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UNITED STATESSECURITIES 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, 2001

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period  to

Commission file number: 0-28494

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

|Delaware                                                       |  | 04-3177038                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer
Identification No.)

75 Sidney 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:None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
Preferred Stock Purchase Rights(Title of class)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes 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

The
aggregate market value of voting Common Stock held by non-affiliates of the registrant was $5,232,481,952 based on the last reported sale price of the Common Stock on the
Nasdaq Stock Market on March 1, 2002.

Number
of shares outstanding of the registrant's class of Common Stock as of March 1, 2002: 279,912,088.

Documents incorporated by reference:

|Portions of the registrant's definitive Proxy Statement for the 2002 Annual Meeting of Stockholders |  | Part III
|--------------------------------------------------------------------------------------------------- |  | --------

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TABLE OF CONTENTS

|Part I                                                                                        |  |   
|--------------------------------------------------------------------------------------------- |  | --
|Item 1. BUSINESS                                                                              |  | 1 
|Overview                                                                                      |  | 1 
|Key Transactions and Developments in 2001 and 2002                                            |  | 1 
|Our Markets                                                                                   |  | 4 
|Our Strategy                                                                                  |  | 7 
|Our Products                                                                                  |  | 9 
|Our Pipeline                                                                                  |  | 12
|The Discovery Process                                                                         |  | 13
|Our Discovery Technology                                                                      |  | 14
|Our Alliance Program                                                                          |  | 16
|Our Major Discovery Alliances                                                                 |  | 17
|Our Technology Alliances                                                                      |  | 18
|Predictive Medicine                                                                           |  | 18
|Research and Development                                                                      |  | 19
|Patents and Proprietary Rights; Licenses                                                      |  | 19
|Government Regulation                                                                         |  | 20
|Manufacturing                                                                                 |  | 26
|Sales and Marketing                                                                           |  | 27
|Competition                                                                                   |  | 28
|Employees                                                                                     |  | 29
|RISK FACTORS THAT MAY AFFECT RESULTS                                                          |  | 30
|Risks Relating to COR Acquisition                                                             |  | 30
|Regulatory Risks                                                                              |  | 31
|Risks Relating to Our Business, Strategy and Industry                                         |  | 32
|Risks Relating to Our Financial Results and Need for Financing                                |  | 34
|Risks Relating to Collaborators                                                               |  | 35
|Risks Relating to Intellectual Property                                                       |  | 36
|Risks Relating to Product Manufacturing, Marketing and Sales                                  |  | 37
|Risks Relating to an Investment in Our Common Stock                                           |  | 40
|Item 2. PROPERTIES                                                                            |  | 41
|Item 3. LEGAL PROCEEDINGS                                                                     |  | 41
|Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 41
|DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                               |  | 42
|Part II                                                                                       |  |   
|Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                |  | 46
|Item 6. SELECTED FINANCIAL DATA                                                               |  | 47
|Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 48

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|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            |  | 88
|Part III                                                                                                |  |   
|Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                                |  | 88
|Item 11. EXECUTIVE COMPENSATION                                                                         |  | 88
|Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 88
|Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 89
|Part IV                                                                                                 |  |   
|Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               |  | 90
|Signatures                                                                                              |  | 91
|EXHIBIT INDEX                                                                                           |  |   

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PART I

Item 1.    BUSINESS

Overview

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

Either
alone or in collaboration with strategic partners, we:



We
have entered into research, development and commercialization arrangements with major pharmaceutical and biotechnology companies relating to a broad range of therapeutic and
predictive medicine products and services. These alliances provide us with the opportunity to share profits and/or receive royalties if our collaborators are successful in developing and
commercializing products using our technology. In many cases, we also retain rights to develop and commercialize products resulting from these alliances. We have also entered into technology
development and technology transfer arrangements with major pharmaceutical and biotechnology companies. Under these arrangements we work cooperatively with other pharmaceutical and biotechnology
companies to enhance our technology platform and provide such companies licenses to use our technology platform in exchange for fees and, in some cases, the opportunity to receive royalties if the
other companies are successful in developing and commercializing products using our technology platform.

References
in this Annual Report on Form 10-K to we, us, our, and the like include, where applicable, references to our Millennium Predictive Medicine
division, or MPMx, and its predecessor entity, Millennium Predictive Medicine, Inc., which was a wholly-owned subsidiary of ours before it was merged with and into Millennium
Pharmaceuticals, Inc. in January 2001.

We
were incorporated in Delaware in 1993, and our principal executive offices are located at 75 Sidney Street, Cambridge, Massachusetts 02139.

Key Transactions and Developments in 2001 and 2002

Merger with COR Therapeutics, Inc.

On February 12, 2002, we completed our merger with COR Therapeutics, Inc. In connection with this merger, we issued approximately 55 million
shares of our common stock to the former holders of COR's common stock. Additionally we assumed COR's $600 million of convertible notes. At the time of the merger, COR had over
$600 million in cash, cash equivalents and short term investments. Through the merger, we added approximately 300 new employees, a facility in South San Francisco, California, acquired
INTEGRILIN®, for the treatment of acute coronary syndromes and substantial research capabilities in the areas of cardiovascular disease and oncology. Results of COR's operations will be
consolidated in our 2002 financial statements beginning on February 12, 2002.

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Development and Commercialization of Therapeutics Products

Through our merger with COR, we now have a fourth major area of focus, cardiovascular disease, and have the product INTEGRILIN® (eptifibatide)
Injection on the market. INTEGRILIN® is approved to treat patients who undergo a procedure known as angioplasty to open blood vessels. INTEGRILIN® is also approved to treat
patients with intermittent chest pains known as unstable angina and patients suffering from a kind of heart attack known as non-Q wave myocardial infarction, whether the doctor intends to
treat these patients with medicines alone or with subsequent angioplasty. We co-promote INTEGRILIN® with Schering-Plough Ltd. and Schering Plough Corporation in the
U.S., and share any profits or losses and license INTEGRILIN® outside of the U.S. to Schering on a royalty-bearing basis. During the year ended 2001, sales of INTEGRILIN®
totaled $230 million.

During
the second and third quarters of 2001, the CAMPATH® (alemtuzumab) humanized monoclonal antibody was cleared for marketing and commercially launched in both the U.S.
and Europe as a treatment for patients with refractory B-cell chronic lymphocytic leukemia (B-CLL). On December 31, 2001, ILEX Oncology, Inc. acquired our equity
interest in Millennium & ILEX Partners, L.P., which owns the CAMPATH® product. In exchange for our equity interest in Millennium & ILEX Partners, ILEX paid us
$20 million on December 31, 2001 and is obligated to pay us up to an additional $120 million over the next three years if sales of CAMPATH® in the U.S. meet specified
sales thresholds. In addition, we will be entitled to additional payments from ILEX based on U.S. sales of CAMPATH® after 2004. In light of our co-development of and continuing
financial interest in CAMPATH®, we treat CAMPATH® as a product in which we have an ongoing interest for purposes of disclosure in this Form 10-K.

We
continue to develop our product pipeline and are conducting multiple clinical trials. As of February 28, 2002, we or our collaborators were conducting more than
15 clinical trials, including:



Research and Product Alliances

In 2001, we entered into the following research and product alliances:

Genentech.In January 2001, COR, Schering and Genentech, Inc., entered into an agreement to
co-promote INTEGRILIN® with Genentech's fibrinolytic, or clot-dissolving drugs, TNKase (tenecteplase) and Activase® (alteplase), in the
United States. COR, Schering and Genentech have also agreed to an exclusive clinical collaboration for any future large-scale clinical trials that combine a fibrinolytic with drugs in the same class
as INTEGRILIN®. This agreement expires in December 2002.

Abbott.On March 9, 2001, we formed a five-year strategic alliance with Abbott Laboratories by signing agreements
covering:



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BZL.On April 5, 2001, we entered into an agreement with BZL Biologics, L.L.C., providing for:



TDT.On November 21, 2001, we entered into a license agreement with Targeted Diagnostics and Therapeutics, Inc.
Under the agreement, TDT granted us an exclusive world-wide license to develop and commercialize human therapeutic products for oncology indications using TDT's ST receptor
(GC-C) based technology. We agreed to pay TDT milestone fees and potential royalties based on product sales. We also agreed to make an equity investment in TDT.

XOMA.On November 26, 2001, we entered into a collaboration agreement with XOMA Ltd. providing for:



Xenova.On December 14, 2001, we entered into a license agreement with Xenova Group, plc, providing for:



Productivity and Technology Alliances

We continue to invest considerable resources to expand and enhance our technology platform and to institute clinical development initiatives in an effort to
fundamentally change the drug discovery process, including to more rapidly develop our product pipeline. Currently, we are using pharmacogenomic and imaging technologies in four of our clinical
programs (MLN341, MLN591,

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MLN977 and MLN518) and we intend to utilize these technologies in two additional programs in 2002. In 2001 we signed a number of new technology alliances including:

SGX.In December 2001, we entered into a collaboration agreement with Structural GenomiX, Inc. providing for:



ImmunoGen.In March 2001, we entered into a collaboration agreement with ImmunoGen, Inc. providing for:



Pharsight.In July 2001, we entered into an agreement with Pharsight Corporation to evaluate and apply Pharsight's
computer-assisted trial design and decision making methodologies to our drug development programs. We intend to apply Pharsight's software to our oncology program, with an option for future expansion
into additional programs.

Affymetrix.In October 2001, we entered into a research and development agreement and volume discount supply agreement
with Affymetrix, Inc. providing for:



Our Markets

We focus our research and development activities in four major disease areas: cardiovascular, oncology, inflammatory and metabolic. We believe that these areas
present attractive markets for the products we are developing and marketing.

Cardiovascular Diseases

Despite decades of extensive research and development and significant advances in its treatment, cardiovascular disease remains the leading cause of death in the
United States. Approximately one million people die each year from heart attacks, strokes and related diseases. As the number of elderly people in the population increases, the number of deaths
attributable to these diseases continues to climb. We focus our research and development efforts on agents that have the potential to prevent and/or treat life threatening cardiovascular diseases,
including arterial thrombosis, venous thrombosis and restenosis.

In
arterial thrombosis, an aggregation of platelets (a thrombus, which essentially is a plug) forms on the lining of an injured artery. The thrombus blocks the artery impairing its
ability to supply blood

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and oxygen to the heart, brain and other organs. In the heart, disorders from arterial thrombosis range from prolonged episodes of severe chest pain (including unstable angina) to heart attack (acute
myocardial infarction) to sudden death. In the brain, disorders range from a temporary reduction in oxygen supply (transient ischemic attacks) to stroke. Each year, approximately six million
people suffer from severe chest pain, one million from heart attack and 600,000 from stroke in the U.S.

In
venous thrombosis, disorders are generally related to a thrombus breaking off from the lining of an injured artery or vein. The thrombus may travel to the lungs and cause a pulmonary
embolism, a serious disorder in which blood supply is blocked and lung tissue is killed. Each year in the U.S., over 270,000 patients are diagnosed with venous thrombosis and approximately 50,000
patients die from pulmonary embolisms.

In
restenosis, an artery significantly re-narrows following an angioplasty procedure, usually within six months. Approximately 600,000 patients undergo angioplasties each
year, and up to 40% suffer from restenosis. New treatments or devices such as stents help reduce restenosis in angioplasty. However, stenting itself can be complicated by restenosis, particularly in
smaller vessels.

Given
the increasing prevalence of cardiovascular disease, current treatment gaps, and the fact that therapies of cardiovascular diseases are the single largest source of sales revenues
in the pharmaceutical industry, we believe that our existing program provides us with a significant foundation for future growth. We are focusing our efforts in this area on a combination of internal
research opportunities from our robust knowledge base and pipeline, and external licensing and acquisition opportunities, with the ultimate vision of becoming a major contributor to advances in the
quality of care in this area.

In
addition to those research, development and commercialization activities assumed as part of the COR acquisition, in the field of cardiovascular diseases, we are engaged in the
identification and validation of new drug targets. We are conducting this activity in collaboration with Eli Lilly in
connection with congestive heart failure and primarily with Bayer in connection with other cardiovascular diseases.

Oncology

Cancer is the second leading cause of death in the U.S. despite initiatives directed towards prevention and screening for early detection. With advances in
treatment of cardiovascular disease and a population that continues to age, cancer may eventually overtake heart disease as the leading cause of death in the U.S. During 2002, it is estimated that
over 1.2 million Americans will be diagnosed with cancer and over half a million will die from it.

Although
impressive developments in the knowledge of underlying cell chemistry and the physiological construction of cancer have been made in the last 20 years, the complexity of
this group of diseases has made cancer difficult to treat. Current treatments, including radiation, chemotherapy, and surgery, are limited in their ability to work consistently against cancers and
often cause damage to healthy cells or cause life altering side effects of their own. Over the next decade, we expect that these traditional therapies will become displaced by new treatments that work
on a molecular level, where individual cancer cells can be identified and then treated by combinations of drugs specifically designed for those tumors.

We
focus our research and development efforts on agents that have the potential to extend survival, improve the quality of life and be less toxic than currently available treatments.
Through our genomics platform and understanding of tumor biology, we hope to discover and develop novel therapies that impact critical pathways involved in the origination, proliferation and survival
of cancer cells.

The
classes of drugs with the greatest long-term potential are those targeting signal transduction and apoptosis. Our oncology programs are primarily concentrated on the
treatment of both solid

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tumors and hematological tumors including: pancreatic cancer, colorectal cancer, lung cancer, prostrate cancer, breast cancer, ovarian cancer, multiple myeloma, chronic lymphocytic leukemia and acute
myelogenous leukemia.

We
have entered into two strategic alliances for target and drug discovery in cancer:

Lilly.We have an alliance with Eli Lilly and Company focused on finding small-molecule drug targets in select areas of
cancer, including prostate cancer and mechanisms of drug resistance. We received four milestone payments from Lilly during 2000 under this alliance for the delivery of three cancer drug
candidate genes and the acceptance of one validated target for cancer drugs. This alliance was extended for one year past its initial term and will conclude in March 2002.

Bayer.Our multi-disease alliance with Bayer AG includes discovery of small-molecule drug targets for areas of cancer that
fall outside of our Lilly collaboration.

Inflammatory Diseases

Our inflammatory disease program covers a broad range of markets. Asthma and chronic obstructive pulmonary disease (COPD) are high-prevalence
diseases, treated largely by primary care physicians and pulmonologists. The prevalence of these diseases in the U.S. is approximately 20 million and 23 million, respectively. Rheumatoid
arthritis (RA), multiple sclerosis (MS), and inflammatory bowel disease (IBD) are primarily specialist markets, with low growth rates but high unmet needs. In the U.S., approximately
2.3 million people suffer from RA, 400,000 people suffer from MS and 700,000 people suffer from IBD. Through better scientific characterization of inflammatory disease processes, new
therapies are beginning to shift the method of disease treatment away from the treatment of disease symptoms and towards disease course modification with the hope for disease control in select
patients. Common inflammatory pathways across these diseases also present opportunities for exploitation of individual targets in multiple indications.

Asthma
and COPD require large promotional investments in a primary care sales force with substantial direct-to-consumer advertising. The specialty markets of RA,
MS, and IBD require a more concentrated promotional effort. In June 2000, we entered into a broad agreement in the field of inflammation with Aventis Pharmaceuticals, Inc. that includes
joint development and commercialization of drugs for the treatment of specified inflammatory diseases. Our agreement with Aventis covers a substantial portion of our research and development program
in inflammation and provides us with potential access to Aventis' large promotional infrastructure.

Metabolic Diseases

Our metabolic disease focus area includes both obesity and type 2 diabetes. Obesity represents our largest market opportunity in the metabolic disease
area. There are approximately 116 million obese or overweight individuals in the U.S., which represents more than half of the U.S. adult population. This incidence is greater than all
individuals living in the U.S. with any type of cardiovascular disease (approximately 61 million) and all U.S. individuals with high cholesterol (approximately 100 million).

In
addition, the prevalence of obesity in the U.S. population is growing at 3% per year. Between 1991 and 2001, obesity prevalence has increased by 61%. Between 1980 and 1999, the
percentage of overweight adults rose from 33% to 35% of the population. During that period, the percentage of obese adults nearly doubled, rising from 15% to 27% of the population.

Type 2
diabetes represents a moderate market opportunity that is closely associated with obesity. Between 80% and 90% of type 2 diabetic patients in the U.S. are obese.
According to the Journal of the American Medical Association, "body mass index is one of the strongest predictors of diabetes... for every 1-kg increase in measured weight, the risk of
diabetes increase by 4.5% in a national sample of adults."

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Both
obesity and type 2 diabetes are multi-factorial diseases with complex genetic and environmental components. Our discovery efforts in these areas focus on multiple drug
targets in a variety of biochemical pathways. We are applying our knowledge to build an understanding of inter-individual variation in these pathways that will allow us to target each of our products
to the patient population that will derive the most benefit from it, thereby enhancing efficacy and patient compliance with therapeutic regimens.

In
March 2001, we entered into a broad alliance with Abbott Laboratories that includes joint development and commercialization of drugs for the treatment and management of obesity
and type 2 diabetes. Both companies are contributing their research pipelines in these disease areas to the collaboration, which included 47 projects during 2001. In the fourth quarter of 2001, the
collaboration delivered MLN4760, its first ever genomically derived product, to the clinic.

Our Strategy

We combine a variety of proprietary and non-proprietary technologies and know-how to systematically study genes in the context of disease
and to discover and develop proprietary therapeutic and diagnostic human healthcare products and services. We believe that our platform is unique in the breadth and diversity of the technologies that
it encompasses, and the degree to which we have integrated these technologies. We use advanced capabilities in information technology, robotics, genetics, genomics, molecular biology, cell biology,
immunology, biochemistry, chemistry, microfluidics and analytical instrumentation. By combining these capabilities, we have created a series of high-throughput processes that we believe
have the potential to improve the efficiency of the discovery and development of therapeutic and diagnostic products, as well as the quality of these products. We believe that these products will
change the practice of medicine.

Our
business is built around three principal areas of focus:

Therapeutics.We have four disease areas of major emphasis: cardiovascular, oncology, inflammatory and metabolic. We also
have significant programs in infectious diseases and diseases of the central nervous
system. We seek to discover disease-related genes, produce validated drug targets and drug leads, and develop and commercialize new, proprietary drugs to treat major human illnesses. We direct these
efforts at both small-molecule drugs, which are typically formulated into pills for oral consumption, as well as monoclonal antibodies and proteins, which are typically only available in injectable
form.

Predictive Medicine.We seek to develop products and services that will provide clinicians and pharmaceutical researchers
with information that will enable them to make better informed decisions about drug treatment and other aspects of patient management. Our core areas of focus include Diagnomics products
and pharmacogenomics. A Diagnomics product is a gene-based diagnostic test to determine the patient's risk for developing specific diseases. Once a predisposed individual is
identified, that individual can make more informed decisions in selecting the most appropriate surveillance measures and therapeutic course of action. We expect that the use of Diagnomics
products will allow healthcare resources to be focused on individuals who are at the greatest risk and therefore help to reduce waste in the healthcare system. Pharmacogenomics is the identification
of genes, or their activity, associated with responsiveness to particular drugs. We believe that predictive medicine products and services will enable physicians to customize medical treatment by
providing them with the ability to identify the genetic basis for a patient's disease and select the most appropriate drugs and treatment regimen for the particular patient. Knowing how a patient will
likely respond to particular drugs may decrease the occurrence of adverse side effects from medications while improving their effectiveness, possibly leading to better outcomes and lower overall
healthcare costs. We believe Diagnomics products and pharmacogenomics are of interest to third-party payors who seek to lower costs and improve the effectiveness of medical care.

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Technology.We use many technologies in each step of the therapeutic and diagnostic product discovery and development
processes. We seek the most advanced methods available to integrate into our technology platform, whether developed internally or licensed from third parties, in order to increase the efficiency and
productivity of these processes. We believe that our platform will enable us to accelerate the:



The
key initiatives that we are pursuing to implement our strategy are:

Expand downstream pipeline and other skills through acquisitions.We continually consider joint development, merger and other
acquisition opportunities that may provide us with access to products currently on the market or which are in later stages of commercial development or may bring us scientific or other skills that
enhance our existing capabilities. We believe that integrating these acquired capabilities with our other resources will facilitate bringing our internally developed products to market quickly and
efficiently. Examples of these initiatives by us include:



Enhance proprietary technology platform.We are committed to continually enhancing our technology platform by incorporating
the latest technological advances. Our technology enhancement activities are based on our own internal development efforts and our program to identify, evaluate and integrate technologies licensed
from third parties. The quality of our technology platform has been central to our ability to attract a broad range of strategic alliances with major pharmaceutical and biotechnology companies. Our
platform also has enabled us to create a technology transfer alliance in the area of agriculture with Monsanto Company, and a broad technology transfer alliance with Aventis.

Establish and expand strategic alliances.Based on the strength of our technology platform and product development pipeline,
we have established a series of strategic alliances with major pharmaceutical and biotechnology companies. These alliances provide us with substantial revenues and other financing, furnish us with
access to important technology, broaden our product development pipeline and reduce our product development risks. These alliances also enhance our ability to bring products to market
because of our collaborators' substantial resources and expertise in research, preclinical and clinical development, regulatory issues, manufacturing and marketing.

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Our Products

INTEGRILIN® (eptifibatide) Injection

Commercial Market

In May 1998, the FDA approved INTEGRILIN® for sale in the U.S.

In
February, 1999 the Committee for Proprietary Medicinal Products (CPMP) of the European Agency for the Evaluation of Medicinal Products (EMEA) gave the European Commission their
recommendation to approve the marketing of INTEGRILIN® in all 15 member states of the European Union: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. Shortly thereafter, the following countries also approved the marketing of INTEGRILIN®: Argentina, Australia,
Brazil, Canada, Chile, Columbia, Egypt, Hong Kong, Hungary, India, Israel, Japan, Malaysia, Mexico, Poland, Singapore, South Africa, Switzerland and Thailand.

Marketing
of INTEGRILIN® in the U.S. by COR and Schering started in June 1998. Marketing of INTEGRILIN® outside of the U.S. by Schering started in
approximately June 1999.

INTEGRILIN®
is a small synthetic peptide that blocks the platelet receptor GP IIb-IIIa to inhibit platelet aggregation. By blocking
GP IIb-IIIa, INTEGRILIN® helps prevent thrombus formations from fully blocking coronary arteries, a situation that can lead to heart attack or death in patients with
acute coronary syndromes or patients undergoing angioplasty procedures. Importantly, the effects of INTEGRILIN® are specific to platelets, thereby avoiding interference with other normal
cardiovascular processes. Additionally, the effects of INTEGRILIN® can be reversed once therapy with INTEGRILIN®
is discontinued. Well over one million people in the United States annually are candidates for INTEGRILIN® therapy.

INTEGRILIN®
has the broadest range of indications among GP IIb-IIIa inhibitors approved for marketing in the United States. INTEGRILIN® can be
administered at the time of diagnosis in the emergency department to patients with acute coronary syndromes regardless of whether they are medically managed or ultimately undergo coronary angioplasty
procedures on INTEGRILIN® therapy. INTEGRILIN® can be administered to patients with acute coronary syndromes prior to (but not during) coronary artery bypass grafting surgery.
INTEGRILIN® can also be administered at the time of coronary angioplasty to patients who undergo elective, emergency or urgent angioplasty procedures.

Our
marketing strategy aims for INTEGRILIN® to be used in patients undergoing coronary angioplasty procedures and also to encourage the early use of INTEGRILIN®
in patients presenting with acute coronary syndromes. We believe that INTEGRILIN® sales will continue to increase if early usage becomes more common and if the number of hospitals using
INTEGRILIN® increases.

In
collaboration with Schering and Genentech, our cardiovascular sales forces educate the U.S. medical community about GP IIb-IIIa inhibitor therapy and market the use
of INTEGRILIN® in such therapy. We jointly market INTEGRILIN® to clinical cardiologists, interventional cardiologists and emergency medicine physicians. We also focus on
hospital pharmacy directors, formulary committee members, hospital administrators and nurses, all of whom might affect purchasing decisions.

A
competing product, ReoPro® (abciximab), is used primarily in the catheterization laboratory setting in patients undergoing coronary angioplasty procedures. Another
competing product, Aggrastat® (tirofiban), is used primarily for treating acute coronary syndromes.

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The ESPRIT Trial and Continued Development of INTEGRILIN® (eptifibatide) Injection

Subsequent to obtaining marketing approval for INTEGRILIN®, we have continued with a program of clinical trials of this product in collaboration with
Schering directed at broadening the approved indications.

The
ESPRIT (Enhanced Suppression of Platelet Receptor GP IIb-IIIa using INTEGRILIN® Therapy) study was the first clinical trial designed to assess the
efficacy and safety of INTEGRILIN® as GP IIb-IIIa inhibitor therapy in patients undergoing non-urgent angioplasty procedures with the wide variety of
intracoronary stents currently used in clinical practice. On February 4, 2000, the ESPRIT Study was
stopped after an interim analysis of 1,758 patients revealed a highly statistically significant reduction in the incidence of death or heart attack at 48 hours with INTEGRILIN as compared to
placebo. The ESPRIT study demonstrated a statistically significant reduction in death, heart attack, need for emergency repeat PCI (percutaneous coronary intervention), or need for
bail-out therapy in the case of visible thrombosis at both 48 hours and 30 days. The primary results of this study were published in December 2000 in The Lancet.

