<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   -----------
                                    FORM 10-Q
                                   ----------

                                   (Mark One)

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the transition period from ____ to ____

                        Commission File Number: 000-30289

                      PRAECIS PHARMACEUTICALS INCORPORATED
             -------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Delaware                        04-3200305
         -------------------------------       -------------------
         (State or other jurisdiction of        (I.R.S. Employer
          incorporation or organization)       Identification No.)

                    830 Winter Street, Waltham, MA 02451-1420
              ----------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (781) 795-4100
                                -----------------
              (Registrant's telephone number, including area code)

                 One Hampshire Street, Cambridge, MA 02139-1572
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since lastreport)

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

                              Yes [X]    No [ ]

As of April 30, 2001, there were 50,789,215 shares of the registrant's common
stock, $0.01 par value, outstanding.

<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED

                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2001

                                      INDEX
<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                   NUMBER
                                                                                   ------
<S>                                                                                <C>
PART I.      FINANCIAL INFORMATION                                                   3

Item 1.      Financial Statements                                                    3

             Condensed Consolidated Balance Sheets - December 31,
                                2000 and March 31, 2001 (unaudited)                  3

             Condensed Consolidated Statements of Operations (unaudited)
                              - three months ended March 31, 2000 and 2001           4

             Condensed Consolidated Statements of Cash Flows (unaudited)
                              - three months ended March 31, 2000 and 2001           5

             Notes to Condensed Consolidated Financial Statements                    6

Item 2.      Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                               9

Item 3.      Quantitative and Qualitative Disclosures About Market Risk             24

PART II.     OTHER INFORMATION                                                      26

Item 2.      Changes in Securities and Use of Proceeds                              26

Item 6.      Exhibits and Reports on Form 8-K                                       26

SIGNATURE                                                                           28

EXHIBIT INDEX                                                                       29
</TABLE>

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                      PRAECIS PHARMACEUTICALS INCORPORATED
                      Condensed Consolidated Balance Sheets
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                        December 31,        March 31,
                                                                                            2000               2001
                                                                                       ---------------    -------------
                                                                                                           (unaudited)
              <S>                                                                   <C>                   <C>
              ASSETS
              Current assets:
                  Cash and cash equivalents .......................                        $132,207          $231,639
                  Marketable securities ...........................                              --            58,673
                  Accounts receivable .............................                           1,079               986
                  Refundable income taxes .........................                           4,853             4,795
                  Unbilled revenue ................................                           1,493             1,265
                  Prepaid expenses and other assets ...............                             786               941
                                                                                           --------          --------
                        Total current assets ......................                         140,418           298,299

              Property and equipment, net .........................                          53,821            66,503
              Other assets ........................................                           1,332             1,215
                                                                                           --------          --------
                        Total assets                                                       $195,571          $366,017
                                                                                           ========          ========
              LIABILITIES AND STOCKHOLDERS' EQUITY
              Current liabilities:
                  Accounts payable ................................                        $ 12,834          $  15,995
                  Accrued expenses ................................                           7,142              7,775
                  Deferred revenue ................................                           4,709              3,572
                                                                                            -------           --------
                        Total current liabilities .................                          24,685             27,342
              Deferred revenue ....................................                             355                315
              Long term debt ......................................                          24,000             26,881

              Commitments and contingencies

              Stockholders' equity:
                  Preferred Stock, $0.01 par value; 10,000,000
                      shares authorized; no shares issued and
                      outstanding .................................                              --                 --
                  Common Stock, $0.01 par value; 200,000,000
                      shares authorized; 42,284,199 shares in 2000
                      and 50,771,815 shares in 2001 issued and
                      outstanding .................................                             423                508
                  Accumulated other comprehensive income ..........                              --                 12
                  Additional paid-in capital ......................                         175,937            352,635
                  Accumulated deficit .............................                         (29,829)           (41,676)
                                                                                           --------           --------
                        Total stockholders' equity ................                         146,531            311,479
                                                                                           --------           --------
                            Total liabilities and stockholders'
                               equity .............................                        $195,571           $366,017
                                                                                           ========           ========
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       3

<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
                 Condensed Consolidated Statements of Operations
                 (In thousands, except share and per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                               March 31,
                                                                               ----------------------------------------
                                                                                       2000                     2001
                                                                               -------------------       --------------
              <S>                                                                 <C>                      <C>
              Revenues:
                  Corporate collaborations................................            $  9,001               $   2,582
                                                                                     ---------              ----------
                        Total revenues....................................               9,001                   2,582

              Costs and expenses:
                  Research and development................................              11,276                  12,210
                  Sales and marketing.....................................                 275                   3,099
                  General and administrative..............................               1,119                   1,594
                                                                                     ---------              ----------
                      Total costs and expenses............................              12,670                  16,903
                                                                                     ---------              ----------
              Operating loss..............................................              (3,669)                (14,321)

              Interest income, net........................................               1,294                   2,474
                                                                                     ---------              ----------
              Loss before income taxes....................................              (2,375)                (11,847)
              Provision for income taxes..................................                 100                      --
                                                                                     ---------              ----------
              Net loss....................................................            $ (2,475)              $ (11,847)
                                                                                     =========              ==========
              Basic and diluted net loss per share........................            $  (0.36)              $   (0.26)
                                                                                     =========              ==========

              Weighted average number of basic and
                 diluted shares outstanding...............................           6,844,407              46,049,676

              Pro forma basic and diluted net loss per share..............            $  (0.08)              $   (0.26)
                                                                                     =========              ==========
              Pro forma weighted average number of
                 basic and diluted common shares outstanding..............          32,452,257              46,049,676
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      4

<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                           March 31,
                                                                               ----------------------------------
                                                                                     2000            2001
                                                                               ----------------------------------
   <S>                                                                             <C>             <C>
   OPERATING ACTIVITIES:
   Net loss ................................................................       $ (2,475)       $ (11,847)
   Adjustments to reconcile net loss to cash used in
   operating activities:
      Depreciation and amortization ........................................            633              312
      Stock compensation ...................................................            462             (281)
      Changes in operating assets and liabilities:
         Accounts receivable ...............................................          1,777               93
         Refundable income taxes ...........................................             --               58
         Unbilled revenue ..................................................          1,592              228
         Materials inventory ...............................................         (5,230)              --
         Prepaid expenses and other assets .................................         (3,497)             (38)
         Accounts payable ..................................................         (1,176)           3,161
         Accrued expenses ..................................................           (342)             633
         Deferred revenue ..................................................           (835)          (1,177)
         Advance payments ..................................................          5,230               --
         Income taxes payable ..............................................         (4,572)              --
                                                                               ------------        ---------
   Net cash used in operating activities ...................................         (8,433)          (8,858)

