UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                                         |                                                                                         
|------------------------------------------------------------------ | ----------------------------------------------------------------------------------------
|ý                                                                  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2007                       
|Or                                                                
|o                                                                  | 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

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MILLENNIUM PHARMACEUTICALS, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                                  |  | 04-3177038(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|40 Landsdowne Street, Cambridge, Massachusetts 02139(Address of principal executive offices) (zip code)
|Registrant's telephone number, including area code(617) 679-7000                                       
|Securities registered pursuant to Section 12(b) of the Act:                                            

|Title of Each Class                                             |  | Name of Each Exchange on Which Registered
|--------------------------------------------------------------- |  | -----------------------------------------
|Common Stock, $.001 par value                                   |  | The NASDAQ Stock Market LLC              
|Preferred Stock Purchase Rights                                 |  |                                          
|Securities registered pursuant to Section 12(g) of the Act:None

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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer ý |  | Accelerated filer o |  | Non-accelerated filer o (Do not check if a
smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

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

The aggregate market value of voting Common Stock held by non-affiliates of the registrant as of June 29, 2007 was $3,345,067,986 based on the
last reported sale price of the Common Stock on the NASDAQ Global Select Market on that date.

Number
of shares outstanding of the registrant's class of Common Stock as of February 22, 2008: 324,850,168.

Documents incorporated by reference:

Portions of the information required by Part III of Form 10-K will appear in the registrant's definitive Proxy Statement on
Schedule 14A for the 2008 Annual Meeting of Stockholders and are hereby incorporated by reference into this report.



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TABLE OF CONTENTS    PART I

|Item 1.                |                                                                | BUSINESS                                                                                                         |    | 1 
|---------------------- | -------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | -- | --
|                       | Overview                                                       |                                                                                                                  | 1 
|                       | VELCADE                                                        |                                                                                                                  | 2 
|                       | Our Development Efforts                                        |                                                                                                                  | 3 
|                       | Our Collaborations                                             |                                                                                                                  | 5 
|                       | Manufacturing                                                  |                                                                                                                  | 8 
|                       | Sales and Marketing                                            |                                                                                                                  | 8 
|                       | Competition                                                    |                                                                                                                  | 9 
|                       | Drug Research, Discovery and Development                       |                                                                                                                  | 10
|                       | Patents and Proprietary Rights; Licenses                       |                                                                                                                  | 11
|                       | Government Regulation                                          |                                                                                                                  | 12
|                       | Employees                                                      |                                                                                                                  | 16
|                       | Available Information                                          |                                                                                                                  | 16
|Item 1A.               |                                                                | RISK FACTORS                                                                                                     |    | 17
|                       | Regulatory Risks                                               |                                                                                                                  | 17
|                       | Risks Relating to Our Business, Strategy and Industry          |                                                                                                                  | 19
|                       | Risks Relating to Our Financial Results and Need for Financing |                                                                                                                  | 24
|                       | Risks Relating to Collaborators                                |                                                                                                                  | 25
|                       | Risks Relating to Intellectual Property                        |                                                                                                                  | 27
|                       | Risks Relating to Product Manufacturing, Marketing and Sales   |                                                                                                                  | 30
|                       | Risks Relating to Holding Our Common Stock                     |                                                                                                                  | 33
|Item 1B.               |                                                                | UNRESOLVED STAFF COMMENTS                                                                                        |    | 34
|Item 2.                |                                                                | PROPERTIES                                                                                                       |    | 34
|Item 3.                |                                                                | LEGAL PROCEEDINGS                                                                                                |    | 35
|Item 4.                |                                                                | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                              |    | 35
|OUR EXECUTIVE OFFICERS |                                                                | 35                                                                                                              
|PART II               
|Item 5.                |                                                                | MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |    | 37
|Item 6.                |                                                                | SELECTED FINANCIAL DATA                                                                                          |    | 39
|Item 7.                |                                                                | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                            |    | 40
|Item 7A.               |                                                                | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                       |    | 60
|Item 8.                |                                                                | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                      |    | 61
|Item 9.                |                                                                | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                             |    | 94
|Item 9A.               |                                                                | CONTROLS AND PROCEDURES                                                                                          |    | 94
|Item 9B.               |                                                                | OTHER INFORMATION                                                                                                |    | 96
|PART III              
|Item 10.               |                                                                | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                           |    | 97
|Item 11.               |                                                                | EXECUTIVE COMPENSATION                                                                                           |    | 97
|Item 12.               |                                                                | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                   |    | 98
|Item 13.               |                                                                | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                        |    | 98
|Item 14.               |                                                                | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                           |    | 98

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|PART IV                                      
|---------------------------------------------
|Item 15.                                     
|SIGNATURES                                   
|EXHIBIT INDEX                                
|SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

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PART I

Item 1.    BUSINESS

Overview

We are an innovation-driven biopharmaceutical company focused on discovering, developing and commercializing medicines to improve the lives of patients with
cancer, inflammatory bowel diseases and other inflammatory diseases. We currently commercialize VELCADE® (bortezomib) for Injection, the global market leader for the treatment of patients
with multiple myeloma who have received at least one prior therapy and the United States market leader for the treatment of Mantle Cell Lymphoma, or MCL, patients who have received at least one prior
therapy. We are also awaiting a decision from the Food and Drug Administration, or FDA, regarding our application to market VELCADE for patients with newly diagnosed multiple myeloma. We have a
development pipeline of clinical and preclinical product candidates in our therapeutic focus areas of cancer and inflammatory diseases. We have an oncology-focused drug discovery organization.
Strategic business relationships are a key component of our business to maximize the global potential of our products and product candidates.

VELCADE
was first approved in the United States in May 2003 and in the European Union in April 2004 for marketing as a treatment for some types of patients with multiple myeloma, a type
of blood cancer. In December 2006, the FDA granted us approval to market VELCADE in the United States for the treatment of some types of patients with MCL, an aggressive subtype of
non-Hodgkin's Lymphoma, or NHL. We began marketing VELCADE in the United States shortly after receiving the first approval. We sell VELCADE in the United States directly
through our oncology sales force. In the first quarter of 2007, our collaborator Ortho Biotech Products, Inc., or OBI, a member of The Johnson & Johnson Family Of Companies, began
jointly promoting VELCADE with us to U.S.-based physicians. We believe this collaboration, with the well-established OBI oncology sales force, is helping us to realize the full potential
of VELCADE in the U.S. market. In May 2007, the FDA granted marketing approval to OBI for the combination therapy of VELCADE / DOXIL® (pegylated liposomal doxorubicin) in multiple myeloma
patients who have received at least one prior therapy.

VELCADE
is sold in the European Union and other areas where marketing approval has been obtained outside of the United States by Ortho Biotech Products, L.P., or OBL, also a
member of The Johnson & Johnson Family Of Companies. The product is now approved in 85 countries. In 2007, U.S. sales of VELCADE were approximately $265.2 million, which represented
approximately 50% of our total revenue for 2007. In 2006, U.S. sales of VELCADE were approximately $220.5 million, which represented approximately 45% of our total revenue for 2006. In 2005,
U.S. sales of VELCADE were approximately $192.1 million, which represented approximately 34% of our total revenue for 2005.

Our
business strategy is to build a portfolio of new medicines based on our understanding of genomics and protein homeostasis, which is a set of particular molecular pathways that affect
the establishment and progression of diseases. These molecular pathways include the related effects of proteins on cellular performance, reproduction and death. We plan to develop and commercialize
many of our products on our own, but expect to seek development and commercial collaborators when favorable terms are available or when we otherwise believe that doing so would be advantageous to us.
For example, we maintain a significant royalty stake in INTEGRILIN® (eptifibatide) Injection, a cardiovascular product.

In
the near term, we expect to focus our commercial activities in cancer where we plan to build on our commercial and regulatory experience with VELCADE. We also are working to obtain
approval to market VELCADE in the United States and, through OBL, outside of the United States for the treatment of multiple myeloma in newly diagnosed patients and for the treatment of additional
types of cancers. If approved, we believe these additional uses of VELCADE would lead to a significant expansion of our cancer business.

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In
the area of inflammatory disease, we are advancing novel product candidates in clinical development as potential treatments for serious and widely prevalent conditions. For example,
MLN0002 is a highly selective gut-targeted immune therapy being studied in inflammatory bowel diseases. We expect to initiate pivotal trials with MLN0002 in patients with moderate to
severe ulcerative colitis and Crohn's disease in the timeframe of late 2008 or early 2009. If we successfully complete these trials and are successful in obtaining FDA approval, we believe
MLN0002 could be available to patients as early as 2012. Ulcerative colitis and Crohn's disease represent areas of high unmet medical need with approximately 1.4 million patients
worldwide with moderate to severe disease.

In
the long term, we expect to bring new products to market on a regular basis from our pipeline of discovery and development-stage programs. We also expect to continue to evaluate
opportunities to in-license and acquire molecules from other companies in order to supplement our pipeline.

We
were incorporated in Delaware in 1993. Our principal executive offices are located at 40 Landsdowne Street, Cambridge, Massachusetts 02139.

VELCADE

VELCADE, the first of a new class of medicines called proteasome inhibitors, was the first treatment in more than a decade to be approved in the United States for
patients with multiple myeloma. Based on phase II data, the FDA granted us accelerated approval in May 2003 to market VELCADE for the treatment of multiple myeloma patients who have received at
least two prior therapies and have demonstrated disease progression on their most recent therapy, commonly referred to as third-line and beyond. In March 2005, the FDA granted us approval
to market VELCADE for the treatment of patients with multiple myeloma who have received at least one prior therapy, commonly referred to as relapsed, or second-line multiple myeloma.

In
late 2007, we announced positive results from the large, randomized, Phase III VISTA trial of VELCADE in patients with newly diagnosed multiple myeloma who are not eligible for
stem cell transplantation. In this trial, the combination therapy of VELCADE, melphalan and prednisone demonstrated a highly statistically significant improvement, compared with only melphalan and
prednisone alone, across all efficacy endpoints in the trial, including complete remission rate, time to progression, progression free survival and overall survival. Based on these positive data, the
control arm of the trial was stopped early to allow patients still being treated with melphalan and prednisone to have VELCADE added to their therapy. In December 2007, we filed a supplementary new
drug application, or sNDA, for use of VELCADE in patients with newly diagnosed multiple myeloma. The filing was granted priority review by the FDA. The FDA decision date for approval is scheduled to
occur by June 20, 2008.

Outside
of the United States, VELCADE is approved by the European Commission as a monotherapy for multiple myeloma patients who have received at least one prior therapy and who have
already undergone or are unsuitable for bone marrow transplantation. Regulatory authorities representing 85 other countries, including countries within Europe, Latin America, South-East
Asia and Japan have also approved VELCADE. In December 2007, OBL submitted a variation to their Marketing Authorization to the European Medicines Evaluation Agency, or EMEA, for use of VELCADE for the
treatment of newly diagnosed multiple myeloma. We expect the EMEA to make a decision on this variation by the end of 2008.

In
December 2006, the FDA granted approval of VELCADE for the treatment of patients with MCL who have received at least one prior therapy, commonly referred to as relapsed, or
second-line, MCL. This approval followed the FDA's decision in November 2004 to grant VELCADE fast track designation for MCL due to the high unmet medical need of MCL patients and the
strength of clinical trial data for VELCADE in the treatment of MCL.

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Multiple
myeloma is a cancer of the bone marrow in which some types of white blood cells are overproduced. As a result, there is decreased production of normal red and normal white blood
cells, thereby damaging the body's immune system. The overproduced white blood cells also cause the growth of tumors that spread to multiple sites, causing bone destruction and resulting in pain and
bone fractures. In the U.S., multiple myeloma is the second most common hematologic malignancy and, although the disease is predominantly a cancer of the elderly (the median age at diagnosis is
70 years of age), recent statistics indicate both increasing incidence and younger age of onset. In the U.S., more than 50,000 individuals have multiple myeloma, over 19,000 new cases are
diagnosed each year and almost 11,000 people die from the disease each year.

In
the U.S., NHL is the most common hematological cancer and the sixth leading cause of cancer death. The prevalence of NHL in the U.S. is approximately 380,000 patients, of which we
estimate approximately 100,000 are patients with follicular or marginal zone lymphoma, which are subtypes of NHL, and 10,000 are patients with MCL. In the U.S., there are approximately 63,000 new
cases of NHL diagnosed in the U.S. per year, and 19,000 deaths are attributed to the disease annually. MCL is an aggressive, rapidly progressive subtype of NHL. It is not curable with standard
treatment. The median life expectancy for a patient with MCL following his or her first relapse is estimated to be one to two years.

Proteasome
inhibition is a novel approach to treating cancer. Proteasomes are enzyme complexes in all cells, both healthy and cancerous, that break down intracellular proteins in a
regulated manner. Intracellular proteins form pathways by which cancer cells multiply, spread, interact with other cells and avoid programmed cell death. Inhibition of the proteasome by VELCADE
prevents the regulated breakdown of these intracellular proteins, thereby interfering with many of these functions. This disruption of essential pathways in cancer cells can lead to cell death and
inhibit tumor growth.

The
most commonly reported side effects of VELCADE are asthenic conditions including fatigue, malaise and weakness, nausea, diarrhea, decreased appetite (including anorexia),
constipation, thrombocytopenia, peripheral neuropathy, pyrexia, vomiting, anemia, neutropenia and orthostatic hypotension.

Our Development Efforts

VELCADE Development

We believe that VELCADE may have broad applications in the treatment of cancer in addition to its currently approved indications. Over 300 company-sponsored,
investigator-initiated, or cooperative group-sponsored trials are ongoing or planned with the goal of exploring the potential of the product alone and in combination with other therapies in a variety
of hematological and solid tumor cancers. Principal ongoing VELCADE programs are described below:



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We
expect that our ability to expand sales of VELCADE may be dependent on the outcome of these ongoing clinical trials as well as many other trials.

Pipeline Development

In addition to our ongoing clinical trials of VELCADE, we have a significant pipeline of product candidates in clinical and late preclinical development. The
following chart summarizes the applicable disease indication and the clinical or preclinical trial status of our drug candidates.

|Product Description                                                                                              |  | Disease Indication                                  |  | Current Trial Status            
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------- |  | --------------------------------
|Cancer                                                                                                           |  |                                                     |  |                                 
|MLN0518 is a small molecule inhibitor of the class III receptor tyrosine kinase (RTKs), FLT-3, c-KIT, and PDGF-R |  | Acute myeloid leukemia
Glioma(1)
Prostate cancer(1) |  | phase I/II
phase I/II
phase I/II
|MLN8054 / MLN8237 are small molecule inhibitors of Aurora A Kinase                                               |  | Advanced malignancies                               |  | phase I                         
|MLN4924 is a small molecule inhibitor of Nedd8activating enzyme (NAE)                                           |  | Advanced malignancies                               |  | phase I planned                 
|MLN2238 is a second generation proteasome small molecule inhibitor                                               |  | Advanced malignancies                               |  | preclinical                     
|Inflammatory Bowel Diseases                                                                                      |  |                                                     |  |                                 
|MLN0002 is a humanized monoclonal antibody directed against the alpha4beta7 integrin                             |  | Ulcerative colitis
Crohn's disease                  |  | phase II(2)                     
|Other Inflammatory Diseases                                                                                      |  |                                                     |  |                                 
|MLN1202 is a humanized monoclonal antibody directed against CCR2                                                 |  | Atherosclerosis
Multiple sclerosis                  |  | phase IIa-completed             
|MLN3897 / 3701 are small molecule CCR1 inhibitors(3)                                                             |  | Chronic inflammatory diseases                       |  | phase I/II                      
|MLN0415 is a small molecule inhibitor of IKKbeta(3)                                                              |  | Chronic inflammatory diseases                       |  | phase I                         
|MLN6095 is a small molecule CrTh2 receptor antagonist(3)                                                         |  | Asthma                                              |  | preclinical                     

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

Our Collaborations

We have entered into commercialization and development arrangements with pharmaceutical and biotechnology companies relating to a broad range of products and
potential product opportunities. We believe that these collaborations provide us with the opportunity to maximize the value of our internal resources and to reduce our commercialization and
development costs and risks, while at the same time utilizing the resources of other companies to market and develop our products. Under our
collaborations, we have in the past and may in the future receive combinations of royalties, distribution fees, license fees, shares of profits and losses and/or milestone and other payments.

Ortho Biotech Collaborations

In June 2003, we entered into an agreement with OBL to collaborate on the commercialization of VELCADE and with JJPRD for the continued clinical development of
VELCADE. OBL and its affiliate, Janssen-Cilag, are commercializing VELCADE outside of the United States, and Janssen Pharmaceutical K.K. is responsible for Japan. We receive distribution fees from OBL
and its affiliates from sales of VELCADE outside of the United States. We manage the supply chain for VELCADE at the expense of OBL for products sold in the OBL territories. We retain a limited option
to co-promote VELCADE with OBL at a future date in specified European countries.

We
are engaged with JJPRD in an extensive global program for further clinical development of VELCADE with the purpose of maximizing the commercial potential of the product. This program
is investigating VELCADE to treat multiple forms of solid and hematological tumors, including continued clinical development of VELCADE for multiple myeloma and NHL. JJPRD is responsible for 45% of
the joint development costs and we are responsible for the balance. We are eligible to receive payments from JJPRD or OBL for achieving clinical development milestones, regulatory milestones outside
of the United States and agreed-upon sales levels of VELCADE outside of the United States.

Decisions
regarding the ongoing development and marketing of VELCADE are generally subject to the oversight of a joint steering committee with equal membership from OBL and us. However,
in the event of a dispute, specified development, United States commercialization and other decisions are allocated to us, and commercialization decisions outside of the United States and other
decisions are allocated to OBL.

Unless
our agreement with OBL is terminated early due to a material uncured breach by one of the parties or by OBL unilaterally subject to specified notice obligations, the agreement
continues on a country by country basis outside of the United States until no earlier than the expiration of the last to expire patent covering the manufacture, use or sale of the product in the
country. Revenues from this alliance, including license fees, reimbursement of development expenses, milestone payments and distribution fees, accounted for approximately 25% of our total revenues for
2007, 22% of our total revenues in 2006 and 10% of our total revenues in 2005.

In
October 2006, we entered into a two-year agreement with OBI to jointly promote VELCADE in the U.S. Under the terms of the agreement, in the first quarter of 2007, OBI
began jointly promoting VELCADE with us to U.S.-based physicians. Under this agreement, we pay the cost of a portion of the OBI sales effort dedicated to VELCADE and a commission if sales associated
with the increased promotional effort exceed pre-specified targets. Both parties are able to
terminate the agreement under specified circumstances and subject to fees. We continue to be responsible for commercialization, manufacturing and distribution of VELCADE in the U.S.

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INTEGRILIN Collaborations

INTEGRILIN is approved for marketing in the United States for the treatment of patients with acute coronary syndromes, or ACS, which include unstable angina and
non-ST segment elevation myocardial infarction, or heart attack. This patient group includes individuals who are medically managed and those undergoing percutaneous coronary intervention,
or PCI, including angioplasty. INTEGRILIN is also approved for use at the time of a PCI, including for patients undergoing intracoronary stenting. This set of indications is broader than the FDA
approved indications for the other two GP IIb-IIIa inhibitors approved for marketing in the United States.

We
acquired INTEGRILIN as part of our acquisition of COR Therapeutics, Inc., or COR, in February 2002. INTEGRILIN has been marketed in the United States since 1998 and outside of
the United States since 1999. From February 2002 through August 31, 2005, we co-promoted INTEGRILIN in the United States in collaboration with Schering Corporation and Schering-
Plough Ltd, together referred to as SGP, and shared profits and losses. As of September 1, 2005, we changed our relationship with SGP from a co-promotion to a royalty based
arrangement. SGP now exclusively markets INTEGRILIN in the United States and specified other areas outside of Europe. GlaxoSmithKline plc, or GSK, markets INTEGRILIN in Europe under a license
from us.

In
2007, sales of INTEGRILIN by SGP as reported by SGP were approximately $332.0 million. Approximately 94% of those sales were made in the United States. In 2007, revenues from
this alliance, including license fees, reimbursement of manufacturing-related expenses and royalties, accounted for approximately 20% of our 2007 total revenues. In 2006, revenues from this alliance,
including license fees, reimbursement of manufacturing-related expenses and royalties accounted for approximately 27% of our 2006 total revenues.

Under
our revised relationship with SGP, we have incurred lower sales and marketing expenses, including personnel related and promotional expenses, associated with INTEGRILIN. For the
period September 1, 2005 through December 31, 2005, revenue from SGP, including license fees, reimbursement of manufacturing-related expenses and royalties accounted for approximately
24% of our total revenues during this period. From January 1, 2005 through September 1, 2005, which was the effective date of our modified relationship with SGP, we recognized
approximately $123.5 million of co-promotion revenue, or 22% of our total revenue, from sales of INTEGRILIN by SGP during this period.

INTEGRILIN
is a small synthetic peptide administered by injection that prevents the aggregation of platelets by blocking the platelet receptor glycoprotein, or GP,
IIb-IIIa. The effects of INTEGRILIN are specific to platelets, avoiding interference with other normal cardiovascular processes. In addition, these effects can be reversed following
INTEGRILIN discontinuation when no longer needed. Bleeding is the most common complication encountered during administration of INTEGRILIN therapy. The majority of excess major bleeding events
associated with INTEGRILIN are localized at the site of catheter insertion.

SGP

In April 1995, COR entered into a collaboration agreement with SGP to jointly develop and commercialize INTEGRILIN on a worldwide basis. Under our original
collaboration agreement with SGP following our acquisition of COR in February 2002, we generally shared any profits or losses from INTEGRILIN sales in the United States with SGP, and we granted SGP an
exclusive license to market INTEGRILIN outside the United States and Europe in exchange for royalty obligations.

On
September 1, 2005, SGP obtained the exclusive U.S. development and commercialization rights for INTEGRILIN products from us and paid us a nonrefundable upfront payment of
approximately $35.5 million. In addition, we are entitled to receive royalties on net product sales of INTEGRILIN in the United States from SGP for so long as SGP is engaged in the
commercialization and sale of an

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INTEGRILIN
product in the United States, with the potential of receiving royalties beyond the 2014 patent expiration date. Minimum royalty payments for 2006 and 2007 were approximately
$85.4 million. There are no guaranteed minimum royalty payments for 2008 or future years. We also receive royalties on net product sales by SGP in SGP's territory outside of the United States.
SGP's obligation to pay us royalties in other countries expires on a country by country basis upon the later of fifteen years from the first commercial sale of an INTEGRILIN product in such country
and the expiration of the last to expire patent covering such INTEGRILIN product. We are continuing to manage the supply chain for INTEGRILIN at the expense of SGP for products sold in the SGP
territories including the U.S.

GSK License Agreement

In June 2004, we reacquired the rights to market INTEGRILIN in Europe from SGP and concurrently entered into a license agreement granting GSK exclusive marketing
rights to INTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketing authorizations for the European Union from SGP to GSK was completed, and GSK began selling INTEGRILIN in the
countries of the European Union. GSK also markets INTEGRILIN in other European countries where it has received
approval of the transfer from SGP to GSK of the relevant marketing authorizations. Under the terms of the agreement, we have received license fees and are entitled to royalties from GSK on INTEGRILIN
sales in Europe subject to the achievement of specified objectives. We manage the supply chain for INTEGRILIN at the expense of GSK for products sold in the GSK territories.

Under
the license agreement with GSK, GSK has significant final decision-making authority with respect to European marketing issues. Our agreement with GSK continues until the later of
December 31, 2014, or as long as GSK continues to commercialize INTEGRILIN in any European country.

sanofi-aventis Small Molecule Inflammatory Disease Collaboration

In June 2000, we entered into a broad agreement in the field of inflammatory disease with Aventis, now sanofi-aventis, which includes joint discovery, development
and commercialization of small molecule drugs for the treatment of inflammatory diseases. This agreement covers several of our development programs in the inflammatory disease area and provides us
with potential access to sanofi-aventis' large promotional infrastructure in connection with the commercialization of jointly developed products. The discovery phase of this collaboration has
concluded. The development and commercialization programs continue under the agreement.

As
provided in the original agreement, we have agreed to share the responsibility for developing, manufacturing and marketing products and share profits and losses in North America.
Outside of North America, sanofi-aventis is responsible for and bears the cost of developing, manufacturing and marketing products arising from the alliance. sanofi-aventis is required to pay us a
royalty on product sales outside of North America.

To
date, we and sanofi-aventis have identified several novel drug targets and associated molecules relevant in inflammatory diseases. During the remaining portion of the development
phase of the alliance, we and sanofi-aventis have agreed to focus our joint resources on preclinical and clinical development of candidates identified in the collaboration. As of the end of 2007, the
alliance had identified several development candidates, two of which, MLN3701 and MLN0415, are in clinical trials with another product candidate, MLN6095, now in preclinical testing. In addition, we
and sanofi-aventis are currently contemplating further development of MLN3897, a small molecule CCR1 inhibitor.

Prosecution
of development candidates discovered through the collaboration will continue until marketing approval or termination of development by the parties. Either party may terminate

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development
of a development candidate prior to marketing approval, in which case the other party may continue to develop such candidate subject to payment of royalties to the other party.

Manufacturing

Our strategy with regard to manufacturing is to contract with third parties to meet our needs for commercial supply and, as to most of our compounds, to meet our
needs for research, development, preclinical testing and clinical trials. Therefore, we have limited manufacturing capabilities and produce only a small amount of product for research and development
and preclinical testing.

We
have established an in-house quality assurance/control program to ensure that our products and product candidates are manufactured in accordance with applicable
regulations. We require that our contract manufacturers adhere to current Good Manufacturing Practices, or GMP, except for products and product candidates for toxicology studies and animal studies,
which we generally require to be manufactured in accordance with current Good Laboratory Practices, or GLP. The facilities of our contract manufacturers of marketed products must pass regular
post-approval inspections by the FDA and other agencies.

The
FDA or other regulatory agencies must approve the processes and the facilities that may be used for the manufacture of any of our potential drug substances and drug products. The
manufacture of our products and product candidates is based in part on technology that we believe to be proprietary to our contract manufacturers. In addition, some of our manufacturers may develop
process technology related to the manufacture of our compounds that such suppliers own either independently or jointly with us. This could increase our reliance on such manufacturers, require us to
obtain a license from such manufacturers in order to have our products manufactured, or result in us not benefiting from the potential efficiencies of new process technologies.

We
manage the commercial and clinical supply chains for the production of both VELCADE and INTEGRILIN. We rely on third party contract manufacturers for the manufacturing of the active
ingredient, formulation, fill/finish and packaging of VELCADE for both commercial purposes and for ongoing clinical trials. We have established long term supply relationships for the production of
commercial supplies of VELCADE. We believe we currently have a sufficient quantity of bortezomib, the active pharmaceutical ingredient necessary to make VELCADE, to meet the anticipated commercial
demand for the product for 2008 and to fulfill the needs for our ongoing and planned clinical trials. We work with two manufacturers to manufacture bortezomib and one manufacturer to complete
fill/finish for VELCADE. We have contracted with an additional manufacturer for the
fill/finish of VELCADE. We expect that this additional manufacturer will provide services to us in the future.

We
also rely on third party contract manufacturers for the clinical and commercial production of INTEGRILIN. Two manufacturers provide us with eptifibatide, the raw material necessary to
make INTEGRILIN, for both clinical trials and commercial supply. One of the current manufacturers owns the process technology used by it. We expect to cease receiving supplies of eptifibatide from
this manufacturer by the end of 2008. The process technology for the production of eptifibatide used by the second manufacturer is owned by us. SGP and GSK have had this proprietary process technology
approved in the United States and in the European Union, and, we, GSK or SGP are responsible for submitting that proprietary process technology for approval in other countries, as required. Our supply
agreement with this manufacturer ends in 2011. Two approved manufacturers currently perform fill/finish services for INTEGRILIN for us, and we have two packaging suppliers for the United States.

Sales and Marketing

We have built a specialized oncology sales force with approximately 100 sales representatives and managers located across the United States. This sales force
markets VELCADE in its approved

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indications
to physicians, hospitals and other health care providers. Under our agreement with OBI, OBI began jointly promoting VELCADE to U.S.-based physicians in the first quarter of 2007. OBL or
its affiliates market VELCADE outside of the United States and pay us distribution fees on product sales. See "Our CollaborationsOrtho Biotech Collaborations." All sales of VELCADE in the
United States are distributed through a sole-source distribution model, where we sell directly to a third party who in turn distributes to the wholesaler base.

SGP's
sales force markets INTEGRILIN to clinical cardiologists, interventional cardiologists and emergency medicine physicians. GSK markets and sells INTEGRILIN in the European Union and
other European countries, and SGP sells and markets INTEGRILIN elsewhere outside the United States. See "Our CollaborationsINTEGRILIN CollaborationsSGP Collaboration" and
"Our CollaborationsINTEGRILIN CollaborationsGSK License Agreement."

We
have not developed commercialization plans for our product candidates that may receive marketing approval in the future because the manner in which we will commercialize these product
candidates will depend in large part on their market potential and our financial resources. We may decide to perform all necessary commercial functions for these products on our own or we may
establish co-promotion, collaboration, licensing or other arrangements for the marketing and sale of some products in some or all geographic markets.

Sales
of VELCADE, INTEGRILIN and product candidates that may be approved in the future will depend heavily upon the availability of reimbursement from third party payors, such as
government and private insurance plans. We meet with administrators of these plans to discuss the potential medical benefits and cost-effectiveness of our products. We believe this
approach may assist in obtaining reimbursement authorization for our products from these third party payors. See "Government RegulationThird Party Reimbursement."

Competition

We currently face competition, and believe significant long-term competition can be expected, from a range of pharmaceutical and biotechnology
companies. This competition may become more intense as we develop additional products. Some competitors have greater resources and experience than we have. Many of these companies have commercial
arrangements with other companies in the biotechnology industry to supplement their own research and development capabilities.

The
introduction of new products or the development of new processes by competitors or new information about existing products may result in price reductions or product replacements,
even for products protected by patents. Other factors that may affect our ability to meet competition include the skill of our employees and our ability to recruit and retain skilled employees, our
program of seeking patent protection for our discoveries and advances and our research, development and regulatory affairs capabilities. Many large pharmaceutical and biotechnology companies have
significantly larger intellectual property estates than we do, more substantial capital resources than we have and greater capabilities and experience than we do in discovery, research, preclinical
and clinical development, sales, marketing, manufacturing and regulatory affairs.

Over
the longer term, our and our collaborators' abilities to successfully market products, expand their usage and bring new products to the marketplace will depend on many factors,
including:



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We
expect traditional chemotherapy treatments and other therapies on the market and in development, including other proteasome inhibitors, to compete with VELCADE. In particular, in
December 2005, the FDA granted Celgene Corporation approval for Revlimid® (lenalidomide) for the treatment of a subset of patients with myelodysplastic syndromes, a group of related blood
disorders, and in June 2006 for the treatment of patients with multiple myeloma who have received at least one prior therapy. Competition from Revlimid may limit future sales of VELCADE. Additionally,
in May 2006, the FDA approved the use of Celgene's Thalomid® (thalidomide) for the treatment of newly diagnosed multiple myeloma. We anticipate that Celgene will seek approval of Revlimid
for newly diagnosed multiple myeloma in the near-term. There are also other potentially competitive therapies that are in late-stage clinical development for multiple myeloma.
We believe that VELCADE generally competes with other marketed therapies on the basis of efficacy, safety, convenience and price.

