   | — |   |   | 40,000 |   | (100) |
|                                                                         |                                  |   |                                      |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |
|         Total other income (expense) |                                  |   | $                                    | 2,082 |   | $ | (1,610 | ) | 229% |   |   | $ | 16,358 |   | $ | 45,638 |   | (64)% |
|                                                                         |                                  |   |                                      |  |   |  |  |   |   |   |   |  |  |   |  |  |   |   |

***Investment Income***

        Investmentincome increased 340% in the 2005 Three Month Period and 76% in the 2005 Nine Month Periodfrom the comparable periods in 2004. The increase in the 2005 Three Month Period isprimarily attributable to higher realized losses in the 2004 Three Month Period. Theincrease in the 2005 Nine Month Period is primarily attributable to the realized gain ofapproximately $10.5 million recognized upon the sale of our cost method investment inTransForm Pharmaceuticals, Inc., or TransForm. We expect to record an additional realizedgain of up to approximately $2.8 million in the second half of 2006 upon the finalsettlement and receipt of the escrowed portion of the sale proceeds. 

***Interest Expense***

        Interestexpense increased 3% in the 2005 Three Month Period and decreased 4% in the 2005 NineMonth Period. 

***Gain on Sale of EquityInterest in Joint Venture***

        Throughour acquisition of LeukoSite, we became a party to a joint venture partnership, Millenniumand ILEX Partners, L.P., or M&I, for development of Campath® (alemtuzumab)humanized monoclonal antibody. We sold our equity interest in M&I and in considerationfor the sale, we received an initial payment of $20.0 million in December 2001.During each of the second quarters of 2003 and 2002, we recorded additional gains of$40.0 million on our sale of this equity interest based upon the achievement ofpredetermined sales targets of Campath. During the first quarter of 2004, we recorded thefinal $40.0 million gain related to our sale of this equity interest based upon theachievement of predetermined 2004 sales targets of Campath. We will be entitled toadditional payments from ILEX’s successor, Genzyme Corporation, if sales of Campathin the United States after 2004 exceed specified annual thresholds. However, we currentlydo not expect that these thresholds will be achieved and therefore, we are unlikely toreceive future additional payments related to Campath. 

Liquidity and CapitalResources 

        We require cash to fund our operating expenses, to make capital expenditures, acquisitionsand investments and to pay debt service, including principal and interest and capitallease payments. We have also made strategic purchases of debt and equity securities fromsome of our alliance collaborators in accordance with our Board of Directors’approved policies and our business needs. These investment commitments are generally insmaller companies. We have and may in the future lose money in these investments and ourability to liquidate these investments is in some cases very limited. We may also owe ourpartners milestone payments and royalties. We also have committed to fund developmentcosts incurred by some of our collaborators. 

        Wehave funded our cash requirements primarily through the following: 

|   | • |   | our co-promotion relationship with SGP for the sale of INTEGRILIN;                                                                               |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                             |
|   | • |   | product sales of VELCADE;                                                                                                                        |
|   |   |   |                                                                                                                                             |
|   | • |   | payments from our strategic collaborators, including equity investments, license fees, milestone payments and research              funding; and |
|   |   |   |                                                                                                                                             |
|   | • |   | equity and debt financings in the public markets.                                                                                                |

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        In thefuture, we expect to continue to fund our cash requirements from some of these sources aswell as from sales of other products, subject to receiving regulatory approval. We areentitled to additional committed research and development funding under some of ourstrategic alliances. We believe the key factors that could affect our internal andexternal sources of cash are: 

|   | • |   | revenues and margins from sales of VELCADE, INTEGRILIN and other products and services forwhich we may obtain marketing approval in the future or which are sold by companies thatmay owe us royalty, milestone, distribution or other payments on account of such products; |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                         |
|   | • |   | the success of our clinical and preclinical development programs;                                                                                                                                                                                                            |
|   |   |   |                                                                                                                                                                                                                                                                         |
|   | • |   | our ability to enter into additional strategic collaborations and to maintain existing and new collaborations as well as the              success of such collaborations; and                                                                                                |
|   |   |   |                                                                                                                                                                                                                                                                         |
|   | • |   | the receptivity of the capital markets to financings by biopharmaceutical companies generally and to financings by our              company specifically.                                                                                                                    |

        Asof September 30, 2005 we had $655.2 million in cash, cash equivalents and marketablesecurities. This excludes $9.6 million of interest-bearing marketable securitiesclassified as restricted cash on our balance sheet as of September 30, 2005, whichprimarily serve as collateral for letters of credit securing leased facilities. 

|                                             | September 30, 2005 |   | December 31, 2004 |    |
|--------------------------------------------------|--------------------|--------|-------------------|---------|
||
| Cash, cash equivalents and marketable securities |               |   | $                 | 655,154 |   | $ | 700,407 |   |
| Working capital                                  |               |   |              | 605,011 |   |   | 660,751 |   |
|                                             |               |   |              |    |   |   |   |   |
|                                             |               |   |              |    |   |   |   |   |

|                                                          | Nine Months Ended September 30, |   |
|---------------------------------------------------------------|---------------------------------|--------|
||
| Cash provided by (used in):                                   |                            |   |   |   |   |   |   |   |
|     Operating activities                  |                            |   | $ | (45,168 | ) | $ | (126,937 | ) |
|     Investing activities                  |                            |   |   | 82,643 |   |   | 66,121 |   |
|     Financing activities                  |                            |   |   | 8,092 |   |   | 10,661 |   |
| Capital expenditures (included in investing activities above) |                            |   |   | (8,561 | ) |   | (34,519 | ) |

***Cash Flows***

        Theprincipal use of cash in operating activities in both 2005 and 2004 was to fund our netloss. In September 2005, we received approximately $85.5 million from SGP, consisting ofthe upfront license fee associated with the U.S. commercialization rights for INTEGRILIN,as well as payment for the one-time sale of existing INTEGRILIN raw materials inventory.In January 2005, we paid SGP approximately $49.3 million for advances SGP had made to CORfor inventory purchases in prior years. Cash flows from operations can vary significantlydue to various factors including changes in accounts receivable, as well as changes inaccounts payable and accrued expenses. The average collection period of our accountsreceivable can vary and is dependent on various factors, including the type of revenue andthe payment terms related to those revenues. 

