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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, 2003

or

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

For the transition period from  to

Commission file number: 0-28494

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:None

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

Common Stock, $.001 par value(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

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

The aggregate market value of voting Common Stock held by non-affiliates of the registrant as of June 30, 2003 was $4,612,936,511 based on the
last reported sale price of the Common Stock on the Nasdaq Stock Market on that date.

Number
of shares outstanding of the registrant's Common Stock as of March 5, 2004: 303,942,934.

Documents incorporated by reference:

Portions of the information required by Part III of Form 10-K will appear in the registrant's definitive Proxy Statement on
Schedule 14A for the 2004 Annual Meeting of Stockholders and are hereby incorporated by reference into this report.



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TABLE OF CONTENTS



|PART I                               |                                                                |                                                                                                                 
|------------------------------------ | -------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------
|Item 1.                              |                                                                | BUSINESS                                                                                                        
|                                     | Overview                                                       |                                                                                                                 
|                                     | Our Strategy                                                   |                                                                                                                 
|                                     | Our Products                                                   |                                                                                                                 
|                                     | Our Clinical Pipeline                                          |                                                                                                                 
|                                     | Drug Discovery and Development                                 |                                                                                                                 
|                                     | Research and Development                                       |                                                                                                                 
|                                     | Patents and Proprietary Rights; Licenses                       |                                                                                                                 
|                                     | Government Regulation                                          |                                                                                                                 
|                                     | Manufacturing                                                  |                                                                                                                 
|                                     | Sales and Marketing                                            |                                                                                                                 
|                                     | Competition                                                    |                                                                                                                 
|                                     | Employees                                                      |                                                                                                                 
|                                     | Available Information                                          |                                                                                                                 
|RISK FACTORS THAT MAY AFFECT RESULTS |                                                                | 17                                                                                                              
|                                     | Regulatory Risks                                               |                                                                                                                 
|                                     | Risks Relating to Our Business, Strategy and Industry          |                                                                                                                 
|                                     | Risks Relating to Our Financial Results and Need for Financing |                                                                                                                 
|                                     | Risks Relating to Collaborators                                |                                                                                                                 
|                                     | Risks Relating to Intellectual Property                        |                                                                                                                 
|                                     | Risks Relating to Product Manufacturing, Marketing and Sales   |                                                                                                                 
|                                     | Risks Relating to an Investment in Our Common Stock            |                                                                                                                 
|Item 2.                              |                                                                | PROPERTIES                                                                                                      
|Item 3.                              |                                                                | LEGAL PROCEEDINGS                                                                                               
|Item 4.                              |                                                                | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             
|OUR EXECUTIVE OFFICERS               |                                                                | 32                                                                                                              
|PART II                              |                                                                |                                                                                                                 
|Item 5.                              |                                                                | MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|Item 6.                              |                                                                | SELECTED FINANCIAL DATA                                                                                         
|Item 7.                              |                                                                | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                           
|Item 7A.                             |                                                                | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                      
|Item 8.                              |                                                                | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                     
|Item 9.                              |                                                                | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            
|Item 9A.                             |                                                                | CONTROLS AND PROCEDURES                                                                                         
|PART III                             |                                                                |                                                                                                                 
|Item 10.                             |                                                                | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                              
|                                     |                                                                |                                                                                                                 

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|Item 11.      |  | EXECUTIVE COMPENSATION                                                                         |  | 82
|------------- |  | ---------------------------------------------------------------------------------------------- |  | --
|Item 12.      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 82
|Item 13.      |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 84
|Item 14.      |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                         |  | 84
|PART IV       |  |                                                                                               
|Item 15.      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               |  | 84
|SIGNATURES    |  | 85                                                                                            
|EXHIBIT INDEX |  | 87                                                                                            

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PART I

Item 1. BUSINESS

Overview

We are a leading biopharmaceutical company focused on developing and commercializing breakthrough products in the disease areas of cancer, cardiovascular disease
and inflammatory disease. We currently have a cancer product and a cardiovascular disease product on the market. We also have other potential products in various stages of preclinical and clinical
development in all three of our therapeutic disease areas of focus.

Our
cancer product, VELCADE® (bortezomib) for Injection, was approved for marketing in the United States in May 2003 as a treatment for patients with multiple myeloma,
a type of blood cancer, who have received at least two prior therapies and demonstrated disease progression on their most recent therapy. We started to market VELCADE in the United States shortly
after receiving marketing approval and we sell VELCADE directly through our cancer sales force. In June 2003, we entered into a commercialization and development agreement for VELCADE with
Ortho Biotech Products, L.P., or Ortho Biotech, a wholly owned subsidiary of Johnson & Johnson. If VELCADE receives regulatory approval in areas outside of the United States, Ortho Biotech and
its affiliates will sell VELCADE in those areas and pay us distribution fees. In 2003, sales of VELCADE were approximately $59.6 million, which represented approximately 14% of our total
revenue for 2003.

Our
market-leading cardiovascular product, INTEGRILIN® (eptifibatide) Injection, has been marketed in the United States since 1998 and outside of the United States since
1999. In the
United States, we co-promote INTEGRILIN with Schering-Plough Corporation and Schering-Plough Ltd., together referred to as SGP, and share profits and losses. Outside of the United
States, SGP sells INTEGRILIN pursuant to a royalty-bearing license. In 2003, worldwide sales of INTEGRILIN were approximately $305.8 million. Approximately 93% of those sales were made in the
United States. Our co-promotion revenue from INTEGRILIN in the United States was approximately $184.3 million, which represented approximately 43% of our total revenue for 2003.

Our
strategy is to develop multiple products in three broad disease areas through clinical trials and regulatory approvals and to be involved in the marketing and sale of many of these
products. We plan to develop and commercialize many of our products on our own, but will seek development and commercial collaborators when we believe that this will maximize product value. For
example, we plan to enter into sales and marketing alliances with major pharmaceutical companies for products in disease areas that require large sales forces or for markets outside of the United
States.

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

Our Strategy

We remain committed to building our business as a leading biopharmaceutical company. We focus on developing and commercializing important new medicines in three
therapeutic areas. A key element of the strategy in our disease areas is to build a portfolio of innovative, new treatments based on our understanding of particular molecular pathways that affect the
instigation and progression of specific diseases. These molecular pathways include the related effects of proteins on cellular performance, replication and death.

In
the near term, we expect to focus our commercial activities in the cancer and cardiovascular therapeutic areas. In cancer, in May 2003, we successfully obtained marketing
approval of VELCADE from the United States Food and Drug Administration, or FDA, and launched the product in the United States shortly after the approval date with our new cancer sales force. In the
cardiovascular

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area,
our acquisition of COR Therapeutics, Inc., or COR, in 2002 brought us INTEGRILIN® (eptifibatide) Injection and a hospital-based cardiovascular sales and marketing
organization.

We
believe we will make substantial progress in bringing new products to market from our current pipeline of compounds in clinical development. We are seeking to gain approval to market
VELCADE outside of the United States. We also are working to obtain approval to market VELCADE in the United States and elsewhere for earlier use in multiple myeloma and for the treatment of
additional cancer types. We believe that these additional uses of VELCADE would lead to a significant expansion of our cancer business. In inflammatory disease, we hope to advance novel product
candidates in clinical development as potential treatments for serious and widely prevalent conditions.

In
the long term, we expect to bring new products to market derived from our pipeline of discovery and development-stage programs on a regular basis. If we are successful, we would use
the revenues from this expanding portfolio of marketed products to broaden the scope of our operations.

Our Products

VELCADE® (bortezomib) for Injection

VELCADE, the first of a new class of medicines called proteasome inhibitors, is the first treatment in more than a decade to be approved in the United States for
patients with multiple myeloma. We received accelerated approval from the FDA on May 13, 2003 to market VELCADE for the treatment of multiple myeloma patients who have received at least two
prior therapies and have demonstrated disease progression on their most recent therapy.

In
February 2003, our Marketing Authorization Application to market VELCADE in the European Union for the treatment of patients with multiple myeloma who have received at least
two prior therapies and have demonstrated disease progression on their most recent therapy was accepted for review by the European Agency for the Evaluation of Medicinal Products, or EMEA. In
January 2004, the EMEA's Committee on Proprietary Medicinal Products, or CPMP, issued a positive opinion to recommend approval under exceptional circumstances for VELCADE. The CPMP's opinion
was forwarded to the European Commission, and we anticipate that the European Commission will ratify the opinion and issue a Marketing Authorization in the second quarter of 2004. Under a Marketing
Authorization, the EMEA would issue us a single license to market VELCADE in the 15 member states of the European Union, the ten other participating accession member countries, plus Norway and
Iceland. Under our agreement with Ortho Biotech, after issuance, we would transfer the license to an affiliate of Ortho Biotech and Ortho Biotech's affiliates will market VELCADE in these countries.

Multiple
myeloma is a cancer of the bone marrow in which some types of white blood cells are overproduced. As a result, there is decreased production of normal red and normal white blood
cells, thereby damaging the body's immune system. The overproduced white blood cells also cause the growth of tumors that spread to multiple sites, causing bone destruction and resulting in pain and
bone fractures. Approximately 15,000 new cases of multiple myeloma were diagnosed in the United States in 2003 and approximately 11,000 people in the United States died of this disease in 2003.
Multiple myeloma is one of the top ten causes of cancer death among African-Americans. We estimate that in the United Kingdom, France, Germany, Italy, Spain and Sweden a total of approximately 14,000
new cases of multiple myeloma were diagnosed in 2003.

VELCADE
is the first in a new class of drugs called proteasome inhibitors. These drugs act in a different way from other anti-cancer therapies. Proteasomes are enzyme
complexes in all cells that break down intracellular proteins in a regulated manner in both healthy and cancerous cells. Intracellular proteins form pathways by which cancer cells multiply, spread,
interact with other cells and avoid programmed cell death. Inhibition of the proteasome by VELCADE prevents the regulated

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breakdown
of these intracellular proteins, thereby interfering with many of these varied functions. This disruption of essential pathways in cancer cells can lead to cell death and inhibit tumor
growth.

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

VELCADE® (bortezomib) for Injection Clinical Development

We believe that VELCADE may have broad applications in the treatment of cancer. In order to widely investigate VELCADE to its fullest potential, during 2003,
patients were enrolled in approximately 50 on-going clinical trials studying the use of VELCADE alone and in combination with other therapies in a variety of cancers in both the United
States and Europe.

Our
largest clinical trial of VELCADE in multiple myeloma was the confirmatory phase III APEX trial. The APEX trial includes relapsed or refractory patients who had received from one to
three prior therapies. This is a broader patient population than the SUMMIT trial, the results of which were included in our New Drug Application, or NDA, for VELCADE filed with the FDA and formed the
basis for the FDA's approval. In December 2003, we permitted the control arm of the APEX trial to have the opportunity to switch to VELCADE on the recommendation of an independent committee
after reviewing data that indicated a statistically significant improvement in time to disease progression
in patients receiving VELCADE compared to patients receiving high-dose dexamathasone, a current standard of care.

In
addition to clinical trials investigating VELCADE in combinations with other therapies and in patients with various stages of multiple myeloma, clinical trials covering other
hematologic cancers, such as non-Hodgkin's lymphoma, as well as various solid tumors, including non-small cell lung, breast, prostate and ovarian cancers are also being
conducted. In December 2003, we stopped further patient enrollment to a phase II trial examining VELCADE in colorectal cancer because interim findings produced results that did not meet the
pre-specified efficacy criteria for continuation of study accrual.

Our Ortho Biotech Collaboration

On June 30, 2003, we entered into an agreement with Ortho Biotech to collaborate on the commercialization and continued clinical development of VELCADE.
Under the terms of the agreement, we retain all commercialization rights to and profits from VELCADE in the United States. Subject to obtaining regulatory approvals of VELCADE outside of the United
States, Ortho Biotech and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside of the United States. We are entitled to distribution fees from Ortho Biotech and its affiliates on
sales of VELCADE outside of the United States. We also retain an option to co-promote VELCADE with Ortho Biotech at a future date in certain European countries.

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

Under
this agreement, decisions regarding the ongoing development and marketing of VELCADE are generally subject to the oversight of a joint steering committee with equal membership from
Ortho Biotech and us. However, in the event of a dispute, specified development, United States

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commercialization
and other decisions are allocated specifically to us, and commercialization decisions outside of the United States and some other decisions are allocated specifically to Ortho
Biotech. Unless our agreement with Ortho Biotech is terminated early due to a material uncured breach by one of the parties or by Ortho Biotech unilaterally subject to notice obligations, the
agreement continues on a country by country basis outside of the United States until no earlier than the expiration of the last to expire patent covering the manufacture, use or sale of the product in
the country. For the year ended December 31, 2003, revenues from this alliance including license fees, reimbursement of development expenses and milestone payments accounted for approximately
11% of our total revenues.

INTEGRILIN® (eptifibatide) Injection

General

In collaboration with SGP, INTEGRILIN is marketed in the United States, in all 15 member states of the European Union and in other countries, including Argentina,
Australia, Brazil, Canada, India, Japan, Mexico, Singapore, South Africa, Switzerland and Thailand.

INTEGRILIN
is a small synthetic peptide that works by preventing the aggregation of platelets by blocking the platelet receptor GP IIb-IIIa. The effects of INTEGRILIN are
specific to platelets, avoiding interference with other normal cardiovascular processes. In addition, these effects can be reversed following INTEGRILIN discontinuation when no longer needed. We
believe that more than one million people in the United States are candidates for INTEGRILIN therapy each year. Bleeding is the most common complication encountered during administration of INTEGRILIN
therapy. The majority of excess major bleeding events associated with INTEGRILIN are localized at the site of catheter insertion.

INTEGRILIN
is approved for marketing in the United States for the treatment of patients with acute coronary syndromes, which include unstable angina and non-ST segment
elevation myocardial infarction and for use at the time of a percutaneous coronary intervention. This is a broader set of indications than the other two GP IIb-IIIa inhibitors approved for
marketing in the United States. We believe that growth of INTEGRILIN sales for its current indications will depend
on increasing early usage in patients with acute coronary syndromes and the number of hospitals using INTEGRILIN.

We
have a specialized United States cardiovascular sales force that focuses on expanding hospital use of INTEGRILIN. We market INTEGRILIN in the United States 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 can affect
purchasing decisions. SGP is responsible for the sale of the final product to wholesalers.

INTEGRILIN Clinical Development

We are pursuing opportunities to expand the market potential for INTEGRILIN by increasing the use of the product in its currently approved indications. For
instance, we believe that it may be possible to increase usage before patients enter cardiac surgery. We expect to initiate an EARLY ACS trial in 2004 to demonstrate the benefits of earlier usage of
INTEGRILIN. Additionally, through the CRUSADE quality improvement initiative conducted by Duke Clinical Research Institute, we are seeking to increase awareness of the 2002 American College of
Cardiology and the American Heart Association guidelines for the management of non-ST-Segment Elevation Acute Coronary Syndromes providing for early use of GP
IIb-IIIa inhibitors in certain high risk patients.

We
are also continuing to invest in clinical trials like PROTECT, which is investigating the potential additional benefit of a GP IIb-IIIa inhibitor over
anti-thrombin treatment. We and SGP are funding the EVENT patient registry, which is investigating the incremental benefit of using INTEGRILIN with drug eluting stents. In addition, we are
funding investigator-initiated clinical studies to look at INTEGRILIN without anti-thrombin treatment in the REMOVE study for low-risk PCI

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patients,
and to study the benefit of INTEGRILIN® (eptifibatide) Injection in patients with ST segment elevation myocardial infarction in the TITAN study. Finally, we are currently funding
other investigator-initiated clinical trials to evaluate INTEGRILIN in other possible indications.

Our SGP Collaboration

In April 1995, COR entered into a collaboration agreement with SGP 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 SGP and us. However, some development decisions are
allocated specifically to us. In addition, in those markets where SGP has exclusive marketing rights, currently everywhere except the United States, SGP has decision-making authority with respect to
marketing issues.

Under
our collaboration agreement with SGP, we generally share any profits or losses from the United States with SGP based on the amount of promotional efforts that each party
contributes. Since the United States launch of INTEGRILIN in June 1998, we have agreed to share promotional efforts in the United States equally with SGP, except for costs associated with
marketing programs specific to us. We have granted SGP an exclusive license to market INTEGRILIN outside the United States, and SGP pays royalties to us based on sales outside of the United States. We
have the right, in the future, to co-promote INTEGRILIN in Europe and Canada. If we exercise this right, we would share any profits or losses from this additional co-promotion
territory with SGP.

Our
agreement with SGP continues on a country by country basis until the later of fifteen years from first commercial sale of an INTEGRILIN product in that country, or expiration of the
last to expire patent covering the manufacture, use or sale of that product in that country.

Our Clinical Pipeline

In 2003, we met our goal of commencing human clinical trials for three new compounds: MLN944, MLN3897 and MLN2222. In addition to VELCADE®
(bortezomib) for Injection and INTEGRILIN, we now have ten drug candidates in clinical development. We plan to advance the clinical development of these drug candidates based on our assessment of
their market potential, the results of clinical trials and our available resources.

Our Cancer Pipeline

In addition to our ongoing clinical trials of VELCADE in patients with multiple myeloma and other cancers discussed above, we have completed or have ongoing,
directly or through collaborators or third party investigators, the following clinical trials for our cancer product candidates:



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Our Cancer Product Alliances

In December 2001, we entered into a license agreement with Xenova Group, plc, or Xenova, for the development and exclusive North American commercialization
rights to Xenova's DNA-targeting program, including MLN576 and MLN944, for the treatment of solid cancerous tumors. Under this agreement, Xenova, in collaboration with and funded by us,
agreed to continue its efforts to move compounds to pivotal clinical trial stages. Under the agreement, we made an initial payment to Xenova of $11.5 million and are required to pay Xenova
milestone payments and royalties based on product sales. In February 2004, we and Xenova amended this agreement to provide us the right to conduct clinical trials in North America prior to
pivotal clinical trial stages.

In
April 2001, we entered into an agreement with BZL Biologics, L.L.C., or BZL, for the joint development and commercialization of antibody-based therapeutics targeting PSMA,
including both chemotherapeutic agent conjugated and radio-labeled products. These products include MLN2704 and MLN591RL. Under this agreement, we currently have exclusive development and worldwide
marketing rights to these products. We are required to pay development costs of the products and milestone and royalty payments to BZL based on product sales.

Our Cancer Discovery Alliance

We formed a comprehensive, multi-disease alliance with Bayer in October 1998 relating to the identification of targets for small molecule therapies and
Bayer's development and commercialization of small molecule therapies. On October 31, 2003, the research phase of this strategic alliance ended. On October 10, 2003, we and Bayer amended
the agreement to provide both parties access to certain targets identified in the collaboration for a period of seven years.

We
expect Bayer will continue to develop small molecule drugs based on drug targets identified during the research portion of the alliance. The alliance covers several disease areas,
including cardiovascular disease, cancer, pain, blood diseases, viral infections and urology. If Bayer develops and commercializes drugs that modulate targets discovered in the alliance, Bayer will be
obligated to make success and royalty payments to us based on product sales.

For
the year ended December 31, 2003, revenues from this alliance accounted for approximately 14% of our total revenues.

Our Cardiovascular Pipeline

In addition to the ongoing trials of INTEGRILIN® (eptifibatide) Injection discussed above, we have completed or have ongoing, directly or through
collaborators or third party investigators, the following clinical trials for our cardiovascular product candidates:



Our Cardiovascular Product Alliance

In November 2001, we entered into a collaboration agreement with XOMA Ltd., or XOMA, providing for the development by XOMA of two biotherapeutic
agents of ours, MLN2222 and MLN2201, in the cardiovascular disease area. The agreement provides for payment of associated costs by XOMA through completion of phase II trials of these agents,
commercialization of the products by us after successful phase II trials and the choice by XOMA to further participate in the development program and share in profits or if XOMA does not so elect, to
receive future milestone and royalty payments from us.