   INVESTING ACTIVITIES:
   Purchase of available-for-sale securities ...............................             --          (58,661)
   Purchase of property and equipment ......................................           (493)         (12,994)
                                                                               ------------        ---------
   Net cash used in investing activities ...................................           (493)         (71,655)

   FINANCING ACTIVITIES:
   Net follow-on offering proceeds .........................................             --          175,892
   Proceeds from debt issuance .............................................             --            2,881
   Proceeds from issuance of common stock, options and warrants ............            716            1,172
   Principal repayments of capital lease obligations .......................            (19)              --
                                                                               ------------        ---------
   Net cash provided by financing activities ...............................            697          179,945
                                                                               ------------        ---------
   Net (decrease) increase in cash and cash equivalents ....................         (8,229)          99,432
   Cash and cash equivalents, beginning of period ..........................         94,525          132,207
                                                                               ------------        ---------
   Cash and cash equivalents, end of period ................................       $ 86,296        $ 231,639
                                                                               ============        =========
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      5

<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
by PRAECIS PHARMACEUTICALS INCORPORATED (the "Company") in accordance with
generally accepted accounting principles and pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that the financial statements be read in conjunction with the audited financial
statements and the accompanying notes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000.

The information furnished reflects all adjustments which, in the opinion of
management, are considered necessary for a fair presentation of results for the
interim periods. Such adjustments consist only of normal recurring items. It
should also be noted that results for the interim periods are not necessarily
indicative of the results expected for the full year or any future period.

The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

NEW ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133 ("SFAS No. 133"), ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal
year 2001. SFAS No. 133 requires all derivatives to be carried on the balance
sheet as assets or liabilities at fair value. The Company has entered into an
interest rate cap agreement in order to reduce the potential impact of interest
rate increases on future income. The accounting for changes in fair value would
depend on the hedging relationship and would be reported in the income statement
or as a component of comprehensive income. The adoption of SFAS No. 133 during
2001 did not have a material impact on the Company's financial position or
results of operations.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the Company's
accounts and the accounts of its wholly owned real estate subsidiary. All
significant intercompany account balances and transactions between the companies
have been eliminated.

<PAGE>

NET LOSS PER SHARE

Basic net loss per share is based on the weighted average number of common
shares outstanding. For the three months ended March 31, 2000 and 2001, diluted
net loss per common share is the same as basic net loss per common share as the
inclusion of weighted average shares of common stock issuable upon exercise of
stock options and warrants would be antidilutive.

Pro forma net loss per share has been computed as described above and also gives
effect, under SEC guidance, to the conversion of preferred shares not included
above that automatically converted to common shares upon the closing of the
Company's initial public offering in May 2000, using the if-converted method.

The reconciliation of the denominators of the historical and pro forma, basic
and diluted net loss per share calculations is as follows:

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                       -------------------------
                                                                        2000            2001
                                                                       --------      -----------
<S>                                                                    <C>           <C>
Historical:

     Weighted average number of common shares
      outstanding used in computing basic and                          6,844,407     46,049,676
      diluted net loss per share ............................          =========     ==========

Pro forma:

     Weighted average number of common shares
      used in computing basic and diluted net loss
      per share (from above) ................................          6,844,407     46,049,676
     Adjustment to reflect the effect of the
      assumed conversion of preferred stock from                      25,607,850             --
      the date of issuance ..................................         ----------     ----------
     Weighted average number of common shares
      outstanding used in computing pro forma
      basic net loss per share...............................         32,452,257     46,049,676
                                                                      ==========     ==========
</TABLE>

COMPREHENSIVE INCOME

SFAS No. 130 REPORTING COMPREHENSIVE INCOME establishes standards for the
reporting and display of comprehensive income and its components in the
consolidated financial statements. The Company's accumulated other comprehensive
income is comprised primarily of net unrealized gains or losses on
available-for-sale securities. Comprehensive net loss is not presented for
either the three months ended March 31, 2000 or 2001, as there was no material
difference between the reported net loss and the comprehensive net loss.

3. INVESTMENTS

Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
The Company's debt securities are classified as available-for-sale and are
carried at estimated fair value in cash equivalents and marketable securities.
Unrealized gains and losses are reported as accumulated other comprehensive
income in stockholders' equity. The amortized cost of debt securities in this
category is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest income. Realized gains and
losses on available-for-sale securities are included in interest income and
expense. 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 interest income. The Company's cash, cash equivalents and
marketable securities as of March 31, 2001 are as follows (in thousands):

<PAGE>

<TABLE>
<CAPTION>
                                                                      GROSS         GROSS    ESTIMATED
                                                         AMORTIZED  UNREALIZED   UNREALIZED     FAIR
                                                            COST      GAINS        LOSSES      VALUE
                                                         ---------- ----------  ----------  -----------
<S>                                                      <C>        <C>         <C>         <C>
Money market funds ....................................    $ 86,865     $-           $-       $86,865
U.S. government agencies ..............................      23,049      4           --        23,053
Commercial paper ......................................     180,397     10          (13)      180,394
                                                           --------    ---         ----      --------
     Total ............................................     290,311     14          (13)      290,312

Less amounts classified as cash and
   cash equivalents ...................................     231,639     --           --       231,639
                                                           --------    ---         ----      --------
     Total marketable securities ......................    $ 58,672    $14         $(13)     $ 58,673
                                                           ========    ===         ====      ========
</TABLE>

There were no realized gains or losses on sales of available-for-sale securities
in the three months ended March 31, 2001.

4.       FOLLOW-ON OFFERING

In February 2001, the Company completed a follow-on public offering of its
Common Stock. The Company sold 7,587,500 shares of its Common Stock, resulting
in net proceeds to the Company of approximately $175.9 million.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ TOGETHER WITH THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS FORM 10-Q.
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISKS AND
UNCERTAINTIES. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL INFORMATION
PROVIDED HEREIN ARE FORWARD-LOOKING AND MAY CONTAIN INFORMATION ABOUT FINANCIAL
RESULTS, ECONOMIC CONDITIONS, TRENDS AND KNOWN UNCERTAINTIES. OUR ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS
AS A RESULT OF A NUMBER OF FACTORS, WHICH INCLUDE THOSE DISCUSSED IN THIS
SECTION AND ELSEWHERE IN THIS REPORT AND THE RISKS DISCUSSED IN OUR OTHER
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. READERS ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT
MANAGEMENT'S ANALYSIS, JUDGMENT, BELIEF OR EXPECTATION ONLY AS OF THE DATE
HEREOF. PRAECIS UNDERTAKES NO OBLIGATION TO PUBLICLY REISSUE OR MODIFY THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT ARISE AFTER
THE DATE HEREOF.