        Investingactivities provided cash of $82.6 million in the 2005 Nine Month Period and $66.1million in the comparable period in 2004. The principal source of funds during both the2005 Nine Month Period and in the comparable period in 2004 was from the proceeds fromsales and maturities of marketable securities. In April 2005, we recorded a realized gainof approximately $10.5 million upon the sale of our cost method investment in TransForm.We expect to record an additional realized gain of up to approximately $2.8 million in thesecond half of 2006 upon the final settlement and receipt of the escrowed portion of thesale proceeds. The decrease in capital expenditures from the 2004 Nine Month Period is aresult of less leasehold improvements in 2005. 

        Financingactivities provided cash of $8.1 million in the 2005 Nine Month Period and$10.7 million in the comparable period in 2004. The principal source was from thesales of common stock to our employees. We used cash in financing activities to makeprincipal payments on our capital leases. 

27

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        Webelieve that our existing cash and cash equivalents and the anticipated cash payments fromour product sales, co-promotion revenue, current strategic alliances and royalties will besufficient to support our expected operations, fund our debt service and capital leaseobligations and fund our capital commitments for at least the next several years. 

***Contractual Obligations***

        Therehave been no significant changes, other than in January 2005, we paid SGP approximately$49.3 million for advances SGP had made to COR for inventory purchases in prior years, toour contractual obligations and commercial commitments included in our Form 10-K as ofDecember 31, 2004. 

        As of September 30, 2005, we did not have any financing arrangements that were notreflected in our balance sheet. 

RISK FACTORS THAT MAYAFFECT RESULTS

          This Quarterly Report on Form 10-Q and certain other communications made by uscontain forward-looking statements, including statements about our growth and futureoperating results, discovery and development of products, strategic alliances andintellectual property. For this purpose, any statement that is not a statement ofhistorical fact should be considered a forward-looking statement. We often use the words“believe,” “anticipate,” “plan,” “expect,”“intend,” “may,” “will” and similar expressions to helpidentify forward-looking statements. 

        Wecannot assure investors that our assumptions and expectations will prove to have beencorrect. Important factors could cause our actual results to differ materially from thoseindicated or implied by forward-looking statements. Such factors that could cause orcontribute to such differences include those factors discussed below. We undertake nointention or obligation to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise. 

Regulatory Risks 

**Our business may be harmed if wedo not obtain approval to market VELCADE for additional therapeutic uses.**

        An important part of our strategy to grow our business is to market VELCADE for additionalindications. To do so, we will need to successfully conduct clinical trials and then applyfor and obtain the appropriate regulatory approvals. If we are unsuccessful in ourclinical trials, or we experience a delay in obtaining or are unable to obtainauthorizations for expanded uses of VELCADE, our revenues may not grow as expected and ourbusiness and operating results will be harmed.

**We may not be able to obtain approval inadditional countries to market VELCADE.**

        VELCADE is currently approved for marketing in the United States, the countries of theEuropean Union and other countries. If we are not able to obtain approval to marketVELCADE in additional countries, we will lose the opportunity to sell in those countriesand will not be able to earn potential milestone payments under our agreement with OrthoBiotech or collect potential distribution fees on sales of VELCADE by Ortho Biotech inthose countries. 

**We may not be able to obtainmarketing approval for products resulting from our development efforts and we may facechallenges to the exclusivity of our marketing approvals.**

        The products that we are developing require research and development, extensivepreclinical studies and clinical trials and regulatory approval prior to any commercialsales. This process is expensive and lengthy, and can often take a number of years. Insome cases, the length of time that it takes for us to achieve various regulatory approvalmilestones affects the payments that we are eligible to receive under our strategicalliance agreements. 

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

        In some cases, we may experience challenges to the extension of exclusivity of ourmarketing approval. For example, with respect to INTEGRILIN, regulatory authorities inLuxembourg instituted a claim to reduce the effective term of supplemental protectioncertificates for INTEGRILIN in the European Community from 2014 to 2012. That claim wasdenied

28

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by the court of first instance in Europe. That denial was appealed to the EuropeanCourt of Justice. In April 2005 the European Court of Justice decided against us andthe term of the supplemental protection certificates covering INTEGRILIN can now beshortened to 2012 in any particular European Community Member State in which a subsequentaction requesting enforcement of the appellate decision was filed and decided against us.Shortening of such term could allow earlier generic competition in any such Member State.

**If we fail to comply with regulatory requirements, or if we experience unanticipatedproblems with our approved products, our products could be subject to restrictions orwithdrawal from the market.
        Any product for which we obtain marketing approval, along with the manufacturingprocesses, post-approval clinical data and promotional activities for such product, issubject to continual review and periodic inspections by the FDA, and other regulatorybodies. Later discovery of previously unknown problems or safety issues with our productsor manufacturing processes, or failure to comply with regulatory requirements, may resultin restrictions on such products or manufacturing processes, withdrawal of the productsfrom the market, the imposition of civil or criminal penalties or a refusal by the FDA andother regulatory bodies to approve pending applications for marketing approval of newdrugs or supplements to approved applications. As with any recently approved therapeuticproduct, we expect that our knowledge of the safety profile for VELCADE will expand afterwider usage and the possibility exists of patients receiving VELCADE treatmentexperiencing unexpected serious adverse events, which could have a material adverse effecton our business. 

        We are a party to collaborations that transfer responsibility for specified regulatoryrequirements, such as filing and maintenance of marketing authorizations and safetyreporting to our collaborators. If our collaborators do not fulfill these regulatoryobligations, products, including VELCADE or INTEGRILIN, could be withdrawn from themarket, which would have a material adverse effect on our business. 