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Under this agreement, XOMA made an initial payment to us and may be required to make additional milestone payments. In addition, we originally agreed to purchase up to
$50.0 million of XOMA common shares. As the preliminary results of a phase I trial of MLN2201 failed to meet pre-defined criteria, the MLN2201 development program was terminated in October
2003. As a result of this termination, our remaining obligation under the terms of the investment agreement was reduced by 40%. As of February 29, 2004, as part of this obligation, we had
purchased $16.9 million in XOMA common shares, and XOMA may require us to purchase up to an additional $19.7 million of XOMA common shares including the conversion of a
$5.0 million convertible promissory note.

Our Inflammatory Disease Pipeline

We have completed or have ongoing, directly or through collaborators or third party investigators, the following clinical trials for our inflammatory disease
product candidates:



Our Inflammatory Disease Product Alliance

In December 1997, we entered into a collaboration with Genentech to develop, seek regulatory approval for and commercialize MLN02 for the treatment of
inflammatory bowel disease. Under the terms of the agreement, we have licensed to Genentech exclusive worldwide rights to market MLN02. We are responsible for developing MLN02 through successful phase
II clinical trials, after which Genentech is responsible for completing the development of the product. We have the option to share in the phase III development costs in return for a share of profits
on sales of MLN02 in the United States while continuing to receive royalties on sales made outside of the United States. We also are entitled to payments upon achievement of development milestones by
Genentech.

Our Inflammatory Disease Discovery Alliance

In June 2000, we entered into a broad agreement in the field of inflammatory disease with Aventis that includes joint discovery, development and
commercialization of drugs for the treatment of specified inflammatory diseases. This agreement covers a substantial portion of our research and development program in the inflammatory disease area
and provides us with potential access to Aventis' large promotional infrastructure in connection with the commercialization of jointly developed products. The research phase of the agreement has a
five-year term.

In
North America, we have agreed to share the responsibility for and cost of developing, manufacturing and marketing products arising from the alliance. Outside of North America, Aventis
is responsible for and will bear the cost of developing, manufacturing and marketing products arising from the alliance. Aventis is required to pay us a royalty on product sales outside of North
America. Under this agreement, Aventis acquired 4.5 million shares of our common stock over a two year period for $250.0 million.

To
date, we and Aventis have identified a significant number of novel drug targets relevant in inflammatory diseases. During the remaining portion of the research phase of the alliance,
we and

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Aventis
will focus our joint resources on the identification and evaluation of compounds for preclinical and clinical development. As of the end of 2003, the alliance had identified several early
development candidates, one of which, MLN3897 is now being tested in a phase I clinical trial.

In
April 2003, Aventis exercised its option to terminate the Technology Transfer Agreement between us and Aventis effective on the third anniversary of the Agreement,
July 21, 2003. Under the terms of the agreement, upon providing this notice to us, Aventis paid us $40.0 million in consideration of future use of technology transferred by us to
Aventis. For the year ended December 31, 2003, revenues from this agreement accounted for approximately 15% of our total revenues.

Drug Discovery and Development

A key element of our overall strategy is to build a sustainable pipeline of innovative new treatments in several disease areas. In these disease areas, we hope to
generate a sufficiently large and diverse portfolio of discovery and development programs at various stages of maturity that we can move new drugs through clinical development and onto the market on a
regular basis.

To
achieve this goal, we have focused on developing a comprehensive understanding of the mechanisms and pathways that underlie important diseases and on building an organization capable
of converting this understanding into innovative treatments for patients. We deploy a full range of genomics capabilities to decipher the workings of the human genome and identify genes the regulation
of which may play an important role in disease. From among these genes, we select those whose properties appear most suitable as targets for new drugs. Then we find and optimize small molecule
compounds or antibodies that interact with targets in an appropriate manner. We test these drug candidates extensively in animal models to assess their likely suitability as therapeutic products. We
then move into clinical testing in humans, to establish the safety and efficacy of these experimental products and to understand therapeutically important differences among people. At any stage of
this entire process we may need to go back to repeat several steps with slight variations, in an effort to ensure that we bring the most suitable new drug candidate through clinical testing. If we
believe we have established safety and efficacy for a new drug candidate, we submit applications for marketing approval to the appropriate regulatory authorities.

During
this process, we are informed by the expertise of our scientists and clinicians in disease biology, chemistry and preclinical and clinical development, and our efforts are enabled
by the comprehensive range of capabilities we have assembled into our technology platform. To augment our internal discovery and development capabilities, we may also license or acquire rights to
drugs or drug candidates that have been developed outside of our company and which address pathways we have identified as important for their particular diseases.

As
we shift our focus to clinical development and product commercialization, and as we conclude our discovery-based alliances, we expect to devote fewer personnel and resources to
research and discovery activities. As a result of this shift, we recorded a restructuring charge in 2003 of approximately $191.0 million and expect to record additional restructuring charges
during 2004 and 2005 in the aggregate of approximately $60.0 million. As part of this restructuring, in August 2003 we terminated our strategic alliance in the metabolic disease area
with Abbott Laboratories.

Research and Development

Company-sponsored research and development expenses totaled $316.8 million in 2003, $337.5 million in 2002 and $99.7 million in 2001. Our
strategic collaborator-sponsored research and development expenditures totaled $171.7 million in 2003, $173.7 million in 2002 and $300.9 million in 2001. 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

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we
may receive future compensation as milestone payments, royalties or otherwise even though we provide the current funding.

Patents and Proprietary Rights; Licenses

Patents

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
possible therapeutic, diagnostic and pharmacogenomic products and processes, drug screening methodologies and other inventions based on such genes, proteins, antibodies and small molecules. We also
seek patent protection or rely upon trade secret rights to protect certain other technologies which may be used to discover and characterize genes, proteins, antibodies and small-molecules and which
may be used to develop and manufacture novel therapeutic, diagnostic and pharmacogenomic products and processes.

We
own issued United States patents, granted foreign patents and pending United States and foreign applications for VELCADE® (bortezomib) for Injection. The issued patents
related to VELCADE expire in 2014.

We
own issued United States patents, granted foreign patents and pending United States and foreign applications for INTEGRILIN® (eptifibatide) Injection. The issued United
States and foreign patents that cover INTEGRILIN expire in 2014 and 2015.

We
also own issued and pending United States and foreign patent applications related to MLN02 and MLN1202. The issued United States patents for MLN02 expire in 2015 and 2016 and the
issued United States patents for MLN1202 expire in 2018.

Licenses

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



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Trademarks

We currently own a number of trademarks and servicemarks including: Millennium®, the Millennium "M" logo and design (registered), Millennium
Pharmaceuticals, "Transcending the Limits of Medicine", VELCADE®, INTEGRILIN® and "Breakthrough Science. Breakthrough Medicine." All are covered by
registrations or pending applications for registration in the United States Patent and Trademark Office and many other countries.

Government Regulation

Regulatory Compliance

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

The
activities required before a pharmaceutical product may be marketed in the United States begin with preclinical testing. Preclinical tests include laboratory evaluation of product
chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies must be submitted to the FDA as part of an Investigational
New Drug application, or IND, which must be reviewed by the FDA before proposed clinical testing can begin.

Typically,
clinical testing involves a three-phase process.



The
results of the preclinical and clinical testing of a pharmaceutical product are then submitted to the FDA for approval to commence commercial sales. For a chemical pharmaceutical
product, the submission is in the form of an NDA and for a biological pharmaceutical product the submission is in the form of a biologic license application, or BLA. In responding to an NDA or a BLA,
the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. We can not assure
you that any approval required by the FDA will be obtained on a timely basis, if at all.

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

In
European Union countries, Canada, and Australia, regulatory requirements and approval processes are similar in principle to those in the United States and can be at least as rigorous,
costly and uncertain. Additionally, depending on the type of drug for which an applicant is requesting approval, there are currently two potential tracks for marketing approval in European Union
countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval in all European Union countries, but each method grants all participating countries
some decision making authority in product approval.

We
are also subject to various federal and state laws pertaining to health care "fraud and abuse," including anti-kickback laws and false claims laws.
Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business,
including the purchase or prescription of a particular drug. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors
(including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items
or services.

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

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

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

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

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

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

Pricing Controls

The levels of revenues and profitability of biopharmaceutical companies may be affected by the continuing efforts of government and third party payors to contain
or reduce the costs of health care
through various means. For example, in certain foreign markets, pricing reimbursement or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In Canada
this practice has led to lower priced products than in the United States. As a result, importation of products from Canada into the United States may result in reduced potential product revenues. In
the United States there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control. For example, the passage of
the Medicare Prescription Drug and Modernization Act of 2003 imposes new requirements for the distribution and pricing of prescription drugs which may affect the marketing of our products. While we
cannot predict whether any such future legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and
profitability.

In
many foreign markets, including the countries in the European Union, pricing of pharmaceutical products is subject to governmental control. In the United States, there have been, and
we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control. While we cannot predict whether such legislative or regulatory
proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability.

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Third Party Reimbursement

In addition, in the United States and elsewhere, sales of therapeutic and other pharmaceutical products are dependent in part on the availability of reimbursement
to the consumer from third party payors, such as government and private insurance plans. Third party payors are increasingly challenging the prices charged for medical products and services. We cannot
assure you that any of our products will be considered cost effective and that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive
and profitable basis.

Manufacturing

General

We have limited manufacturing capabilities and produce only a small amount of product for research and development and preclinical testing. We rely on third
parties to manufacture all of our commercial supply and most of our compounds for research, development, preclinical and clinical trials.

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 GMP, except for products and product candidates for toxicology studies and animal studies, which we require to be manufactured in accordance with current GLP.
The facilities of our contract manufacturers of marketed products 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 the facilities fail inspections 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. Our manufacturers may not abide by
the limitations or confidentiality restrictions in licenses or other agreements with us. In addition, any of our manufacturers may develop process technology related to the manufacture of our
compounds that such suppliers own either independently or jointly with us. This would increase our reliance on such manufacturers or require us to obtain a license from such manufacturers in order to
have our products manufactured.

VELCADE® (bortezomib) for Injection

We currently rely on third-party contract manufacturers to complete the manufacturing, fill/finish and packaging of VELCADE for both commercial purposes and for
ongoing clinical trials. We are currently seeking to establish long-term supply relationships for the production of commercial supplies of VELCADE. We work with one manufacturer to
complete fill/finish for VELCADE. We believe we currently have a sufficient quantity of commercial grade VELCADE drug substance to meet the anticipated commercial demand for the product for the next
year and to fulfill the needs for our ongoing clinical trials. Subject to receiving approval to market VELCADE in the European Union, an affiliate of Ortho Biotech will perform packaging for European
sales of VELCADE.

INTEGRILIN® (eptifibatide) Injection

We have no manufacturing facilities for INTEGRILIN and, accordingly, rely on third-party contract manufacturers for the clinical and commercial production of
INTEGRILIN. Although we believe our contracted supply of INTEGRILIN is sufficient to meet current market demand, our manufacturing plans call for the addition of extra manufacturing capacity.

We
have two manufacturers that provide us with eptifibatide, the raw material necessary to make INTEGRILIN. In January 2003, we entered into a new supply agreement with one of
those

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manufacturers,
Solvay, Societe Anonyme, or Solvay. This agreement is initially for a four year term with one year renewal periods thereafter. Solvay owns the process technology used by it and the
other manufacturer for the production of bulk product. We also have one manufacturer that performs fill/finish services. INTEGRILIN® (eptifibatide) Injection that we use for ongoing
clinical trials is manufactured by the same suppliers as those that produce commercial supply.

Sales and Marketing

We have built our cancer expertise in our commercial operations by recruiting a cancer specific sales force geographically dispersed across the United States.
This sales force markets VELCADE® (bortezomib) for Injection to physicians, hospitals and other health care providers. Subject to approval in areas outside the United States, Ortho Biotech
or its affiliates will market VELCADE and pay us distribution fees on product sales. See "Our Ortho Biotech Collaboration."

We
currently have a specialized cardiovascular sales force geographically dispersed across the United States. This sales force markets, together with SGP's sales force, INTEGRILIN to
clinical cardiologists, interventional cardiologists and emergency medicine physicians. One of the primary goals of this sales force is to expand hospital emergency room early use of INTEGRILIN for
when a patient first presents with acute coronary syndrome. SGP sells INTEGRILIN 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. SGP markets and sells INTEGRILIN outside the United States. See "Our SGP Collaboration."

We
have not developed commercialization plans for our product candidates beyond VELCADE and INTEGRILIN. The manner in which we commercialize these product candidates will depend in large
part on their market potential and our financial resources. We may establish co-promotion, corporate collaboration, licensing or other arrangements for the marketing and sale of some
products in some or all geographic markets.

We
expect that sales from INTEGRILIN will generally be lower in the summer months because fewer medical procedures are typically performed during these months. These fluctuations in
sales of INTEGRILIN may have a material adverse effect on our results of operations for particular reporting periods. It is possible that sales of VELCADE will be similarly affected by fluctuations in
buying patterns. Additionally, wholesaler management decisions to increase or decrease their inventory of VELCADE may result in sales of VELCADE to wholesalers that do not track directly with demand
for the product at hospitals and other health care providers.

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

Competition

General

We face competition, and believe significant long-term competition can be expected, from pharmaceutical companies as well as biotechnology companies.
This competition may become more intense as we develop additional products and commercial applications for biotechnology products increase. Some competitors, primarily large pharmaceutical companies,
have greater discovery, research,

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development,
clinical, regulatory and marketing resources and experience than we have. Many of these companies have commercial arrangements with other companies in the biotechnology industry to
supplement their own research capabilities.

The
introduction of new products or the development of new processes by competitors or new information about existing products may result in price reductions or product replacements,
even for products protected by patents. However, we believe our competitive position is enhanced by our commitment to research leading to the discovery and development of new products. Other factors
that may help us meet competition include 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 our discoveries and advances and our capabilities for early stage research and drug discovery. 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 discovery, research, preclinical
and clinical development, sales, marketing, manufacturing and regulatory affairs.

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



VELCADE® (bortezomib) for Injection

Although the mechanism of action utilized by VELCADE is unique, we expect traditional chemotherapy treatments and other therapies in development to compete with
VELCADE. In particular, Thalomid® (thalidomide) is marketed by Celgene Corporation as a treatment for patients with leprosy, but has an increasing off-label use in multiple
myeloma based on data published in peer-reviewed publications. Celgene Corporation recently filed an sNDA for thalidomide for the treatment of multiple myeloma that was accepted by the FDA
for review. There are also other potentially competitive therapies that are in late-stage clinical development for multiple myeloma. We believe that VELCADE generally competes with other
therapies on the basis of safety, efficacy, convenience and price.

INTEGRILIN® (eptifibatide) Injection

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



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Other
competitive factors that could negatively impact the future growth and development of the GP IIb-IIIa inhibitors market segment include:



Employees

As of March 3, 2004, we had approximately 1,530 full-time employees. We believe that relations with our employees are good.

Available Information

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

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

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RISK FACTORS THAT MAY AFFECT RESULTS

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

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

Regulatory Risks

Our business may be harmed if we do not fulfill certain post-approval requirements of the FDA relating to VELCADE® (bortezomib) for Injection or obtain
approval to market VELCADE for additional therapeutic uses.

The FDA granted accelerated approval for VELCADE for specific therapeutic uses that requires the fulfillment of specific post-approval requirements.
Our business would be seriously harmed if we do not fulfill these requirements and the FDA revokes its marketing approval for VELCADE. In addition, an important part of our strategy to grow our
business is to market VELCADE for additional indications. To do so, we will need to successfully conduct clinical trials and then apply for and obtain the appropriate regulatory approvals. If we are
unsuccessful in our clinical trials, or we experience a delay in obtaining or are unable to obtain authorizations for expanded uses of VELCADE, our revenues may not grow as expected and our business
and operating results will be harmed.

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

We have filed a Marketing Authorization Application with the European Agency for the Evaluation of Medicinal Products, or EMEA, for approval to market VELCADE in
the European Union and in January 2004 received a positive opinion from the EMEA's Committee on Proprietary Medicinal Products to recommend approval to market VELCDE under exceptional
circumstances. The European Commission may not grant marketing approval for VELCADE within the time frame that we anticipate, or at all. For example, we filed our application for the approval of
VELCADE with the EMEA based on phase II clinical trial data. It is possible that the European Commission will not approve VELCADE for marketing prior to our filing of the results of a phase III
clinical trial with the EMEA.

If
we are not able to obtain approval to market VELCADE in additional countries, we will lose the opportunity to sell in those countries and will not be able to earn potential milestone
payments under our agreement with Ortho Biotech or collect potential distribution fees on sales of VELCADE by Ortho Biotech in those countries.

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

The products that we are developing require research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any
commercial sales. This process is expensive and lengthy, and can often take a number of years. In some cases, the length of time that it

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takes
for us to achieve various regulatory approval milestones affects the payments that we are eligible to receive under our strategic alliance agreements.

We
may need to address successfully 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.

In
some cases, we may experience challenges to the extension of exclusivity of our marketing approval in certain jurisdictions. With respect to INTEGRILIN, regulatory authorities in
Luxembourg instituted
a claim to reduce the effective term of supplemental protection certificates for INTEGRILIN in the European Community from 2014 to 2012. That claim was denied by the court of first instance in Europe.
That denial has been appealed to the European Court of Justice, which we expect will hold a hearing on the appeal in 2004. If that court decides against us, the term of the supplemental protection
certificates covering INTEGRILIN could be shortened in any particular European Community Member State in which a subsequent action requesting enforcement of the appellate decision was filed and
decided against us. Shortening of such term could allow earlier generic competition in any such Member State.

If we fail to comply with regulatory requirements, or if we experience 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, is subject to continual review and periodic inspections by the FDA, and other regulatory bodies. In particular, the marketing approval that we received from the FDA for VELCADE requires
that we satisfactorily complete specified post-approval clinical trials of this product. Later discovery of previously unknown problems or safety issues with our products or manufacturing
processes, or failure to comply with regulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the products from the market or the imposition of
civil or criminal penalties. As with any newly approved therapeutic product, we expect that our knowledge of the safety profile for VELCADE will expand after wider usage and the possibility exists of
patients receiving VELCADE treatment experiencing unexpected serious adverse events which could have a material adverse effect on our business.

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

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

Risks Relating to Our Business, Strategy and Industry

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

Our revenues over the next several years will be materially dependent on the commercial success of INTEGRILIN, which has been on the market in the United States
since June 1998, and VELCADE, which was approved by the FDA in May 2003 and commercially launched in the United States shortly

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after
that date. Marketing of INTEGRILIN outside the United States commenced in mid-1999. Demand for GP IIb-IIIa inhibitors, such as INTEGRILIN® (eptifibatide)
Injection, has been flattening since the beginning of 2003, although we did see an increase in demand for INTEGRILIN in the fourth quarter of 2003. Because of the recent introduction of
VELCADE® (bortezomib) for Injection, we have very limited experience as to the sales levels of this product. Our business plan contemplates obtaining marketing authorization to sell
VELCADE outside the United States for the treatment of patients with multiple myeloma, and both in the United States and abroad for other indications. We will be adversely affected if VELCADE does not
receive such approvals. We will not achieve our business plan, and we may be forced to scale back our operations and research and development programs, if:



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

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

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

Other
competitive factors that could negatively affect INTEGRILIN include:



With
respect to VELCADE, we face competition from Celgene Corporation's Thalomid® (thalidomide) and its derivatives, a treatment for complications associated with leprosy
which is

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increasingly
used for multiple myeloma based on data published in peer-reviewed publications. Celgene Corporation recently filed an sNDA for thalidomide for the treatment of multiple
myeloma that was accepted by the FDA for review. We also face competition for VELCADE from traditional chemotherapy treatments, and there are other potentially competitive therapies for VELCADE that
are in late-stage clinical development for the treatment of multiple myeloma. In addition, multiple myeloma therapies in development may reduce the number of patients available for VELCADE
treatment through enrollment of these patients in clinical trials of these potentially competing products.