In
January 2002, the Journal of the American Medical Association reported the one-year follow-up results from ESPRIT which showed that the combined
incidence of death or heart attack was significantly reduced from 12.4% with placebo to 8.0% with INTEGRILIN® (P=0.0010). A consistency of benefit was reported regardless of patient age,
weight, sex, clinical condition or presence or absence of diabetes. Follow-up vital status information was available for 98.1% of all patients at 12 months. 30 day results
showing that the incidence of death, myocardial infarction or need for urgent target vessel revascularization was reduced from 10.5% with placebo to 6.8% with INTEGRILIN® were incorporated
into the U.S. Prescribing Information for INTEGRILIN® in June 2001. Other relevant Prescribing Information changes made at that time reflected the findings from the ESPRIT study,
including the ESPRIT dosing regimen, specific reference within the product's indications for use in patients undergoing intracoronary stenting, revised heparin recommendations, and updating to the
safety sections.

We
continue to develop INTEGRILIN® for additional indications in collaboration with Schering. In addition to supporting a number of investigator-initiated studies in a
variety of clinical settings, we have been conducting and are continuing to conduct research to evaluate use of INTEGRILIN® for ST-segment elevation myocardial infarction in the following
studies:



Collaboration Agreement with Schering

In April 1995, we entered into a collaboration agreement with Schering to jointly develop and commercialize INTEGRILIN® on a worldwide basis.
Under this agreement, decisions regarding the
ongoing development and marketing of INTEGRILIN® are generally subject to the oversight of a joint steering committee with equal membership from Schering and ourselves, although certain
development decisions are allocated specifically to us. In those markets where Schering has exclusive marketing rights, Schering has decision-making authority with respect to marketing issues.

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We
and Schering co-promote INTEGRILIN® (eptifibatide) Injection in the United States and share any profits or losses. Schering is responsible for the sale of the
final product to wholesalers. In the U.S., the exact profit-sharing ratio between the companies depends on the amount of promotional effort in the U.S. contributed by each company. Since the launch of
INTEGRILIN® in June 1998, promotional efforts have been shared equally between ourselves and Schering.

INTEGRILIN®
has received regulatory approval for various cardiovascular conditions in the European Union and a number of other countries. We have granted Schering an
exclusive license to market INTEGRILIN® outside the United States, and Schering pays us royalties based on sales of INTEGRILIN® outside the United States. We have the right, in
the future, to co-promote INTEGRILIN® in Europe and Canada with Schering and share any profits or losses. Schering participates in and shares the costs of continuing
development of INTEGRILIN®. Under the terms of the agreement, both Schering and we have certain rights to terminate for breach.

This
agreement continues, unless earlier terminated, for so long as the parties are in material compliance with their obligations and either party is engaged in the manufacture or sale
of INTEGRILIN® products, and further extends on a country by country basis until the later of fifteen (15) years from first commercial sale of an INTEGRILIN® product in
such country, or until expiration of the last to expire patent covering the manufacture, use or sale of such product.

CAMPATH®

The CAMPATH® (alemtuzumab) humanized monoclonal antibody is used for the treatment of patients with chronic lymphocytic leukemia, which is the most
prevalent form of adult leukemia. CAMPATH® was developed by Millennium & ILEX Partners, L.P., our former joint venture with ILEX Products, Inc., a subsidiary of ILEX
Oncology, Inc. During the second and third quarters of 2001, CAMPATH® was cleared for marketing and commercially launched in both the U.S and Europe as a treatment for patients with
refractory B-cell chronic lymphocytic leukemia (B-CLL). On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX
Partners, L.P., which owns the CAMPATH® product. In exchange for our equity interest in Millennium & ILEX Partners, ILEX paid us $20 million on December 31,
2001 and is obligated to pay us up to an additional $120 million over the next three years if sales of CAMPATH® in the U.S. meet specified sales thresholds. In addition, we will be
entitled to additional payments from ILEX based on U.S. sales of CAMPATH® after 2004.

ILEX
has a worldwide, other than the Far East, distribution agreement with Schering AG and its affiliate, Berlex Laboratories. CAMPATH® has received an orphan drug
designation from the FDA, which may entitle ILEX to a seven-year marketing exclusivity period in the United States.

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Our Pipeline

In addition to our ongoing clinical trials of INTEGRILIN® (eptifibatide) Injection, we have ten drug candidates in clinical development. The following
chart identifies each of these drug candidates, and the applicable disease indication, our partner or collaborator for the clinical program and the current phase of the program.

|Product Description                                                                                                                                         |  | Disease Indication                                                                          |  | Partner/Collaborator                                                            |  | Current Trial Status
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | --------------------
|MLN341is a small-molecule proteasome inhibitor.                                                                                                             |  | Hematological Malignancies
Single agent and combination studies:                            |  | None                                                                            |  |                     
|                                                                                                                                                            |  | Myeloma                                                                                     |  | None                                                                            |  | Phase II and III    
|                                                                                                                                                            |  | Chronic Lymphocytic Leukemia                                                                |  | None                                                                            |  | Phase II            
|                                                                                                                                                            |  | Other hematological malignancies                                                            |  | None                                                                            |  | Phase I and II      
|                                                                                                                                                            |  | Solid Tumors                                                                                |  |                                                                                 |  |                     
|                                                                                                                                                            |  | Single agent and combination studies:                                                       |  | None                                                                            |  | Phase I and II      
|                                                                                                                                                            |  | Pancreatic, prostate, colorectal, lung, breast, and other solid tumors                      |  | None                                                                            |  |                     
|                                                                                                                                                            |  |                                                                                             |  |                                                                                 |  |                     
|MLN591is a de-immunized radio-labeled murine monoclonal antibody (J591) that specifically recognizes the protein PSMA (prostate specific membrane antigen). |  | Prostate cancer                                                                             |  | BZL                                                                             |  | Phase I/Phase II    
|                                                                                                                                                            |  |                                                                                             |  |                                                                                 |  |                     
|MLN576is a small molecule with DNA binding activity.                                                                                                        |  | Solid and hematological tumors                                                              |  | Xenova                                                                          |  | Phase I             
|                                                                                                                                                            |  |                                                                                             |  |                                                                                 |  |                     
|CAMPATH®is a humanized monoclonal antibody directed against CD 52.                                                                                          |  | Chronic Lymphocytic Leukemia                                                                |  | ILEX Oncology, Inc.                                                             |  | Phase IV            
|                                                                                                                                                            |  | Hematological malignancies, Stem cell/mini transplant, Multiple sclerosis, Organ transplant |  | ILEX Oncology, Inc                                                              |  | Phase I and Phase II
|                                                                                                                                                            |  |                                                                                             |  |                                                                                 |  |                     
|MLN02is a humanized monoclonal antibody directed against thea4b7 receptor.                                                                                  |  | Crohn's disease                                                                             |  | Genentech                                                                       |  | Phase II            
|                                                                                                                                                            |  | Ulcerative colitis                                                                          |  | Genentech                                                                       |  | Phase I and Phase II
|                                                                                                                                                            |  |                                                                                             |  |                                                                                 |  |                     
|MLN977is a small-molecule designed to selectively inhibit the production of leukotrienes.                                                                   |  | Asthma                                                                                      |  | Marketing agreement with Taisho Pharmaceutical Company, Ltd. in Asia and Europe |  | Phase II            

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|MLN519is a small-molecule proteasome inhibitor.                             |  | Stroke                                                            |  | None                  |  | Phase I                     
|--------------------------------------------------------------------------- |  | ----------------------------------------------------------------- |  | --------------------- |  | ----------------------------
|                                                                            |  |                                                                   |  |                       |  |                             
|MLN01is a humanized monoclonal antibody directed against CD18.              |  | Renal transplant, stroke (restenosis planned)                     |  | XOMA (for restenosis) |  | Phase I (restenosis planned)
|                                                                            |  |                                                                   |  |                       |  |                             
|MLN4760is a novel small molecule.                                           |  | Obesity                                                           |  | Abbott                |  | Phase I                     
|                                                                            |  |                                                                   |  |                       |  |                             
|MLN518is a small molecule that selectively inhibits F1t-3.                  |  | Acute Myeloid Leukemia                                            |  | None                  |  | Phase 1                     
|                                                                            |  |                                                                   |  |                       |  |                             
|INTEGRILIN® (eptifibatide) Injectionis a
small molecule
IIb/IIIa inhibitor. |  | Coronary artery bypass graft                                      |  | Schering              |  | Phase II (Pending)          
|                                                                            |  |                                                                   |  |                       |  |                             
|                                                                            |  | STE Myocardial infarction with percutaneous coronary intervention |  | Schering              |  | Phase III                   

Human
clinical trials typically are conducted in three sequential phases, although phases may overlap. Phase I trials consist of testing the product in a small number of patients
or healthy volunteers, primarily for safety, in one or more dosages, as well as characterization of a drug's pharmacokinetic or pharmacodynamic profile. In Phase II, in addition to safety, the
efficacy of the product is evaluated. Phase III trials typically involve additional testing for safety and clinical efficacy in an expanded population.

The Discovery Process

The selection of new targets for drug discovery historically has been an inefficient process because of the lack of knowledge of the underlying disease causes.
Drug targets have often been selected based on speculation that they might be involved in disease processes, rather than because of any clear, well-documented association with specific
diseases. As a result, many drug candidates fail during clinical trials because they turn out to be ineffective or unsafe. Moreover, many drugs that do reach the market treat only the symptoms of
diseases rather than their underlying causes.

In
recent years, however, the drug discovery process has changed, beginning with the process for discovering drug targets. Fueled by a broad interest in determining the entire DNA
sequence of the human genome, scientists have made major improvements in the technologies available for identifying and cataloguing genes in complex organisms. These technologies include
high-throughput methods for sequencing genes, for monitoring and comparing the expression of genes in different situations and for following the inheritance of genes in families prone to
particular diseases. The integration of molecular biology with robotics, information technology and analytical instrumentation is crucial to these technologies. The combination of these disciplines
provides powerful capabilities for generating, capturing and analyzing large volumes of data concerning genes and their expression, making it possible for the first time to mount a systematic search
to discover and characterize the genes and biochemical pathways which underlie human diseases.

Major
advances have also recently been made in the technologies available for screening synthetic chemical and natural-product libraries to identify compounds active against specific
drug targets and for

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the subsequent generation of lead compounds optimized for their activity against these drug targets. As with the advances in target discovery, the advances in drug discovery depend heavily on
robotics, information technology and analytical instrumentation, coupled with novel combinatorial approaches to the synthesis of chemical libraries.

Another
important recent development in biotechnology has been the emergence of monoclonal antibody-based drugs as successful therapeutics. Monoclonal antibodies, which are specially
produced proteins that play a role in the immune system, have long held great potential as drugs because, by their nature, they recognize and interact with target molecules in a highly specific way.
However, early therapeutic monoclonal antibodies were generated in non-human animals and, therefore, were recognized by the body as foreign and neutralized by the immune system. Recently,
it has become possible to produce humanized monoclonal antibodies that appear less foreign to the body, and even to produce completely human monoclonal antibodies in quantity. As a result, monoclonal
antibodies are now realizing their potential as drugs, with several successfully on the market, and many more in advanced clinical development.

We
believe that the combined effect of these developments has reduced and will continue to reduce the risk, time and expense associated with the development of new drugs. These
developments have created an opportunity for biopharmaceutical companies with cutting edge technologies to deliver new classes of drugs which are safe and effective for treating a broad range of
important diseases in diverse individuals.

Our Discovery Technology

Our comprehensive and industrialized technology platform is based on multiple, parallel approaches to high-throughput product discovery and
development which are integrated through the latest advances in enabling technologies and informatics. The enabling technologies include robotics, fluidics, miniaturization and analytical
instrumentation.

The
following chart illustrates how we apply various processes of our technology platform to the principal steps in the discovery and development of drugs from gene identification to
patient management.

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LOGO



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Our Alliance Program

Our disease-focused alliance agreements and our target-specific and product-specific alliance agreements generally provide for the funding by a collaborator of
some portion of a research program to be conducted by us in conjunction with the collaborator, and the grant of license rights by us to a collaborator to develop and commercialize specified products
and services resulting from discoveries made in the research program. In many cases, we have retained development and commercialization rights for ourselves to certain therapeutic and diagnostic
applications of discoveries made in the
research program. In some cases, if specified research, product development or regulatory milestones are achieved, our collaborators are obligated to make milestones payments to us. In addition, our
alliance agreements generally entitle us to royalties or a share of profits on product sales, which are payable for the life of the applicable patents or a specified period of time. The agreements
governing these alliances are subject to various contingencies, including in some cases, early termination rights. We have generally agreed with our collaborators that, for a specified period of time
while the alliance is in place, we will not conduct research, independently or with third parties, in the fields covered by the alliance agreement.

Our
technology transfer alliance agreements generally provide for the non-exclusive grant of license rights by us to a collaborator to use our technology platform for
biotechnology research and development. Typically, our collaborators are obligated to make periodic payments to us and/or to pay us royalties on products they develop using our technology platform.

Our
ability to obtain ongoing funding for our sponsored research and technology transfer programs and certain milestone payments under these programs, if any, depends on these alliances
continuing for their full term and on our ability to achieve specified research objectives.

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Since inception, substantially all of our revenues have been derived from our strategic alliances. For the twelve-month period ended December 31, 2001, revenues from our strategic
alliance with Bayer AG accounted for approximately 39% of our total revenues, revenues from our strategic alliance with Monsanto accounted for approximately 18% of our total revenues, and
revenues from our strategic alliance with Aventis accounted for approximately 16% of our total revenues.

Our Major Discovery Alliances

Our discovery alliances with major pharmaceutical and biotechnology companies focus on performing drug discovery research funded by our collaborators. The
following is a summary of our principal disease-focused alliances:



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Our Technology Alliances

We have entered into a number of alliances based on the transfer of our technology platform. The following is a summary of our principal technology transfer
alliances:



Predictive Medicine

An important strategic focus for us is the application of our technology platform to develop products and services that will provide clinicians and pharmaceutical
researchers with information that enables them to make better informed decisions about drug treatment and other aspects of patient management. We are conducting this work through our MPMx
division.

MPMx
is focusing its efforts on diagnostics and pharmacogenomic services and expects to expand into the provision of information services related to patient management.

Diagnomics Products

Many current diagnostic tests are directed towards the symptoms, rather than the causes, of the diseases that they are used to diagnose or monitor. As a result,
these tests generally provide information only about a patient's current condition. In contrast, we are developing gene-based diagnostic tests, which we call Diagnomics tests,
to assess the underlying causes of diseases and evaluate a patient's risk for developing specific diseases. We believe that Diagnomics products and services will provide information with
inherent prognostic, therapeutic and economic implications, facilitating a shift in medical care towards planned and cost-effective treatment of the underlying causes of disease.

We
are engaged in two strategic collaborations as part of our Diagnomics program.

Becton Dickinson.In February 1999, we entered into a strategic alliance with Becton Dickinson focused primarily on
Diagnomics products for specified cancers. Under this agreement, we are undertaking research to identify and deliver clinically validated diagnostic markers to Becton Dickinson for skin,
cervical, breast, ovarian, uterine and prostate cancers. A diagnostic marker is a molecule or substance whose presence or concentration can be measured in a biological sample taken from a patient,
providing useful information about the patient's status or future prospects with respect to a particular disease or diseases. For example, under license from us, Becton Dickinson developed the
Melastatin® product, a clinical marker to diagnose melanoma. In July 2001, Becton Dickinson sublicensed certain of its rights to TriPath Imaging, Inc. and its wholly-owned
subsidiary, TriPath Oncology, Inc.

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In
June 2000, we entered into a licensing agreement with Becton Dickinson in the area of colon cancer diagnostics. Under this agreement, Becton Dickinson paid us a licensing fee
in exchange for research and development rights to select diagnostic markers and related intellectual property that we develop in
this disease area. We have also granted Becton Dickinson an option to obtain a royalty-bearing, worldwide license from us to commercialize diagnostic markers arising out of this program.

Roche Diagnostics.In December 2000, we entered into a collaborative research agreement with Roche Diagnostics,
relating to the development of diagnostic products for rheumatoid arthritis. Under the agreement, we have granted Roche research and development rights to select diagnostic markers and related
intellectual property developed by us in this disease area. Roche has agreed to pay us a licensing fee, funding for research, milestone payments and royalties. We have granted Roche the right to
commercialize, on a worldwide basis, any diagnostic products resulting from the alliance. The research and development program is for a term of three years.

Pharmacogenomics

Different people often respond in different ways to the same drug. A drug that is safe and effective in one patient may be toxic or ineffective in another. We
believe that these differences in response, in part, reflect genetic variations between the individuals concerned. Pharmacogenomic studies seek to establish correlations between specific genetic
variations and specific responses to drugs. By establishing such correlations, pharmacogenomics may permit both new and existing drugs to be targeted to those patients in whom they are most likely to
be both effective and safe. In November 1999, we entered into a strategic alliance with Bristol-Myers Squibb focused primarily on the application of pharmacogenomics to cancer treatments.

Research and Development

Company-sponsored research and development expenses totaled $99.7 million in 2001, $77.0 million in 2000 and $19.3 million in 1999. Our
strategic collaborator-sponsored research and development expenditures totaled $300.9 million in 2001, $191.7 million in 2000 and $140.6 million in 1999. In calculating
strategic-collaborator sponsored research and development expenditures, we have included expenditures in programs for which we receive current funding as well as programs for which we may receive
future compensation as milestone payments, royalties or otherwise even though we provide the current funding. Our research and development expenditures in 2001 increased significantly over 2000 as we
added personnel and expanded research and development activities to accommodate existing and added strategic alliances and development efforts, and as a result of the addition, through our acquisition
of LeukoSite in December 1999, of several preclinical product candidates and product candidates in clinical trials.

Patents and Proprietary Rights; Licenses

We generally seek United States and foreign patent protection for the genes, proteins, antibodies and small-molecule drug leads that we discover, as well as
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 certain other technologies which may be used to discover and characterize genes, proteins, antibodies and small-molecules and which may be used to develop novel therapeutic, diagnostic and
pharmacogenomic products and processes.

We
own three issued U.S. patents and several pending U.S. and foreign patent applications related to the Melastatin® product. We are an exclusive licensee under two issued
U.S. patents and pending U.S. and foreign patent applications related to MLN01. The MLN01 license extends through the expiration of the licensed patents in 2016. We also own pending U.S. and foreign
patent applications

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related to MLN02. We also own issued U.S. patents, granted foreign patents and pending U.S. and foreign applications related to MLN341 and INTEGRILIN® (eptifibatide) Injection. We also
are the exclusive licensee of an issued U.S. patent and pending U.S. and foreign applications and we own an issued U.S. patent and pending U.S. and foreign applications related to MLN519. The MLN519
license extends through the expiration of the licensed patents in 2015. The issued patents relating to MLN341 expire in 2014 and the patents that cover INTEGRILIN® expire in 2014 and 2015.
We are also the exclusive licensee of U.S. patents and pending U.S. and foreign patent applications relating to MLN591. The issued U.S. patents that cover MLN591 expire in 2017. The MLN591 license
extends through the expiration of the issued patents and any patents that may result from such applications. One or more patents relating to MLN591 may be subject to a U.S. interference proceeding by
NW Biotherapeutics.

We
have pending patent applications related to MLN4760, none of which has yet resulted in issued patents. We are an exclusive licensee under pending patent applications relating to
MLN576, none of which has yet resulted in issued patents. The MLN576 license extends through the expiration of any licensed patents that may result from such applications. We are an exclusive licensee
under issued patents and pending applications relating to MLN518. The issued patents relating to MLN518 expire in 2018. The MLN518 license extends through the expiration of any licensed patents that
may result from such applications.

We
have entered into several license agreements under which we have acquired certain rights to use proprietary technologies and compounds. In the event our in-licensed rights
were terminated or modified, our ability to manufacture and sell products using the covered technologies would be materially adversely affected.

In
October 1997 a patent opposition was filed in Europe by another company against the claims of a patent originally granted to COR in Europe covering broad, generic claims for
INTEGRILIN®, as well as numerous related compounds that are not part of our core technology. The opposition asserts that all claims of the patent are unpatentable. In July 2000 the
Opposition Division of the European Patent Office confirmed the validity of our patent claims without requiring us to limit or otherwise amend our claims. In November 2000 the opposition filed
an appeal of this decision.

We
also currently own the following trademarks and servicemarks: "Changing the Practice of Medicine"sm, Chemoprediction, DGx,
Diagnomics, Expression Explorer, G2P, "Gene to Patient", the Millennium "M" logo and design (registered), MBio,
Melastatin®, Millennium®, Millennium Biotherapeutics®, Millennium Informationsm, Millennium Pharmaceuticals, Millennium Predictive
Medicine, MPMx, Pharmacoinformatics, Protein Explorer, RADE®, Sequence Explorer®, "Transcending the Limits of
Medicine" and INTEGRILIN®. CAMPATH® is a registered trademark, and MabCAMPATH is a trademark, of ILEX Pharmaceuticals, L.P.

Government Regulation

Overview of FDA Regulations

Biological and non-biological drugs, including our products on the market and our products under development, and medical devices, are subject to
extensive and rigorous regulation by the federal government, principally the FDA, and by state and local governments. Federal and state statutes and regulations govern, among other things, the
research, development, testing, manufacture, storage, recordkeeping, reporting, labeling, distribution, promotion and marketing of pharmaceutical and diagnostic device products. If these products are
marketed abroad, they also are subject to export requirements and to regulation by foreign governments. Failure to comply with applicable regulatory requirements may subject a company to
administrative or judicially imposed sanctions, such as warning letters, product recalls, product seizure, injunctions, civil penalties, disgorgement of past or future

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profits, criminal prosecution, suspension of production, license revocation, or FDA refusal to approve pending marketing applications.

The
applicable regulatory clearance process, which must be completed prior to the commercialization of a product, is very lengthy and expensive. FDA requirements for our products on the
market and our products under development vary depending upon whether the product is a non-biological drug or biological drug. Product candidates currently in human clinical or late
preclinical development (i.e., MLN01 and MLN02) are regulated by the FDA as biological drugs. INTEGRILIN® (eptifibatide) Injection is
currently, and we believe that products under development in our small-molecule antagonist program will be, regulated as non-biological drugs. We are also developing diagnostic products
that will be regulated as medical devices.

Regulation of Non-Biological Drugs and Biological Drugs

Non-biological drugs and biological drugs are subject to many of the same laws and regulations, although they are approved under somewhat different
regulatory frameworks. Product development and approval within either regulatory framework takes a number of years, involves the expenditure of substantial resources and is uncertain. Many
non-biological drugs and biological drugs that initially appear promising ultimately do not reach the market because they are not found to be safe or effective under the standards applied
by FDA, or cannot meet the FDA's other regulatory requirements for product manufacture and sale. In addition, the current regulatory framework may change or additional regulations may arise at any
stage of our product development that may affect approval, delay the submission or review of an application or require additional expenditures by us.

The
activities required before a new non-biological drug or biological drug can be marketed in the United States begin primarily with preclinical testing. Preclinical tests
include laboratory evaluation of product chemistry, toxicology and other characteristics. Animal studies are used to assess the potential safety and efficacy of the product as formulated. Many
preclinical studies are regulated by the FDA under the current Good Laboratory Practice, or GLP, regulations. Violations of these regulations can, in some cases, lead to invalidation of the studies,
requiring such studies to be replicated if the data are to be submitted to the FDA in support of a marketing application.

The
entire body of preclinical development work necessary to administer investigational non-biological drugs and biological drugs to human volunteers or patients is
summarized in an investigational new drug application, or IND, which must be submitted to the FDA before the drug may be shipped to investigators for use in humans. FDA regulations provide that human
clinical trials may begin 30 days following submission of an IND application, unless the FDA advises otherwise or requests additional information, clarification or additional time to review the
application. Once trials have commenced, investigators must promptly report all unanticipated risks and adverse events that occur in human subjects to an Institutional Review Board, or IRB,
responsible for approval and ongoing review of the trial, and the drug sponsor. The sponsor must promptly report an adverse event that is unexpected, serious, and possibly drug-related to
the FDA. The FDA may stop the trials by placing a "clinical hold" on such trials because of concerns about, for example, the safety of the product being tested. Such holds can cause substantial delay
and in some cases may require abandonment of a product.

Clinical
testing in humans involves the administration of the investigational non-biological drug or biological drug to healthy volunteers or to patients under the
supervision of a qualified principal investigator, usually a physician, pursuant to an FDA reviewed protocol. Each clinical study is conducted under the auspices of an IRB at each academic center,
hospital or other research facility at which the study will be conducted. The IRB must approve the protocol and informed consent documents before a clinical trial can proceed. An IRB will consider,
among other things, ethical

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factors, the safety of human subjects, whether informed consent was properly obtained, and the possible liability of the institution.

Human
clinical trials typically are conducted in three sequential phases, but the phases may overlap. Phase I clinical trials consist of testing the product in a small number of
patients or normal volunteers, primarily for safety, in one or more dosages, as well as characterization of a drug's pharmacokinetic and/or pharmacodynamic profile. In Phase II clinical trials,
in addition to safety, the efficacy of the product is evaluated in a patient population. Phase III clinical trials typically involve additional testing for safety and clinical efficacy in an
expanded population at multiple geographically dispersed sites. A clinical plan, or "protocol," is submitted to the FDA prior to commencement of each clinical trial. The FDA may order the temporary or
permanent discontinuation of a clinical trial at any time for a variety of reasons, particularly if safety concerns arise.

During
the conduct of a clinical trial, the company is required to monitor the investigators' compliance with the study protocol and other FDA requirements, including the requirements to
submit reports to the sponsor, the IRB, and FDA, and to keep detailed records regarding study findings and use and disposition of the study drug. Although monitoring can help reduce the risk of
inadequate compliance by study investigators, it cannot eliminate that risk entirely. Inadvertent regulatory noncompliance by the investigator, or intentional investigator misconduct, can jeopardize
the usefulness of study results and, in rare circumstances, require the company to repeat a study.