**Some of our products may be basedon new technologies which may affect our ability or the time we require to obtainnecessary regulatory approvals.**

        Products that result from our research and development programs may be based on newtechnologies and new therapeutic approaches that have not been extensively tested inhumans. The regulatory requirements governing these types of products may be more rigorousthan for conventional products. As a result, we may experience a longer regulatory processin connection with any products that we develop based on these new technologies or newtherapeutic approaches. 
Risks Relating to OurBusiness, Strategy and Industry **Our revenues over the next several years will be materially dependent on the commercialsuccess of VELCADE and INTEGRILIN.**
        Our revenues over the next several years will be materially dependent on the commercialsuccess of our two currently marketed products: VELCADE andINTEGRILIN. VELCADE was approved by the FDA in May 2003 and commercially launched inthe United States shortly after that date. Marketing of VELCADE outside the United Statescommenced in April 2004. INTEGRILIN has been on the market in the United States sinceJune 1998. Marketing of INTEGRILIN outside the United States commenced in mid-1999. 

        Because of the recent introduction of VELCADE, we have limited experience as to the saleslevels of this product. Our business plan contemplates obtaining marketing authorizationto sell VELCADE in many countries for the treatment of all patients with multiple myelomaand both in the United States and abroad for other indications. We will be adverselyaffected if VELCADE does not receive such approvals. 

        We will not achieve our business plan, and we may be forced to scale back our operationsand research and development programs, if: 
 • we do not obtain regulatory approval to sell VELCADE in additional countries or for additional therapeutic uses;     • physicians reduce prescribing INTEGRILIN for its current indications or fail to use INTEGRILIN earlier in treatment        and in the PCI setting; or     • the sales of VELCADE or INTEGRILIN do not meet our expectations.
29

**We face substantial competition, and others may discover, develop or commercialize productsbefore or more successfully than we do.**
         The fields of biotechnology andpharmaceuticals are highly competitive. Many of our competitors are substantially larger than we are, and these competitorshave substantially greater capital resources, research and development staffs andfacilities than we have. Furthermore, many of our competitors are more experienced than weare in drug research, discovery, development and commercialization, obtaining regulatoryapprovals and product manufacturing and marketing. As a result, our competitors maydiscover, develop and commercialize pharmaceutical products before or in a shortertimeframe than we do. In addition, our competitors may discover, develop and commercializeproducts that make the products that we or our collaborators have developed or are seekingto develop and commercialize non-competitive or obsolete. 

        With respect to VELCADE, we face competition from Celgene Corporation’s Thalomid®(thalidomide) and its derivatives, a treatment approved for complications associated withleprosy which is increasingly used for multiple myeloma based on data published inpeer-reviewed publications. Celgene has filed an sNDA for Thalomid for the treatment ofmultiple myeloma that was accepted by the FDA for review. We also face competition forVELCADE from traditional chemotherapy treatments, and there are other potentiallycompetitive therapies for VELCADE that are in late-stage clinical development for thetreatment of multiple myeloma including Celgene’s Revlimid®. In addition,multiple myeloma therapies in development may reduce the number of patients available forVELCADE treatment through enrollment of these patients in clinical trials of thesepotentially competing products. 

        Due to the incidence and severity of cardiovascular diseases, the market for therapeuticproducts that address these diseases is large, and we expect the already intensecompetition in this field to increase. Our most significant competitors are majorpharmaceutical companies and biotechnology companies. The two products that competedirectly with INTEGRILIN in the GP IIb-IIIa inhibitor market segment are ReoPro®(abciximab), which is produced by Johnson & Johnson and sold byJohnson & Johnson and Eli Lilly and Company, and Aggrastat® (tirofiban HCl),which is produced and sold by Merck & Co., Inc. outside of the United Statesand by Guilford Pharmaceuticals, Inc. in the United States. 

        Other competitive factors that could negatively affect INTEGRILIN include: 
 • expanded use of heparin replacement therapies, such as Angiomax(R)(bivalirudin), which is produced and sold by The        Medicines Company;     • changing treatment practices for PCI and ACS based on new technologies, including the use of drug-coated stents;     • increased use of another class of anti-platelet drugs known as ADP inhibitors inpatients whose symptoms make them potential candidates for treatment with INTEGRILIN; and      • inability to complete clinical trials and develop data to promote increased use ofINTEGRILIN in its current indications as well as in new indications.
**Sales of INTEGRILIN and possiblyVELCADE in particular reporting periods may be affected by fluctuations in inventory,allowances and buying patterns.**

        A significant portion of INTEGRILIN domestic pharmaceutical sales is made by SGP to majordrug wholesalers. These sales are affected by fluctuations in the buying patterns of thesewholesalers and the corresponding changes in inventory levels maintained by them.Inventory levels held by these wholesalers may fluctuate significantly from quarter toquarter. If these wholesalers build inventory levels excessively in any quarter, sales tothe wholesalers in future quarters may unexpectedly decrease notwithstanding steadyprescriber demand. Because SGP commercializes the product and manages productdistribution, we have limited insight into or control over forces affecting changes indistributor inventory levels. If SGP does not appropriately manage this distribution, weand SGP may not realize sales goals for the product and increased returns could reduce therevenue we recognize and adversely affect our business. 

        We distribute VELCADE in the U.S. through a sole-source distribution model, where we selldirectly to a third party who in turn distributes to the wholesaler base. Our VELCADEproduct inventory levels may fluctuate from time to time depending on the consistency ofthe distribution logistics of this arrangement and the buying patterns of thesewholesalers. 

        Additionally, we and our commercial collaborators make provisions at the time of sale ofboth VELCADE and INTEGRILIN for all discounts, rebates and estimated sales allowancesbased on historical experience updated for changes in facts and circumstances, asappropriate. To the extent these allowances are incorrect, we may need to adjust ourestimates, which could have a material impact on the timing and actual revenue we are ableto recognize from these sales. 

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        Because fewer medical procedures are typically performed in the summer months, demand forINTEGRILIN could generally be lower during these months. These fluctuations in sales ofINTEGRILIN could have a material adverse effect on our results of operations forparticular reporting periods. It is possible that sales of VELCADE could be similarlyaffected by fluctuations in buying patterns. 