Sales of INTEGRILIN® (eptifibatide) Injection and possibly VELCADE® (bortezomib) for Injection in particular reporting periods may be affected by
fluctuations in buying patterns.

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

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

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

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

We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they
can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure
can occur at any stage of testing. Interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be seen in later
studies. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent
regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial, adverse medical events during a clinical trial or safety issues resulting from products of the same
class of drug could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful. For example, in
December 2003, we decided to stop further accrual to a phase II trial examining VELCADE in colorectal cancer because interim findings produced results that did not meet the
pre-specified efficacy criteria for continuation of study accrual.

We
may not complete our planned preclinical or clinical trials on schedule or at all. We may not be able to confirm the safety and efficacy of our potential drugs in
long-term clinical trials, which may result in a delay or failure to commercialize our products. In addition, due to the substantial demand

20

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for
clinical trial sites in the cardiovascular area, we may have difficulty obtaining a sufficient number of appropriate patients or clinician support to conduct our clinical trials as planned. As a
result, we may have to expend substantial additional funds to obtain access to resources or delay or modify our plans significantly. Our product development costs will increase if we experience delays
in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential
products.

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

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

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

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

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

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

Risks Relating to Our Financial Results and Need for Financing

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

We have incurred losses of $483.7 million for the year ended December 31, 2003 and losses of $590.2 million for the year ended
December 31, 2002 and $192.0 million for the year ended

21

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December 31,
2001. 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 continue to incur significant expenses in connection with our research and development programs and commercialization activities. As a result, we will need to generate
significant revenues to pay these costs and achieve profitability. We cannot be certain whether or when we will become profitable because of the significant uncertainties with respect to our ability
to generate revenues from the sale of products and services and from existing and potential future strategic alliances.

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

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

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

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

At December 31, 2003, we had approximately $105.5 million of outstanding convertible debt and $102.3 million of capital lease obligations.
During each of the last five years, our earnings were insufficient to cover our fixed charges. We will be required to make interest payments on our outstanding convertible notes totaling approximately
$19.5 million over the next three years, assuming our convertible debt remains outstanding until maturity and we will be required to make interest payments on our capital lease obligations
totaling approximately $9.6 million over the next three years.

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

Our
indebtedness could have significant additional negative consequences, including:



22

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

On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX Partners, L.P. or M&I, which owned the CAMPATH
product. In exchange for our equity interest in M&I, we are entitled to a payment of $40.0 million in 2004, up to 25% of which ILEX may pay to us in the form of their stock, if sales of CAMPATH
in the U.S. meet a specified threshold. In February 2004, Genzyme Corp. announced it is acquiring ILEX. Under the terms of our agreement, if Genzyme does acquire ILEX before the payments for
2004 become due, Genzyme would not be permitted to make any payments in the form of stock. In addition, we will be entitled to additional payments from ILEX if United States sales of CAMPATH after
2004 exceed specified annual thresholds. If these thresholds are not achieved, we will not receive any future additional payments related to CAMPATH. We have no ability to influence the actions of the
entity that owns CAMPATH. Therefore, we have no control over the financial success of CAMPATH or our ability to earn additional revenues from the product.

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

In June, 2003, we announced a restructuring designed to focus our resources on development and commercialization of product opportunities and achieving our goal
of becoming profitable in the future. We may not achieve the cost savings anticipated from the restructuring because such savings are difficult to predict and speculative in nature. In 2003, we
recorded approximately $191.0 million related to this restructuring and expect to record additional restructuring charges during 2004 and 2005 in the aggregate of approximately
$60.0 million. While we believe this estimate to be reasonable, it is possible that the actual charges will exceed this range. For example, we may not be able to lease facilities that we plan
to close in connection with the restructuring as quickly or on as favorable terms as we anticipate.

Risks Relating to Collaborators

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

We market and sell INTEGRILIN® (eptifibatide) Injection through an alliance with SGP and, if we receive any regulatory approvals outside of the United
States, will develop and commercialize VELCADE® (bortezomib) for Injection outside of the United States through an alliance with Ortho Biotech Products, L.P., a wholly owned subsidiary of
Johnson & Johnson. We conduct substantial discovery and development activities through strategic alliances, including with Ortho Biotech for the ongoing development of VELCADE, and with SGP for
the ongoing development of INTEGRILIN. We expect to enter into additional alliances in the future, especially in connection with product commercialization. The success of our alliances depends heavily
on the efforts and activities of our collaborators.

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

23

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



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

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

24

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Risks Relating to Intellectual Property

If we are unable to obtain patent protection for our discoveries, the value of our technology and products will be adversely affected. If we infringe patent or other
intellectual property rights of third parties, we may not be able to develop and commercialize our products 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 some of our existing and proposed products, processes or services. Third parties may
own or control these patents and patent applications in the United States and abroad. Therefore, in some cases, such as those described below, in order to develop, manufacture, sell or import some of
our existing and proposed products, processes or services, we or our collaborators may choose to seek, or be required to seek, licenses under third-party patents issued in the United States and
abroad, or those that might issue from United States and foreign patent applications. In such event, we would be required to pay license fees or royalties or both to the licensor. If licenses are not
available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products, processes or services.

Our
MLN02 product candidate is a humanized monoclonal antibody. We are aware of third-party patents and patent applications that relate to humanized or modified antibodies, products
useful for

25

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making
humanized or modified antibodies and processes for making and using humanized or modified antibodies. We are also aware of third-party patents and patent applications relating to manufacturing
processes for humanized or modified antibodies, products thereof and materials useful in such processes. With respect to MLN2704 and MLN1202, also humanized monoclonal antibodies, we are also aware of
third-party patent applications relating to anti-PSMA, in the case of MLN2704, and anti-CCR-2 antibodies, in the case of MLN1202.

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

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 are dependent on third parties to successfully perform these functions on our behalf,
or we may be required to incur significant costs and devote significant efforts to augment our existing capabilities.

We have limited sales, marketing and distribution experience and capabilities.

We
are marketing and selling VELCADE in the United States solely through our recently hired cancer-specific sales force and without a collaborator. Our success in selling VELCADE will
depend heavily on the performance of this sales force. Subject to approval in areas outside the United States, Ortho Biotech or its affiliates will market VELCADE in those areas and as a result our
ability to recognize revenue related to VELCADE outside of the United States will depend heavily on Ortho Biotech.

We
have a specialty cardiovascular sales force that markets INTEGRILIN® (eptifibatide) Injection with SGP in the United States. SGP also markets INTEGRILIN outside of the
United States. Our

26

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success
in receiving co-promotion revenue from sales of INTEGRILIN® (eptifibatide) Injection will depend heavily on the marketing efforts of these sales forces.

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

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

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

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
non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

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

Our manufacturing experience with VELCADE® (bortezomib) for Injection is very limited we are dependent on third parties to produce product sufficient to meet market
demand.

We currently rely on third-party contract manufacturers to complete the manufacturing, fill/finish and packaging of VELCADE for both commercial purposes and for
ongoing clinical trials. We are currently seeking to establish long-term supply relationships for the production of commercial supplies of VELCADE. We work with one manufacturer to
complete fill/finish for VELCADE. If our current third party manufacturer performing fill/finish for VELCADE is unable or unwilling to continue performing these services for us and we are unable to
find a replacement manufacturer, we could run out of VELCADE for commercial sale and our business could be substantially harmed.

27

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Subject
to receiving approval to market VELCADE® (bortezomib) for Injection in the European Union, an affiliate of Ortho Biotech will perform packaging for European sales of
VELCADE and as a result we will be substantially dependent on Ortho Biotech's ability to manufacture for these areas.

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.

We have no manufacturing facilities for INTEGRILIN and, accordingly, rely on third-party contract manufacturers for the clinical and commercial production of
INTEGRILIN. We have two manufacturers that provide us with eptifibatide, the raw material necessary to make INTEGRILIN. In January 2003, we entered into a new supply agreement with Solvay, one
of those manufacturers. Solvay owns the process technology used by it and the other manufacturer for the production of bulk product. As a result, until we develop alternative process technologies, we
will continue to rely on these manufacturers.

We
have one manufacturer that currently performs fill/finish services for INTEGRILIN. We have identified alternative fill/finish and packaging suppliers to serve as future sources of
supply for the United States and international markets. Although we believe that the fill/finish and packaging performed by our primary manufacturer is sufficient to meet our supply requirements for
INTEGRILIN for the foreseeable future, the inability of this manufacturer to continue its fill/finish services or our inability to secure alternative manufacturers could adversely affect the supply of
INTEGRILIN and, thereby, harm our results of operations.

We
expect to improve or modify our existing process technologies and manufacturing capabilities for INTEGRILIN. We cannot quantify the time or expense that may ultimately be required to
improve or modify our existing process technologies, but it is possible that such time or expense could be substantial. Moreover, we may not be able to implement any of these improvements or
modifications successfully.

Our
manufacturing plans and commercialization strategy for INTEGRILIN include the addition of extra capacity for the manufacture of INTEGRILIN as described above. We are currently
engaged in finalizing multiple third-party manufacturing arrangements on commercially reasonable terms. We may not be able to do so, and, even if such arrangements are established, if demand for
INTEGRILIN does not meet our forecasts, the manufacturing cost could become more expensive on a per unit basis. If we are unable to obtain contract manufacturing on commercially acceptable terms, we
may not be able to produce INTEGRILIN in sufficient quantities to meet future market demand.

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

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

The availability and levels of reimbursement by governmental and other third-party payors affect the market for any pharmaceutical product or health care service.
These third-party payors continually attempt to contain or reduce the costs of health care by challenging the prices charged for medical products and services. In 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 or doctors to treat the conditions for which the FDA has approved INTEGRILIN or VELCADE. If
they do, pricing levels or sales volumes of INTEGRILIN or VELCADE may decrease. In addition, if we fail

28

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to
comply with the rules applicable to the Medicaid and Medicare programs, we could be subject to the imposition of civil or criminal penalties or exclusion from these programs.

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

In
both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system. For example, the passage
of the Medicare Prescription Drug and Modernization Act of 2003 imposes new requirements for the distribution and pricing of prescription drugs which may affect the marketing of our products. Further
proposals are likely. The potential for adoption of these proposals affects or will affect our ability to raise capital, obtain additional collaborators and market our products.

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

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

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

Guidelines and recommendations can affect the use of our products.

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

29

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Risks Relating to an Investment in Our Common Stock

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

The trading price of our common stock has been volatile, and may be volatile in the future. Between January 1, 2003 and December 31, 2003, our
common stock traded as high as $19.05 per share and as low as $6.24 per share. Factors such as announcements of our or our competitors' operating results, changes in our prospects and market
conditions for biotechnology stocks in general could have a significant impact on the future trading prices of our common stock.

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



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

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

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

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Item 2. PROPERTIES

We lease a total of approximately 1,433,000 square feet of office and laboratory space in Cambridge, Massachusetts, South San Francisco, California and Cambridge
and London, England. This table shows information about our current properties.

|Leased Properties Locations                   |  | Square Feet               |  | Use                                      |  | Lease expiration dates
|--------------------------------------------- |  | ------------------------- |  | ---------------------------------------- |  | ----------------------
|Several locations in Cambridge, Massachusetts |  | 1,204,000 (65,000 sublet) |  | corporate headquarters
office
laboratory |  | 2004 to 2020          
|South San Francisco, California               |  | 136,000
(27,000 sublet)   |  | office
laboratory                        |  | 2011                  
|London, England                               |  | 3,000                     |  | office                                   |  | 2005                  
|Cambridge, England                            |  | 90,000                    |  | laboratory
office                        |  | 2023                  

In
connection with our 2003 restructuring initiatives, we sublet 92,000 square feet of space in various facilities, as shown in the table above. We are seeking to sublease an additional
387,000 square feet of our Cambridge, Massachusetts facilities and will consolidate our Cambridge operations into our remaining facilities in that location. We are in the process of closing our
facilities in Cambridge, England and South San Francisco, California and plan to sublease these facilities through the end of our lease terms.

We
believe that, after the completion of these facilities closings, our leased and occupied facilities will be adequate to meet our requirements for the near term.

Item 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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

No matters were submitted to a vote of our security holders, through solicitation of proxies or otherwise, during the last quarter of the year ended
December 31, 2003.

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OUR EXECUTIVE OFFICERS

|Name, age and title                                                                                                                             |  |   |  | Prior business experience                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                               
|Mark J. LevinAge: 53
Chairperson of the Board of Directors(since March 1996) Chief Executive Officer(since November 1994) President(since 1993) |  |  |  | Prior to joining Millennium, Mr. Levin was a Partner at Mayfield, a venture capital firm, (1987 to 1994) and held various positions with Genentech, Inc., Foxboro Company, Miller Brewing Company and Eli Lilly and Company
(1974 to 1987) in biochemical and process engineering, marketing and project leadership
|                                                                                                                                               
|Kenneth M. BateAge: 53                                                                                                                          |  |  |  | Senior Vice President of Millennium (December 2002 to July 2003)                                                                                                                                                                                                                                                   
|Executive Vice President,
Head of Commercial Operations                                                                                         |  |  |  | Founding partner, JSB Partners, L.P., a firm providing banking and advisory services to biopharmaceutical and life sciences companies (July 1999 to December 2002)                                                                                                                                                 
|(since July 2003) Chief Financial Officer(since December 2002)                                                                                  |  |  |  | Vice President of sales and marketing (1993 to 1996) and chief financial officer (1990 to 1993), Biogen, Inc., a biopharmaceutical company                                                                                                                                                                         
|                                                                                                                                               
|Linda K. PineAge: 52
Senior Vice President,                                                                                                     |  |  |  | Vice President of Consulting Services, The Survey Group, a regional human resources survey and consulting firm (1990 to 1994)                                                                                                                                                                                      
|Human Resources(since October 1994)                                                                                                             |  |  |  | Vice President of Human Resources and Corporate Relations, Collaborative Research, Inc. (now Genome Therapeutics Corporation), a biotechnology company (1982 to 1990)                                                                                                                                              
|                                                                                                                                               
|Robert I. TepperAge: 48President, Research                                                                                                      |  |  |  | Executive Vice President, Discovery of Millennium (June 2001 to December 2002) and Chief Scientific Officer (March 1999 to December 2002)                                                                                                                                                                          
|and Development(since December 2002)                                                                                                            |  |  |  | Senior Vice President of Millennium (June 2000 to June 2001); Chief Scientific Officer, Pharmaceuticals (November 1997 to March 1999); Vice President, Biology (January 1996 to November 1997) and Director, Biology (August
1994 to January 1996)                                                                 
|                                                                                                                                               

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PART II

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

(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.

2003

2002High

Low

High

LowFirst quarter

$
9.20

$
6.43

$
25.28

$
16.91Second quarter


17.20


8.32


23.12


10.85Third quarter


16.50


11.50


14.66


8.75Fourth quarter


18.87


14.55


11.19


7.19


On
March 5, 2004, the closing price per share of our common stock was $19.01, as reported on the NASDAQ National Market and we had approximately 995 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.

(b)   Changes in Securities and Use of Proceeds

None

33

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Item 6. SELECTED FINANCIAL DATA

Millennium Pharmaceuticals, Inc.
Selected Financial Data

|                                                                                   |                                     | Year Ended December 31,  |          
|---------------------------------------------------------------------------------- | ----------------------------------- | ------------------------ | ---------
|
|
|Consolidated Statements of Operations Data:                                        |                                     |                          |          
|Revenues:                                                                          |                                     |                          |          
|                                                                                   | Net product sales                   |                          | $        
|                                                                                   | Co-promotion revenue                |                          |          
|                                                                                   | Revenue under strategic alliances   |                          |          
|                                                                                   |                                     |                          |          
|                                                                                   |                                     | Total revenues           |          
|                                                                                   |                                     |                          |          
|Costs and expenses:                                                                |                                     |                          |          
|                                                                                   | Cost of goods sold                  |                          |          
|                                                                                   | Research and development            |                          |          
|                                                                                   | Selling, general and administrative |                          |          
|                                                                                   | Restructuring                       |                          |          
|                                                                                   | Acquired in-process R&D (Note 1)    |                          |          
|                                                                                   | Amortization of intangibles         |                          |          
|                                                                                   |                                     |                          |          
|                                                                                   |                                     | Total costs and expenses |          
|                                                                                   |                                     |                          |          
|Loss from operations                                                               |                                     |                          | (524,773 
|Other income (loss)                                                                |                                     |                          | 41,086   
|                                                                                   |                                     |                          |          
|Loss before cumulative effect of change in accounting principle (Note 2)           |                                     |                          | (483,687 
|Cumulative effect of change in accounting principle (Note 2)                       |                                     |                          |         
|                                                                                   |                                     |                          |          
|Net loss                                                                           |                                     |                          | (483,687 
|Deemed preferred stock dividend                                                    |                                     |                          |         
|                                                                                   |                                     |                          |          
|Net loss attributable to common stockholders                                       |                                     | $                        | (483,687 
|                                                                                   |                                     |                          |          
|Amounts per common share (Note 3):                                                 |                                     |                          |          
|Loss before cumulative effect of change in accounting principle, basic             |                                     | $                        | (1.63    
|Cumulative effect of change in accounting principle                                |                                     |                          |         
|Deemed preferred stock dividend                                                    |                                     |                          |         
|                                                                                   |                                     |                          |          
|Net loss attributable to common stockholders, basic and diluted                    |                                     | $                        | (1.63    
|                                                                                   |                                     |                          |          
|Weighted average shares, basic and diluted                                         |                                     |                          | 297,641  
|                                                                                   |                                     |                          |          
|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 |                                     |                          |          
|Consolidated Balance Sheet Data:                                                   |                                     |                          |          
|Cash, cash equivalents and marketable securities                                   |                                     | $                        | 915,303  
|Total assets                                                                       |                                     |                          | 3,010,263
|Current liabilities                                                                |                                     |                          | 255,758  
|Capital lease obligations, net of current portion                                  |                                     |                          | 87,889   
|Long-term debt, net of current portion                                             |                                     |                          | 105,461  
|Stockholders' equity                                                               |                                     |                          | 2,501,526

---

Note 1: On February 12, 2002 Millennium acquired COR Therapeutics, Inc. The transaction was recorded as a purchase
for accounting purposes and the consolidated statements of operations data include COR's operating results from the date of acquisition.

Note 2: 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.

Note 3: 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.

Note 4: The Company's 2002 results from operations reflect the adoption of Financial Accounting Standards Board ("FASB")
No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). Upon adoption, the Company ceased the amortization of goodwill.

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

Our management's discussion and analysis of financial condition and operations contains "forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements that relate to prospective events or developments are forward-looking statements. Also, words such as "believe," "anticipate," "plan," "expect," "intend,"
"will" and similar expressions identify forward-looking statements.

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

Overview

We are a leading biopharmaceutical company focused on developing and commercializing breakthrough products in the disease areas of cancer, cardiovascular disease
and inflammatory disease. We currently have a cancer product and a cardiovascular disease product on the market. We also have other potential products in various stages of preclinical and clinical
development in all three of our therapeutic disease areas of focus.

Our
strategy is to develop multiple products in three broad disease areas through clinical trials and regulatory approvals and to be involved in the marketing and sale of many of these
products. We plan to develop and commercialize many of our products on our own, but will seek development and commercial collaborators when we believe that this will maximize product value. For
example, we plan to enter into sales and marketing alliances with major pharmaceutical companies for products in disease areas that require large sales forces or for markets outside of the United
States.