OVERVIEW

         Since our inception, we have been engaged in developing drugs for the
treatment of a variety of human diseases. Our lead program is the development of
abarelix depot, a drug to treat diseases that respond to the lowering of hormone
levels. We have entered into collaborations with Amgen Inc. and
Sanofi-Synthelabo S.A. to further develop and commercialize our abarelix
products. We are also developing Latranal, a proprietary topical composition for
the relief of chronic back pain, and Apan, our proprietary drug candidate for
the treatment of Alzheimer's disease. In addition, we have numerous product
candidates in the research or preclinical development stage.

         Since our inception, we have had no revenues from product sales. We
have received revenues in the form of signing, performance-based, cost sharing
and contract services payments from corporate collaborations. Under these
agreements, we could receive additional non-refundable performance-based
payments and reimbursement for ongoing development costs, as well as a
percentage of future product profits. For the next several years, we expect that
our sources of revenue, if any, will consist primarily of interest income and
payments from our corporate collaborators. We expect reimbursement for ongoing
development costs under our corporate collaborations to diminish over the next
several years.

         Our accumulated deficit as of March 31, 2001 was approximately $41.7
million. At March 31, 2001, we had 113 employees, 89 of whom were engaged in
research and development activities, compared to 101 employees at March 31,
2000, 83 of whom were engaged in research and development activities.
Substantially all of our expenditures to date have been for drug development and
commercialization activities and for general and administrative expenses.

         Due to the high costs associated with preparing to launch our first
product, as well as other research and development and general and
administrative expenses, we had net operating losses for 2000 and for the three
months ended March 31, 2001. We expect to have net operating losses for 2001 and
for the following several years. We do not expect to generate operating income
until several years after our receipt of FDA approval to market abarelix depot
for the treatment of prostate cancer. We will require regulatory approval to
market all of our future products.

         Under our agreement with Sanofi-Synthelabo, we could receive up to
approximately $69.6 million in non-refundable fees and performance-based
payments. Of this amount, we are recognizing the $4.7 million initial
non-refundable signing fee payment over the period through December 2001,
which is the period during which we are obligated to participate on a
continuing and

<PAGE>

substantial basis in the research, development and manufacturing process
development of abarelix products. For supply of product to Sanofi-Synthelabo, we
are entitled to receive a transfer price that varies based on sales price and
volume. Additionally, we are entitled to receive reimbursement for certain
ongoing development costs. Through March 31, 2001, we have recognized a total of
approximately $33.7 million in non-refundable fees, performance-based payments
and reimbursement for ongoing development costs under the Sanofi-Synthelabo
agreement.

         Under our agreement with Amgen for the development and
commercialization of abarelix products in the countries not covered by the
Sanofi-Synthelabo agreement, we could receive up to $25.0 million in signing and
performance-based fees. Of this $25.0 million, we have received $10.0 million to
date, which is the minimum amount payable under the agreement. We are
recognizing this amount as revenue over the period through December 2001, during
which time we are obligated to participate on a continuing and substantial basis
in the research, development and manufacturing process development of abarelix
products. The remaining $15.0 million is payable upon FDA approval of a new drug
application relating to abarelix.

         Under the agreement, Amgen paid the first $175.0 million of all
authorized costs and expenses associated with the research, development and
commercialization of abarelix products in the United States. Amgen's initial
$175.0 million funding commitment was fulfilled during the third quarter of
2000. Following Amgen's completion of this funding, we became responsible for
one-half of all subsequent United States research and development costs for
abarelix products. Additionally, we must reimburse Amgen for one-half of the
costs associated with establishing a sales and marketing infrastructure for
abarelix products in the United States. In general, we will receive a transfer
price and royalty based on an equal sharing of the resulting profits on sales of
abarelix products in the United States. All program expenses in Amgen's licensed
territory outside the United States will be borne by Amgen, and we will receive
a royalty on net sales of abarelix products in those territories. Through March
31, 2001, we have recognized approximately $116.0 million of revenues under the
Amgen agreement.

         We have granted Amgen exclusive manufacturing and commercialization
rights for abarelix products for all indications in the licensed territories.
During the second quarter of 2000, Amgen assumed manufacturing responsibility
for abarelix products, with the exception of the depot formulation, pursuant to
the terms of the Amgen agreement. Subject to the terms of the agreement, we have
retained manufacturing responsibility for the depot formulation of abarelix. In
addition, under the terms of the Amgen agreement, during the third quarter of
2000 we transferred to Amgen final decision-making authority as to abarelix for
the treatment of endometriosis.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

         Revenues for the three months ended March 31, 2001 decreased 71% to
approximately $2.6 million, from approximately $9.0 million for the
corresponding period in 2000. The decrease in revenues was the result of
decreases in both the amount and rate of reimbursement of abarelix expenses
under our corporate collaboration agreements. We anticipate that revenues from
corporate collaborations will continue to decrease due to the continuing decline
in our reimbursable abarelix expenses.

         Research and development expenses for the three months ended March 31,
2001 increased 8% to approximately $12.2 million, from approximately $11.3
million for the corresponding period in 2000. The increase in expenses was
primarily the result of our responsibility for one-half of the costs associated
with the abarelix clinical development program, as well as our increased
spending related to the Latranal and Apan clinical development programs and our
discovery research initiatives. These increases were partially offset by a
decrease in reimbursable abarelix expenses incurred

<PAGE>

directly by us and decreased spending related to the abarelix clinical
development program for endometriosis. In the third quarter of 2000, Amgen
completed its initial funding commitment and we became responsible for one-half
of all subsequent United States research and development costs for abarelix
products through the launch period. Due to our abarelix cost sharing
responsibility and increased spending on our other clinical development and
research programs, we expect our research and development expenses to continue
to increase for the next several years.

         Sales and marketing expenses for the three months ended March
31, 2001 increased to approximately $3.1 million, from approximately $0.3
million for the corresponding period in 2000. The increase in expenses was due
primarily to our responsibility for one-half of the costs associated with the
commercialization of abarelix depot in the United States. In the third quarter
of 2000, Amgen completed its initial funding commitment and we became
responsible for one-half of all subsequent costs associated with establishing a
sales and marketing infrastructure in the United States for abarelix through the
launch period. Accordingly, we expect our sales and marketing expenses to
increase significantly for the remainder of 2001 and thereafter as we and Amgen
prepare for the anticipated launch of abarelix depot for the treatment of
prostate cancer.