**Because our research anddevelopment projects are based on new technologies and new therapeutic approaches thathave not been extensively tested in humans, it is possible that our discovery process willnot result in commercial products.**

        The process of discovering drugs based upon genomics and other new technologies is new andevolving rapidly. We focus a portion of our research on diseases that may be linked toseveral or many genes working in combination or to unprecedented targets. Both we and thegeneral scientific and medical communities have only a limited understanding of the rolethat genes play in these diseases. To date, we have not commercialized any productsdiscovered through our genomics research, and we may not be successful in doing so in thefuture. In addition, relatively few products based on gene discoveries have been developedand commercialized by others. Rapid technological development by us or others may resultin compounds, products or processes becoming obsolete before we recover our developmentexpenses. Further, manufacturing costs or products based on these new technologies maymake products uneconomical to commercialize. 

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

        We must provide the FDA and foreign regulatory authorities with preclinical and clinicaldata demonstrating that our products are safe and effective before they can be approvedfor commercial sale. Clinical development, including preclinical testing, is a long,expensive and uncertain process. It may take us several years to complete our testing, andfailure can occur at any stage of testing. Interim results of preclinical or clinicalstudies do not necessarily predict their final results, and acceptable results in earlystudies might not be seen in later studies. Any preclinical or clinical test may fail toproduce results satisfactory to the FDA. Preclinical and clinical data can be interpretedin different ways, which could delay, limit or prevent regulatory approval. Negative orinconclusive results from a preclinical study or clinical trial, adverse medical eventsduring a clinical trial or safety issues resulting from products of the same class of drugcould cause a preclinical study or clinical trial to be repeated or a program to beterminated, even if other studies or trials relating to the program are successful. 

        We may not complete our planned preclinical or clinical trials on schedule or at all. Wemay not be able to confirm the safety and efficacy of our potential drugs in long-termclinical trials, which may result in a delay or failure to commercialize our products. Anumber of additional events could delay the completion of our clinical trials, includingconditions imposed on us by the FDA or foreign regulatory authorities regarding the scopeor design of our clinical trials, lower than anticipated retention rates for patients inour clinical trials, insufficient supply or deficient quality of our product candidates orother materials necessary to conduct our clinical trials or the failure of our third-partycontractors to comply with regulatory requirements or otherwise meet their contractualobligations to us in a timely manner. As a result, we may have to expend substantialadditional funds to obtain access to resources or delay or modify our plans significantly.Our product development costs will increase if we experience delays in testing orapprovals. Significant clinical trial delays could allow our competitors to bring productsto market before we do and impair our ability to commercialize our products or potentialproducts. 

**If third parties on which we relyfor clinical trials do not perform as contractually required or as we expect, we may notbe able to obtain regulatory approval for or commercialize our product candidates.**

        We depend on independent clinical investigators and, in some cases, contract researchorganizations and other third-party service providers to conduct the clinical trials ofour product candidates and expect to continue to do so. We rely heavily on these partiesfor successful execution of our clinical trials, but we do not control many aspects oftheir activities. Nonetheless, we are responsible for confirming that each of our clinicaltrials is conducted in accordance with the general investigational plan and protocol. Ourreliance on these third parties that we do not control does not relieve us of ourresponsibility to comply with the regulations and standards of the FDA relating to goodclinical practices. Third parties may not complete activities on schedule or may notconduct our clinical trials in accordance with regulatory requirements or the applicabletrials plans and protocols. The failure of these third parties to carry out theirobligations could delay or prevent the development, approval and commercialization of ourproduct candidates or result in enforcement action against us. 

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**Because many of the products thatwe are developing are based on new technologies and therapeutic approaches, the market maynot be receptive to these products upon their introduction.**

        The commercial success of any of our products for which we may obtain marketing approvalfrom the FDA or other regulatory authorities will depend upon their acceptance by themedical community and third party payors as clinically useful, cost-effective and safe.Many of the products 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 ofour products, particularly the first products that we introduce to the market based on newtechnologies and therapeutic approaches. Our efforts to educate the medical community onthese potentially unique approaches may require greater resources than would be typicallyrequired for products based on conventional technologies or therapeutic approaches. Thesafety, efficacy, convenience and cost-effectiveness of our products as compared tocompetitive products will also affect market acceptance.

**Because of the high demand fortalented personnel within our industry, we could experience delays and/or incursubstantial costs to recruit employees necessary for our success and growth.**

        Because competition for talented employees within our industry is fierce, we may not besuccessful in hiring, retaining or promptly replacing key management, sales, marketing andtechnical personnel. Any failure to expediently fill our needs for key personnel couldhave a material adverse effect on our business. 
Risks Relating to OurFinancial Results and Need for Financing 
**We have incurred substantial losses and expect to continue to incur losses. We will not besuccessful unless we reverse this trend.**

        We have incurred net losses of $73.8 million and $63.1 million for the three months ended September 30, 2005 and 2004,respectively, net losses of $154.3 million and $157.6 million for the nine months ended September 30, 2005 and 2004,respectively, net losses of $252.3 million for the year ended December 31, 2004,net losses of $483.7 million for the year ended December 31, 2003 and net lossesof $590.2 million for the year ended December 31, 2002. We expect to continue toincur substantial operating losses in future periods. Prior to our acquisition of COR,substantially all of our revenues resulted from payments from collaborators, and not fromthe sale of products. 

        We expect to continue to incur significant expenses in connection with our research anddevelopment programs and commercialization activities. As a result, we will need togenerate significant revenues to help fund these costs and achieve profitability. Ourability to achieve profitability would be adversely impacted if our acquired intangibleassets and goodwill, primarily resulting from our acquisition of COR, became impaired as aresult of reduced market capitalization or product failures or withdrawals. We cannot becertain whether or when we will become profitable because of the significant uncertaintieswith respect to our ability to generate revenues from the sale of products and fromexisting and potential future strategic alliances. 

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

        We will require substantial funds to conduct research and development, includingpreclinical testing and clinical trials of our potential products. We will also requiresubstantial funds to meet our obligations to our collaborators, manufacture and marketproducts that are approved for commercial sale, including VELCADE, and meet our debtservice obligations. Additional financing may not be available when we need it or may notbe available on favorable terms. 