Our Products

VELCADE® (bortezomib) for Injection

VELCADE, the first of a new class of medicines called proteasome inhibitors, is the first treatment in more than a decade to be approved in the United States for
patients with multiple myeloma. We received accelerated approval from the FDA on May 13, 2003 to market VELCADE for the treatment of multiple myeloma patients who have received at least two
prior therapies and have demonstrated disease progression on their most recent therapy.

In
February 2003, our Marketing Authorization Application to market VELCADE in the European Union for the treatment of patients with multiple myeloma who have received at least
two prior therapies and have demonstrated disease progression on their most recent therapy was accepted for review by the European Agency for the Evaluation of Medicinal Products, or EMEA. In
January 2004, the EMEA's Committee on Proprietary Medicinal Products, or CPMP, issued a positive opinion to recommend approval under exceptional circumstances for VELCADE. The CPMP's opinion
was forwarded to the European Commission, and we anticipate that the European Commission will ratify the opinion and issue a Marketing Authorization in the second quarter of 2004. Under a Marketing
Authorization, the EMEA would issue us a single license to market VELCADE in the 15 member states of the European Union, the ten other participating accession member countries, plus Norway and
Iceland.

Our Ortho Biotech Collaboration

On June 30, 2003, we entered into an agreement with Ortho Biotech Products, L.P., or Ortho Biotech, a wholly owned subsidiary of Johnson & Johnson,
to collaborate on the commercialization and continued clinical development of VELCADE. Under the terms of the agreement, we retain all commercialization rights to and profits from VELCADE in the
United States. Subject to obtaining

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regulatory
approvals of VELCADE outside of the United States, Ortho Biotech and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside of the United States. We are entitled to
distribution fees from Ortho Biotech and its affiliates on sales of VELCADE outside of the United States. We also retain an option to co-promote VELCADE with Ortho Biotech at a future date
in certain European countries.

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

INTEGRILIN® (eptifibatide) Injection

In collaboration with Schering-Plough Corporation and Schering-Plough Ltd., together referred to as SGP, INTEGRILIN is marketed in the United States, in all 15
member states of the European Union and in other countries, including Argentina, Australia, Brazil, Canada, India, Japan, Mexico, Singapore, South Africa, Switzerland and Thailand.

In
April 1995, COR Therapeutics, Inc., or COR, entered into a collaboration agreement with SGP 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 SGP and us. However,
some development decisions are allocated specifically to us. In addition, in those markets where SGP has exclusive marketing rights, currently everywhere except the United States, SGP has
decision-making authority with respect to marketing issues.

Revenues

Historically, we have derived our revenue from our strategic research alliances with major pharmaceutical companies. With the February 2002 acquisition of
COR, we began generating co-promotion revenue based on sales of INTEGRILIN. In May 2003, we began recording product sales from VELCADE. We expect that our revenue mix will continue
to shift to product-based revenue as we develop our product pipeline, commercialize additional products subject to obtaining required regulatory approvals and enter into new commercial alliances, and
our discovery-focused alliances conclude.

VELCADE® (bortezomib) for Injection Revenue

We record sales of VELCADE in the United States, net of estimated product returns and discounts, as net product sales. We record royalty and milestone payments,
if any, when earned as royalty revenue and revenue under strategic alliances, respectively. We record reimbursement of development costs by Ortho Biotech as revenue under strategic alliances in the
period in which the related costs are incurred.

INTEGRILIN Revenue

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

36

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INTEGRILIN®
(eptifibatide) Injection within co-promotion territories and royalties from SGP on sales of INTEGRILIN outside of the co-promotion territory.

Revenue under Strategic Alliances

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

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

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



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

In
October 2003, the research phase of our five-year alliance with Bayer concluded. Bayer and Millennium amended the agreement to provide both parties access to
certain identified targets for a period of seven years. If Bayer successfully develops and commercializes any of these targets discovered in the alliance, Bayer will owe us success and royalty
payments on the sale of products generated from the alliance.

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



37

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Restructuring

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

In
June 2003, we announced a broad, accelerated restructuring plan to focus our resources on development and commercialization. The plan included consolidation of research and
development facilities, overall headcount reduction to approximately 1,700 employees by the end of 2004 and streamlining of the number of discovery and development projects. These actions resulted in
the recognition of $191.0 million of restructuring charges for the year ended December 31, 2003, including the termination of approximately 700 employees and the vacating of several of
our facilities.

Acquisitions

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

COR

On February 12, 2002, we acquired COR for an aggregate purchase price of $1.8 billion through the issuance of approximately 55.1 million
shares of our common stock. We recorded the transaction as a
purchase for accounting purposes and our consolidated financial statements include COR's operating results from the date of the acquisition. The purchase price was allocated, based upon an independent
valuation, to the assets purchased and liabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair market value of net tangible assets
acquired allocated to in-process research and development, developed technology, trademark and goodwill. The charge to earnings in the year ended December 31, 2002 for acquired
in-process research and development was $242.0 million. Through the merger, we acquired INTEGRILIN® (eptifibatide) Injection and substantial research capabilities in the
areas of cardiovascular disease and oncology.

Financial Resources

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



As
of December 31, 2003, we had $915.3 million in cash, cash equivalents and marketable securities. We primarily invest in investment-grade corporate bonds, asset-backed
debt securities and U.S. government agency debt securities. Our investment objectives are to preserve principal, maintain a high degree of liquidity to meet operating needs and obtain competitive
returns subject to prevailing market conditions. We expect that income from these investments will decline as our cash and marketable securities balances decline and will fluctuate based upon market
conditions.

On
April 29, 2003, we completed the repurchase of $577.8 million aggregate principal amount of the outstanding 5.0% convertible subordinated notes due March 1, 2007,
that are convertible into our

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common
stock at any time prior to maturity at a price equal to $34.21 per share (the "5.0% notes") and 4.5% convertible senior notes due June 15, 2006, that are convertible into our common
stock at any time prior to maturity at a price equal to $40.61 per share (the "4.5% notes") for an aggregate payment of approximately $637.1 million, including principal, accrued interest and
put premium. Approximately $22.1 million of the 5.0% notes and 4.5% notes in the aggregate were not tendered in the offer and remain outstanding as of December 31, 2003. As a result of
the repurchase, we recorded a net charge of approximately $10.5 million which represents the write-off of approximately $12.4 million of unamortized original debt issuance
costs associated with the 5.0% notes and 4.5% notes, offset by $1.9 million relating to the expired put premium on the untendered notes.

In
2003 we received $28.6 million from Abbott Laboratories, or Abbott, for the final purchase of approximately 3.7 million shares of our common stock under our equity
investment agreement with Abbott. In 2002 we received $114.3 million from Abbott for purchases of approximately 8.3 million shares our common stock under this agreement. In 2001 we
received $107.2 million from Abbott for purchases of approximately 3.5 million shares our common stock under this agreement.

In
2001, we received $100.0 million from Aventis for purchases of approximately 2.0 million shares of our common stock under our equity investment agreement with Aventis.

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

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

We
expect to continue to pursue additional alliances and to consider joint development, merger, or acquisition opportunities that may provide us with access to products on the market or
in later stages of commercial development. Our results of operations for any period may not be indicative of future results as our revenues and expenses may fluctuate from period to period or year to
year.

Reclassifications

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

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

Critical Accounting Policies and Significant Judgments and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial

39

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statements
as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition,
inventory, intangible assets and goodwill. We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.

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

Revenue

We recognize revenue from the sale of our products, co-promotion collaboration and strategic alliances. Our revenue arrangements with multiple
elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and
reliable evidence of the fair value of the undelivered items. The consideration we receive is allocated among the separate units based on their respective fair values, and the applicable revenue
recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

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

We
recognize co-promotion revenue when SGP ships INTEGRILIN® (eptifibatide) Injection to wholesalers. Co-promotion revenue includes our share of the
profits from the sales of INTEGRILIN, reimbursements of our manufacturing-related costs, advertising and promotional expenses and royalties from SGP on sales of INTEGRILIN outside of the
co-promotion territory. We communicate with SGP to calculate our share of the profits from the sales of INTEGRILIN on a monthly basis. The calculation includes estimates of the amount of
advertising and promotional expenses and other costs incurred on a monthly basis. We also communicate with SGP to estimate royalties earned on sales outside of the co-promotion territory.
Adjustments to our estimates are based upon actual information that we receive subsequent to our reporting deadlines. Our estimates are adjusted on a monthly basis and historically have not been
significant due to periodic communication with our collaborator. Significant adjustments in future reporting periods could impact the timing and the amount of revenue to be recognized.

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



40

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

Reimbursements
of development costs are recognized as strategic alliance revenue as the related costs are incurred.

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

On
October 31, 2003 the research phase of our alliance with Bayer concluded. We recognized the research funding portion of our Bayer alliance on a
percentage-of-completion basis. The percentage-of-completion was determined based upon the actual level of work performed during the period as compared
to our estimate of the total work to be performed under the alliance. We continually reviewed these estimates and adjusted as necessary, as experience developed or new information became known. In
September 2001, we revised the estimate of the total work to be performed downward as a result of productivity improvements. No further adjustments were necessary and the accounting estimates
used approximate actual efforts from September 2001 to the end of the research phase of the agreement.

Inventory

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

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

Intangible Assets

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

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Goodwill

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

On
October 1, 2003, we performed our annual goodwill impairment test and determined that no impairment existed on that date. However, since the date of acquisition of COR, which
generated a significant amount of goodwill, we have experienced a significant decline in market capitalization due to a decline in stock price. We continually monitor business and market conditions to
assess whether an impairment indicator exists. If we were to determine that an impairment indicator exists, we would be required to perform an impairment test which could result in a material
impairment charge to our statement of operations.

Accounting Pronouncements

In November 2002, the EITF of the FASB issued EITF 00-21, "Revenue Arrangements with Multiple Deliverables," ("EITF 00-21") which
addressed certain aspects of the accounting for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Under EITF 00-21, revenue
arrangements with multiple deliverables should be divided into separate accounting units if the deliverables meet certain criteria, including whether the fair value of the delivered items can be
determined and whether there is evidence of fair value of the undelivered items. In addition, the consideration should be allocated among the separate units of accounting based on their fair values,
and the applicable revenue recognition criteria should be considered separately for each of the separate units of accounting. EITF 00-21 is effective for revenue arrangements entered
into after June 30, 2003. We have not entered into any such arrangements since the effective date of EITF 00-21.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51" ("FIN
46") and in December 2003 issued a revised FIN 46 ("FIN 46R") which addressed the period of adoption of FIN 46 for entities created before January 31, 2003. FIN 46 provides a new consolidation
model which determines control and consolidation based on potential variability in gains and losses. The provisions of FIN 46 are effective for enterprises with variable interests in variable interest
entities created after January 31, 2003. We must adopt the provisions of FIN 46 in the first quarter of fiscal 2004 and do not expect the adoption to have a material impact on our financial
position or results of operations for our interests in variable interest entities created before February 1, 2003.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS
No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and
equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position or results of operations.

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Results of Operations

Years Ended December 31, 2003 and December 31, 2002

For the year ended December 31, 2003 (the "2003 Period"), we reported a net loss of $483.7 million, or $1.63 per basic and diluted share, compared
to a net a loss of $590.2 million, or $2.13 per basic and diluted share for the year ended December 31, 2002 (the"2002 Period").

Revenue
increased to $433.7 million for the 2003 Period from $353.0 million for the 2002 Period. Net product sales of VELCADE® (bortezomib) for Injection,
launched in May 2003, were $59.6 million in the 2003 Period. Co-promotion revenue, based on worldwide sales of INTEGRILIN® (eptifibatide) Injection, was
$184.3 million for the 2003 Period compared to $160.0 million for the 2002 Period. Worldwide sales of INTEGRILIN in the 2003 Period, as provided to us by SGP, were $305.8 million,
a 1% increase over sales for the 2002 Period. This slight increase in sales reflects growth in INTEGRILIN market share in a flattening market. Revenue under strategic alliances decreased to
$189.7 million in the 2003 Period from $193.1 million in the 2002 Period. The decrease in strategic alliance revenue primarily relates to the decrease in revenue recognized under our
research alliance and technology transfer agreement with Monsanto Company, or Monsanto, which expired in 2002 at the end of its original five-year term and the conclusion of the research
phase of the Bayer alliance in the fourth quarter of the 2003 Period. This decrease is partially offset by approximately $33.0 million of clinical milestones earned under our Ortho Biotech
alliance and $40.0 million of revenue recognized upon the April 2003 termination of the Aventis technology transfer agreement.

Included
in 2003 Period revenue is $8.6 million of revenue that was recognized in prior years relating to the adoption of SAB 101. Included in 2002 revenue is $36.1 million
of revenue that was recognized in prior years relating to the adoption of SAB 101. There are no remaining amounts of revenue to be recognized that was included in the cumulative effect of change in
accounting principle.

Cost
of goods sold includes manufacturing-related expenses associated with the sale of INTEGRILIN and VELCADE. The increase in cost of goods sold in the 2003 Period is principally due to
the 2003 commercial launch of VELCADE, as well as a full year of the cost of INTEGRILIN sales.

Research
and development expenses decreased to $488.5 million in the 2003 Period from $511.2 million in the 2002 Period. This decrease reflects the financial benefits of
our restructuring efforts, including reductions in discovery personnel and personnel-related costs, as well decreased outside research and development services and consulting expenses. The decrease is
partially offset by increases in clinical trial costs for VELCADE.

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In
addition to our ongoing clinical trials of INTEGRILIN® (eptifibatide) Injection and VELCADE® (bortezomib) for Injection, we have ten drug candidates in
clinical development. The following chart summarizes the clinical trials of these ten drug candidates, the applicable disease indication and the current trial status of the program.

|Product Description                                                                                                                            |  | Disease Indication                                                                |  | Current Trial Status
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------------
|Cancer                                                                                                                                         |  |                                                                                   |  |                     
|MLN2704 is a targeting monoclonal antibody vehicle                                                                                             |  | Prostate cancer                                                                   |  | Phase I/Phase II    
|MLN944 is a novel DNA-targeting agent                                                                                                          |  | Solid tumors                                                                      |  | Phase I             
|MLN518 is a small molecule that selectively inhibits F1t-3                                                                                     |  | Acute myeloid leukemia                                                            |  | Phase I             
|MLN591RL is a de-immunized radio-labeled murine monoclonal antibody that specifically recognizes the PSMA (prostate specific membrane antigen) |  | Prostate cancer                                                                   |  | Phase I             
|MLN576 is a small molecule with DNA-targeting activity                                                                                         |  | Solid tumors                                                                      |  | Phase I             
|Cardiovascular Diseases                                                                                                                        |  |                                                                                  
|MLN2222 is a recombinant protein that is designed to block both the C3 and C5 convertases                                                      |  | Patients undergoing cardiac surgeries                                             |  | Phase I             
|MLN519 is a small molecule proteasome inhibitor                                                                                                |  | Stroke                                                                            |  | Phase I             
|Inflammatory Diseases                                                                                                                          |  |                                                                                  
|MLN1202 is a humanized monoclonal antibody directed against CCR2                                                                               |  | Chronic inflammatory diseases such as rheumatoid arthritis and multiple sclerosis |  | Phase II            
|MLN3897 is a small molecule directed against CCR1                                                                                              |  | Chronic inflammatory diseases such as rheumatoid arthritis                        |  | Phase I             
|MLN02 is a humanized monoclonal antibody directed against the (Greek alpha)4ß7 receptor                                                        |  | Crohn's disease
Ulcerative colitis                                                |  | Phase II
Phase II   

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

44

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CMR
International, an independent pharmaceutical data collection agency, estimates that clinical trials in our areas of focus are typically completed over the following timelines:

Clinical Phase

Objective

Estimated Completion PeriodPhase I

Establish safety in humans, study how the drug works, metabolizes and interacts with other drugs

1-2 yearsPhase II

Evaluate efficacy, optimal dosages and expanded evidence of safety

2-3 yearsPhase III

Confirm efficacy and safety of the product

2-3 years


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

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

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

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

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

Selling,
general and administrative expenses increased to $178.8 million in the 2003 Period from $168.9 million in the 2002 Period. The increase reflects the net impact of
increased selling and

45

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marketing
expenses related to the launch of VELCADE® (bortezomib) for Injection and the expansion of the Millennium-SGP sales force for INTEGRILIN® (eptifibatide)
Injection offset by decreased consulting and legal expenses.

In
June 2003, we announced a broad, accelerated restructuring plan to focus our resources on development and commercialization. The plan includes consolidation of research and
development facilities, overall headcount reduction and streamlining of discovery and development projects. As a result, we have recorded restructuring charges of $191.0 million in the 2003
Period related to asset impairments, remaining rental obligations on facilities that we have vacated, personnel costs and contract termination. Charges related to facilities include the estimated
remaining rental obligation, net of estimated sublease income, for facilities that we no longer occupy. Our decisions to vacate certain facilities and abandon the related leasehold improvements as
well as terminate certain research programs were deemed to be impairment indicators under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," or SFAS
No. 144. As a result of performing the impairment evaluations, we recorded asset impairment charges to adjust the carrying value of the related long lived assets to fair value. Fair value of
the assets was estimated based upon anticipated future cash flows, discounted at a rate commensurate with the risk involved. We anticipate additional restructuring charges in future periods as we
complete the execution of our restructuring plan. These charges will primarily include additional facilities and personnel.

We
recorded a one-time, non-cash charge to operations in the 2002 Period of $242.0 million for acquired in-process research and development.
The valuation of acquired in-process research and development represents the estimated fair value related to incomplete projects that, at the time of the COR acquisition, had no
alternative future use and for which technological feasibility had not been established. The in-process technology we acquired from COR consisted of five significant research and
development projects for the treatment of cardiovascular diseases, as well as in the area of oncology. During 2003, we discontinued four of the five programs as part of our streamlining of discovery
and development projects. As of December 31, 2003, we expect to incur an additional $45.0 million to $70.0 million of research and development expenses for the remaining project,
which we expect to complete by 2015.

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

Investment
income decreased to $32.6 million in the 2003 Period from $116.0 million in the 2002 Period. The decrease is primarily attributable to a lower average balance of
invested funds in the 2003 Period as compared to the 2002 period and less favorable market conditions resulting in lower yields, coupled with a decrease in realized gains, as significant realized
gains were recognized from our investment portfolio during the 2002 Period.

Interest
expense decreased to $21.0 million in the 2003 Period from $38.0 million in the 2002 Period, primarily as a result of the April 2003 repurchase of
$577.8 million aggregate principal amount of the 5.0% notes and 4.5% notes.

Through
our acquisition of LeukoSite, we became a party to a joint venture partnership, Millennium and ILEX Partners, L.P., or M&I, for development of CAMPATH® (alemtuzumab)
humanized monoclonal antibody. We sold our equity interest in M&I and in consideration for the sale, we received an initial payment of $20.0 million in December 2001. During each of the
2003 and 2002 Periods, we recorded an additional gain of $40.0 million on our sale of this equity interest based upon the achievement of predetermined sales targets of CAMPATH for 2003 and 2002
that entitled us to this additional consideration under the terms of our agreement with ILEX.

46

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

During
the 2002 Period, we recorded a non-cash charge of $54.0 million relating to the fair value of the put premium placed on the 5.0% notes and 4.5% notes.

Years Ended December 31, 2002 and December 31, 2001

Amounts relating to the year ended December 31, 2001 (the "2001 Period") do not include financial results for COR, which we acquired on February 12,
2002.

For
the 2002 Period, we had a net loss of $590.2 million, or $2.13 per basic and diluted share, compared to a net loss of $192.0 million, or $0.88 per basic and diluted
share for the 2001 Period.