         General and administrative expenses for the three months ended March
31, 2001 increased 42% to approximately $1.6 million, from approximately $1.1
million for the corresponding period in 2000. The increase was due to an
increase in personnel and compensation costs, an increased use of professional
services and other costs associated with being a public company. We expect that
general and administrative expenses will increase as we hire additional
administrative personnel to support continued growth of our research and
development initiatives and incur increased operating costs related to our new
facility.

         Net interest income for the three months ended March 31, 2001 increased
91% to approximately $2.5 million, from approximately $1.3 million for the
corresponding period in 2000. The increase in interest income was due to higher
average cash and investment balances resulting from the proceeds of both our
initial public offering in May 2000 and our follow-on public offering in
February 2001. This increase was offset slightly by a decrease in average
interest rates from the same period last year.

         The provision for income taxes for the three months ended March 31,
2001 and 2000 was zero and $0.1 million, respectively. We anticipate that we
will continue to be in a net operating loss carryforward position during 2001
and therefore, as in 2000, no benefit from the Company's operating losses has
been recognized.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations since inception principally through
private placements of equity securities and the proceeds from our public
offerings. Prior to our initial public offering, we had received aggregate
net proceeds of approximately $88.5 million from various private placements
of our securities. In May 2000, we completed our initial public offering in
which we sold a total of 9,200,000 shares of common stock at a price of $10
per share, raising a total of approximately $84.3 million, net of
underwriting discounts and commissions and offering expenses. Additionally,
we have received a total of approximately $183.5 million from one-time
signing payments and performance-based payments, cost reimbursements and
contract service payments under our collaboration agreements. We have also
received approximately $21.7 million from interest on invested cash balances,
and paid approximately $0.8 million in interest expense associated with
building and equipment financing.

         In February 2001, we completed a follow-on public offering in which we
sold a total of 7,587,500 shares of common stock at a price of $24.5625 per
share, raising a total of approximately $175.9 million, net of underwriting
discounts and commissions and offering expenses.

<PAGE>

         At March 31, 2001, we had cash, cash equivalents and marketable
securities of approximately $290.3 million and working capital of approximately
$271.0 million, compared to approximately $132.2 million and $115.7 million,
respectively, at December 31, 2000. Based upon our existing capital resources,
interest income, payments under our collaboration agreements and the line of
credit contemplated by the Amgen agreement, which we discuss below, we
anticipate that we will be able to maintain currently planned operations for at
least the next several years.

         For the three months ended March 31, 2001, net cash of approximately
$8.9 million was used in operating activities, compared to approximately $8.4
million used in operating activities during the corresponding period in 2000.
During the three months ended March 31, 2001, our use of cash in operations
was due principally to our net loss, partially offset by an increase in
accounts payable. Our investing activities during the three months ended
March 31, 2001 consisted of the purchase of marketable securities in the
aggregate amount of $58.7 million, as well as $13.0 million of additional
spending toward the continued build-out of our new corporate headquarters and
research facility in Waltham, Massachusetts. Our financing activities for the
three months ended March 31, 2001 consisted principally of the proceeds of
our follow-on offering, proceeds received from the exercise of common stock
options and advances of $2.9 million under an acquisition and construction
loan agreement.

         In July 2000, in connection with our purchase, through our wholly
owned real estate subsidiary, of our new corporate headquarters and research
facility in Waltham, Massachusetts, the subsidiary entered into an
acquisition and construction loan agreement providing for up to $33.0 million
in financing for the acquisition of, and improvements to, the new facility.
As of March 31, 2001, approximately $26.9 million was outstanding, and
approximately $6.1 million was available, under the loan agreement. Advances
bear interest at a rate equal to the 30-day LIBOR plus 2.0% (7.08% at March
31, 2001). Interest is payable monthly in arrears. Principal is due and
payable in full on July 30, 2003, subject to two, one-year extension options.
The loan is secured by the new facility, together with all fixtures,
equipment, improvements and other related items, and by all rents, income or
profits received by our real estate subsidiary, and is unconditionally
guaranteed by us. In addition to this financing, as of March 31, 2001, we had
spent approximately $36.2 million of our own funds, and anticipate spending
an additional $4.4 million, in connection with the build-out and occupancy of
our new facility. We expect to occupy the new facility during May 2001 and
intend to sublet a portion of the facility as soon as possible thereafter. In
addition, in connection with our move to the new facility, we have
consolidated our Provid Research division with our Massachusetts operations
and are actively seeking a sublessee for our facility located in New Jersey.

         Our agreement with Amgen provides that, subject to definitive
agreements to be mutually agreed, Amgen will provide us with a line of credit
not to exceed $150.0 million through 2002 whereby, subject to various conditions
each year, we will be permitted to draw down a maximum of $75.0 million in 2001
and, in 2002, the remaining balance of the line of credit available after all
previous drawdowns. For each drawdown in 2002, we must demonstrate a cash flow
need reasonably acceptable to Amgen and meet various other specified conditions,
including conditions relating to the commercial sale of abarelix. Borrowings
will bear interest at market rates and will be secured by various receivables
relating to abarelix products. All borrowings under the line of credit must be
repaid by 2008.

         We expect our funding requirements to increase over the next several
years as we prepare for a potential commercial launch of abarelix products,
continue with current clinical trials for abarelix depot, Latranal and Apan,
initiate preclinical trials for additional product candidates, improve and move
into our new facility and expand our research and development initiatives. The
amount of these expenditures will depend on numerous factors, including:

<PAGE>

         o  decisions relating to the abarelix program made by our corporate
            collaborators;

         o  the cost, timing and outcomes of regulatory reviews;

         o  the development of sales and marketing resources by our corporate
            collaborators or us;

         o  the establishment, continuation or termination of third-party
            manufacturing or sales and marketing arrangements;

         o  the progress of our research and development activities;

         o  the scope and results of preclinical testing and clinical trials;

         o  the rate of technological advances;

         o  determinations as to the commercial potential of our products under
            development;

         o  the status of competitive products;

         o  our ability to defend and enforce our intellectual property rights;

         o  the continued viability and duration of, and timely compliance by
            our collaborators with, our corporate collaboration agreements or
            other licensing agreements;

         o  the establishment of additional strategic or licensing arrangements
            with other companies or acquisitions;

         o  our ability to sublease our current facilities and part of our new
            facility; and

         o  the availability of other financing.

         At December 31, 2000, we had provided a valuation allowance of $10.2
million for our deferred tax assets. The valuation allowance represents the
excess of the deferred tax asset over the benefit from future losses that could
be carried back if, and when, they occur. Due to anticipated operating losses in
the future, we believe that it is more likely than not that we will not realize
a portion of the net deferred tax assets in the future and we have provided an
appropriate valuation allowance.