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

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

        At September 30, 2005, we had approximately $105.5 million of outstanding convertibledebt and $82.0 million of capital lease obligations. During each of the last fiveyears, our earnings were insufficient to cover our fixed charges. We will be required tomake interest payments on our outstanding convertible notes totaling approximately$8.4 million over the next two years. 

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

        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 cash flow from operationsto service our indebtedness, thereby reducing the amount of our expected cash flowavailable for other purposes, including capital expenditures and research and development;     • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we        compete; and     • placing us at a possible competitive disadvantage to less leveraged competitors andcompetitors that have better access to capital resources.
**If we do not achieve theanticipated benefits of our restructuring efforts, or if the costs of our restructuringefforts exceed anticipated levels, our business could be harmed.**

        In December 2002 and June 2003, we announced a restructuring designed to focusour resources on development and commercialization of product opportunities and achievingour goal of becoming profitable in the future. We may not achieve the cost savingsanticipated from the restructuring because such savings are difficult to predict andspeculative in nature. In 2003, we recorded approximately $191.0 million related tothis restructuring and in 2004, we recorded approximately $38.0 million related tothis restructuring. 

        On September 1, 2005, we transferred exclusive U.S. commercialization and developmentrights of INTEGRILIN to SGP and on October 26, 2005, we announced additional efforts torefine our strategy including a substantial reduction of our inflammation discoveryprograms. As a result of these 2005 efforts, we expect to reduce total research anddevelopment and sales, general and administration expenses by approximately 30 percent in2006 from 2004, including headcount reductions from approximately 1,500 at the end of 2004to approximately 1,100 by year end 2005. We expect to incur total restructuring charges ofbetween $75.0 million to $85.0 million related to these 2005 efforts, consisting primarilyof facilities costs and employee termination benefits. The majority of these charges willbe spread over 2005 and 2006. We recorded $28.2 million of restructuring charges for these2005 efforts in the third quarter of 2005. We may not achieve our estimated expensereductions because such savings are difficult to predict and speculative in nature. 

        Whilewe believe our restructuring estimates to be reasonable, it is possible that the actualcharges will exceed the ranges discussed above. For example, we may not be able to leasefacilities that we have closed or plan to close in connection with the restructuring asquickly or on as favorable terms as we anticipated. 
Risks Relating toCollaborators 
**We depend significantly on our collaborators to work with us to commercialize and developproducts including VELCADE and INTEGRILIN.
         Outside of the United States, wecommercialize VELCADE through an alliance with Ortho Biotech. On September 1, 2005, we transferred exclusive U.S.commercialization and development rights of INTEGRILIN to SGP and SGP is solelyresponsible for the commercialization and development of INTEGRILIN outside of Europe. GSKis responsible for marketing and selling INTEGRILIN in Europe. We conduct substantialdiscovery and development activities through strategic alliances, including with OrthoBiotech for the ongoing development of VELCADE. We expect to enter into additionalalliances in the future, especially in connection with product commercialization. Thesuccess of our alliances depends heavily on the efforts and activities of ourcollaborators. 
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        Each of our collaborators has significant discretion in determining the efforts andresources that it will apply to the alliance and the degree to which it shares financialand product sales and inventory information. Our existing and any future alliances may notbe scientifically or commercially successful. 

        The risks that we face in connection with these existing and any future alliances includethe following: • All of our strategic alliance agreements are for fixedterms and are subject to termination under various circumstances,including, in many cases, such as in our collaboration with Ortho Biotech, without cause.     • Our collaborators may change the focus of their development and commercializationefforts. Pharmaceutical and biotechnology companies historically have re-evaluated theirdevelopment and commercialization priorities following mergers and consolidations, whichhave been common in recent years in these industries. The ability of some of our productsto reach their potential could be limited if our collaborators decrease or fail toincrease marketing or spending efforts related to such products.      • We expect to rely on our collaborators to manufacture many products covered by ouralliances.     • In our strategic alliance agreements, we generally agree not to conduct specifiedtypes of research and development in the field that is the subject of the alliance. Theseagreements may have the effect of limiting the areas of research and development that wemay pursue, either alone or in collaboration with third parties.      • Our collaborators may develop and commercialize, either alone or with others,products that are similar to or competitive with the products that are the subject of thealliance with us.     • Our collaborators may not properly maintain or defend our intellectual propertyrights or may use our proprietary information in such a way as to expose us to potentiallitigation.
**We are substantially dependent onSGP for future revenues related to INTEGRILIN.**

        Under the terms of our revised agreement with SGP effective as of September 1, 2005, SGPwill pay us royalties over the U.S. lifespan of INTEGRILIN based on product sales. In 2006and 2007, minimum royalty payments for each year are set at $85.4 million, with someconditions that could reduce these minimums. If SGP’s INTEGRILIN sales after 2007 areless than expected, we will receive less royalty revenue than we expect which would have amaterial adverse effect on our ability to fund other parts of our business. 

**We may not be successful inestablishing additional strategic alliances, which could adversely affect our ability todevelop and commercialize products.**

        An important element of our business strategy is entering into strategic alliances for thedevelopment and commercialization of selected products. In some instances, if we areunsuccessful in reaching an agreement with a suitable collaborator, we may fail to meetall of our business objectives for the applicable product or program. We face significantcompetition in seeking appropriate collaborators. Moreover, these alliance arrangementsare complex to negotiate and time-consuming to document. We may not be successful in ourefforts to establish additional strategic alliances or other alternative arrangements. Theterms of any additional strategic alliances or other arrangements that we establish maynot be favorable to us. Moreover, such strategic alliances or other arrangements may notbe successful. 
Risks Relating toIntellectual Property 
**If we are unable to obtain patentprotection for our discoveries, the value of our technology and products will be adverselyaffected. If we infringe patent or other intellectual property rights of third parties, wemay not be able to develop and commercialize our products or the cost of doing so mayincrease.**