Revenue
increased to $353.0 million for the 2002 Period from $246.2 million for the 2001 Period. The increase in revenue primarily relates to the recognition of
$160.0 million of co-promotion revenue in the 2002 Period from worldwide sales of INTEGRILIN® (eptifibatide) Injection. Worldwide sales of INTEGRILIN in the 2002 Period,
as provided to us by SGP, were $303.7 million, a 32% increase over 2001 primarily as result of increased volume and also from price increases. Revenue under strategic alliances decreased from
$246.2 million in the 2001 Period to $193.1 million in the 2002 Period. Strategic alliance revenue decreased due to reduced research efforts in our Bayer alliance and termination of
certain of our early strategic alliances, including our American Home Products alliance for the treatment and prevention of disorders of the central nervous system.

Included
in 2002 revenue is $36.1 million of revenue that was recognized in prior years relating to the adoption of SAB 101. Included in 2001 revenue is $43.9 million of
revenue that was recognized in prior years relating to the adoption of SAB 101.

Research
and development expenses increased to $511.2 million for the 2002 Period from $400.6 million for the 2001 Period. The research and development expense categories
with the most significant increases were personnel costs, followed by clinical trial costs and facilities expenses. The increase was primarily attributable to our continued investment in building a
sustainable product pipeline, with increases in clinical costs related to advancing our lead oncology program, VELCADE® (bortezomib) for Injection, and clinical investments made in
INTEGRILIN.

Selling,
general and administrative expenses increased to $168.9 million for the 2002 Period from $82.7 million for the 2001 Period. The increase was primarily attributable
to the addition of the COR commercial infrastructure that was not present in the 2001 Period as well as increased expenses due to the expansion of our 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 personnel expenses, followed by consulting and facilities
expenses.

In
December 2002, we announced the first in a series of steps we will take to realign our resources to those of a fully-integrated biopharmaceutical company. We have discontinued
certain discovery efforts, reduced related headcount and will reallocate certain resources to enhance our commercial capabilities. As a result, we have recorded a restructuring charge of
$3.0 million in the 2002 Period related to termination benefits, which include severance, out-placement services and other associated costs.

Cost
of goods sold was $47.3 million for the 2002 Period and consists of certain manufacturing-related expenses associated with the sale of INTEGRILIN within
co-promotion territories.

We
recorded a one-time, non-cash charge to operations in the 2002 Period of $242.0 million for acquired in-process research and development.
The valuation of acquired in-process research and

47

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development
represents the estimated fair value related to incomplete projects that, at the time of the COR acquisition, had no alternative future use and for which technological feasibility had not
been established.

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

A
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 may be adversely affected. Additionally, the value of the other intangible assets
acquired may become impaired.

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

Amortization
of intangible assets in the 2002 Period relates to specifically identified intangible assets from the COR, LeukoSite and CDC acquisitions. Amortization of intangible assets
in the 2001 Period relates to existing technology, assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense decreased to $34.9 million in
the 2002 Period from $64.6 million in the 2001 Period due to the adoption of SFAS No. 142. Following our adoption of SFAS No. 142 effective as of January 1, 2002, we
continue to amortize specifically identifiable intangible assets and ceased amortizing goodwill and assembled workforce which was reclassified to goodwill.

Investment
income increased to $116.0 million in the 2002 Period from $98.2 million in the 2001 Period. The increase primarily relates to realized gains recognized from
sales of marketable securities of $53.4 million in the 2002 period, offset by an increase in realized losses of $21.3 million. Because we realized significant gains from our investment
portfolio during 2002, we expect realized gains on the sales of marketable securities to decrease in future periods.

Interest
expense increased to $38.0 million in the 2002 Period from $9.4 million in the 2001 Period. The change relates to increased interest due to the assumption of
$600.0 million of principal of the 5.0% notes and 4.5% notes.

We
also recognized a non-cash charge of $54.0 million in the 2002 Period relating to the fair value of the premium put placed on these notes.

In
the 2001 Period, we sold our equity interest in M&I for $20.0 million and contingent consideration based on future sales of CAMPATH in the United States, $40.0 million
of which we received in the 2002 Period.

48

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Liquidity and Capital Resources

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

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



In
the future, we expect to continue to fund our cash requirements from some of these external sources as well as from sales of VELCADE® (bortezomib) for Injection,
INTEGRILIN and other products, subject to regulatory approval. We are entitled to additional committed research and development funding under certain of our strategic alliances. We believe the key
factors that could affect our internal and external sources of cash are:



As
of December 31, 2003, we had approximately $915.3 million in cash, cash equivalents and marketable securities. This excludes $16.3 million of interest-bearing
marketable securities classified as restricted cash on our balance sheet as of December 31, 2003, which serve as collateral for letters of credit securing leased facilities.

Cash Flows

We used $221.2 million of cash in operating activities in the 2003 Period and $353.1 million in the 2002 Period. The principal use of cash in
operating activities in both 2003 and 2002 was to fund our net loss. Cash flows from operations can vary significantly due to various factors including changes in accounts receivable and deferred
revenues related to our existing and new arrangements with collaborators, as well as changes in accounts payable and accrued expenses. The average collection period of our accounts receivable can vary
and is dependent on various factors, including the type of revenue and the payment terms related to those revenues and whether the related revenue was recorded at the beginning or at the end of a
period.

49

---

We
used $480.3 million of cash in investing activities in the 2003 Period. Investing activities provided cash of $1.5 billion in the 2002 Period, which was reinvested into
our securities portfolio during the 2003 Period. The principal uses of funds in the 2003 Period and 2002 Period were purchases of marketable securities and property and equipment. The decrease of
approximately $90.0 million in purchases of property and equipment is primarily attributable to less equipment purchased in the 2003 Period, as a result of the consolidation of research and
development facilities, overall headcount reduction and streamlining of discovery and development projects. The principal source of funds in the 2002 Period is from the sale of marketable securities
and the cash acquired in the COR acquisition.

In
the 2003 Period, we used $574.9 million of cash in financing activities. The primary use of cash was the repurchase of $577.8 million in principal of convertible notes
and the related put premium of $52.1 million. Financing activities provided net cash of $111.7 million in the 2002 Period. In the 2003 and 2002 Periods, the principal sources of net cash
from financing activities were the sales of common stock to Abbott and Millennium employees.

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

Contractual Obligations

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

As
of December 31, 2003, our convertible notes aggregated $105.5 million in principal amount outstanding. All three issues of notes require semi-annual interest
payments through maturity. All required interest payments have been made to date. As of December 31, 2003, these notes consisted of:



We
also have lease obligations relating to two new buildings for laboratory and office space in Cambridge, Massachusetts. The rent obligation for the first of these buildings began in
July 2002 and the rent on the second building began in July 2003. Rent is calculated on an escalating scale ranging from approximately $7.8 million, per building per year, to
approximately $9.4 million, per building per year. Each lease is for a term of seventeen years. We were responsible for a portion of the construction costs for both buildings and were deemed to
be the owner during the construction period of each building under EITF 97-10, "The Effect of Lessee Involvement in Asset Construction." As a result, during the 2003 Period, we recorded
approximately $9.1 million and during the 2002 Period, we recorded approximately $34.4 million of additional non-cash construction costs under these leases. Upon completion
of the construction period of each of the buildings, we recorded the leases as capital leases.

50

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Below
is a table which presents our contractual obligations and commercial commitments as of December 31, 2003:

|                                                        |  |   |         | Payments Due by Period
|------------------------------------------------------- |  | - | ------- | ----------------------
|
|Long-term debt obligations, including interest payments |  | $ | 125,005 |                       
|Capital lease obligations                               |  |   | 145,036 |                       
|Operating lease obligations                             |  |   | 318,089 |                       
|Long term supply contracts                              |  |   | 31,500  |                       
|External collaborations                                 |  |   | 27,323  |                       
|                                                        |  |   |         |                       
|Total                                                   |  | $ | 646,953 |                       
|                                                        |  |   |         |                       

As
of December 31, 2003, we had net operating loss carryforwards of approximately $1.2 billion to offset future federal taxable income expiring in 2004 through 2023 and
$1.0 billion to offset future state taxable income expiring in 2004 through 2008. Due to the degree of uncertainty related to the ultimate realization of tax benefits created from such prior
losses, no benefit has been recognized in the financial statements as of December 31, 2003. 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.

Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We manage our fixed income investment portfolio in accordance with our Policy for Securities Investments, or Investment Policy, that has been approved by our
Board of Directors. The primary objectives of our Investment Policy are to preserve principal, maintain a high degree of liquidity to meet operating needs, and obtain competitive returns subject to
prevailing market conditions. Investments are made primarily in investment-grade corporate bonds with effective maturities of three years or less, asset-backed debt securities and U.S. government
agency debt securities. These investments are subject to risk of default, changes in credit rating and changes in market value. These investments are also subject to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical 100 basis point increase in interest rates would result in an approximate $14.2 million decrease in the fair value of our
investments as of December 31, 2003. However, due to the conservative nature of our investments and relatively short effective maturities of debt instruments, interest rate risk is mitigated.
Our Investment Policy specifies credit quality standards for our investments and limits the amount of exposure from any single issue, issuer or type of investment. We do not own derivative financial
instruments in our investment portfolio.

As
of December 31, 2003, the fair value of our 4.5% notes, 5.0% notes and 5.5% notes approximates their carrying value. The interest rates on our convertible notes and capital
lease obligations are fixed and therefore not subject to interest rate risk.

We
have no derivative instruments outstanding as of December 31, 2003.

As
of December 31, 2003 we did not have any financing arrangements that were not reflected in our balance sheet.

51

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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, 2003 and 2002, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the consolidated results of its operations, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

As
discussed in Note 2 to the consolidated financial statements, in 2002, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets."

|                                       |  | /s/ Ernst & Young LLP
|-------------------------------------- |  | ---------------------
|January 21, 2004
Boston, Massachusetts |  |                      

52

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Millennium Pharmaceuticals, Inc.        Consolidated Balance Sheets

|                                                                                                                                                              |                                            | December 31, |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | ----------
|
|
|Assets                                                                                                                                                        |                                            |              |           
|Current assets:                                                                                                                                               |                                            |              |           
|Cash and cash equivalents                                                                                                                                     |                                            | $            | 55,847    
|Marketable securities                                                                                                                                         |                                            |              | 859,456   
|Accounts receivable                                                                                                                                           |                                            |              | 59,025    
|Inventory                                                                                                                                                     |                                            |              | 110,213   
|Prepaid expenses and other current assets                                                                                                                     |                                            |              | 30,207    
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total current assets                       |              |           
|Property and equipment, net                                                                                                                                   |                                            |              | 231,469   
|Restricted cash                                                                                                                                               |                                            |              | 16,297    
|Other assets                                                                                                                                                  |                                            |              | 14,767    
|Goodwill                                                                                                                                                      |                                            |              | 1,201,635 
|Developed technology, net                                                                                                                                     |                                            |              | 372,260   
|Intangible assets, net                                                                                                                                        |                                            |              | 59,087    
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total assets                               |              | $         
|                                                                                                                                                              |                                            |              |           
|Liabilities and Stockholders' Equity                                                                                                                          |                                            |              |           
|Current liabilities:                                                                                                                                          |                                            |              |           
|Accounts payable                                                                                                                                              |                                            | $            | 27,341    
|Accrued expenses                                                                                                                                              |                                            |              | 133,617   
|Current portion of deferred revenue                                                                                                                           |                                            |              | 80,402    
|Current portion of capital lease obligations                                                                                                                  |                                            |              | 14,398    
|Current portion of long term debt                                                                                                                             |                                            |              |          
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total current liabilities                  |              |           
|Restructuring, net of current portion                                                                                                                         |                                            |              | 46,614    
|Deferred revenue, net of current portion                                                                                                                      |                                            |              | 13,015    
|Capital lease obligations, net of current portion                                                                                                             |                                            |              | 87,889    
|Long term debt, net of current portion                                                                                                                        |                                            |              | 105,461   
|Commitments and contingencies                                                                                                                                 |                                            |              |           
|Stockholders' equity:                                                                                                                                         |                                            |              |           
|Preferred Stock, $0.001 par value; 5,000 shares authorized, none issued                                                                                       |                                            |              |          
|Common Stock, $0.001 par value; 500,000 shares authorized: 302,291 shares at December 31, 2003 and 291,094 shares at December 31, 2002 issued and outstanding |                                            |              | 302       
|Additional paid-in capital                                                                                                                                    |                                            |              | 4,513,143 
|Deferred compensation                                                                                                                                         |                                            |              | (271      
|Accumulated other comprehensive income                                                                                                                        |                                            |              | 4,844     
|Accumulated deficit                                                                                                                                           |                                            |              | (2,016,492
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total stockholders' equity                 |              |           
|                                                                                                                                                              |                                            |              |           
|                                                                                                                                                              | Total liabilities and stockholders' equity |              | $         
|                                                                                                                                                              |                                            |              |           

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

53

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Millennium Pharmaceuticals, Inc.        Consolidated Statements of Operations

|                                           |                                                  | Year Ended December 31,  |         
|------------------------------------------ | ------------------------------------------------ | ------------------------ | --------
|
|
|Revenues:                                  |                                                  |                          |         
|                                           | Net product sales                                |                          | $       
|                                           | Co-promotion revenue                             |                          |         
|                                           | Revenue under strategic alliances                |                          |         
|                                           |                                                  |                          |         
|                                           |                                                  | Total revenues           |         
|                                           |                                                  |                          |         
|Costs and expenses:                        |                                                  |                          |         
|                                           | Cost of goods sold                               |                          |         
|                                           | Research and development                         |                          |         
|                                           | Selling, general and administrative              |                          |         
|                                           | Restructuring                                    |                          |         
|                                           | Acquired in-process research and development     |                          |         
|                                           | Amortization of intangibles                      |                          |         
|                                           |                                                  |                          |         
|                                           |                                                  | Total costs and expenses |         
|                                           |                                                  |                          |         
|Loss from operations                       |                                                  |                          | (524,773
|Other income (expense):                    |                                                  |                          |         
|                                           | Investment income                                |                          |         
|                                           | Interest expense                                 |                          |         
|                                           | Gain on sale of equity interest in joint venture |                          |         
|                                           | Equity in operations of joint venture            |                          |         
|                                           | Debt financing charges                           |                          |         
|                                           | Debt conversion expenses                         |                          |         
|                                           |                                                  |                          |         
|Net loss                                   |                                                  | $                        | (483,687
|                                           |                                                  |                          |         
|Amounts per common share:                  |                                                  |                          |         
|Net loss per share, basic and diluted      |                                                  | $                        | (1.63   
|                                           |                                                  |                          |         
|Weighted average shares, basic and diluted |                                                  |                          | 297,641 
|                                           |                                                  |                          |         

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

54

---



Millennium Pharmaceuticals, Inc.        Consolidated Statements of Cash Flows

|                                                                                            |                                                        | Year Ended December 31,                   |           
|------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------- | ----------
|
|
|Cash Flows from Operating activities:                                                       |                                                        |                                           |           
|Net loss                                                                                    |                                                        | $                                         | (483,687  
|Adjustments to reconcile net loss to cash                                                   |                                                        |                                           |           
|used in operating activities:                                                               |                                                        |                                           |           
|                                                                                            | Acquired in-process research and development           |                                           |           
|                                                                                            | Depreciation and amortization                          |                                           |           
|                                                                                            | Restructuring                                          |                                           |           
|                                                                                            | Amortization and write-off of deferred financing costs |                                           |           
|                                                                                            | Realized gain on securities, net                       |                                           |           
|                                                                                            | Stock compensation expense                             |                                           |           
|                                                                                            | Equity in operations of joint venture                  |                                           |           
|                                                                                            | Changes in operating assets and liabilities:           |                                           |           
|                                                                                            |                                                        | Accounts receivable                       |           
|                                                                                            |                                                        | Inventory                                 |           
|                                                                                            |                                                        | Prepaid expenses and other current assets |           
|                                                                                            |                                                        | Restricted cash and other assets          |           
|                                                                                            |                                                        | Accounts payable and accrued expenses     |           
|                                                                                            |                                                        | Deferred revenue                          |           
|                                                                                            |                                                        |                                           |           
|Net cash used in operating activities                                                       |                                                        |                                           | (221,155  
|                                                                                            |                                                        |                                           |           
|Cash Flows from Investing activities:                                                       |                                                        |                                           |           
|Investments in marketable securities                                                        |                                                        |                                           | (1,081,650
|Proceeds from sales and maturities of marketable securities                                 |                                                        |                                           | 655,624   
|Purchase of property and equipment                                                          |                                                        |                                           | (52,422   
|Other investing activities                                                                  |                                                        |                                           | (1,873    
|Net cash acquired in COR Therapeutics, Inc. acquisition                                     |                                                        |                                           |          
|                                                                                            |                                                        |                                           |           
|Net cash (used in) provided by investing activities                                         |                                                        |                                           | (480,321  
|                                                                                            |                                                        |                                           |           
|Cash Flows from Financing activities:                                                       |                                                        |                                           |           
|Net proceeds from issuance of common stock and exercises of warrants                        |                                                        |                                           | 28,571    
|Net proceeds from employee stock purchases                                                  |                                                        |                                           | 44,053    
|Repayment of principal of long-term debt obligations, including payment of debt premium     |                                                        |                                           | (629,880  
|Repayment of notes receivable from officers                                                 |                                                        |                                           |          
|Principal payments on capital leases                                                        |                                                        |                                           | (17,689   
|                                                                                            |                                                        |                                           |           
|Net cash (used in) provided by financing activities                                         |                                                        |                                           | (574,945  
|                                                                                            |                                                        |                                           |           
|(Decrease) increase in cash and cash equivalents                                            |                                                        |                                           | (1,276,421
|Equity adjustment from foreign currency translation                                         |                                                        |                                           | (123      
|Cash and cash equivalents, beginning of period                                              |                                                        |                                           | 1,332,391 
|                                                                                            |                                                        |                                           |           
|Cash and cash equivalents, end of period                                                    |                                                        | $                                         | 55,847    
|                                                                                            |                                                        |                                           |           
|Supplemental Cash Flow Information:                                                         |                                                        |                                           |           
|Cash paid for interest                                                                      |                                                        | $                                         | 24,412    
|Supplemental Disclosure of Noncash Investing and Financing Activities:                      |                                                        |                                           |           
|Receipt of ILEX common stock on sale of equity interest in Millennium &
ILEX Partners, L.P. |                                                        | $                                         | 10,000    
|Construction costs for laboratory and office space                                          |                                                        |                                           | 9,115     
|Equipment acquired under capital leases                                                     |                                                        |                                           | 1,598     
|Acquisition of COR Therapeutics, Inc., including direct transaction costs                   |                                                        |                                           |          
|Millennium & ILEX Partners, L.P. capital contribution                                       |                                                        |                                           |          
|Adjustment to goodwill of LeukoSite, Inc. for contingent consideration settlement           |                                                        |                                           |          
|Conversion of subordinated debt to common stock                                             |                                                        |                                           |          
|Services due from the sale of Cambridge Discovery Chemistry, Inc.                           |                                                        |                                           |          