<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT ARE
CURRENTLY DEEMED IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. IF ANY OF THESE RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY
AFFECTED.

BECAUSE WE HAVE NOT YET MARKETED OR SOLD ANY PRODUCTS AND ANTICIPATE SIGNIFICANT
INCREASES IN OUR OPERATING EXPENSES OVER THE NEXT SEVERAL YEARS, WE MAY NOT BE
PROFITABLE IN THE FUTURE.

         We cannot assure you that we will be profitable in the future or, if we
are profitable, that it will be sustainable. All but one of our potential
products are in the research or development stage. We have not yet marketed or
sold any products, and we may not succeed in developing and marketing any
product in the future. To date, we have derived substantially all of our
revenues from payments under our collaboration and license agreements and will
continue to do so for at least the next several years. In addition, we expect to
continue to spend significant amounts to continue clinical studies, obtain
regulatory approval for our existing product candidates and expand our
facilities. We also intend to spend substantial amounts to fund additional
research and development for other products, enhance our core technologies, and
for general and administrative purposes. As of March 31, 2001, we had an
accumulated deficit of approximately $41.7 million. We expect that our operating
expenses will increase significantly in the near term, primarily due to our
obligations under the Amgen agreement following Amgen's fulfillment of its
initial funding commitment during the third quarter of 2000, resulting in
significant operating losses for 2001 and the next several years.

IF OUR CLINICAL TRIALS ARE NOT SUCCESSFUL, OR IF WE ARE OTHERWISE UNABLE TO
OBTAIN AND MAINTAIN THE REGULATORY APPROVAL REQUIRED TO MARKET AND SELL OUR
POTENTIAL PRODUCTS, WE WOULD INCUR ADDITIONAL OPERATING LOSSES.

         The development and sale of our product candidates are subject to
extensive regulation by governmental authorities. Obtaining and maintaining
regulatory approval typically is costly and takes many years. Regulatory
authorities, most importantly, the FDA, have substantial discretion to terminate
clinical trials, delay or withhold registration and marketing approval in the
United States, and mandate product recalls. Failure to comply with regulatory
requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction, as
well as other actions as to our potential products or against us. Outside the
United States, we can market a product only if we receive a marketing
authorization from the appropriate regulatory authorities. This foreign
regulatory approval process includes all of, and in some cases, additional,
risks associated with the FDA approval process.

         To gain regulatory approval from the FDA and foreign regulatory
authorities for the commercial sale of any product, we must demonstrate the
safety and efficacy of the product in clinical trials. If we develop a product
to treat a long-lasting disease, such as cancer or Alzheimer's disease, we must
gather data over an extended period of time. There are many risks associated
with our clinical trials. For example, we may be unable to achieve the same
level of success in later trials as we did in earlier ones. Additionally, data
we obtain from preclinical and clinical activities are susceptible to varying
interpretations that could impede regulatory approval. Further, some patients in
our prostate cancer and Alzheimer's disease programs have a high risk of death,
age-related disease or other adverse medical events not related to our products.
These events may affect the statistical analysis of the safety and efficacy of
our products.

<PAGE>

         In addition, many factors could delay or result in termination of our
ongoing or future clinical trials. For example, a clinical trial may experience
slow patient enrollment or lack of sufficient drug supplies. Patients may
experience adverse medical events or side effects, and there may be a real or
perceived lack of effectiveness of the drug we are testing. Future governmental
action or changes in FDA policy may also result in delays or rejection of an
application for marketing approval. Accordingly, we may not be able to obtain
product registration or marketing approval for abarelix depot, our drug
candidate for the treatment of prostate cancer and endometriosis, or for any of
our other product candidates, based on the results of our clinical trials, or
regulatory approval may be conditioned upon significant labeling requirements
which could adversely affect marketability of the product.

         If we obtain regulatory approval for a product, the approval will be
limited to those diseases for which our clinical trials demonstrate the product
is safe and effective. To date, none of our product candidates have received
regulatory approval for commercial sale. If we are delayed in obtaining or are
unable to obtain regulatory approval to market our products, we may exhaust our
available resources, including the net proceeds from our initial public
offering, which we completed in May 2000, and the net proceeds from our
follow-on offering, which we completed in February 2001, significantly sooner
than we had planned. If this were to happen, we would need to raise additional
funds to complete commercialization of our lead products and continue our
research and development programs. We cannot assure you that we would be able to
obtain these additional funds on favorable terms, if at all.

EVEN IF WE RECEIVE APPROVAL FOR THE MARKETING AND SALE OF OUR PRODUCT
CANDIDATES, THEY MAY FAIL TO ACHIEVE MARKET ACCEPTANCE AND, ACCORDINGLY, MAY
NEVER BE COMMERCIALLY SUCCESSFUL.

         Many factors may affect the market acceptance and commercial success of
any of our potential products, including:

         o  the extent and success of our marketing and sales efforts, and, in
            particular, those of our collaborators, relating to the marketing
            and sales of abarelix products;

         o  the timing of market entry as compared to competitive products;

         o  the effectiveness of our products, including any potential side
            effects, as compared to alternative treatment methods;

         o  the rate of adoption of our products by doctors and nurses and
            acceptance by the target population;

         o  the product labeling or product insert required by the FDA for each
            of our products;

         o  the competitive features of our products as compared to other
            products, including the frequency of administration of abarelix
            depot as compared to other products, and doctor and patient
            acceptance of these features;

         o  the cost-effectiveness of our products and the availability of
            insurance or other third-party reimbursement, in particular
            Medicare, for patients using our products; and

         o  unfavorable publicity concerning our products or any similar
            products.

         If our products are not commercially successful, we may never become
profitable.

<PAGE>

IF OUR CORPORATE COLLABORATORS REDUCE, DELAY OR TERMINATE THEIR FINANCIAL
SUPPORT, WE MAY BE UNABLE TO SUCCESSFULLY DEVELOP, MARKET, DISTRIBUTE OR SELL
OUR PRODUCT CANDIDATES.

         We depend upon our corporate collaborators, in particular Amgen and
Sanofi-Synthelabo, to provide substantial financial support for developing our
product candidates. We also will rely on them in some instances to help us
obtain regulatory approval for our products and to manufacture, market,
distribute or sell our products. Despite our collaborative relationships, we
have limited control over the amount and timing of resources that our corporate
collaborators devote to our programs or potential products. For example, Amgen
has final decision-making authority with regard to most of the abarelix program
in the Amgen territory, and accordingly, we have limited control over decisions
related to that program. Also, the availability of the $150.0 million line of
credit that Amgen has agreed to provide us is subject to the execution of
mutually acceptable definitive agreements which, for some borrowings thereunder,
will include specified conditions relating to the sale of abarelix.