Upon
completion of clinical trials, a company seeking FDA approval to market a new non-biological drug must file a new drug application, or NDA, with the FDA. To approve an
NDA, the FDA must determine, based on the information submitted in the NDA, that the drug is safe and effective for its intended uses. In addition to reports of the preclinical and clinical trials
conducted under the U.S. IND application, the NDA includes information pertaining to the product's safety and efficacy, preparation of the drug substance, analytical methods, drug product formulation,
detail on the manufacture of finished products and proposed product packaging and labeling. In addition, the manufacturing facility must also pass an FDA current Good Manufacturing Practices (cGMP)
inspection before the marketing application can be approved.

A
company seeking FDA approval to market a biological drug is required to prepare and submit additional information for inclusion in a single biologics license application, or BLA, which
is similar in content to the NDA. To approve a BLA, the FDA must determine that the product is effective for its intended uses and that the manufacturing establishment and product meet applicable
requirements to ensure the safety, purity, and potency of the product.

Submission
of a standard NDA or BLA does not assure FDA approval for marketing. After the application is submitted, the FDA initially determines whether all pertinent data and
information have been submitted before accepting the application for filing. After the application is accepted for filing, the FDA begins its substantive review. The FDA typically will request a
review of the data in the NDA or BLA and recommendation regarding approval by an advisory committee consisting of outside experts. The FDA may accept or reject the advisory committee's
recommendations, or accept them with modifications. The application review process generally takes one to three years to complete, although reviews of non-biological drugs and biological
drugs that meet a medical need for serious or life-threatening diseases may be accelerated or prioritized for a six month review. However, the process may take substantially longer if,
among other things, the review is complex, the information in the NDA or BLA is not complete, or the FDA has questions or concerns about the safety or efficacy of a
product. In some circumstances, FDA may approve an NDA even though some unanswered questions remain about the product, if the applicant agrees to conduct post-marketing studies. FDA may
impose other conditions of approval as well. Expedited or accelerated approvals may require additional larger confirmatory clinical studies to be conducted following approval.

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In
addition, the FDA may, in some circumstances, impose restrictions on the use of the non-biological drug or biological product that may be difficult and expensive to
administer. Product approval may be withdrawn if compliance with regulatory requirements is not maintained or if post-marketing adverse events associated with the product are reported that
cannot be addressed satisfactorily through changes to the products labeling or warnings to healthcare professionals. The FDA requires reporting of certain safety and other information that becomes
known to a manufacturer of an approved non-biological drug or biological product. The company may become aware of such information from reports of adverse events suspected to be related to
the drug, voluntarily provided to the company and/or the FDA by physicians and other healthcare professionals, or from published scientific data. In some circumstances, FDA may require the company to
make changes to its approved product labeling or to issue safety warnings to healthcare professionals or the public, which may have a negative impact on product sales. Manufacturing and sale may also
be disrupted, or delayed, in the event of failure to comply with all required current Good Manufacturing Practices as determined by FDA investigators in periodic inspections of manufacturing
facilities. In addition, changes in the product, synthesis processes, or the manufacturing facility may require the submission of a supplemental NDA or BLA.

Upon
approval, a prescription non-biological drug or biological product may only be marketed for the approved indications in the approved dosage forms and at the approved
dosage. Approval may entail ongoing requirements for post-marketing studies. In addition, the nature of marketing claims that we will be permitted to make in the labeling and advertising
of our products will be limited to those specified in an FDA clearance or approval. Claims exceeding those that are cleared or approved will constitute violation of the Food, Drug and Cosmetic Act.

Orphan Drug Act

Under the Orphan Drug Act, a sponsor of a marketing application may seek to obtain a seven-year period of marketing exclusivity for a
non-biological or biological drug intended to treat a rare disease or condition, which is defined as a disease or condition that occurs in fewer than 200,000 patients. Orphan drugs provide
significant tax advantages to a sponsor. Before a product can receive marketing exclusivity associated with orphan product status, it must receive orphan product designation. If a drug is designated
as an orphan drug or biologic by the FDA, the sponsor of the first FDA approved application of the drug or biologic for the specified indication receives seven years of marketing exclusivity, subject
to certain limitations.

ILEX
has obtained orphan product designation for CAMPATH® for the treatment of patients with chronic lymphocytic leukemia. We may seek such designation for other products as
well. However, other companies may also receive orphan designation and obtain the FDA marketing approval before we obtain such approval. If another company obtains marketing approval for the same drug
or biologic first and receives seven-year marketing exclusivity, we would not be permitted by the FDA to market our product in the United States for the same use during the exclusivity
period. In addition, we could incur substantial costs in asserting any rights to prevent such uses we may have under the Orphan Drug Act. If we receive seven-year marketing exclusivity,
FDA may rescind the period of exclusivity under certain circumstances, including our failure to assure a sufficient quantity of the drug.

The
Orphan Drug Act is subject to amendment by Congress, which has periodically considered amendments that would change the substantive provisions of the law, including the market
exclusivity provisions. There can be no assurance that the market exclusivity provisions under this Act will still be the same when our product candidates are approved.

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Foreign Regulations

Outside the United States, our ability to market a product is contingent upon receiving marketing authorization from the appropriate regulatory authorities. The
requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. At present, foreign marketing authorizations are applied
for at a national level, although within the European Union, centralized procedures are available to companies wishing to market a product in more than one European Union member state. If the
regulatory authorities are satisfied that adequate evidence of safety, quality and efficacy has been presented, a marketing authorization will be granted. This foreign regulatory approval process
includes all of the risks and potential delays associated with FDA approval set forth above.

Other Regulations

In addition to regulations enforced by the FDA, we also are subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act,
the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local regulations. Our research and development involves the
controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for storing, handling, using and disposing of such materials comply
with the standards prescribed by applicable regulations, the risk of accidental contaminations or injury from these materials cannot be completely eliminated. In the event of such an accident, we
could be held liable for any damages that result and any such liability could materially effect our ongoing business.

Regulation of Diagnostics

The FDA regulates the development, manufacture, and marketing of medical devices including diagnostic products and reagents. We are engaging in research involving
diagnostic testing and may develop diagnostic testing products subject to FDA regulation as medical devices. FDA classifies these products as "in vitro" diagnostics, which means that they are
laboratory tests that do not involve invasive procedures. Clinical trials of such products do not require FDA approval. Such studies must, however, receive prior approval from an IRB and are subject
to ongoing review by the IRB. An IRB may impose restrictions on the conduct of a study either prior to its initiation or during the conduct of the study. Such restrictions may include termination of
the study.

The
FDA has regulations that set varying requirements for medical devices according to potential risk class. Class I devices represent the lowest potential risk devices and are
therefore subject only to the general controls that include establishment registration, product listing, the prohibition of mislabeling or adulteration, and a requirement to comply with current
federal Good Manufacturing Practices regulations. Premarket clearance is required for some Class I clinical diagnostic devices. Class II devices present greater risk than Class I
devices and are subject to special controls, such as guidelines or performance standards, as well as the same general controls that are applicable to Class I devices. Most Class II
devices require premarket clearance to demonstrate to the FDA the manufacturer's claims that the device is substantially equivalent to other legally marketed devices, and meets generally accepted
performance criteria that may be required to demonstrate that the device is safe and effective. Class III devices present a higher level of risk and are additionally subject to rigorous
demonstration of safety and effectiveness through the premarket approval process.

For
some Class I and most Class II devices, a premarket notification must be submitted to the FDA and FDA premarket clearance obtained prior to commercial distribution of
the product. Usually within 90 days of the receipt of this notification, the FDA makes the determination whether the device submitted is substantially equivalent to a legally marketed predicate
device. A legally marketed predicate device is one which was marketed prior to the passage of the Medical Device Amendments of

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1976, or a post-1976 device that has been determined by the FDA to be substantially equivalent to the previously cleared devices. A determination of substantial equivalence requires
several FDA findings: first, that the device has the same intended use as the legally marketed device; and second, either that the device has the same technological characteristics as the legally
marketed predicate device, or, if it does not, that the device is as safe and effective as the legally marketed predicate device and does not present different questions about safety and
effectiveness. Class III devices require extensive clinical testing to prove safety and effectiveness, and submission of the resulting data to the FDA as a premarket approval application, or
PMA. The FDA ordinarily will refer a new device PMA to an advisory panel of outside experts for a recommendation on whether to approve the application or to request additional testing.

Where
a PMA is required, FDA regulations require the demonstration of safety and effectiveness, typically based upon extensive clinical trials. Fulfilling the requirements of the PMA are
costly and both
the preparation and review are time consuming, commonly taking from one to several years. Before granting premarket approval, the FDA must inspect and find acceptable the proposed manufacturing
procedures and facilities. The FDA can also impose conditions of approval, such as requirements for postmarketing study, or restrictions on sale, distribution or use. The premarket approval
regulations also require FDA approval of most changes to the product's design, materials of construction, labeling or manufacturing made after the initial approval.

Analyte
specific reagents, or ASRs, that are used by clinical laboratories to conduct in-house assays or "home brew" tests are regulated by FDA under this device
classification scheme, and their sale, distribution, and use are restricted under FDA regulations. The majority of ASRs are Class I and exempt from premarket notification requirements, although
they remain subject to other FDA requirements such as good manufacturing practices, labeling, and reporting. Some ASRs are Class II (for example, for blood bank tests) or Class III (for
example, for HIV and tuberculosis tests) and are subject to FDA premarket review. ASRs for genetic testing or predictive genetic testing currently are Class I and exempt from premarket review,
although FDA has announced that the agency may propose additional regulation of genetic tests if determined appropriate following its ongoing evaluation of pertinent reports and recommendations.

Manufacturing Regulation

Among the conditions for FDA approval of a pharmaceutical product is the requirement that the manufacturer's quality control and manufacturing procedures (either
our own or a third-party manufacturer's) conform to Current Good Manufacturing Practices, which must be followed at all times. Diagnostic products and reagents are also subject to various
postmarketing requirements, such as complaint handling and reporting of adverse events. Premarket approval products are also subject to annual reports. The FDA typically inspects manufacturing
facilities every two years. In complying with Current Good Manufacturing Practices regulations, pharmaceutical manufacturers must expend resources and time to ensure compliance with product
specifications as well as production, record keeping, quality control, reporting and other requirements.

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Clinical Laboratory Improvement Amendments of 1988

All medical testing in the United States is regulated by the Centers for Medicare & Medical Services (CMS, formerly the Health Care Financing
Administration) according to the complexity of the testing as specified under the Clinical Laboratory Improvement Amendments of 1988. CLIA regulations establish three categories of laboratory tests
for which regulatory requirements become increasingly stringent as the complexity of the test rises: (1) tests that require little or no operator skill, which allows for a certificate waiver of
the regulations; (2) tests of moderate complexity; and (3) high complexity tests which require significant operator skill or training. Complexity categorization of diagnostic tests has
been the responsibility of the Centers for Disease Control and Prevention although that responsibility has recently been transferred to the FDA. CLIA regulatory requirements apply to facilities such
as clinical laboratories, hospitals, and physician offices which perform laboratory tests. All laboratories are subject to periodic inspection. In addition, all laboratories performing tests of
moderate or high complexity must register with CMS or an organization to whom CMS has delegated such authority. They also must meet requirements relating to personnel qualifications, proficiency
testing, quality assurance, and quality control. We expect all genetic tests to be categorized as having moderate to high complexity. "Home brew" tests using analyte specific reagents must be
conducted in a clinical laboratory meeting the requirements for high-complexity tests. In practical terms, performing a test of high complexity means that the individual supervising the
test (generally, the physician, pathologist or laboratory director) must be appropriately educated and trained, and the laboratory must be certified for high complexity testing under CLIA.

State Regulation

In addition to federal regulation, certain diagnostic tests will be subject to a variety of state laws and regulations in those states where our products may be
marketed, sold or used. States also impose requirements on clinical laboratories and regulate the ordering of laboratory tests, reporting of test results and confidentiality of medical records.

Manufacturing

General

We have limited manufacturing capabilities and produce only a few of our compounds for research and development and preclinical testing. We rely on third parties
to manufacture most of our compounds for research, development, preclinical and clinical trials and commercial supply. Under most of our collaboration agreements, our collaborators have the exclusive
right to manufacture products that result from their programs.

We
have established a 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, except for products and product candidates for toxicology studies and animal studies which we require to be manufactured in
accordance with Current Good Laboratory Practices. Our contract manufacturing facilities must pass regular post-approval FDA inspections. The FDA or other regulatory agencies must approve
the processes or the facilities that may be used for the manufacture of any of our potential products. If these inspections were to fail and we were unable to obtain the necessary approvals,
manufacturing and distribution may be disrupted, recalls of distributed products may be necessary and other sanctions could be applied.

The
manufacture of our products and product candidates is based in part on technology that we believe to be proprietary to our contract manufacturers. Contract manufacturers may utilize
their own technology, our technology or that of third parties. Successful technology transfer is needed to ensure success with potential secondary suppliers. Such manufacturers may not abide by the
limitations or

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confidentiality restrictions in licenses with us. In addition, any such manufacturer may develop process technology related to the manufacture of our compounds that such supplier owns either
independently or jointly with us. This would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have our products manufactured.

INTEGRILIN® (eptifibatide) Injection

We have no manufacturing facilities for INTEGRILIN® and, accordingly, rely on third-party contract manufacturers and Schering for the clinical and
commercial production of INTEGRILIN®.

We
believe our contracted supply of INTEGRILIN® is sufficient to meet current market demand although our manufacturing plans call for the addition of extra capacity for the
manufacture of INTEGRILIN®. We work with our vendors on capacity forecasts to assure that there is an adequate supply of the drug, including raw materials, in the future. We have two
manufacturers that produce bulk product, and two manufacturers, one of which is Schering, at its Manati facility in Puerto Rico, that perform fill/finish and packaging, of INTEGRILIN®. As
of December 31, 2001, the filling and final
packaging of INTEGRILIN® at the Schering Manati facility for sales in the United States is in abeyance pending resolution of issues to be addressed between Schering and ourselves related
to production processes and procedures. We have additional manufacturers producing INTEGRILIN® for clinical trials.

Our
commercialization strategy for INTEGRILIN® includes establishment of multiple third-party manufacturing sources on commercially reasonable terms. See "Risks Relating to
Product Manufacturing, Marketing and Sales."

Sales and Marketing

As a result of our acquisition of COR, we currently have a highly specialized sales force geographically dispersed across the U.S. focused upon further expanding
hospital use of INTEGRILIN®. It is our intent to build upon this sales and marketing infrastructure consisting of more than 100 people as we expand our commercial presence into
other therapeutic disease markets.

We
have not developed specific commercialization plans for our product candidates beyond INTEGRILIN®. How we commercialize product candidates will depend in large part on
their market potential and our financial resources. We may establish co-promotion, corporate partnering or other arrangements for the marketing and sale of certain products and in certain
geographic markets. We may not be successful in establishing such arrangements and even if we are, these arrangements may not result in the successful marketing and sales of any of our products or
product candidates.

We
and Schering co-promote INTEGRILIN® in the United States and share any profits or losses. Together with Schering and Genentech, we also co-promote
INTEGRILIN®, TNKase (tenecteplase) and Activase® (alteplase) for various indications in hospitals across the United States. We have exclusively licensed Schering
to market INTEGRILIN® outside the United States, and Schering pays us royalties based on sales of INTEGRILIN® outside the United States.

We
and Schering market INTEGRILIN® to healthcare providers and Schering sells INTEGRILIN® primarily to drug wholesalers. These wholesalers subsequently sell
INTEGRILIN® to the hospitals where health care providers administer the drug to patients. Wholesaler management decisions to increase or decrease their inventory of INTEGRILIN®
may result in sales of INTEGRILIN® to wholesalers that do not track directly with demand for the product at hospitals.

Sales
of 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 product. We believe this approach
may assist in obtaining reimbursement

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authorization for our products from these third-party payors. See "Risk Factors That May Affect Our Performance."

Becton
Dickinson is responsible for the development and commercialization of MELASTATIN® and any other diagnomic products that result from our collaboration. Becton Dickinson
in turn, has contracted with TriPath for commercialization of MELASTATIN® and any other diagnomic products that result from our collaboration with Beckton Dickinson.

Competition

General

We face intense competition from a wide range of pharmaceutical, biotechnology and diagnostic companies, as well as academic and research institutions and
government agencies. Our competitors include organizations that are pursuing the same or similar technologies as those which constitute our technology platform and from organizations that are pursuing
pharmaceutical or diagnostic products that are competitive with our potential products. Many of our competitors compete against us for strategic collaborators for their research and development and
commercialization programs.

Principal
competitive factors in our industry include:



We
are aware of products in research or development by our competitors that address all of the diseases and disorders we are targeting. Any of these products may compete with our product
candidates. In addition, competitors might succeed in developing other products or technologies that are more effective than those we are developing. These products or technologies might render our
technology obsolete or noncompetitive. Competition is based primarily on product efficacy, safety, timing and scope of regulatory approvals, availability of supply, marketing and sales capability,
reimbursement coverage, price and patent position.

We
believe that the quality and breadth of our technology platform, the skill of our employees and our ability to recruit and retain skilled employees, our aggressive program of seeking
patent protection for gene discoveries, our capabilities for early stage research and drug discovery and our capital resources are competitive strengths. However, 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
preclinical and clinical development, sales, marketing, manufacturing and regulatory affairs.

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INTEGRILIN® (eptifibatide) Injection

We are marketing the approved product INTEGRILIN®. Due to the incidence and severity of cardiovascular diseases, the market for therapeutic products
that address such diseases is large, and competition is intense and expected to increase. Two GP IIb-IIIa inhibitors have received regulatory approval in the United States and
Europe which compete with INTEGRILIN®: ReoPro® (abciximab), which is produced by Johnson & Johnson and sold by Johnson & Johnson and Eli
Lilly & Co.; and Aggrastat® (tirofiban), which is produced and sold by Merck & Co., Inc.

Employees

As of February 28, 2002, we had approximately 1,900 full-time employees, of whom approximately 510 hold Ph.D. or M.D. degrees and approximately
510 hold other advanced degrees. Approximately 1,370 of our employees are engaged in research and development activities, approximately 420 are engaged in business development, finance, operations
support and administration and approximately 110 are engaged in sales and sales support. None of our employees is represented by a collective bargaining agreement, nor have we experienced work
stoppages. We believe that relations with our employees are good.

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RISK FACTORS THAT MAY AFFECT RESULTS

This Annual Report on Form 10-K, together with the accompanying letter to shareholders, contain forward-looking statements, including
statements about our growth and future operating results, discovery and development of products, potential acquisitions, strategic alliances and intellectual property. For this purpose, any statement
that is not a statement of historical fact should be considered a forward-looking statement. We often use the words "believes," "anticipates," "plans," "expects," "intends" and similar expressions to
help identify forward-looking statements.

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

Risks Relating to COR Acquisition

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

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

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

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

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

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

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

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

Regulatory Risks

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

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

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

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

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

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

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

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

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Risks Relating to Our Business, Strategy and Industry

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

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

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

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

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

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

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

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

We must provide the FDA and foreign regulatory authorities with preclinical and clinical data that demonstrate that our products are safe and effective before
they can be approved for commercial sale. 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

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results in early studies might not be seen in later studies. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in
different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial or adverse medical events during a clinical trial
could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.

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

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

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

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

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

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Risks Relating to Our Financial Results and Need for Financing

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

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

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

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

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

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

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

At December 31, 2001, after giving pro forma effect to the acquisition of COR, we had approximately $683 million of outstanding debt. During each of
the last five years, our earnings were insufficient to cover our fixed charges. During each of the next three years, we will be required to make interest payments on our outstanding convertible notes
totaling approximately $99 million. If we are unable to generate sufficient cash to meet these obligations and have to use existing cash or investments, we may have to delay or curtail our
research and development programs.

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

Our
indebtedness could have significant additional negative consequences, including:



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We have entered into an agreement to restructure our interest in CAMPATH®; as a result, we will no longer have control over the financial success of that product.

On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX Partners, L.P., which owns the
CAMPATH® product. In exchange for our equity interest in Millennium & ILEX Partners, ILEX paid us $20 million on December 31, 2001 and is obligated to pay us up to an
additional $120 million over the next three years if sales of CAMPATH® in the U.S. meet specified sales thresholds. In addition, we will be entitled to additional payments from ILEX
based on U.S. sales of CAMPATH® after 2004. There can be no assurance that we will receive any of the payments that are dependent on sales of CAMPATH®. In addition, as a result
of the restructuring, we will have no ability to influence the actions of the entity that owns CAMPATH® and, therefore, will have no control over the financial success of
CAMPATH®.

Risks Relating to Collaborators

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

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

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



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

An important element of our business strategy is entering into strategic alliances for the development and commercialization of products and services based on our
discoveries. We face

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significant competition in seeking appropriate collaborators. Moreover, these alliance arrangements are complex to negotiate and time-consuming to document. We may not be successful in
our efforts to establish additional strategic alliances or other alternative arrangements. The terms of any additional strategic alliances or other arrangements that we establish may not be favorable
to us. Moreover, such strategic alliances or other arrangements may not be successful.

Risks Relating to Intellectual Property

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

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

Our
ability to develop and commercialize products and services depends in significant part on our ability to:



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

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

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

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

36

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licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products, processes or services.

With
respect to our product candidate MLN01, we are aware of third party patents and patent applications which relate to certain anti-CD18 antibodies and their use in various
methods of treatment including methods of reperfusion therapy and methods of treating focal ischemic stroke. In addition, our MLN01 and MLN02 product candidates are humanized monoclonal antibodies. We
are aware of third party patents and patent applications that relate to certain humanized or modified antibodies, products useful for making humanized or modified antibodies and processes for making
and using humanized or modified antibodies. We are also aware of third party patents and patent applications relating to certain manufacturing processes, products thereof and materials useful in such
processes. We are also aware of third party patent applications and a potentially interfering patent application relating to anti-PSMA antibodies.

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

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

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

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

Risks Relating to Product Manufacturing, Marketing and Sales

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

We have limited sales, marketing and distribution experience and capabilities, primarily the specialty sales force that we acquired in the COR merger that markets
INTEGRILIN® (eptifibatide) Injection. Depending on the nature of the products and services for which we obtain market approval, we may need to rely significantly on sales, marketing and
distribution arrangements with our

37

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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 such types of products ourselves, we
would face a number of additional risks, including the need to recruit a large number of additional experienced marketing and sales personnel.

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

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

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

There
are a limited number of manufacturers that operate under the FDA's good manufacturing practices regulations capable of manufacturing our products. As a result, we have experienced
some difficulty finding manufacturers for our products with adequate capacity for our anticipated future needs. If we are unable to arrange for third party manufacturing of our products, or to do so
on commercially reasonable terms, we may not be able to complete development of our products or market them.

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

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

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

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

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

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

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be substantial. Moreover, we may not be able to implement any of these improvements or modifications successfully.

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

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

The availability and levels of reimbursement by governmental and other third party payors affect the market for any pharmaceutical product or healthcare service.
These third party payors continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for medical products and services. In certain foreign countries,
particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. We may not be able to sell our products and services profitably if
reimbursement is unavailable or limited in scope or amount.

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

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

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

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

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

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

Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing and marketing of human therapeutic products. In
particular, INTEGRILIN® is administered to patients with serious cardiovascular disease who have a high incidence of mortality. Although we have product liability and clinical trial
liability insurance that we believe is appropriate, this insurance is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential
liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities,

39

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which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product commercialization efforts.

Guidelines and recommendations can affect the use of our products.

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

Risks Relating to an Investment in Our Common Stock

Certain provisions of our charter documents, our rights agreement and Delaware law could delay or prevent the sale of our company.

Provisions of our charter documents, our rights agreement and Delaware law may make it more difficult for a third party to acquire, or attempt to acquire, control
of our company, even if a change in control would result in the purchase of shares of our common stock at a premium to the market price. In addition, these provisions may limit the ability of
stockholders to approve transactions that they may deem to be in their best interest.

Our stock price is volatile, which could cause you to lose part or all of your investment.

The market price of our common stock, like that of the shares of many other biotechnology companies, has been and may continue to be volatile. For example, from
January 1, 2001 to December 31, 2001, our common stock traded as high as $63.50 per share and as low as $15.63 per share.

40

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Item 2.    PROPERTIES

We lease a total of approximately 780,000 square feet of laboratory and office space in several buildings located in Cambridge, Massachusetts, with the majority
of this space subject to leases expiring in 2003 through 2014. In addition, we have signed long term leases for two buildings to be constructed in Cambridge. Each building will consist of
approximately 200,000 square feet of office and laboratory space. The leases will expire in 2019 and 2020. We expect to occupy the first of these buildings in the third quarter of 2002 and the second
building in the second half of 2003.

We
lease approximately 136,000 square feet of laboratory and office space in South San Francisco, California. This lease expires in 2011. We currently sublease approximately 10,000
square feet at this facility.

We
also lease approximately 44,000 square feet of laboratory and office space in Cambridge, England for our subsidiary, Millennium Pharmaceuticals Limited under leases expiring in 2003.
In February 2001, we signed an agreement to lease for a period of 15 years a building to be constructed in Cambridge, England comprising 90,000 square feet of office and laboratory space
which we expect to occupy in early 2003 and which will replace our current Cambridge, England locations. This agreement for lease includes options for expansion into additional space at the same
location.

We
believe our currently-leased and occupied facilities, and the facilities to be constructed in Cambridge, Massachusetts and Cambridge, England, are 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, 2001.