Due
to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address such diseases is large, and we expect the already intense competition in
this field to increase. INTEGRILIN generally competes with other therapies on the basis of efficacy, safety, convenience and price. There are two marketed GP IIb-IIIa inhibitors
which compete with INTEGRILIN in the United States and Europe:



Sales
of INTEGRILIN could also be negatively impacted in the future by other competitive factors including:



Drug Research, Discovery and Development

A key element of our overall strategy is to build a sustainable pipeline of innovative new treatments in areas of high unmet medical needcancer,
inflammatory bowel and other inflammatory diseases. Our goal is to generate a sufficiently large portfolio of discovery and development programs at various stages of maturity so that we can move new
drugs through clinical development and onto the market on a regular basis.

To
achieve this goal, we have focused on developing a comprehensive understanding of the mechanisms and pathways that underlie important diseases and identifying appropriate biological
targets. Then we seek to identify and optimize small molecule compounds or antibodies that interact with targets in a desired manner. We test these drug candidates in animal models to assess their
likely suitability as therapeutic products. For candidates meeting our criteria for clinical development, we then move into human clinical testing to establish the safety and efficacy of these
experimental products and to understand therapeutically important differences among people. At any stage of this process, we may encounter unexpected difficulties and may need to delay or terminate
programs or go back to repeat several steps with slight variations, in an effort to ensure that we bring the most suitable new drug candidate through clinical testing.

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In order to focus our efforts and resources, throughout the discovery and development process we currently rely substantially upon third parties and expect to continue to do so in the
future. For example, we rely on third parties to provide us with discovery technology services, produce material for preclinical and clinical testing purposes and perform clinical development
activities.

The
expertise of our scientific, clinical and regulatory groups is critical. To augment our internal discovery and development capabilities, we continuously evaluate opportunities to
license or acquire rights to drugs or drug candidates that have been developed outside of our company.

We
are devoting fewer personnel and resources to research and discovery activities than we have in the past. As a result of this shift, we recorded net restructuring charges in 2007 of
approximately $12.9 million, in 2006 of approximately $20.4 million and in 2005 of approximately $77.1 million and expect to record additional restructuring charges during 2008 of
less than $5.0 million.

Our
research and development expenses totaled $287.1 million in 2007, $310.9 million in 2006 and $334.1 million in 2005. Our research and development expenses are
primarily company-sponsored.

Patents and Proprietary Rights; Licenses

Patents

Our success depends in part on our ability to obtain and maintain proprietary protection for our products, product candidates, technology and
know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We generally seek United States and foreign patent
protection for the genes, proteins and the antibody and small-molecule drug leads that we discover as well as possible therapeutic, diagnostic and pharmacogenomic products and processes, drug
screening methodologies and other inventions based on
such genes, proteins, antibodies and small molecules. We also seek patent protection or rely upon trade secret rights to protect other technologies which may be used to discover and characterize
genes, proteins, antibodies and small molecules or may be used to develop and manufacture novel therapeutic, diagnostic and pharmacogenomic products and processes.

We
own issued United States patents, granted foreign patents and pending United States and foreign applications for VELCADE. The issued U.S. patents related to VELCADE expire in 2014
with patent term extension for VELCADE composition of matter expiring in 2017. The issued foreign patents expire in 2015 with extensions obtained in several EU countries through 2019 and pending in
other countries.

We
own issued United States patents, granted foreign patents and pending United States and foreign applications for INTEGRILIN. The issued United States patents that cover INTEGRILIN
expire in 2014 and 2015 and the issued foreign patents expire between 2010 and 2014, including the exclusivity extensions we have received in several countries.

We
also own issued patents and/or pending United States and foreign patent applications related to MLN0002 and MLN1202. The issued United States patents for MLN0002 expire in 2015 and
2016. The issued United States patents for MLN1202 expire in 2018.

Licenses

We have obtained licenses from various parties for rights to use proprietary technologies and compounds. These licenses generally are for a fixed duration,
typically the life of the licensed patents, and require us to use reasonable or diligent efforts to develop and commercialize and to pay ongoing royalties on product sales. We are the exclusive
licensee of issued United States and foreign patents and/or pending United States and foreign applications relating to our products on the market and in clinical development.

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For
VELCADE, we are a party to an exclusive worldwide Patent License Agreement with the U.S. Public Health Service, or PHS, dated December 12, 2002. This agreement provides us
with the right to use the patents belonging to PHS relating to the formulation of VELCADE. Under this agreement we have obligations to pay PHS up-front royalty payments, royalty
milestones, royalties on net sales of VELCADE and sublicensing royalties. The license extends through the expiration of any licensed patents that may result from PHS' pending applications unless it is
terminated earlier by PHS
to meet requirements for public use specified by law, or based on a default by us or a failure to meet our obligations under the agreement, in either case, following a cure period. The issued United
States patents to which this license relates expire in 2022.

Trademarks

We currently own a number of trademarks and servicemarks including: Millennium, the Millennium "M" logo and design, "Transcending the Limits of Medicine,"
VELCADE, INTEGRILIN and "Breakthrough Science. Breakthrough Medicine." All of these marks are covered by registrations or pending applications for registration in the United States Patent and
Trademark Office and in the patent and trademark offices of many other countries. The U.S. registrations for these trademarks will be valid and will not expire for so long as we continue to use and
properly maintain their registrations (e.g. obtain renewals at the appropriate time and pay appropriate fees).

Government Regulation

Regulatory Compliance

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of our products and in
ongoing research and product development activities. All of our products require regulatory approval by governmental agencies prior to commercialization. In particular, our products are subject to
rigorous preclinical and clinical testing and other premarket approval requirements by the FDA and regulatory authorities in other countries. Various statutes and regulations also govern or influence,
among other things, the manufacturing, safety, labeling, storage, record keeping, distribution and marketing of our products. The lengthy process of seeking these approvals, and the subsequent
compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, any delay in obtaining or any failure to maintain regulatory
approvals could materially adversely affect our business.

In
addition, the recently enacted Food and Drug Administration Amendments Act of 2007, or FDAAA, grants significant new powers to the FDA, many of which are aimed at improving the safety
of drug products before and after approval. In particular, the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug
labeling to reflect new safety information, and require risk evaluation and mitigation strategies for certain drugs, including certain currently approved drugs. It also significantly expands the
federal government's clinical trial registry and results databank and creates new restrictions on the advertising and promotion
of drug products. Under the FDAAA, companies that violate these and other provisions of the new law are subject to substantial civil monetary penalties.

The
activities required before a biopharmaceutical product may be marketed in the United States begin with preclinical testing. Preclinical tests include laboratory evaluation of product
chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies, together with manufacturing information, analytical data and
a proposed clinical trial protocol and other information, must be submitted to the FDA as part of an investigational new drug application, or IND, which must be reviewed by the FDA and become
effective before proposed clinical testing can begin. The study protocol and informed consent

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information
for subjects in clinical trials must also be submitted to an independent institutional review board, or IRB, for approval.

Typically,
clinical testing prior to approval involves a three-phase process, but the phases may overlap or be combined.



The
FDA, the IRB, or the clinical trial sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable
health risk or for failure to comply with the IRB's requirements, or may impose other conditions.

The
results of the preclinical and clinical testing of a pharmaceutical product, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the
product, results of chemical studies and other relevant information, are then submitted to the FDA for review and potential approval to commence commercial sales. For a chemical pharmaceutical
product, the submission is in the form of a new drug application, or NDA, and for a biological pharmaceutical product, the submission is in the form of a biologic license application, or BLA. In
responding to an NDA or a BLA, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for
approval. We cannot assure that any approval required by the FDA will be obtained on a timely basis, if at all.

Among
the conditions for an NDA or a BLA approval is the requirement that the applicable manufacturing, clinical, pharmacovigilance, quality control and manufacturing procedures conform
on an ongoing basis with the FDA's good clinical practices, or GCP, GLP, for specific non-clinical toxicology studies, current GMP and computer information system validation standards.
Before approval of an NDA or BLA, the FDA will perform a prelicensing inspection of clinical sites, manufacturing facilities and the related quality control records to determine compliance with these
requirements. To assure compliance, applicants must continue to expend time, money and effort in the area of training, production and quality control. After the applicant is licensed for the
manufacture of any product, manufacturers are subject to periodic unannounced inspections by the FDA. We also face similar inspections coordinated by the EMEA by inspectors from particular European
Union member states that conduct inspections on behalf of the European Union.

Once
an approval is granted, a product will be subject to pervasive and continuing regulation by the FDA and other regulatory authorities, including, among other things, requirements
relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. In addition, the FDA may require
post-approval testing, including phase IV studies, and surveillance programs to monitor the product's safety or efficacy after approval. The FDA may withdraw product approvals if
compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologic products may be promoted only for the approved
indications

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and
in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is
found to have improperly promoted off label uses may be subject to significant liability.

In
addition, the distribution of prescription pharmaceutical products in the U.S. is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution and
recordkeeping requirements for drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state
laws limit the
distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

Regulatory
requirements and approval processes in countries outside the United States can be at least as rigorous, costly and uncertain as those requirements and processes in the United
States.

We
are also subject to various federal and state laws pertaining to health care "fraud and abuse," including anti-kickback laws and false claims laws.
Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business,
including the purchase or prescription of a particular drug. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors,
including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items
or services. We have adopted the Pharmaceutical Research and Manufacturers of America Code, or the PhRMA Code, an industry code developed to govern interactions with healthcare professionals and we
have adopted processes that we believe enhance compliance with the PhRMA Code and these laws.

As
a result of gaining approval of and launching VELCADE, we are a participant in the Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, and under
amendments of that law that became effective in 1993. Participation in this program includes requirements such as extending comparable discounts under the PHS pharmaceutical pricing program. Under the
Medicaid rebate program, we pay a rebate for each unit of our product reimbursed by Medicaid. The amount of the rebate for each product is set by law as a minimum of 15.1% of the average manufacturer
price, or AMP, of that product, or if it is greater, the difference between AMP and the best price available from us to any customer. The rebate amount also includes an inflation adjustment if AMP
increases faster than inflation. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services
grants from the PHS, as well as hospitals that serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The rebate amount is recomputed each quarter based on our reports of our
current average manufacturer price and best price for each of our products to the Centers for Medicare & Medicaid Services.

The
Medicaid Prescription Drug, Improvement and Modernization Act of 2003, or the MMA, has significantly changed how Medicare pays for VELCADE. As of January 1, 2005, Medicare
pays for products covered by the Part B benefit based on the average selling price, or ASP, plus 6%. Medicare had previously paid for these products based on 95% of the average wholesale price,
or AWP. To date, the change from the AWP to the ASP system has not had a material adverse impact on our ability to obtain adequate reimbursement for our products.

VELCADE
is available to authorized users of the Federal Supply Schedule of the General Services Administration. Since 1993, as a result of the Veterans Health Care Act of 1992, or VHC
Act, federal law has required that product prices for purchases by the Veterans Administration, the Department of Defense, Coast Guard, and the PHS, including the Indian Health Service, be discounted
by a minimum of 24% off the AMP to non-federal customers, the non-federal average manufacturer price, or non-FAMP. Our computation and report of
non-FAMP is used in establishing the price, and the

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accuracy
of the reported non-FAMP may be audited by the government under applicable federal procurement laws.

Under
the laws of the United States, the countries of the European Union and other nations, we and the institutions where we sponsor research are subject to obligations to ensure the
protection of personal information of human subjects participating in our clinical trials. We have instituted procedures that we believe will enable us to comply with these requirements and the
contractual requirements of our data sources. The laws and regulations in this area are evolving and further regulation, if adopted, could affect the timing and the cost of future clinical development
activities.

We
are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current and
potential future federal, state, or local regulations. Our research and development activities involve the controlled use of hazardous materials, chemicals, biological materials, and various
radioactive compounds. We believe that our procedures comply with the standards prescribed by local, state and federal laws and regulations; however, the risk of injury or accidental contamination
cannot be completely eliminated. We conduct our research and manufacturing activities in voluntary compliance with the National Institutes of Health Guidelines for Recombinant DNA Research.

We
are subject to the United States Foreign Corrupt Practices Act which prohibits corporations and individuals from engaging in specified activities to obtain or retain business or to
influence a person working in an official capacity. Under this act, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government
staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. Our present and future business has
been and will continue to be subject to various other laws and regulations.

Pricing Controls

The levels of revenues and profitability of biopharmaceutical companies may be affected by the continuing efforts of government and third party payors to contain
or reduce the costs of health care through various means. For example, in some foreign markets, pricing reimbursement or profitability of
therapeutic and other pharmaceutical products is subject to governmental control. In Canada this practice has led in some instances to lower priced products than in the United States. As a result,
importation of products from Canada into the United States may result in reduced product revenues. In many foreign markets, including the countries in the European Union, pricing of pharmaceutical
products is subject to governmental control. In the United States there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar
governmental pricing reimbursement and pricing controls. In addition, legislation has been introduced in the U.S. Congress that, if enacted, would permit more widespread importation or
re-importation of pharmaceutical products from foreign countries into the United States, including from countries where the products are sold at lower prices than in the United States.
While we cannot predict whether any future legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition
and results.

Third Party Coverage and Reimbursement

In the United States and elsewhere, sales of therapeutic and other pharmaceutical products are dependent in part on the availability of coverage and reimbursement
from third party payors, such as government and private insurance plans. Third party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all
of the FDA-approved drugs for a particular indication. Increasingly, third party payors are challenging the prices charged for medical products and services. As a result, in the future, our products
could be considered not cost effective or

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reimbursement
to the physician or consumer could become unavailable or could be insufficient to allow us to sell our products on a competitive and profitable basis.

Employees

As of February 22, 2008, we had approximately 966 full-time employees. We believe that relations with our employees are good.

Available Information

Our Internet website is http://www.millennium.com. We make available free of charge through our website our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. We have made these reports available through our website during the period
covered by this report and, since November 15, 2002, at the same time that they become available on the Securities and Exchange Commission's website.

Our
code of conduct, the Core Values Handbook, our Board Policies, and the charters of the Audit Committee, Compensation and Talent Committee, Research and Development Committee and
Board Governance Committee are all available on the corporate governance section of our website at http://www.millennium.com/investors. Stockholders may request a free copy of any of these documents
by writing to Investor Relations, Millennium Pharmaceuticals, Inc., 40 Landsdowne Street, Cambridge, Massachusetts, U.S.A. 02139 or submitting a request through the website.

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Item 1A.    RISK FACTORS

This Annual Report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and
projections about us, our future performance, our business, our beliefs and our management's assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press
releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls.
Words such as "expect," "anticipate," "outlook," "could," "target," "project," "intend," "plan," "believe," "seek," "estimate," "should," "may," "will," "assume" or "continue," and variations of such
words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve important risks, uncertainties and
assumptions that are difficult to predict. We describe some of the risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, in
this "Risk Factors" section. We have based our forward-looking statements on our management's beliefs and assumptions based on information available to our management at the time the statements are
made.

We
caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements. Reference is made in particular to
forward-looking statements about our growth and future financial and operating results, discovery and development of products, strategic alliances, regulatory approvals, competitive strengths,
intellectual property, litigation, mergers and acquisitions, market acceptance or continued acceptance of our products, accounting estimates, financing activities, ongoing contractual obligations and
sales efforts. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

Regulatory Risks

Our business will be harmed if we do 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 additional indications. To do so, we will need to successfully conduct clinical
trials in accordance with good clinical practices and then apply for and obtain the appropriate regulatory approvals. If we are unsuccessful in our clinical trials, or we experience a delay in
obtaining or are unable to obtain authorizations for expanded uses of VELCADE, our revenues will not grow as expected and our business and operating results will be harmed. For example, in December
2007 we submitted a sNDA to the FDA, and OBL submitted a variation to their Marketing Authorization to the EMEA, to market VELCADE for patients with newly diagnosed multiple myeloma. If these
submissions are not approved by the regulatory agencies, sales of VELCADE could be materially lower than anticipated. Future sales of VELCADE could also be materially lower than expected if the
results from our phase III clinical trial in patients with relapsed follicular or marginal zone NHL do not justify a label expansion into this indication.

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

VELCADE is currently approved for marketing in the United States and a total of 85 countries including the countries of the European Union. If OBL is not able to
obtain approval to market VELCADE in additional countries, OBL will lose the opportunity to sell in those countries and we may not be able to earn potential milestone payments under our agreement with
OBL or collect potential distribution fees on sales of VELCADE by OBL in those countries.

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

The products that we are developing require research and development, extensive preclinical studies and clinical trials and regulatory approval, including the
submission of user fees, prior to any commercial sales. This process is expensive and lengthy, and can often take a number of years. In some cases, the length of time that it takes for us to achieve
various regulatory approval milestones affects the payments that we are eligible to receive under our strategic alliance agreements.

We
may need to successfully address a number of technological challenges in order to complete development of our products. Moreover, these products may not be effective in treating any
disease or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude completing development, obtaining regulatory approval or prevent or limit
commercial use. For example, in November 2007, we announced that the results from a phase II trial of MLN3897 did not achieve the pre-established criteria for moving this product
candidate forward in rheumatoid arthritis.

Failure
to gain approval for the products we are developing could have a material adverse impact on our business.

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

Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, adverse event reporting and
promotional activities for such product, is subject to continual review and periodic inspections by the FDA and other regulatory authorities. Later discovery of previously unknown problems or safety
issues with our products or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the
products from the market, warning letters, product recalls or seizures, the imposition of total or partial suspension of production or distribution, fines, civil or criminal penalties or a refusal by
the FDA and other regulatory authorities to approve pending applications for marketing approval of new drugs or supplements to approved applications. As with any recently approved therapeutic product,
we expect that our knowledge of the safety profile for VELCADE will expand after wider usage, and the possibility exists of patients receiving VELCADE treatment experiencing unexpected or more
frequently than expected serious adverse events, which could have a material adverse effect on our business.

We
are a party to collaborations that transfer responsibility for specified regulatory requirements, such as filing and maintenance of marketing authorizations and safety reporting, to
our collaborators. If our collaborators do not fulfill these regulatory obligations, products, including VELCADE and INTEGRILIN, could be withdrawn from the market, which would have a material adverse
effect on
our business. Additionally, the FDA requires that we, along with our collaborators and third party manufacturers, may not employ, in any capacity, persons who have been debarred under the FDA's
Application Integrity Policy. Employment of such a debarred person (even if inadvertently) may result in delays in the FDA's review or approval of our products, or the rejection of data developed with
the involvement of such person(s).

Additionally,
because VELCADE and other products we may develop could be used in combination with therapies we do not control, our sales of VELCADE and other future products could be
adversely impacted if those combined therapies became subject to increased safety concerns, were withdrawn from the market or otherwise lost favor among practitioners.

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Recently enacted legislation may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to produce, market
and distribute products after approval.

On September 27, 2007, the President signed the FDAAA. The FDAAA grants a variety of new powers to the FDA, many of which are aimed at improving the safety
of drug products before and after approval. Under the FDAAA, companies that violate the new law are subject to substantial civil monetary penalties. While we expect the FDAAA to have a substantial
effect on the pharmaceutical industry, the extent of that effect is not yet known. As the FDA issues regulations, guidance and interpretations relating to the new legislation, the impact on the
industry, as well as our business, will become clearer. The new requirements and other changes that the FDAAA imposes may make it more difficult, and likely more costly, to obtain approval of new
pharmaceutical products and to produce, market and distribute products after approval.

Some of our products may be based on new technologies, which may affect our ability or the time we require to obtain necessary regulatory approvals.

Products that result from our research and development programs may be based on new technologies, such as proteasome inhibition, Nedd 8activating
enzyme inhibition, IKK beta inhibition and other new therapeutic approaches that have not been extensively tested in humans. The regulatory requirements governing these types of products may be more
rigorous than for conventional products. As a result, we may experience a longer development or regulatory process in connection with any products that we develop based on these new technologies or
new therapeutic approaches.

Risks Relating to Our Business, Strategy and Industry

Our revenues over the next several years will be materially dependent on the commercial success of VELCADE and INTEGRILIN.

VELCADE was approved by the FDA in May 2003 and commercially launched in the United States shortly after that date. Marketing of VELCADE outside the United States
commenced in April 2004. INTEGRILIN has been on the market in the United States since June 1998. Marketing of INTEGRILIN outside the United States commenced in mid-1999.

Our
business plan contemplates obtaining marketing authorization to sell VELCADE in many countries for the treatment of all patients with multiple myeloma and both in the United States
and abroad for other indications. We will be adversely affected if VELCADE does not receive such approvals, or if such approvals are subject to limitations on the indicated uses for which we may
market the product.

We
will not achieve our business plan, and we may be forced to scale back our operations and research and development programs, if we do not obtain regulatory approval to sell VELCADE in
additional countries or for additional therapeutic uses or the sales of VELCADE or INTEGRILIN do not meet our expectations.

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

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

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the
products that we or our collaborators have developed, or are seeking to develop and commercialize, non-competitive or obsolete.

With
respect to VELCADE, we face competition from Celgene Corporation's Thalomid and Revlimid. In May 2006, the FDA approved the use of Thalomid for the treatment of newly diagnosed
multiple myeloma. Revlimid was approved by the FDA in December 2005 for the treatment of a subset of patients with myelodysplastic syndromes and in June 2006 for multiple myeloma patients who have
received at least one prior therapy. We also face competition for VELCADE from traditional chemotherapy treatments and other potentially competitive therapies for VELCADE, including other proteasome
inhibitors, some of which are in late-stage clinical development for the treatment of multiple myeloma. In addition, multiple myeloma therapies in development may reduce the number of
patients available for VELCADE treatment through enrollment of these patients in clinical trials of potentially competing products.

Due
to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address these diseases is large, and we expect the already intense competition in
this field to increase. The most significant competitors for SGP and GSK in marketing INTEGRILIN are major pharmaceutical companies and biotechnology companies. The two products that compete directly
with INTEGRILIN in the GP IIb-IIIa inhibitor market segment are ReoPro® (abciximab), which is produced by Johnson & Johnson and sold by Johnson & Johnson
and Eli Lilly and Company, and Aggrastat® (tirofiban HCl), which is produced and sold by Merck & Co., Inc. outside of the United States and by Medicure Inc. in
the United States.

Sales
of INTEGRILIN could also be negatively impacted in the future by other competitive factors, including:



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

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

Additionally,
we make provisions at the time of sale of VELCADE for discounts, product returns and governmental and contractual adjustments based on historical experience updated for
changes in facts and circumstances, as appropriate. To the extent these allowances are incorrect, we may need to adjust our estimates, which could have a material impact on the timing and actual
amount of revenue we are able to recognize from these sales. Also, pricing decisions may cause fluctuations in our quarterly results. For example, purchasers of VELCADE may increase purchase orders in
anticipation of a price increase and reduce order levels following the price increase.

A
significant portion of INTEGRILIN domestic pharmaceutical sales is made by SGP to major drug wholesalers. These sales are affected by fluctuations in the buying patterns of these
wholesalers and the corresponding changes in inventory levels maintained by them. Inventory levels held by these

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wholesalers
may fluctuate significantly from quarter to quarter. If these wholesalers build inventory levels excessively in any quarter, sales to the wholesalers in future quarters may unexpectedly
decrease notwithstanding steady prescriber demand. Because SGP commercializes INTEGRILIN and manages product distribution, we have limited insight into or control over factors affecting changes in
distributor inventory levels. If SGP does not appropriately manage this distribution, SGP may not realize sales goals for the product which would reduce the royalty revenue we recognize and thus
adversely affect our business.

Because many of our research and development projects are based on new technologies and new therapeutic approaches that have not been extensively tested
in humans, it is possible that our discovery process will not result in commercial products.

The process of discovering drugs based upon genomics and other new technologies is evolving rapidly. Our effort to develop new therapeutics is focused on the
discovery of novel targets and pathways. Many novel targets and pathways that appear viable in preclinical models do not result in intended biologic outcomes due to pathway redundancy in humans. As a
result, we anticipate that many of these targets and pathways will not result in the successful development of marketable therapeutics. Rapid technological development by us or others may result in
compounds, products or processes becoming obsolete before we recover our development expenses. Further, manufacturing costs or products based on these new technologies may make products uneconomical
to commercialize.

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

We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they
can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure
can occur at any stage of testing. Interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be seen in later
studies. Any preclinical or clinical test may fail to produce results satisfactory to the FDA or other regulatory authorities. Preclinical and clinical data can be interpreted in different ways, which
could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial, adverse medical events during a clinical trial or safety issues
resulting from products of the same class of drug could cause pending regulatory action to be delayed, a preclinical study or clinical trial to be repeated or prolonged or a program to be terminated,
even if other studies or trials relating to the program are successful.

We
may not complete our planned preclinical or clinical trials on schedule or at all. We may not be able to confirm the safety and efficacy of our potential drugs in
long-term clinical trials, which may result in a delay or failure to commercialize our products. We may have difficulty obtaining a sufficient number of appropriate patients or clinical
support to conduct our clinical trials as planned. A number of additional events could delay the completion of our clinical trials, including:



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In
addition, institutional review boards or regulators, including the FDA, or our collaborators may hold, suspend or terminate our clinical trials for various reasons, including
noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks. As a result, we may have to expend substantial additional
funds to obtain access to resources or delay or modify our plans significantly. Our product development costs will increase if we experience delays in testing or approvals. Significant clinical trial
delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential products.

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

We depend on independent clinical investigators and, in some cases, contract research organizations and other third party service providers to conduct the
clinical trials of our product candidates and expect to continue to do so. We rely heavily on these parties for successful execution of our clinical trials, but we do not control many aspects of their
activities. Nonetheless, we are responsible for confirming that each of our clinical trials is conducted in accordance with the general investigational plan and protocol. Our reliance on these third
parties that we do not control does not relieve us of our responsibility to comply with the regulations and standards of the FDA relating to good clinical practices. Third parties may not complete
activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or the applicable trial plans and protocols. The failure of these third parties to carry out
their obligations could delay or prevent the development, approval and commercialization of our product candidates or result in enforcement action against us.

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

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

Because of the high demand for talented personnel within our industry, we could experience difficulties in recruiting or retaining employees necessary
for our success and growth.

Because competition for talented employees within our industry is fierce, we may not be successful in hiring, retaining or promptly replacing key management,
sales, marketing and technical personnel. Any failure to expeditiously fill our needs for key personnel could reduce our operational capacity and productivity and have a material adverse effect on our
business.

Our strategy of generating growth through license arrangements and acquisitions may not be successful.

An important element of our business strategy is to acquire additional therapeutic agents through license arrangements or acquisitions of other companies.
Although we regularly review and engage in discussions with third parties with respect to such transactions, we may be unable to license or acquire

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other
suitable products or product candidates from third parties for a number of reasons. In particular, the licensing and acquisition of pharmaceutical and biological products, including through the
acquisition of other companies, is a competitive area. A number of other companies are also pursuing strategies to license or acquire products within our therapeutic focus areas of cancer and
inflammation. These other companies may have a competitive advantage over us due to their size, cash resources and greater drug research, discovery and development and commercialization capabilities.

Other
factors that may prevent us from licensing or otherwise acquiring suitable products and product candidates include the following:



In
addition, we expect competition for licensing and acquisition candidates in the biotechnology and pharmaceutical fields to increase, which may mean fewer suitable opportunities for us
as well as higher prices. If we are unable to successfully obtain rights to suitable products and product candidates, our business, financial condition and prospects for growth could suffer.

If we fail to successfully manage any acquisitions, our ability to develop our product candidates and expand our product candidate pipeline may be
harmed.

Following any future acquisitions, our failure to adequately address the financial, operational or legal risks of these transactions could harm our business.
Financial aspects of these transactions that could alter our financial position, reported operating results or stock price include:



Operational
risks that could harm our existing operations or prevent realization of anticipated benefits from these transactions include:



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If
we are unable to successfully manage our acquisitions, our ability to develop new products and continue to expand our product pipeline may be limited.

Risks Relating to Our Financial Results and Need for Financing

We have incurred substantial losses and cannot be certain when we will achieve ongoing profitability.

We recorded net income of $14.9 million for the year ended December 31, 2007, but have incurred net losses of $44.0 million for the year
ended December 31, 2006 and $198.2 million for the year ended December 31, 2005. It is possible that we will incur operating losses in future periods which may be significant. As
of December 31, 2007, we had an accumulated deficit of $2.5 billion.

We
expect to continue to incur significant expenses in connection with our research and development programs and commercialization activities. As a result, we will need to generate
significant revenues to continue to operate profitably. Our ability to generate future profits would be adversely impacted if our acquired intangible assets, primarily resulting from our acquisition
of COR, and goodwill became impaired as a result of reduced market capitalization, reduced VELCADE revenues, product failures or withdrawals.

We
cannot be certain if and to what extent we will achieve ongoing profitability because of the significant uncertainties with respect to our ability to successfully develop products and
generate revenues from the sale of approved products and from existing and potential future strategic alliances.

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

We will require substantial funds to conduct research and development, including preclinical testing and clinical trials of our potential products. We will also
require substantial funds to meet our obligations to our collaborators, manufacture and market products that are approved for commercial sale, including VELCADE, and meet our debt service obligations.
We may also require additional financing to execute on product in-licensing or acquisition opportunities. Additional financing may not be available when we need it or may not be available
on favorable terms.

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

Our indebtedness and debt service obligations may adversely affect our cash flow and otherwise negatively affect our operations.

At December 31, 2007, we had approximately $250.0 million of convertible debt and $75.0 million of capital lease obligations. We may incur
additional indebtedness in the future, including long term debt, credit lines and property and equipment financings to finance capital expenditures. We intend to satisfy our current and future debt
service obligations from cash generated by our operations, our existing cash and investments and funds from external sources. We may not have sufficient funds and we may be unable to arrange for
additional financing to satisfy our principal or interest payment obligations when those obligations become due. Funds from external sources may not be available on acceptable terms, or at all.

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Our
indebtedness could have significant additional negative consequences, including:



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

We recorded net restructuring charges of $12.9 million for the year ended December 31, 2007, $20.4 million for the year ended
December 31, 2006, and $77.1 million for the year ended December 31, 2005. Costs associated with our restructuring efforts have included reducing personnel and infrastructure
resulting from the restructured relationship with SGP for INTEGRILIN in 2005 and reducing our in-house research and development technologies and headcount in areas in which we believe the
work can now be outsourced cost effectively. As a result of these efforts, we expect to recognize other cost savings. We may not achieve our estimated expense reductions or
recognize other cost savings anticipated from restructurings because such savings are difficult to predict and speculative in nature.