         In addition, our corporate collaborators may terminate our
collaboration agreements in various circumstances. For example, in December
1998, we and Roche Products Inc. mutually terminated our agreement. We and each
of Amgen and Sanofi-Synthelabo may mutually terminate our agreement, and, in
addition:

         o  Amgen and Sanofi-Synthelabo each may terminate its agreement with us
            if the results of any clinical trial of abarelix materially harms
            the product's commercial prospects;

         o  Amgen may terminate its agreement with us at any time upon 90 days'
            prior written notice; and

         o  Sanofi-Synthelabo may terminate its agreement with us if specified
            adverse events occur relating to our European patent applications or
            the related patents which may be issued covering abarelix or our
            Rel-Ease technology.

         We cannot assure you that any of our present or future collaborators
will meet their obligations to us under the collaboration agreements. If a
collaborator terminates its agreement with us or fails to perform, or delays
performance of, its obligations, it could delay or prevent the development or
commercialization of the potential product or research program. As a result, we
could be forced to devote unforeseen additional resources to development and
commercialization or to terminate one or more of our drug development programs.
Due to increased operating costs and lost revenue associated with the
termination of, or non-performance or delay of performance by a corporate
collaborator under, a collaboration agreement, we could have to seek funds in
addition to the net proceeds of both our initial public offering, which we
completed in May 2000, and our follow-on public offering, which we completed in
February 2001, to meet our capital requirements. We cannot assure you that we
would be able to raise the necessary funds or negotiate additional corporate
collaborations on acceptable terms, if at all, and in that event we could have
to curtail or cease operations. For instance, if, following the termination of
our agreement with Roche, we had been unable to enter into an alternative
collaboration for the development and commercialization of our abarelix products
in a timely manner, we likely would have needed to delay or cut back our
programs for the development of abarelix or other drugs and raise additional
funds through one or more equity financings prior to the time we had planned to
do so, and possibly on less than favorable terms.

<PAGE>

IF WE OR OUR CORPORATE COLLABORATORS FAIL TO DEVELOP AND MAINTAIN OUR
RELATIONSHIPS WITH THIRD-PARTY MANUFACTURERS, OR IF THESE MANUFACTURERS FAIL TO
PERFORM ADEQUATELY, WE MAY BE UNABLE TO COMMERCIALIZE OUR PRODUCT CANDIDATES.

         Our ability to conduct clinical trials and commercialize our product
candidates will depend in part on our ability to manufacture, or arrange for
third-party manufacture of, our products on a large scale, at a competitive cost
and in accordance with regulatory requirements. We or our corporate
collaborators must establish and maintain a commercial scale formulation and
manufacturing process for each of our potential products for which we seek
marketing approval. We, our corporate collaborators or third-party manufacturers
may encounter difficulties with these processes at any time that could result in
delays in clinical trials, regulatory submissions or in the commercialization of
potential products.

         We have no experience in large-scale product manufacturing, nor do we
have the resources or facilities to manufacture products on a commercial scale.
We will continue to rely upon contract manufacturers and, in certain instances,
our corporate collaborators, to produce abarelix and other compounds for
preclinical, clinical and commercial purposes for a significant period of time.
Either we or our corporate collaborators have manufacturing and supply
agreements with third parties, and if these agreements are not satisfactory, we
may not be able to develop or commercialize potential products as planned. The
manufacture of our potential products will be subject to current good
manufacturing practices regulations. Third-party manufacturers are subject to
regulatory review and may fail to comply with these good manufacturing practices
regulations. If we or our corporate collaborators need to replace our current
third-party manufacturers, or contract with additional manufacturers, this would
necessitate new product testing and facility compliance inspections. This
testing and inspection is costly and time-consuming. Any of these factors could
prevent, or cause delays in, obtaining regulatory approvals for, and the
manufacturing, marketing or selling of, our products and could also result in
significantly higher operating expenses.

         If we fail to meet our manufacturing and supply obligations under our
agreements with either Amgen or Sanofi-Synthelabo, they may assume manufacturing
responsibility under their agreements to the extent they do not already have
this responsibility. In addition, if this occurs, we must pay Sanofi-Synthelabo
its incremental costs of assuming manufacturing responsibility.

DUE TO OUR INEXPERIENCE AND OUR LIMITED SALES AND MARKETING STAFF, WE WILL
DEPEND ON THIRD PARTIES TO SELL AND MARKET OUR PRODUCTS.

         We have no experience in marketing or selling pharmaceutical products
and have a limited marketing and sales staff. To achieve commercial success for
any approved product, we must either develop a marketing and sales force or
enter into arrangements with others to market and sell our products. We have
granted Amgen and Sanofi-Synthelabo exclusive marketing and distribution rights
for abarelix products in defined geographic locations. We have limited control
over the decisions made by Amgen or Sanofi-Synthelabo or the resources they
devote to the marketing and distribution of abarelix products in their
respective territories. Moreover, our corporate collaborators may, subject to
certain limitations with respect to Sanofi-Synthelabo, market products that
compete with our products. Our marketing and distribution arrangements with
Amgen and Sanofi-Synthelabo may not be successful, and we may not receive any
revenues from these arrangements. Also, we cannot assure you that we will be
able to enter into marketing and sales agreements on acceptable terms, if at
all, for any other products.

BECAUSE WE DEPEND ON THIRD PARTIES TO CONDUCT LABORATORY TESTING AND HUMAN
CLINICAL STUDIES AND ASSIST US WITH REGULATORY COMPLIANCE, WE MAY ENCOUNTER
DELAYS IN PRODUCT DEVELOPMENT AND COMMERCIALIZATION.

         We have contracts with a limited number of research organizations to
design and conduct our laboratory testing and human clinical studies. If we
cannot contract for testing activities on acceptable terms, or at all, we may
not complete our product development efforts in a timely manner. To the extent

<PAGE>

we rely on third parties for laboratory testing and human clinical studies, we
may lose some control over these activities. For example, third parties may not
complete testing activities on schedule or when we request. In addition, these
third parties may not conduct our clinical trials in accordance with regulatory
requirements. The failure of these third parties to carry out their contractual
duties could delay or prevent the development and commercialization of our
product candidates.

ALTERNATIVE TREATMENTS ARE AVAILABLE WHICH MAY IMPAIR OUR ABILITY TO CAPTURE
MARKET SHARE FOR OUR POTENTIAL PRODUCTS.