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

         Our ability to develop and commercialize products depends in significant part on our ability to:
 • obtain patents;     • obtain licenses to the proprietary rights of others on commercially reasonable terms;    
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 • operatewithout infringing upon the proprietary rights of others;     • preventothers from infringing on our proprietary rights; and     • protect trade secrets.
**There is significant uncertaintyabout the validity and permissible scope of patents in our industry, which may make itdifficult for us to obtain patent protection for our discoveries.**

        The validity and permissible scope of patent claims in the pharmaceutical andbiotechnology fields, including the genomics field, involve important unresolved legalprinciples and are the subject of public policy debate in the United States and abroad.For example, there is significant uncertainty both in the United States and abroadregarding the patentability of gene sequences in the absence of functional data and thescope of patent protection available for full-length genes and partial gene sequences.Moreover, some groups have made particular gene sequences available in publicly accessibledatabases. These and other disclosures may adversely affect our ability to obtain patentprotection for gene sequences claimed by us in patent applications that we file subsequentto such disclosures. There is also some uncertainty as to whether human clinical data willbe required for issuance of patents for human therapeutics. If such data are required, ourability to obtain patent protection could be delayed or otherwise adversely affected.

**Third parties may own or control patents or patent applications and require us to seeklicenses, which could increase our development and commercialization costs, or prevent usfrom developing or marketing our products.**

        We may not have rights under some patents or patent applications related to some of ourexisting and proposed products or processes. Third parties may own or control thesepatents and patent applications in the United States and abroad. Therefore, in some cases,such as those described below, in order to develop, manufacture, sell or import some ofour existing and proposed products or processes, we or our collaborators may choose toseek, or be required to seek, licenses under third-party patents issued in the UnitedStates and abroad, or those that might issue from United States and foreign patentapplications. In such event, we would be required to pay license fees or royalties or bothto the licensor. If licenses are not available to us on acceptable terms, we or ourcollaborators may not be able to develop, manufacture, sell or import these products orprocesses. 

        Our MLN02 and MLN1202 product candidates are humanized monoclonal antibodies. Our productcandidate MLN2704 also includes a recombinant antibody. We are aware of third-partypatents and patent applications that relate to humanized or modified antibodies, productsuseful for making humanized or modified antibodies and processes for making and usingrecombinant antibodies. With respect to MLN2704, we are also aware of third-party patentapplications relating to anti-PSMA antibodies. 

        With respect to VELCADE and other proteasome inhibitors in the treatment of myocardialinfarctions, we are aware of the existence of a potentially interfering patent applicationfiled by a third party. In addition, on June 26, 2002, AriadPharmaceuticals, Inc. sent to us and approximately 50 other parties a letter offeringa sublicense for the use of United States Patent No. 6,410,516, which is exclusivelylicensed to Ariad. If this patent is valid and Ariad successfully sues us forinfringement, we would require a license from Ariad in order to manufacture and marketVELCADE. 

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

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

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

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

**Our patent protection for anycompounds that we seek to develop may be limited to a particular method of use orindication such that, if a third party were to obtain approval of the compound for use inanother indication, we could be subject to competition arising from off-label use.**

        Although we generally seek the broadest patent protection available for our proprietarycompounds, we may not be able to obtain patent protection for the actual composition ofany particular compound and may be limited to protecting a new method of use for thecompound or otherwise restricted in our ability to prevent others from exploiting thecompound. If we are unable to obtain patent protection for the actual composition of anycompound that we seek to develop and commercialize and must rely on method of use patentcoverage, we would likely be unable to prevent others from manufacturing or marketing thatcompound for any use that is not protected by our patent rights. If a third party were toreceive marketing approval for the compound for another use, physicians could neverthelessprescribe it for indications that are not described in the product’s labeling orapproved by the FDA or other regulatory authorities. Even if we have patent protection ofthe prescribed indication, as a practical matter, we would have little recourse as aresult of this off-label use. In that event, our revenues from the commercialization ofthe compound would likely be adversely affected. 

**If we fail to comply with ourobligations in our intellectual property licenses with third parties, we could loselicense rights that are important to our business.**

        We are a party to various license agreements. In particular, we license rights to patentsfor the formulation of VELCADE, issued U.S. patents covering MLN2704 and issued patentsrelating to MLN518 and MLN1202. We may enter into additional licenses in the future. Ourexisting licenses impose, and we expect future licenses will impose, various diligence,milestone payment, royalty, insurance and other obligations on us. If we fail to complywith these obligations, the licensor may have the right to terminate the license, in whichevent we might not be able to market any product that is covered by the licensed patents. 
Risks Relating toProduct Manufacturing, Marketing and Sales 
**Because we have limited sales,marketing and distribution experience and capabilities, we are dependent on third partiesto successfully perform these functions on our behalf, or we may be required to incursignificant costs and devote significant efforts to augment our existing capabilities.**

        We are marketing and selling VELCADE in the United States solely through ourcancer-specific sales force and without a collaborator. Our success in selling VELCADEwill depend heavily on the performance of this sales force. In areas outside the UnitedStates where VELCADE has received approval, Ortho Biotech or its affiliates marketVELCADE. As a result, our ability to earn revenue related to VELCADE outside of the UnitedStates will depend heavily on Ortho Biotech. 

        SGP exclusively markets INTEGRILIN in areas outside of Europe including the United Statesand GSK exclusively markets INTEGRILIN in Europe. As a result, except for our minimumroyalty payments from SGP in 2006 and 2007, our success in receiving royalties andmilestone payments from sales of INTEGRILIN depends entirely on the marketing efforts ofthese third parties. 

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

**Because we have no commercial manufacturing capabilities, we willcontinue to be dependent on third-party manufacturers to manufacture products for us, orwe will be required to incur significant costs and devote significant efforts to establishour own manufacturing facilities and capabilities.**

        We have no commercial-scale manufacturing capabilities. In order to continue to developproducts, apply for regulatory approvals and commercialize products, we will need todevelop, contract for or otherwise arrange for the necessary manufacturing capabilities. 