A portion of our revenues and expenses is subject to exchange rate fluctuations in the normal course of business, which could adversely affect our
reported results of operations.

We receive distribution fees from OBL based on worldwide sales of VELCADE outside of the U.S. and we make payments for certain inventory purchases and clinical
trials outside of the U.S. As a result, our financial position, results of operations and cash flows can be affected by fluctuations in foreign currency exchange rates, primarily the euro. Movement in
foreign currency exchange rates could cause royalty revenue or clinical trial costs to vary significantly in the future and may affect period-to-period comparisons of our
operating results. Historically, we have not hedged our exposure to these fluctuations in exchange rates.

Risks Relating to Collaborators

We depend significantly on our collaborators to work with us to commercialize and develop products including VELCADE and INTEGRILIN.

Outside of the United States, we commercialize VELCADE through an alliance with OBL. We began jointly promoting VELCADE in the United States in the first quarter
of 2007 under a two-year agreement with OBI. On September 1, 2005, we transferred exclusive U.S. commercialization and development rights of INTEGRILIN to SGP and SGP is solely
responsible for the commercialization and development of INTEGRILIN outside of Europe. GSK is responsible for marketing and selling INTEGRILIN in Europe. We conduct substantial discovery and
development activities through strategic alliances, including with OBL for the ongoing development of VELCADE.

We
expect to enter into additional alliances in the future, especially in connection with product development and commercialization. The success of our alliances depends heavily on the
efforts and activities of our collaborators.

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Each
of our collaborators has significant discretion in determining the efforts and resources that it will apply to the alliance and the degree to which it shares financial and product
sales and inventory information. Our existing and any future alliances may not be scientifically or commercially successful.

The
risks that we face in connection with these existing and any future alliances include the following:



We are substantially dependent on SGP for future revenues related to INTEGRILIN.

Under the terms of our revised agreement with SGP effective as of September 1, 2005, SGP began paying us royalties based on net product sales of
INTEGRILIN. Under the agreement, beginning in 2008, SGP no longer has minimum royalty obligations to us. As a result, if SGP's INTEGRILIN sales are less than expected, we will receive less royalty
revenue than we expect, which could have a material adverse effect on our financial results and our ability to fund other parts of our business.

We may not be successful in establishing additional strategic alliances, which could adversely affect our ability to develop and commercialize products.

An important element of our business strategy is entering into strategic alliances for the development and commercialization of selected products. In some
instances, if we are unsuccessful in reaching an agreement with a suitable collaborator, we may fail to meet all of our business objectives for the applicable product or program. We face significant
competition in seeking appropriate collaborators. Moreover, these alliance arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to
establish additional strategic alliances or other alternative arrangements. The terms of any additional strategic alliances or other arrangements that we establish may not be favorable to us. We may
incur significant infrastructure, research and development and other expenses as we try to maximize the value of assets subject to these arrangements. Moreover, such strategic alliances or other
arrangements may not be successful.

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Risks Relating to Intellectual Property

If we are unable to obtain patent protection for our discoveries, the value of our technology and products will be adversely affected. If we infringe
patent or other intellectual property rights of third parties, we may not be able to develop and commercialize our products or the cost of doing so may increase.

Our patent positions, and those of other pharmaceutical and biotechnology companies, are generally uncertain and involve complex legal, scientific and factual
questions. Our ability to develop and commercialize products depends in significant part on our ability to:



There is significant uncertainty about the validity and permissible scope of patents in our industry, which may make it difficult for us to obtain
patent protection for our discoveries.

The validity and permissible scope of patent claims in the pharmaceutical and biotechnology fields, including, for example, the genomics field, involve important
unresolved legal principles and are the subject of public policy debate in the United States and abroad. We have filed patent applications in the U.S. and abroad seeking patent protection on our
current products and our potential products and processes emanating from our research and development, and we have similarly obtained rights to various patents and patent applications from various
third parties under licensing arrangements. There is significant uncertainty both in the United States and abroad regarding the duration and enforceability of patent protection available for
pharmaceutical and biopharmaceutical products and processes. The ultimate scope of patent protection to be afforded such inventions will be dependent
upon the decisions rendered by patent offices, courts and legislators in the U.S. and abroad. Thus, there is no assurance that our pending patent applications, or those of third parties that we have
licensed, will ultimately be granted as patents or that those patents that have issued or will be issued in the future will withstand challenge in court or patent offices in the U.S. or abroad.

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

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

Our
MLN0002 and MLN1202 product candidates are humanized monoclonal antibodies. We are aware of third party patents and patent applications that relate to humanized or modified
antibodies, products useful for making humanized or modified antibodies and processes for making and using recombinant antibodies.

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With
respect to VELCADE, in June 2002, Ariad Pharmaceuticals, Inc., or Ariad, sent to us and approximately 50 other parties a letter offering a sublicense for the use of United
States Patent No. 6,410,516, which is exclusively licensed to Ariad. If this patent is valid and Ariad successfully sues us for infringement, we would require a license from Ariad in order to
manufacture and market VELCADE. In 2002, Ariad filed a lawsuit in the United States District Court for the District of Massachusetts against Eli Lilly and Company, or Lilly, alleging infringement of
certain claims of Ariad's patent. In May 2006, the jury rendered a verdict in favor of Ariad that the claims of the patent asserted in the lawsuit are valid and infringed by Lilly. The jury determined
that a reasonable royalty of 2.3% should be awarded. In July 2007, the court entered a judgment in accordance with the jury verdict in favor of Ariad against Lilly. We expect that Lilly will challenge
this judgment and the validity of the patent with the U.S. Court of Appeals. In July 2007, Lilly filed a motion to stay entry of the final judgment by the court pending re-examination of
the patent and Ariad filed an opposition to this motion. In April 2005, Lilly also filed a request in the United States Patent and Trademark Office to reexamine the patentability of certain claims of
Ariad's patent. In addition, we are
aware that Amgen Inc. has filed a declaratory relief action seeking an invalidity ruling with respect to this patent. However, Ariad's initial success in its claim against Lilly may increase
the possibility that Ariad could sue additional parties, including us, and allege infringement of the patent.

The
timing and ultimate outcome of the Lilly and Amgen litigations and the patent reexamination proceeding cannot be determined at this time. As a result, we cannot determine whether or
when a final determination as to allowance or rejection of the patent claims will be made or the outcome of any appeal of any such decision that may follow such a ruling. Thus, at the present time, we
cannot assess the probability of whether Ariad will seek to enforce the patent against other companies, including our company.

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

There has been substantial litigation and other proceedings regarding the patent and other intellectual property rights in the pharmaceutical and biotechnology
industries. We may become a party to patent litigation or other proceedings regarding intellectual property rights. For example, we believe that we hold patent applications that cover genes that are
also claimed in patent applications filed by others. Interference proceedings before the United States Patent and Trademark Office may be necessary to establish which party was the first to invent
these genes. In addition, from time to time, we receive unsolicited letters purporting to advise us of the alleged relevance of third party patents.

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

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

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

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

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to
our business.

We are a party to various license agreements. In particular, we license rights to patents for the formulation of VELCADE and issued patents relating to MLN0002,
MLN0518 and MLN1202. We may enter into additional licenses in the future. Our existing licenses impose, and we expect future licenses will impose, various diligence, milestone payment, royalty,
insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product
that is covered by the licensed patents.

Competition from generic pharmaceutical manufacturers could negatively impact our products sales.

Competition from manufacturers of generic drugs is a major challenge for us in the U.S. and is growing internationally. Upon the expiration or loss of patent
protection for one of our products, or upon the "at-risk" launch (despite pending patent infringement litigation against the generic product) by a generic manufacturer of a generic version
of one of our products, we could lose the major portion of sales of that product in a very short period, which could adversely affect our business.

Generic
competitors operate without our large research and development expenses and our costs of conveying medical information about our products to the medical community. In addition,
the FDA approval process exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and
efficacy
data of the innovator product. Generic products, however, need only demonstrate a level of availability in the bloodstream equivalent to that of the innovator product. This means that generic
competitors can market a competing version of our product after the expiration or loss of our patent and charge much less. The issued U.S. patents related to VELCADE expire in 2014 with patent term
extension for VELCADE expiring in 2017 and the issued foreign patents expire in 2015 with extensions issued or pending in a number of countries. However, we may not be granted any such potential or
pending extension. The issued United States patents that cover INTEGRILIN expire in 2014 and 2015 and the issued foreign patents expire between 2010 and 2014. Our patent-protected products also can
face competition in the form of generic versions of branded products of competitors that lose their market exclusivity.

In
addition, third parties could produce counterfeit products labeled as VELCADE, INTEGRILIN or other of our products in the future. Counterfeit products could reduce sales or compromise
goodwill associated with our product brands.

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Risks Relating to Product Manufacturing, Marketing and Sales

We depend on third parties to successfully perform certain sales, marketing and distribution functions on our behalf and we may be required to incur
significant costs and devote significant efforts to augment our existing capabilities.

We market and sell VELCADE in the United States through our cancer-specific sales force. In the first quarter of 2007, we began jointly promoting VELCADE in the
United States with OBI. Our success in selling VELCADE depends heavily on the performance of these sales forces. In areas outside the United States where VELCADE has received approval, OBL or its
affiliates market VELCADE. As a result, our ability to earn revenue related to VELCADE outside of the United States depends entirely on OBL.

SGP
exclusively markets INTEGRILIN in areas outside of Europe, including the United States, and GSK exclusively markets INTEGRILIN in Europe. As a result, our success in receiving
royalties and milestone payments from sales of INTEGRILIN depends entirely on the marketing efforts of these third parties.

Depending
on the nature of the products for which we obtain marketing approval, we may need to rely significantly on sales, marketing and distribution arrangements with our collaborators
and other third parties. For example, some types of pharmaceutical products require a large sales force and extensive marketing capabilities for effective commercialization. If in the future we elect
to perform sales, marketing and distribution functions for these types of products ourselves, we would face a number of additional risks, including the need to recruit a large number of additional
experienced marketing and sales personnel.

Because we have no commercial manufacturing capabilities, we are dependent on third party manufacturers to manufacture products for us, or we will be
required to incur significant costs and devote significant efforts to establish our own manufacturing facilities and capabilities.

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

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

There
are a limited number of contract manufacturers that operate under the FDA's current Good Manufacturing Practices, or GMP, regulations capable of manufacturing our products. In
addition, the FDA will inspect our contract manufacturers prior to granting approval of a new drug application, and will conduct periodic, unannounced inspections to ensure strict ongoing compliance
with current GMPs and other applicable regulations. If we are unable to arrange for third party manufacturing of our products, or to do so on commercially reasonable terms, we may not be able to
complete development of our products or commercialize them, or we may experience delays in doing so.

Reliance
on third party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including reliance on the third party for regulatory
compliance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or non-renewal of the
agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us. Any failure by our third party manufacturers to comply with applicable regulations,
including current GMP regulations, could result in sanctions being imposed on the manufacturers or us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant
marketing approval of our product candidates, delays, suspension or

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withdrawal
of approvals, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.

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

Because we have no commercial manufacturing capability for VELCADE or INTEGRILIN, we are dependent on third parties to produce product sufficient to
meet market demand.

We are responsible for managing the supply of material for all clinical and commercial production of VELCADE, including VELCADE that OBL sells or uses in clinical
trials, and INTEGRILIN, including INTEGRILIN that SGP and GSK sell or use in clinical trials.

We
rely on third party contract manufacturers to manufacture, fill/finish and package VELCADE for both commercial purposes and for all clinical trials. We have established
long-term supply relationships for the production of commercial supplies of VELCADE. We work with one manufacturer, with whom we have a long-term supply agreement, to complete
fill/finish for VELCADE, and have contracted with a second manufacturer who will provide fill/finish services for VELCADE in the future. If any of our current third party manufacturers performing
production and fill/finish for VELCADE are unable or unwilling to continue performing these services for us, and we are unable to find a replacement manufacturer or in the future we are otherwise
unable to contract with manufacturers to produce commercial supplies of VELCADE in a cost-effective manner, we could run out of VELCADE for commercial sale and clinical trials and our
business could be substantially harmed.

We
have no manufacturing facilities for INTEGRILIN and, accordingly, rely on third party contract manufacturers for the clinical and commercial production of INTEGRILIN. We have three
approved manufacturers, two of which currently provide us with eptifibatide, the active ingredient necessary to make INTEGRILIN. Solvay, one of the current manufacturers, owns the process technology
used by it
for the production of eptifibatide. We expect to cease receiving eptifibatide from Solvay by the end of 2008. Thereafter, Lonza will be our sole source manufacturer of eptifibatide, and we own the
process technology utilized by it. We have two approved manufacturers that currently perform fill/finish services for INTEGRILIN and two packaging suppliers for INTEGRILIN for the United States. If
our current manufacturers are unable to continue or decide to discontinue their manufacturing, fill/finish or packaging services and we are unable to secure alternative manufacturers, the supply of
INTEGRILIN could be adversely affected which could substantially harm our business. Furthermore, if we are responsible for supply chain failures that adversely impact OBL or SGP, we could be liable to
these parties for any losses they may incur.

In
2006, Solvay raised concerns that the new Millennium process may have been developed using information asserted to be confidential and proprietary to Solvay. We subsequently met with
Solvay to demonstrate why we believe no such information was used to develop our new process. If Solvay nevertheless brings a successful claim relating to these concerns and prevails, our ability to
practice our new process could be negatively impacted, which could adversely affect our ability to obtain INTEGRILIN from suppliers using the new process or the cost of manufacturing eptifibatide and
could in turn negatively impact our business.

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

The availability and levels of reimbursement by governmental and other third party payors affect the market for any pharmaceutical product or health care service.
These third party payors continually attempt to contain or reduce the costs of health care by challenging the prices charged for medical products and services. In some foreign countries, particularly
the countries of the European Union, the

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pricing
of prescription pharmaceuticals is subject to governmental control. We may not be able to sell our products as successfully or as profitably as we expect if we are required to sell our
products at lower than anticipated prices, reimbursement is unavailable or limited in scope or amount or product price increases we implement result in reduced demand or government challenges.

In
particular, third party payors could lower the amount that they will reimburse hospitals or doctors to treat the conditions for which the FDA has approved VELCADE or INTEGRILIN. If
they do, pricing levels or sales volumes of VELCADE or INTEGRILIN may decrease. In addition, if we fail to comply with the rules applicable to the Medicaid and Medicare programs, we could be subject
to the imposition of civil or criminal penalties or exclusion from these programs.

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

In
both the United States, on federal and state levels, and foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system. For
example, the Medicare Prescription Drug and Modernization Act of 2003 and its implementing regulations impose new requirements for the distribution and pricing of prescription drugs which may
adversely affect the marketing of our products. Further proposals are also likely. The potential for adoption of additional proposals and ensuing uncertainty among prescribers could impact sales
levels and 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 States has and will continue to put pressure on the price and usage of our present and future products,
which may adversely affect product sales. Further, when a new therapeutic product is approved, the availability of governmental or private reimbursement for that product is uncertain, as is the amount
for which that product will be reimbursed. We cannot predict the availability or amount of reimbursement for our product candidates, and current reimbursement policies for VELCADE or INTEGRILIN could
change at any time.

Other
matters also could be the subject of U.S. federal or state legislative or regulatory action that could adversely affect our business, including the importation of prescription
drugs that are marketed outside the U.S. and sold at lower prices as a result of drug price regulations by the governments of various foreign countries. Such legislation or regulatory action could
lead to a decrease in the price we receive for any approved products, which, in turn, could impair our ability to generate revenue. Alternatively, in response to legislation such as this, we might
elect not to seek approval for or market our products in foreign jurisdictions in order to minimize the risk of re-importation, which could also reduce the revenue we generate from our
product sales.

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

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

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We face a risk of government enforcement actions in connection with marketing activities.

Because we are a company operating in a highly regulated industry, for many reasons, regulatory authorities could take enforcement action against us in connection
with our marketing activities, including, among other things, seizure of allegedly misbranded product, cessation of promotional activities, imposition of significant fines, injunction or criminal
prosecution against us and our officers or employees, and exclusion from government health care programs.

Our
labeling and promotional activities relating to our products are regulated by the FDA and other federal and state regulatory agencies and are subject to associated risks. If we fail
to comply with FDA regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained, the FDA, or the Office of the
Inspector General of the Department of Health and Human Services or state Attorneys General could bring an enforcement action against us that could inhibit our marketing capabilities as well as result
in significant penalties.

In
addition to FDA requirements, our marketing activities are affected by government regulations and professional standards that constrain marketing practices in the pharmaceutical
industry. These include, for example, anti-kickback laws that broadly prohibit payments or other incentives for physicians to prescribe a drug or to select one drug over another;
self-referral laws that prohibit transactions in which physicians direct business to suppliers from which they receive compensation or have other financial ties; and industry standards and
state laws intended to prevent conflicts of interest in arrangements between health care providers and the pharmaceutical industry.

Guidelines and recommendations can affect the use of our products.

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

Risks Relating to Holding Our Common Stock

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

The trading price of our common stock has been quite volatile, and may be volatile in the future. During the year ended December 31, 2007, our common stock
traded as high as $16.62 per share and as low as $9.49 per share. Factors such as announcements of our or our competitors' operating results, data from our competitors' clinical trial results, changes
in our prospects, market conditions for biopharmaceutical stocks in general and analyst recommendations or commentary concerning our or our competitors' products or business could have a significant
impact on the future trading prices of our common stock.

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



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The
price of our common stock may also be affected by the recommendations, estimates and projections of the investment community and our ability to meet or exceed the financial
projections we provide to the public. The price may also be affected by general economic and market conditions, and the cost of operations in our product markets. While we cannot predict the
individual effect that these factors may have on the price of our securities, these factors, either individually or in the aggregate, could result in significant variations in price during any given
period of time. We cannot assure you that these factors will not have an adverse effect on the trading price of our common stock.

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

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

Item 1B.    UNRESOLVED STAFF COMMENTS

There are no unresolved comments from the Staff of the U.S. Securities and Exchange Commission.

Item 2.    PROPERTIES

We lease a total of approximately 1,177,000 square feet of office and laboratory space. This table contains information about our materially important leased
properties as of December 31, 2007.

|Location                                      |  | Square feet used in current operations |  | Square feet sublet |  | Square feet we are seeking to sublease |  | Use                                      |  | Lease expiration date
|--------------------------------------------- |  | -------------------------------------- |  | ------------------ |  | -------------------------------------- |  | ---------------------------------------- |  | ---------------------
|Several locations in
Cambridge, Massachusetts |  | 461,906                                |  | 427,986            |  | 147,468                                |  | corporate
headquarters
office
laboratory |  | 2008 to 2020         
|South San Francisco,
California               |  |                                       |  | 78,117             |  | 58,125                                 |  | office
laboratory                        |  | 2011                 

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In connection with our 2003, 2005 and 2006 restructuring initiatives and resulting consolidation of facilities, we have sublet and are seeking to sublease certain of our leased
facilities as shown in the table above. Where possible, we plan to sublease those facilities through the end of the lease terms. We believe that our leased and occupied facilities will be adequate to
meet our requirements for the near term.

Item 3.    LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders, through solicitation of proxies or otherwise, during the last quarter of the year ended
December 31, 2007.

OUR EXECUTIVE OFFICERS

Deborah Dunsire, M.D.    Chief Executive Officer and President(since July 2005) Age 45Dr. Dunsire is Chief Executive Officer and President of Millennium (since July 2005). Prior to joining Millennium, Dr. Dunsire was Head of North American Oncology Operations (2000 to
July 2005) and Vice President, Oncology Business Unit (1996 to 2000) of Novartis, a pharmaceutical company. Prior to
that she held various positions with Sandoz, a pharmaceutical company (1988 to 1996) in the areas of product management, scientific development and clinical research. Dr. Dunsire is a director
of Allergan, Inc., a pharmaceutical company.

Christophe Bianchi, M.D.    Executive Vice President, Commercial Operations(since February 2006) Age 46Prior to joining Millennium, Dr. Bianchi was Vice President, Business Unit Head, Oncology of sanofi-aventis US (formerly sanofi-synthelabo USA), a biopharmaceutical company (2004 to January
2006). Previously, he was Vice President, Internal Medicine and Central Nervous System Business Unit at sanofi-synthelabo (2001 to 2004). He served as President Europe, Senior Vice President Global
Marketing and Business Development of Sangstat Pharmaceuticals, a biopharmaceutical company (2000 to 2001). Dr. Bianchi held various positions with Rhone-Poulenc Rorer, a biopharmaceutical
company (1989 to 1999), where his last position was Vice President of Global Marketing.

Joseph B. Bolen, Ph.D.    Chief Scientific Officer(since December 2006) Age 54Dr. Bolen was Senior Vice President of Research and Drug Discovery (from August 2003 to December 2006), Senior Vice President of Discovery Research (from April 2002 to August 2003) and Vice
President of Oncology (from August 1999 to April 2002). Prior to joining Millennium, Dr. Bolen held various positions in the field of oncology research and development in life sciences
companies, including Vice President of Oncologic Diseases at Hoechst Marion Roussel.

Marsha H. Fanucci    Senior Vice President and Chief Financial Officer(since July 2004) Age 54Ms. Fanucci was Senior Vice President, Finance and Corporate Strategy of Millennium (October 2003 to July 2004), Vice President, Finance and Corporate Strategy (July 2003 to October 2003) and
Vice President, Corporate Development (July 2000 to July 2003). Prior to joining Millennium, she was Vice President, Corporate Development and Strategy of Genzyme Corporation, a biotechnology company
(August 1998 to June 2000).

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Stephen M. Gansler    Senior Vice President, Human Resources(since February 2006) Age 53Prior to joining Millennium, Mr. Gansler was Vice President, Human Resources of Synta Pharmaceuticals, Inc., a biotechnology company (2005 to February 2006). He was Senior Vice
President, Human Resources of Covanta Energy Corporation, a provider of waste-to-energy services (2001 to 2004). Prior to that, Mr. Gansler held Vice President of Human
Resources positions at Johnson & Johnson, a diversified health care company (1981 to 2001) and was a member of the management board of a number of Johnson & Johnson companies.

Laurie B. Keating    Senior Vice President and General Counsel(since September 2004)and Assistant Secretary(since August 2006) Age 54Ms. Keating also served as Secretary of Millennium (September 2004 to August 2006). Prior to joining Millennium, Ms. Keating was Vice President of Operations and Finance (September 2003
to September 2004), member of the Board of Directors (June 2001 to December 2007) and Chief Executive Officer (June 2001 to September 2003) of Hydra Biosciences, Inc., a biopharmaceutical
company. Previously she held a variety of senior executive positions at high technology companies, including serving as Senior Vice President, General Counsel and Secretary of Iomega Corporation and
Sybase, Inc.

Anna Protopapas    Senior Vice President, Corporate Development(since March 2005) Age 43Ms. Protopapas was Vice President, Corporate Development of Millennium (March 2001 to March 2005), Senior Director, Corporate Development (April 1999 to March 2001) and Director, Corporate
Development (October 1997 to April 1999). Prior to joining Millennium, Ms. Protopapas held a variety of marketing and business development roles in companies outside of the life sciences field.

Nancy Simonian, M.D.    Chief Medical Officer, Clinical, Medical and Regulatory Affairs(since December 2006) Age 47Dr. Simonian served as Senior Vice President, Clinical, Medical and Regulatory Affairs (from 2004 to December 2006). She was Senior Vice President, Clinical Research (from 2003 to 2004) and
joined Millennium as Vice President, Clinical Research (2001 to 2003). Prior to joining Millennium, Dr. Simonian was Vice President of Clinical Research at Biogen, Inc., a biotechnology
company.

Peter F. Smith, Ph.D    Senior Vice President, Non-Clinical Development Sciences(since June 2007) Age 50Dr. Smith has served as Senior Vice President at Millennium since April 2001. He joined Millennium as Senior Vice President, Drug Safety and Disposition and Comparative Medicine (from April
2001 to June 2007). Previously he held a variety of senior executive positions at life sciences companies, including Pharmacia and Searle/Monsanto.

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PART II

Item 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price of and Dividends on Millennium's Common Stock and Related Stockholder Matters

Our common stock is traded on the NASDAQ Global Select Market under the symbol "MLNM." Prior to July 2006, our common stock traded on the NASDAQ National Market.
The following table reflects the range of the reported high and low last sale prices of our common stock for the periods indicated.

|               |  | 2007 |       | 2006
|-------------- |  | ---- | ----- | ----
|
|First quarter  |  | $    | 11.53 |     
|Second quarter |  |      | 12.09 |     
|Third quarter  |  |      | 10.89 |     
|Fourth quarter |  |      | 15.99 |     

On
February 22, 2008, the closing price per share of our common stock was $13.33, as reported on the NASDAQ Global Select Market, and we had approximately 1,431 stockholders of
record.

We
have never declared or paid any cash dividends on our common stock. We anticipate that, in the foreseeable future, we will retain any earnings for use in the operation of our business
and will not pay any cash dividends.

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities

None.

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STOCK PERFORMANCE GRAPH

The following performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the
extent that we specifically incorporate it by reference into such filing.

This
graph compares the performance of Millennium common stock with the performance of the NASDAQ Composite Index and the NASDAQ Pharmaceuticals Index (assuming reinvestment of
dividends). The graph assumes $100 invested at the per share closing price on the NASDAQ Global Select Market in Millennium and each of the indices on December 31, 2002. Measurement points are
on the last trading days of the years ended December 31, 2003, December 31, 2004, December 31, 2005, December 31, 2006 and December 31, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNAmong Millennium Pharmaceuticals, Inc, The NASDAQ Composite Index
And The NASDAQ Pharmaceutical Index

GRAPHIC

|                                 |  | 12/31/2002 |  | 12/31/2003 |  | 12/31/2004 |  | 12/31/2005 |  | 12/31/2006 |  | 12/31/2007
|-------------------------------- |  | ---------- |  | ---------- |  | ---------- |  | ---------- |  | ---------- |  | ----------
|Millennium Pharmaceuticals, Inc. |  | 100.00     |  | 234.89     |  | 152.90     |  | 122.17     |  | 137.28     |  | 188.66    
|NASDAQ Composite Index           |  | 100.00     |  | 149.75     |  | 164.64     |  | 168.60     |  | 187.83     |  | 205.22    
|NASDAQ Pharmaceuticals Index     |  | 100.00     |  | 144.89     |  | 160.46     |  | 160.65     |  | 163.42     |  | 154.46    

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Item 6.    SELECTED FINANCIAL DATA

The following selected financial data are derived from the consolidated financial statements of Millennium Pharmaceuticals, Inc. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this Annual
Report on Form 10-K.

Millennium Pharmaceuticals, Inc.  Selected Financial Data

|                                                  |                                                                     | Year Ended December 31,  |          
|------------------------------------------------- | ------------------------------------------------------------------- | ------------------------ | ---------
|
|
|Consolidated Statements of Operations Data:       |                                                                     |                          |          
|Revenues:                                         |                                                                     |                          |          
|                                                  | Net product sales                                                   |                          | $        
|                                                  | Co-promotion revenue                                                |                          |          
|                                                  | Revenue under strategic alliances                                   |                          |          
|                                                  | Royalties (Note 1)                                                  |                          |          
|                                                  |                                                                     |                          |          
|                                                  |                                                                     | Total revenues           |          
|                                                  |                                                                     |                          |          
|Costs and expenses:                               |                                                                     |                          |          
|                                                  | Cost of sales (excludes amortization of acquired intangible assets) |                          |          
|                                                  | Research and development                                            |                          |          
|                                                  | Selling, general and administrative                                 |                          |          
|                                                  | Restructuring                                                       |                          |          
|                                                  | Amortization of intangibles                                         |                          |          
|                                                  |                                                                     |                          |          
|                                                  |                                                                     | Total costs and expenses |          
|                                                  |                                                                     |                          |          
|Loss from operations                              |                                                                     |                          | (23,847  
|Other income, net                                 |                                                                     |                          | 38,756   
|                                                  |                                                                     |                          |          
|Net income (loss)                                 |                                                                     | $                        | 14,909   
|                                                  |                                                                     |                          |          
|Amounts per common share:                         |                                                                     |                          |          
|Earnings (loss) per share, basic and diluted      |                                                                     | $                        | 0.05     
|                                                  |                                                                     |                          |          
|Weighted average shares, basic                    |                                                                     |                          | 318,221  
|                                                  |                                                                     |                          |          
|Weighted average shares, diluted                  |                                                                     |                          | 321,320  
|                                                  |                                                                     |                          |          
|Consolidated Balance Sheet Data:                  |                                                                     |                          |          
|Cash, cash equivalents and marketable securities  |                                                                     | $                        | 891,276  
|Total assets                                      |                                                                     |                          | 2,736,500
|Current liabilities                               |                                                                     |                          | 132,475  
|Capital lease obligations, net of current portion |                                                                     |                          | 73,795   
|Long term debt, net of current portion            |                                                                     |                          | 250,000  
|Stockholders' equity                              |                                                                     |                          | 2,236,893

---

Note 1:
On September 1, 2005, Millennium transferred the exclusive U.S. rights for INTEGRILIN products to Schering Corporation and Schering-Plough, Ltd. In
connection with the closing of the transaction, the Company no longer reports co-promotion revenue and now records royalty revenue as a separate line item.

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Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our management's discussion and analysis of our financial condition and results of our operations contains forward-looking statements, including statements about
our growth and future operating results, discovery and development of products, strategic alliances and intellectual property. For this purpose, any statement that is not a statement of historical
fact should be considered a forward-looking statement. We often use the words "expect," "anticipate," "intend," "plan," "believe," "may," "will" and similar expressions to help identify
forward-looking statements.

Actual
results may differ from those indicated by such forward-looking statements as a result of various important factors, including, without limitation, those factors discussed in this
annual report under the heading "Risk Factors."

Overview

We are an innovation-driven biopharmaceutical company focused on discovering, developing and commercializing medicines to improve the lives of patients with
cancer, inflammatory bowel diseases and other inflammatory diseases. We currently commercialize VELCADE, the global market leader for the treatment of patients with multiple myeloma who have received
at least one prior therapy and the United States market leader for the treatment of mantle cell lymphoma, or MCL, patients who have received at least one prior therapy. We are also awaiting a decision
from the Food and Drug Administration, or FDA, to market VELCADE for patients with newly diagnosed multiple myeloma. We have a development pipeline of clinical and preclinical product candidates in
our therapeutic focus areas of cancer and inflammatory diseases. We have an oncology-focused drug discovery organization. Strategic business relationships are a key component of our business to
maximize the global potential of our products and product candidates.

In
January 2007, we began, with Ortho Biotech Inc., or OBI, to jointly promote VELCADE for a two year time period in the United States. We believe this collaboration, with the
well-established OBI oncology sales force, is helping us to realize the full potential of VELCADE in the U.S. market. In May 2007, the FDA granted marketing approval to OBI for the
combination therapy of VELCADE/DOXIL® (pegylated liposomal doxorubicin) in multiple myeloma patients who have received at least one prior therapy.