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

55

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Millennium Pharmaceuticals, Inc.        Statements of Stockholders' Equity

|                                                                      |                          | Common Stock |   |   |     |  |   | Notes
Receivable
from
Officers |   | Accumulated
Other
Comprehensive
Income (Loss) |        |   |   |      |  
|--------------------------------------------------------------------- | ------------------------ | ------------ | - | - | --- |  | - | ------------------------------ | - | --------------------------------------------- | ------ | - | - | ---- | -
|
|
|
|Balance at December 31, 2000                                          |                          | 213,978,993  |   | $ | 214 |  | $ | 2,203,902                      |   | $                                             | (1,296 | ) | $ | (385 | )
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Net loss                                                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Unrealized gain on marketable securities                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Foreign currency translation                                          |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|                                                                      | 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 | )
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Net loss                                                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Unrealized loss on marketable securities                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Foreign currency translation                                          |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|                                                                      | Total comprehensive loss |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Issuance of common stock                                              |                          | 63,430,074   |   |   | 64  |  |   | 1,927,194                      |   |                                               |       |   |   |     |  
|Repurchase of common stock                                            |                          | (21,150      | ) |   |    |  |   | (78                            | ) |                                               |       |   |   |     |  
|Exercise of stock warrants                                            |                          | 101,588      |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Employee stock purchases                                              |                          | 2,891,185    |   |   | 3   |  |   | 18,292                         |   |                                               |       |   |   |     |  
|Repayment of notes from officers                                      |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   | 145  |  
|Reclassification of notes from former officers                        |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   | 170  |  
|Stock compensation expense                                            |                          |             |   |   |    |  |   | 165                            |   |                                               |       |   |   |     |  
|Deferred stock compensation                                           |                          |             |   |   |    |  |   | 3,790                          |   |                                               | (3,790 | ) |   |     |  
|Write off deferred stock compensation                                 |                          |             |   |   |    |  |   | (173                           | ) |                                               | 173    |   |   |     |  
|Stock compensation earned                                             |                          |             |   |   |    |  |   |                               |   |                                               | 2,430  |   |   |     |  
|401K stock match                                                      |                          | 402,554      |   |   |    |  |   | 5,516                          |   |                                               |       |   |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Balance at December 31, 2002                                          |                          | 291,094,230  |   |   | 291 |  |   | 4,432,040                      |   |                                               | (1,952 | ) |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Net loss                                                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Unrealized loss on marketable securities                              |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Foreign currency translation                                          |                          |             |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|                                                                      | Total comprehensive loss |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Issuance of common stock                                              |                          | 3,658,314    |   |   | 4   |  |   | 28,567                         |   |                                               |       |   |   |     |  
|Repurchase of common stock                                            |                          | (187         | ) |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Exercise of stock warrants                                            |                          | 143,504      |   |   |    |  |   |                               |   |                                               |       |   |   |     |  
|Employee stock purchases                                              |                          | 6,697,171    |   |   | 7   |  |   | 44,046                         |   |                                               |       |   |   |     |  
|Other common stock transactions                                       |                          |             |   |   |    |  |   | 88                             |   |                                               |       |   |   |     |  
|Restructuring related stock compensation expense                      |                          |             |   |   |    |  |   | 1,185                          |   |                                               |       |   |   |     |  
|Write off deferred stock compensation                                 |                          |             |   |   |    |  |   | (401                           | ) |                                               | 401    |   |   |     |  
|Stock compensation earned                                             |                          |             |   |   |    |  |   |                               |   |                                               | 1,280  |   |   |     |  
|401K stock match                                                      |                          | 697,821      |   |   |    |  |   | 7,618                          |   |                                               |       |   |   |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  
|Balance at December 31, 2003                                          |                          | 302,290,853  |   | $ | 302 |  | $ | 4,513,143                      |   | $                                             | (271   | ) | $ |     |  
|                                                                      |                          |              |   |   |     |  |   |                                |   |                                               |        |   |   |      |  

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

56

---



Millennium Pharmaceuticals, Inc.        Notes to Consolidated Financial Statements December 31, 2003

[1] The Company

Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company") is a leading biopharmaceutical company focused on developing and commercializing
breakthrough products in the disease areas of cancer, cardiovascular disease and inflammatory disease. The Company currently has a cancer product and a cardiovascular disease product on the market.
The Company also has other potential products in various stages of preclinical and clinical development in all three of its therapeutic disease areas of focus.

Millennium's
strategy is to develop multiple products in several disease areas through clinical trials and regulatory approvals and to be involved in the marketing and sale of many of
these products. The Company plans to develop and commercialize many of its products on its own, but will seek development and commercial partners when it believes that this will maximize product
value.

[2]    Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Millennium and its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Investment in the Company's unconsolidated joint venture in 2001 is accounted for using the equity method (see Note 5).

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.

Reclassifications

In connection with the launch of VELCADE® (bortezomib) for Injection in May 2003 and the recognition of related costs of sales, the Company
reclassified certain INTEGRILIN® (eptifibatide) Injection related manufacturing expenses to cost of goods sold so that cost of goods sold now includes manufacturing-related expenses
associated with the sales of INTEGRILIN and VELCADE. These reclassified manufacturing-related expenses were previously included in cost of co-promotion revenue and certain INTEGRILIN
related advertising and promotional expenses that were previously included in cost of co-promotion revenue have been reclassified to selling, general and administrative expenses.
Advertising and promotional expenses are expensed as incurred. During the years ended December 31, 2003 and 2002, advertising and promotional expenses were $37.0 million and
$15.9 million, respectively. The Company did not incur any advertising and promotional expenses during the year ended December 31, 2001.

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

Cash Equivalents and Marketable Securities

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

57

---

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, 2003 and December 31, 2002 are classified as "available-for-sale." Available-for-sale securities are carried at fair
value, with the unrealized gains and losses reported in a separate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion are included in investment income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities and other investments are included in investment income. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income.

During
the years ended December 31, 2003 and 2002, the Company recorded realized gains on marketable securities of $6.3 million and $53.4 million, respectively, and
realized losses on marketable securities and other investments of $3.3 million and $21.3 million, respectively.

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 investment-grade corporate bonds, asset-backed and U.S. government agency securities. The
Company's investment policy, approved by the Board of Directors, limits the amount the Company may invest in any one type of investment, thereby reducing credit risk concentrations.

Segment Information

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

The
Company operates in one business segment, which focuses on the development and commercialization of proprietary therapeutic products. All of the Company's product sales are currently
related to sales of VELCADE® (bortezomib) for Injection. All of the Company's co-promotion revenue is currently related to sales of INTEGRILIN® (eptifibatide)
Injection.

Revenues
from Ortho Biotech Products, L.P. ("Ortho Biotech") accounted for approximately 11% of consolidated revenues for the year ended December 31, 2003. Revenues from Bayer, AG
("Bayer") accounted for approximately 14%, 22%, and 39% of consolidated revenues for the years ended December 31, 2003, 2002 and 2001, respectively. Revenues from Aventis
Pharmaceuticals, Inc. ("Aventis") accounted for approximately 15%, 12% and 16% of consolidated revenues for the years ended December 31, 2003, 2002 and 2001, respectively. Revenues from
Monsanto Company ("Monsanto") accounted for approximately 12% and 18% of consolidated revenues for the years ended December 31, 2002 and 2001, respectively. There were no other significant
customers in 2003, 2002 and 2001, respectively.

58

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Information Concerning Market and Source of Supply Concentration

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

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.

Inventory

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

Inventory
consists of the following (in thousands):

December 31, 2003

December 31, 2002Raw materials

$
77,485

$
65,039Work in process


3,382


10,534Finished goods


29,346


29,773$
110,213

$
105,346


Property and Equipment

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

Equipment

3 to 4 yearsCapitalized software

3 to 5 yearsLeasehold improvements

4 to 27 years


59

---

Goodwill and Intangible Assets

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

Intangible
assets consist of the following (in thousands):

December 31, 2003

December 31, 2002Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
AmortizationDeveloped technology

$
435,000

$
(62,740
)
$
435,000

$
(29,279
)Core technology

$
18,712

$
(18,712
)
$
18,712

$
(14,149
)Other


16,560


(16,473
)

16,560


(2,037
)Total amortizable intangible assets


35,272


(35,185
)

35,272


(16,186
)Total indefinite-lived trademark


59,000





59,000


$
94,272

$
(35,185
)
$
94,272

$
(16,186
)


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

Developed technology

13 yearsCore technology

4 yearsOther

2 to 4 years


Amortization
expense was approximately $38.9 million, $34.9 million and $64.6 million in 2003, 2002 and 2001, respectively. In addition, in connection with its
restructuring initiative discussed in Note 3, the Company recognized an impairment charge of approximately $11.3 million for technology it no longer intends to pursue.

The
Company expects to incur amortization expense of approximately $33.5 million for each of the next five years.

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

On
October 1, 2003, the Company performed its annual goodwill impairment test and determined that no impairment existed on that date. The Company continually monitors business and
market conditions to assess whether an impairment indicator exists. If the Company were to determine that an

60

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impairment
indicator exists, it would be required to perform an impairment test which might result in a material impairment charge to the statement of operations.

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.

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

|                                             |  | Year Ended December 31, |         
|-------------------------------------------- |  | ----------------------- | --------
|
|
|Net loss                                     |  | $                       | (483,687
|Add back: Goodwill amortization              |  |                         |        
|Add back: Assembled workforce amortization   |  |                         |        
|                                             |  |                         |         
|Adjusted net loss                            |  | $                       | (483,687
|                                             |  |                         |         
|Amounts per common share, basic and diluted: |  |                         |         
|Net loss                                     |  | $                       | (1.63   
|Add back: Goodwill amortization              |  |                         |        
|Add back: Assembled workforce amortization   |  |                         |        
|                                             |  |                         |         
|Adjusted net loss                            |  | $                       | (1.63   
|                                             |  |                         |         
|Shares                                       |  |                         | 297,641 
|                                             |  |                         |         

Revenue Recognition

The Company recognizes revenue from the sale of its products, co-promotion collaboration and strategic alliances. The Company's revenue arrangements
with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is
objective and reliable evidence of the fair value of the undelivered items. The consideration received is allocated among the separate units based on their respective fair values, and the applicable
revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.



The Company records product sales of VELCADE® (bortezomib) for Injection when delivery has occurred and title passes to the customer, collection is
reasonably assured and the Company has no further obligations. Allowances are recorded as a reduction to product sales for estimated returns and discounts at the time of sale. Costs incurred by the
Company for shipping and handling are recorded in cost of goods sold.

61

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



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

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



Milestone
payments are recognized as revenue when the performance obligation, as defined in the contract, are achieved. 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.

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

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.

Net Loss Per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is
typically computed using the weighted average number of common and dilutive common equivalent shares from stock options,

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---

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

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, 2003 and 2002 included $4.9 million and $2.4 million, respectively of unrealized gains on marketable securities and
$(0.03) million and $1.7 million, respectively, of cumulative foreign currency translation adjustments. Comprehensive loss is reflected in the consolidated statements of stockholders' equity.

Stock-Based Compensation

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

63

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

|                                                                                                                |  | Year Ended December 31, |         
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------
|
|Net loss                                                                                                        |  | $                       | (483,687
|Add: Stock-based compensation as reported in the Statement of Operations                                        |  |                         | 2,465   
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                         | (68,776 
|                                                                                                                |  |                         |         
|Pro forma net loss                                                                                              |  | $                       | (549,998
|                                                                                                                |  |                         |         
|Amounts per common share:                                                                                       |  |                         |         
|Basic and dilutedas reported                                                                                   |  | $                       | (1.63   
|                                                                                                                |  |                         |         
|Basic and dilutedpro forma                                                                                     |  | $                       | (1.85   
|                                                                                                                |  |                         |         

The
weighted-average per share fair value of options granted during 2003, 2002 and 2001 was $7.51, $10.81, and $19.36, respectively.

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

Stock Options

Stock Purchase Plan2003

2002

2001

2003

2002

2001Expected life (years)

5.2

5.5

4.4

0.5

0.5

0.5Interest rate

2.32%

3.66%

4.35%

1.13%

1.47%

2.90%Volatility

.85

.87

.87

.85

.87

.87


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

Accounting Pronouncements

In November 2002, the EITF issued EITF 00-21, "Revenue Arrangements with Multiple Deliverables," ("EITF 00-21") which addressed
certain aspects of the accounting for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Under EITF 00-21, revenue
arrangements with multiple deliverables should be divided into separate accounting units if the deliverables meet certain criteria, including whether the fair value of the delivered items can be
determined and whether there is evidence of fair value of the undelivered items. In addition, the consideration should be allocated among the separate units of accounting based on their fair values,
and the applicable revenue recognition criteria should be considered separately for each of the separate units of accounting. EITF 00-21 is effective for revenue arrangements entered into
after June 30, 2003. The Company has not entered into any such arrangements since the effective date of EITF 00-21.

64

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In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51" ("FIN
46") and in December 2003 issued a revised FIN 46 ("FIN 46R") which addressed the period of adoption of FIN 46 for entities created before January 31, 2003. FIN 46 provides a new consolidation
model which determines control and consolidation based on potential variability in gains and losses. The provisions of FIN 46 are effective for enterprises with variable interests in variable interest
entities created after January 31, 2003. For its interests in variable interest entities created before February 1, 2003, the Company must adopt the provisions of FIN 46 in the first
quarter of fiscal 2004 and does not expect the adoption to have a material impact on its financial position or results of operations.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS
No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and
equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on the financial position or results of operations of the Company.

[3]    Restructuring

In December 2002, the Company announced the first in a series of steps to realign the Company's resources to become a commercially-focused
biopharmaceutical company. The Company discontinued certain discovery research efforts, reduced headcount in its discovery group and began reallocating certain resources to enhance its commercial
capabilities. As of December 1, 2002, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146
requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at its fair value in the period in which the liability is incurred, except for
one-time termination benefits that meet certain requirements. These actions resulted in the recognition of restructuring charges in the fourth quarter of 2002 and first quarter of 2003.

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

65

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These
costs are included in restructuring charges in the statements of operations and accrued expenses and restructuring, net of current portion on the balance sheet at
December 31, 2003. The following table displays the restructuring activity and liability balance included in accrued expenses (in thousands):

|                       |  | Balance at
December 31,
2002 |       | Charges |   | Payments |  | Asset
Impairment |         | Stock
Compensation |   | Other   |   | Balance at
December 31,
2003
|---------------------- |  | ---------------------------- | ----- | ------- | - | -------- |  | ---------------- | ------- | ------------------ | - | ------- | - | ----------------------------
|Termination benefits   |  | $                            | 2,710 |         | $ | 31,417   |  | $                | (18,061 | )                  | $ |        |   | $                           
|Facilities             |  |                              |      |         |   | 63,597   |  |                  | (10,589 | )                  |   |        |   |                             
|Asset impairment       |  |                              |      |         |   | 79,752   |  |                  |        |                    |   | (79,752 | ) |                             
|Contract termination   |  |                              |      |         |   | 15,601   |  |                  | (5,249  | )                  |   |        |   |                             
|Other associated costs |  |                              | 82    |         |   | 646      |  |                  | (618    | )                  |   |        |   |                             
|                       |  |                              |       |         |   |          |  |                  |         |                    |   |         |   |                             
|Total                  |  | $                            | 2,792 |         | $ | 191,013  |  | $                | (34,517 | )                  | $ | (79,752 | ) | $                           
|                       |  |                              |       |         |   |          |  |                  |         |                    |   |         |   |                             

Balance at
December 31,
2001

Charges

Payments

Balance at
December 31,
2002Termination benefits

$


$
2,872

$
(162
)
$
2,710Other associated costs





122


(40
)

82Total

$


$
2,994

$
(202
)
$
2,792


Costs
of termination benefits relate to severance packages, out-placement services and career counseling for employees affected by the restructuring. Charges related to
facilities include estimated remaining rental obligations, net of estimated sublease income, for facilities that the Company no longer occupies. Included in other facilities charges is the
write-off deferred rent recorded in accordance with SFAS No. 13, "Accounting for Leases." The Company's decisions to vacate certain facilities and abandon the related leasehold
improvements as well as terminate certain research programs were deemed to be impairment indicators under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." As a result of performing the impairment evaluations, asset impairment charges were recorded to adjust the carrying value of the related long-lived assets to their net realizable
values. The fair values of the assets were estimated based upon anticipated future cash flows, discounted at a rate commensurate with the risk involved.

The
projected payments of the remaining balances of the restructuring charges for the year ended December 31, 2003 are approximately $36.6 million in 2004 and
$46.6 million thereafter through 2022.

During
2004, the Company expects to recognize an additional $60.0 million in termination benefits and lease obligations as a result of the restructuring plan, the majority of
which will be paid out in cash.

66

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[4]    COR Acquisition

On February 12, 2002, the Company acquired COR for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares of
Millennium common stock pursuant to the merger agreement between the Company and COR. Through the merger, the Company added approximately 300 new employees and a leased facility in South San
Francisco, California and acquired INTEGRILIN® (eptifibatide) Injection for the treatment of acute coronary syndromes and substantial research capabilities in the areas of cardiovascular
disease and oncology. The purchase price calculation was based on COR outstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 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 with a weighted average exercise price of $12.90 were
assumed by Millennium pursuant to the merger agreement and converted into options to purchase approximately 6.1 million shares of Millennium common stock.

The
total cost of the merger was determined as follows (in thousands, except per share):

Fair value of Millennium shares (calculated using $30.57 per share average fair value for the three days prior to and after announcement of the merger)

$
1,685,334Value of COR options assumed net of intrinsic value of unvested options


127,714Millennium transaction costs, consisting primarily of financial advisory, legal and accounting fees


20,281$
1,833,329


The
fair value of options assumed was determined using the Black-Scholes method assuming expected lives ranging from one to five years, a risk-free interest rate of 4.35%,
volatility of 86.88% and no expected dividends. In accordance with FASB Interpretation No. 44, or FIN 44, Accounting for Certain Transactions Involving Stock Compensationan
Interpretation of APB 25, a portion of the intrinsic value of unvested options of COR has been allocated to deferred stock compensation. Deferred stock compensation is amortized on a
straight-line basis over the estimated remaining vesting period of the related options, or approximately five years.

The
transaction was recorded as a purchase for accounting purposes and the Company's consolidated financial statements include COR's operating results from the date of the acquisition.
The purchase price was allocated to the assets purchased and the liabilities assumed based upon their respective fair values, with the excess of the purchase price over the estimated fair value of net
tangible assets allocated to specific intangible assets and goodwill as follows (in thousands):

Net tangible assets acquired

$
37,585In-process research and development


242,000Identifiable intangible assets (primarily developed technology13 year useful life and trademarkindefinite life)


494,000Goodwill


1,059,744$
1,833,329


67

---

The
Company recorded a one-time, noncash charge to operations in 2002 of $242.0 million for acquired in-process research and development. The valuation of
acquired in-process research and development represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had no alternative future use and for
which technological feasibility had not been established. During 2003, the Company discontinued four of the five programs as part of its restructuring initiatives. As of December 31, 2003, the
Company expects to incur an additional $45.0 million to $70.0 million of research and development expenses for this project, which the Company expects to complete by 2015.

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

[5]    Revenue and Strategic Alliances

Historically, the Company has formed strategic alliances with major pharmaceutical companies where its discovery expertise and technology platform are applicable.
These agreements include alliances based on the transfer of technology platforms, alliances which combine technology transfer with a focus on a specific disease or therapeutic approach, and
disease-focused programs under which the Company conducts research funded by its partners. The Company's disease-based alliances and alliances which combine technology transfer with a disease focus
are generally structured as research collaborations. Under these arrangements, the Company performs research in a specific disease area aimed at discoveries leading to novel pharmaceutical (small
molecule) products. These alliances generally provide research funding over an initial period, with renewal provisions, varying by agreement.

Under
these agreements, the Company's partners may make up-front payments, additional payments upon the achievement of specific research and product development milestones,
ongoing research funding and/or pay royalties to or in some cases share profits with the Company based upon any product sales resulting from the collaboration. In certain alliances, collaborators may
make equity investments in the Company's common stock.



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

The
Company and Ortho Biotech and its research affiliate, Johnson & Johnson Pharmaceutical Research & Development, L.L.C., will jointly engage in an extensive global
program for further clinical

68

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development
of VELCADE® (bortezomib) for Injection with the purpose of maximizing the clinical and commercial potential of VELCADE. This program will investigate the potential of VELCADE
to treat multiple forms of solid and hematological cancers, including continued clinical development of VELCADE for multiple myeloma. Ortho Biotech is responsible for 40% of the joint development
costs through 2005 and for 45% of such costs thereafter.