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        We currently rely upon third parties to produce material for preclinical testing purposesand expect to continue to do so in the future. We also currently rely and expect tocontinue to rely, upon other third parties, potentially including our collaborators, toproduce materials required for clinical trials and for the commercial production of ourproducts. 

        There are a limited number of contract manufacturers that operate under the FDA’sgood manufacturing practices regulations capable of manufacturing our products. If we areunable 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 productsor commercialize them. 

        Reliance on third-party manufacturers entails risks to which we would not be subject if wemanufactured products ourselves, including reliance on the third party for regulatorycompliance, the possibility of breach of the manufacturing agreement by the third partybecause of factors beyond our control and the possibility of termination or non-renewal ofthe agreement by the third party, based on its own business priorities, at a time that iscostly or inconvenient for us. 

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

**Because we have no commercialmanufacturing capability for VELCADE, we are dependent on third parties to produce productsufficient to meet market demand.**

        We rely on third-party contract manufacturers to manufacture, fill/finish and packageVELCADE for both commercial purposes and for all clinical trials. We have establishedlong-term supply relationships for the production of commercial supplies of VELCADE. Wework with one manufacturer, with whom we have a long-term supply agreement, to completefill/finish for VELCADE. If any of our current third party manufacturers performingproduction and fill/finish for VELCADE are unable or unwilling to continue performingthese services for us and we are unable to find a replacement manufacturer or in thefuture we are otherwise unable to contract with manufacturers to produce commercialsupplies of VELCADE in a cost-effective manner, we could run out of VELCADE for commercialsale and clinical trials and our business could be substantially harmed. 

**We face challenges in connectionwith the manufacture of INTEGRILIN; if we do not meet these challenges, our revenues andincome will be adversely affected.**

        We are responsible for managing all clinical and commercial production of INTEGRILINincluding INTEGRILIN that SGP and GSK sell or use in clinical trials. 

        We have no manufacturing facilities for INTEGRILIN and, accordingly, rely on third-partycontract manufacturers for the clinical and commercial production of INTEGRILIN. We havetwo manufacturers that currently provide us with eptifibatide, the active ingredientnecessary to make INTEGRILIN. Solvay, one of the current manufacturers, owns the processtechnology used by it and the other manufacturer for the production of bulk product. As aresult, until we have an approved alternative process technology, we will be reliant onthese manufacturers. We have one manufacturer that currently performs fill/finish servicesfor INTEGRILIN. We are qualifying a second fill/finish supplier and we have identified analternative packaging supplier to serve as future sources of supply for the United States.The inability of our current manufacturer to continue its fill/finish services or ourinability to secure alternative manufacturers could adversely affect the supply ofINTEGRILIN and, thereby, harm our business. 

        We are seeking approval of an alternate process technology and we are engaged in effortsto enhance the availability of manufacturing capabilities for INTEGRILIN. We cannotquantify the time or expense that may ultimately be required to obtain approval for analternate process technology, but it is possible that such time or expense could besubstantial. Moreover, we may not be able to implement any new process technologysuccessfully. 

        In order to mitigate the risk of supply interruption, our manufacturing plans andcommercialization strategy for INTEGRILIN include the addition of extra capacity for themanufacture of INTEGRILIN as described above. We are currently engaged in finalizingthird-party manufacturing arrangements on commercially reasonable terms. We may not beable to do so, and, even if such arrangements are established, if demand for INTEGRILINdoes not meet our forecasts, the manufacturing cost could become more expensive on a perunit basis. 

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

        The availability and levels of reimbursement by governmental and other third-party payorsaffect the market for any pharmaceutical product or health care service. These third-partypayors continually attempt to contain or reduce the costs of health care by challengingthe prices charged for medical products and services. In some foreign countries,particularly the countries of the European Union, the pricing of prescriptionpharmaceuticals is subject to governmental control. We may not be able to sell ourproducts as profitably as we expect if we are required to sell our products at lower thananticipated prices or reimbursement is unavailable or limited in scope or amount. 

        In particular, third-party payors could lower the amount that they will reimbursehospitals or doctors to treat the conditions for which the FDA has approved VELCADE orINTEGRILIN. If they do, pricing levels or sales volumes of VELCADE or INTEGRILIN maydecrease. In addition, if we fail to comply with the rules applicable to the Medicaid andMedicare programs, we could be subject to the imposition of civil or criminal penalties orexclusion from these programs. 

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

        In both the United States and other foreign jurisdictions, there have been a number oflegislative and regulatory proposals to change the health care system. For example, theMedicare Prescription Drug and Modernization Act of 2003 and its implementing regulationsimpose new requirements for the distribution and pricing of prescription drugs which mayaffect the marketing of our products. These new requirements have created uncertaintyamong oncologists and could impact sales levels of VELCADE as oncologists adapt to the newreimbursement model. Further proposals are also likely. The current uncertainty and thepotential for adoption of additional proposals could affect the timing of product revenue,our ability to raise capital, obtain additional collaborators and market our products. 

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

**Weface 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 themanufacturing, testing and marketing of human therapeutic products. In particular, VELCADEand INTEGRILIN are administered to patients with serious diseases who have a highincidence of mortality. Although we have product liability insurance that we believe isappropriate, this insurance is subject to deductibles, co-insurance requirements andcoverage limitations and the market for such insurance is becoming more restrictive. Wemay not be able to obtain or maintain adequate protection against potential liabilities.If we are unable to obtain insurance at acceptable cost or otherwise protect againstpotential product liability claims, we will be exposed to significant liabilities, whichmay materially and adversely affect our business and financial position. These liabilitiescould prevent or interfere with our product commercialization efforts. 
Guidelines andrecommendations can affect the use of our products. 
        Government agencies promulgate regulations and guidelines directly applicable to us and toour products. In addition, professional societies, practice management groups, privatehealth and science foundations and organizations involved in various diseases from time totime may also publish guidelines or recommendations to the health care and patientcommunities. Recommendations of government agencies or these other groups or organizationsmay relate to such matters as usage, dosage, route of administration and use ofconcomitant therapies. Recommendations or guidelines suggesting the reduced use of ourproducts or the use of competitive or alternative products that are followed by patientsand health care providers could result in decreased use of our products. 
Risks Relating to anInvestment in Our Common Stock 
**The trading price of oursecurities could be subject to significant fluctuations.**

        The trading price of our common stock has been quite volatile, and may be volatile in thefuture. During 2005, our common stock has traded as high as $13.52 per share and as low as$7.63 per share. Factors such as announcements of our or 

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 our competitors’ operatingresults, data from our competitors’ clinical trial results, changes in our prospects,market conditions for biopharmaceutical stocks in general and analyst recommendationscould have a significant impact on the future trading prices of our common stock. 