Our
business strategy is to build a portfolio of new medicines based on our understanding of genomics and protein homeostasis, which is a set of particular molecular pathways that affect
the establishment and progression of diseases. These molecular pathways include the related effects of proteins on cellular performance, reproduction and death. We plan to develop and commercialize
many of our products on our own, but expect to seek development and commercial collaborators when favorable terms are available or when we otherwise believe that doing so would be advantageous
to us.

In
the near term, we expect to focus our commercial activities in cancer where we plan to build on our commercial and regulatory experience with VELCADE. We also are working to obtain
approval to market VELCADE in the United States and, through Ortho Biotech Products, L.P., or OBL, a member of The Johnson & Johnson Family Of Companies and an affiliate of OBI, outside
of the United States for the treatment of multiple myeloma in newly diagnosed, or front-line, patients and for the treatment of additional types of cancers. We believe, if approved, these
additional uses of VELCADE would lead to a significant expansion of our cancer business.

In
the area of inflammatory disease, we are advancing novel product candidates in clinical development as potential treatments for serious and widely prevalent conditions. For example,
MLN0002 is a highly selective gut-targeted immune therapy being studied in inflammatory bowel diseases. We expect to initiate pivotal trials with MLN0002 in patients with moderate to

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severe ulcerative
colitis and Crohn's disease in late 2008 or early 2009. If we successfully complete these trials and are successful in obtaining FDA approval, we believe MLN0002 could be
available to patients as early as 2012.

In
the long term, we expect to bring new products to market on a regular basis from our pipeline of discovery and development-stage programs. We also expect to continue to evaluate
opportunities to in-license and acquire molecules from other companies in order to supplement our pipeline.

VELCADE

In May 2003, the FDA granted us approval to market VELCADE for the treatment of multiple myeloma patients who have received at least two prior therapies and have
demonstrated disease
progression on their most recent therapy, commonly referred to as third-line and beyond. In March 2005, the FDA granted us approval for the treatment of patients with multiple myeloma who
have received at least one prior therapy, commonly referred to as relapsed, or second-line multiple myeloma.

In
late 2007, we announced positive results from the large, randomized, Phase III VISTA trial in patients with newly diagnosed multiple myeloma who are not eligible for stem cell
transplantation. In this trial, the therapy of VELCADE, melphalan and prednisone demonstrated a highly statistically significant improvement, compared with melphalan and prednisone alone across all
efficacy endpoints. In December 2007, we filed a supplementary new drug application, or sNDA, for use of VELCADE in patients with newly diagnosed multiple myeloma. The filing was granted priority
review by the FDA. The FDA decision date for approval is scheduled to occur by June 20, 2008.

Outside
of the United States, VELCADE is approved by the European Commission as a monotherapy for multiple myeloma patients who have received at least one prior therapy and who have
already undergone or are unsuitable for bone marrow transplantation. Regulatory authorities in a number of other countries, including countries within Latin America, South-East Asia and
Japan have also approved VELCADE. The product is now approved in more than 85 countries. In December 2007, OBL submitted a variation to their Marketing Authorization to the European Medicines
Evaluation Agency, or EMEA, for use of VELCADE for the treatment of newly diagnosed multiple myeloma. We expect the EMEA's decision on the submission by the end of 2008.

In
December 2006, the FDA granted approval of VELCADE for the treatment of patients with MCL who have received at least one prior therapy, commonly referred to as relapsed, or
second-line MCL.

Our Alliances

VELCADE

Ortho Biotech Collaborations

In June 2003, we entered into an agreement with OBL to collaborate on the commercialization of VELCADE and with Johnson & Johnson Pharmaceutical
Research & Development, L.L.C., or JJPRD, for the continued clinical development of VELCADE. OBL and its affiliate, Janssen-Cilag, are commercializing VELCADE outside of the United States, and
Janssen Pharmaceutical K.K. is responsible for Japan. We receive distribution fees from OBL and its affiliates from sales of VELCADE outside of the United States. We record these distribution fees as
royalties. We manage the supply chain for VELCADE at the expense of OBL for products sold in the OBL territories. We retain a limited option to co-promote VELCADE with OBL at a future date
in specified European countries.

We
are engaged with JJPRD in an extensive global program for further clinical development 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 tumors, including continued clinical

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development
of VELCADE for multiple myeloma and non-Hodgkin's lymphoma, or NHL. JJPRD was responsible for 40% of the joint development costs through 2005 and is now responsible for 45% of
those costs. We are responsible for the remaining 55% of the joint development costs. We are eligible to receive payments from JJPRD or OBL for achieving clinical development milestones, regulatory
milestones outside of the United States or agreed-upon sales levels of VELCADE outside of the United States.

In
October 2006, we entered into a two-year agreement with OBI to jointly promote VELCADE in the U.S. Under the terms of the agreement, in the first quarter of 2007, OBI
began jointly promoting VELCADE with us to U.S.-based physicians. Under this agreement, we pay the cost of a portion of the OBI sales effort dedicated to VELCADE and a commission if sales associated
with the increased effort exceed specified targets. Both parties are able to terminate the agreement under certain circumstances and subject to fees. We continue to be responsible for
commercialization, manufacturing and distribution of VELCADE in the U.S.

INTEGRILIN

Through August 31, 2005, we co-promoted INTEGRILIN in the United States in collaboration with Schering-Plough Ltd. and Schering
Corporation, together referred to as SGP, and shared profits and losses. Since September 1, 2005, SGP has marketed INTEGRILIN in the United States and specified other areas outside of the
European Union. GlaxoSmithKline plc, or GSK, markets INTEGRILIN in the European Union under a license from us.

SGP Collaboration

In April 1995, COR entered into a collaboration agreement with SGP to jointly develop and commercialize INTEGRILIN on a worldwide basis. We acquired COR in
February 2002. Under our original collaboration agreement with SGP, we generally shared any profits or losses from INTEGRILIN sales in the United States included in co-promotion revenue
with SGP and we granted SGP an exclusive license to market INTEGRILIN outside the United States and the European Union in exchange for royalty obligations.

On
September 1, 2005, SGP obtained the exclusive U.S. development and commercialization rights for INTEGRILIN products from us and paid us a nonrefundable upfront payment of
approximately $35.5 million. In addition, we are entitled to receive royalties on net product sales of INTEGRILIN in the United States from SGP for so long as SGP is engaged in the
commercialization and sale of an INTEGRILIN product in the United States, with the potential of receiving royalties beyond the 2014 patent expiration date. Minimum royalty payments for 2006 and 2007
were approximately $85.4 million. There are no guaranteed minimum royalty payments for 2008 or future years. We also receive royalties on net product sales by SGP in SGP's territory outside of
the United States. SGP's obligation to pay us royalties in other countries expires on a country by country basis upon the later of fifteen years from the first commercial use of an INTEGRILIN product
in such country and the expiration of the last to expire patent covering such INTEGRILIN product. We continue to manage the supply chain for INTEGRILIN at the expense of SGP for products sold in the
SGP territories including the U.S. We receive payments as a result of managing the supply chain and record those payments as strategic alliance revenue.

GSK License Agreement

In June 2004, we reacquired the rights to market INTEGRILIN in Europe from SGP and concurrently entered into a license agreement granting GSK exclusive marketing
rights to INTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketing authorizations for the European Union from SGP to GSK was completed, and GSK began selling

42

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INTEGRILIN
in the countries of the European Union. GSK also markets INTEGRILIN in other European countries where it has received approval of the transfer from SGP to GSK of the relevant marketing
authorizations. Under the terms of the agreement, we have received license fees and are entitled to future royalties from GSK on INTEGRILIN sales in Europe subject to the achievement of specified
objectives. We manage the supply chain for INTEGRILIN at the expense of GSK for products sold in the GSK territories. We receive payments as a result of managing the supply chain and record those
payments as strategic alliance revenue.

sanofi-aventis Small Molecule Inflammatory Disease Collaboration

In June 2000, we entered into a broad agreement in the field of inflammatory disease with Aventis, now sanofi-aventis, which includes joint discovery, development
and commercialization of small molecule drugs for the treatment of specified inflammatory diseases. This agreement covers several of our development programs in the inflammatory disease area and
provides us with potential access to sanofi-aventis' large promotional infrastructure in connection with the commercialization of jointly developed products. The discovery phase of this collaboration
has concluded. The development and commercialization programs continue under the agreement.

As
provided in the original agreement, in North America, we have agreed to share the responsibility for and cost of developing, manufacturing and marketing products arising from the
alliance. Outside of North America, sanofi-aventis is responsible for and bears the cost of developing, manufacturing and marketing products arising from the alliance. sanofi-aventis is required to
pay us a royalty on product sales outside of North America.

To
date, we and sanofi-aventis have identified a significant number of novel drug targets and associated molecules relevant in inflammatory diseases. During the remaining portion of the
development phase of the alliance, we and sanofi-aventis have agreed to focus our joint resources on preclinical and clinical development of candidates identified in the collaboration. As of the end
of 2007, the alliance has identified several development candidates, two of which, MLN3701 and MLN0415, are now being tested in clinical trials with another product candidate, MLN6095, now in
preclinical testing. In addition, we and sanofi-aventis are currently contemplating further development of MLN3897, a small molecule CCR1 inhibitor.

Critical Accounting Policies and Significant Judgments and Estimates

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

While
our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in this report, we believe the following accounting
policies are most critical to aid in fully understanding and evaluating our reported financial results.

43

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Revenue

We recognize revenue from the sale of our products, our strategic alliances, as well as royalties and distribution fees based on net sales of licensed products.
We recognized revenue from our co-promotion collaboration through August 31, 2005. We divide our revenue arrangements with multiple elements into separate units of accounting if
specified criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered
items. We allocate the consideration we receive among the separate units based on their respective fair values, and we apply the applicable revenue recognition criteria to each of the separate units.
We classify advance payments received in excess of amounts earned as deferred revenue until earned.



We recognize revenue from the sale of VELCADE in the United States when delivery has occurred and title has transferred. During the fourth quarter of 2004, we
began distributing VELCADE through a sole-source open access distribution model in which we sell directly to an independent third party who in turn distributes to the wholesaler base. In
April 2006, our sole-source distributor added a second distribution site to its network in order to improve access to the product for physicians in the western United States. Under our
agreement with our sole-source distributor, inventory levels are contractually limited to no more than three weeks. VELCADE product inventory levels held by the sole-source
distributor have historically been below this limit at the end of each quarter. We expect future inventory levels to be within our desired range of one to two weeks of inventory in the distribution
channel.

We
record allowances as a reduction to product sales for discounts, product returns and governmental and contractual adjustments at the time of sale. Calculating these gross-to-net sales
adjustments involves estimates and judgments based primarily on sales or invoice data and historical experience.

An
analysis of the amount of, and change in, these allowances is as follows (in thousands):

|                                   |                                                        | Discounts |       | Returns |   | Governmental and contractual adjustments |        | Total |      
|---------------------------------- | ------------------------------------------------------ | --------- | ----- | ------- | - | ---------------------------------------- | ------ | ----- | -----
|Beginning balance, January 1, 2005 |                                                        | $         | 210   |         | $ | 2,517                                    |        | $     | 336  
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|                                   | Current provisions relating to sales in current period |           |       | 3,971   |   |                                          | 1,301  |       |      
|                                   | Payments/credits relating to sales in current period   |           |       | (2,955  | ) |                                          | (178   | )     |      
|                                   | Payments/credits relating to sales in prior period     |           |       | (88     | ) |                                          | (1,084 | )     |      
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|Balance at December 31, 2005       |                                                        |           | 1,138 |         |   | 2,556                                    |        |       | 1,233
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|                                   | Current provisions relating to sales in current period |           |       | 4,692   |   |                                          | 1,707  |       |      
|                                   | Adjustments relating to prior years                    |           |       |        |   |                                          | (1,282 | )     |      
|                                   | Payments/credits relating to sales in current period   |           |       | (4,291  | ) |                                          | (43    | )     |      
|                                   | Payments/credits relating to sales in prior period     |           |       | (730    | ) |                                          | (376   | )     |      
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|Balance at December 31, 2006       |                                                        |           | 809   |         |   | 2,562                                    |        |       | 1,463
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|                                   | Current provisions relating to sales in current period |           |       | 5,786   |   |                                          | 1,679  |       |      
|                                   | Payments/credits relating to sales in current period   |           |       | (5,389  | ) |                                          | (112   | )     |      
|                                   | Payments/credits relating to sales in prior period     |           |       | (387    | ) |                                          | (676   | )     |      
|                                   |                                                        |           |       |         |   |                                          |        |       |      
|Balance at December 31, 2007       |                                                        | $         | 819   |         | $ | 3,453                                    |        | $     | 3,238
|                                   |                                                        |           |       |         |   |                                          |        |       |      

44

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We offer a 2% prompt payment discount to our sole-source distributor as an incentive to remit payment in accordance with the stated terms of the
invoice. Because our customer typically takes advantage of the prompt payment discount, we accrue 100% of the prompt payment discount, based on the gross amount of each invoice, at the time of sale.
We adjust the accrual quarterly to reflect actual experience. Historically, these adjustments have not been material.



We estimate VELCADE product returns based on historical return patterns. Under our current methodology, we track actual returns by individual production lots.
Returns on closed lots (i.e., lots no longer eligible for credits under our returned goods policy) are analyzed to determine historical returns experience. Returns on open lots
(i.e., lots still eligible for credits under our returned goods policy) are monitored and compared with historical return trends and rates. Historical rates of return are adjusted for known or
expected changes in the marketplace.

We
consider several factors in our estimation process, including our internal sales forecasts and inventory levels in the distribution channel. We have experienced, and expect, that
wholesalers will not stock significant inventory due to the product's cost, expense to store and just-in-time distribution model and as a result, returns have been, and we expect will continue to be
low. When considering the level of inventory in the distribution channel, we determine whether an adjustment to the sales return reserve is appropriate. For example, if levels of inventory in the
distribution channel increase and we believe sales returns will be larger than expected, we adjust the sales return reserve, taking into account historical experience, our returned goods policy and
the shelf life of our product, which ranges from 18 to 24 months.

We
have reduced and may, from time to time in the future, reduce our product returns estimate. Doing so results in increased product revenue at the time the return estimate is reduced.
For example, since the launch of VELCADE in 2003, we have estimated our returns based upon historical trends in the pharmaceutical industry for similar products and our historical return patterns as
they became available. In 2006, we reduced our return estimate based on lower than previously anticipated returns as our first commercial lots reached expiration during the second half of 2005. These
adjustments to our estimates were not material to product sales in any quarter or on an annual basis for 2006. We did not make any adjustments to our return estimate in 2007.

If
circumstances change or conditions become more competitive in the market for therapeutic products that address the approved indications for VELCADE, we may take actions to increase
our product return estimates. Doing so would result in an incremental reduction of product sales at the time the return estimate is changed. For example, an increase in our returns as a percentage of
gross sales for the year ended December 31, 2007 of 0.50% would have resulted in a $1.4 million decrease in net product sales.



Governmental and contractual adjustment reserves relate to chargebacks and rebates. Chargeback reserves represent our estimated obligations resulting from the
difference between the wholesaler price and the lower pricing as mandated by statute to eligible federally funded healthcare providers, and in rare instances, lower contractual pricing to certain
other classes of trade. We determine our chargeback estimates based on our historical chargeback data. Chargebacks are generally invoiced and paid monthly in arrears, so that our accrual consists of
an estimate of the amount to be expected for the current month's product sales for which actual adjustments have not been billed, plus an accrual based upon the amount of inventory in the distribution
channel. Rebate reserves relate to our reimbursement arrangements with state Medicaid programs. We determine our rebate estimates based on our historical

45

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experience
regarding rebates, outstanding claims and payments under state Medicaid programs. Rebate amounts generally are invoiced and paid quarterly in arrears, so that our accrual consists of an
estimate of the rebates that will be paid on the current quarter's product sales, plus an accrual for unprocessed and unpaid rebates from prior periods. Governmental and contractual adjustment reserve
accruals are recorded in the same period the related revenue is recognized resulting in a reduction to product revenue and the establishment of a liability. We adjust the accrual rate quarterly to
reflect actual experience, taking into consideration price increases, as well as current and expected product sales to federally and state funded healthcare providers. Historically, these adjustments
have not been material.



Through August 31, 2005, we recognized co-promotion revenue based on SGP's reported shipments of INTEGRILIN to wholesalers.
Co-promotion revenue included our share of the profits from the sales of INTEGRILIN and reimbursements of our manufacturing-related costs, development costs and advertising and promotional
expenses. We communicated with SGP to calculate our share of the profits from the sales of INTEGRILIN on a monthly basis. The calculation included estimates of the amount of advertising and
promotional expenses and other costs incurred on a monthly basis. Adjustments to our estimates were based upon actual information that we received subsequent to our reporting deadlines. Our estimates
were adjusted on a monthly basis and historically the adjustments were not significant due to frequent communication with SGP.



We recognize nonrefundable upfront licensing fees and guaranteed, time-based payments that, in either case, require continuing involvement in the form
of research and development, manufacturing or other commercialization efforts by us as strategic alliance revenue:



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

Milestone
payments are recognized as strategic alliance revenue when the substantive performance obligations, as defined in the contract, are achieved. Performance obligations typically
consist of significant milestones in the development life cycle of the related product candidate, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by
regulatory agencies. Reimbursements of research and development costs are recognized as strategic alliance revenue as the related costs are incurred.



We are entitled to receive royalty payments under license agreements with a number of third parties that sell products based on technology we have developed or to
which we have rights. These license agreements provide for the payment of royalties to us based on sales of the licensed product and we record royalty revenues based on estimates of sales from interim
data provided by licensees. Under certain of our license agreements, the royalty structure is tiered based upon annual sales and resets at the beginning of each annual period. Beginning
September 1, 2005, upon closing the amended collaboration agreement with SGP, we began recording royalty revenues as a separate line item in our

46

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statement
of operations. For all of our royalty arrangements, we perform an analysis of historical royalties we have been paid, adjusted for any changes in facts and circumstances, as appropriate.
Differences between actual royalty revenues and estimated royalty revenues are adjusted for in the period which they become known, typically the following quarter. These adjustments have not been, and
we do not expect them to be, significant. To the extent we do not have sufficient ability to accurately estimate royalty revenue, we record royalties on a cash basis.

Inventory

Inventory consists of currently marketed products. VELCADE inventories primarily represent raw materials used in production, work in process and finished goods
inventory on hand, valued at cost. INTEGRILIN inventories include raw materials used in production and work in process, valued at cost, to supply GSK and limited amounts of work in process, valued at
cost, to supply SGP. We review inventories periodically for slow-moving or obsolete status based on sales activity, both projected and historical. Our current sales projections provide for
full utilization of the inventory balance. If product sales levels differ from projections or a launch of a new product is delayed, inventory may not be fully utilized and could be subject to
impairment, at which point we would adjust inventory to its net realizable value.

Intangible Assets

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

Goodwill

On October 1, 2007, we performed our annual goodwill impairment test and determined that no impairment existed on that date. We continually monitor
business and market conditions, including the restructured relationship with SGP, to assess whether an impairment indicator exists. If we were to determine that an impairment indicator exists, we
would be required to perform an impairment test, which could result in a material impairment charge to our statement of operations.

Restructuring

In accordance with Statement of Financial Accounting Standard, or SFAS, No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," our
facilities related expenses and liabilities under all of our restructuring plans included estimates of the remaining rental obligations, net of estimated sublease income, for facilities we no longer
occupy. We review our estimates and assumptions on a regular basis until the outcome is finalized, and make whatever modifications we believe necessary, based on our best judgment, to reflect any
changed circumstances. It is possible that such estimates could change in the future resulting in additional adjustments, and the effect of any such adjustments could be material.

47

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Stock-Based Compensation Expense

We adopted SFAS No. 123 (revised 2004), "Share Based Payment," or SFAS 123R, effective January 1, 2006 under the modified prospective method.
SFAS 123R requires the recognition of the fair value of stock-based compensation expense in our operations, and accordingly the adoption of SFAS 123R fair value method has had and will
continue to have a significant impact on our results of operations, although it will have no impact on our overall financial position. Option valuation models require the
input of highly subjective assumptions, including stock price volatility and expected term of an option. In determining our volatility, we have considered implied volatilities of currently traded
options to provide an estimate of volatility based upon current trading activity in addition to our historical volatility. After considering other such factors as our stage of development, the length
of time we have been public and the impact of having a marketed product, we believe a blended volatility rate based upon historical performance, as well as the implied volatilities of currently traded
options, best reflects the expected volatility of our stock going forward. Changes in market price directly affect volatility and could cause stock-based compensation expense to vary significantly in
future reporting periods.

We
use historical data to estimate option exercise and employee termination behavior, adjusted for known trends, to arrive at the estimated expected life of an option. We update these
assumptions on a quarterly basis to reflect recent historical data. Additionally, we are required to estimate forfeiture rates to approximate the number of shares that will vest in a period to which
the fair value is applied. We will continually monitor employee exercise behavior and may further adjust the estimated term and forfeiture rates in future periods. Increasing the estimated life would
result in an increase in the fair value to be recognized over the requisite service period, generally the vesting period. Estimated forfeitures will be adjusted to actual forfeitures upon the vest
date of the cancelled options as a cumulative adjustment on a quarterly basis. Doing so could cause future expenses to vary at each reporting period.

In
March 2006, we revised our annual merit compensation program to include the availability of both stock options and restricted stock to certain employees. In March 2007, we extended
the choice of stock options or restricted stock to all employees through the annual merit compensation program. Additionally, in March 2007, we implemented performance based vesting for a portion of
executive officer restricted stock awards. A significant portion of the annual equity awards to all executive officers will vest only upon achievement of predefined performance objectives. In May
2007, we issued restricted stock units to members of the Board of Directors as partial compensation for their board member service. For the years ended December 31, 2007 and 2006, we recognized
total stock-based compensation expense under SFAS 123R of $25.2 million and $42.1 million, respectively. As of December 31, 2007, the total remaining unrecognized
compensation cost related to nonvested stock option awards amounted to approximately $6.6 million, including estimated forfeitures, which will be recognized over the weighted-average remaining
requisite service periods of approximately one and one half years. As of December 31, 2007, the total remaining unrecognized compensation cost related to nonvested restricted stock awards and
restricted stock units amounted to approximately $12.1 million, including estimated forfeitures, which will be recognized over the weighted-average remaining requisite service periods of
approximately one and one half years.

Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," or SFAS 157. SFAS157 defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 codifies the definition of fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, clarifies the principle that fair value
should be based on the assumptions market participants

48

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would
use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for fiscal years
beginning after December 15, 2007. We do not currently believe that adoption will have a material impact on our results of operations, financial position or cash flows.

In
February 2007, the FASB released SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," or SFAS 159. SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. We are currently analyzing the effect, if any, SFAS 159 will have on our consolidated financial position and results of operations.

In
June 2007, the FASB issued EITF No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development
Activities," or EITF 07-3. EITF 07-3 requires that nonrefundable advance payments for goods or services to be received in the future for use in research and
development activities should be deferred and capitalized. The capitalized amounts should be expensed as the related goods are delivered or the services are performed. EITF 07-3 is
effective for new contracts entered into during fiscal years beginning after December 15, 2007. We are currently analyzing the effect, if any, EITF 07-3 will have on our
consolidated financial position and results of operations.

In
December 2007, the FASB issued EITF Issue 07-1, "Accounting for Collaborative Arrangements," or EITF 07-1. EITF 07-1 requires
collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable
GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further,
EITF 07-1 clarified the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship subject to
EITF 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." EITF 07-1 will be effective for us
beginning on January 1, 2009. We are currently evaluating the effect of EITF 07-1 on our consolidated financial statements.

Reclassifications

We have reclassified certain prior year consolidated statements of operations amounts between research and development and selling, general and administrative
expenses to conform to the current year presentation. This reclassification does not have a material impact on previously reported research and development and selling, general and administrative
expenses and has no impact on previously reported net loss from operations.

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Results of Operations

|                                             |                                                                     | Year Ended December 31,  |         | Annual Percentage Change |        
|-------------------------------------------- | ------------------------------------------------------------------- | ------------------------ | ------- | ------------------------ | -------
|
|
|Revenues:                                    |                                                                     |                          |         |                          |        
|                                             | Net product sales                                                   |                          | $       | 265,241                  |        
|                                             | Co-promotion revenue                                                |                          |         |                         |        
|                                             | Revenue under strategic alliances                                   |                          |         | 95,417                   |        
|                                             | Royalties                                                           |                          |         | 166,867                  |        
|                                             |                                                                     |                          |         |                          |        
|                                             |                                                                     | Total revenues           |         |                          | 527,525
|                                             |                                                                     |                          |         |                          |        
|Costs and expenses:                          |                                                                     |                          |         |                          |        
|                                             | Cost of sales (excludes amortization of acquired intangible assets) |                          |         | 28,380                   |        
|                                             | Research and development                                            |                          |         | 287,094                  |        
|                                             | Selling, general and administrative                                 |                          |         | 189,062                  |        
|                                             | Restructuring                                                       |                          |         | 12,886                   |        
|                                             | Amortization of intangibles                                         |                          |         | 33,950                   |        
|                                             |                                                                     |                          |         |                          |        
|                                             |                                                                     | Total costs and expenses |         |                          | 551,372
|                                             |                                                                     |                          |         |                          |        
|Loss from operations                         |                                                                     |                          | (23,847 | )                        |        
|Other income (expense):                      |                                                                     |                          |         |                          |        
|                                             | Investment income, net                                              |                          |         | 48,810                   |        
|                                             | Interest expense                                                    |                          |         | (10,054                  | )      
|                                             | Other income                                                        |                          |         |                         |        
|                                             |                                                                     |                          |         |                          |        
|Net income (loss)                            |                                                                     | $                        | 14,909  |                          | $      
|                                             |                                                                     |                          |         |                          |        
|Amounts per common share:                    |                                                                     |                          |         |                          |        
|Earnings (loss) per share, basic and diluted |                                                                     | $                        | 0.05    |                          | $      
|                                             |                                                                     |                          |         |                          |        
|Weighted average shares, basic               |                                                                     |                          | 318,221 |                          |        
|                                             |                                                                     |                          |         |                          |        
|Weighted average shares, diluted             |                                                                     |                          | 321,320 |                          |        
|                                             |                                                                     |                          |         |                          |        

---

Note 1:    Stock-based
compensation expense is allocated in the consolidated statements of operations expense lines as follows:

Year Ended December 31,2007

2006

2005Research and development

$
10,674

$
23,280

$
Selling, general and administrative


14,484


18,861





Revenues

Total revenues increased 8% to $527.5 million in 2007 compared to 2006 and decreased 13% to $486.8 million in 2006 from $558.3 million in
2005. The increase in 2007 was primarily related to increased net product sales of VELCADE within the United States and to a lesser extent, increased distribution fees recognized from OBL on sales of
VELCADE outside of the United States partially offset by a decrease in strategic alliance revenue. The decrease in 2006 was primarily related to lower revenue received from our collaborators, which
consisted of revenue under strategic alliances, royalties,

50

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and
in 2005, co-promotion revenue. The decrease in revenue received from our collaborations was primarily the result of the restructured relationship with SGP, including a
one-time sale of $71.4 million of existing INTEGRILIN inventory to SGP during the third quarter of 2005. Additionally, we recognized lower license fees from GSK in 2006. This
decrease was offset in part by increased distribution fees recognized from OBL on sales of VELCADE outside of the United States.

Net
product sales of VELCADE increased 20% to $265.2 million in 2007 and 15% to $220.5 million in 2006 from $192.1 million in 2005. The increase in 2007 was
primarily attributable to growth in product demand and to a lesser extent, price increases during the period. The increase in 2006 was primarily due to price increases of the product as we maintained
the product's market leadership in the relapsed
multiple myeloma treatment setting despite new competition in 2006. Reserves as a percentage of gross product sales for discounts, product returns and governmental and contractual adjustments were 8%
in 2007, 6% in 2006 and 5% in 2005. The increases in both 2007 and 2006 were primarily related to increased governmental and contractual adjustments. Net product sales of VELCADE represented
approximately 50% of our 2007 total revenues, 45% of our 2006 total revenues and 34% of our 2005 total revenues.

Total
revenues related to VELCADE, including net product sales of the product by us in the U.S. and revenues from OBL included in strategic alliance revenue and royalties as more fully
described below, were approximately $397.2 million in 2007, $327.2 million in 2006 and $248.6 million in 2005.

As
of September 1, 2005, we are no longer reporting co-promotion revenue due to our restructured relationship with SGP. Co-promotion revenue from
INTEGRILIN represented approximately 22% of our 2005 total revenues.

Total
revenues related to INTEGRLIN from GSK and our modified relationship with SGP included in strategic alliance revenue and royalties more fully described below, were
$109.6 million in 2007 and $142.0 million in 2006, including $85.4 million in royalties we received from SGP for sales of INTEGRILIN in the United States in both periods. In 2005,
total revenues related to INTEGRILIN, including co-promotion revenue, revenues from SGP and GSK included in strategic alliance revenues and royalties as more fully described below, were
approximately $287.9 million.

Revenue
under strategic alliances decreased 28% to $95.4 million in 2007 and 36% to $131.7 million in 2006 from $204.5 million in 2005. The decrease in 2007 was
primarily related to lower manufacturing-related reimbursement revenue and lower license revenue under the SGP and GSK relationships as well as a decrease in milestone revenue earned in 2007. Revenue
under the SGP relationship was generated from the management of the INTEGRILIN supply chain on behalf of SGP in the form of license fees and reimbursement of manufacturing-related expenses. On
July 1, 2006, SGP began purchasing the majority of the active pharmaceutical ingredient necessary to manufacture INTEGRILIN resulting in lower reimbursement of manufacturing-related expenses
during 2007. The decrease in 2006 was primarily due to the one-time sale of existing INTEGRILIN inventory to SGP in 2005, as well as lower license fees recognized from GSK.

We
expect revenue under strategic alliances to fluctuate in future periods depending on the level of revenues earned for ongoing development efforts, the level of milestones achieved and
the number of alliances we may enter into in the future with major biopharmaceutical companies.

We
began recording royalties on September 1, 2005 in connection with the closing of our transaction with SGP. Royalty revenue may include royalties earned upon sales of INTEGRILIN
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 fees earned upon sales of VELCADE
outside of the United States as provided by OBL and any royalties earned under certain of our early discovery alliances. Royalty revenue increased 24% to $166.9 million in 2007 and 253% to
$134.7 million in 2006 from $38.2 million in 2005. The increase in 2007 was primarily a result of

51

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increased
distribution fees from OBL on sales of VELCADE outside of the United States. We recognized the minimum royalty from SGP in 2007. There are no guaranteed minimum royalty payments for 2008 or
future years. The increase in 2006 was primarily a result of the first full year of reported royalty revenue from SGP and to a lesser extent increased distribution fees from OBL.

We
recognize revenues from activities outside of the U.S., including royalties, distribution fees, milestones from OBL, SGP and GSK for sales of VELCADE and INTEGRILIN and for cost
reimbursement of product sold to these parties. Without taking into account revenues we receive for license fees, our revenues for these activities outside of the U.S. were $132.9 million in
2007, $113.5 million in 2006 and $62.2 million in 2005.