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DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

This table sets forth the names, ages and positions of our directors and executive officers.

|Name                           |  | Age |  | Positions Held                                                              
|------------------------------ |  | --- |  | ----------------------------------------------------------------------------
|Mark J. Levin                  |  | 51  |  | Chairperson of the Board of Directors, President and Chief Executive Officer
|Vaughn M. Kailian              |  | 57  |  | Vice Chairperson of the Board of Directors                                  
|Kevin P. Starr                 |  | 39  |  | Chief Operating Officer and Chief Financial Officer                         
|John B. Douglas III            |  | 48  |  | Senior Vice President and General Counsel                                   
|Charles J. Homcy, M.D.         |  | 53  |  | President of Research and Development                                       
|John Maraganore, Ph.D.         |  | 39  |  | Senior Vice President, Strategic Product Development                        
|Linda K. Pine                  |  | 50  |  | Senior Vice President, Human Resources                                      
|Robert Tepper, M.D.            |  | 46  |  | Executive Vice President, Discovery and Chief Scientific Officer            
|Eugene Cordes, Ph.D.           |  | 65  |  | Director                                                                    
|Shaun R. Coughlin, M.D., Ph.D. |  | 47  |  | Director                                                                    
|Ginger L. Graham               |  | 46  |  | Director                                                                    
|A. Grant Heidrich, III         |  | 49  |  | Director                                                                    
|Raju S. Kucherlapati, Ph.D.    |  | 59  |  | Director                                                                    
|Eric S. Lander, Ph.D.          |  | 45  |  | Director                                                                    
|Ernest Mario, Ph.D.            |  | 63  |  | Director                                                                    
|Edward D. Miller, Jr., M.D.    |  | 59  |  | Director                                                                    
|Norman C. Selby                |  | 49  |  | Director                                                                    
|Kenneth E. Weg                 |  | 63  |  | Director                                                                    

Mr. Levinhas served as our Chairperson of the Board of Directors since March 1996, as our Chief Executive Officer since
November 1994 and as a director of our company since its inception. From 1987 to 1994, Mr. Levin was a partner at Mayfield, a venture capital firm, and co-director of its
Life Science Group. While employed with Mayfield, Mr. Levin was the founding Chief Executive Officer of several biotechnology and biomedical companies, including Cell Genesys Inc., Stem
Cells, Inc. (formerly CytoTherapeutics Inc.), Tularik Inc. and Focal, Inc. Mr. Levin holds an M.S. in Chemical and Biomedical
Engineering from Washington University. Mr. Levin also serves on the Board of Directors of StemCells, Inc., a biotechnology company.

Mr. Kailianjoined us as Vice Chairperson following the merger of COR into us on February 12, 2002. From March 1990
to February 2002, he served as President, Chief Executive Officer and a director of COR. From 1967 to 1990, Mr. Kailian was employed by Marion Merrell Dow, Inc., a pharmaceutical
company, and its predecessor companies in various U. S. and international general management, product development, marketing and sales positions. Mr. Kailian is also a director of Amylin
Pharmaceuticals Inc., a biotechnology company, and NicOx S.A., a biotechnology company.

Mr. Starrhas served as our Chief Operating Officer since December 2001 and Chief Financial Officer since
December 1998. From June 2001 to December 2001 he served as our Executive Vice President, Business Operations. From June 2000 to June 2001, Mr. Starr served
as a Senior Vice President of our company. From March 1998 to December 1998, he served as the Vice President, Finance of Millennium BioTherapeutics, Inc., while it was a
majority-owned subsidiary of ours. Prior to

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joining Millennium BioTherapeutics, Mr. Starr held the positions of Corporate Controller and Manager of Financial Analysis at Biogen from 1991 to 1998. Mr. Starr holds a B.A. degree in
mathematics and business from Colby College and an M.S. degree in corporate finance from Boston College.

Mr. Douglashas served as our General Counsel since May 1999 and Senior Vice President since June 2000. Prior to
joining us, Mr. Douglas was engaged in the private practice of law as a sole practitioner and as a partner at the Boston law firm of Hutchins, Wheeler & Dittmar from October 1997
until May 1999. Mr. Douglas was previously Senior Vice President and General Counsel of Apple Computer, Inc., a computer software and hardware company, from January to
October 1997. Mr. Douglas was Senior or Executive Vice President and General Counsel of Reebok International Ltd., a sports and fitness products company, from 1994 to
January 1997, and was responsible for several other corporate staff functions for most of this period, including Real Estate, Tax, Human Resources and Public Affairs, and he was Vice President
and General Counsel of Reebok from 1986 to 1994. Mr. Douglas received his J.D. from Harvard Law School and his A.B. from Colgate University.

Dr. Homcyjoined us as President of Research and Development following the merger of COR into our company. Dr. Homcy served
as Executive Vice President, Research and Development of COR from March 1995 to February 2002. Since 1997, Dr. Homcy has been Clinical Professor of Medicine at the University of
California, San Francisco Medical School and Attending Physician at the San Francisco VA Hospital. From 1994 until March 1995, Dr. Homcy was President of the Medical Research Division of
American Cyanamid Company-Lederle Laboratories, a pharmaceutical company (now a division of Wyeth-Ayerst Laboratories). From 1990 until 1994, Dr. Homcy was Executive Director of the
Cardiovascular and Central Nervous System Research Section at Lederle Laboratories, a pharmaceutical company. From 1991 to 1995, Dr. Homcy also served as an attending physician at The
Presbyterian Hospital, College of Physicians and Surgeons, at Columbia University in New York. From 1979 to 1990, he was an attending physician at Massachusetts General Hospital and an Associate
Professor of Medicine at Harvard Medical School.

Dr. Maraganorewas appointed our Senior Vice President, Strategic Product Development in December 2000 after serving as Vice
President, Strategic Product Development from June 2000 to December 2000. He served as our Vice President, Strategic Planning and Mergers and Acquisitions from December 1999 to
June 2000. From July 1997 to December 1999, he served as a director and from May 1997 to December 1999, he served as Vice President and General Manager, of
Millennium BioTherapeutics Inc., a majority-owned subsidiary of ours which merged into us in December 1999. Dr. Maraganore served from 1987 to 1997 at Biogen, Inc., a
biopharmaceutical company, serving from 1995 to 1997 as Director of Marketing and Business Development and from 1992 to 1995 as Director of Biological Research. Dr. Maraganore received his
Ph.D. from the University of Chicago.

Ms. Pinehas served as our Senior Vice President, Human Resources since October 1994. From 1990 to 1994, Ms. Pine
served as Vice President of Consulting Services for The Survey Group, a regional human resources survey and consulting firm. From 1982 to 1990, she was Vice President of Human Resources and Corporate
Relations with Collaborative Research, Inc. (now Genome Therapeutics Corporation). She earned her B.A. from Brandeis University and her M.P.A. from Northeastern University.

Dr. Tepperhas served as our Executive Vice President, Discovery since June 2001 and our Chief Scientific Officer since
March 1999. From June 2000 to June 2001 he served as a Senior Vice President of our company. He joined us in August 1994 as Director, Biology, served as Vice President,
Biology from January 1996 to November 1997 and served as Chief Scientific Officer, Pharmaceuticals from November 1997 to March 1999. From 1990 to 1994, Dr. Tepper
served as Director of the Laboratory of Tumor Biology at Massachusetts General Hospital Cancer Center where he was the recipient of a Lucille P. Markey Biomedical Scholar award. Dr. Tepper was
also a founder and member of the

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Scientific Advisory Board of Cell Genesys Inc. Dr. Tepper received his M.D. from Harvard Medical School and completed his residency in medicine at Massachusetts General Hospital where
he was Chief Resident.

Dr. Cordeshas been a Professor of Pharmacy and Adjunct Professor of Chemistry, University of Michigan in Ann Arbor since
September 1995. From 1988 to October 1994, Dr. Cordes served as a Vice President of Sterling Winthrop, Inc., a pharmaceutical company, and as President of that company's
Pharmaceuticals Research Division.

Dr. Coughlinhas been Professor of Medicine since 1996 and Professor of Molecular and Cellular Pharmacology since 1997 at the
University of California, San Francisco and Director of the Cardiovascular Research Institute at UCSF since 1997. Dr. Coughlin is also a member of the editorial boards of Trends in
Cardiovascular Medicine, Molecular Medicine and Journal of Clinical Investigation. Dr. Coughlin joined the our Board of Directors after the COR merger after serving on the COR Board of
Directors since 1994.

Ms. Grahamhas been Group Chairman, Office of the President, for Guidant Corporation, a medical device company, since 2000. She
served as President of the Vascular Intervention Group of Guidant Corporation from 1995 to 2000 and as President and Chief Executive Officer of Advanced Cardiovascular Systems at Guidant from 1993 to
1995. Ms. Graham joined our Board of Directors after the COR merger after serving on the COR Board of Directors since February 2001. Ms. Graham is also a director of Amylin
Pharmaceuticals, Inc., a biotechnology company.

Mr. Heidrichhas served as a general partner of Mayfield, a venture capital firm, since 1983. Mr. Heidrich received his
M.B.A. from Columbia University Graduate School of Business. Mr. Heidrich also serves on the Board of Directors of Tularik, Inc. (as Chairman of the Board), a biotechnology company.

Dr. Kucherlapatiis a founder of our company. Since September 2001, Dr. Kucherlapati has served as the Paul C. Cabot
Professor of Genetics, Harvard Medical School and as the first Scientific Director, Harvard-Partners Center for Genetics and Genomics. From 1989 to September 2001, Dr. Kucherlapati
served as the Lola and Saul Kramer Professor and Chairman of the Department of Molecular Genetics at the Albert Einstein College of Medicine. He received his M.S. in Biology from Andhra University
(India) and his Ph.D. in Genetics from the University of Illinois, Urbana. Dr. Kucherlapati also serves on the Board of Directors of Abgenix, Inc. and Valentis, Inc., both of
which are biotechnology companies.

Dr. Landeris a founder of our company. From 1993 to the present, Dr. Lander has served as Director of the Whitehead/MIT
Center for Genome Research and has been a member of the Whitehead Institute for Biomedical Research since 1989. From 1989 to the present, Dr. Lander has also held the positions of Associate
Professor and Professor in the Department of Biology at the Massachusetts Institute of Technology. Dr. Lander received his Ph.D. in Mathematics from Oxford University, which he attended as a
Rhodes Scholar. Dr. Lander also serves on the board of directors of Aclara Biosciences Inc., a biotechnology company.

Dr. Mariois Chairman and Chief Executive Officer of Apothogen, Inc., a pharmaceutical development company he founded in
2002. He served as Chairman and Chief Executive Officer of ALZA Corporation, a pharmaceutical company, from December 1997 through December 2001 and as Co-Chairman and Chief
Executive Officer of ALZA from July 1993 to November 1997. From 1989 to 1993, he was Deputy Chairman and Chief Executive Officer of Glaxo Holdings plc, a pharmaceutical company, in
London. Prior to 1989, Dr. Mario served as Chief Executive Officer of Glaxo, Inc., a pharmaceutical company, in the United States. Dr. Mario joined our Board of Directors after
the merger of COR after serving on the COR Board of Directors since 1995. Dr. Mario is also a director

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of Catalytica Energy Systems, Inc., a biotechnology company, Orchid Biosciences, Inc., a biotechnology company, Pharmaceutical Product Development, Inc., a pharmaceutical
development company, Boston Scientific Corp., a medical devices company, Maxygen, Inc., a biotechnology company, and SonoSite, Inc., an ultrasound products and services company.

Dr. Millerhas served as Chief Executive Officer of Johns Hopkins Medicine, Dean of The Johns Hopkins University School of Medicine
and Vice President for Medicine of The Johns Hopkins University since 1997. He was Professor and Chairman of the Department of Anesthesiology and Critical Care at The Johns Hopkins University from
1994 to 1999.

Mr. Selbyhas served as President and Chief Executive Officer of TransForm Pharmaceuticals, Inc., a drug development
company, since June 2001. He served as head of Consumer Internet Business at Citigroup, a financial services company, from June 1999 to July 2000. He also served as Executive Vice
President at Citicorp from September 1997 to July 2000. Prior to joining Citicorp, he was a director and senior partner at McKinsey & Company, an international management
consulting firm, and head of the firm's global pharmaceutical practice.

Mr. Weghas served as founder and Chairman of Clearview Projects Inc., a company engaged in partnering and deal transaction
services to biopharmaceutical companies and academic institutions, since February 2001. Prior to his retirement in February 2001 from Bristol-Myers Squibb Company, a pharmaceutical
company, he served as Vice Chairman since 1999 and a member of the Office of Chairman since 1998, having been elected to the Board in 1995. Mr. Weg was elected Executive Vice President of
Bristol-Myers in 1995 and was President of the Worldwide Medicines Group from 1997 to 1998, President of the Pharmaceutical Group from 1993 to 1996 and President of Pharmaceutical Operations from 1991
to 1993.

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PART II

Item 5.    MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

Our Common Stock is traded on the NASDAQ National Market under the symbol "MLNM". The following table reflects the range of the reported high and low last sale
prices on the NASDAQ National Market for the periods indicated.

2001

2000High

Low

High

LowFirst quarter

$
63.50

$
21.06

$
78.64

$
29.12Second quarter


45.00


23.60


72.09


26.19Third quarter


35.23


15.63


78.49


48.13Fourth quarter


36.25


17.52


86.50


41.44


On
March 1, 2002, the closing price per share of our Common Stock was $19.06, as reported on the NASDAQ National Market and we had approximately 1,150 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 continue to retain any earnings for use in the operation of
our business and will not pay any cash dividends.

On
February 28, 2000 and September 7, 2000, the Board of Directors of the Company declared two-for-one stock splits of our Common Stock. These stock
splits were effected in the form of 100%
stock dividends paid on April 18, 2000 and October 4, 2000, respectively, to stockholders of record as of March 28, 2000 and September 27, 2000, respectively. All
references to per share amounts have been restated to reflect these stock splits.

(b)    Changes in Securities and Use of Proceeds

On December 7, 2001, we issued and sold to Abbott Laboratories 1,046,957 shares of our common stock for aggregate proceeds of approximately $28.6 million.
These shares were issued in connection with a collaboration agreement between the parties and no person served as an underwriter with respect to this transaction. We relied on Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act") for exemption from the registration requirements of the Securities Act.

From
October 31, 2001 through December 10, 2001, we issued 1,071,705 shares of our common stock in exchange for extinguishing certain contingent payments obligations that arose
out of the acquisition by merger of ProScript, Inc. by LeukoSite in August 1999. We assumed these obligations when we acquired by merger LeukoSite. We relied on Section 4(2) of the
Securities Act for exemption from the registration requirements of the Securities Act.

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Item 6.    SELECTED FINANCIAL DATA

Millennium Pharmaceuticals, Inc.    Selected Financial Data

|                                                                                   |                             | Year Ended December 31, |         
|---------------------------------------------------------------------------------- | --------------------------- | ----------------------- | --------
|
|
|Statement of Operations Data:                                                      |                             |                         |         
|Revenue under strategic alliances                                                  |                             | $                       | 89,933  
|Costs and expenses:                                                                |                             |                         |         
|                                                                                   | Research and development    |                         |         
|                                                                                   | General and administrative  |                         |         
|                                                                                   | Amortization of intangibles |                         |         
|                                                                                   | Acquired in-process R&D     |                         |         
|                                                                                   |                             |                         |         
|                                                                                   |                             |                         | 177,542 
|                                                                                   |                             |                         |         
|Loss from operations                                                               |                             |                         | (87,609 
|Other income, net                                                                  |                             |                         | 6,387   
|Gain on sale of equity interest                                                    |                             |                         |        
|Debt conversion expense                                                            |                             |                         |        
|                                                                                   |                             |                         |         
|Income (loss) before cumulative effect of change in accounting principle(1)        |                             |                         | (81,222 
|Cumulative effect of change in accounting principle(1)                             |                             |                         |        
|                                                                                   |                             |                         |         
|Net income (loss)                                                                  |                             |                         | (81,222 
|Deemed preferred stock dividend                                                    |                             |                         |        
|                                                                                   |                             |                         |         
|Net income (loss) attributable to common stockholders                              |                             | $                       | (81,222 
|                                                                                   |                             |                         |         
|Amounts per common share:                                                          |                             |                         |         
|Income (loss) before cumulative effect of change in accounting principle, basic(2) |                             | $                       | (0.72   
|Cumulative effect of change in accounting principle                                |                             |                         |        
|Deemed preferred stock dividend                                                    |                             |                         |        
|                                                                                   |                             |                         |         
|Net income (loss) attributable to common stockholders, basic(2)                    |                             | $                       | (0.72   
|                                                                                   |                             |                         |         
|Weighted average shares, basic(2)                                                  |                             |                         | 113,292 
|                                                                                   |                             |                         |         
|Net income (loss) attributable to common stockholders, diluted(2)                  |                             | $                       | (0.72   
|                                                                                   |                             |                         |         
|Weighted average shares, diluted(2)                                                |                             |                         | 113,292 
|                                                                                   |                             |                         |         
|Pro forma amounts assuming the accounting change is applied retroactively:         |                             |                         |         
|Net loss attributable to common stockholders                                       |                             | $                       | (117,415
|Net loss per weighted share attributable to common stockholders, basic and diluted |                             | $                       | (1.04   
|Consolidated Balance Sheet Data:                                                   |                             |                         |         
|Cash, cash equivalents and marketable securities                                   |                             | $                       | 96,557  
|Total assets                                                                       |                             |                         | 144,513 
|Capital lease obligations, net of current portion                                  |                             |                         | 19,809  
|Long-term debt, net of current portion                                             |                             |                         |        
|Stockholders' equity                                                               |                             |                         | 91,755  

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Note 1: The cumulative effect of change in accounting principle is a one-time, noncash charge relating to
Millennium's adoption of Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 was issued by the Securities and Exchange Commission ("SEC") in December 1999. SAB 101 provides
guidance related to revenue recognition policies based on interpretations and practices followed by the SEC. The impact of Millennium's adoption of SAB 101 was to defer revenue recognition for
certain portions of the revenue previously recognized by Millennium under its strategic alliances into future accounting periods. Refer to Note 6 of the 2001 audited financial statements.

Note 2: All per share data have been restated to reflect the two-for-one stock splits of Millennium's Common Stock
that became effective on April 18, 2000 and October 4, 2000.

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

Overview

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

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

Alliances

We have entered into research, development, technology transfer and commercialization arrangements with major pharmaceutical and biotechnology companies relating
to a broad range of therapeutic and predictive medicine products and services. These alliances provide us with the opportunity to receive various combinations of equity investments, license fees and
research funding, and may provide certain additional payments contingent upon our achievement of research and regulatory milestones and royalties and/or share profits if our collaborations are
successful in developing and commercializing products. The alliances which we consider material to our business are:



Historically,
we have primarily derived our revenue from payments from our strategic alliances with major pharmaceutical companies. We have not received any revenue from the sale of
products.

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Beginning in the first quarter of 2002, we will recognize co-promotion revenue which will include our share of the profits from the sale of INTEGRILIN® (eptifibatide)
Injection, in co-promotion territories by Schering-Plough Ltd. and Schering Corporation, as well as the reimbursement from Schering of a portion of our costs of
co-promotion revenue. Additionally, revenues will include recognition of reimbursement to us by Schering of certain manufacturing-related expenses for materials outside the
co-promotion territory and royalties from Schering on sales of INTEGRILIN® outside the co-promotion territory.

Acquisitions

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

COROn February 12, 2002, we acquired COR through the issuance of approximately 55.0 million shares of our
common stock. This calculation is based on COR's outstanding common stock at the time of the merger using the conversion ratio of .9873 of a share of our common stock for each share of outstanding COR
common stock. In addition, options to purchase approximately 6.2 million shares of COR common stock were assumed by us and converted into options to purchase approximately 6.1 million
shares of our common stock. In the first quarter of 2002, we will record the transaction as a purchase for accounting purposes and allocate the purchase price, based upon an independent valuation, to
the assets purchased and liabilities assumed based upon their respective fair values. We will allocate the excess of the purchase price over the estimated fair market value of net tangible assets
acquired to in-process research and development, developed technology and trademark and goodwill. Based upon a preliminary review, we estimate the charge to earnings for acquired
in-process research and development to be approximately $239.0 million. The amount of acquired in-process research and development will be determined upon completion of
an independent appraisal and, therefore, may differ from our current estimate. COR's results of operations will be included in our results beginning on the date of the acquisition. Through the merger,
we added approximately 300 new employees, a facility in South San Francisco, California, acquired INTEGRILIN® for the treatment of acute coronary syndromes and substantial research
capabilities in the areas of cardiovascular disease and oncology.

In
connection with the COR acquisition, we assumed COR's $600.0 million in convertible debt resulting from two offerings: the 5.0% convertible subordinated notes due
March 1, 2007 and the 4.5% convertible senior notes due June 15, 2006. As a result, the noteholders have an option to convert to our common stock. Within thirty days following the
closing of the merger, we are obligated to offer cash for the notes at face value through a tender offer. In the event that the holders of large numbers of these notes accept the offer, the amount of
our cash and cash equivalents would be substantially diminished.

CDCOn July 27, 2000, we acquired Cambridge Discovery Chemistry Ltd., a subsidiary of Oxford Molecular Group,
plc, for an aggregate purchase price of $51.8 million in cash. We recorded the transaction as a purchase for accounting purposes and accordingly, we allocated the purchase price to the assets
purchased and liabilities assumed based upon their respective fair values. We allocated the excess of the purchase price over the estimated fair market value of tangible assets acquired and
liabilities assumed to intangible assets, resulting in $5.5 million of specifically identified intangible assets and $48.9 million of goodwill. The acquisition did not result in an
in-process research and development charge.

LeukoSiteOn December 22, 1999, we acquired LeukoSite for an aggregate purchase price of $550.4 million,
effected through the issuance of 26.7 million shares of our common stock and 3.5 million shares of our common stock issuable upon the exercise of assumed LeukoSite options and

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warrants. We recorded the transaction as a purchase for accounting purposes. We allocated the purchase price, based upon an independent valuation, to the assets purchased and liabilities assumed
based upon their respective fair values, with the excess of the purchase price over the estimated fair market value of net tangible assets allocated to in-process research and development,
assembled workforce, core technology and goodwill. The acquired in-process research and development of $350.5 million was immediately charged to earnings.

Through
our 1999 acquisition of LeukoSite, we became a party to a joint venture partnership, Millennium and ILEX Partners, L.P. ("M&I"), for development of CAMPATH®. Under
the terms of the partnership, we were required to fund fifty percent of M&I's working capital requirements. We accounted for our investment in the joint venture under the equity method of accounting.
On December 31, 2001, ILEX Oncology, Inc. ("ILEX") acquired our equity interest in M&I, which owns the CAMPATH® product. In exchange for our equity interest in M&I, ILEX paid
us $20 million on December 31, 2001 and is obligated to pay us up to an additional $120 million over the next three years if sales of CAMPATH® in the U.S. meet
specified sales thresholds. In addition, we will be entitled to additional payments from ILEX based on U.S. sales of CAMPATH® after 2004.

Financings

In order to fund our working capital and other corporate purposes, we have completed several financings in the past three years. The actual and planned uses of
proceeds include:



In
October 2000, we completed a public offering of 12.5 million shares of our common stock resulting in net proceeds to us of $767.4 million.

In
January 2000, we completed a sale, pursuant to Rule 144A of the Securities Act of 1933, of $400.0 million of 5.5% convertible subordinated notes due
January 15, 2007, which resulted in net proceeds to us of $388.7 million. The notes are convertible into shares of our common stock at any time prior to maturity at a price equal to
$42.07 per share, subject to adjustment, unless previously repurchased or redeemed by us. Under the terms of the notes, we are required to make semi-annual interest payments on the
outstanding principal balance of the notes on January 15 and July 15 of each year. To date, all required interest payments have been made.

During
2001 and 2000, we paid an aggregate of $2.6 million and $54.9 million in cash, respectively, to certain holders of our 5.5% convertible subordinated notes due
January 15, 2007 in order to induce the conversion of their notes into our common stock. These cash payments were expensed during 2001 and 2000. Interest accrued through the date of conversion
was charged to interest expense and was paid upon conversion. These conversions resulted in the retirement of $12.6 million and $304.1 million in 2001 and 2000, respectively, of
outstanding principal of these notes, the issuance of approximately 0.3 million and 7.2 million shares in 2001 and 2000, respectively, of our common stock, and the reclassification of
deferred debt issuance costs of $0.1 million and $7.0 million in 2001 and 2000, respectively, to additional paid-in capital. At December 31, 2001, we had
$83.3 million of these notes outstanding.

During
2001, we received $107.2 million from Abbott and $100.0 million from Aventis for purchases of approximately 3.5 million shares and approximately
2.0 million shares, respectively, of our common stock under equity investment agreements.

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Expansion of Operations

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

As
a result of the COR acquisition, we will incur additional significant expenses for research and development and to develop, train, maintain and manage our sales force for
INTEGRILIN® (eptifibatide) Injection. For the COR notes that remain outstanding after the tender offer, we will be required to make semi-annual interest payments each year on
the outstanding principal balance.

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

Critical Accounting Policies

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

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

Effective
October 1, 2000, we changed our method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101 ("SAB 101"), Revenue Recognition in Financial Statements.Previously, we had recognized revenue relating to non-refundable, up-front, license
and milestone payments and certain research funding payments from our strategic partners in accordance with the contract. Under the new accounting method adopted retroactively to January 1,
2000, we recognize revenue from non-refundable, up-front, license and milestone payments, not specifically tied to a separate earnings process, ratably over the term of the
research contract. When

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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. When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance
obligation associated with the payment is completed. Performance obligations typically consist of significant milestones in the
development life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory agencies. In addition, when
appropriate, we recognize revenue from certain research payments based upon the level of research services performed during the period of the research contract. The cumulative effect of the change on
prior years resulted in a charge to income of $107.7 million, which is included in the loss for the year ended December 31, 2000.

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

Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was deferred to fiscal years beginning after June 15, 2000 by SFAS No. 137
"Accounting for Derivative Instruments and Hedging ActivitiesDeferral of Effective Date of SFAS No. 133." SFAS No. 133 was amended by SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." We adopted this new accounting standard effective January 1, 2001 and it did not have a significant effect on the financial
statements.