         Alternative products exist or are under development to treat the
diseases for which we are developing drugs. For example, the FDA has approved
several drugs for the treatment of prostate cancer that respond to changes in
hormone levels. Even if the FDA approves abarelix depot for commercialization
for the treatment of prostate cancer, it may not compete favorably with existing
treatments that already have an established market share. If abarelix depot does
not achieve broad market acceptance as a drug for the treatment of prostate
cancer, we may not become profitable.

WE COULD EXPERIENCE DELAYS IN THE RESEARCH, DEVELOPMENT OR COMMERCIALIZATION OF
OUR PRODUCT CANDIDATES AS A RESULT OF CONFLICTS WITH OUR CORPORATE COLLABORATORS
OR COMPETITION FROM THEM.

                  An important part of our strategy involves conducting
proprietary research programs. We may pursue opportunities that conflict with
our collaborators' businesses. Disagreements with our collaborators could
develop over rights to intellectual property, including the ownership of
technology co-developed with our collaborators. Our current or future
collaborators could develop or market products in the future that compete with
our products. This could diminish our collaborators' commitment to us, and
reduce the resources they devote to developing and commercializing our product
candidates. For example, the U.S. subsidiary of Sanofi-Synthelabo has recently
entered into a collaboration agreement with Atrix Laboratories, Inc., under
which it will exclusively market Leuprogel, Atrix's product in development for
the treatment of prostate cancer, in North America. If approved, Leuprogel is
likely to compete with abarelix depot as a treatment for advanced stage prostate
cancer.

         Conflicts or disputes with our collaborators, and competition from
them, could harm our relationships with our other collaborators, restrict our
ability to enter into future collaboration agreements and delay the research,
development or commercialization of our product candidates.

MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY
BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR POTENTIAL PRODUCTS
AND TECHNOLOGIES OBSOLETE OR NON-COMPETITIVE.

         A biotechnology company such as ours must keep pace with rapid
technological change and faces intense competition. We compete with
biotechnology and pharmaceutical companies for funding, access to new
technology, research personnel and in product research and development. Many of
these companies have greater financial resources and more experience than we do
in developing drugs, obtaining regulatory approvals, manufacturing and
marketing. We also face competition from academic and research institutions and
government agencies pursuing alternatives to our products and technologies. We
expect that all of our products under development will face intense competition
from existing or future drugs.

         Our competitors may:

         o  successfully identify drug candidates or develop products earlier
            than we do;

<PAGE>

         o  obtain approvals from the FDA or foreign regulatory bodies more
            rapidly than we do;

         o  develop products that are more effective, have fewer side effects or
            cost less than our products; or

         o  successfully market products that compete with our products.

         The success of our competitors in any of these efforts would adversely
affect our ability to develop, commercialize and market our product candidates.

IF WE ARE UNABLE TO OBTAIN AND ENFORCE VALID PATENTS, WE COULD LOSE ANY
COMPETITIVE ADVANTAGE WE MAY HAVE.

         Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our technologies and potential products. If
we do not adequately protect our intellectual property, competitors may be
able to use our technologies and erode any competitive advantage we may have.
For example, if we lose our patent protection for abarelix, another party
could produce and market abarelix in direct competition with us. Some foreign
countries lack rules and methods for defending intellectual property rights
and do not protect proprietary rights to the same extent as the United
States. Many companies have had difficulty protecting their proprietary
rights in foreign countries.

         Patent positions are sometimes uncertain and usually involve complex
legal and factual questions. We can protect our proprietary rights from
unauthorized use by third parties only to the extent that our proprietary
technologies are covered by valid and enforceable patents or are effectively
maintained as trade secrets. We currently own or have exclusively licensed
thirteen issued United States patents. We have applied, and will continue to
apply, for patents covering both our technologies and products as we deem
appropriate. Others may challenge our patent applications or our patent
applications may not result in issued patents. Moreover, any issued patents on
our own inventions, or those licensed from third parties, may not provide us
with adequate protection, or others may challenge the validity of, or seek to
narrow or circumvent, these patents. Third-party patents may impair or block our
ability to conduct our business. Additionally, third parties may independently
develop products similar to our products, duplicate our unpatented products, or
design around any patented products we develop.

IF WE ARE UNABLE TO PROTECT OUR TRADE SECRETS AND PROPRIETARY INFORMATION, WE
COULD LOSE ANY COMPETITIVE ADVANTAGE WE MAY HAVE.

         In addition to patents, we rely on a combination of trade secrets,
confidentiality, nondisclosure and other contractual provisions, and security
measures to protect our confidential and proprietary information. These measures
may not adequately protect our trade secrets or other proprietary information.
If these measures do not adequately protect our rights, third parties could use
our technology, and we could lose any competitive advantage we may have. In
addition, others may independently develop similar proprietary information or
techniques, which could impair any competitive advantage we may have.

IF OUR TECHNOLOGIES, PROCESSES OR POTENTIAL PRODUCTS CONFLICT WITH THE PATENTS
OF COMPETITORS, UNIVERSITIES OR OTHERS, WE COULD HAVE TO ENGAGE IN COSTLY
LITIGATION AND BE UNABLE TO COMMERCIALIZE THOSE PRODUCTS.

         Our technologies, processes or potential products may give rise to
claims that they infringe other patents. A third party could force us to pay
damages, to stop our use of the technologies or processes, or to stop our
manufacturing or marketing of the affected products by bringing a legal action
against us for infringement. In addition, a third party could require us to
obtain a license

<PAGE>

to continue to use the technologies or processes or manufacture or market the
affected products, and we may not be able to do so. We believe that significant
litigation will continue in our industry regarding patent and other intellectual
property rights. If we become involved in litigation, it could consume a
substantial portion of our resources. Even if legal actions were meritless,
defending a lawsuit could take significant time, be expensive and divert
management's attention from other business concerns.

IF THIRD PARTIES TERMINATE OUR LICENSES, WE COULD EXPERIENCE DELAYS OR BE UNABLE
TO COMPLETE THE DEVELOPMENT AND COMMERCIALIZATION OF OUR POTENTIAL PRODUCTS.

         We license some of our technology from third parties. Termination of
our licenses could force us to delay or discontinue some of our development and
commercialization programs. For example, if Advanced Research and Technology
Institutes, Inc., the assignee of Indiana University Foundation, terminated our
abarelix license, we could have to discontinue development and commercialization
of our abarelix products. We cannot assure you that we would be able to license
substitute technology in the future. Our inability to do so could impair our
ability to conduct our business because we may lack the technology, or the
necessary rights to technology, required to develop and commercialize our
potential products.

OUR REVENUES WILL DIMINISH IF WE FAIL TO OBTAIN ACCEPTABLE PRICES OR ADEQUATE
REIMBURSEMENT FOR OUR PRODUCTS FROM THIRD-PARTY PAYORS.