Cost of Sales

Cost of sales decreased 38% to $28.4 million in 2007 and 68% to $45.4 million in 2006 from $141.3 million in 2005. Cost of sales includes
manufacturing-related expenses associated with the sales of VELCADE, as well as costs associated with managing the INTEGRILIN supply chain on behalf of SGP and GSK. The decrease in 2007 was primarily
due to the decrease in INTEGRILIN manufacturing-related expenses as a result of SGP purchasing the majority of the active pharmaceutical ingredient directly from the manufacturer beginning as of
July 1, 2006. The decrease in 2006 was primarily due to the one-time sale of existing INTEGRILIN inventory to SGP on September 1, 2005.

Research and Development

Research and development expenses decreased 8% to $287.1 million in 2007 and 7% to $310.9 million in 2006 from $334.1 million in 2005. The
decrease in 2007 was primarily a result of cost reductions associated with our 2006 restructuring efforts combined with reduced stock-based compensation expense offset by an increases in drug product
manufacturing and clinical development activity. The reduction in stock-based compensation expense was primarily due to forfeitures in excess of our original estimates related to certain cliff-based
awards held by employees whose employment was terminated in connection with restructuring initiatives, normal attrition, and the vesting of certain
options grants that were included in expense during 2006. The decrease in 2006 was primarily a result of cost reductions associated with our 2005 strategy refinement and restructuring efforts combined
with the decreased spending in our discovery organization offset by the inclusion of stock-based compensation expense upon adoption of SFAS 123R beginning on January 1, 2006.

52

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In
addition to our ongoing clinical trials of VELCADE, we have a significant pipeline of product candidates in clinical and late preclinical development. The following chart summarizes
the applicable disease indication and the clinical or preclinical trial status of our pipeline of drug candidates.

|Product Description                                                                                              |  | Disease Indication                                  |  | Current Trial Status            
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------- |  | --------------------------------
|Cancer                                                                                                           |  |                                                     |  |                                 
|MLN0518 is a small molecule inhibitor of the class III receptor tyrosine kinase (RTKs), FLT-3, c-KIT, and PDGF-R |  | Acute myeloid leukemia
Glioma(1)
Prostate cancer(1) |  | phase I/II
phase I/II
phase I/II
|MLN8054/MLN9237 are small molecule inhibitors of Aurora A Kinase                                                 |  | Advanced malignancies                               |  | phase I                         
|MLN4924 is a small molecule inhibitor of Nedd8activating enzyme (NAE)                                           |  | Advanced malignancies                               |  | phase I planned                 
|MLN2238 is a second generation proteasome small molecule inhibitor                                               |  | Advanced malignancies                               |  | preclinical                     
|Inflammatory Bowel Diseases                                                                                      |  |                                                     |  |                                 
|MLN0002 is a humanized monoclonal antibody directed against the alpha4beta7 integrin                             |  | Ulcerative colitis
Crohn's disease                  |  | phase II(2)                     
|Other Inflammatory Diseases                                                                                      |  |                                                     |  |                                 
|MLN1202 is a humanized monoclonal antibody directed against CCR2                                                 |  | Atherosclerosis
Multiple sclerosis                  |  | phase IIa-completed             
|MLN3897/3701 are small molecule CCR1 inhibitors(3)                                                               |  | Chronic inflammatory diseases                       |  | phase I/II                      
|MLN0415 is a small molecule inhibitor of IKKbeta(3)                                                              |  | Chronic inflammatory diseases                       |  | phase I                         
|MLN6095 is a small molecule CrTh2 receptor antagonist(3)                                                         |  | Asthma                                              |  | preclinical                     

---

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

53

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We
estimate that clinical trials in our areas of focus are typically completed over the following timelines:

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

Upon
successful completion of phase III clinical trials of a product candidate, we intend to submit the results to the FDA to support regulatory approval. However, we cannot be
certain that any of our product candidates will prove to be safe or effective, will receive regulatory approvals, or will be successfully commercialized. Our clinical trials might prove that our
product candidates may not be effective in treating the disease or have undesirable or unintended side effects, toxicities or other
characteristics that require us to cease further development of the product candidate. The cost to take a product candidate through clinical trials is dependent upon, among other things, the disease
indications, the timing, the size and dosing schedule of each clinical trial, the number of patients enrolled in each trial and the speed at which patients are enrolled and treated. We could incur
increased product development costs if we experience delays in clinical trial enrollment, delays in the evaluation of clinical trial results or delays in regulatory approvals.

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

Due
to the variability in the length of time necessary to develop a product, the uncertainties related to the estimated cost of the projects and ultimate ability to obtain governmental
approval for commercialization, accurate and meaningful estimates of the ultimate cost to bring our product candidates to market are not available.

We
budget and monitor our research and development costs by type or category, rather than by project on a comprehensive or fully allocated basis. Significant categories of costs include
personnel, clinical, third party research and development services and laboratory supplies. In addition, a significant portion of our research and development expenses is not tracked by project as it
benefits multiple projects or our technology platform. Consequently, fully loaded research and development cost summaries by project are not available.

Given
the uncertainties related to development, we are currently unable to reliably estimate when, if ever, our product candidates will generate revenue and cash flows. We do not expect
to receive net cash inflows from any of our major research and development projects until a product candidate becomes a profitable commercial product.

54

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Selling, General and Administrative

Selling, general and administrative expenses increased 16% to $189.1 million in 2007 compared to 2006 and decreased 14% to $162.9 million in 2006
from $188.7 million in 2005. The 2007 increase was primarily attributable to higher expense associated with the long-term investment in our VELCADE brand, including continuing
medical education, higher commission expense payable to our sales force associated with increased product sales as well as payments to OBI for their portion of VELCADE related costs under our
co-promotion agreement. This increase was offset by lower stock-based compensation expense primarily due to forfeitures in excess of our original estimates related to certain cliff-based
awards held by employees whose employment was terminated in connection with restructuring initiatives, normal attrition and the vesting of certain options grants that were included in expense during
2006. The decrease in 2006 was primarily the result of reduced sales and marketing expenses associated with the transfer of the U.S. commercialization rights for INTEGRILIN to SGP as of
September 1, 2005 offset by the inclusion of stock-based compensation expense upon adoption of SFAS 123R beginning on January 1, 2006.

Restructuring

In October 2006, we announced a program to further align resources with our current corporate priorities of advancing VELCADE and accelerating the clinical
pipeline by lowering investment in discovery and supporting areas. As part of our program, we reduced in-house research and development technologies and headcount in areas where the work
can now be effectively outsourced, and we also scaled back infrastructure supporting these activities.

During
the fourth quarter of 2005, we announced a 2005 strategy refinement focused on advancing key growth assets, including VELCADE, our clinical and preclinical pipeline of oncology
and inflammation molecules and our oncology-focused discovery organization. As part of our refined strategy, we took a series of steps, building on our restructured relationship with SGP, which
together reduced research and development and selling, general and administrative expenses in 2006. We reduced the size of our company from approximately 1,500 employees at the end of 2004 to
approximately 1,100 at the end of 2005, by managing attrition, eliminating INTEGRILIN sales and marketing positions, and reducing the number of positions in our inflammation discovery and business
support groups.

In
December 2002 and June 2003, we took steps as part of our 2003 restructuring plan to focus our resources on drug development and commercialization. Our restructuring plan included
consolidation of research and development facilities, overall headcount reduction and streamlining of discovery and development projects.

During
2007, we recorded net restructuring charges of $12.9 million under all of our restructuring initiatives. We recorded restructuring charges of approximately
$17.2 million under the 2006
restructuring program primarily related to facilities-related costs associated with vacated buildings and employee termination benefits as a result of headcount reductions. We also recorded net
restructuring credits in 2007 of approximately $3.8 million under the 2005 restructuring plan, primarily related to the earlier than anticipated sublease of one of our facilities charged to
restructuring in prior years at a higher rate per square foot than we had originally estimated. We recorded net restructuring credits of approximately $0.5 million in 2007 under the 2003
restructuring plan, primarily related to the earlier than anticipated sublease of one of our facilities charged to restructuring in prior years at a higher rate per square foot than we had originally
estimated as well as the sublease extension for another facility charged to restructuring in prior years.

During
2006, we recorded a total of $20.4 million of restructuring charges under all of our restructuring initiatives. We recorded restructuring charges of approximately
$5.2 million under the 2006 restructuring program primarily related to employee termination benefits. Costs of termination

55

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benefits
relate to severance packages, outplacement services and career counseling for employees affected by restructuring. We also recorded restructuring charges in 2006 of approximately
$1.2 million under the 2005 restructuring plan, primarily related to the impairment charges for leasehold improvements that were abandoned at facilities, offset by a credit resulting from the
earlier than anticipated sublease of one of the vacated buildings at a higher rate per square foot than we had originally estimated. We recorded restructuring charges of approximately
$14.0 million in 2006 under the 2003 restructuring plan, primarily related to the lease termination payment for our vacated facility in Cambridge, England.

In
connection with the 2006 decision to abandon certain facilities in 2007 under the 2006 restructuring program, we shortened the useful lives of the leasehold improvements at these
facilities in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." During the years ended December 31, 2007 and 2006, we recorded
additional depreciation expense of approximately $3.3 million and $3.8 million, respectively, in research and development expense related to our decision.

We
estimate that of the remaining restructuring liabilities under all restructuring initiatives at December 31, 2007, we will pay approximately $23.0 million in 2008 and
$26.4 million thereafter through 2014 primarily for noncancelable lease agreements. We expect to record additional restructuring charges during 2008 of less than $5.0 million.

Amortization of Intangibles

Amortization of intangible assets was $34.0 million in 2007, 2006 and 2005. Amortization primarily related to specifically identified intangible assets
from the COR acquisition. We will continue to
amortize the specifically identified intangible assets from our COR acquisition through 2015. We expect to incur amortization expense of approximately $34.0 million for each of the next
five years.

Investment Income

Investment income increased 58% to $48.8 million in 2007 compared to $31.0 million in 2006 and increased 6% in 2006 from $29.1 million in
2005. The increase in 2007 was primarily attributable to a higher average balance of invested funds resulting from our 2006 convertible debt offering, combined with higher effective interest rates, a
$3.5 million gain on sale of our investment in SGX Pharmaceuticals, Inc. common stock and a $2.3 million gain related to our share of additional proceeds from a class action
proceeding against WorldCom, Inc. The increase in 2006 was primarily attributable to a higher average balance of invested funds combined with a $3.1 million gain recognized in December
2006 upon the settlement of the class action lawsuit of WorldCom, Inc. and an additional realized gain of approximately $2.9 million in October 2006 upon the final settlement and receipt
of the escrowed portion of the TransForm Pharmaceuticals, Inc., or TransForm, sales proceeds.

Interest Expense

Interest expense decreased 9% to $10.1 million in 2007 compared to 2006 and increased 6% to $11.1 million in 2006 from $10.4 million in 2005.
The decrease in 2007 was primarily related to decreased capital lease buyouts resulting in lower related interest expense offset slightly by an increase in interest, including amortization of deferred
financing costs, on our convertible notes as a result of higher average balances of indebtedness during the year. The increase in 2006 was primarily due to increased interest under our 2.25%
convertible senior notes due November 15, 2011, or the 2.25% notes, combined with the amortization of deferred financing costs incurred in connection with the sale of our 2.25% notes.

56

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Other income

We recorded other income of approximately $22.9 million in 2006 upon the receipt of $19.5 million in connection with the termination of the support
agreement that we entered into in connection with a proposed acquisition of AnorMED, Inc. in October 2006 and the recognition of a deferred gain of $3.4 million in July 2006 from the
sale of assets to GeneLogic, Inc. in 2004.

Liquidity and Capital Resources

We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to pay debt service, including principal and
interest and capital lease payments. We have also made strategic purchases of debt and equity securities of some of our alliance collaborators in accordance with our Board of Directors' approved
policies and our business needs. These investments were generally in smaller companies. We have and may in the future lose money in these investments and our ability to liquidate these investments is
in some cases very limited. We may also owe our partners milestone payments and royalties. We also have committed to fund development costs incurred by some of our collaborators.

We
have funded our cash requirements primarily through the following:



In
the future, we expect to continue to fund our cash requirements from some or all of these sources as well as from sales of other products, subject to receiving regulatory approval. We
are entitled to
additional committed research and development funding under some of our strategic alliances. We believe the key factors that could affect our internal and external sources of cash are:



As
of December 31, 2007, we had $891.3 million in cash, cash equivalents and marketable securities. This excludes $7.7 million of interest-bearing marketable
securities classified as restricted cash on our balance sheet as of December 31, 2007, which primarily serve as collateral for letters of credit securing leased facilities.

57

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Our
significant capital resources and sources and uses of cash are as follows:

December 31,(in thousands)2007

2006

2005Cash, cash equivalents and marketable securities

$
891,276

$
894,349

$
645,588Working capital


901,595


790,135


576,501


|
|

Year Ended December 31,(in thousands)2007

2006

2005Cash provided by (used in):Operating activities

$
67,162

$
(19,185
)
$
(56,065
)Investing activities


(131,336
)

(38,152
)

32,988Financing activities


(58,939
)

264,557


13,713Capital expenditures (included in investing activities above)


(17,859
)

(8,789
)

(12,466
)


Cash Flows

Operating activities provided cash of $67.2 million in 2007 and used cash of $19.2 million in 2006. The principal source of funds in 2007 was our
net income and adjustments for non-cash charges. The principal use of cash in operating activities in 2006 was to fund our net loss. In December 2007, we achieved a $40.0 million
milestone related to sales of VELCADE outside of the United States, which we collected in January 2008. In December 2006, we achieved a $25.0 million milestone related to sales of VELCADE
outside of the United States, which we collected in January 2007. In September 2005, we received approximately $85.5 million from SGP, consisting of the 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 and finished goods inventory. In January 2005, we paid SGP
approximately $49.3 million for advances SGP had made to COR for inventory purchases in prior years. Cash flows from operations can vary significantly due to various factors including changes
in accounts receivable, as well as changes in accounts payable and accrued expenses. The average collection period of our accounts receivable can vary and is dependent on various factors, including
the type of revenue and the payment terms related to those revenues.

Investing
activities used cash of $131.3 million in 2007 primarily to invest in marketable securities. In January 2007, we received proceeds of approximately $2.3 million
related to our share of proceeds from a class action proceeding against WorldCom, Inc. In February 2007, we received proceeds of approximately $3.5 related to the sale of our investment in SGX
Pharmaceuticals, Inc. Investing activities used cash of $38.2 million in 2006, primarily for the purchase of marketable securities, partially offset by the receipt of approximately
$2.9 million in October 2006 upon final settlement of the escrowed portion of the sale proceeds from TransForm.

Financing
activities used cash of $58.9 million in 2007 and provided cash of $264.6 million in 2006. The principal use of cash in 2007 was the repayment of
$83.3 million and $16.2 million of our 5.5% and 5.0% convertible subordinated notes, respectively, in accordance with the payment terms offset by payments received from the purchase of
common stock by our employees pursuant to the exercise of stock options. In December 2007, we received proceeds of $4.1 million from the exercise of warrants to purchase 429,600 shares of our
common stock with a weighted-average exercise price of $9.44 per share. The principal source of funds in 2006 was proceeds of $242.2 million from the sale of our 2.25%
notes in November 2006. We used cash of approximately $5.9 million in 2006 to pay off our 4.5% convertible senior notes in accordance with the payment terms. We also used cash in financing
activities to make principal payments on our capital leases in all periods presented.

58

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We
believe that our existing cash, cash equivalents and marketable securities and the anticipated cash receipts from our product sales, current strategic alliances and royalties will be
sufficient to support our expected operations, fund our debt service and capital lease obligations and fund our capital commitments for at least the next several years.

Contractual Obligations

Our major outstanding contractual obligations relate to our facility leases, convertible notes, capital lease financings and long term supply contracts.

As
of December 31, 2007, we had $250.0 million in principal amount outstanding under our 2.25% notes. Under the terms of the 2.25% notes, we are required to make
semi-annual interest payments on the outstanding principal balance on May 15 and November 15 of each year. As of December 31, 2007, all required interest payments have
been made.

The
2.25% notes are convertible into our common stock based upon a conversion rate of 64.6465 shares of common stock per $1,000 principal amount of the 2.25% notes, which was equal to
the initial conversion price of approximately $15.47 per share of stock, subject to adjustment. The 2.25% notes are convertible only in the following circumstances: (1) if the closing price of
the common stock exceeds 120% of the conversion price within a specified period, (2) if specified distributions to holders of the common stock are made or specified corporate transactions
occur, (3) if the average trading price per $1,000 principal amount is less than 98% of the product of the closing price of common stock and the then applicable conversion rate within a
specified period or (4) during the last three months prior to the maturity date of the notes, unless previously repurchased by us under certain circumstances. In lieu of delivery of shares of
our common stock, we, at our sole option, may elect to deliver cash or a combination of cash and shares of common stock in satisfaction of our obligation upon conversion. The 2.25% notes are
subordinated in right of payment to future secured debt.

In
accordance with the payment terms, we repaid the entire $83.3 million principal balance on our 5.5% convertible subordinated notes due on January 15, 2007 that were
convertible at a price equal to $42.07
per share and the entire $16.2 million principal balance on our 5.0% convertible subordinated notes due on March 1, 2007 that were convertible at a price equal to $34.21
per share.

Below
is a table which presents our contractual obligations and commercial commitments as of December 31, 2007:

|                                                                  |  | Payments Due by Period
|----------------------------------------------------------------- |  | ----------------------
|
|Long term debt obligations, including interest payments           |  | $                     
|Capital lease obligations, including rental and interest payments |  |                       
|Operating lease obligations                                       |  |                       
|Long term supply contracts                                        |  |                       
|External collaborations                                           |  |                       
|                                                                  |  |                       
|Total                                                             |  | $                     
|                                                                  |  |                       

Long
term supply contracts represent contracts with certain third party manufacturers that we rely on for the manufacturing, fill/finish and packaging of VELCADE and INTEGRILIN for both
commercial purposes and for ongoing clinical trials.

59

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In
addition to the amounts reflected in the table above, in the future we may owe royalties and other contingent payments to our collaborators, licensors and other parties based on the
achievement of product sales and specified other objectives and milestones.

At
December 31, 2007, we had unused net operating loss carryforwards of approximately $1.4 billion available to reduce federal taxable income, expiring in 2008 through
2027, and $266.0 million available to reduce state taxable income, expiring in 2008 through 2012. We also have federal and net state tax credits of approximately $112.2 million available
to offset federal and state income taxes, both of which begin to expire in 2008. Due to the degree of uncertainty related to the ultimate use of the loss carryforwards and tax credits, we have fully
reserved these tax benefits.

Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We manage our fixed income investment portfolio in accordance with our Policy for Securities Investments, or Investment Policy, that has been approved by our
Board of Directors. The primary objectives of our Investment Policy are to preserve principal, maintain a high degree of liquidity to meet operating needs, and obtain competitive returns subject to
prevailing market conditions. Investments are made primarily in investment-grade corporate bonds with effective maturities of three years or less, asset-backed debt securities and U.S. government
agency debt securities. These
investments are subject to risk of default, changes in credit rating and changes in market value. These investments also are subject to interest rate risk and will decrease in value if market interest
rates increase. A hypothetical 100 basis point increase in interest rates would result in an approximate $13.5 million decrease in the fair value of our investments as of December 31,
2007. However, due to the conservative nature of our investments and relatively short effective maturities of debt instruments, interest rate risk is mitigated. Our Investment Policy specifies credit
quality standards for our investments and limits the amount of exposure from any single issue, issuer or type of investment. We do not own derivative financial instruments in our investment portfolio
as of December 31, 2007.

The
estimated fair value of our 2.25% notes as of December 31, 2007 was $294.1 million based on quoted market values. The interest rates on our convertible notes and
capital lease obligations are fixed and therefore not subject to interest rate risk.

We
receive distribution fees from OBL based on worldwide sales of VELCADE outside of the U.S and we make payments for certain inventory purchases and clinical trials outside of the U.S.
As a result, our financial position, results of operations and cash flows can be affected by fluctuations in foreign currency exchange rates, primarily the Euro. Movement in foreign currency exchange
rates could cause royalty revenue or research and development expenses to vary significantly in future periods. We currently do not engage in any hedging strategies with respect to such foreign
currency exposures.

As
of December 31, 2007, we did not have any financing arrangements that were not reflected in our balance sheet.

60

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Millennium Pharmaceuticals, Inc.  Report of Independent Registered Public Accounting Firm

Board
of Directors and Stockholders
Millennium Pharmaceuticals, Inc.

We
have audited the accompanying consolidated balance sheets of Millennium Pharmaceuticals, Inc. as of December 31, 2007 and 2006, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the
Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Millennium Pharmaceuticals, Inc. at
December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.

As
discussed in Note 2 to the consolidated financial statements, effective January 1, 2007, the Company adopted FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes," and effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payments" using the modified
prospective transition method.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Millennium Pharmaceuticals, Inc.'s internal control over
financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 25, 2008 expressed an unqualified opinion thereon.

|                      |  | /s/ Ernst & Young LLP
|--------------------- |  | ---------------------
|Boston, Massachusetts |  |                      
|February 25, 2008     |  |                      

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Millennium Pharmaceuticals, Inc.    Consolidated Balance Sheets

|                                                                                                                                                              |                                            | December 31, |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | ----------
|
|
|Assets                                                                                                                                                        |                                            |              |           
|Current assets:                                                                                                                                               |                                            |              |           
|Cash and cash equivalents                                                                                                                                     |                                            | $            | 89,163    
|Marketable securities                                                                                                                                         |                                            |              | 802,113   
|Accounts receivable, net of allowances of $524 in 2007 and $521 in 2006                                                                                       |                                            |              | 126,349   
|Inventory                                                                                                                                                     |                                            |              | 6,821     
|Prepaid expenses and other current assets                                                                                                                     |                                            |              | 9,624     
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total current assets                       |              |           
|Property and equipment, net                                                                                                                                   |                                            |              | 147,869   
|Restricted cash                                                                                                                                               |                                            |              | 7,650     
|Other assets                                                                                                                                                  |                                            |              | 29,961    
|Goodwill                                                                                                                                                      |                                            |              | 1,217,501 
|Developed technology, net                                                                                                                                     |                                            |              | 238,413   
|Intangible assets, net                                                                                                                                        |                                            |              | 61,036    
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total assets                               |              | $         
|                                                                                                                                                              |                                            |              |           
|Liabilities and Stockholders' Equity                                                                                                                          |                                            |              |           
|Current liabilities:                                                                                                                                          |                                            |              |           
|Accounts payable                                                                                                                                              |                                            | $            | 23,461    
|Accrued expenses                                                                                                                                              |                                            |              | 75,370    
|Current portion of restructuring                                                                                                                              |                                            |              | 22,986    
|Current portion of deferred revenue                                                                                                                           |                                            |              | 9,412     
|Current portion of capital lease obligations                                                                                                                  |                                            |              | 1,246     
|Current portion of long term debt                                                                                                                             |                                            |              |          
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total current liabilities                  |              |           
|Other long term liabilities                                                                                                                                   |                                            |              | 2,016     
|Restructuring, net of current portion                                                                                                                         |                                            |              | 26,416    
|Deferred revenue, net of current portion                                                                                                                      |                                            |              | 14,905    
|Capital lease obligations, net of current portion                                                                                                             |                                            |              | 73,795    
|Long term debt                                                                                                                                                |                                            |              | 250,000   
|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: 324,605 shares at December 31, 2007 and 317,342 shares at December 31, 2006 issued and outstanding |                                            |              | 325       
|Additional paid-in capital                                                                                                                                    |                                            |              | 4,728,762 
|Accumulated other comprehensive income (loss)                                                                                                                 |                                            |              | 3,888     
|Accumulated deficit                                                                                                                                           |                                            |              | (2,496,082
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total stockholders' equity                 |              |           
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total liabilities and stockholders' equity |              | $         
|                                                                                                                                                              |                                            |              |           

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

62

---



Millennium Pharmaceuticals, Inc.    Consolidated Statements of Operations

|                                             |                                                                     | Year Ended December 31,  |        
|-------------------------------------------- | ------------------------------------------------------------------- | ------------------------ | -------
|
|
|Revenues:                                    |                                                                     |                          |        
|                                             | Net product sales                                                   |                          | $      
|                                             | Co-promotion revenue                                                |                          |        
|                                             | Revenue under strategic alliances                                   |                          |        
|                                             | Royalties                                                           |                          |        
|                                             |                                                                     |                          |        
|                                             |                                                                     | Total revenues           |        
|                                             |                                                                     |                          |        
|Costs and expenses:                          |                                                                     |                          |        
|                                             | Cost of sales (excludes amortization of acquired intangible assets) |                          |        
|                                             | Research and development                                            |                          |        
|                                             | Selling, general and administrative                                 |                          |        
|                                             | Restructuring                                                       |                          |        
|                                             | Amortization of intangibles                                         |                          |        
|                                             |                                                                     |                          |        
|                                             |                                                                     | Total costs and expenses |        
|                                             |                                                                     |                          |        
|Loss from operations                         |                                                                     |                          | (23,847
|Other income (expense):                      |                                                                     |                          |        
|                                             | Investment income, net                                              |                          |        
|                                             | Interest expense                                                    |                          |        
|                                             | Other income                                                        |                          |        
|                                             |                                                                     |                          |        
|Net income (loss)                            |                                                                     | $                        | 14,909 
|                                             |                                                                     |                          |        
|Amounts per common share:                    |                                                                     |                          |        
|Earnings (loss) per share, basic and diluted |                                                                     | $                        | 0.05   
|                                             |                                                                     |                          |        
|Weighted average shares, basic               |                                                                     |                          | 318,221
|                                             |                                                                     |                          |        
|Weighted average shares, diluted             |                                                                     |                          | 321,320
|                                             |                                                                     |                          |        

---

Note 1:
Stock-based compensation expense is allocated in the consolidated statements of operations expense lines as follows:

|                                    |  | Year Ended December 31,
|----------------------------------- |  | -----------------------
|
|Research and development            |  | $                      
|Selling, general and administrative |  |                        

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

63

---



Millennium Pharmaceuticals, Inc.    Consolidated Statements of Cash Flows

|                                                                                               |                                                                          | Year Ended December 31,                   |         
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------------------------- | --------
|
|
|Cash Flows from Operating Activities:                                                          |                                                                          |                                           |         
|Net income (loss)                                                                              |                                                                          | $                                         | 14,909  
|Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |                                                                          |                                           |         
|                                                                                               | Depreciation and amortization                                            |                                           |         
|                                                                                               | Restructuring charges, net                                               |                                           |         
|                                                                                               | Restructuring related stock-based compensation expense                   |                                           |         
|                                                                                               | Amortization of deferred financing costs                                 |                                           |         
|                                                                                               | Realized (gain) loss on marketable securities and other investments, net |                                           |         
|                                                                                               | Realized gain on sale of investment in TransForm Pharmaceuticals         |                                           |         
|                                                                                               | Realized gain on sale of assets to GeneLogic, Inc.                       |                                           |         
|                                                                                               | 401K stock match                                                         |                                           |         
|                                                                                               | Stock-based compensation expense                                         |                                           |         
|                                                                                               | Changes in operating assets and liabilities:                             |                                           |         
|                                                                                               |                                                                          | Accounts receivable                       |         
|                                                                                               |                                                                          | Inventory                                 |         
|                                                                                               |                                                                          | Prepaid expenses and other current assets |         
|                                                                                               |                                                                          | Restricted cash and other assets          |         
|                                                                                               |                                                                          | Accounts payable and accrued expenses     |         
|                                                                                               |                                                                          | Advance from Schering-Plough              |         
|                                                                                               |                                                                          | Deferred revenue                          |         
|                                                                                               |                                                                          | Other long term liabilities               |         
|                                                                                               |                                                                          |                                           |         
|Net cash provided by (used in) operating activities                                            |                                                                          |                                           | 67,162  
|                                                                                               |                                                                          |                                           |         
|Cash Flows from Investing Activities:                                                          |                                                                          |                                           |         
|Investments in marketable securities                                                           |                                                                          |                                           | (560,476
|Proceeds from sales and maturities of marketable securities                                    |                                                                          |                                           | 444,392 
|Proceeds from the sale of investment in TransForm Pharmaceuticals                              |                                                                          |                                           |        
|Proceeds from the sale of assets to GeneLogic, Inc.                                            |                                                                          |                                           |        
|Purchases of property and equipment                                                            |                                                                          |                                           | (17,859 
|Other investing activities                                                                     |                                                                          |                                           | 2,607   
|                                                                                               |                                                                          |                                           |         
|Net cash provided by (used in) investing activities                                            |                                                                          |                                           | (131,336
|                                                                                               |                                                                          |                                           |         
|Cash Flows from Financing Activities:                                                          |                                                                          |                                           |         
|Issuance of convertible senior notes, net of issuance costs                                    |                                                                          |                                           |        
|Net proceeds from employee stock purchases                                                     |                                                                          |                                           | 37,762  
|Repayment of principal of long term debt obligations                                           |                                                                          |                                           | (99,571 
|Net proceeds from warrant exercise                                                             |                                                                          |                                           | 4,055   
|Principal payments on capital leases                                                           |                                                                          |                                           | (1,185  
|                                                                                               |                                                                          |                                           |         
|Net cash provided by (used in) financing activities                                            |                                                                          |                                           | (58,939 
|                                                                                               |                                                                          |                                           |         
|Increase (decrease) in cash and cash equivalents                                               |                                                                          |                                           | (123,113
|Effects of exchange rate changes on cash and cash equivalents                                  |                                                                          |                                           | 3       
|Cash and cash equivalents, beginning of period                                                 |                                                                          |                                           | 212,273 
|                                                                                               |                                                                          |                                           |         
|Cash and cash equivalents, end of period                                                       |                                                                          | $                                         | 89,163  
|                                                                                               |                                                                          |                                           |         
|Supplemental Cash Flow Information:                                                            |                                                                          |                                           |         
|Cash paid for interest                                                                         |                                                                          | $                                         | 10,801  
|Supplemental Disclosure of Noncash Investing and Financing Activities:                         |                                                                          |                                           |         
|Receipt of shares of SGX Pharmaceuticals, Inc. common stock in exchange for note receivable.   |                                                                          | $                                         |        
|Issuance of restricted stock under APB No. 25                                                  |                                                                          |                                           |        

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

64

---



Millennium Pharmaceuticals, Inc.    Statements of Stockholders' Equity

|                                                                          |                            | Common Stock |   |   |     |   |   |           |   |   |        |   |  
|------------------------------------------------------------------------- | -------------------------- | ------------ | - | - | --- | - | - | --------- | - | - | ------ | - | -
|
|
|
|
|Balance at December 31, 2004                                              |                            | 306,399,120  |   | $ | 306 |   | $ | 4,547,430 |   | $ |       |   | $
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Net loss                                                                  |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Unrealized loss on marketable securities                                  |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Foreign currency translation                                              |                            |             |   |   |    |   |   |          |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|                                                                          | Total comprehensive loss   |              |  |   |     |  |   |           |  |   |        |  |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Employee stock purchases                                                  |                            | 3,662,719    |   |   | 4   |   |   | 24,280    |   |   |       |   |  
|Restructuring related stock-based compensation expense                    |                            |             |   |   |    |   |   | 479       |   |   |       |   |  
|Issuance of deferred stock-based compensation                             |                            | 480,000      |   |   | 1   |   |   | 4,783     |   |   | (4,219 | ) |  
|401K stock match                                                          |                            | 579,036      |   |   |    |   |   | 5,232     |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Balance at December 31, 2005                                              |                            | 311,120,875  |   |   | 311 |   |   | 4,582,204 |   |   | (4,219 | ) |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Net loss                                                                  |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Unrealized gain on marketable securities                                  |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Foreign currency translation                                              |                            |             |   |   |    |   |   |          |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|                                                                          | Total comprehensive loss   |              |  |   |     |  |   |           |  |   |        |  |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Employee stock purchases                                                  |                            | 4,533,701    |   |   | 5   |   |   | 32,336    |   |   |       |   |  
|Issuance of restricted stock                                              |                            | 1,391,730    |   |   | 1   |   |   | (1        | ) |   |       |   |  
|Forfeiture of restricted stock                                            |                            | (172,630     | ) |   |    |   |   |          |   |   |       |   |  
|Write-off of deferred stock-based compensation upon adoption of SFAS 123R |                            |             |   |   |    |   |   | (4,219    | ) |   | 4,219  |   |  
|Stock-based compensation expense                                          |                            |             |   |   |    |   |   | 42,141    |   |   |       |   |  
|401K stock match                                                          |                            | 467,857      |   |   |    |   |   | 4,716     |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Balance at December 31, 2006                                              |                            | 317,341,533  |   |   | 317 |   |   | 4,657,177 |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Net income                                                                |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Unrealized gain on marketable securities                                  |                            |             |   |   |    |   |   |          |   |   |       |   |  
|Foreign currency translation                                              |                            |             |   |   |    |   |   |          |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|                                                                          | Total comprehensive income |              |  |   |     |  |   |           |  |   |        |  |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Employee stock purchases                                                  |                            | 4,517,631    |   |   | 5   |   |   | 37,757    |   |   |       |   |  
|Warrants exercise                                                         |                            | 429,600      |   |   | 1   |   |   | 4,054     |   |   |        |   |  
|Issuance of restricted stock                                              |                            | 2,260,786    |   |   | 2   |   |   |           |   |   |       |   |  
|Forfeiture of restricted stock                                            |                            | (370,526     | ) |   |    |   |   |          |   |   |       |   |  
|Stock-based compensation expense                                          |                            |             |   |   |    |   |   | 25,158    |   |   |       |   |  
|401K stock match                                                          |                            | 426,051      |   |   |    |   |   | 4,616     |   |   |       |   |  
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  
|Balance at December 31, 2007                                              |                            | 324,605,075  |   | $ | 325 |   | $ | 4,728,762 |   | $ |       |   | $
|                                                                          |                            |              |   |   |     |   |   |           |   |   |        |   |  

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

65

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Millennium Pharmaceuticals, Inc.        Notes to Consolidated Financial Statements December 31, 2007

1.     The Company

Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company") is an innovation-driven biopharmaceutical company focused on discovering, developing and
commercializing medicines to improve the lives of patients with cancer, inflammatory bowel diseases and other inflammatory diseases. The Company currently commercializes VELCADE, the global market
leader for the treatment of patients with multiple myeloma who have received at least one prior therapy and the United States market leader for the treatment of mantle cell lymphoma patients who have
received at least one prior therapy. The Company is also awaiting a decision from the Food and Drug Administration ("FDA") to market VELCADE for patients with newly diagnosed multiple myeloma. The
Company has a development pipeline of clinical and preclinical product candidates in its therapeutic focus areas of cancer and inflammatory diseases. The Company has an oncology-focused drug discovery
organization. Strategic business relationships are a key component of the Company's business to maximize the global potential of its products and product candidates.