In
July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Under SFAS
No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable
intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. With respect to goodwill and intangible assets acquired prior to July 1,
2001, we are required to adopt SFAS No. 142 for the fiscal year beginning after December 15, 2001. We adopted SFAS No. 142 effective January 1, 2002 and reclassified
amounts to goodwill which were previously allocated to assembled workforce. Upon adoption, we ceased the amortization of goodwill currently representing expense of $58.9 million per year.
Although we have not completed the transitional impairment test, we do not currently expect a material impairment charge upon adoption.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and provides a single accounting model for
long-lived assets to be disposed of. We are required to adopt SFAS No. 144 for the fiscal year beginning after December 15, 2001. We adopted SFAS No. 144 effective
January 1, 2002 and it did not have a significant effect on the financial statements.

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Results of Operations

Years Ended December 31, 2001 and December 31, 2000

The discussion below relating to the net loss attributable to common stockholders and revenue for the year ended December 31, 2000 (the "2000 Period")
reflect pro forma results as if we had followed SAB 101 from our inception.

For
the year ended December 31, 2001 (the "2001 Period"), we had a net loss of $192.0 million or $0.88 per basic and diluted share compared to a net loss attributable to
common stockholders of $247.6 million or $1.28 per basic and diluted share for the 2000 Period.

Revenue
under strategic alliances increased to $246.2 million for the 2001 Period from $196.3 million for the 2000 Period. The increase is primarily attributable to
increased revenue from Bayer, Aventis and Taisho. The increase in Bayer revenue relates primarily to increased milestone and research revenue during the 2001 Period. The increase in Aventis revenue is
due to the fact that the alliance was in place for a full year during the 2001 Period versus a partial year in the 2000 Period. Taisho revenue increased as the research program expanded.

Included
in 2001 and 2000 revenue is $43.9 million and $20.0 million, respectively, of revenue that was recognized in prior years relating to the adoption of SAB 101. The
amount of revenue to be recognized in future years that was included in the cumulative effect of change in accounting principle is $35.9 million, $8.3 million and $.5 million for
2002, 2003 and 2004, respectively.

Under
the percentage-of-completion method of revenue recognition, we are required to periodically review and update our estimates as experience develops and as
new information becomes known. To reflect research productivity improvements, management revised its estimate of the remaining work to be performed under the Bayer alliance, which resulted in a
cumulative catch up adjustment of $18.4 million of additional revenue in September 2001. Excluding the impact of this change in estimate, net loss attributable to common stockholders and
the related earnings per share amounts for the year ended December 31, 2001 would have been $210.4 million and $0.96 per share.

Research
and development expenses increased to $400.6 million for the 2001 Period from $268.7 million for the 2000 Period. The increase was primarily attributable to our
continued investment in building a sustainable product pipeline, with increases in personnel and facilities, expenses relating to clinical trials and preclinical product candidates, technology license
payments and purchases of laboratory supplies.

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

Clinical Phase

Estimated Completion PeriodPhase I

12 yearsPhase II

23 yearsPhase III

23 years


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Upon
successful completion of Phase III trials, we intend to submit the results to the FDA to support regulatory approval of the product. However, we cannot be certain that any of
our products will prove to be safe or effective, will receive regulatory approvals, or will be successfully commercialized.

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

General
and administrative expenses increased to $82.7 million for the 2001 Period from $49.3 million for the 2000 Period. The increase was largely due to the expansion of
our commercial organization, other business groups, facilities and infrastructure necessary to support the development of our pipeline and growth in all areas of our business. Significant increases
were primarily in consulting, personnel expenses, and facility expenses.

Amortization
of intangible assets relates to existing technology, assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense increased
to $64.6 million in the 2001 Period from $55.1 million in the 2000 Period due to a full year of amortization of the CDC goodwill and other intangible assets during 2001 versus a partial
year in 2000. Upon our adoption of FAS 142 effective as of January 1, 2002, we will continue to amortize specifically identifiable intangible assets and will cease amortizing goodwill
and assembled workforce which will be reclassified to goodwill.

Equity
in operations of the M&I joint venture was income of $3.3 million for the 2001 Period and a loss of $5.4 million for the 2000 Period. The income in the 2001 Period
was primarily due to profits from the launch of CAMPATH® in the U.S. and Europe and product sales by M&I during 2001. The loss in the 2000 Period was primarily attributable to
pre-product launch marketing and sales activities of the joint venture. We sold our interest in the partnership to ILEX on December 31, 2001. In consideration for the sale of our
interest to ILEX, we received $20.0 million in 2001.

Investment
income increased to $98.3 million for the 2001 Period from $55.0 million for the 2000 Period. The increase resulted primarily from a higher average level of
invested funds due to net proceeds from our public stock offering in October 2000 of $767.4 million and $388.7 million in net proceeds from our convertible debt offering which
closed in January 2000. Interest expense decreased to $9.4 million for the 2001 Period from $19.7 million for the 2000 Period due to a decrease in the average outstanding debt.

During
the 2001 Period and the 2000 Period, we paid an aggregate of $2.6 million and $54.9 million in cash, respectively to certain holders of our convertible notes in
order to induce the conversion of their notes into our common stock. These cash payments were expensed during the respective periods.

The
minority interest in the 2000 period consisted of the minority shareholder interest of Becton, Dickinson and Company in the net income for the 2000 Period of our then majority-owned
subsidiary, Millennium Predictive Medicine, Inc. ("MPMx"). On June 2, 2000, we acquired the outstanding preferred stock of our MPMx subsidiary that we did not already own, making MPMx a
wholly-owned subsidiary of the Company. We recorded a deemed preferred stock dividend of $45.7 million in 2000 relating to the excess of the fair value of our common stock over the carrying
value of the MPMx minority interest acquired from Becton Dickinson.

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Years Ended December 31, 2000 and December 31, 1999

The following discussions relating to the net loss attributable to common stockholders and revenue for the 2000 Period and for the year ended December 31,
1999 (the "1999 Period") reflect pro forma results as if we had followed SAB 101 from our inception.

For
the 2000 Period, we had a net loss attributable to common stockholders of $247.6 million or $1.28 per basic and diluted share compared to a net loss attributable to common
stockholders of $417.1 million or $2.87 per basic and diluted share for the 1999 Period. Operating results for the 2000 Period represent the first reported year of fully combined revenues and
expenses related to our acquisition of LeukoSite and five months of combined revenues and expenses related to our acquisition of CDC.

Revenue
under strategic alliances increased to $196.3 million for the 2000 Period from $146.4 million for the 1999 Period. The increase is primarily attributable to revenue
from a new alliance with Aventis, other new alliance revenue and an increase in the revenue recognized under the Bayer alliance during the 2000 Period.

Research
and development expenses increased to $268.7 million for the 2000 Period from $159.9 million for the 1999 Period. The increase was primarily attributable to our
continued investment in clinical trials and preclinical product candidates, increased personnel and facilities expenses, increased purchases of laboratory supplies, increased technology license
payments and increased professional fees.

General
and administrative expenses increased to $49.3 million for the 2000 Period from $32.9 million for the 1999 Period. The increase was primarily attributable to
increased expenses for additional management and administrative personnel associated with the expansion and increased complexity of our operations and business development efforts.

As
part of the LeukoSite acquisition, we also recorded a one-time, noncash charge to operations in 1999 of $350.5 million for acquired in-process research
and development. With respect to the value of purchased research and development, we considered, among other factors, each research and development project's stage of completion, the complexity of the
work completed to date, the costs already incurred, the projected costs to complete, the contribution of core technologies and other acquired assets, the projected date to market and the estimated
useful life. The respective after-tax cash flows were then discounted back to present value using a risk-adjusted discount rate. The discount rates used in the LeukoSite
analysis ranged from 19% to 23.25%, depending upon the risk profile of the asset.

We
believed and continue to believe that the assumptions used to value the acquired intangibles were reasonable at the time of the acquisition. We cannot assure you, however, that the
underlying assumptions we used to estimate projected revenues, development costs or profitability, or other events associated with such projects, will transpire as estimated. For these reasons, among
others, actual results may vary from the projected results.

The
in-process technology we acquired from LeukoSite consisted of five significant research and development projects with values assigned of $14.8 million to
$136.3 million for each project. These include humanized monoclonal antibodies for the treatment of refractory chronic lymphocytic leukemia, inflammatory bowel disease and the prevention of
post-ischemic reperfusion, small molecule chemotherapeutic agents, and a small molecule compound for treatment of bronchial asthma. Acquired in-process technologies related to
preclinical projects consisted of treatments primarily for inflammatory and autoimmune conditions and diseases, as well as treatments for asthma and allergies and were assigned a value of
$85.8 million. Through the acquisition date, LeukoSite had spent approximately $150 million on all of the in-process research and development projects. We expect to incur
approximately $10 million to $60 million for each of the four remaining significant clinical projects and

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approximately $97 million for all of the projects in preclinical development to develop the in-process technology into commercially viable projects.

The
estimated stage of completion for acquired research and development projects ranged from 45% to 95%. Of the five clinical projects acquired, one project reached completion in late
1999 with the filing of a BLA, while the others, which are in various stages of Phase I and Phase II clinical trials, are projected to reach completion in 2003 through 2006. The first of
the molecules comprising the preclinical development portfolio is projected to reach completion in 2006. To successfully complete the projects we will be required to undertake and complete a number of
significant activities, including product validation, the successful completion of clinical trials and governmental regulatory approvals.

Our
ability to successfully complete the research and development projects will be dependent upon numerous factors over which we may have limited or no control. If these projects are not
successfully developed, we may not realize the value assigned to the in-process technology. Additionally, the value of the other intangible assets acquired may also become impaired.

We
are amortizing specifically identified intangible assets over four years on a straight-line basis and goodwill through December 31, 2001, after adopting
FAS 142. Amortization expense for the 2000 Period of $55.1 million was primarily related to the LeukoSite acquisition.

Equity
in operations of the M&I joint venture was a loss of $5.4 million for the 2000 Period. The loss was primarily attributable to pre-product launch marketing and
sales activities.

Investment
income increased to $55.0 million for the 2000 Period from $12.5 million for the 1999 Period. The increase resulted from an increase in our average balance of
cash, cash equivalents and marketable securities. Interest expense increased to $19.7 million for the 2000 Period from $3.0 million for the 1999 Period due to the issuance of our 5.5%
convertible subordinated notes due January 15, 2007 and increased capital lease obligations.

The
minority interest of $2.0 million in 1999 consisted of the minority shareholder interest of Lilly in the net loss for the 1999 Period of our then majority-owned subsidiary,
MBio, as well as the minority shareholder interest of Becton Dickinson in the net income for the 1999 Period of our then majority-owned subsidiary, MPMx. In October 1999, we issued Lilly
approximately 1,500,000 shares of Millennium common stock in exchange for all MBio shares owned by it. In December 1999, we merged MBio with and into Millennium. We recorded a deemed preferred
stock dividend of $27.9 million in 1999 relating to the excess of the fair value of our common stock over the carrying value of the MBio minority interest acquired from Lilly.

Liquidity and Capital Resources

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

Historically,
we have funded our cash requirements primarily through the following:



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We
expect to continue to fund our cash requirements from these external sources in the future. In particular, we are entitled to additional committed research and development funding
under a number of our strategic alliances, Abbott has agreed to purchase an additional $142.8 million of our common stock in five quarterly installments through 2003 and we may receive
additional substantial payments from ILEX as a result of our sale of our joint venture interest in M&I. In addition, commencing with the first quarter of 2002, we anticipate that the co-promotion
revenue relating to sales of INTEGRILIN® (eptifibatide) Injection in the U.S. will result in significant internally generated funds.

We
believe that the key factors that could affect our internal and external sources of cash are:



As
of both December 31, 2001 and December 31, 2000, we had approximately $1.5 billion in cash, cash equivalents and marketable securities. This excludes
$47.3 million of interest-bearing marketable securities classified as restricted cash on our balance sheet, which serve as collateral for letters of credit securing leased facilities.

Cash Flows

We used $156.9 million of cash in operating activities in 2001 and $108.7 million in 2000. Operating activities provided cash of
$21.2 million in 1999. The principal use of cash in both 2000 and 2001 was to fund our net loss, which includes cash payments of $2.6 million and $54.9 million in 2001 and 2000,
respectively to certain holders of our convertible notes in order to induce the conversion of their notes. The cash provided in 1999 primarily reflected the lower net loss before the in-process
research and development charge in connection with the LeukoSite acquisition.

We
used cash of $186.6 million in investing activities in 2001, $1.2 billion in 2000 and $143.0 million in 1999. The principal uses for this purpose in all three
years were net investments in marketable securities, purchases of property and equipment and other long term assets and, in 2000, the acquisition of CDC.

Financing
activities provided net cash of $213.6 million in 2001, $1.4 billion in 2000 and $39.5 million in 1999. Principal sources of net cash from financing
activities in 2001 were the sale of common stock to Abbott and Aventis and the exercise of stock options by employees. Principal sources in 2000 were from our secondary public stock offering, our
Rule 144A sale of 5.5% convertible notes and the exercise of stock options by employees. Principal sources in 1999 were the sale of a minority interest in our MPMx subsidiary to
Becton-Dickinson and the exercise of stock options by employees. We also made payments on our capital leases aggregating $37.1 million over these three years.

57

---

Contractual obligations

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

Our
convertible notes aggregate $683.3 million in principal amount outstanding. These notes consist of $83.3 million of our 5.5% convertible subordinated notes due 2007,
$300.0 million of 4.5% convertible senior notes due June 15, 2006 assumed by us in the COR acquisition and $300.0 million of 5.0% convertible subordinated notes due
March 1, 2007 assumed by us in the COR acquisition. All three issues of notes require semi-annual interest payments through maturity. We are required to commence an offer to
repurchase the $600.0 million notes assumed by us in the COR acquisition for cash at face value no later than March 14, 2002 and to repurchase tendered notes on April 29, 2002. We
plan to use our existing cash and marketable securities to fund the purchase of any tendered notes.

In
February 2001, we entered into a lease agreement relating to a building to be constructed for laboratory and office space in Cambridge, England. The lease has a term of
20 years and is expected to commence in 2003. We are responsible for a portion of the construction costs, which we estimate to be approximately $21.0 million. Rent is expected to be
approximately $2.4 million per year and is subject to market adjustments at the end of the 5th, 10th and 15th years.

On
August 4, 2000, we entered into lease agreements, relating to two buildings to be constructed for laboratory and office space in Cambridge, Massachusetts. The rent obligation
for each building is expected to commence on the earlier of (a) September 1, 2002 or October 1, 2003, respectively or (b) the date on which we commence occupancy of the
respective building. Both leases are for a term of seventeen years. We are responsible for a portion of the construction costs for both buildings. Our cost to complete each of the buildings is
expected to be approximately $37.9 and $42.0 million, respectively. Rent is calculated on an escalating scale ranging from approximately $7.6 million, per building per year, to
approximately $9.7 million, per building per year.

At
December 31, 2001, we had pledged $47.3 million of marketable securities, included in restricted cash, as collateral for letters of credit for certain leased facilities.

Below
is a table which presents our contractual obligations and commercial commitments as of December 31, 2001:

|                                             |  | Payments Due by Period
|-------------------------------------------- |  | ----------------------
|
|Long-term debt                               |  | $                     
|Capital lease obligations including interest |  |                       
|Operating leases                             |  |                       
|External collaborations                      |  |                       
|                                             |  |                       
|Total contractual cash obligations           |  | $                     
|                                             |  |                       

As
of December 31, 2001, we had net operating loss carryforwards of approximately $845.3 million to offset future federal taxable income expiring in 2004 through 2021 and
$780.4 million to offset future state taxable income expiring in 2002 through 2006. Due to the degree of uncertainty related to the ultimate realization of such prior losses, no benefit has
been recognized in the financial statements as of December 31, 2001. We would allocate any subsequently recognized tax benefits to operations, goodwill and additional paid-in
capital. Moreover, our ability to utilize these losses in future years may be limited under the change of stock ownership rules of the Internal Revenue Service.

58

---

We
believe that existing cash and cash equivalents, internally generated funds and the anticipated cash payments from our current strategic alliances will be sufficient to support our
operations and fund our capital commitments for the near term. Our actual future cash requirements, however, will depend on many factors, including:



59

---



Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain an investment portfolio in accordance with our Investment Policy. The primary objectives of our Investment Policy are to preserve principal, maintain
proper liquidity to meet operating needs and maximize yields. Although our investments are subject to credit risk, our Investment Policy specifies credit quality standards for our investments and
limits the amount of credit exposure from any single issue, issuer or type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates
increase. A hypothetical 100 basis point increase in interest rates would result in an approximate $19.6 million decrease in the fair value of our investments as of December 31, 2001.
However, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated. We do not own derivative financial instruments in our investment portfolio.

The
interest rates on our 5.5% convertible subordinated notes due January 15, 2007 and capital lease obligations are fixed and therefore not subject to interest rate risk.

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

As
of December 31, 2001, we did not have any off-balance sheet arrangements.

60

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Millennium Pharmaceuticals, Inc.    Report of Independent Auditors

Board
of Directors and Stockholders
Millennium Pharmaceuticals, Inc.

We
have audited the accompanying consolidated balance sheets of Millennium Pharmaceuticals, Inc. as of December 31, 2001 and 2000, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Millennium
Pharmaceuticals, Inc. at December 31, 2001 and 2000, and the consolidated results of its operations, stockholders' equity and cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted in the United States.

As
discussed in Note 2 to the consolidated financial statements, in 2000 the Company changed its method of accounting for revenue recognition.



January 15,
2002
Boston, Massachusetts

61

---



Millennium Pharmaceuticals, Inc.        Consolidated Balance Sheets

|                                                                                                                                    |  | December 31, |          
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------
|
|
|Assets                                                                                                                              |  |              |          
|Current assets:                                                                                                                     |  |              |          
|Cash and cash equivalents                                                                                                           |  | $            | 35,993   
|Marketable securities                                                                                                               |  |              | 1,438,875
|Due from strategic alliance partners                                                                                                |  |              | 18,360   
|Prepaid expenses and other current assets                                                                                           |  |              | 21,389   
|                                                                                                                                    |  |              |          
|Total current assets                                                                                                                |  |              | 1,514,617
|Property and equipment, net                                                                                                         |  |              | 168,600  
|Restricted cash                                                                                                                     |  |              | 47,308   
|Other assets                                                                                                                        |  |              | 13,362   
|Goodwill, net                                                                                                                       |  |              | 138,519  
|Intangible assets, net                                                                                                              |  |              | 25,328   
|                                                                                                                                    |  |              |          
|Total assets                                                                                                                        |  | $            | 1,907,734
|                                                                                                                                    |  |              |          
|Liabilities and Stockholders' Equity                                                                                                |  |              |          
|Current liabilities:                                                                                                                |  |              |          
|Accounts payable                                                                                                                    |  | $            | 25,237   
|Accrued expenses                                                                                                                    |  |              | 88,867   
|Acquisition related contingencies                                                                                                   |  |              |         
|Obligation to fund joint venture                                                                                                    |  |              | 505      
|Current portion of deferred revenue                                                                                                 |  |              | 71,018   
|Current portion of capital lease obligations                                                                                        |  |              | 17,536   
|                                                                                                                                    |  |              |          
|Total current liabilities                                                                                                           |  |              | 203,163  
|Deferred revenue, net of current portion                                                                                            |  |              | 17,902   
|Capital lease obligations, net of current portion                                                                                   |  |              | 35,107   
|Long term debt                                                                                                                      |  |              | 83,325   
|Commitments and contingencies                                                                                                       |  |              |          
|Stockholders' equity:                                                                                                               |  |              |          
|Preferred Stock, $0.001 par value;
5,000 shares authorized, none issued                                                             |  |              |         
|Common Stock, $0.001 par value;
500,000 shares authorized: 224,290 shares in 2001 and 213,979 shares in 2000 issued and outstanding |  |              | 224      
|Additional paid-in capital                                                                                                          |  |              | 2,477,334
|Deferred compensation                                                                                                               |  |              | (765     
|Notes receivable from officers                                                                                                      |  |              | (315     
|Accumulated other comprehensive income                                                                                              |  |              | 34,371   
|Accumulated deficit                                                                                                                 |  |              | (942,612 
|                                                                                                                                    |  |              |          
|Total stockholders' equity                                                                                                          |  |              | 1,568,237
|                                                                                                                                    |  |              |          
|Total liabilities and stockholders' equity                                                                                          |  | $            | 1,907,734
|                                                                                                                                    |  |              |          

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

62

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Millennium Pharmaceuticals, Inc.        Consolidated Statements of Operations

|                                                                                   |                                              | Year Ended December 31, |         
|---------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------- | --------
|
|
|Revenue under strategic alliances                                                  |                                              | $                       | 246,216 
|Costs and expenses:                                                                |                                              |                         |         
|                                                                                   | Research and development                     |                         |         
|                                                                                   | General and administrative                   |                         |         
|                                                                                   | Amortization of intangible assets            |                         |         
|                                                                                   | Acquired in-process research and development |                         |         
|                                                                                   |                                              |                         |         
|                                                                                   |                                              |                         | 547,792 
|                                                                                   |                                              |                         |         
|Loss from operations                                                               |                                              |                         | (301,576
|Equity in operations of joint venture                                              |                                              |                         | 3,303   
|Gain on sale of equity interest in joint venture                                   |                                              |                         | 20,000  
|Investment income                                                                  |                                              |                         | 98,206  
|Interest expense                                                                   |                                              |                         | (9,371  
|Debt conversion expense                                                            |                                              |                         | (2,567  
|Minority interest                                                                  |                                              |                         |        
|                                                                                   |                                              |                         |         
|Loss before cumulative effect of change in accounting principle                    |                                              |                         | (192,005
|Cumulative effect of change in accounting principle                                |                                              |                         |        
|                                                                                   |                                              |                         |         
|Net loss                                                                           |                                              |                         | (192,005
|Deemed preferred stock dividend                                                    |                                              |                         |        
|                                                                                   |                                              |                         |         
|Net loss attributable to common stockholders                                       |                                              | $                       | (192,005
|                                                                                   |                                              |                         |         
|Amounts per common share:                                                          |                                              |                         |         
|Loss before cumulative effect of change in accounting principle                    |                                              | $                       | (0.88   
|Cumulative effect of change in accounting principle                                |                                              |                         |        
|Deemed preferred stock dividend                                                    |                                              |                         |        
|                                                                                   |                                              |                         |         
|Net loss attributable to common stockholders, basic and diluted                    |                                              | $                       | (0.88   
|                                                                                   |                                              |                         |         
|Weighted average shares, basic and diluted                                         |                                              |                         | 218,937 
|                                                                                   |                                              |                         |         
|Pro forma amounts assuming the accounting change is applied retroactively:         |                                              |                         |         
|Net loss attributable to common stockholders                                       |                                              |                         |         
|Net loss per weighted share attributable to common stockholders, basic and diluted |                                              |                         |         

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 loss                                                                                                                                                                 |                                                    | $                                            | (192,005
|Adjustments to reconcile net loss to cash provided by (used in) operating activities:                                                                                    |                                                    |                                              |         
|                                                                                                                                                                         | Acquired in-process research and development       |                                              |         
|                                                                                                                                                                         | Depreciation and amortization                      |                                              |         
|                                                                                                                                                                         | Minority interest                                  |                                              |         
|                                                                                                                                                                         | Net realized gain on available-for-sale securities |                                              |         
|                                                                                                                                                                         | Stock compensation expense                         |                                              |         
|                                                                                                                                                                         | Equity in operations of joint venture              |                                              |         
|                                                                                                                                                                         | Changes in operating assets and liabilities:       |                                              |         
|                                                                                                                                                                         |                                                    | Prepaid expenses and other current assets    |         
|                                                                                                                                                                         |                                                    | Due from strategic partners                  |         
|                                                                                                                                                                         |                                                    | Restricted cash and other assets             |         
|                                                                                                                                                                         |                                                    | Accounts payable, accrued expenses and other |         
|                                                                                                                                                                         |                                                    | Deferred revenue                             |         
|                                                                                                                                                                         |                                                    |                                              |         
|Net cash provided by (used in) operating activities                                                                                                                      |                                                    |                                              | (156,879
|                                                                                                                                                                         |                                                    |                                              |         
|Cash Flows from Investing activities:                                                                                                                                    |                                                    |                                              |         
|Investments in marketable securities                                                                                                                                     |                                                    |                                              | (695,344
|Proceeds from sales and maturities of marketable securities                                                                                                              |                                                    |                                              | 568,924 
|Purchase of property and equipment and other long term assets                                                                                                            |                                                    |                                              | (58,381 
|Net cash provided by Cambridge Discovery Chemistry Inc. sale                                                                                                             |                                                    |                                              | 518     
|Investment in joint venture                                                                                                                                              |                                                    |                                              | (656    
|Net cash used in Cambridge Discovery Chemistry Ltd. acquisition                                                                                                          |                                                    |                                              | (1,614  
|Net cash acquired in LeukoSite, Inc. acquisition                                                                                                                         |                                                    |                                              |        
|                                                                                                                                                                         |                                                    |                                              |         
|Net cash used in investing activities                                                                                                                                    |                                                    |                                              | (186,553
|                                                                                                                                                                         |                                                    |                                              |         
|Cash Flows from Financing activities:                                                                                                                                    |                                                    |                                              |         
|Issuance of convertible subordinated notes, net of issuance costs                                                                                                        |                                                    |                                              |        
|Proceeds from sales of common stock and exercises of warrants                                                                                                            |                                                    |                                              | 206,815 
|Proceeds from sale of subsidiary stock                                                                                                                                   |                                                    |                                              |        
|Net proceeds from employee stock purchases                                                                                                                               |                                                    |                                              | 22,056  
|Principal payments on capital leases                                                                                                                                     |                                                    |                                              | (15,272 
|                                                                                                                                                                         |                                                    |                                              |         
|Net cash provided by financing activities                                                                                                                                |                                                    |                                              | 213,599 
|                                                                                                                                                                         |                                                    |                                              |         
|Increase (decrease) in cash and cash equivalents                                                                                                                         |                                                    |                                              | (129,833
|Equity adjustment from foreign currency translation                                                                                                                      |                                                    |                                              | (260    
|Cash and cash equivalents, beginning of year                                                                                                                             |                                                    |                                              | 166,086 
|                                                                                                                                                                         |                                                    |                                              |         
|Cash and cash equivalents, end of year                                                                                                                                   |                                                    | $                                            | 35,993  
|                                                                                                                                                                         |                                                    |                                              |         
|Supplemental Cash Flow Information:                                                                                                                                      |                                                    |                                              |         
|Cash paid for interest                                                                                                                                                   |                                                    |                                              | 8,640   
|Supplemental Disclosure of Noncash Investing and Financing Activities:                                                                                                   |                                                    |                                              |         
|Equipment acquired under capital leases                                                                                                                                  |                                                    | $                                            | 24,338  
|Construction costs for laboratory and office space                                                                                                                       |                                                    |                                              | 36,198  
|M&I capital contribution                                                                                                                                                 |                                                    |                                              | 4,189   
|Deferred compensation relating to issuance of stock options                                                                                                              |                                                    |                                              |        
|Write off of capital assets                                                                                                                                              |                                                    |                                              | 1,578   
|Issuance of common stock to Abgenix, Inc.                                                                                                                                |                                                    |                                              |        
|Buyout of Becton Dickinson interest in MPMx, including deemed preferred stock
dividend                                                                                   |                                                    |                                              |        
|Conversion of subordinated debt to common stock                                                                                                                          |                                                    |                                              | 12,602  
|Services to be received as consideration in the sale of Cambridge Discovery Inc.                                                                                         |                                                    |                                              | 3,000   
|Acquisition and additional goodwill of Cambridge Discovery Chemistry Ltd.                                                                                                |                                                    |                                              |        
|Acquisition and adjustments to goodwill of LeukoSite, Inc. including contingent consideration settlement in 2001 and 2000 and direct transaction costs of $2,700 in 1999 |                                                    |                                              | 19,703  
|Reclassification of debt issuance costs to additional paid-in capital                                                                                                    |                                                    |                                              | 110     
|Deemed preferred stock dividend resulting from MPI buyout of Eli Lilly interest in MBio                                                                                  |                                                    |                                              |        