        In particular, the trading price of the common stock of many biopharmaceutical companies,including ours, has experienced extreme price and volume fluctuations, which have at timesbeen unrelated to the operating performance of such companies whose stocks were affected.Some of the factors that may cause volatility in the price of our securities include: 
 • product revenues and the rate of revenue growth;     • introduction or success of competitive products;     • clinical trial results and regulatory developments;     • quarterly variations in financial results and guidance to the investment community with respect to future financial        results;     • business and product market cycles;     • fluctuations in customer requirements;     • availability and utilization of manufacturing capacity;     • timing of new product introductions; and     • our ability to develop and implement new technologies.
        The price of our securities may also be affected by the estimates and projections of theinvestment community and our ability to meet or exceed the financial projections weprovide to the public. The price may also be affected by general economic and marketconditions, and the cost of operations in our product markets. While we cannot predict theindividual effect that these factors may have on the price of our securities, thesefactors, either individually or in the aggregate, could result in significant variationsin price during any given period of time. We can not assure you that these factors willnot have an adverse effect on the trading price of our common stock. 

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

        Provisions of our certificate of incorporation and bylaws and of Delaware law could havethe effect of delaying, deferring or preventing anacquisition of our company. For example, we have divided our board of directors into threeclasses that serve staggered three-year terms, we may issue shares of our authorized“blank check” preferred stock and our stockholders are limited in their abilityto call special stockholder meetings. In addition, we have issued preferred stock purchaserights that would adversely affect the economic and voting interests of a person or groupthat seeks to acquire us or a 15% or greater interest in our common stock withoutnegotiations with our board of directors. Item 3.        Quantitativeand Qualitative Disclosures About Market Risk
        We manage our fixed income investment portfolio in accordance with our Policy forSecurities Investments, or Investment Policy, that has been approved by our Board ofDirectors. The primary objectives of our Investment Policy are to preserve principal,maintain a high degree of liquidity to meet operating needs, and obtain competitivereturns subject to prevailing market conditions. Investments are made primarily ininvestment-grade corporate bonds with effective maturities of three years or less,asset-backed debt securities and U.S. government agency debt securities. These investmentsare subject to risk of default, changes in credit rating and changes in market value.These investments are also subject to interest rate risk and will decrease in value ifmarket interest rates increase. A hypothetical 100 basis point increase in interest rateswould result in an approximate $10.2 million decrease in the fair value of our investmentsas of September 30, 2005. However, due to the conservative nature of our investments andrelatively short effective maturities of debt instruments, interest rate risk ismitigated. Our Investment Policy specifies credit quality standards for our investmentsand limits the amount of exposure from any single issue, issuer or type of investment. Wedo not own derivative financial instruments in our investment portfolio. 

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        Asof September 30, 2005, the fair value of our 4.5% notes, 5.0% notes and 5.5% notesapproximates their carrying value. The interest rates on our convertible notes and capitallease obligations are fixed and therefore not subject to interest rate risk. 

        Wehave no derivative instruments outstanding as of September 30, 2005. 

        As ofSeptember 30, 2005 we did not have any financing arrangements that were not reflected inour balance sheet. 
Item 4.        Controls andProcedures
        Ourmanagement, with the participation of our chief executive officer and chief financialofficer, evaluated the effectiveness of our disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2005. Indesigning and evaluating our disclosure controls and procedures, management recognizedthat any controls and procedures, no matter how well designed and operated, can provideonly reasonable assurance of achieving their objectives and our management necessarilyapplied its judgment in evaluating the cost-benefit relationship of possible controls andprocedures. Based on this evaluation, our chief executive officer and chief financialofficer concluded that as of September 30, 2005, our disclosure controls and procedureswere (1) designed to ensure that material information relating to us is made known to ourchief executive officer and chief financial officer by others, particularly during theperiod in which this report was prepared and (2) effective, in that they providereasonable assurance that information required to be disclosed by us in the reports wefile or submit under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms. 

        Nochange in our internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30,2005 that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting. 

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**PART II    OTHER INFORMATION**

**Item 6.    Exhibits**
(a)    Exhibits      The exhibits listed in the Exhibit Index are included in this report.      
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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 8, 2005  By /s/  MARSHA H. FANUCCI      Marsha H. Fanucci   *Senior Vice President and Chief Financial Officer*   *(principal financial and chief accounting officer)*    
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**EXHIBIT INDEX**
Exhibit No. Description       10.1† Amended and Restated Integrilin Agreement dated July 22, 2005 amongthe Company, Schering Corporation and Schering-Plough, Ltd.       10.2† Side Agreement dated October 13, 2005 among the Company, Schering Corporationand Schering-Plough Ltd.       10.3† Supply Agreement dated September 1, 2005 by andbetween the Company and Schering Corporation       10.4 1996 Employee Stock Purchase Plan, as amended       10.5 2003 Employee Stock Purchase Plan for Non-U.S. Subsidiariesand Affiliated Entities, as amended       10.6 Agreement for Consulting Services dated August 1, 2005 between the Company andMark J. Levin       31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) ofthe Securities Exchange Act of 1934, as amended       31.2 Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) ofthe Securities Exchange Act of 1934, as amended       32.1 Statement Pursuant to 18 U.S.C. §1350       32.2 Statement Pursuant to 18 U.S.C. §1350 
† Confidential treatmentrequested as to certain portions, which portions have been separately filed with theSecurities and Exchange Commission.

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