Millennium's
strategy is to build a portfolio of new medicines based on its understanding of genomics and protein homeostasis, which is a set of particular molecular pathways that affect
the establishment
and progression of diseases. These molecular pathways include the related effects of proteins on cellular performance, reproduction and death. The Company plans to develop and commercialize many of
its products on its own, but expects to seek development and commercial collaborators on favorable terms or when it believes that doing so would be advantageous to the Company.

2.     Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Millennium and its wholly-owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.

The
preparation of financial statements in accordance with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year consolidated statements of operations amounts have been reclassified between research and development and selling, general and administrative
expenses to conform to the current year presentation. This reclassification does not have a material impact on previously reported research and development and selling, general and administrative
expenses and has no impact on previously reported net loss from operations.

Cash Equivalents, Marketable Securities and Other Investments

Cash equivalents principally consist of money market funds and corporate bonds with maturities of three months or less at the date of purchase. Marketable
securities primarily consist of investment-grade corporate bonds, asset-backed debt securities and U.S. government agency debt securities. Other investments represent ownership in private companies in
which the Company holds less than a

66

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

20 percent
ownership position and does not otherwise exercise significant influence. The Company carries such investments at cost unless significant influence can be exercised over the
investee, in which case such securities are recorded using the equity method. The Company monitors these investments in private companies on a quarterly basis and determines whether any impairment in
their value would require a charge to the statement of operations, based on the implied value from any recent rounds of financing completed by the investee, market prices of comparable public
companies and general market conditions. These other investments are included in other assets and aggregate $9.3 million and $8.9 million at December 31, 2007 and
December 31, 2006, respectively.

Management
determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable securities
at December 31, 2007 and December 31, 2006 are classified as "available-for-sale." Available-for-sale securities are carried at fair
value, with the unrealized gains and losses reported in a separate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion are included in investment income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities and other investments are included in investment income. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income.

During
the years ended December 31, 2007, 2006 and 2005, the Company recorded realized gains on marketable securities and other investments of $9.6 million,
$3.1 million and $0.1 million, respectively, and realized losses and declines in value judged to be other-than-temporary on marketable securities and other
investments of $5.0 million, $5.3 million and $3.6 million, respectively.

Realized
gains on marketable securities for the year ended December 31, 2007 and 2006 included a realized gain of approximately $2.3 million and $3.1 million,
respectively, related to the Company's share of proceeds from a class action proceeding against WorldCom, Inc. The Company had previously recorded realized losses equal to the carrying value of
its investment in WorldCom, Inc., as the decline in value was determined to be other-than-temporary at that time.

During
the year ended December 31, 2005, the Company recorded a realized gain of approximately $10.5 million from the sale of its cost method investment in TransForm
Pharmaceuticals, Inc. ("TransForm"). In October 2006, the Company recorded an additional realized gain of $2.9 million upon the final settlement and receipt of the escrowed portion of
the sale proceeds. TransForm, a company specializing in the discovery of formulations and novel crystalline forms of drug molecules, was acquired by Johnson & Johnson in a
cash-for-stock transaction that closed in April 2005.

Concentrations of Credit Risk

Cash and cash equivalents are primarily maintained with two major financial institutions in the United States. Deposits with banks may exceed the amount of
insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of marketable securities and accounts receivable. Marketable securities consist of investment-grade corporate bonds, asset-backed and U.S. government
agency securities. The Company's investment policy, approved by the Board of Directors, limits the amount the Company may invest in any one type of investment and, in certain cases, in any one issuer,
thereby reducing credit risk concentrations. Accounts receivable includes trade receivables which result from product sales to a sole distributor and

67

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

amounts
due under strategic alliances. Concentration of credit risk with respect to accounts receivables is limited by ongoing credit evaluation and account monitoring procedures.

Segment Information

Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS
No. 131"), establishes standards for the way that public business enterprises report information about operating segments in their financial statements. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas, and major customers.

The
Company operates in one business segment, which focuses on the research, development and commercialization of therapeutic products. All of the Company's product sales are currently
related to sales of VELCADE® (bortezomib) for Injection. All of the Company's co-promotion revenue reported in prior periods was related to sales and development of
INTEGRILIN® (eptifibatide) Injection through August 31, 2005. The remainder of the Company's total revenue is related to its strategic alliances and royalties.

Revenues
from Ortho Biotech Products, L.P. ("OBL"), a member of The Johnson & Johnson Family Of Companies, accounted for approximately 25 percent,
22 percent and 10 percent of consolidated revenues for the years ended December 31, 2007, 2006 and 2005, respectively.

Revenues
from Schering-Plough Ltd. and Schering Corporation (collectively "SGP"), excluding co-promotion revenue, related to the sale of INTEGRILIN, accounted for
approximately 20 percent, 27 percent and 24 percent of consolidated revenues for the years ended December 31, 2007, 2006 and 2005, respectively.

There
were no other significant customers under strategic alliances and royalties in 2007, 2006 and 2005.

Information Concerning Market and Source of Supply Concentration

The Company relies on third party contract manufacturers for the manufacturing, fill/finish and packaging of VELCADE for both commercial purposes and for ongoing
clinical trials. The Company has established long term supply relationships for the production of commercial supplies of VELCADE. The Company works with one manufacturer under a long term supply
agreement to complete fill/finish for VELCADE. The Company is currently qualifying a second fill/finish supplier in order to mitigate its risk of VELCADE supply interruption.

The
Company distributes VELCADE in the United States through a sole-source open access distribution model where the Company sells directly to an independent third party who
in turn distributes to the wholesaler base. In April 2006, the Company's distributor added a second distribution site to its network in order to improve access to the product for physicians in the
western United States.

INTEGRILIN
has received regulatory approvals in the United States, the countries of the European Union and a number of other countries for various indications. The Company and SGP
co-promoted INTEGRILIN in the United States and shared any profits and losses through August 31, 2005. In September 2005, SGP acquired the exclusive development and
commercialization rights to INTEGRILIN in the United States from the Company. In the European Union, GlaxoSmithKline plc ("GSK") exclusively markets INTEGRILIN. The Company continues to manage
the supply chain for

68

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

INTEGRILIN
at the expense of SGP for products sold in the SGP territories, and at the expense of GSK in the GSK territory.

The
Company relies on third party contract manufacturers for the clinical and commercial production of INTEGRILIN. The Company has three approved manufacturers, two of which currently
provide the Company with eptifibatide, the active pharmaceutical ingredient ("API") necessary to make INTEGRILIN, for both clinical trials and commercial supply. Solvay, S.A., one of the
current manufacturers, owns the process technology used by it and one other manufacturer for the production of the API. In June 2006, the Company received FDA approval of its own alternative process
technology utilized by the second manufacturer for the production of eptifibatide for approval in the United States. The European Medicines Agency approved the alternate process technology for
eptifibatide in June 2007. The Company has two manufacturers that currently perform fill/finish services for INTEGRILIN and two packaging suppliers for INTEGRILIN for the United States. The FDA or
other regulatory agencies must approve the processes or the facilities that may be used for the manufacture of the Company's marketed products.

Inventory

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

VELCADE
inventories primarily relate to raw materials used in production, work in process and finished goods inventory on hand. INTEGRILIN inventories include raw materials used in
production and work in process to supply GSK and limited amounts of work in process to supply SGP.

Inventory
consists of the following (in thousands):

December 31, 2007

December 31, 2006Raw materials

$
4,270

$
6,770Work in process


1,385


6,424Finished goods


1,166


404$
6,821

$
13,598


Property and Equipment

Property and equipment are stated at cost. Assets held under capitalized leases are stated at the present value of future minimum lease obligations. Application
development costs incurred for computer software developed or obtained for internal use are capitalized in accordance with Statement of Position ("SOP") No. 98-1, "Accounting for
the Costs of Computer Software Developed for Internal Use." Leasehold improvements are stated at cost and are amortized over the shorter of the remaining life of the building lease or useful life.
Depreciation is recorded on the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease as follows:

Equipment

3 to 4 yearsCapitalized software

3 to 5 yearsLeasehold improvements

4 to 27 years


69

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

Goodwill and Intangible Assets

Intangible assets consist of specifically identified intangible assets. Goodwill is the excess of any purchase price over the estimated fair market value of net
tangible assets acquired not allocated to specific intangible assets.

Intangible
assets consist of the following (in thousands):

|                           |                                                                     | December 31, 2007 |         | December 31, 2006 |  
|-------------------------- | ------------------------------------------------------------------- | ----------------- | ------- | ----------------- | -
|
|Developed technology       |                                                                     | $                 | 435,000 |                   | $
|                           |                                                                     |                   |         |                   |  
|Core technology            |                                                                     | $                 | 18,712  |                   | $
|Other                      |                                                                     |                   | 17,060  |                   |  
|                           |                                                                     |                   |         |                   |  
|                           | Total amortizable intangible assets, excluding developed technology |                   |         | 35,772            |  
|Indefinite-lived trademark |                                                                     |                   | 59,000  |                   |  
|                           |                                                                     |                   |         |                   |  
|                           | Total intangible assets, excluding developed technology             |                   | $       | 94,772            |  
|                           |                                                                     |                   |         |                   |  

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

Developed technology

13 yearsCore technology

4 yearsOther

2 to 12 years


Amortization
expense was approximately $34.0 million in each of the years ended December 31, 2007, 2006, and 2005. The Company expects to incur amortization expense of
approximately $34.0 million for each of the next five years.

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

On
October 1, 2007, the Company performed its annual goodwill impairment test and determined that no impairment existed on that date. The Company continually monitors business and
market conditions, including the restructured relationship with SGP, to assess whether an impairment indicator exists. If the Company were to determine that an impairment indicator exists, it would be
required to perform an impairment test, which might result in a material impairment charge to the statement of operations.

Goodwill
as of December 31, 2007 consists of the excess purchase price over the estimated fair value of net tangible and intangible assets. The carrying value may be adjusted as a
result of the continued settlement of contingent consideration arising from acquisitions. Accordingly, goodwill

70

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

increased
by $3.6 million and $3.0 million for the years ended December 31, 2007 and 2006, respectively.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheets for current assets and current liabilities approximate their fair value. The estimated fair value as
of December 31, 2007 of the Company's 2.25% convertible senior notes due November 15, 2011 (the "2.25% notes") was $294.1 million based on quoted market values.

Revenue Recognition

The Company recognizes revenue from the sale of its products, its co-promotion collaboration through August 31, 2005, strategic alliances and
royalties. The Company's revenue arrangements with multiple elements 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 whether there is objective and reliable evidence of the fair value of the undelivered items. The consideration received is allocated among the separate units
based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified
as deferred revenue until earned.

Net product sales

The Company records product sales of VELCADE when delivery has occurred, title has transferred, collection is reasonably assured and the Company has no further
obligations. Allowances are recorded as a reduction to product sales for discounts, product returns and governmental and contractual adjustments at the time of sale. Costs incurred by the Company for
shipping and handling are recorded in cost of sales.

Co-promotion revenue

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

Beginning
September 1, 2005 as a result of the Company's transition from a co-promotion to a royalty arrangement for INTEGRILIN in the United States, the Company no
longer reports co-promotion revenue.

Revenue under strategic alliances

The Company recognizes revenue under strategic alliances from nonrefundable license payments, milestone payments, reimbursement of research and development costs
and reimbursement of manufacturing-related costs. Nonrefundable upfront fees for which no further performance obligations exist are recognized as revenue on the earlier of when payments are received
or collection is assured.

71

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

Nonrefundable
upfront licensing fees and guaranteed, time-based payments that require continuing involvement in the form of research and development, manufacturing or other
commercialization efforts by the Company are recognized as revenue:



Milestone
payments are recognized as revenue when the performance obligations, as defined in the contract, are achieved. Performance obligations typically consist of significant
milestones in the development life cycle of the related technology or product candidate, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory
agencies.

Reimbursements
of research and development costs are recognized as revenue as the related costs are incurred.

Royalties

Royalties are recognized as revenue when earned. Royalties may include:



Advertising and Promotional Expenses

Advertising and promotional expenses are expensed as incurred. During the years ended December 31, 2007, 2006 and 2005, advertising and promotional
expenses were $43.1 million, $23.2 million and $35.8 million, respectively. Amounts recorded in 2005 include advertising and promotional expenses related to INTEGRILIN.

Other Income

In July 2006, the Company recognized a deferred gain of $3.4 million upon receipt of proceeds from the sale of assets to Gene Logic, Inc., which was
included in other income for the year ended December 31, 2006.

In
September 2006, the Company entered into a support agreement to acquire the outstanding stock of AnorMED, Inc. Subsequent to executing the support agreement, AnorMED received a
more favorable acquisition offer from Genzyme Corporation and terminated the initial support agreement with the Company. As a result of the termination of the support agreement, the Company received a
$19.5 million termination fee from AnorMED in October 2006, which was included in other income for the year ended December 31, 2006. Transaction costs associated with the attempted
acquisition of approximately $5.5 million were included in selling, general and administrative expenses for the year ended December 31, 2006.

72

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

Income Taxes

The liability method, in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), is used to account for income taxes.
Deferred tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities, as well as net operating loss and tax credit
carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the differences reverse. Deferred tax assets, representing future tax benefits, are reduced by a
valuation allowance to reflect uncertainty when it is more likely than not that the related tax asset will not be realized. If it is determined at a later date that these deferred tax assets may
become realizable, it would result in a reversal of some or all of the valuation allowance recorded against these assets. This would result in a corresponding tax benefit in the Company's results of
operation, which could be material.

Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxesan Interpretation of
FASB 109" (the "Interpretation"). The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS
No. 109. The Interpretation proscribes a recognition
threshold and measurement attribute for financial statement recognition of an income tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company's adoption did not have a material impact on its results of
operations or financial position as it did not recognize any assets or liabilities for unrecognized tax benefits relative to uncertain tax positions upon adoption of the Interpretation. The adoption
resulted in the net derecognition of approximately $33.7 million of deferred tax assets from tax credit carryforwards which was offset by a reduction in the valuation allowance on the deferred
tax assets.

Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed using the weighted-average number of common shares outstanding during the period, excluding restricted stock
that has been issued but is not yet vested. Diluted earnings (loss) per share is based upon the weighted average number of common shares outstanding during the period, plus additional weighted average
common equivalent shares outstanding during the period when the effect is not anti-dilutive. Common equivalent shares result from the assumed exercise of outstanding stock options and
warrants (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method), the assumed conversion of convertible notes and the vesting of
unvested restricted shares of common stock. Common equivalent shares from options, warrants, unvested restricted shares and the assumed conversion of convertible notes that were not included in the
calculation of diluted shares because the effect would have been anti-dilutive were 31.7 million, 39.4 million and 27.7 million at December 31,

73

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

2007,
2006 and 2005, respectively. Basic and diluted earnings (loss) per common share were determined as follows (in thousands, except per share amounts):

Year Ended December 31,2007

2006

2005BasicNet income (loss)

$
14,909

$
(43,953
)
$
(198,249
)Weighted average shares outstanding


318,221


313,724


308,284Basic earnings (loss) per share

$
0.05

$
(0.14
)
$
(0.64
)DilutedNet income (loss)

$
14,909

$
(43,953
)
$
(198,249
)Weighted average shares outstanding


318,221


313,724


308,284Effect of dilutive options and restricted stock


3,099





Weighted average shares assuming dilution


321,320


313,724


308,284Diluted earnings (loss) per share

$
0.05

$
(0.14
)
$
(0.64
)


For
the quarter ended December 31, 2007, the assumed conversion of convertible notes into 16.2 million shares of common stock has a dilutive effect resulting in a dilutive
income adjustment of $1.8 million in the calculation of the quarterly earnings per share included in Note 13.

Foreign Currency Translation

The financial statements of the Company's foreign subsidiaries are measured using the local currency as the functional currency, with results of operations and
cash flows translated at average exchange rates during the period, and assets and liabilities translated at end of period exchange rates. Foreign currency transaction gains and losses are included in
the results of operations and are not material to the Company's consolidated financial statements. Translation adjustments are excluded from the determination of net income (loss) and are presented in
a separate component of accumulated other comprehensive income (loss) in stockholders' equity.

Comprehensive Income (Loss)

Comprehensive income (loss) comprises net income (loss), changes in unrealized gains and losses on marketable securities and cumulative foreign currency
translation adjustments. Accumulated other comprehensive income (loss) as of December 31, 2007 and 2006 included unrealized gains of $4.9 million and unrealized losses of
$0.4 million, respectively, on marketable securities and $(1.0) million and $(0.9) million, respectively, of cumulative foreign currency translation adjustments. Comprehensive income (loss) is
reflected in the consolidated statements of stockholders' equity.

Stock-Based Compensation Expense

As discussed more fully in Note 10, the Company adopted SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123R") effective
January 1, 2006 under the modified prospective transition method of adoption. SFAS 123R requires the recognition of the fair value of stock-based compensation in its statements of
operations. Stock-based compensation expense primarily relates to stock options, restricted stock and stock issued under the Company's employee stock purchase plans.

74

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

Prior
to January 1, 2006, the Company followed Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations, in accounting for its stock-based compensation plans. Under APB 25, when the exercise price of the employee stock options equals the market price of the underlying stock on the
date of grant, no stock-based compensation expense was recognized. The Company elected the modified prospective transition method for adopting SFAS 123R. Under this method, the provisions of
SFAS 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the
original provisions of SFAS 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), is being recognized in the Company's statements of operations in the periods after the date of
adoption. For stock options granted prior to January 1, 2006, the Company calculated stock-based compensation expense on a straight-line basis over the requisite service period for
each separately vesting portion of the award as if the award was, in substance, multiple awards. For restricted stock granted prior to January 1, 2006, the Company calculated stock-based
compensation expense on a straight-line basis over the requisite service period of the entire award.

SFAS 123
and 123R require the presentation of pro forma information for periods prior to adoption as if the Company had accounted for all stock-based employee compensation expense
under the fair value
method of those statements. For purposes of this pro forma disclosure, the estimated fair value of the stock options at the date of the grant is amortized to expense on a straight-line
basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The Company accounted for forfeitures as they occurred. The
following table illustrates the effect on net loss and loss per share as if the Company had applied the fair value recognition provisions to stock-based employee compensation expense (in thousands,
except per share amounts):

Year Ended
December 31, 2005Net loss

$
(198,249
)Add: Stock-based compensation as reported in the Statement of Operations


1,044Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards


(48,629
)Pro forma net loss

$
(245,834
)Amounts per common share:Basic and dilutedas reported

$
(0.64
)Basic and dilutedpro forma

$
(0.80
)


Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," ("SFAS No. 157"). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 codifies the
definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, clarifies
the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that

75

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

prioritizes
the information used to develop those assumptions. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. The Company does not believe that adoption
will have a material impact on its results of operations, financial position or cash flows.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," ("SFAS 159"). SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. The Company is currently analyzing the effect, if any, SFAS 159 will have on its consolidated financial position and results of operations.

In
June 2007, the FASB issued EITF No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development
Activities," ("EITF 07-3"). EITF 07-3 requires that nonrefundable advance payments for goods or services to be received in the future for use in research and
development activities should be deferred and capitalized. The capitalized amounts should be expensed as the related goods are delivered or the services are performed. EITF 07-3 is
effective for new contracts entered into during fiscal years beginning after December 15, 2007. The Company is currently analyzing the effect, if any, EITF 07-3 will have on
its consolidated financial position and results of operations.

In
December 2007, the FASB issued EITF Issue 07-1, "Accounting for Collaborative Arrangements," ("EITF 07-1"). EITF 07-1 requires
collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable
GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further,
EITF 07-1 clarified the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship subject to
EITF 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)." EITF 07-1 will be effective for the Company beginning on January 1, 2009. The Company is currently evaluating the effect
EITF 07-1 will have on its consolidated financial position and results of operations.

3.     Restructuring

2006 Resource Alignment

In October 2006, the Company announced a program to further align resources with its current corporate priorities of advancing VELCADE and accelerating the
clinical and preclinical pipeline by lowering investment in discovery and supporting areas. As part of its program, the Company has reduced in-house research and development technologies
and headcount in areas where the work can now be outsourced.

The
Company recorded restructuring charges of approximately $17.2 million during the year ended December 31, 2007 under the 2006 restructuring program primarily for
additional facility-related costs associated with vacated buildings and employee termination benefits as a result of headcount reductions. "Other" in the table below includes the write-off
of deferred rent in accordance with SFAS No. 13, "Accounting for Leases," upon vacating the facilities. During the year ended December 31, 2006, the Company recorded restructuring
charges of approximately $5.2 million under the 2006

76

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

restructuring
program primarily related to employee termination benefits as a result of headcount reductions.

The
following table displays the restructuring activity and liability balances (in thousands):

|                       |  | Balance at December 31, 2006 |       | Net Charges/(Credits) |   | Payments |   | Asset Impairment |        | Other |   | Balance at December 31, 2007
|---------------------- |  | ---------------------------- | ----- | --------------------- | - | -------- | - | ---------------- | ------ | ----- | - | ----------------------------
|Termination benefits   |  | $                            | 3,602 |                       | $ | 1,460    |   | $                | (4,423 | )     | $ |                            
|Facilities             |  |                              |      |                       |   | 16,028   |   |                  | (3,955 | )     |   |                            
|Asset impairment       |  |                              |      |                       |   | (301     | ) |                  |       |       |   | 301                         
|Other associated costs |  |                              |      |                       |   | 57       |   |                  | (57    | )     |   |                            
|                       |  |                              |       |                       |   |          |   |                  |        |       |   |                             
|Total                  |  | $                            | 3,602 |                       | $ | 17,244   |   | $                | (8,435 | )     | $ | 301                         
|                       |  |                              |       |                       |   |          |   |                  |        |       |   |                             

|
|

|                     |  | Balance at December 31, 2005 |   | Net Charges/(Credits) |   | Payments |  | Balance at December 31, 2006
|-------------------- |  | ---------------------------- | - | --------------------- | - | -------- |  | ----------------------------
|Termination benefits |  | $                            |  |                       | $ | 5,155    |  | $                           
|                     |  |                              |   |                       |   |          |  |                             

2005 Strategic Refinement

In October 2005, the Company announced its 2005 restructuring plan in support of a refined business strategy focused on advancing key growth assets, including
VELCADE, advancing the Company's clinical pipeline and building a leading oncology-focused discovery organization. In connection with the strategic refinement, the Company substantially reduced its
effort in inflammation discovery and reduced overall headcount, including eliminating positions in INTEGRILIN sales and marketing, inflammation discovery and various other business support groups.

The
Company recorded net restructuring credits of approximately $3.8 million during the year ended December 31, 2007 under the 2005 restructuring plan, primarily related to
the earlier than anticipated sublease of one of its facilities charged to restructuring in prior years at a higher rate per square foot than it had originally estimated. During the year ended
December 31, 2006, the Company recorded restructuring charges under the Company's 2005 restructuring plan of approximately $1.2 million primarily for additional facility-related costs
associated with vacated buildings, changes in sublease assumptions of certain vacated buildings, and employee termination benefits as a result of headcount reductions within inflammation discovery and
business support groups, partially offset by a credit resulting from the earlier than anticipated sublease of one of the vacated buildings at a higher rate per square foot than the Company had
originally estimated.

The
following table displays the restructuring activity and liability balances (in thousands):

|                       |  | Balance at December 31, 2006 |        | Net Charges/(Credits) |   | Payments |   | Balance at December 31, 2007
|---------------------- |  | ---------------------------- | ------ | --------------------- | - | -------- | - | ----------------------------
|Termination benefits   |  | $                            | 133    |                       | $ | (30      | ) | $                           
|Facilities             |  |                              | 13,827 |                       |   | (3,780   | ) |                             
|Other associated costs |  |                              | 24     |                       |   | (24      | ) |                             
|                       |  |                              |        |                       |   |          |   |                             
|Total                  |  | $                            | 13,984 |                       | $ | (3,834   | ) | $                           
|                       |  |                              |        |                       |   |          |   |                             

77

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

|
|

|                       |  | Balance at December 31, 2005 |        | Net Charges/(Credits) |   | Payments |   | Asset Impairment |         | Other |   | Balance at December 31, 2006
|---------------------- |  | ---------------------------- | ------ | --------------------- | - | -------- | - | ---------------- | ------- | ----- | - | ----------------------------
|Termination benefits   |  | $                            | 4,367  |                       | $ | 280      |   | $                | (4,514  | )     | $ |                            
|Facilities             |  |                              | 24,812 |                       |   | (3,997   | ) |                  | (7,240  | )     |   |                            
|Asset impairment       |  |                              |       |                       |   | 4,869    |   |                  |        |       |   | (4,869                      
|Contract termination   |  |                              | 37     |                       |   | 37       |   |                  | (74     | )     |   |                            
|Other associated costs |  |                              | 16     |                       |   | 47       |   |                  | (39     | )     |   |                            
|                       |  |                              |        |                       |   |          |   |                  |         |       |   |                             
|Total                  |  | $                            | 29,232 |                       | $ | 1,236    |   | $                | (11,867 | )     | $ | (4,869                      
|                       |  |                              |        |                       |   |          |   |                  |         |       |   |                             

2003 Restructuring Plan

In December 2002 and June 2003, the Company realigned its resources to become a commercially-focused biopharmaceutical company. The Company discontinued specified
discovery research efforts, reduced overall headcount, primarily in its discovery group, and consolidated its research and development facilities.

During
the year ended December 31, 2007, the Company recorded net restructuring credits under the Company's 2003 restructuring plan of approximately $0.5 million primarily
related to the earlier than anticipated sublease of one of its facilities charged to restructuring in prior years at a higher rate per square foot than it had originally estimated, as well as the
sublease extension for another facility charged to restructuring in prior years. During the year ended December 31, 2006, the Company recorded restructuring charges under the Company's 2003
restructuring plan of approximately $14.0 million primarily related to the lease termination payment for its vacated facility in Cambridge, England.

The
following table displays the restructuring activity and liability balances (in thousands):

|                     |  | Balance at December 31, 2006 |        | Net Charges/(Credits) |   | Payments |   | Balance at December 31, 2007
|-------------------- |  | ---------------------------- | ------ | --------------------- | - | -------- | - | ----------------------------
|Termination benefits |  | $                            |       |                       | $ | (10      | ) | $                           
|Facilities           |  |                              | 49,928 |                       |   | (514     | ) |                             
|                     |  |                              |        |                       |   |          |   |                             
|Total                |  | $                            | 49,928 |                       | $ | (524     | ) | $                           
|                     |  |                              |        |                       |   |          |   |                             

|
|

|                       |  | Balance at December 31, 2005 |        | Net Charges/(Credits) |   | Payments |  | Balance at December 31, 2006
|---------------------- |  | ---------------------------- | ------ | --------------------- | - | -------- |  | ----------------------------
|Facilities             |  | $                            | 75,671 |                       | $ | 13,995   |  | $                           
|Other associated costs |  |                              |       |                       |   | 7        |  |                             
|                       |  |                              |        |                       |   |          |  |                             
|Total                  |  | $                            | 75,671 |                       | $ | 14,002   |  | $                           
|                       |  |                              |        |                       |   |          |  |                             

The
Company accounts for its restructuring charges in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146").
SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at its fair value in the period in which the liability is
incurred, except for one-time termination benefits that meet specified requirements. Costs of termination benefits relate to severance packages,
out-placement services and career counseling for employees affected by the restructuring.