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

64

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Millennium Pharmaceuticals, Inc        Statements of Stockholders' Equity

|                                                                      |                          |             |   |   |     |  |   |           |   |   |        | Accumulated
Other
Comprehensive
Income
(Loss) |   |        |   |   |       
|--------------------------------------------------------------------- | ------------------------ | ----------- | - | - | --- |  | - | --------- | - | - | ------ | --------------------------------------------- | - | ------ | - | - | ------
|
|
|
|
|Balance at December 31, 1998                                          |                          | 139,692,816 |   | $ | 140 |  | $ | 296,265   |   | $ | (957   | )                                             | $ | (87    | ) | $ | 29    
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Net loss                                                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Unrealized loss on marketable securities                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   | (768  
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|                                                                      | Total comprehensive loss |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Issuance of common stock                                              |                          | 37,811,996  |   |   | 39  |  |   | 580,494   |   |   |        |                                               |   |        |   |   |       
|Repurchase of common stock                                            |                          | (10,828     | ) |   |     |  |   | (1        | ) |   |        |                                               |   |        |   |   |       
|Exercise of stock warrants                                            |                          | 504,456     |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Employee stock purchases                                              |                          | 491,524     |   |   |     |  |   | 2,226     |   |   |        |                                               |   |        |   |   |       
|Issuance of Common Stock in exchange for note from officer            |                          |             |   |   |     |  |   |           |   |   |        |                                               |   | (1,026 | ) |   |       
|Forgiveness of notes from officers                                    |                          |             |   |   |     |  |   |           |   |   |        |                                               |   | 87     |   |   |       
|Deferred stock compensation                                           |                          |             |   |   |     |  |   | 1,059     |   |   | (1,059 | )                                             |   |        |   |   |       
|Stock compensation expense                                            |                          |             |   |   |     |  |   | 1,815     |   |   |        |                                               |   |        |   |   |       
|Write off deferred stock compensation                                 |                          |             |   |   |     |  |   | (33       | ) |   | 33     |                                               |   |        |   |   |       
|Stock compensation earned                                             |                          |             |   |   |     |  |   |           |   |   | 928    |                                               |   |        |   |   |       
|401K stock match                                                      |                          | 112,504     |   |   |     |  |   | 1,210     |   |   |        |                                               |   |        |   |   |       
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Balance at December 31, 1999                                          |                          | 178,602,468 |   |   | 179 |  |   | 883,035   |   |   | (1,055 | )                                             |   | (1,026 | ) |   | (739  
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Net loss                                                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Unrealized gain on marketable securities                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   | 11,503
|Foreign currency translation                                          |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   | (309  
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|                                                                      | Total comprehensive loss |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Issuance of common stock                                              |                          | 17,548,846  |   |   | 17  |  |   | 944,987   |   |   |        |                                               |   |        |   |   |       
|Issuance of common stock pursuant to conversion of subordinated notes |                          | 7,227,689   |   |   | 7   |  |   | 297,055   |   |   |        |                                               |   |        |   |   |       
|Repurchase of common stock                                            |                          | (132,572    | ) |   |     |  |   | (52       | ) |   |        |                                               |   |        |   |   |       
|Exercise of stock warrants                                            |                          | 530,505     |   |   | 1   |  |   | 167       |   |   |        |                                               |   |        |   |   |       
|Employee stock purchases                                              |                          | 10,153,296  |   |   | 10  |  |   | 75,683    |   |   |        |                                               |   |        |   |   |       
|Repayment of notes from officers                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   | 641    |   |   |       
|Deferred stock compensation                                           |                          |             |   |   |     |  |   | 1,160     |   |   | (1,160 | )                                             |   |        |   |   |       
|Stock compensation earned                                             |                          |             |   |   |     |  |   |           |   |   | 919    |                                               |   |        |   |   |       
|401K stock match                                                      |                          | 48,761      |   |   |     |  |   | 1,867     |   |   |        |                                               |   |        |   |   |       
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Balance at December 31, 2000                                          |                          | 213,978,993 |   |   | 214 |  |   | 2,203,902 |   |   | (1,296 | )                                             |   | (385   | ) |   | 10,455
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Net loss                                                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Unrealized gain on marketable securities                              |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   | 24,176
|Foreign currency translation                                          |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   | (260  
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|                                                                      | Total comprehensive loss |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Issuance of common stock                                              |                          | 6,575,592   |   |   | 6   |  |   | 235,179   |   |   |        |                                               |   |        |   |   |       
|Issuance of common stock pursuant to conversion of subordinated notes |                          | 299,544     |   |   |     |  |   | 12,602    |   |   |        |                                               |   |        |   |   |       
|Repurchase of common stock                                            |                          | (73,707     | ) |   |     |  |   | (14       | ) |   |        |                                               |   |        |   |   |       
|Exercise of stock warrants                                            |                          | 52,532      |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Employee stock purchases                                              |                          | 3,337,130   |   |   | 4   |  |   | 22,070    |   |   |        |                                               |   |        |   |   |       
|Repayment of notes from officers                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   | 70     |   |   |       
|Deferred stock compensation                                           |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Stock compensation earned                                             |                          |             |   |   |     |  |   |           |   |   | 531    |                                               |   |        |   |   |       
|401K stock match                                                      |                          | 119,895     |   |   |     |  |   | 3,595     |   |   |        |                                               |   |        |   |   |       
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       
|Balance at December 31, 2001                                          |                          | 224,289,979 |   | $ | 224 |  | $ | 2,477,334 |   | $ | (765   | )                                             | $ | (315   | ) | $ | 34,371
|                                                                      |                          |             |   |   |     |  |   |           |   |   |        |                                               |   |        |   |   |       

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, 2001

[1] The Company

Millennium Pharmaceuticals, Inc. ("Millennium", or the "Company") is a leading biopharmaceutical company focused on applying its comprehensive and
integrated science and technology platform to discover and accelerate the development of breakthrough drugs and predictive medicine products. The Company expects that these drugs and products
ultimately will enable physicians to more closely customize medical treatment by combining knowledge of the genetic basis for disease and the genetic characteristics of a patient. The Company
primarily focuses its research and development and commercialization activities in four key disease areas: cardiovascular, oncology, inflammatory and metabolic. The Company views the pursuit of
mergers, acquisitions and product in-licensing as important in achieving its business goals.

[2] Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Millennium and in 2000 and 1999 its majority-owned subsidiaries and other subsidiaries controlled by
the Company. The ownership of the other interest holders of the consolidated subsidiaries is reflected as minority interest. There have been no such other interest holders since June 2, 2000.
All significant intercompany accounts and transactions have been eliminated in consolidation. Investment in the Company's unconsolidated joint venture is accounted for using the equity method (see
Note 6).

The
preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and 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.

Cash Equivalents and Marketable Securities

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

Management
determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable securities
at December 31, 2001 and 2000 are classified as "available-for-sale." Available-for-sale securities are carried at fair value, with the
unrealized gains and losses reported in a separate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization and accretion is included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on
available-for-sale securities 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 year ended December 31, 2001, the Company recorded realized gains of $7.9 million and realized losses of $5.9 million on marketable securities. There were
no significant realized gains or losses on sales of any marketable securities in 2000 and 1999.

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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. Marketable securities consist of high-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, thereby reducing credit risk concentrations.

Segment Information

The Company operates in one business segment, which primarily focuses on the discovery and development of proprietary therapeutic and diagnostic human healthcare
products and services. Substantially all of the Company's revenues have been derived from its strategic alliances. Revenues from Bayer, AG ("Bayer") accounted for approximately 39%, 27% and 45% of
consolidated revenues for the years ended December 31, 2001, 2000 and 1999. Revenues from Monsanto Company ("Monsanto") accounted for approximately 18%, 22% and 20% of consolidated revenues for
the years ended December 31, 2001, 2000 and 1999. Revenues from Aventis Pharmaceuticals, Inc. ("Aventis") accounted for approximately 16% and 10% of consolidated revenues for the years
ended December 31, 2001 and 2000. There were no other significant customers in 2001, 2000 and 1999.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheets for other current assets and long-term debt approximate their fair value. The fair
values of the Company's long-term debt are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing
arrangements.

Property and Equipment

Property and equipment are stated at cost. Equipment consists principally of assets held under capitalized leases and those assets 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 remaining life of
the building lease. 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 15 years


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Intangible Assets

Intangible assets at December 31, 2001 consist of goodwill and other intangible assets. Amortization is computed using the straight-line method
over the useful lives of the respective assets, generally four years. Amortization expense for all intangible assets was $64.6 million, $55.1 million, and $3.8 million in 2001,
2000, and 1999, respectively. Accumulated amortization was $128.2 million and $64.0 million at December 31, 2001 and 2000, respectively. On a periodic basis, the Company estimates
the future undiscounted cash flows of the businesses to which the intangible assets relate in order to ensure that the carrying value of such intangible assets has not been impaired. In
July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS
No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable
intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company adopted SFAS No. 142 effective January 1, 2002 and
reclassified amounts to goodwill which were previously allocated to assembled workforce. Upon adoption, the Company ceased the amortization of goodwill, currently representing expense of
$58.9 million per year. Although the Company has not completed the transitional impairment test, the Company does not currently expect a material impairment charge upon adoption.

Revenue Recognition

Effective October 1, 2000, Millennium changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB)
No. 101 ("SAB 101"),Revenue Recognition in Financial Statements.Previously, the Company had recognized revenue relating to
non-refundable, up-front, license and milestone payments and certain research funding payments from its strategic partners in accordance with the contract. Under the new
accounting method adopted retroactively to January 1, 2000, the Company recognizes revenue from non-refundable, up-front, license and milestone payments, not
specifically tied to a separate earnings process, ratably over the term of the research contract. When payments are specifically tied to a separate earnings process, revenue is recognized when the
specific performance obligation associated with the payment is completed. Performance obligations typically consist of significant milestones in the development life cycle of the related technology,
such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory
agencies. In addition, when appropriate, the Company recognizes revenue from certain research payments based upon the level of research services performed during the period of the research contract.
The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which is included in the loss for the year ended December 31, 2000.

Income Taxes

The liability method is used to account for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and
income tax basis of assets and liabilities, as well as net operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the differences reverse.
Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.

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Net Loss Per Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is
computed using the weighted average number of common and dilutive common equivalent shares from stock options, warrants and convertible debt using the treasury stock method. The 2000 and 1999 net loss
attributable to common stockholders is calculated by including the deduction of a deemed preferred stock dividend relating to the excess of the fair value of the Company's common stock over the
carrying value of the Millennium Predictive Medicine, Inc. ("MPMx") and Millennium Biotherapeutics, Inc. ("MBio") minority interests acquired, respectively. For the years ended
December 31, 2001, 2000 and 1999, diluted net loss per share is the same as basic net loss per share, as the inclusion of outstanding common stock options, warrants and convertible debt would
be antidilutive.

Foreign Currency Translation

The financial statements of the Company's foreign subsidiary 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 loss and are accumulated in a separate
component of accumulated other comprehensive income (loss) in stockholders' equity.

Comprehensive Loss

Comprehensive loss is comprised of net loss, unrealized gains and losses on marketable securities and cumulative foreign currency translation adjustments.
Accumulated other comprehensive income as of December 31, 2001 and 2000 included $34.9 million and $10.8 million, respectively and $0.5 million and $0.3 million,
respectively, of unrealized gains on marketable securities and cumulative foreign currency translation adjustments. Comprehensive loss is reflected in the consolidated statements of stockholders'
equity.

Stock-Based Compensation

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

Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was
deferred to fiscal years beginning after June 15, 2000 by SFAS No. 137 "Accounting for Derivative Instruments and Hedging ActivitiesDeferral of

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Effective Date of SFAS No. 133." SFAS No. 133 was amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The Company has adopted
this new accounting standard effective January 1, 2001 and it did not have a significant effect on the financial statements.

In
July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Under SFAS
No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable
intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. With respect to goodwill and intangible assets acquired prior to July 1,
2001, the Company is required to adopt SFAS No. 142 for the fiscal year beginning after December 15, 2001. The Company adopted SFAS No. 142 effective January 1, 2002 and
reclassified amounts to goodwill which were
previously allocated to assembled workforce. Upon adoption, the Company ceased the amortization of goodwill, currently representing expense of $58.9 million per year. Although the Company has
not completed the transitional impairment test, the Company does not currently expect a material impairment charge upon adoption.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and provides a single accounting model for
long-lived assets to be disposed of. The Company is required to adopt SFAS No. 144 for the fiscal year beginning after December 15, 2001. The Company adopted SFAS
No. 144 effective January 1, 2002 and it did not have a significant effect on the financial statements.

[3] Subsidiaries

Millennium BioTherapeutics, Inc.

In May 1997, the Company established Millennium BioTherapeutics, Inc. ("MBio") as a subsidiary and, pursuant to a Technology Transfer and License
Agreement, transferred and/or licensed certain technology to MBio in exchange for 9,000,000 shares of the subsidiary's Series A convertible preferred stock. At that time, MBio entered into a
strategic alliance with Eli Lilly and Company ("Lilly") for the discovery and development of novel therapeutic proteins. Under the terms of a related stock purchase agreement, Lilly purchased
$20 million of Series B convertible preferred stock of MBio for an approximate 18% equity interest in MBio. The accompanying consolidated financial statements for 1999 include the
accounts of MBio since inception. The minority interest in the accompanying consolidated statements of operations includes the minority stockholder's interest in the net loss of MBio for the year
ended December 31, 1999.

In
October 1999, Lilly was issued approximately 1,500,000 shares of Millennium common stock in exchange for all shares of MBio Series B convertible preferred stock owned by
it. Also in October 1999, MBio amended the terms of its strategic alliance with Lilly. Under the amendment, the research program was refocused from the discovery of new therapeutic proteins to
further development of the therapeutic proteins which had been identified in the course of the research program. In December 1999, MBio was merged with and into Millennium. The Company recorded
a deemed

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preferred stock dividend of $27.9 million in 1999 relating to the excess of the fair value of its common stock over the carrying value of the MBio minority interest acquired from Lilly.

Millennium Predictive Medicine, Inc.

In September 1997, the Company established a wholly-owned subsidiary, Millennium Predictive Medicine, Inc. ("MPMx"), to develop products and
services to optimize the prevention, diagnosis, treatment and management of disease. In February 1999, MPMx announced the formation of a strategic alliance in the diagnostic field with Becton,
Dickinson and Company ("Becton Dickinson"). In March 1999, Becton Dickinson made an equity investment in MPMx of $15.0 million, representing approximately an 11% voting interest in MPMx,
and paid a $3.0 million licensing fee to MPMx. The minority interest in the accompanying consolidated statements of operations includes the minority stockholder's interest in the net income of
MPMx for the years ended December 31, 2000 and 1999. All intercompany transactions with this subsidiary have been eliminated in consolidation.

On
June 2, 2000, the Company acquired the outstanding preferred stock of its MPMx subsidiary that it did not already own, making MPMx a wholly-owned subsidiary of the Company. The
transaction was a stock-for-stock merger. Under the terms of the agreement, MPMx shareholders, including Becton Dickinson, received 0.8 shares of Millennium common stock in
exchange for each MPMx share. The Company recorded a deemed preferred stock dividend of $45.7 million in 2000 relating to the excess of the fair value of its common stock over the carrying
value of the MPMx minority interest acquired from Becton Dickinson.

[4] LeukoSite Acquisition

On December 22, 1999, the Company acquired LeukoSite, Inc. ("LeukoSite") for an aggregate purchase price of $550.4 million primarily
consisting of 26,707,732 shares of common stock and 3,536,348 shares of common stock issuable upon the exercise of LeukoSite options and warrants. The transaction was recorded as a purchase for
accounting purposes and the consolidated financial statements include LeukoSite's operating results from the date of the acquisition. The purchase price was allocated to the assets purchased and
liabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair market value of net tangible assets allocated to specific intangible assets
and goodwill as follows (in thousands):

Goodwill

$
159,080Assembled workforce


2,920Core technology


18,712In-process research and development


350,503Total Allocated to Intangibles

$
531,215


During
2000, the Company determined that certain LeukoSite contingent consideration related to previous acquisitions made by LeukoSite were probable. As a result, the Company accrued
$15.9 million of contingent consideration through an increase to goodwill. During 2001, the Company issued an additional $19.7 million of contingent consideration related to the previous
acquisitions made by LeukoSite. Amounts allocated to goodwill, assembled workforce, and core technology are being amortized on a straight-line basis over a period of four years. The
Company also incurred a one-time,

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noncash charge to operations in 1999 of $350.5 million for acquired in-process research and development. The valuation of acquired in-process research and development
represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had no alternative future use and for which technological feasibility had not been established.

The
most significant purchased research and developments projects that were in-process at the date of the acquisition consisted of a chemotherapeutic agent, a humanized
monoclonal antibody for oncology and non-oncology indications, and 10 molecules in preclinical development. In aggregate these projects represented approximately 83% of the
in-process value. The chemotherapeutic agent represented approximately 39% of the in-process research and development value. Key assumptions used in the analysis of the
chemotherapeutic agent included gross margin of 95% and a discount rate of 22%. The chemotherapeutic agent is a new class of small molecules that acts by inhibiting the proteasome, the complex of a
cell which regulates the breakdown of proteins that are critical for cell proliferation. As of the date of the acquisition, the project was expected to be completed and commercially available in the
U.S. in 2006, with an estimated cost to complete of approximately $15.0 to $20.0 million. During 2000 and 2001, the Company reprioritized and expanded its clinical development strategy for this
chemotherapeutic agent and now believes the estimated costs to complete the original project are approximately $55.0 million to $60.0 million as of December 31, 2001. As
December 31, 2001, this project was expected to be completed and commercially available in the U.S. in 2003.

The
humanized monoclonal antibody represented approximately 20% of the in-process research and development value. Key assumptions used in the analysis of this project
included gross margins of 100%, as revenue is royalty based, and a discount rate of 19%. The primary indication for this
humanized monoclonal antibody, CAMPATH®, relates to the treatment of refractory chronic lymphocytic leukemia for which Millennium & ILEX Partners, L.P. ("M&I") received FDA
approval. The antibody works by binding to an antigen found on leukemia cells, thus triggering their destruction. As of the date of the acquisition, the Biologics License Application ("BLA") for the
CAMPATH® product was expected to be completed by the end of 1999 and the Company anticipated that the CAMPATH® product would be commercially available in the U.S. in 2000. In
December 2000, the FDA Advisory Committee recommended accelerated approval of the CAMPATH® product. The clinical trials for the other indications for the humanized monoclonal
antibody are expected to be completed and products commercially available in the U.S. between 2003 and 2004. As the BLA for the CAMPATH® product was near completion at the time of the
acquisition and the clinical trials for the other indications build substantially on work already performed, the estimated cost to complete these projects was not considered to be significant at the
time of acquisition, nor is it considered to be significant now.

The
portfolio of molecules in preclinical development represented approximately 24% of the in-process research and development value. As these products are expected to be
partnered, revenue will be royalty based. Therefore, gross margins of 100% were used in the analysis. The discount rate used in valuing the portfolio of preclinical molecules was 23.25%.

Molecules
in preclinical development relate primarily to treatments for inflammatory and autoimmune conditions and diseases, as well as treatments for asthma and allergies. At the date
of the acquisition, of the ten molecules in the preclinical portfolio, the first molecules are expected to be completed and commercially available in the U.S. in 2005 with the remaining molecules
expected to be

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completed and commercially available in the U.S. between 2006 and 2008. At the date of acquisition and at December 31, 2000, the estimated cost to complete all projects in preclinical
development was approximately $40.0 to 45.0 million. At December 31, 2001, the Company now believes that the first of these molecules will be completed and commercially available in the
U.S. in 2006 with the remaining molecules to be completed and commercially available in the U.S. between 2008 and 2012. The expanded estimated costs to complete all the projects in preclinical
development was approximately $95 to $100 million at December 31, 2001.

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

Pro
forma net loss for the year ended December 31, 1999 was $80.3 million or $0.47 per share assuming the LeukoSite acquisition had occurred on January 1, 1998.

[5] CDC Acquisition

On July 27, 2000, the Company acquired Cambridge Discovery Chemistry Ltd. ("CDC"), a subsidiary of Oxford Molecular Group, plc, for an aggregate
purchase price of $51.8 million. The transaction was recorded as a purchase for accounting purposes and accordingly, the purchase price was allocated to the assets purchased and liabilities
assumed based upon their respective fair values. The excess of the purchase price over the estimated fair market value of tangible assets acquired and liabilities assumed was allocated to intangible
assets resulting in $5.5 million of specific intangible assets relating to contracts and assembled workforce and $48.9 million of goodwill. The acquisition did not result in an
in-process research and development charge. Intangible assets and goodwill are being amortized on a straight-line basis over four years. The Company has not presented pro forma
results of operations as though CDC was acquired on January 1,1999 because the pro forma results are not materially different than the actual results of operations recorded. The consolidated
financial statements include CDC's operating results from the date of acquisition.

[6] Revenues and Strategic Alliances

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

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Effective
October 1, 2000, Millennium changed its method of accounting for revenue recognition in accordance with SAB 101. The cumulative effect of the change resulted in a
charge to income of $107.7 million and relates to revenue previously recognized by the Company that was deferred into future periods. The pro forma amounts presented in the consolidated
statements of operations were calculated assuming the accounting change was made retroactively to prior periods. Included in revenue is $43.9 million and $20.0 million in 2001 and 2000,
respectively, of revenue that was recognized in prior years relating to the adoption of SAB 101. The amount of revenue to be recognized in future years that was included in the cumulative
effect of change in accounting principle is $35.9 million, $8.3 million and $.5 million in 2002, 2003, and 2004, respectively.

In
1998, Millennium and Bayer entered into a five-year research collaboration. In connection with the company's adoption of SAB 101, Millennium began recognizing the research
funding portion of the Bayer alliance on a percentage-of-completion basis. The percentage-of-completion is determined based upon the actual level of
work performed during the period as compared to management's estimate of the total work to be performed under the alliance. The estimates are continually reviewed and adjusted as necessary, as
experience develops or new information becomes known. To reflect research productivity improvements, management revised its estimate of the remaining work to be performed under the alliance, which
resulted in a cumulative catch up adjustment of $18.4 million of additional revenue in September 2001. Excluding the impact of this change in estimate, net loss attributable to common
stockholders and the related earnings per share amounts for the year ended December 31, 2001 was $210.4 million and $0.96 per share.

Significant Alliances Beginning in 2001

On March 9, 2001, the Company entered into a strategic alliance with Abbott Laboratories ("Abbott"). This alliance is for a five-year term, and
is a research and development collaboration in the area of metabolic diseases. The Company and Abbott have agreed to share the cost of developing, manufacturing and marketing products on a worldwide
basis. This arrangement with Abbott also includes a technology exchange and development agreement and an equity investment agreement by Abbott, under which the Company is eligible to receive up to
$250 million. As part of this $250 million equity investment agreement, Abbott made investments of $50.0 million, $28.6 million and $28.6 million in
April 2001, September 2001 and December 2001, respectively, and has agreed to make additional investments totaling $142.8 million in five remaining equal quarterly
installments through 2003.