In
connection with the agreement, the Company received a nonrefundable payment from Ortho Biotech of $15.0 million in July 2003. In addition, the Company may receive
payments for achieving clinical development milestones, for achieving regulatory milestones outside of the United States and for achieving agreed-upon sales levels of VELCADE. The Company
may also receive additional payments for achieving specified clinical and regulatory approval milestones outside of the United States for additional solid and hematological cancers and for achieving
sales milestones outside of the United States. During the year ended December 31, 2003, the Company recognized approximately $33.0 million of milestone payments as revenue under this
alliance.

Through
its merger with LeukoSite, Inc. ("LeukoSite") in 1999, the Company became a party to a joint venture agreement with ILEX Products, Inc. ("ILEX") to form Millennium
and ILEX Partners, L.P. ("M&I") for the purpose of developing and commercializing the CAMPATH for use in the treatment of chronic lymphocytic leukemia. The Company accounted for its investment in the
joint venture under the equity method of accounting. During the year ended December 31, 2001, the Company recognized $3.3 million of revenue from research and development activities
performed on behalf of and to be reimbursed by M&I. On December 31, 2001, ILEX Oncology acquired the Company's equity interest in M&I which owns the CAMPATH product in exchange for
$20.0 million plus additional consideration contingent upon future sales of CAMPATH. The Company earned $40.0 million of such consideration in each of 2003 and 2002. The Company is
entitled to receive additional payments of $40.0 million in 2004 if sales of CAMPATH in the United States meet specified thresholds. In addition, the Company may be entitled to additional
payments from ILEX Oncology based on future U.S. sales of CAMPATH.



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

On
March 9, 2001, the Company entered into a strategic alliance with Abbott Laboratories ("Abbott"). This alliance was for a five-year term, and is a research and
development collaboration in the area of metabolic diseases. The Company and Abbott agreed to share the cost of developing, manufacturing and marketing products on a worldwide basis. This arrangement
with Abbott also included a technology exchange and development agreement and a $250.0 million equity investment agreement. As part of this $250.0 million equity investment agreement,
Abbott made investments in 2002 and 2001 totaling $221.4 million. Abbott made the remaining $28.6 million investment in March 2003.

69

---

On
August 8, 2003, the Company and Abbott agreed to terminate their alliance covering joint discovery, development and commercialization of certain metabolic disease products in
connection with the Company's June 2003 restructuring plan. Included in restructuring charges for the three months ended September 30, 2003 are restructuring charges specifically related
to the discontinuation of metabolic research and development, which include termination benefits and costs associated with the Abbott separation agreement.

On
June 22, 2000, the Company entered into an alliance with 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 between
$160.0 million and $200.0 million over a three to five-year period. Aventis has purchased $250.0 million of the Company's common stock as agreed under an Investment
Agreement with the Company.

On
April 22, 2003, Aventis exercised its option to terminate the Technology Transfer Agreement between the Company and Aventis effective on the third anniversary of the Agreement,
July 21, 2003. Pursuant to the terms of the Agreement, upon providing this notice to the Company, Aventis paid the Company $40.0 million in consideration for future use of certain
Millennium technology transferred to Aventis, which is included in revenue under strategic alliances for the year ended December 31, 2003.

On
October 31, 2003, the research phase of the Company's five year strategic alliance with Bayer concluded. On October 10, 2003, Bayer and Millennium amended the agreement
to provide both parties access to certain identified drug targets for a period of seven years. If Bayer successfully develops and commercializes any of these targets discovered in the alliance, Bayer
may make success payments and royalties to Millennium on the sale of products generated from the alliance.

Revenues
recognized under the research phase of the Bayer alliance were approximately $45.5 million, $60.1 million and $80.6 million for the years ended
December 31, 2003, 2002 and 2001, respectively. The Company recognized the research funding portion of the alliance on a percentage-of-completion basis. The
percentage-of-completion was determined at each measurement date based upon the actual full-time equivalents to date as compared to management's estimate of the
total full-time equivalents needed to complete the deliverables required by the alliance. In September 2001, the Company revised the estimate of total full-time
equivalents required to complete the project downward as a result of productivity improvements made at the Company and changes to the program requirements made by Bayer. During each subsequent
reporting period, the Company continued to monitor the full-time equivalent estimate necessary to complete the deliverables and compared the estimate to the actual effort put forth. No
further adjustments were necessary and the accounting estimates used approximated actual efforts from September 2001 to the end of the research phase of the agreement, October 31, 2003.

70

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[6]    Marketable Securities

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

|                                  |                           | December 31, 2003
|--------------------------------- | ------------------------- | -----------------
|
|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 five years  |                  
|                                  | Due in six to ten years   |                  
|                                  | Due after ten years       |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Equities                          |                           |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

|                                  |                           | December 31, 2002
|--------------------------------- | ------------------------- | -----------------
|
|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 five years  |                  
|                                  | Due in six to ten years   |                  
|                                  | Due after ten years       |                  
|U.S. government agency securities |                           |                  
|                                  | Due in one year or less   |                  
|                                  | Due in one to three years |                  
|Equities                          |                           |                  
|                                  |                           |                  
|                                  |                           | $                
|                                  |                           |                  

The
aggregated fair value of investments with unrealized losses was approximately $177.6 million and $70.1 million at December 31, 2003 and 2002, respectively. All
such investments have been in an unrealized loss position for less than a year.

71

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[7]    Property and Equipment

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

2003

2002Equipment

$
198,978

$
195,795Capitalized software


34,951


26,797Leasehold improvements


242,645


156,959Construction in progress


7,152


79,839483,726


459,390Less accumulated depreciation and amortization


252,257


149,065$
231,469

$
310,325


Depreciation
expense, which includes amortization of assets recorded under capital leases, was $68.1 million, $51.6 million and $35.5 million in 2003, 2002 and 2001,
respectively.

[8]    Accrued expenses

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

2003

2002Restructuring

$
36,572

$
2,792Payroll & benefits


29,335


22,013Clinical and preclinical development


21,294


21,167Premium put obligation





54,000Construction costs


3,283


34,247Other expenses


43,133


47,099$
133,617

$
181,318


[9]    Commitments

Lease Commitments

The Company conducts the majority of its operations in leased facilities with a combination of leased and owned equipment. At December 31, 2003 and 2002,
respectively, the Company has capitalized leased equipment totaling $89.4 million and $104.8 million, with related accumulated amortization of $66.7 million and
$70.5 million. Such amounts are included in the appropriate categories of property and equipment in Note 7.

The
Company leases certain of its laboratory and office space under operating lease agreements with various terms and renewal options, including major facilities with lease expirations
ranging from 2004 through 2022. In addition to minimum lease commitments, these lease agreements require the Company to pay its pro rata share of property taxes and building operating expenses.

On
August 4, 2000, the Company entered into lease agreements, relating to two buildings for laboratory and office space in Cambridge, Massachusetts. The rent obligation for the
first of these buildings began in July 2002 and the rent obligation on the second building began in July 2003. The Company was responsible for a portion of the construction costs for
both buildings and was deemed to

72

---

be
the owner during the construction period of each building under EITF 97-10, "The Effect of Lessee Involvement in Asset Construction." In July 2002 and July 2003, upon
completion of the construction period of the buildings, respectively, the Company recorded the leases as capital leases.

At
December 31, 2003, the Company has pledged $16.3 million of marketable securities and cash equivalents, included in restricted cash, as collateral for letters of credit
for certain leased facilities.

At
December 31, 2003, future minimum commitments under leases with noncancelable terms, including leases for facilities that the Company no longer occupies as part of its
restructuring plan, of more than one year are as follows (in thousands):

Capital
Leases

Operating
LeasesYear:2004

$
18,401

$
40,1102005


13,361


37,8522006


6,728


37,4642007


3,529


36,0962008


3,529


36,045Thereafter


99,488


130,522Total


145,036

$
318,089Less amount representing interest


42,749Present value of minimum lease payments


102,287Less current portion of capital lease obligations


14,398Capital lease obligations, net of current portion

$
87,889


Total
rent expense was $53.6 million, $48.7 million and $33.6 million in 2003, 2002 and 2001, respectively.

External Collaborations

The Company funds research efforts of its strategic alliance and various academic collaborators in connection with its research and development programs. Total
future fixed commitments under these agreements approximate $4.7 million in 2004 and $2.9 million in 2005.

The
Company has also made strategic commitments to purchase debt and/or equity securities from certain of its partners. The Company may also owe its partners milestone payments and
royalties and the Company has committed to fund development costs incurred by some of its partners. Total future fixed purchases of debt and/or equity commitments under these agreements approximate
$19.7 million as of December 31, 2003.

73

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[10]    Convertible Debt

The Company had the following convertible notes outstanding at December 31, 2003:



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

In
April 2002, the Company amended the 4.5% notes and 5.0% notes to add put options permitting noteholders to require the Company on April 29, 2003, to repurchase the 4.5%
notes for cash at a price of $1,095 per $1,000 of principal amount and the 5.0% notes for cash at a price of $1,085 per $1,000 of principal amount, resulting in a maximum aggregate payment obligation
of $654.0 million. These put options on the notes were derivative instruments. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and as such we recorded on the
balance sheet at fair value and recognized as a debt financing charge in the 2002 statement of operations. The fair value of the derivative was $54.0 million at December 31, 2002.

On
April 29, 2003, the Company completed the repurchase of $577.8 million of aggregate principal amount of the outstanding 4.5% notes and 5.0% notes for an aggregate
payment of approximately $637.1 million, including principal, accrued interest and put premium. Approximately $22.1 million of aggregate principal amount of these notes were not tendered
in the offer and remain outstanding as of December 31, 2003. As a result of the repurchase, the Company recorded a charge in 2003 of approximately $10.5 million which represents the
write-off of approximately $12.4 million of unamortized original debt issuance costs associated with the 4.5% notes and 5.0% notes, offset by $1.9 million relating to the
expired put premium on the untendered notes.

[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

The Company had 500,000,000 authorized shares of common stock, $0.001 par value, and 302,290,853 shares issued and outstanding at December 31, 2003.

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---

Common Stock Warrants

At December 31, 2003, the Company has outstanding exercisable warrants to purchase 529,154 shares of Common Stock with a weighted-average exercise price of
$7.81 per share, which expire through 2007.

Stock Option Plans

In December 2002, the Company's Board of Directors reduced the number of shares authorized for issuance under certain of the Company's older plans and
acquired plans so that the Company cannot issue new options under those plans. Additionally, the Board of Directors amended certain of the Company's option plans to provide for full vesting of options
issued under the plans to optionholders who terminate their employment for good reason or are terminated without cause within the period one month before and one year after a change of control.

The
Company's 1993 Incentive Stock Plan (the "1993 Plan") allowed for the granting of incentive and nonstatutory options to purchase up to 21,600,000 shares of common stock. At
December 31, 2003, a total of 461,554 shares of common stock have been reserved for the exercise of options outstanding under the 1993 Plan. No options are available for future grant 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, 2003, a total of 9,483,284 shares of common stock have been reserved for the exercise of options outstanding and are available for future grant under the
1996 Plan.

The
1997 Equity Incentive Plan (the "1997 Plan"), as amended, provides for the granting of options to purchase 16,000,000 shares of common stock. The terms and conditions of the 1997
Plan are substantially consistent with those of the 1993 Plan and the 1996 Plan. At December 31, 2003, a total of 6,510,034 shares of common stock have been reserved for the exercise of options
outstanding and are available for future grant 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, 2003, a total of 44,784,878 shares of common stock have been reserved for the exercise of options outstanding and are
available for future grant 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, 2003, a total of
320,000 shares of common stock have been reserved for the exercise of options outstanding under the Director Plan. No options are available for future grant 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

75

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limited
to 10% of the employee's compensation or $25,000 in any calendar year. The first offering period began on October 1, 1996. At December 31, 2003, subscriptions were outstanding
for an estimated 75,898 shares at $13.35 per share.

In
connection with the February 2002 merger of COR and the Company, COR's 1991 Equity Incentive Plan (the "COR 1991 Plan"), 1994 Equity Incentive Plan (the "COR 1994 Plan") and
1998 Equity Incentive Plan (the "COR 1998 Plan") were assumed by Millennium. 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 "LeukoSite 1993 Plan"). The Plans, as assumed, allow for the granting of incentive and nonstatutory options to purchase up to 14,595,425 shares of Millennium
common stock. At December 31, 2003, a total of 3,413,494 shares of common stock have been reserved for the exercise of options outstanding under these assumed Plans. No options are available
for future grant under the COR 1994 Plan, the COR 1998 Plan, the MBio 1997 Plan, the MPMx 1997 Plan and the LeukoSite 1993 Plan. At December 31, 2003, a total of 3,098,434 shares are available
for future grant under the COR 1991 Plan.

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.

The
following table presents the combined activity of the Company's stock plans for the years ended December 31, 2003, 2002 and 2001:

|                                   |  | Shares      |   | Weighted-
Average
Exercise
Price |       | Shares |            | Weighted-
Average
Exercise
Price |   | Shares |  | Weighted-
Average
Exercise
Price
|---------------------------------- |  | ----------- | - | -------------------------------- | ----- | ------ | ---------- | -------------------------------- | - | ------ |  | --------------------------------
|
|Outstanding at January 1           |  | 43,847,975  |   | $                                | 21.97 |        | 33,786,251 |                                  | $ | 27.41  |  | 29,539,240                      
|Granted                            |  | 9,789,968   |   |                                  | 11.12 |        | 17,901,889 |                                  |   | 14.02  |  | 10,173,493                      
|Exercised                          |  | (5,859,807  | ) |                                  | 6.41  |        | (2,149,746 | )                                |   | 5.72   |  | (3,158,480                      
|Canceled                           |  | (10,959,722 | ) |                                  | 26.50 |        | (5,690,419 | )                                |   | 36.77  |  | (2,768,002                      
|                                   |  |             |   |                                  |       |        |            |                                  |   |        |  |                                 
|Outstanding at December 31         |  | 36,818,414  |   |                                  | 20.21 |        | 43,847,975 |                                  |   | 21.97  |  | 33,786,251                      
|                                   |  |             |   |                                  |       |        |            |                                  |   |        |  |                                 
|Options exercisable at December 31 |  | 22,829,678  |   | $                                | 22.80 |        | 24,068,039 |                                  | $ | 21.02  |  | 15,250,950                      
|                                   |  |             |   |                                  |       |        |            |                                  |   |        |  |                                 

76

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The following table presents weighted-average exercise price and life information about significant option groups outstanding at
December 31, 2003 for the above plans:

|                |  | Options Outstanding |  | Options Exercisable
|--------------- |  | ------------------- |  | -------------------
|
|$0.03 -  $5.25  |  | 3,720,466           |  | 3.29               
|$5.44 -  $6.88  |  | 3,701,933           |  | 7.84               
|$7.06 -  $8.44  |  | 4,181,817           |  | 7.31               
|$8.62 - $14.68  |  | 6,144,756           |  | 8.74               
|$14.73 - $18.42 |  | 4,747,014           |  | 7.86               
|$18.65 - $24.51 |  | 4,072,112           |  | 8.01               
|$25.19 - $36.68 |  | 3,700,123           |  | 7.23               
|$37.78 - $44.00 |  | 3,823,963           |  | 6.50               
|$45.00 - $72.56 |  | 2,433,155           |  | 6.42               
|$73.03 - $73.03 |  | 293,075             |  | 6.75               
|                |  |                     |  |                    
|                |  | 36,818,414          |  |                    
|                |  |                     |  |                    

At December 31, 2003, an aggregate of 68,600,832 shares of Common Stock were reserved for the exercise of stock options and warrants
outstanding and for future grant.

[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 35% to loss before
minority interest and provision for income taxes, and actual tax is reconciled in the following chart (in thousands):

|                                                                               |  | 2003 |          | 2002 |   | 2001     |  
|------------------------------------------------------------------------------ |  | ---- | -------- | ---- | - | -------- | -
|Loss before minority interest and provision for income taxes                   |  | $    | (483,687 | )    | $ | (590,193 | )
|Expected tax benefit at 35%                                                    |  | $    | (169,290 | )    | $ | (206,568 | )
|Write off of purchased research and development                                |  |      |         |      |   | 84,700   |  
|Amortization of goodwill                                                       |  |      |         |      |   |         |  
|Change in valuation allowance for deferred tax assets allocated to tax expense |  |      | 164,904  |      |   | 119,602  |  
|Other permanent items                                                          |  |      | 4,386    |      |   | 2,266    |  
|                                                                               |  |      |          |      |   |          |  
|Income tax provision                                                           |  | $    |         |      | $ |         |  
|                                                                               |  |      |          |      |   |          |  

At
December 31, 2003, the Company has unused net operating loss carryforwards of approximately $1.2 billion available to reduce federal taxable income expiring in 2004
through 2023 and $1.0 billion available to reduce state taxable income expiring in 2004 through 2008. The Company also has federal and net state research tax credits of approximately
$84.9 million available to offset federal and state income taxes, both of which expire beginning in 2004. Due to the degree of uncertainty related to the

77

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ultimate
use of the loss carryforwards and tax credits, the Company has fully reserved these tax benefits. No income tax payments were made in 2003, 2002 and 2001.

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):

|                                                  |  | 2003 |          | 2002 |   | 2001     |  
|------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|Net operating loss carryforwards                  |  | $    | 479,076  |      | $ | 443,776  |  
|Research and development tax credit carryforwards |  |      | 84,912   |      |   | 78,823   |  
|Capitalized research costs                        |  |      | 275,303  |      |   | 185,521  |  
|Property and other intangible assets              |  |      | 67,435   |      |   | 31,340   |  
|Deferred revenue                                  |  |      | 40,930   |      |   | 53,677   |  
|Accrued restructuring                             |  |      | 31,274   |      |   | 1,117    |  
|Other                                             |  |      | 13,810   |      |   | 19,824   |  
|                                                  |  |      |          |      |   |          |  
|Total deferred tax assets                         |  |      | 992,740  |      |   | 814,078  |  
|Valuation allowance                               |  |      | (819,003 | )    |   | (629,041 | )
|                                                  |  |      |          |      |   |          |  
|Total deferred tax assets                         |  |      | 173,737  |      |   | 185,037  |  
|                                                  |  |      |          |      |   |          |  
|Deferred tax liability:                           |  |      |          |      |   |          |  
|Intangible assets                                 |  |      | (172,504 | )    |   | (185,888 | )
|Unrealized (gain) loss on marketable securities   |  |      | (1,233   | )    |   | 851      |  
|                                                  |  |      |          |      |   |          |  
|Net deferred tax asset                            |  | $    |         |      | $ |         |  
|                                                  |  |      |          |      |   |          |  

The
valuation allowance increased by $190.0 million during 2003 due primarily to net operating loss carryforwards from operations and the exercise of stock options as well as
differences in the timing of
capitalized research costs and restructuring costs for financial accounting and tax purposes. The valuation allowance increased by $149.4 million during 2002 due primarily to the increase in
research and development tax credits, net operating loss carryforwards from operations and differences in the timing of capitalized research costs for financial accounting and tax purposes. The
deferred tax assets acquired from COR, 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, 2003 would be allocated as follows (in thousands):

Reported in the statement of operations

$
549,952Reported as a decrease to goodwill


20,316Reported in additional paid-in capital


248,735$
819,003


78

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[13]    Related Party Transaction

In November 2003, the Company sold certain assets, including intellectual property to Portola Pharmaceuticals, Inc. ("Portola"), a company founded
and owned in part by a member of Millennium's board of directors. In exchange for these assets, the Company received Portola Series A preferred convertible stock, representing less than a 5%
ownership in Portola. The investment in Portola is accounted for using the cost method and is included in other long term assets on the balance sheet at December 31, 2003. In addition,
commencing in June 2004, Portola will sublease certain research facilities of the Company in South San Francisco, CA. The Company believes these lease terms are comparable to those that would
be available from unaffiliated third parties.