78

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

In
accordance with SFAS No. 146, the Company's facilities related expenses and liabilities in all restructuring plans include estimates of the remaining rental obligations, net of
estimated sublease income, for facilities the Company no longer occupies. The Company reviews its estimates and assumptions on a regular basis, until the outcome is finalized, and makes whatever
modifications are necessary, based on the Company's best judgment, to reflect any changed circumstances.

The
Company's decisions to vacate specified facilities and abandon the related leasehold improvements as well as terminate specified research programs were deemed to be impairment
indicators under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." As a result of performing the impairment evaluations, asset impairment charges were
recorded to adjust the carrying value of the related long-lived assets to their net realizable values. The fair values of the assets were estimated based upon anticipated future cash
flows, discounted at a rate commensurate with the risk involved. These amounts are included in asset impairment in the above tables.

In
connection with its 2006 decision to abandon certain facilities in 2007 under the 2006 restructuring program, the Company shortened the useful lives of the leasehold improvements at
these facilities in accordance with SFAS No. 144. During the years ended December 31, 2007 and 2006, the Company recorded additional depreciation expense of approximately
$3.3 million and $3.8 million, respectively, in research and development expense related to its decision.

The
projected timing of payments of the remaining restructuring liabilities under all of the Company's restructuring initiatives at December 31, 2007 is approximately
$23.0 million in 2008 and $26.4 million thereafter through 2014. The actual amount and timing of the payment of the remaining accrued liability is dependent upon the ultimate terms of
any potential subleases or lease restructuring.

4.     Revenue and Strategic Alliances

The Company has entered into research, development, technology transfer and commercialization arrangements with major pharmaceutical and biotechnology companies
relating to a broad range of therapeutic products. These alliances provide the Company with the opportunity to receive various combinations of license fees, research funding, distribution fees and may
provide additional payments
contingent upon its achievement of research and regulatory milestones and royalties and/or profit shares if the Company's collaborations are successful in developing and commercializing products.

Product Alliances

VELCADE

On June 30, 2003, the Company entered into an agreement with OBL to collaborate on the commercialization and with Johnson & Johnson Pharmaceutical
Research & Development, L.L.C., or JJPRD, to continue clinical development of VELCADE. Under the terms of the agreement, the Company retains all commercialization rights to VELCADE in the
United States. OBL and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside of the United States. The Company is entitled to royalties in the form of distribution fees from OBL
and its affiliate on sales of VELCADE outside of the United States. The Company also retains a limited option to co-promote VELCADE with OBL at a future date in specified European
countries.

The
Company is engaged with JJPRD in an extensive global program for further clinical development 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 solid and hematological cancers, including continued clinical development of VELCADE for multiple myeloma.

79

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

JJPRD
was responsible for 40% of the joint development costs through 2005 and is currently responsible for 45% of those costs. The Company is responsible for the remaining 55% of the joint development
costs.

The
Company may receive payments for achieving clinical development milestones, for achieving regulatory milestones outside of the United States and for achieving agreed-upon
sales levels of VELCADE outside of the United States. The Company may also receive additional payments for achieving specified clinical and regulatory approval milestones outside of the United States
for additional solid and hematological cancers and for achieving sales milestones outside of the United States. During the years ended December 31, 2007, 2006 and 2005, the Company recognized
approximately $40.0 million, $48.0 million and $22.0 million, respectively, of milestone payments as revenue under this alliance.

In
October 2006, the Company and Ortho Biotech Inc. ("OBI") announced a two-year agreement to jointly promote VELCADE in the U.S. Under the terms of the agreement, in
the first quarter of 2007, OBI and the Company began jointly promoting VELCADE to U.S.-based physicians. The Company pays a proportion of the VELCADE related costs for the OBI sales force, and OBI is
entitled to receive a commission should sales associated with the increased promotional effort exceed pre-specified targets. Both parties are able to terminate the agreement under certain
circumstances and subject to fees. The Company continues to be responsible for manufacturing and distribution of VELCADE in the U.S. The Company believes this collaboration, with the
well-established OBI oncology sales force, helps realize the full potential of the product. The current agreement between the Company and OBL for the promotion of VELCADE outside the U.S.
remains unchanged.

INTEGRILIN

In April 1999, COR entered into a collaboration agreement with SGP to jointly develop and commercialize INTEGRILIN on a worldwide basis. The Company acquired COR
in February 2002. Under its collaboration agreement with SGP, the Company generally shared any profits or losses from the sale of INTEGRILIN in the United States with SGP based on the amount of
promotional efforts that each party contributed. Since the United States launch of INTEGRILIN in June 1998, the Company and SGP had agreed to share promotional efforts in the United States equally,
except for costs associated with marketing programs that are specific to the Company. The Company had granted SGP an exclusive license to market INTEGRILIN outside of the United States and Europe and
SGP paid the Company royalties based on those sales.

In
June 2004, the Company reacquired the rights to market INTEGRILIN in Europe from SGP and concurrently entered into a license agreement granting GSK exclusive marketing rights to
INTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketing authorization for the European Union from SGP to GSK was completed and GSK began selling INTEGRILIN in the countries
of the European Union. Under the terms of the agreement, the Company is entitled to license fees and royalties from GSK on INTEGRILIN sales in Europe upon the achievement of specified objectives.
During the years ended December 31, 2006 and 2005, the Company recognized license fees of approximately $2.9 million and $21.7 million, respectively, included in strategic
alliance revenue from GSK.

80

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

On September 1, 2005, the Company transferred to SGP the exclusive development and commercialization rights to INTEGRILIN in the United States. In exchange
for these rights, SGP paid the Company approximately $35.5 million in a nonrefundable upfront payment that the Company is recognizing as revenue ratably over the Company's period of involvement
in managing the supply chain. In addition, SGP is obligated to pay the Company royalties on product sales of INTEGRILIN over the lifetime of the product, with the potential of the Company receiving
royalties beyond the 2014 patent expiration date.

As
of September 1, 2005, the Company no longer records co-promotion revenue. The Company now records royalties on sales of INTEGRILIN in the United States and other
territories, as earned on a quarterly basis over the life of the INTEGRILIN product. Minimum royalty payments for 2006 and 2007 were approximately $85.4 million. There are no guaranteed minimum
royalty payments for 2008 or future years.

Upon
closing the amended collaboration agreement with SGP, the Company recognized strategic alliance revenue of approximately $71.4 million in the third quarter of 2005 relating
to the Company's sale to SGP of its existing raw materials and finished goods INTEGRILIN inventory. SGP assumed development obligations relating to the product. The Company continues to manage the
supply chain
for INTEGRILIN at the expense of SGP for products sold in the United States and other areas outside of the European Union.

5.     Marketable Securities

The following is a summary of available-for-sale securities (in thousands):

|                                  |                           | December 31, 2007
|--------------------------------- | ------------------------- | -----------------
|
|Corporate bonds                   |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Asset-backed securities           |                           |                  
|                                  | Due in one to five years  |                  
|                                  | Due in six to ten years   |                  
|                                  | Due after ten years       |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

81

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

|
|

|                                  |                           | December 31, 2006
|--------------------------------- | ------------------------- | -----------------
|
|Corporate bonds                   |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Asset-backed securities           |                           |                  
|                                  | Due in one to five years  |                  
|                                  | Due in six to ten years   |                  
|                                  | Due after ten years       |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Equity securities                 |                           |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

The
following is a summary of the gross unrealized losses and the fair value of the Company's investments with unrealized losses that are not deemed to be
other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in
thousands):

|                                  |  | December 31, 2007 |        
|--------------------------------- |  | ----------------- | -------
|
|
|Corporate bonds                   |  | $                 | 98,026 
|Asset-backed securities           |  |                   | 49,803 
|U.S. government agency securities |  |                   | 5,103  
|                                  |  |                   |        
|Total                             |  | $                 | 152,932
|                                  |  |                   |        

There
were 58 corporate bonds and 125 asset-backed securities in an unrealized loss position at December 31, 2007. The majority of the securities in an unrealized
loss position greater than one year have been in an unrealized loss position for less than two years. The unrealized losses were primarily caused by interest rate changes, and not credit quality
issues. To determine whether an other-than-temporary impairment exists, the Company demonstrates that it has the ability and intent to hold the investment until a market price
recovery and, in doing so, considers evidence indicating the cost of the investment is recoverable and outweighs evidence to the contrary. Since the decline in market value is primarily attributable
to changes in interest rates and the Company has the ability and intent to hold these investments until a recovery of fair value, the Company does not consider these investments to be
other-than-temporarily impaired at December 31, 2007.

The
unrealized losses on investments in United States government agency securities at December 31, 2007 were primarily caused by interest rate changes. The contractual terms of
those investments do not permit the issuer to settle the securities at a price less than amortized cost of the investment. Because the Company has the ability and intent to hold these investments
until a recovery of fair value, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2007.

82

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

6.     Property and Equipment

Property and equipment consists of the following at December 31 (in thousands):

2007

2006Equipment

$
147,555

$
164,463Capitalized software


39,861


39,192Leasehold improvements


241,144


231,730Construction in progress


2,376


1,621430,936


437,006Less accumulated depreciation and amortization


(283,067
)

(283,657
)$
147,869

$
153,349


Depreciation
expense, which includes amortization of assets recorded under capital leases as described in Note 9, was $23.1 million, $31.9 million
and $42.3 million, in 2007, 2006 and 2005, respectively. During the years ended December 31, 2007 and December 31, 2006, the Company retired certain fixed assets that had been
fully amortized.

7.     Accrued expenses

Accrued expenses consist of the following at December 31 (in thousands):

2007

2006Payroll and benefits

$
31,886

$
24,895Clinical and preclinical development


11,822


10,933Manufacturing


8,158


4,330Product returns


3,453


2,562Governmental and contractual adjustments


3,238


1,463Other expenses


16,813


18,361$
75,370

$
62,544


8.     Commitments

Lease Commitments

The Company leases some of its laboratory and office space under operating lease agreements with various terms and renewal options, including major facilities
with lease expirations ranging from 2008 through 2020. In addition to minimum lease commitments, these lease agreements require the Company to pay its pro rata share of property taxes and building
operating expenses.

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

83

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

At
December 31, 2007, the Company has pledged $6.9 million of marketable securities, included in restricted cash, primarily as collateral for letters of credit for
specified leased facilities.

At
December 31, 2007, future minimum commitments under leases with noncancelable terms, including leases for facilities that the Company no longer occupies as part of its
restructuring plan, of more than one year are as follows (in thousands):

|                                                    |      | Capital Leases |          | Operating Leases |   | Operating Subleases |       
|--------------------------------------------------- | ---- | -------------- | -------- | ---------------- | - | ------------------- | ------
|Year:                                               |      |                |          |                  |   |                     |       
|                                                    | 2008 |                | $        | 16,915           |   | $                   | 32,184
|                                                    | 2009 |                |          | 17,183           |   |                     | 22,341
|                                                    | 2010 |                |          | 17,183           |   |                     | 21,905
|                                                    | 2011 |                |          | 17,183           |   |                     | 15,884
|                                                    | 2012 |                |          | 17,183           |   |                     | 11,385
|Thereafter                                          |      |                | 189,007  |                  |   | 11,549              |       
|                                                    |      |                |          |                  |   |                     |       
|Total                                               |      |                | 274,654  |                  | $ | 115,248             |       
|                                                    |      |                |          |                  |   |                     |       
|Less amount representing additional rental payments |      |                | (167,621 | )                |   |                     |       
|Less amount representing interest                   |      |                | (31,992  | )                |   |                     |       
|                                                    |      |                |          |                  |   |                     |       
|Present value of minimum lease payments             |      |                | 75,041   |                  |   |                     |       
|Less current portion of capital lease obligations   |      |                | (1,246   | )                |   |                     |       
|                                                    |      |                |          |                  |   |                     |       
|Capital lease obligations, net of current portion   |      | $              | 73,795   |                  |   |                     |       
|                                                    |      |                |          |                  |   |                     |       

Total
rent expense, which includes rent for buildings and equipment, was $27.8 million, $31.4 million and $37.4 million in 2007, 2006 and 2005,
respectively.

Long-Term Supply Contracts

The Company relies on third party contract manufacturers for the manufacturing, fill/finish and packaging of VELCADE and INTEGRILIN for both commercial purposes
and ongoing clinical trials. The Company has entered into long term supply contracts with certain of these manufacturers. Total future fixed commitments under these long term arrangements approximate
$17.6 million in 2008, $24.3 million in 2009, $24.6 million in 2010 and $65.0 million thereafter.

External Collaborations

The Company funds research efforts of its strategic alliance and various academic collaborators in connection with its research and development programs. Total
future fixed commitments under these agreements approximate $2.5 million in 2008 and $2.9 million thereafter.

9.     Convertible Debt

The Company had the following convertible notes outstanding at December 31, (in thousands):

2007

20062.25% convertible notes due November 15, 2011

$
250,000

$
250,0005.5% convertible notes due January 15, 2007





83,3255.0% convertible notes due March 1, 2007





16,246Total

$
250,000

$
349,571


84

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

In
November 2006, the Company completed the sale of $250.0 million of its 2.25% notes, which resulted in net proceeds of approximately $242.2 million. The
2.25% notes are convertible into the Company's common stock based upon a conversion rate of 64.6465 shares of common stock per $1,000 principal amount of the 2.25% notes, which was equal to the
initial conversion price of approximately $15.47 per
share of stock, subject to adjustment. The 2.25% notes are convertible only in the following circumstances: (1) if the closing price of the common stock exceeds 120% of the conversion price
within a specified period, (2) if specified distributions to holders of the common stock are made or specified corporate transactions occur, (3) if the average trading price per $1,000
principal amount is less than 98% of the product of the closing price of common stock and the then applicable conversion rate within a specified period or (4) during the last three months prior
to the maturity date of the notes, unless previously repurchased by the Company under certain circumstances. The 2.25% notes are subordinated in right of payment to all existing and future secured
debt of the Company.

In
connection with the sale of the 2.25% notes, the Company paid approximately $7.8 million in financing costs, which have been deferred and are included in other assets. These
deferred financing costs are being amortized to interest expense under the effective interest method over the life of the debt. The Company recognized $1.6 million and $0.2 million of
interest expense related to deferred financing cost amortization associated with the 2.25% notes during the years ended December 31, 2007 and 2006, respectively.

Under
the terms of the 2.25% notes, the Company is required to make semi-annual interest payments on the outstanding principal balance on May 15 and November 15
of each year. All required interest payments to date have been made.

The
estimated fair value of the Company's 2.25% notes as of December 31, 2007 was $294.1 million based on quoted market values.

In
accordance with the payment terms, the Company repaid the entire $83.3 million principal balance on its 5.5% convertible subordinated notes due on January 15, 2007 that
were convertible at a price equal to $42.07 per share and the entire $16.2 million principal balance on its 5.0% convertible subordinated notes due on March 1, 2007 that were convertible
at a price equal to $34.21 per share.

10.   Stockholders' Equity

Preferred Stock

The Company has 5,000,000 authorized shares of preferred stock, $0.001 par value, issuable in one or more series, each of such series to have such rights and
preferences, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Board of Directors.

Common Stock

At December 31, 2007, the Company had 500,000,000 authorized shares of common stock, $0.001 par value, with 324,605,075 shares issued and outstanding.

Common Stock Warrants

During the year ended December 31, 2007, warrants to purchase 429,600 shares of common stock were exercised with a weighted-average exercise price of $9.44
per share. There are no outstanding warrants at December 31, 2007.

85

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

Stock Option Plans

As discussed in Note 2, the Company adopted SFAS 123R effective January 1, 2006. Stock-based compensation expense primarily relates to stock
options, restricted stock and stock issued under the Company's employee stock purchase plans. The Company's policy is to grant stock options to employees at exercise prices equal to the fair market
value of the Company's stock at the dates of grant. Generally, options have a contractual term of ten years and vest monthly over a four-year period from grant date, although certain
options have been, and may in the future, be granted with shorter vesting periods. Certain of the Company's option plans provide for full vesting of options issued under the plans to optionholders who
terminate their employment for good reason or are terminated without cause within the period one month before and one year after a change of control. Options granted to consultants and other
nonemployees generally vest over the period of service to the Company. Awards of restricted stock are granted to officers and certain employees and generally fully vest four years from the grant date,
although certain awards have been, and may in the future, be granted with shorter vesting periods. The Company recognizes stock-based compensation expense equal to the fair value of stock options on a
straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. Restricted stock awards are
recorded as stock-based compensation expense, based on the market value on the date of the grant, on a straight-line basis over the
requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The Company provides newly issued shares to satisfy stock option
exercises, the issuance of restricted stock and stock issued under the Company's employee stock purchase plans.

As
a result of the adoption of SFAS 123R, the Company's net loss for the year ended December 31, 2006 was $42.1 million, or $0.13 per basic and diluted share,
greater than if it had continued to account for share-based compensation related to stock options and the Company's employee stock purchase plan under APB 25.

In
connection with the adoption of SFAS 123R, the Company reassessed its valuation methodology for stock options and the related input assumptions. The assessment of the valuation
methodology resulted in the continued use of the Black-Scholes model. In the fourth quarter of 2005, the Company considered implied volatilities of currently traded options to provide an estimate of
volatility based upon current trading activity. After considering other factors such as its stage of development, the length of time the Company has been public and the impact of having a marketed
product, the Company concluded that a blended volatility rate based upon historical performance, as well as the implied volatilities of currently traded options, better reflects the expected
volatility of its stock going forward. The Company uses historical data to estimate option exercise and employee termination behavior, adjusted for known trends, to arrive at the estimated expected
life of an option. The Company updates its assumptions on a quarterly basis to reflect recent historical data. The risk-free interest rate for periods within the contractual life of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.

The
following table summarizes the weighted-average assumptions the Company used in its fair value calculations at the date of grant:

Stock Options

Stock Purchase Plan2007

2006

2005

2007

2006

2005Expected life (years)

4.1

3.7

4.8

0.5

0.5

0.5Risk-free interest rate

4.58
%
4.76
%
4.03
%
4.20
%
4.49
%
3.13
%Volatility

39
%
45
%
60
%
37
%
49
%
60
%


86

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

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

SFAS 123R
requires the application of an estimated forfeiture rate to current period expense to recognize stock-based compensation expense only for those awards expected to vest.
The Company estimates forfeitures based upon historical data, adjusted for known trends, and will adjust its estimate of forfeitures if actual forfeitures differ, or are expected to differ from such
estimates. Subsequent changes in estimated forfeitures will be recognized through a cumulative adjustment in the period of change and will also impact the amount of stock-based compensation expense in
future periods.

The
Company has various stock options plans for employees, officers and directors of the Company. During 2007, the Company's 2007 Incentive Plan (the "2007 Plan") was approved to allow
for the granting of incentive and nonstatutory stock options, restricted stock awards and other stock-based awards, including the grant of shares based upon specified conditions, the grant of
securities convertible into common stock and the grant of stock appreciation rights of up to 25,000,000 shares of common stock. At December 31, 2007, 520,278 shares of common stock have been
reserved for the exercise of options outstanding, 40,000 shares of common stock have been reserved for the vesting of restricted stock units and 24,295,537 shares of common stock are available for
future grant under the 2007 Plan. The purpose of the 2007 Plan was to consolidate, conform and replace all of the Company's existing equity plans under which there were shares available for grant.

The
Company's 1993 Incentive Stock Plan (the "1993 Plan"), 1996 Equity Incentive Plan (the "1996 Plan"), and 1997 Equity Incentive Plan (the "1997 Plan"), allowed for the granting of
incentive and nonstatutory stock options for purchase of common stock of up to 21,600,000, 22,400,000, and 16,000,000 options, respectively. The Company's 2000 Incentive Stock Plan (the "2000 Plan")
allowed for the granting of incentive and nonstatutory stock options, restricted stock awards and other stock-
based awards, including the grant of shares based upon specified conditions, the grant of securities convertible into common stock and the grant of stock appreciation rights of up to 45,607,706 shares
of common stock. At December 31, 2007, a total of 61,977, 568,788, 760,549 and 17,601,788 shares of common stock have been reserved for exercise of options outstanding under the 1993, 1996,
1997 and 2000 Plans, respectively. No options are available for future grant under the 1993, 1996, 1997 and 2000 Plans.

In
connection with acquisitions prior to 2004, the Company assumed certain stock option plans of its acquired companies. The Plans, as assumed, allowed for the granting of incentive and
nonstatutory options to purchase up to 14,595,425 shares of Millennium common stock. At December 31, 2007, a total of 390,897 shares of common stock have been reserved for the exercise of
options outstanding under these assumed Plans. No options are available for future grant under these plans.

Under
the 1996 Employee Stock Purchase Plan, eligible employees may purchase common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at
the beginning or end of each offering period. Participation in the offering is limited to 10% of the employee's compensation or $25,000 in any calendar year. The offering periods begin on May 1
and November 1 of each year. At December 31, 2007, subscriptions were outstanding for an estimated 74,356 shares at $9.96 per share.

87

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

The
following table presents the combined option activity of the Company's stock option plans for the year ended December 31, 2007:

|                                                |  | Shares of Common Stock Attributable to Options |   | Weighted-Average Exercise Price Of Options |       | Weighted-Average Remaining Contractual Term (in years) |      | Aggregate Intrinsic Value (in thousands)
|----------------------------------------------- |  | ---------------------------------------------- | - | ------------------------------------------ | ----- | ------------------------------------------------------ | ---- | ----------------------------------------
|Outstanding at January 1, 2007                  |  | 27,004,963                                     |   | $                                          | 16.19 |                                                        |      |                                         
|Granted                                         |  | 1,327,326                                      |   |                                            | 10.88 |                                                        |      |                                         
|Exercised                                       |  | (4,112,542                                     | ) |                                            | 8.26  |                                                        |      |                                         
|Forfeited or expired                            |  | (4,315,470                                     | ) |                                            | 22.25 |                                                        |      |                                         
|                                                |  |                                                |   |                                            |       |                                                        |      |                                         
|Outstanding at December 31, 2007                |  | 19,904,277                                     |   | $                                          | 16.32 |                                                        | 5.35 |                                         
|                                                |  |                                                |   |                                            |       |                                                        |      |                                         
|Vested or expected to vest at December 31, 2007 |  | 19,150,633                                     |   | $                                          | 16.54 |                                                        | 5.19 |                                         
|                                                |  |                                                |   |                                            |       |                                                        |      |                                         
|Exercisable at December 31, 2007                |  | 16,534,035                                     |   | $                                          | 17.46 |                                                        | 4.72 |                                         
|                                                |  |                                                |   |                                            |       |                                                        |      |                                         

The
weighted-average grant-date fair value of options granted during 2007, 2006 and 2005 was $3.96, $3.93 and $4.56, respectively.

The
intrinsic value of options exercised during 2007, 2006 and 2005 was $15.7 million, $13.5 million and $9.4 million, respectively.

As
of December 31, 2007, the total remaining unrecognized compensation cost related to nonvested stock option awards amounted to approximately $6.6 million, including
estimated forfeitures, which will be recognized over the weighted-average remaining requisite service period of approximately one and one half years.

A
summary of the status of nonvested shares of restricted stock and restricted stock units as of December 31, 2007, and changes during the year then ended, is presented below:

Shares

Weighted-Average Grant Date Fair ValueNonvested at January 1, 2007

1,659,100

$
10.31Granted

2,300,786


10.90Vested

(509,819
)

10.36Forfeited

(370,526
)

10.58Nonvested at December 31, 2007

3,079,541

$
10.70


The
total fair value of shares of restricted stock that vested was approximately $5.3 million and $0.4 million during the periods ended December 31,
2007 and 2006, respectively. No shares of restricted stock vested in 2005.

As
of December 31, 2007, the total remaining unrecognized compensation cost related to nonvested restricted stock awards and restricted stock units amounted to approximately
$12.1 million, including estimated forfeitures, which will be recognized over the weighted-average remaining requisite service period of approximately one and one half years.

88

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

11.   Income Taxes

The difference between the Company's expected tax provision (benefit), as computed by applying the U.S. federal corporate tax rate of 35% to income (loss) before
provision for income taxes, and actual tax is reconciled as follows (in thousands):

2007

2006

2005Income (loss) before provision for income taxes

$
14,909

$
(43,953
)
$
(198,249
)Expected income tax (benefit) at 35% statutory rate

$
5,218

$
(15,384
)
$
(69,387
)Change in valuation allowance allocated to tax expense


(7,172
)

13,236


68,694Nondeductible compensation including stock plans


1,089


1,324


Other permanent items


865


824


693Income tax provision

$


$


$



At
December 31, 2007, the Company had unused net operating loss carryforwards of approximately $1.4 billion available to reduce federal taxable income,
expiring in 2008 through 2027, and $266.0 million available to reduce state taxable income, expiring in 2008 through 2012. The Company also has federal and net state tax credits of
approximately $112.2 million available to offset federal and state income taxes, both of which begin to expire in 2008. Due to the degree of uncertainty related to the ultimate use of the loss
carryforwards and tax credits, the Company has fully reserved these tax benefits.

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's deferred tax assets as of December 31 are as follows (in thousands):

2007

2006Net operating loss carryforwards

$
261,512

$
276,830Tax credit carryforwards


77,727


104,291Capitalized research costs


377,374


388,219Property and other intangible assets


58,987


65,898Deferred revenue


5,053


7,769Stock compensation


18,023


14,216Accrued restructuring


19,761


27,005Unrealized loss on marketable securities





143Other


12,522


13,625Gross deferred tax assets


830,959


897,996Valuation allowance


(710,037
)

(765,646
)Total deferred tax assets


120,922


132,350Deferred tax liabilities:Other intangible assets


(118,965
)

(132,350
)Unrealized gain on marketable securities


(1,957
)

Total deferred tax liabilities


(120,922
)

(132,350
)Net deferred taxes

$


$



89

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

The valuation allowance decreased by $55.6 million during 2007 due primarily to the Company's adoption of FIN 48, as more fully described below,
which resulted in a net derecognition of approximately $33.7 million of deferred tax assets from tax credit carryforwards and the related valuation allowance. In addition, there were net
reductions of approximately $14.9 million due to temporary items arising from changes in the differences of costs for financial accounting and tax purposes, especially for capitalized research
costs, property and other intangible assets, accrued restructuring and amortized intangible assets. Net operating loss carryforwards decreased by approximately $15.3 million as the amount of
losses expiring during the year exceeded current net operating losses from operations.

All
of the Company's deferred tax assets that are not offset with reversing deferred tax liabilities have a full valuation allowance recorded against them as, pursuant to the criteria
under SFAS 109, it is "more likely than not" that they will not be realized based on the Company's historical accumulated loss position. Should the Company continue to have profitable
operations in the future, some or all of the deferred tax assets may be considered realizable. If and when the Company concludes that the realization of the deferred tax assets is more likely than
not, the Company will record a reduction in the valuation allowance in the period such determination is made.

Any
subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2007 would be allocated as follows (in thousands):

Reported in the statement of operations

$
694,052Reported as a decrease to goodwill


17,942Reported in other comprehensive income (loss)


(1,957
)Total valuation allowance

$
710,037


As
discussed in Note 2, the Company adopted SFAS 123R effective January 1, 2006 for stock-based compensation plans. Generally, tax return deductions are allowable on
such arrangements, but, may arise in different amounts and periods from compensation costs recognized on financial statements. Pursuant to SFAS 123R, if the tax return deduction for an award
exceeds the cumulative compensation cost recognized in the financial statements, any excess tax benefit shall be recognized as additional paid-in capital when the deduction reduces taxes
payable. Prior to adoption, the Company recognized deferred tax assets, along with an offsetting valuation allowance, for net operating loss carryforwards that included deductions for excess tax
benefits from stock-based compensation. On adoption, the Company chose to derecognize the deferred tax asset for these excess tax deductions in the net operating loss carryforwards, along with the
offsetting valuation allowance. The net tax amount of the unrealized excess tax benefits that are no longer included and disclosed as deferred tax assets for December 31, 2007, is approximately
$234.0 million.

Effective
January 1, 2007, the Company adopted FIN 48. Upon implementation, the Company derecognized $33.7 million, net, of deferred tax assets related to research
and development and investment tax credit carryforwards that did not meet the more-likely-than-not recognition threshold under FIN 48. The adjustment did not
impact retained earnings or the statement of operations, as there is a full valuation allowance recorded against these deferred tax assets. There would be no affect on the Company's effective tax rate
upon a recognition of this tax benefit because any increase in the benefit would result an increase in a deferred tax asset and a corresponding increase in the Company's valuation allowance. The
Company does not expect that the unrecognized tax benefit will materially increase or decrease in the next year. It is the Company's accounting policy to treat interest and penalties related to
unrecognized tax benefits as a component of income tax expense. The Company

90

---



Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

has
not recognized any interest and penalties related to uncertain tax positions to date since adoption of FIN 48.

A
reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows (in thousands):

Balance at January 1, 2007

$
40,013Additions based on tax positions related to current year


1,040Other additions or reductions


Total valuation allowance

$
41,053


The
Company files income tax returns in the United States federal jurisdiction and various state, local, and foreign jurisdictions. The Company is no longer subject to any tax assessment
from an income tax examination in major taxing jurisdictions for years before 2004, except to the extent that in the future it utilizes net operating losses or tax credit carryforwards that originated
before 2004. The Company currently is not under examination by the Internal Revenue Service or other jurisdictions for any tax years.

12.   Related Party Transactions

In November 2003, the Company sold specified assets, including intellectual property to Portola Pharmaceuticals, Inc. ("Portola"), a company founded and
owned in part by a member of Millennium's board of directors. In exchange for these assets, the Company received Portola Series A preferred convertible stock, representing less than a 5%
ownership in Portola. The investment in Portola is accounted for using the cost method and is included in other assets on the balance sheet at December 31, 2007 and 2006. In addition,
commencing in June 2004, Portola sub-leased specified research facilities of the Company in South San Francisco, CA. In August 2004, the Company entered into an additional transaction with
Portola to license to Portola the Company's Factor Xa inhibitor program in return for milestone and royalty payments upon achievement of certain events. In December 2007, the Company recorded
$5.0 million in strategic alliance revenue for the achievement of a clinical development milestone under the Factor Xa inhibitor program. In December 2005, the Company entered into a
transaction with Portola to license to Portola the Company's Aggregometer system in exchange for cash and Portola Series B preferred stock, which combined with the previous stock issued,
maintains the Company's ownership in Portola at less than 5%.