On
April 5, 2001, the Company entered into an agreement with BZL Biologics, L.L.C. ("BZL"), a privately-held company, to develop and commercialize
antibody-based therapeutics targeting Prostate Specific Membrane Antigen (PSMA). The development plan includes programs for both immunotoxin and radio-labeled products. The primary indication expected
for products targeting PSMA is prostate cancer, although PSMA may also be a relevant therapeutic target in other solid tumors. The terms of the agreement call for Millennium and BZL to jointly develop
the immunotoxin and radiolabeled products for the prostate cancer indication until a predetermined clinical decision point. Thereafter, Millennium will have full responsibility for development,
manufacturing and commercialization of all antibody-based therapies for all indications, as well as all diagnostic products. Millennium will be responsible for all development costs of the products.
In addition, BZL will be entitled to receive milestone payments and royalties based on net sales of any marketed products.

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On
November 26, 2001, the Company entered into an agreement with XOMA Ltd. ("XOMA") in which XOMA will collaborate to develop two of the Company's biotherapeutic agents:
CAB-2 and MLN01, for certain vascular inflammation indications. Under the terms of the agreement, XOMA will be responsible for development activities and related costs through the
completion of Phase II trials.
XOMA has agreed to make payments to the Company at the beginning of the collaboration and upon achievement of certain clinical milestones. If successful completion of Phase II, the Company will
have the right to commercialize the products and XOMA will have the option to choose between further participation in the development program and eventual profit sharing, or alternatively being
entitled to future royalty and milestone payments. Under an investment agreement, the Company committed to purchase, at XOMA's option, up to $50 million worth of XOMA common shares over the
next three years.

On
December 14, 2001 the Company and Xenova Group, plc ("Xenova") entered into a license agreement for the development and North American commercialization of Xenova's novel
compounds for the treatment of solid tumors in cancer. The program includes three molecules; MLN576, XR5944, and XR11612. MLN576 is an oral agent that has entered Phase I clinical development
with the first patients screened for study entry. The two additional compounds are in preclinical development. Under the terms of the agreement, the Company will acquire development and exclusive
marketing rights to the topoisomerase program in North America in exchange for an upfront payment as well as future milestone payments and royalties following the achievement of specific development
and sales goals. Xenova retains commercialization rights for all products arising from this topoisomerase collaboration outside the United States, Canada and Mexico, including marketing in Europe and
the rest of the world. Xenova will retain responsibility for performing development activities associated with the program, which will be funded by the Company commencing in 2003, to the end of
Phase II clinical trials. Thereafter, the Company will assume responsibility for subsequent development activities in North America and Xenova will retain development activity responsibility
for the rest of the world.

Significant Alliances Beginning in 2000

On June 22, 2000, the Company entered into an alliance with Aventis Pharmaceuticals Inc. ("Aventis"), the pharmaceutical company of
Aventis S.A., covering the joint development and commercialization of drugs for the treatment of inflammatory diseases; joint development of new drug discovery technologies; transfer of key
elements of the Company's technology platform to Aventis to enhance its existing capabilities; and purchase of an equity interest in the Company by Aventis. The companies have agreed to share the
responsibility for and cost of developing, marketing and manufacturing products arising from the alliance, as well as profits in North America. Outside of North America, Aventis is responsible for
developing and marketing products arising from the alliance, with a royalty obligation to the Company. Under a Technology Transfer Agreement, the Company agreed to provide Aventis with rights to its
drug discovery technologies in exchange for payments of up to $200.0 million over a five-year period. As of December 31, 2001, Aventis had invested all $250.0 million
in the Company's common stock as agreed under an Investment Agreement.

Significant Alliances Beginning in 1999

On February 22, 1999, MPMx and Becton Dickinson formed a strategic alliance in the diagnostic field. The five-year, genomics-based research
collaboration focuses on several areas of oncology. Under the alliance, MPMx has agreed to undertake a research program to identify genetic markers and

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related assays that may be used to develop diagnostic products for several types of cancer. Becton Dickinson has agreed to manufacture and market any products that result from the research of MPMx,
and MPMx will receive a royalty based upon gross profits from any related product sales. On March 31, 1999, Becton Dickinson made a fair market value equity investment in MPMx of
$15.0 million, representing approximately an 11% voting interest in MPMx, and paid a $3.0 million licensing fee to MPMx. On June 2, 2000 the Company acquired the outstanding
preferred stock of MPMx. Becton Dickinson received 0.8 shares of Millennium common stock in exchange for each MPMx share. Becton Dickinson has agreed to pay MPMx up to $51.5 million in research
funding and additional annual license fees over the term, provided the alliance continues for the full five-year term. Becton Dickinson has agreed to pay milestones and royalties to MPMx
in connection with the commercialization and sale of any products developed through the alliance.

Through
its merger with LeukoSite, the Company became a party to a joint venture agreement with ILEX Products, Inc. ("ILEX") to form M&I for the purpose of developing and
commercializing the CAMPATH® product, a monoclonal antibody for use in the treatment of chronic lymphocytic leukemia. In August 1999, M&I and Schering AG entered into a distribution
and development agreement which grants Schering AG exclusive marketing and distribution rights to the CAMPATH® product in the U.S., Europe and the rest of the world except Japan and East
Asia, where M&I retained rights. In the United States, Berlex Laboratories, Inc., Schering's U.S. affiliate, and M&I share in the profits from the sale of the CAMPATH®
 product. On sales made in the rest of the territory, Schering AG has agreed to pay royalties equivalent to the rate of profit sharing expected in the U.S. Under the terms of the
agreement, Schering agreed to make payments of up to $30.0 million, all of which had been paid at December 31, 2001, for rights to the CAMPATH® product upon the achievement
of certain regulatory milestones. On December 31, 2001, ILEX Oncology, Inc. ("ILEX Oncology") acquired our equity interest in M&I which owns the CAMPATH® product. In exchange for
our equity interest in M&I, ILEX Oncology paid us $20 million on December 31, 2001 and is obligated to pay us up to an additional $120 million over the next three years if sales
of CAMPATH® in the U.S. meet specified sales thresholds. In addition, we will be entitled to additional payments from ILEX Oncology based on U.S. sales of CAMPATH® after 2004.
The Company accounted for its investment in the joint venture under the equity method of accounting. During the years ended December 31, 2001 and 2000, the Company recognized
$3.3 million and $5.6 million of revenue from research and development activities performed on behalf of and to be reimbursed by M&I, respectively. At December 31, 2001 and 2000,
the Company had an amount receivable of $1.1 million and $3.8 million, respectively, included in Due from strategic alliance partners, for amounts due from M&I, for such work.

Significant Alliances Beginning in 1998 and Earlier

In September 1998, the Company entered into a strategic alliance with Bayer AG ("Bayer"). In November 1998, Bayer made an equity investment of
$96.6 million for approximately 19.8 million shares of Millennium common stock. The primary goal of the alliance is for the Company to supply 225 drug targets to Bayer over a period of
five years. These targets will be identified as relevant for cardiovascular disease, areas of oncology not covered by Millennium's alliance with Lilly, osteoporosis, pain, liver fibrosis, hematology
and viral infections. Future anticipated payments over the full alliance term include $219 million of ongoing research program funding, as well as a potential of up to
$116 million of success fee payments for delivery of targets. Bayer has the right to cancel the agreement after two and three years if certain minimum target delivery objectives are not met.

76

---

In
October 1997, the Company entered into a technology transfer alliance through a collaborative agreement with Monsanto Company ("Monsanto"). Under this agreement, the Company
granted to Monsanto exclusive rights to its technologies in the field of plant agriculture, as well as a nonexclusive license to its technologies outside the plant agriculture field. The Company has
agreed to collaborate exclusively with Monsanto in the application of those technologies through the establishment of a subsidiary wholly owned by Monsanto. Monsanto agreed to pay $118 million
in up-front, licensing and technology transfer fees over the five-year term of the agreement. Monsanto may also pay the Company up to $100 million over five years,
contingent upon the achievement of mutually agreed-upon research objectives. Millennium may also receive royalty payments from the sale of products, if any, originating from the research
conducted by the Monsanto subsidiary.

[7]    Marketable Securities

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

|                                  |                           | December 31, 2001
|--------------------------------- | ------------------------- | -----------------
|
|Corporate bonds:                  |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Asset-backed securities           |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Convertible note                  |                           |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

|                                  |                           | December 31, 2000
|--------------------------------- | ------------------------- | -----------------
|
|Corporate bonds:                  |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Asset-backed securities           |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

77

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[8]    Property and Equipment

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

2001

2000Equipment

$
132,105

$
105,803Capitalized software


11,674


8,064Leasehold improvements and construction in progress


122,483


35,056266,262


148,923Less accumulated depreciation and amortization


97,662


63,120$
168,600

$
85,803


Depreciation
expense, which includes amortization of assets recorded under capital leases, was $35.5 million, $23.2 million, and $17.1 million in 2001, 2000 and
1999, respectively.

[9]    Commitments

Lease Commitments

The Company conducts the majority of its operations in leased facilities with leased equipment. At December 31, 2001 and 2000, respectively, the Company
has capitalized leased equipment totaling $98.6 million and $74.3 million, with related accumulated amortization of $54.3 million and $39.4 million. Such amounts are
included in Note 8.

The
Company leases its laboratory and office space under operating lease agreements with various terms and renewal options, including major facilities with lease expirations ranging from
2002 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 to be constructed for laboratory and office space in Cambridge, Massachusetts. The rent
obligation for each building is expected to commence on the earlier of (a) September 1, 2002 or October 1, 2003, respectively or (b) the date on which the Company commences
occupancy of the respective building. Both leases are for a term of seventeen years. The Company is responsible for a portion of the construction costs for both buildings. The cost to complete each of
the buildings is expected to be approximately $37.9 and $42.0 million, respectively. Rent is calculated on an escalating scale ranging from approximately $7.6 million, per building per
year, to approximately $9.7 million, per building per year.

At
December 31, 2001, the Company has pledged $47.3 million of marketable securities, included in restricted cash, as collateral for letters of credit for certain leased
facilities.

78

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At
December 31, 2001, future minimum commitments under leases with noncancelable terms of more than one year, excluding the August 4, 2000 leases described above, are as
follows (in thousands):

Capital
Leases

Operating
LeasesYear:2002

$
21,110

$
27,8522003


16,778


24,5882004


12,602


27,4682005


7,569


24,3382006


2,048


24,280Thereafter





113,159Total


60,107

$
241,685Less amount representing interest


7,464Present value of minimum lease payments


52,643Less current portion of capital lease obligations


17,536Capital lease obligations, net of current portion

$
35,107


Total
rent expense was $33.6 million, $24.3 million and $15.1 million in 2001, 2000 and 1999, respectively.

External Collaborations

The Company funds research efforts of various academic collaborators in connection with its research and development programs. Total future fixed commitments
under these agreements approximate $5.0 million in 2002, $1.0 million in 2003 and $.2 million in 2004.

[10]    Convertible Debt

In January 2000, the Company completed a sale, pursuant to Rule 144A of the Securities Act of 1933, of $400.0 million of 5.5% convertible
subordinated notes due January 15, 2007. The notes are convertible into Millennium common stock at any time prior to maturity at a price equal to $42.07 per share, subject to adjustment, unless
previously repurchased or redeemed by the Company under certain circumstances. The notes are subordinated in right of payment to all existing and future senior indebtedness of the Company. Under the
terms of the notes, the Company is required to make semi-annual interest payments on the outstanding principal balance of the notes on January 15 and July 15 of each year. To
date, all required interest payments have been made.

During
2001 and 2000, the Company paid an aggregate of $2.6 million and $54.9 million in cash, respectively to certain holders of the Company's 5.5% convertible
subordinated notes due January 15, 2007 in order to induce the conversion of their notes into Millennium common stock. These cash payments were expensed during 2001 and 2000. Interest accrued
through the date of conversion was charged to interest expense and was paid upon conversion. These conversions resulted in the retirement of $12.6 million and $304.1 million in 2001 and
2000, respectively, of outstanding principal of the

79

---

Company's 5.5% convertible subordinated notes due January 15, 2007, the issuance of approximately 0.3 million and 7.2 million share in 2001 and 2000, respectively, of the
Company's common stock, and the reclassification of deferred debt issuance costs of $0.1 million and $7.0 million in 2001 and 2000, respectively, to additional paid-in
capital. At December 31, 2001, the Company had $83.3 million of outstanding 5.5% convertible subordinated notes due January 15, 2007.

[11]    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

On October 11, 2000, Millennium completed a public offering of 11,000,000 shares of its common stock resulting in net proceeds to the Company of
approximately $677.1 million. On October 17, 2000 the underwriters exercised their over-allotment option with respect to an additional 1,465,500 shares of common stock,
resulting in net proceeds to the Company of an additional $90.3 million. The Company has used and expects to continue to use the net proceeds of this offering for working capital and other
corporate purposes including financing the Company's growth, accelerating the expansion of its technology platform, developing products, including conducting preclinical testing and clinical trials,
and acquisitions of businesses, products and technologies that complement or expand the Company's business.

Common Stock Warrants

At December 31, 2001, the Company has outstanding exercisable warrants to purchase 815,286 shares of Common Stock with a weighted-average exercise price of
$5.51 per share, which expire through 2007.

Stock Option Plans

The 1993 Incentive Stock Plan (the "1993 Plan") allows for the granting of incentive and nonstatutory options to purchase up to 21,600,000 shares of common stock.
At December 31, 2001, a total of 1,197,877 shares of common stock have been reserved for issuance under the 1993 Plan.

The
1996 Equity Incentive Plan (the "1996 Plan") is substantially consistent with the terms of the 1993 Plan and, as amended, provides for the granting of options to purchase 22,400,000
shares of common stock. At December 31, 2001, a total of 11,541,676 shares of common stock have been reserved for issuance under the 1996 Plan.

The
1997 Equity Incentive Plan (the "1997 Plan"), as amended, provides for the granting of 16,000,000 options to purchase shares of common stock. The terms and conditions of the 1997
Plan are

80

---

substantially consistent with those of the 1993 Plan and the 1996 Plan. At December 31, 2001, a total of 8,568,365 shares of common stock have been reserved for issuance under the 1997 Plan.

The
2000 Incentive Stock Plan (the "2000 Plan") allows for the granting of incentive and nonstatutory stock options, restricted stock awards and other stock-based awards, including the
grant of shares based
upon certain conditions, the grant of securities convertible into common stock and the grant of stock appreciation rights. The number of stock option shares authorized is equal to 5% of the number of
shares outstanding on April 12, 2000 plus an annual increase to be made on January 1, 2001, 2002, and 2003 equal to 5% of the number of shares outstanding or a lesser amount determined
by the Board of Directors. At December 31, 2001, a total of 19,829,863 shares of common stock have been reserved for issuance under the 2000 Plan.

The
1996 Director Option Plan (the "Director Plan") provides for the granting of nonstatutory stock options to non-employee directors. At December 31, 2001, a total of 888,333
shares of common stock have been reserved for issuance under the Director Plan.

Under
the 1996 Employee Stock Purchase Plan (the "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 first
offering period began on October 1, 1996. A total of 2,600,000 shares of common stock have been reserved for issuance under the Purchase Plan, as amended. At December 31, 2001,
subscriptions were outstanding for an estimated 85,211 shares at $15.55 per share.

Under
the SAYE Plan (the "SAYE Plan"), our United Kingdom employees who are not eligible to participate in the Stock Purchase Plan may purchase shares of common stock at a discount. A
total of 500,000 shares of common stock have been reserved for issuance under the SAYE Plan. At December 31, 2001, subscriptions were outstanding for an estimated 24,498 shares at
$21.64 per share.

In
connection with the mergers of MBio and MPMx into the Company, MBio's 1997 Equity Incentive Plan (the "MBio 1997 Plan") and MPMx's 1997 Equity Incentive Plan (the "MPMx 1997 Plan")
were assumed by Millennium. In December 1999, in connection with the merger of LeukoSite and the Company, Millennium assumed the LeukoSite 1993 Stock Option Plan. The Plans, as assumed, allow
for the granting of incentive and nonstatutory options to purchase up to 5,293,950 shares of Millennium common stock. At December 31, 2001, a total of 2,236,539 shares of common stock have been
reserved for issuance under these assumed Plans.

Options
granted to employees generally vest over a four-year period. Options granted to consultants and other nonemployees generally vest over the period of service to the
Company and the Company records compensation expense equal to the fair value of these options.

During
1995 and 1996, the Company granted options to purchase 6,322,728 shares of common stock at exercise prices below the deemed fair value for accounting purposes of the stock options
at the date of grant. The Company recorded an increase to additional paid-in capital and a corresponding charge to deferred compensation in the amount of approximately $3.5 million
to recognize the aggregate difference between such deemed fair value and the exercise price. The deferred compensation was amortized over the option vesting period of four years.

81

---

During
1999, MBio granted options to purchase 76,180 shares of MBio common stock at exercise prices below the deemed fair value for accounting purposes of the stock options at the date
of the grant. These options were converted to 59,788 options to purchase common stock of Millennium in connection with the merger of MBio and the Company. During 2000, MPMx granted options to purchase
93,730 shares of MPMx common stock at exercise prices below the deemed fair value for accounting purposes of the stock options at the date of the grant. These options were converted to 74,984 options
to purchase common stock of Millennium in connection with the merger of MPMx and the Company. The Company recorded increases to additional paid-in capital and a corresponding charge to
deferred compensation in the amount of approximately $1.1 million and $345,000, respectively to recognize the aggregate difference between such deemed fair value and the exercise price. The
deferred compensation is being amortized over the option vesting period of four years.

The
following table presents the combined activity of the Company's stock plans for the years ended December 31, 2001, 2000 and 1999:

|                                   |  | 2001       |   | 2000 |       | 1999
|---------------------------------- |  | ---------- | - | ---- | ----- | ----
|
|Outstanding at January 1           |  | 29,539,240 |   | $    | 25.22 |     
|Granted                            |  | 10,173,493 |   |      | 29.19 |     
|Exercised                          |  | (3,158,480 | ) |      | 5.53  |     
|Canceled                           |  | (2,768,002 | ) |      | 36.79 |     
|                                   |  |            |   |      |       |     
|Outstanding at December 31         |  | 33,786,251 |   |      | 27.41 |     
|                                   |  |            |   |      |       |     
|Options exercisable at December 31 |  | 15,250,950 |   | $    | 21.29 |     
|                                   |  |            |   |      |       |     

The
weighted-average per share fair value of options granted during 2001, 2000, and 1999 was $19.36, $31.68, and $9.10, respectively.

82

---

The
following table presents weighted-average price and life information about significant option groups outstanding at December 31, 2001 for the above plans:

|              |  | Options Outstanding |  |      |  |  
|------------- |  | ------------------- |  | ---- |  | -
|
|
|
|$0.03 - $4.69 |  | 4,061,754           |  | 5.27 |  | $
|4.72 -  7.53  |  | 3,419,589           |  | 6.17 |  |  
|7.57 - 14.73  |  | 3,797,851           |  | 7.35 |  |  
|15.63 - 24.34 |  | 4,002,210           |  | 8.92 |  |  
|24.51 - 33.25 |  | 5,027,062           |  | 9.07 |  |  
|33.75 - 41.31 |  | 3,212,012           |  | 9.26 |  |  
|41.81 - 44.00 |  | 4,407,615           |  | 8.21 |  |  
|45.00 - 58.75 |  | 3,391,546           |  | 8.43 |  |  
|59.94 - 72.56 |  | 1,847,544           |  | 8.33 |  |  
|73.03 - 73.03 |  | 619,068             |  | 8.75 |  |  
|              |  |                     |  |      |  |  
|              |  | 33,786,251          |  |      |  |  
|              |  |                     |  |      |  |  

At
December 31, 2001, 45,077,939 shares of Common Stock were reserved for issuance upon exercise of stock options and warrants.

SFAS No. 123 Disclosures

Pursuant to the requirements of SFAS No. 123, the following are the pro forma consolidated net loss and consolidated net income loss per share for 2001,
2000, and 1999 as if the compensation cost for the stock option and stock purchase plans had been determined based on the fair value at the grant date for grants in 2001, 2000, and 1999 (in thousands,
except per share amounts):

|                                             |  | 2001 |          | 2000 |   | 1999     |  
|-------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|
|Net loss attributable to common stockholders |  | $    | (192,005 | )    | $ | (394,180 | )
|Basic and diluted net loss per share         |  |      | (0.88    | )    |   | (1.80    | )

83

---

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

Stock Options

Stock Purchase Plan2001

2000

1999

2001

2000

1999Expected life (years)

4.4

4.5

4.4

0.5

0.5

0.5Interest rate

4.35
%
6.43
%
5.59
%
2.90
%
5.72
%
4.83
%Volatility

.87

.84

.67

.87

.84

.67


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

The
effects on 2001, 2000 and 1999 pro forma net loss and net loss per share of expensing the estimated fair value of stock options and common shares issued pursuant to the Stock Option
and Stock Purchase Plans are not necessarily representative of the effects on reported results of operations for future years as the periods presented include only two, three and four years,
respectively, of option grants and share purchases under the Company's plans.

[12]    Income Taxes

The difference between the Company's "expected" tax provision (benefit), as computed by applying the U.S. federal corporate tax rate of 34% to loss before
minority interest, the cumulative effect of
accounting change and provision for income taxes, and actual tax is reconciled in the following chart (in thousands):

|                                                                                                        |  | 2001 |          | 2000 |   | 1999     |  
|------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|Loss before minority interest and cumulative effect of accounting change and provision for income taxes |  | $    | (191,850 | )    | $ | (201,927 | )
|Expected tax benefit at 34%                                                                             |  | $    | (65,229  | )    | $ | (68,655  | )
|Write off of purchased research and development                                                         |  |      |         |      |   |         |  
|Amortization of goodwill                                                                                |  |      | 17,003   |      |   | 15,857   |  
|Change in valuation allowance for deferred tax assets allocated to tax expense                          |  |      | 48,072   |      |   | 52,315   |  
|Other permanent items                                                                                   |  |      | 154      |      |   | 483      |  
|                                                                                                        |  |      |          |      |   |          |  
|Income tax provision                                                                                    |  | $    |         |      | $ |         |  
|                                                                                                        |  |      |          |      |   |          |  

At
December 31, 2001, the Company has unused net operating loss carryforwards of approximately $845.3 million available to reduce federal taxable income expiring in 2004
through 2021 and $780.4 million available to reduce state taxable income expiring in 2002 through 2006. The Company also has federal and state research tax credits of approximately
$53.6 million available to offset federal and state income taxes, both of which expire beginning in 2009. 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. No income tax payments were made in 2001, 2000 and 1999.

84

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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):

|                                                  |  | 2001 |          | 2000 |   | 1999     |  
|------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|Net operating loss carryforwards                  |  | $    | 334,251  |      | $ | 287,714  |  
|Research and development tax credit carryforwards |  |      | 50,651   |      |   | 32,307   |  
|Capitalized research costs                        |  |      | 17,507   |      |   | 19,880   |  
|Property and other intangible assets              |  |      | 22,719   |      |   | 12,762   |  
|Deferred revenue                                  |  |      | 62,005   |      |   | 34,726   |  
|Other                                             |  |      | 4,722    |      |   | 6,649    |  
|                                                  |  |      |          |      |   |          |  
|Total deferred tax assets                         |  |      | 491,855  |      |   | 394,038  |  
|Valuation allowance                               |  |      | (479,636 | )    |   | (390,281 | )
|                                                  |  |      |          |      |   |          |  
|                                                  |  |      | 12,219   |      |   | 3,757    |  
|Deferred tax liability:                           |  |      |          |      |   |          |  
|Unrealized gain on marketable securities          |  |      | (12,219  | )    |   | (3,757   | )
|                                                  |  |      |          |      |   |          |  
|Net deferred tax asset                            |  | $    |         |      | $ |         |  
|                                                  |  |      |          |      |   |          |  

The
valuation allowance increased by $89.4 million during 2001 due primarily to the increase in research and development tax credits, net operating loss carryforwards related to
the exercise of stock options and differences in revenue recognition for financial accounting and tax purposes. The valuation allowance increased by $267.7 million during 2000 due primarily to
the increase in research and development tax credits, net operating loss carryforwards related to the exercise of stock options and the cumulative effect of accounting change. The deferred tax assets
acquired from LeukoSite and ChemGenics are subject to review and possible adjustments by the Internal Revenue Service and may be limited due to the change in ownership provisions of the Internal
Revenue Code.

Any
subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2001 would be allocated as follows (in thousands):

Reported in the statement of operations

$
208,140Reported as a decrease to goodwill


56,044Reported in additional paid-in capital


215,452$
479,636


[13]    Subsequent Events (unaudited)

On February 12, 2002, the Company acquired COR Therapeutics, Inc. ("COR") through the issuance of approximately 55.0 million shares of the
Company's common stock. This calculation is based on COR's outstanding common stock at the time of the merger using the conversion ratio of .9873 of a share of Millennium common stock for each share
of outstanding COR common stock. In addition, options to purchase approximately 6.2 million shares of COR common stock were assumed by

85

---

Millennium and converted into options to purchase approximately 6.1 million shares of Millennium common stock. The Company will account for the transaction as a purchase for accounting
purchase and allocate the purchase price, based upon independent valuation, to the assets purchased and liabilities assumed based upon their respective fair values, with the excess of the purchase
price over the estimated fair market value of net tangible assets allocated to in-process research and development, developed technology and trademark and goodwill. In connection with the
COR acquisition, the Company assumed COR's $600.0 million in convertible debt and is required to commence an offer to repurchase these notes for cash at face value no later than
March 14, 2002 and to repurchase tendered notes on April 29, 2002.