[14]    Quarterly Financial Information (unaudited)

|                                           |                                     | First Quarter
Ended
March 31, 2003 |          | Second Quarter
Ended
June 30, 2003 |         | Third Quarter
Ended
September 30, 2003 |         | Fourth Quarter
Ended
December 31, 2003 |        
|------------------------------------------ | ----------------------------------- | ---------------------------------- | -------- | ---------------------------------- | ------- | -------------------------------------- | ------- | -------------------------------------- | -------
|
|Revenues:                                  |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|                                           | Net product sales                   |                                    | $        |                                   |         | $                                      | 7,869   |                                        | $      
|                                           | Co-promotion revenue                |                                    |          | 50,881                             |         |                                        | 53,151  |                                        |        
|                                           | Revenue under strategic alliances   |                                    |          | 30,834                             |         |                                        | 60,702  |                                        |        
|                                           |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|                                           |                                     | Total revenues                     |          |                                    | 81,715  |                                        |         | 121,722                                |        
|Costs and expenses:                        |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|                                           | Cost of goods sold                  |                                    |          | 15,650                             |         |                                        | 15,612  |                                        |        
|                                           | Research and development            |                                    |          | 126,810                            |         |                                        | 130,575 |                                        |        
|                                           | Selling, general and administrative |                                    |          | 38,429                             |         |                                        | 40,775  |                                        |        
|                                           | Restructuring                       |                                    |          | 28,195                             |         |                                        | 65,310  |                                        |        
|                                           | Amortization of intangibles         |                                    |          | 9,676                              |         |                                        | 9,676   |                                        |        
|                                           |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|                                           |                                     | Total costs and expenses           |          |                                    | 218,760 |                                        |         | 261,948                                |        
|                                           |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|Loss from operations                       |                                     |                                    | (137,045 | )                                  |         | (140,226                               | )       |                                        | (98,103
|Other income (expense):                    |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|                                           | Other income, net                   |                                    |          | (810                               | )       |                                        | 43,579  |                                        |        
|                                           | Debt financing charge               |                                    |          |                                   |         |                                        | (10,496 | )                                      |        
|                                           |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|Net loss                                   |                                     | $                                  | (137,855 | )                                  | $       | (107,143                               | )       | $                                      | (92,285
|                                           |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|Amounts per common share:                  |                                     |                                    |          |                                    |         |                                        |         |                                        |        
|Net loss per share, basic and diluted      |                                     | $                                  | (0.47    | )                                  | $       | (0.36                                  | )       | $                                      | (0.31  
|Weighted average shares, basic and diluted |                                     |                                    | 292,944  |                                    |         | 297,231                                |         |                                        | 299,030

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|                                           |                                              | First Quarter
Ended
March 31, 2002 |          | Second Quarter
Ended
June 30, 2002 |         | Third Quarter
Ended
September 30, 2002 |         | Fourth Quarter
Ended
December 31, 2002 |         
|------------------------------------------ | -------------------------------------------- | ---------------------------------- | -------- | ---------------------------------- | ------- | -------------------------------------- | ------- | -------------------------------------- | --------
|
|Revenues:                                  |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|                                           | Co-promotion revenue                         |                                    | $        | 22,142                             |         | $                                      | 44,927  |                                        | $       
|                                           | Revenue under strategic alliances            |                                    |          | 46,457                             |         |                                        | 46,927  |                                        |         
|                                           |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|                                           | Total revenues                               |                                    |          | 68,599                             |         |                                        | 91,854  |                                        |         
|Costs and expenses:                        |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|                                           | Cost of goods sold                           |                                    |          | 6,951                              |         |                                        | 12,631  |                                        |         
|                                           | Research and development                     |                                    |          | 101,312                            |         |                                        | 122,430 |                                        |         
|                                           | Selling, general and administrative          |                                    |          | 38,018                             |         |                                        | 45,222  |                                        |         
|                                           | Restructuring                                |                                    |          |                                   |         |                                        |        |                                        |         
|                                           | Acquired in-process research and development |                                    |          | 242,000                            |         |                                        |        |                                        |         
|                                           | Amortization of intangibles                  |                                    |          | 5,543                              |         |                                        | 9,754   |                                        |         
|                                           |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|                                           |                                              | Total costs and expenses           |          |                                    | 393,824 |                                        |         | 190,037                                |         
|                                           |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|Loss from operations                       |                                              |                                    | (325,225 | )                                  |         | (98,183                                | )       |                                        | (110,730
|Other income (expense):                    |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|                                           | Other income, net                            |                                    |          | 21,364                             |         |                                        | 44,444  |                                        |         
|                                           | Debt financing charge                        |                                    |          |                                   |         |                                        | (54,000 | )                                      |         
|                                           |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|Net loss                                   |                                              | $                                  | (303,861 | )                                  | $       | (107,739                               | )       | $                                      | (98,879 
|                                           |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|Amounts per common share:                  |                                              |                                    |          |                                    |         |                                        |         |                                        |         
|Net loss per share, basic and diluted      |                                              | $                                  | (1.20    | )                                  | $       | (0.38                                  | )       | $                                      | (0.35   
|Weighted average shares, basic and diluted |                                              |                                    | 253,901  |                                    |         | 282,693                                |         |                                        | 285,091 

80

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

There have been no disagreements with our independent accountants on accounting and financial disclosure matters.

Item 9A.    CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2003. In designing and evaluating our disclosure controls and
procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management
necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and chief financial
officer concluded that as of December 31, 2003, our disclosure controls and procedures were (1) designed to ensure that material information relating to us is made known to our chief
executive officer and chief financial officer by others, particularly during the period in which this report was prepared and (2) effective, in that they provide reasonable assurance that
information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules
and forms.

No
change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

We
will provide information in response to this item in the proxy statement we will file with the Securities and Exchange Commission in connection with our solicitation of proxies for
our 2004 annual meeting of stockholders to be held on May 7, 2004. Information about our directors will appear in the section entitled "Proposal One-Election of Directors."
Information about compliance with Section 16(a) of the Securities Exchange Act of 1934 will appear in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance."
Information about the audit committee of our Board of Directors and the audit committee financial expert will appear in the subsection entitled "Committees of the Board" in the section entitled "Our
Corporate Governance." We incorporate here by reference the information contained in those sections of our proxy statement.

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

81

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Item 11.    EXECUTIVE COMPENSATION

We will provide information about our executive compensation in the sections entitled "Director Compensation," "Compensation of Executive Officers," and
"Compensation Committee Report on Executive Compensation" in the proxy statement we will file with the Securities and Exchange Commission in connection with the solicitation of proxies for
Millennium's 2004 annual meeting of stockholders to be held on May 7, 2004. We incorporate here by reference the information contained in those sections of our proxy statement.

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

We will provide information about security ownership of certain beneficial owners and management required by this item in the sections entitled "Ownership of Our
Common Stock" in the proxy statement we will file with the Securities and Exchange Commission in connection with our solicitation of proxies for our 2004 Annual Meeting of Stockholders to be held on
May 7, 2004. We incorporate here by reference the information contained in that section of our proxy statement.

Equity Compensation Plan Information

This table shows information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our equity compensation
plans as of December 31, 2003. For additional information about our equity compensation plans, see Note 11 of our consolidated financial statements included in Item 8 of this
Form 10-K. As required by SEC rules, we include in footnote (2) to this table a brief description of the material features of our equity compensation plans that have not been
approved by Millennium stockholders.

|Plan category                                                     |  | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights |  | Weighted-average
exercise price of
outstanding options,
warrants and rights |       | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in
column (a)) |           
|----------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|
|Equity compensation plans approved by security holders (1)        |  | 33,404,920                                                                                  |  | $                                                                           | 20.47 |                                                                                                                                             | 28,982,905
|Equity compensation plans not approved by security holders (2)(3) |  | 2,381,452                                                                                   |  | $                                                                           | 17.20 |                                                                                                                                             | 3,098,434 
|Total                                                             |  | 35,786,372                                                                                  |  | $                                                                           | 20.25 |                                                                                                                                             | 32,081,339

---

82

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83

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Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We will provide the information required by this item in the section entitled "Certain Relationships and Related Transactions" in the proxy statement we will file
with the Securities and Exchange Commission in connection with our solicitation of proxies for our 2004 Annual Meeting of Stockholders to be held on May 7, 2004. We incorporate here by
reference the information contained in that section of our proxy statement.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

We will provide the information required by this item in the section entitled "Independent Auditors" in the proxy statement we will file with the Securities and
Exchange Commission in connection with our solicitation of proxies for our 2004 Annual Meeting of Stockholders to be held on May 7, 2004. We incorporate here by reference the information
contained in that section of our proxy statement.

PART IV

Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

|                                                                                            |  | Page number
In this report
|------------------------------------------------------------------------------------------- |  | --------------------------
|Report of Independent Auditors on Financial Statements                                      |  | 52                        
|Consolidated Balance Sheets at December 31, 2003 and 2002                                   |  | 53                        
|Consolidated Statements of Operations for the years ended December 31, 2003, 2002, and 2001 |  | 54                        
|Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001 |  | 55                        
|Statements of Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001     |  | 56                        
|Notes to Consolidated Financial Statements                                                  |  | 57                        



The following trademarks of the Company are mentioned in this Annual Report on Form 10-K:the Millennium "M" logo and
design (registered), Millennium®, VELCADE® and INTEGRILIN®. CAMPATH® is a registered trademark of ILEX Pharmaceuticals, L.P. ReoPro®
(abciximab) is a trademark of Eli Lilly & Company. Aggrastat® (tirofiban) is a trademark of Merck & Co., Inc. Thalomid® (thalidomide) is a trademark of
Celgene Corporation. Angiomax® (bivalirudin) is a trademark of The Medicines Company.Other trademarks used in this Annual Report on Form 10-K
are the property of their respective owners.

84

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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 10, 2004 |  | 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 10, 2004
|/s/KENNETH M. BATEKenneth M. Bate               |  | Executive Vice President, Head of Commercial Operations and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 10, 2004
|/s/VAUGHN M. KAILIANVaughn M. Kailian           |  | Vice Chairperson and Director                                                                                                    |  | March 10, 2004
|/s/EUGENE CORDESEugene Cordes                   |  | Director                                                                                                                         |  | March 10, 2004
|/s/SHAUN R. COUGHLINShaun R. Coughlin           |  | Director                                                                                                                         |  | March 10, 2004
|/s/GINGER L. GRAHAMGinger L. Graham             |  | Director                                                                                                                         |  | March 10, 2004
|/s/A. GRANT HEIDRICH, IIIA. Grant Heidrich, III |  | Director                                                                                                                         |  | March 10, 2004
|/s/CHARLES J. HOMCYCharles J. Homcy             |  | Director                                                                                                                         |  | March 10, 2004
|                                                |  |                                                                                                                                  |  |               

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|/s/RAJU S. KUCHERLAPATIRaju S. Kucherlapati |  | Director |  | March 10, 2004
|------------------------------------------- |  | -------- |  | --------------
|/s/ERIC S. LANDEREric S. Lander             |  | Director |  | March 10, 2004
|/s/EDWARD D. MILLEREdward D. Miller         |  | Director |  | March 10, 2004
|/s/NORMAN C. SELBYNorman C. Selby           |  | Director |  | March 10, 2004
|/s/KENNETH E. WEGKenneth E. Weg             |  | Director |  | March 10, 2004

86

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EXHIBIT INDEX

|    |  |                                                                                                                                                                                                                                                        |  | Incorporated by Reference |  |                                 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------- |  | --------------------------------
|
|    |  | 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             |  | 06/20/1996
04/13/2000
04/19/2001
|3.2 |  | Amended and Restated Bylaws of the Company, as amended                                                                                                                                                                                                 |  | 10-Q
10-Q
10-Q            |  | 06/20/1996
05/02/2000
11/09/2000
|    |  | Instruments defining the rights of security holders, including indentures                                                                                                                                                                             
|4.1 |  | Specimen Certificate for shares of Common Stock, $.001 par value, of the Company                                                                                                                                                                       |  | S-1/A (333-02490)         |  | 05/02/1996                      
|4.2 |  | 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                      |  | 02/25/2000                      
|4.3 |  | Rights Agreement dated April 5, 2001 by and between the Company and State Street Bank and Trust Company, N.A.                                                                                                                                          |  | 8-K                       |  | 04/05/2001                      
|4.4 |  | (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*                  |  | 05/10/2000                      
|    |  | (b)    First Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                     |  | (b)8-K                    |  | 02/13/2002                      
|    |  | (c)    Second Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                    |  | (c)8-K                    |  | 02/13/2002                      
|    |  | (d)    Third Supplemental Indenture, dated as of April 22, 2002                                                                                                                                                                                        |  | (d)8-K                    |  | 04/23/2002                      
|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*                  |  | 08/03/2001                      
|    |  | (b)    First Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                     |  | (b)S-3 (333-82654)        |  | 02/13/2002                      
|    |  | (c)    Second Supplemental Indenture, dated as of February 12, 2002                                                                                                                                                                                    |  | (c)S-3 (333-82654)        |  | 02/13/2002                      
|    |  | (d)    Third Supplemental Indenture, dated as of April 22, 2002                                                                                                                                                                                        |  | (d)8-K                    |  | 04/23/2002                      
|    |  |                                                                                                                                                                                                                                                        |  |                           |  |                                 

87

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|     |  | 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                                 
|     |  | Material contractsreal estate                                                                                                                                                 
|10.2 |  | Agreement between Owner and Contractor by and between the Company and Walsh Brothers Incorporated dated as of April 25, 2002 for 40 Landsdowne Street, Cambridge, Massachusetts
|     |  | Material contractsresearch and development/collaboration agreements                                                                                                           
|10.3 |  | (a)    Collaboration and License Agreement dated June 22, 2000 by and between the Company and Aventis Pharmaceuticals, Inc., as amended                                       
|     |  | (b)    Second Amendment effective as of December 22, 2002 dated April 22, 2003 to Collaboration and License Agreement                                                         
|     |  | (c)    Technology Development Agreement dated June 22, 2000                                                                                                                   
|     |  | (d)    Registration Rights Agreement dated June 22, 2000                                                                                                                       
|     |  | Material contractsCAMPATH®                                                                                                                                                    
|10.4 |  | Purchase and Sale Agreement dated October 29, 2001 by and among ILEX Oncology, Inc., ILEX Acquisitions, Inc., mHoldings Trust and the Company                                  
|     |  | Material contractsINTEGRILIN® (eptifibatide) Injection                                                                                                                        
|10.5 |  | License and Supply Agreement between the Company (as successor to COR Therapeutics, Inc.) and Solvay, Société Anonyme, dated July 27, 1994, as amended                        
|10.6 |  | New Long Term Supply Agreement between the Company and Solvay, Société Anonyme, dated January 1, 2003                                                                         
|10.7 |  | Collaboration Agreement between Schering-Plough Ltd., Schering Corporation and the Company (as successor to COR Therapeutics, Inc.) dated April 10, 1995, as amended          
|     |  |                                                                                                                                                                                

88

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|10.8  |  | Letter agreement dated June 4, 2002 relating to the Collaboration Agreement dated April 10, 1995 between Schering Corporation and the Company                                                                                                                                        |  |       |  |            |  |       |  | X
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ---------- |  | ----- |  | -
|10.9  |  | Addendum to Collaboration Agreement among the Company, Schering Corporation and Schering-Plough, Ltd. dated June 1, 2003                                                                                                                                                             |  |       |  |            |  |       |  | X
|10.10 |  | Letter agreement dated November 3, 2003 relating to the Collaboration Agreement dated April 10, 1995 between Schering Corporation and the Company                                                                                                                                    |  |       |  |            |  |       |  | X
|      |  | Material contractsVELCADE® (bortezomib) for Injection                                                                                                                                                                                                                               
|10.11 |  | Patent License Agreement between the Public Health Service and the Company dated December 2, 2002                                                                                                                                                                                    |  |       |  |            |  |       |  | X
|10.12 |  | Collaboration, Distribution and License Agreement by and between the Company and Ortho Biotech Products, L.P. dated June 30, 2003                                                                                                                                                    |  | 10-Q  |  | 08/12/2003 |  | 10.2  |  |  
|      |  | Material contractsmiscellaneous                                                                                                                                                                                                                                                     
|10.13 |  | 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-Q* |  | 05/10/2000 |  | 10.2  |  |  
|10.14 |  | 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-Q* |  | 08/03/2001 |  | 10.2  |  |  
|10.15 |  | 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                                                                                   |  | 10-K  |  | 02/25/2000 |  | 10.29 |  |  
|      |  |                                                                                                                                                                                                                                                                                       |  |       |  |            |  |       |  |  

89

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|      |  | Material contractsmanagement contracts and compensatory plans                                                                                                                  
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.16 |  | 2000 Stock Incentive Plan, as amended #                                                                                                                                         
|10.17 |  | 1997 Equity Incentive Plan, as amended #                                                                                                                                        
|10.18 |  | 1996 Equity Incentive Plan, as amended #                                                                                                                                        
|10.19 |  | 1996 Director Option Plan #                                                                                                                                                     
|10.20 |  | Millennium Pharmaceuticals, Inc. SAYE Plan #                                                                                                                                    
|10.21 |  | 1996 Employee Stock Purchase Plan, as amended #                                                                                                                                 
|10.22 |  | 1993 Incentive Stock Plan, as amended#                                                                                                                                          
|10.23 |  | 1991 Equity Incentive Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc. #                                                                         
|10.24 |  | 1994 Non-employee Directors' Stock Option Plan, as amended, assumed by the Company as successor to COR Therapeutics, Inc. #                                                     
|10.25 |  | 1997 Equity Incentive Plan, as amended, assumed by the Company as successor to Millennium BioTherapeutics, Inc. #                                                               
|10.26 |  | 1997 Equity Incentive Plan, as amended, assumed by the Company as successor to Millennium Predictive Medicine, Inc. #                                                           
|10.27 |  | Form of Employment Offer Letter entered into with certain executive officers of the Company, together with a schedule of parties thereto #                                      
|10.28 |  | Form of Indemnification Agreement between the Company (as successor to COR Therapeutics, Inc.) and Vaughn M. Kailian, Charles J. Homcy, Shaun R. Coughlin and Ginger L. Graham #
|10.29 |  | 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 #                 
|10.30 |  | Employment Agreement between the Company and Vaughn M. Kailian #                                                                                                                
|10.31 |  | Letter agreement dated March 1, 2004 between the Company and Vaughn M. Kailian #                                                                                                
|10.32 |  | Employment Agreement between the Company and Charles J. Homcy #                                                                                                                 
|10.33 |  | Letter agreement dated November 7, 2003 between the Company and Charles J. Homcy #                                                                                              
|      |  |                                                                                                                                                                                 

90

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|21   |  | Subsidiaries of the Company                                                                                                          |  |  |  |  |  |  |  | X
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  |  | -
|23.1 |  | Consent of Ernst & Young LLP, Independent Auditors                                                                                   |  |  |  |  |  |  |  | X
|     |  | Additional Exhibits                                                                                                                 
|31.1 |  | Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended |  |  |  |  |  |  |  | X
|31.2 |  | Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended |  |  |  |  |  |  |  | X
|32.1 |  | Statement Pursuant to 18 U.S.C. §1350                                                                                                |  |  |  |  |  |  |  | X
|32.2 |  | Statement Pursuant to 18 U.S.C. §1350                                                                                                |  |  |  |  |  |  |  | X

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