91

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

13.   Quarterly Financial Information (unaudited)

|                                             |                                                                     | First Quarter
Ended
March 31, 2007 |         | Second Quarter
Ended
June 30, 2007 |   | Third Quarter
Ended
September 30, 2007 |         | Fourth Quarter
Ended
December 31, 2007 |        
|-------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | ------- | ---------------------------------- | - | -------------------------------------- | ------- | -------------------------------------- | -------
|
|Revenues:                                    |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Net product sales                                                   |                                    | $       | 58,640                             |   | $                                      | 62,550  |                                        | $      
|                                             | Revenue under strategic alliances                                   |                                    |         | 15,714                             |   |                                        | 11,826  |                                        |        
|                                             | Royalties                                                           |                                    |         | 36,370                             |   |                                        | 38,903  |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Total revenues                                                      |                                    |         | 110,724                            |   |                                        | 113,279 |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Costs and expenses:                          |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Cost of sales (excludes amortization of acquired intangible assets) |                                    |         | 5,358                              |   |                                        | 5,379   |                                        |        
|                                             | Research and development                                            |                                    |         | 69,206                             |   |                                        | 71,374  |                                        |        
|                                             | Selling, general and administrative                                 |                                    |         | 41,548                             |   |                                        | 49,040  |                                        |        
|                                             | Restructuring                                                       |                                    |         | 5,611                              |   |                                        | 5,772   |                                        |        
|                                             | Amortization of intangibles                                         |                                    |         | 8,487                              |   |                                        | 8,487   |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Total costs and expenses                                            |                                    |         | 130,210                            |   |                                        | 140,052 |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Income (loss) from operations                |                                                                     |                                    | (19,486 | )                                  |   | (26,773                                | )       |                                        | (10,254
|Other income, net                            |                                                                     |                                    | 12,708  |                                    |   | 9,092                                  |         |                                        | 8,561  
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Net income (loss)                            |                                                                     | $                                  | (6,778  | )                                  | $ | (17,681                                | )       | $                                      | (1,693 
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Amounts per common share:                    |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Earnings (loss) per share, basic and diluted |                                                                     | $                                  | (0.02   | )                                  | $ | (0.06                                  | )       | $                                      | (0.01  
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Weighted-average shares, basic               |                                                                     |                                    | 316,072 |                                    |   | 317,799                                |         |                                        | 318,871
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Weighted-average shares, diluted             |                                                                     |                                    | 316,072 |                                    |   | 317,799                                |         |                                        | 318,871
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        

Refer
to Note 2 for the calculation of diluted earnings per share for the quarter ended December 31, 2007.

92

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Millennium Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements December 31, 2007 (Continued)

|                                             |                                                                     | First Quarter
Ended
March 31, 2006 |         | Second Quarter
Ended
June 30, 2006 |   | Third Quarter
Ended
September 30, 2006 |         | Fourth Quarter
Ended
December 31, 2006 |        
|-------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | ------- | ---------------------------------- | - | -------------------------------------- | ------- | -------------------------------------- | -------
|
|Revenues:                                    |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Net product sales                                                   |                                    | $       | 53,373                             |   | $                                      | 58,786  |                                        | $      
|                                             | Revenue under strategic alliances                                   |                                    |         | 38,629                             |   |                                        | 27,165  |                                        |        
|                                             | Royalties                                                           |                                    |         | 30,473                             |   |                                        | 34,172  |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Total revenues                                                      |                                    |         | 122,475                            |   |                                        | 120,123 |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Costs and expenses:                          |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Cost of sales (excludes amortization of acquired intangible assets) |                                    |         | 15,828                             |   |                                        | 14,102  |                                        |        
|                                             | Research and development                                            |                                    |         | 80,839                             |   |                                        | 77,439  |                                        |        
|                                             | Selling, general and administrative                                 |                                    |         | 37,224                             |   |                                        | 39,261  |                                        |        
|                                             | Restructuring                                                       |                                    |         | 2,831                              |   |                                        | 1,554   |                                        |        
|                                             | Amortization of intangibles                                         |                                    |         | 8,487                              |   |                                        | 8,487   |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|                                             | Total costs and expenses                                            |                                    |         | 145,209                            |   |                                        | 140,843 |                                        |        
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Loss from operations                         |                                                                     |                                    | (22,734 | )                                  |   | (20,720                                | )       |                                        | (20,277
|Other income, net                            |                                                                     |                                    | 1,893   |                                    |   | 3,053                                  |         |                                        | 6,560  
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Net income (loss)                            |                                                                     | $                                  | (20,841 | )                                  | $ | (17,667                                | )       | $                                      | (13,717
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Amounts per common share:                    |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Earnings (loss) per share, basic and diluted |                                                                     | $                                  | (0.07   | )                                  | $ | (0.06                                  | )       | $                                      | (0.04  
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Weighted-average shares, basic               |                                                                     |                                    | 311,823 |                                    |   | 313,321                                |         |                                        | 314,228
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        
|Weighted-average shares, diluted             |                                                                     |                                    | 311,823 |                                    |   | 313,321                                |         |                                        | 314,228
|                                             |                                                                     |                                    |         |                                    |   |                                        |         |                                        |        

93

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Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.    CONTROLS AND PROCEDURES

1.     Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2007. In
designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation,
our chief executive officer and chief financial officer concluded that as of December 31, 2007, our disclosure controls and procedures were (1) designed to ensure that material
information relating to us is made known to our chief executive officer and chief financial officer by others, particularly during the period in which this report was prepared, and
(2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and forms.

2.     Internal Control Over Financial Reporting

a)    Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company's principal executive and
principal financial officers and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

94

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Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal ControlIntegrated Framework.

Based
on our assessment, management believes that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria.

Our
independent registered public accounting firm has issued an audit report on our assessment of our internal control over financial reporting. This report appears below.

b)    Attestation Report of the Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm  on Internal Control over Financial Reporting

The
Board of Directors and Stockholders
Millennium Pharmaceuticals, Inc.

We
have audited Millennium Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Millennium Pharmaceuticals, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Management's Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

95

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In
our opinion, Millennium Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on
the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2007
and 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2007 of Millennium
Pharmaceuticals, Inc. and our report dated February 25, 2008 expressed an unqualified opinion thereon.

|                                        |  | /s/ Ernst & Young LLP
|--------------------------------------- |  | ---------------------
|Boston, Massachusetts
February 25, 2008 |  |                      

c)     Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2007 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    OTHER INFORMATION

On February 28, 2008, we entered into indemnification agreements with each of our directors and executive officers. The indemnification agreement is in
addition to the coverage provided by our certificate of incorporation and by our officers' and directors' liability insurance. The indemnification agreement provides, among other things, that we will
indemnify our directors and executive officers for certain expenses including attorneys' fees, judgments, fines, penalties and settlement amounts, and certain other expenses that the director or
officer actually and reasonably incurs in any action or proceeding arising out of the person's services as our director or executive officer. In certain circumstances, expenses may be paid in advance
to the officer or director. The agreement does not indemnify the officer or director in connection with a proceeding initiated by the officer or director unless our Board of Directors approved the
initiation of the proceeding or the proceeding was commenced following a change in control. The agreement also does not indemnify the person to the extent the person's expenses are reimbursed from the
proceeds of insurance, and if we make any indemnification payments to the person which are later reimbursed from the proceeds of insurance, the person must refund the amount of the reimbursed payments
to us.

This
description of the indemnification agreements is not complete and is qualified in its entirety by reference to the complete text of the form of the agreements filed as
Exhibit 10.58 to this Annual Report on Form 10-K for the year ended December 31, 2007.

96

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PART III

Item 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The section entitled "Our Executive Officers" in Part I of this annual report contains information about our executive officers.

We
provide information in response to this item in the proxy statement we file with the Securities and Exchange Commission in connection with our solicitation of proxies for our 2008
Annual Meeting of Stockholders expected to be held on May 22, 2008 as follows:



We
incorporate herein by reference the information contained in those sections of our proxy statement.

We
have adopted a code of business conduct and ethics for directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions) and employees, known as the Core Values Handbook. The Core Values Handbook is available on our website at http://www.millennium.com/investors in
the corporate governance section. We intend to post on our website all disclosures that are required by law or NASDAQ Global Select Market listing standards concerning any amendments to, or waivers
from, our code of business conduct and ethics. Stockholders may request a free copy of the Core Values Handbook by writing to Investor Relations, Millennium Pharmaceuticals, Inc., 40 Landsdowne
Street, Cambridge, Massachusetts 02139 or submitting a request through the website.

Item 11.    EXECUTIVE COMPENSATION

We provide information about our executive compensation in the sections entitled "Director Compensation," "Compensation of Executive Officers," "Compensation
Discussion and Analysis," and "Compensation and Talent Committee Report on Executive Compensation" in the proxy statement we file with the Securities and Exchange Commission in connection with the
solicitation of proxies for our 2008 Annual Meeting of Stockholders expected to be held on May 22, 2008. We incorporate herein by reference the information contained in those sections of our
proxy statement.

The
Compensation and Talent Committee Report on Executive Compensation contained in the proxy statement for our 2008 Annual Meeting of Stockholders shall be deemed furnished in this
annual report and shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission or otherwise subject to the liabilities of Section 18 of the Exchange
Act, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we
specifically request that such information be treated as soliciting material or specifically incorporate such information by reference into such filing.

97

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Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

We provide information about security ownership of certain beneficial owners and management required by this item in the section entitled "Ownership of Our Common
Stock" in the proxy statement we file with the Securities and Exchange Commission in connection with our solicitation of proxies for our 2008 Annual Meeting of Stockholders expected to be held on
May 22, 2008. We incorporate herein by reference the information contained in that section of our proxy statement.

Equity Compensation Plan Information

We provide information about security ownership of certain beneficial owners and management required by this item in the section entitled "Equity Compensation
Plan Information" in the proxy statement we file with the Securities and Exchange Commission in connection with our solicitation of proxies for our 2008 Annual Meeting of Stockholders expected to be
held on May 22, 2008. We incorporate herein by reference the information contained in that section of our proxy statement.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We provide the information required by this item in the section entitled "Our Corporate Governance" in the proxy statement we file with the Securities and
Exchange Commission in connection with our solicitation of proxies for our 2008 Annual Meeting of Stockholders expected to be held on May 22, 2008. We incorporate herein by reference the
information contained in that section of our proxy statement.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

We provide the information required by this item in the section entitled "Independent Registered Public Accounting Firm" in the proxy statement we file with the
Securities and Exchange Commission in connection with our solicitation of proxies for our 2008 Annual Meeting of Stockholders expected to be held on May 22, 2008. We incorporate herein by
reference the information contained in that section of our proxy statement.

98

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PART IV

Item 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are included as part of this Annual Report on Form 10-K.

|                                                                                                     |  | Page number
In this report
|---------------------------------------------------------------------------------------------------- |  | --------------------------
|Report of Independent Registered Public Accounting Firm on Financial Statements                      |  | 61                        
|Consolidated Balance Sheets at December 31, 2007 and 2006                                            |  | 62                        
|Consolidated Statements of Operations for the years ended December 31, 2007, 2006, and 2005          |  | 63                        
|Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006, and 2005          |  | 64                        
|Consolidated Statements of Stockholders' Equity for the years ended December 31, 2007, 2006 and 2005 |  | 65                        
|Notes to Consolidated Financial Statements                                                           |  | 66                        

All
schedules, other than the one listed above, are omitted as the information required is inapplicable or the information is presented in the consolidated financial statements or the
related notes.

The following Millennium trademarks are used in this Annual Report on Form 10-K: Millennium®, the
Millennium "M" logo and design (registered), Millennium Pharmaceuticals, VELCADE® (bortezomib) for Injection, and INTEGRILIN® (eptifibatide) Injection. All are
covered by registrations or pending applications for registration in the U.S. Patent and Trademark Office and many other countries. Campath® is a registered trademark of Genzyme
Corporation or its subsidiaries, ReoPro® (abciximab) is a trademark of Eli Lilly & Company, Aggrastat® (tirofiban) is a trademark of
Merck & Co., Inc., Thalomid® (thalidomide) and Revlimid® (lenalidomide) are trademarks of Celgene Corporation and Angiomax® (bivalirudin) is a
trademark of The Medicines Company.Other trademarks used in this Annual Report on Form 10-K are the property of their respective
owners.

99

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|Date: February 29, 2008 |  | MILLENNIUM PHARMACEUTICALS, INC.
|----------------------- |  | --------------------------------
|                        |  | By:                             

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                       |  | Title                                                                                          |  | Date             
|----------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -----------------
|                                                |  |                                                                                                |  |                  
|/s/DEBORAH DUNSIREDeborah Dunsire               |  | President and Chief Executive Officer and Director
(Principal Executive Officer)               |  | February 29, 2008
|/s/MARSHA H. FANUCCIMarsha H. Fanucci           |  | Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |  | February 29, 2008
|/s/ROBERT F. FRIELRobert F. Friel               |  | Director                                                                                       |  | February 29, 2008
|/s/A. GRANT HEIDRICH, IIIA. Grant Heidrich, III |  | Director                                                                                       |  | February 29, 2008
|/s/CHARLES J. HOMCYCharles J. Homcy             |  | Director                                                                                       |  | February 29, 2008
|/s/RAJU S. KUCHERLAPATIRaju S. Kucherlapati     |  | Director                                                                                       |  | February 29, 2008
|/s/JEFFREY LEIDENJeffrey Leiden                 |  | Director                                                                                       |  | February 29, 2008

100

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|/s/MARK J. LEVINMark J. Levin     |  | Director |  | February 29, 2008
|--------------------------------- |  | -------- |  | -----------------
|/s/NORMAN C. SELBYNorman C. Selby |  | Director |  | February 29, 2008
|/s/KENNETH E. WEGKenneth E. Weg   |  | Director |  | February 29, 2008
|/s/ANTHONY H. WILDAnthony H. Wild |  | Director |  | February 29, 2008

101

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EXHIBIT INDEX

|     |  |                                                                                                                                                                                                                                                |  | Incorporated by Reference     |  |                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | -------------------------------------------
|
|
|     |  | Articles of Incorporation and By-laws                                                                                                                                                                                                          |  |                               |  |                                            
|3.1  |  | Restated Certificate of Incorporation, as amended                                                                                                                                                                                              |  | 8-K                           |  | 05/10/2007                                 
|3.2  |  | Second Amended and Restated By-laws                                                                                                                                                                                                            |  | 8-K                           |  | 05/10/2007                                 
|     |  | Instruments defining the rights of security holders, including indentures                                                                                                                                                                      |  |                               |  |                                            
|4.1  |  | Specimen Certificate for shares of Common Stock, $.001 par value, of the Company                                                                                                                                                               |  | S-1/A(333-02490)              |  | 05/02/1996                                 
|4.2  |  | Rights Agreement dated April 5, 2001 by and between the Company and State Street Bank and Trust Company, N.A.                                                                                                                                  |  | 8-K                           |  | 04/05/2001                                 
|4.3  |  | Indenture, dated November 15, 2006, between the Company and U.S. Bank National Association, as Trustee, relating to the 2.25% Convertible Senior Notes due November 15, 2011 (including the form of Global Note attached as Exhibit A
thereto) |  | 8-K                           |  | 11/21/2006                                 
|     |  | Material contractsfinancing agreements                                                                                                                                                                                                        |  |                               |  |                                            
|10.1 |  | Form of Master Equipment Lease Financing Agreement, dated September 19, 1996 by and between the Company and GE Capital Corporation, as amended                                                                                                 |  | 10-Q
10-Q
10-K
10-K           |  | 11/13/1996
08/14/1997
02/25/2000
03/15/2001
|     |  | Material contractsleases                                                                                                                                                                                                                      |  |                               |  |                                            
|10.2 |  | Lease Agreement dated August 26, 1993, as amended, by and between the Company and the Massachusetts Institute of Technology, as amended, for 640 Memorial Drive, Cambridge, MA                                                                 |  | S-1 (333-2490)
10-K
10-K
10-K |  | 03/18/1996
03/24/1999
02/25/2000
03/15/2001
|10.3 |  | Lease Agreement dated August 4, 2000 by and between the Company and Forest City Enterprises, Inc. for 35 Landsdowne Street, Cambridge, MA                                                                                                      |  | 10-Q                          |  | 11/9/2000                                  
|10.4 |  | Lease Agreement dated August 4, 2000 by and between the Company and Forest City Enterprises, Inc. for 40 Landsdowne Street, Cambridge, MA                                                                                                      |  | 10-Q                          |  | 11/9/2000                                  

102

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|10.5     |  | First Amendment to Lease FC 40 Landsdowne, Inc. to the Company dated November 5, 2001                                                                                       |  | 10-K                          |  | 03/08/2006                                             |  | 10.5                                |  | 
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | ------------------------------------------------------ |  | ----------------------------------- |  | 
|         |  | Material contractsresearch and development/collaboration agreements                                                                                                        |  |                               |  |                                                       
|10.6(a) |  | Collaboration and License Agreement dated June 22, 2000 by and between the Company and the sanofi-aventis Group (as successor to Aventis Pharmaceuticals, Inc.), as amended |  | 10-Q
10-Q                     |  | 07/26/2000
10/25/2001                                  |  | 10.1
10.3                           |  | 
|10.6(b) |  | Second Amendment effective as of December 22, 2002 and dated April 22, 2003 to the Collaboration and License Agreement                                                      |  | 10-Q                          |  | 08/12/2003                                             |  | 10.1                                |  | 
|10.6(c) |  | Technology Development Agreement dated June 22, 2000                                                                                                                        |  | 10-Q                          |  | 07/26/2000                                             |  | 10.2                                |  | 
|10.6(d)  |  | Registration Rights Agreement dated June 22, 2000                                                                                                                           |  | 10-Q                          |  | 07/26/2000                                             |  | 10.4                                |  | 
|10.6(e) |  | Letter Agreement dated May 27, 2004 relating to the Collaboration and License Agreement                                                                                     |  | 10-Q                          |  | 08/04/2004                                             |  | 10.1                                |  | 
|10.6(f) |  | Letter Agreement dated July 21, 2005                                                                                                                                        |  | 10-Q                          |  | 08/08/2005                                             |  | 10.7                                |  | 
|10.6(g) |  | Third Amendment effective as of October 31, 2005 and dated November 7, 2005 to the Collaboration and License Agreement                                                      |  | 10-K                          |  | 03/08/2006                                             |  | 10.7(g)                             |  | 
|         |  | Material contractsINTEGRILIN® (eptifibatide) Injection                                                                                                                     |  |                               |  |                                                       
|10.7    |  | License and Supply Agreement between the Company (as successor to COR Therapeutics, Inc.) and Solvay, Société Anonyme, dated July 27, 1994, as amended                      |  | 10-Q*                         |  | 11/13/1998                                             |  | 10.24
10.25
10.26
10.27
10.28
10.29 |  | 
|10.8    |  | New Long Term Supply Agreement between the Company and Solvay, Société Anonyme, dated January 1, 2003                                                                       |  | 10-K                          |  | 03/07/2003                                             |  | 10.9                                |  | 
|10.9    |  | Collaboration Agreement between Schering-Plough Ltd., Schering Corporation and the Company (as successor to COR Therapeutics, Inc.) dated April 10, 1995, as amended        |  | 10-Q*
10-K*
10-K*
10-Q*
10-Q* |  | 08/08/1995
03/25/1999
03/30/2000
08/10/2000
11/08/2000 |  | 10.41
10.33
10.35
10.1
10.1, 10.2   |  | 

103

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|10.10    |  | Letter agreement dated June 4, 2002 relating to the Collaboration Agreement dated April 10, 1995 between Schering Corporation and the Company                                         |  | 10-K |  | 03/10/2004 |  | 10.8  |  | 
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---------- |  | ----- |  | 
|10.11    |  | Addendum to Collaboration Agreement among the Company, Schering Corporation and Schering-Plough, Ltd. dated June 1, 2003                                                              |  | 10-K |  | 03/10/2004 |  | 10.9  |  | 
|10.12    |  | Letter agreement dated November 3, 2003 relating to the Collaboration Agreement dated April 10, 1995 between Schering Corporation and the Company                                     |  | 10-K |  | 03/10/2004 |  | 10.10 |  | 
|10.13    |  | Agreement about European Commercialization of Integrilin by and among the Company, Schering Corporation and Schering-Plough, Ltd. dated June 21, 2004                                 |  | 10-Q |  | 08/04/2004 |  | 10.2  |  | 
|10.14    |  | Letter agreement dated September 17, 2004 relating to the Addendum dated June 1, 2003 to the Collaboration Agreement among the Company, Schering Corporation and Schering-Plough, Ltd |  | 10-K |  | 03/08/2005 |  | 10.10 |  | 
|10.15    |  | Letter agreement dated November 30, 2004 relating to the Addendum dated June 1, 2003 to the Collaboration Agreement among the Company, Schering Corporation and Schering-Plough, Ltd  |  | 10-K |  | 03/08/2005 |  | 10.11 |  | 
|10.16    |  | Amended and Restated Integrilin Agreement dated July 22, 2005 among the Company, Schering Corporation and Schering-Plough, Ltd.                                                       |  | 10-Q |  | 11/08/2005 |  | 10.1  |  | 
|10.17    |  | Side Agreement dated October 13, 2005 among the Company, Schering Corporation and Schering-Plough Ltd.                                                                                |  | 10-Q |  | 11/08/2005 |  | 10.2  |  | 
|10.18    |  | Supply Agreement dated September 1, 2005 by and between the Company and Schering Corporation                                                                                          |  | 10-Q |  | 11/08/2005 |  | 10.3  |  | 
|10.19(a) |  | License, Development and Commercialization Agreement by and between GlaxoSmithKline plc and the Company dated June 22, 2004                                                           |  | 10-Q |  | 08/04/2004 |  | 10.3  |  | 

104

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|10.19(b) |  | Letter agreement dated March 4, 2005 relating to the License, Development and Commercialization Agreement by and between GlaxoSmithKline plc and the Company dated June 22, 2004 |  | 10-K   |  | 03/08/2005 |  | 10.12(b) |  | 
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | ---------- |  | -------- |  | 
|          |  | Material contractsVELCADE® (bortezomib) for Injection                                                                                                                           |  |        |  |           
|10.20    |  | Patent License Agreement between the Public Health Service and the Company dated December 2, 2002                                                                                |  | 10-K   |  | 03/10/2004 |  | 10.11    |  | 
|10.21(a) |  | Collaboration, Distribution and License Agreement by and between the Company and Ortho Biotech Products, L.P. dated June 30, 2003                                                |  | 10-Q   |  | 08/12/2003 |  | 10.2     |  | 
|10.21(b) |  | Amendment dated July 15, 2004 to Collaboration, Distribution and License Agreement by and between the Company and Ortho Biotech Products, L.P. dated June 30, 2003               |  | 10-Q/A |  | 11/09/2006 |  | 10.5     |  | 
|10.22(a) |  | Co-Promotion Agreement dated October 25, 2006 between the Company and Ortho Biotech Inc.                                                                                         |  | 10-K   |  | 03/01/2007 |  | 10.22    |  | 
|10.22(b) |  | First Amendment dated May 2, 2007 to the Co-Promotion Agreement between the Company and Ortho Biotech, Inc. dated October 25, 2006                                               |  | 10-Q   |  | 08/08/2007 |  | 10.1     |  | 
|          |  | Material contractsmanagement contracts and compensatory plans                                                                                                                   |  |        |  |           
|10.23#    |  | Key Employee Change in Control Severance Plan                                                                                                                                    |  | 10-K   |  | 03/08/2006 |  | 10.26    |  | 
|10.24#    |  | Non-Qualified Deferred Compensation Plan                                                                                                                                         |  | 10-K   |  | 03/08/2006 |  | 10.27    |  | 
|10.25#    |  | Description of Non-Employee Director Compensation                                                                                                                                |  | 8-K    |  | 05/10/2007 |  | 99.4     |  | 
|10.26#    |  | Description of Success Sharing Bonus Program of Millennium Pharmaceuticals, Inc.                                                                                                 |  | 10-K   |  | 03/01/2007 |  | 10.27    |  | 
|10.27#    |  | 2007 Incentive Plan                                                                                                                                                              |  | 8-K    |  | 05/10/2007 |  | 99.1     |  | 
|10.28#    |  | Form of Terms of Stock Option Granted Under 2007 Incentive Plan                                                                                                                  |  | 8-K    |  | 05/10/2007 |  | 99.2     |  | 
|10.29#    |  | Form of Restricted Stock Agreement Under 2007 Incentive Plan                                                                                                                     |  | 8-K    |  | 05/10/2007 |  | 99.3     |  | 

105

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|10.30# |  | Form of Restricted Stock Unit Agreement Under 2007 Incentive Plan                                                   |  |                 |  |            |  |       |  | X
|------ |  | ------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | ---------- |  | ----- |  | -
|10.31# |  | 2003 Employee Stock Purchase Plan for Non-U.S. Subsidiaries and Affiliated Entities, as amended                     |  | 10-Q            |  | 11/08/2005 |  | 10.5  |  |  
|10.32# |  | 2000 Stock Incentive Plan, as amended                                                                               |  | 10-K            |  | 03/07/2003 |  | 10.14 |  |  
|10.33# |  | Form of Terms of Stock Option Granted Under 2000 Stock Incentive Plan                                               |  | 10-K            |  | 03/08/2006 |  | 10.33 |  |  
|10.34# |  | Form of Restricted Stock Agreement Under 2000 Stock Incentive Plan                                                  |  | 10-K            |  | 03/08/2006 |  | 10.28 |  |  
|10.35# |  | 1997 Equity Incentive Plan, as amended                                                                              |  | 10-K            |  | 03/07/2003 |  | 10.15 |  |  
|10.36# |  | 1996 Equity Incentive Plan, as amended                                                                              |  | 10-K            |  | 03/07/2003 |  | 10.16 |  |  
|10.37# |  | 1996 Employee Stock Purchase Plan, as amended                                                                       |  | 10-Q            |  | 08/04/2006 |  | 10.2  |  |  
|10.38# |  | 1993 Incentive Stock Plan, as amended                                                                               |  | 10-K            |  | 03/07/2003 |  | 10.20 |  |  
|10.39# |  | 1991 Equity Incentive Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc.               |  | 10-Q*           |  | 05/09/2001 |  | 10.2  |  |  
|10.40# |  | 1997 Equity Incentive Plan, as amended, assumed by the Company as successor to Millennium BioTherapeutics, Inc.     |  | 10-K            |  | 03/07/2003 |  | 10.23 |  |  
|10.41# |  | 1997 Equity Incentive Plan, as amended, assumed by the Company as successor to Millennium Predictive Medicine, Inc. |  | 10-K            |  | 03/07/2003 |  | 10.24 |  |  
|10.42# |  | Form of Indemnification Agreement between the Company (as successor to COR Therapeutics, Inc.) and Charles J. Homcy |  | S-1 (33-40627)* |  | 05/16/1991 |  | 10.1  |  |  
|10.43# |  | Agreement dated August 6, 2004 between the Company and Marsha H. Fanucci                                            |  | 10-Q            |  | 11/09/2004 |  | 10.1  |  |  
|10.44# |  | Offer letter agreement dated September 28, 2004 between the Company and Laurie B. Keating                           |  | 10-Q            |  | 11/09/2004 |  | 10.3  |  |  
|10.45# |  | Offer Letter Agreement dated June 23, 2005 between the Company and Deborah Dunsire                                  |  | 10-Q            |  | 08/08/2005 |  | 10.1  |  |  
|10.46# |  | Restricted Stock Agreement dated July 18, 2005 between the Company and Deborah Dunsire                              |  | 10-Q            |  | 08/08/2005 |  | 10.2  |  |  

106

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|10.47# |  | Restricted Stock Agreement dated July 18, 2005 between the Company and Deborah Dunsire                                                     |  | 10-Q |  | 08/08/2005 |  | 10.3  |  |  
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- |  | ---------- |  | ----- |  | -
|10.48# |  | Incentive Stock Option Granted under 2000 Stock Incentive Plan to Deborah Dunsire on July 18, 2005                                         |  | 10-Q |  | 08/08/2005 |  | 10.4  |  |  
|10.49# |  | Nonstatutory Stock Option Granted under 2000 Stock Incentive Plan to Deborah Dunsire on July 18, 2005                                      |  | 10-Q |  | 08/08/2005 |  | 10.5  |  |  
|10.50# |  | Description of Deferred Compensation Plan for Deborah Dunsire                                                                              |  | 10-Q |  | 08/08/2005 |  | 10.6  |  |  
|10.51# |  | Offer letter agreement dated January 23, 2006 between the Company and Christophe Bianchi                                                   |  | 10-K |  | 03/08/2006 |  | 10.53 |  |  
|10.52# |  | Offer letter agreement dated February 6, 2006 between the Company and Stephen M. Gansler                                                   |  | 10-K |  | 03/08/2006 |  | 10.54 |  |  
|10.53# |  | Form of agreement entered into with certain executive officers of the Company, together with a schedule of the parties thereto             |  | 10-Q |  | 08/08/2007 |  | 10.2  |  |  
|10.54# |  | Offer letter agreement dated September 30, 1997 between the Company and Anna Protopapas                                                    |  |      |  |            |  |       |  | X
|10.55# |  | Offer letter agreement dated June 11, 1999 between the Company and Joseph B. Bolen                                                         |  |      |  |            |  |       |  | X
|10.56# |  | Offer letter agreement dated August 29, 2001 between the Company and Nancy Simonian                                                        |  |      |  |            |  |       |  | X
|10.57# |  | Offer letter agreement dated February 28, 2001 between the Company and Peter F. Smith                                                      |  |      |  |            |  |       |  | X
|10.58# |  | Form of Indemnification Agreement entered into with certain executive officers of the Company, together with a schedule of parties thereto |  |      |  |            |  |       |  | X
|       |  | Additional Exhibits                                                                                                                        |  |      |  |            |  |       |  |  
|21     |  | Subsidiaries of the Company                                                                                                                |  |      |  |            |  |       |  | X

107

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|23.1 |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                          |  |  |  |  |  |  |  | X
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  |  | -
|31.1 |  | Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended |  |  |  |  |  |  |  | X
|31.2 |  | Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended |  |  |  |  |  |  |  | X
|32.1 |  | Statement Pursuant to 18 U.S.C. §1350                                                                                                |  |  |  |  |  |  |  | X
|32.2 |  | Statement Pursuant to 18 U.S.C. §1350                                                                                                |  |  |  |  |  |  |  | X

---

Unless
otherwise noted, the Commission file number for all exhibits incorporated by reference herein is 0-28494.

108

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Millennium Pharmaceuticals, Inc.    SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS    Allowance for Doubtful Accounts

Valuation and qualifying account information related to operations is as follows (in thousands):

|                             |  | Balance at
Beginning of Period |   | Additions
Charged to
Cost and Expenses |   | Charges
Utilized/Write-offs |  | Balance at
End of Period |  
|---------------------------- |  | ------------------------------ | - | -------------------------------------- | - | --------------------------- |  | ------------------------ | -
|Year ended December 31, 2005 |  | (1,500                         | ) | (2,004                                 | ) | 1,000                       |  | (2,504                   | )
|Year ended December 31, 2006 |  | (2,504                         | ) | (21                                    | ) | 2,004                       |  | (521                     | )
|Year ended December 31, 2007 |  | (521                           | ) | (5                                     | ) | 2                           |  | (524                     | )

109

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