[14]    Quarterly Financial Information (unaudited)

|                                                                         |                                   | First Quarter
Ended
March 31, 2001 |         | Second Quarter
Ended
June 30, 2001 |   | Third Quarter
Ended
September 30,
2001 |        | Fourth Quarter
Ended
December 31,
2001 |        
|------------------------------------------------------------------------ | --------------------------------- | ---------------------------------- | ------- | ---------------------------------- | - | -------------------------------------- | ------ | -------------------------------------- | -------
|Statement of Operations Data:                                            |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Revenue under strategic alliances                                        |                                   | $                                  | 50,364  |                                    | $ | 59,066                                 |        | $                                      | 82,175 
|Costs and expenses:                                                      |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|                                                                         | Research and development          |                                    |         | 92,521                             |   |                                        | 94,583 |                                        |        
|                                                                         | General and administrative        |                                    |         | 16,236                             |   |                                        | 19,397 |                                        |        
|                                                                         | Amortization of intangible assets |                                    |         | 16,267                             |   |                                        | 16,029 |                                        |        
|                                                                         |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Total costs and expenses                                                 |                                   |                                    | 125,024 |                                    |   | 130,009                                |        |                                        | 132,869
|                                                                         |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Loss from operations                                                     |                                   |                                    | (74,660 | )                                  |   | (70,943                                | )      |                                        | (50,694
|Other income, net                                                        |                                   |                                    | 24,159  |                                    |   | 24,213                                 |        |                                        | 25,460 
|Debt conversion expense                                                  |                                   |                                    | (2,567  | )                                  |   |                                       |        |                                        |       
|                                                                         |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Net loss attributable to common stockholders                             |                                   | $                                  | (53,068 | )                                  | $ | (46,730                                | )      | $                                      | (25,234
|                                                                         |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Amounts per common share:                                                |                                   |                                    |         |                                    |   |                                        |        |                                        |        
|Basic and diluted net loss attributable to common stockholders per share |                                   | $                                  | (0.25   | )                                  | $ | (0.21                                  | )      | $                                      | (0.11  
|Weighted average shares, basic and diluted                               |                                   |                                    | 215,371 |                                    |   | 217,779                                |        |                                        | 220,069

86

---

|                                                                         |  | First Quarter
Ended March 31, 2000 |          | Second Quarter Ended June 30, 2000 |   | Third Quarter Ended
September 30, 2000 |   | Fourth Quarter Ended
December 31, 2000 |        
|------------------------------------------------------------------------ |  | ---------------------------------- | -------- | ---------------------------------- | - | -------------------------------------- | - | -------------------------------------- | -------
|Statement of Operations Data:                                            |  |                                    |          |                                    |   |                                        |   |                                        |        
|Revenue under strategic alliances                                        |  | $                                  | 47,236   |                                    | $ | 46,473                                 |   | $                                      | 43,874 
|Costs and expenses:                                                      |  |                                    |          |                                    |   |                                        |   |                                        |        
|Research and development                                                 |  |                                    | 60,100   |                                    |   | 62,011                                 |   |                                        | 68,783 
|General and administrative                                               |  |                                    | 10,823   |                                    |   | 11,057                                 |   |                                        | 12,439 
|Amortization of intangible assets                                        |  |                                    | 11,970   |                                    |   | 12,161                                 |   |                                        | 14,480 
|Total costs and expenses                                                 |  |                                    | 82,893   |                                    |   | 85,229                                 |   |                                        | 95,702 
|                                                                         |  |                                    |          |                                    |   |                                        |   |                                        |        
|Loss from operations                                                     |  |                                    | (35,657  | )                                  |   | (38,756                                | ) |                                        | (51,828
|Other income, net                                                        |  |                                    | 2,888    |                                    |   | 2,775                                  |   |                                        | 5,472  
|Debt conversion expense                                                  |  |                                    |         |                                    |   |                                       |   |                                        | (49,332
|                                                                         |  |                                    |          |                                    |   |                                        |   |                                        |        
|Loss before cumulative change in accounting principle                    |  |                                    | (32,769  | )                                  |   | (35,981                                | ) |                                        | (95,688
|Cumulative effect of change in accounting principle                      |  |                                    | (107,692 | )                                  |   |                                       |   |                                        |       
|                                                                         |  |                                    |          |                                    |   |                                        |   |                                        |        
|Net loss                                                                 |  | $                                  | (140,461 | )                                  | $ | (35,981                                | ) | $                                      | (95,688
|Deemed preferred stock dividend                                          |  |                                    |         |                                    |   | (45,668                                | ) |                                        |       
|                                                                         |  |                                    |          |                                    |   |                                        |   |                                        |        
|Net loss attributable to common stockholders                             |  | $                                  | (140,461 | )                                  | $ | (81,649                                | ) | $                                      | (95,688
|                                                                         |  |                                    |          |                                    |   |                                        |   |                                        |        
|Amounts per common share:                                                |  |                                    |          |                                    |   |                                        |   |                                        |        
|Basic and diluted net loss attributable to common stockholders per share |  | $                                  | (0.78    | )                                  | $ | (0.44                                  | ) | $                                      | (0.49  
|Weighted average shares, basic and diluted                               |  |                                    | 180,890  |                                    |   | 184,440                                |   |                                        | 193,570

87

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

During our two most recent fiscal years there have been no disagreements with our independent accountants on accounting and financial disclosure matters.

PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Information regarding our Directors and Executive Officers is contained in Part I of this annual report in the section entitled "Directors and Executive
Officers of the Company."

For
additional information regarding our Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, we direct you to the sections entitled "Proposal
OneElection of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement we will file with the Securities and Exchange Commission in
connection with the solicitation of proxies for Millennium's 2002 Annual Meeting of Stockholders to be held on April 25, 2002. We are incorporating the information contained in those sections
of our Proxy Statement here by reference.

Item 11.    EXECUTIVE COMPENSATION

For information regarding our executive compensation, we direct you to the sections entitled "Director Compensation," "Compensation of Executive Officers," and
"Compensation Committee Report on Executive Compensation" contained in the Proxy Statement we will file with the Securities and Exchange Commission in connection with the solicitation of proxies for
Millennium's 2002 Annual Meeting of Stockholders to be held on April 25, 2002. We are incorporating the information contained in those sections of our Proxy Statement here by reference.

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

For information about security ownership of certain beneficial owners and management required by this item, we direct you to the section entitled "Ownership of
Millennium's Common Stock" contained in the Proxy Statement we will file with the Securities and Exchange Commission in connection with the solicitation of proxies for Millennium's 2002 Annual Meeting
of Stockholders to be held on April 25, 2002. We are incorporating the information contained in this section of our Proxy Statement here by reference.

Equity Compensation Plan Information

This table shows information about the securities authorized for issuance under our equity compensation plans as of December 31, 2001.

|                                                               |  | (a)        |  | (b) |       | (c)
|-------------------------------------------------------------- |  | ---------- |  | --- | ----- | ---
|
|Equity compensation plans approved by security holders (1)     |  | 32,464,309 |  | $   | 27.36 |    
|Equity compensation plans not approved by security holders (2) |  | 1,431,651  |  |     | 27.93 |    
|Total                                                          |  | 33,895,960 |  |     | 27.38 |    

---

88

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The
information in this table is as of December 31, 2001 and does not include an aggregate of 6,050,210 shares issuable upon the exercise of options outstanding as of
March 1, 2002 under equity compensation plans that we assumed on February 12, 2002 in connection with our acquisition of COR. The weighted average exercise price per share of the
excluded options is $13.07.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information required by this item, we direct you to the caption entitled "Certain Relationships and Related Transactions" contained in the Proxy Statement we
will file with the Securities and Exchange Commission in connection with the solicitation of proxies for Millennium's 2002 Annual Meeting of Stockholders to be held on April 25, 2002. We are
incorporating the information contained in this section of our Proxy Statement here by reference.

89

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PART IV

Item 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

Page number
in this ReportReport of Independent Auditors on Financial Statements

61Consolidated Balance Sheets at December 31, 2001 and 2000

62Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999

63Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999

64Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999

65Notes to Financial Statements

66




1.    A
Current Report on Form 8-K was filed with the Securities and Exchange Commission on October 30, 2001 to report, pursuant to Item 5,
that on October 29, 2001, the Company issued a press release to announce that it entered into an agreement with ILEX Oncology, Inc. ("ILEX") to restructure their 50-50 joint
venture, Millennium & ILEX Partners L.P., as a result of which ILEX would acquire the Company's equity interest in the partnership, and the Company will receive a series of payments and
take a royalty position.

2.    A
Current Report on Form 8-K was filed with the Securities and Exchange Commission on November 26, 2001 to report, pursuant to Item 5,
that on November 26, 2001, the Company issued a press release to announce that it entered into an agreement with XOMA Ltd. ("XOMA") to collaborate in the development of two of the
Company's biotherapeutic agents: CAB-2 and MLN01 for certain vascular inflammation indications. Under an investment agreement, the Company committed to purchase up to $50 million of
XOMA common shares over the next three years, through a combination of convertible debt and equity at then prevailing market prices.

3.    A
Current Report on Form 8-K was filed with the Securities and Exchange Commission on December 6, 2001 to report, pursuant to Item 5,
that on December 5, 2001, the Company entered into an Agreement and Plan of Merger among the Company, PGM Corporation, a Delaware corporation and wholly owned subsidiary of the Company ("Sub")
and COR Therapeutics, Inc., a Delaware corporation ("COR") pursuant to which each outstanding share of common stock of COR will be converted into the right to receive 0.9873 shares of common
stock of the Company.

The following trademarks of the Company are mentioned in this Annual Report on Form 10-K:"Changing the Practice of
Medicine"SM, Chemoprediction, DGx, Diagnomics, Expression Explorer, G2P, "Gene to Patient", the Millennium
"M" logo and design (trademark), MBio, Melastatin®, Millennium®, Millennium Biotherapeutics®, Millennium InformationSM, Millennium
Pharmaceuticals, Millennium Predictive Medicine, MPMx, Pharmacoinformatics, Protein Explorer, RADE®, Sequence
Explorer®, "Transcending the Limits of Medicine" and INTEGRILIN® (eptifibatide) Injection. CAMPATH® is a registered trademark, and MabCAMPATH is a
trademark, of ILEX Pharmaceuticals, L.P. TNKase and Activase® are trademarks of Genentech, Inc.Other trademarks used in this Annual
Report on Form 10-K are the property of their respective owners.

90

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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.

|                    |  | MILLENNIUM PHARMACEUTICALS, INC.
|------------------- |  | --------------------------------
|Date: March 7, 2002 |  |                                 
|                    |  | 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/MARK J. LEVINMark J. Levin         |  | Chairperson of the Board, President and Chief Executive Officer; Director (Principal Executive Officer) |  | March 7, 2002
|/s/KEVIN P. STARRKevin P. Starr       |  | Chief Operating Officer and Chief Financial Officer (Principal Financial and Accounting Officer)        |  | March 7, 2002
|/s/VAUGHN M. KAILIANVaughn M. Kailian |  | Vice Chairperson and Director                                                                           |  | March 7, 2002
|/s/EUGENE CORDESEugene Cordes         |  | Director                                                                                                |  | March 7, 2002
|/s/SHAUN R. COUGHLINShaun R. Coughlin |  | Director                                                                                                |  | March 7, 2002
|/s/GINGER L. GRAHAMGinger L. Graham   |  | Director                                                                                                |  | March 7, 2002
|                                      |  |                                                                                                         |  |              

91

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|/s/A. GRANT HEIDRICH, IIIA. Grant Heidrich, III |  | Director |  | March 7, 2002
|----------------------------------------------- |  | -------- |  | -------------
|/s/RAJU S. KUCHERLAPATIRaju S. Kucherlapati     |  | Director |  | March 7, 2002
|/s/ERIC S. LANDEREric S. Lander                 |  | Director |  | March 7, 2002
|/s/ERNEST MARIOErnest Mario                     |  | Director |  | March 7, 2002
|/s/EDWARD D. MILLER, JR.Edward D. Miller, Jr.   |  | Director |  | March 7, 2002
|/s/NORMAN C. SELBYNorman C. Selby               |  | Director |  | March 7, 2002
|/s/KENNETH E. WEGKenneth E. Weg                 |  | Director |  | March 7, 2002

92

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EXHIBIT INDEX

|    |  |                                                                                                                                                                                                                                                        |  | Incorporated by Reference |  |                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------- |  | -----------------------
|
|2.1 |  | Agreement and Plan of Merger, dated as of December 5, 2001, among the Company, PGM Corporation and COR Therapeutics, Inc.                                                                                                                              |  | 8-K                       |  | 12/6/01                
|    |  | Articles of Incorporation and By-laws                                                                                                                                                                                                                 
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|3.1 |  | Amended and Restated Certificate of Incorporation of the Company, as amended                                                                                                                                                                           |  | 10-Q
8-K
10-Q             |  | 6/20/96
4/13/00
4/19/01
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|3.2 |  | Amended and Restated Bylaws of the Company, as amended                                                                                                                                                                                                 |  | 10-Q
10-Q
10-Q            |  | 6/20/96
5/2/00
11/9/00 
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|    |  | 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 (333-2490)          |  | 5/2/96                 
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|4.2 |  | Indenture, dated as of January 20, 2000, between the Company and State Street Bank and Trust Company, as Trustee relating to the 5.50% Convertible Subordinated Notes due January 15, 2007 (including the form of
debenture)                           |  | 10-K                      |  | 2/25/00                
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|4.3 |  | Rights Agreement dated April 5, 2001 by and between the Company and State Street Bank and Trust Company, N.A.                                                                                                                                          |  | 8-K                       |  | 4/5/01                 
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|4.4 |  | (a)    Indenture, dated February 24, 2000, between the Company (as successor to COR Therapeutics, Inc.) and U.S. Bank, N.A. (formerly known as Firstar Bank, N.A.), as Trustee,
relating to the 5.00% Convertible Subordinated Notes due March 1, 2007 |  | (a)10-Q*                  |  | 5/10/00                
|    |  | (b)    First Supplemental Indenture dated as of February 12, 2002                                                                                                                                                                                      |  | (b)8-K                    |  | 2/13/02                
|    |  | (c)    Second Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                    |  | (c)8-K                    |  | 2/13/02                
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                        
|4.5 |  | (a)    Indenture, dated June 11, 2001, between the Company (as successor to COR Therapeutics, Inc.) and U.S. Bank, N.A. (as successor to Firstar Bank, N.A.), as Trustee, relating to the
4.50% Convertible Senior Notes due June 15, 2006             |  | (a)10-Q*                  |  | 8/3/01                 
|    |  | (b)    First Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                     |  | (b)S-3 (333-82654)        |  | 2/13/02                

---

|     |  | (c)    Second Supplemental Indenture, dated as of February 12, 2002                                                                                                            |  | (c)S-3 (333-82654)            |  | 2/13/02                          |  | 4.3                       |  | 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------- |  | -------------------------------- |  | ------------------------- |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|     |  | 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           |  | 11/13/96
8/14/97
2/25/00
3/15/01 |  | 10.2
10.9
10.3, 10.4
10.2 |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|     |  | Material contractsReal Estate                                                                                                                                                
|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 |  | 3/18/96
3/24/99
2/25/00
3/15/01  |  | 10.32
10.57
10.6
10.4     |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.3 |  | Lease dated November 17, 1997 by and between the Company and FC 45/75 Sidney, Inc., as amended, for 45 and 75 Sidney Street, Cambridge, MA                                     |  | 10-K
10-K                     |  | 3/27/98
2/25/00                  |  | 10.22
10.9                |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.4 |  | Lease Agreement dated August 4, 2000 by and between the Company and Forest City Enterprises, Inc. for 35 Landsdowne Street, Cambridge, MA                                      |  | 10-Q                          |  | 11/9/00                          |  | 10.3                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.5 |  | Agreement between Owner and Contractor by and between the Company and Turner Construction Company dated as of May 4, 2001 for 35 Landsdowne Street, Cambridge, MA              |  | 10-Q                          |  | 8/3/01                           |  | 10.2                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.6 |  | Lease Agreement dated August 4, 2000 by and between the Company and Forest City Enterprises, Inc. for 40 Landsdowne Street, Cambridge, MA                                      |  | 10-Q                          |  | 11/9/00                          |  | 10.4                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.7 |  | Agreement for Lease dated February 9, 2001 among Granta Park Limited, MEPC Limited, Millennium Pharmaceuticals Limited and the Company (including the form of lease)           |  | 10-K                          |  | 3/15/01                          |  | 10.8                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|10.8 |  | Lease Agreement dated July 1, 2001 between Britannia Pointe Grand Limited Partnership and the Company (as successor to COR Therapeutics, Inc.)                                 |  | 10-Q*                         |  | 10/31/01                         |  | 10.3                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 
|     |  | Material contractsresearch and development/collaboration agreements                                                                                                          
|10.9 |  | Agreement dated October 27, 1997 by and among the Company, Monsanto Company and Cereon Genomics Inc. (formerly Monsanto Agricultural Genomics II LLC)                         |  | 8-K/A                         |  | 1/30/98                          |  | 99.1                      |  | 
|     |  |                                                                                                                                                                                |  |                               |  |                                  |  |                           |  | 

---

|10.10 |  | (a)    Agreement dated September 22, 1998 by and between the Company and Bayer AG, as amended                                                                                               |  | (a)10-Q
    10-Q
    10-K |  | 11/16/98
11/9/00
3/15/01 |  | 10.1
10.1, 10.2
10.14 |  | 
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------------ |  | --------------------- |  | 
|      |  | (b)    Registration Rights Agreement dated November 10, 1998                                                                                                                                 |  | 10-Q
(b)10-Q              |  | 10/25/01
11/16/98        |  | 10.2
10.3             |  | 
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|10.11 |  | Collaboration and License Agreement dated February 21, 1999 by and between the Company (as successor to Millennium Predictive Medicine, Inc.) and Becton, Dickinson and Company, as amended |  | 10-Q
10-K
10-Q            |  | 7/30/99
3/15/01
10/25/01 |  | 10.1
10.18
10.1       |  | 
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|10.12 |  | (a)    Collaboration and License Agreement dated June 22, 2000 by and between the Company and Aventis Pharmaceuticals, Inc., as amended                                                     |  | (a)10-Q
    10-Q          |  | 7/26/00
10/25/01         |  | 10.1
10.3             |  | 
|      |  | (b)    Technology Development Agreement dated June 22, 2000                                                                                                                                 |  | (b)10-Q                   |  | 7/26/00                  |  | 10.2                  |  | 
|      |  | (c)    Technology Transfer Agreement dated June 22, 2000                                                                                                                                    |  | (c)10-Q                   |  | 7/26/00                  |  | 10.3                  |  | 
|      |  | (d)    Registration Rights Agreement dated June 22, 2000                                                                                                                                     |  | (d)10-Q                   |  | 7/26/00                  |  | 10.4                  |  | 
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|10.13 |  | (a)    Collaboration and License Agreement dated March 9, 2001 by and between the Company and Abbott Laboratories                                                                           |  | (a)10-Q                   |  | 4/19/01                  |  | 10.1                  |  | 
|      |  | (b)    Technology Exchange and Development Agreement dated March 9, 2001                                                                                                                    |  | (b)10-Q                   |  | 4/19/01                  |  | 10.2                  |  | 
|      |  | (c)    Investment Agreement dated March 9, 2001                                                                                                                                              |  | (c)10-Q                   |  | 4/19/01                  |  | 10.3                  |  | 
|      |  | Material contractsMLN591                                                                                                                                                                   
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|10.14 |  | Development and License Agreement between the Company and BZL Biologics, LLC effective as of April 5, 2001                                                                                  |  | 10-Q                      |  | 8/3/01                   |  | 10.1                  |  | 
|      |  | Material contractsMLN02                                                                                                                                                                    
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|10.15 |  | Development Collaboration and License Agreement, dated as of December 18, 1997, between the Company (as successor to LeukoSite, Inc.) and Genentech, Inc.                                   |  | 8-K**                     |  | 1/26/98                  |  | 10.1                  |  | 
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 
|      |  | Material contractsCAMPATH®                                                                                                                                                                 
|10.16 |  | Purchase and Sale Agreement dated October 29, 2001 by and among ILEX Oncology, Inc., ILEX Acquisitions, Inc., mHoldings Trust and the Company                                                |  | 10-Q***                   |  | 11/2/01                  |  | 10.1                  |  | 
|      |  |                                                                                                                                                                                              |  |                           |  |                          |  |                       |  | 

---

|      |  | Material contractsINTEGRILIN®(eptifibatide) Injection                                                                                                                          
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.17 |  | Amended and Restated Collaboration Agreement, dated as of December 11, 2001 by and between the Company (as successor to COR Therapeutics, Inc.) and Kyowa Hakko Kogyo Co., Ltd.
|      |  |                                                                                                                                                                                 
|10.18 |  | License and Supply Agreement between the Company (as successor to COR Therapeutics, Inc.) and Solvay, Societe Anonyme, dated July 27, 1994, as amended                         
|      |  |                                                                                                                                                                                 
|10.19 |  | Long Term Supply Agreement between the Company (as successor to COR Therapeutics, Inc.) and Solvay, Societe Anonyme, dated September 28, 1995, as amended                      
|      |  |                                                                                                                                                                                 
|10.20 |  | Collaboration Agreement between Schering-Plough Ltd., Schering Corporation and the Company (as successor to COR Therapeutics, Inc.) dated April 10, 1995, as amended           
|      |  |                                                                                                                                                                                 
|10.21 |  | Co-Promotion Agreement dated January 1, 2001 by and between Genentech, Schering Sales Management, Inc. and the Company (as successor to COR Therapeutics, Inc.)                
|      |  |                                                                                                                                                                                 
|      |  | Material contractsMLN01                                                                                                                                                        
|10.22 |  | (a)    Development and License Agreement dated as of November 26, 2001 by and among the Company, XOMA (US) LLC and XOMA Ireland Limited                                        
|      |  | (b)    Investment Agreement dated as of November 26, 2001 by and among XOMA Ltd., the Company and mHoldings Trust                                                              
|      |  | (c)    Registration Rights Agreement dated November 26, 2001 by and among the Company, mHoldings Trust and XOMA Ltd.                                                           
|      |  |                                                                                                                                                                                 

---

|      |  | Material contractsmiscellaneous                                                                                                                                                                                                                                                     
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23 |  | Registration Rights Agreement among the Company (as successor to COR Therapeutics, Inc.) and Goldman, Sachs & Co., Chase H&Q, a division of Chase Securities Inc., CIBC World Markets Corp.,
FleetBoston Robertson Stephens Inc. and Warburg Dillon Read LLC, dated February 24, 2000
|      |  |                                                                                                                                                                                                                                                                                      
|10.24 |  | Registration Rights Agreement among the Company (as successor to COR Therapeutics, Inc.) and Goldman, Sachs & Co., Robertson Stephens, Inc., Credit Suisse First Boston Corporation, CIBC World
Markets Corp., and Needham & Company, Inc., dated June 11, 2001                      
|      |  |                                                                                                                                                                                                                                                                                      
|10.25 |  | Registration Rights Agreement dated January 20, 2000 between the Company and Goldman, Sachs & Co., ING Barings LLC, FleetBoston Robertson Stephens Inc., and Credit Suisse First Boston
Corporation                                                                                  
|      |  |                                                                                                                                                                                                                                                                                      
|      |  | Material contractsmanagement contracts and compensatory plans                                                                                                                                                                                                                       
|10.26 |  | 1996 Director Option Plan#                                                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                      
|10.27 |  | 1997 Equity Incentive Plan assumed by the Company as successor to Millennium BioTherapeutics, Inc.#                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                      
|10.28 |  | 1997 Equity Incentive Plan assumed by the Company as successor to Millennium Predictive Medicine, Inc.#                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                      
|10.29 |  | (a)    Amended and Restated 1993 Stock Option Plan, as amended, assumed by the Company as successor to LeukoSite, Inc.
#                                                                                                                                                             
|      |  | (b)    Fourth and Fifth Amendments                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                      
|10.30 |  | 1991 Equity Incentive Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc.#                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                      
|10.31 |  | 1994 Non-employee Directors' Stock Option Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc.#                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                      
|10.32 |  | 1998 Non-Officer Equity Incentive Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc.#                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                      

---

|10.33 |  | Millennium Pharmaceuticals, Inc. SAYE Plan#                                                                                                                                                    |  |                 |  |         |  |       |  | X
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | ------- |  | ----- |  | -
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.34 |  | Agreement dated as of April 21, 1993, by and between the Company and Raju Kucherlapati#                                                                                                        |  | S-1 (333-2490)  |  | 3/18/96 |  | 10.14 |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.35 |  | Form of Employment Offer Letter entered into with certain executive officers of the Company, together with a schedule of parties thereto#                                                      |  | 10-K            |  | 2/25/00 |  | 10.34 |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.36 |  | Form of Promissory Notes made in favor of the Company by certain executive officers of the Company, together with a schedule of parties thereto#                                               |  | 10-K            |  | 3/15/01 |  | 10.40 |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.37 |  | Form of Stock Restriction Agreement entered into with certain executive officers of the Company, together with a schedule of parties thereto#                                                  |  | 10-K            |  | 3/15/01 |  | 10.41 |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.38 |  | Form of Indemnification Agreement between the Company (as successor to COR Therapeutics, Inc.) and Vaughn M. Kailian, Charles J. Homcy, Shaun R. Coughlin, Ginger L. Graham, and Ernest Mario# |  | S-1 (33-40627)* |  | 5/16/91 |  | 10.1  |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|10.39 |  | Form of Key Employee Change in Control Severance Plan between the Company (as successor to COR Therapeutics, Inc.) and Vaughn M. Kailian and Charles J. Homcy#                                 |  | 10-Q*           |  | 11/4/99 |  | 10.1  |  |  
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|21    |  | Subsidiaries of the Company                                                                                                                                                                    |  |                 |  |         |  |       |  | X
|      |  |                                                                                                                                                                                                |  |                 |  |         |  |       |  |  
|23.1  |  | Consent of Ernst & Young LLP, Independent Auditors                                                                                                                                             |  |                 |  |         |  |       |  | X

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