         The continuing efforts of government and third-party payors to contain
or reduce the costs of health care may limit our commercial opportunity. If
government and other third-party payors do not provide adequate coverage and
reimbursement for our products, physicians may not prescribe them. If we are
unable to offer physicians comparable or superior financial motivation to use
our products, we may not be able to generate significant revenues. In some
foreign markets, pricing and profitability of prescription pharmaceuticals are
subject to government control. In the United States, we expect that there will
continue to be federal and state proposals for similar controls. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products. Cost control initiatives
could decrease the price that any of our collaborators or we receive for any
products in the future. Further, cost control initiatives could impair or
diminish our collaborators' ability or incentive to commercialize our products,
and our ability to earn revenues from this commercialization.

         Our ability to commercialize pharmaceutical products, alone or with
collaborators, may depend in part on the availability of reimbursement for our
products from:

         o  government and health administration authorities;

         o  private health insurers; and

         o  other third-party payors, including Medicare and Medicaid.

         We cannot predict the availability of reimbursement for newly approved
health care products. Third-party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other
third-party payors increasingly are limiting both coverage and the level of
reimbursement for new drugs and, in some cases, refusing to provide coverage for
a patient's use of an approved drug for purposes not approved by the FDA.
Third-party insurance coverage may not be available to patients for any of our
products.

<PAGE>

WE MAY BE UNABLE TO SUBLEASE OUR CURRENT FACILITIES OR FIND SUITABLE TENANTS FOR
A PORTION OF OUR NEW FACILITY.

         In July 2000, we purchased, through our wholly owned real estate
subsidiary, a new facility in Waltham, Massachusetts, and executed a 15-year
lease with this subsidiary. We intend to sublease a portion of our new facility
to third parties and expect to sublease our current facility in Cambridge,
Massachusetts. In addition, in connection with our move to the new facility, we
have consolidated the Provid Research division with our Massachusetts operations
and are seeking a sublease for our Provid facility located in New Jersey. We may
not be able to find suitable sub-tenants to occupy these spaces in a timely
manner, if at all. If we are unable to find suitable sub-tenants in a timely
manner, we may experience greater than anticipated operating expenses in the
future.

IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
SKILLED PERSONNEL, WE MAY BE UNABLE TO PURSUE OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION EFFORTS.

         We depend substantially on the principal members of our management and
scientific staff, including Malcolm L. Gefter, Ph.D., our Chief Executive
Officer, President and Chairman of the Board. We do not have employment
agreements with any of our executive officers. Any officer or employee can
terminate his or her relationship with us at any time and work for one of our
competitors. The loss of these key individuals could result in competitive harm
because we could experience delays in our product research, development and
commercialization efforts without their expertise.

         Recruiting and retaining qualified scientific personnel to perform
future research and development work also will be critical to our success.
Competition for skilled personnel is intense and the turnover rate can be high.
We compete with numerous companies and academic and other research institutions
for experienced scientists. This competition may limit our ability to recruit
and retain qualified personnel on acceptable terms. Failure to attract and
retain qualified personnel would prevent us from successfully developing our
products or core technologies and launching our products commercially. Our
planned activities may require the addition of new personnel, including
management, and the development of additional expertise by existing management
personnel. The inability to retain these personnel or to develop this expertise
could result in delays in the research, development and commercialization of our
potential products.

WE MAY HAVE SUBSTANTIAL EXPOSURE TO PRODUCT LIABILITY CLAIMS AND MAY NOT HAVE
ADEQUATE INSURANCE TO COVER THOSE CLAIMS.

         We may be held liable if any product we develop, or any product made by
others using our technologies, causes injury. We have only limited product
liability insurance coverage for our potential products in clinical trials. We
intend to expand our product liability insurance coverage of any of our products
for which we obtain marketing approval. However, this insurance may be
prohibitively expensive or may not fully cover our potential liabilities. Our
inability to obtain adequate insurance coverage at an acceptable cost could
prevent or inhibit the commercialization of our products. If a third party sues
us for any injury caused by products made by us or using our technologies, our
liability could exceed our total assets.

WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN OUR
BUSINESS AND ANY CLAIMS RELATING TO THE HANDLING, STORAGE OR DISPOSAL OF THESE
MATERIALS COULD BE TIME CONSUMING AND COSTLY.

         Our research and development processes involve the controlled use of
hazardous materials, including chemicals and radioactive and biological
materials. The health risks associated with accidental exposure to abarelix
include temporary impotence or infertility and harmful effects on pregnant
women. Our operations also produce hazardous waste products. We cannot

<PAGE>

completely eliminate the risk of accidental contamination or discharge from
hazardous materials and any resultant injury. Federal, state and local laws and
regulations govern the use, manufacture, storage, handling and disposal of
hazardous materials. Compliance with environmental laws and regulations is
necessary and expensive. Current or future environmental regulations may impair
our research, development or production efforts. We may be required to pay
fines, penalties or damages in the event of noncompliance or the exposure of
individuals to hazardous materials.

         Some of our collaborators also work with hazardous materials in
connection with our collaborations. We have agreed to indemnify our
collaborators in some circumstances against damages and other liabilities
arising out of development activities or products produced in connection with
these collaborations.

IF WE ENGAGE IN AN ACQUISITION, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION.

         If appropriate opportunities become available, we may attempt to
acquire businesses, products or technologies that we believe are a strategic fit
with our business. We currently have no commitments or agreements for any
acquisitions, nor are there any negotiations with respect to any specific
transaction. If we do undertake any transaction of this sort, the process of
integrating an acquired business, product or technology may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for the ongoing development of our
business. Moreover, we may fail to realize the anticipated benefits of any
acquisition. Future acquisitions could dilute your ownership interest in us and
could cause us to incur debt, expose us to future liabilities and result in
amortization expenses related to goodwill and other intangible assets.

THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS.

         The market price of our common stock may fluctuate substantially due to
a variety of factors, including, but not limited to:

         o  announcement of FDA approval or disapproval of our product
            candidates;

         o  the willingness of collaborators to commercialize our product
            candidates and the timing of commercialization;

         o  announcements of technological innovations or new products by us or
            our competitors;

         o  the success rate of our discovery efforts and clinical trials
            leading to performance-based payments and revenues under our
            collaboration agreements;

         o  loss of corporate collaborators, failure or delay by our corporate
            collaborators in performing their obligations or disputes with our
            corporate collaborators;

         o  developments or disputes concerning patents or proprietary rights,
            including announcements of claims of infringement, interference or
            litigation against us or our licensors;

         o  announcements concerning our competitors, or the biotechnology or
            pharmaceutical industry in general;

         o  public concerns as to the safety of our products or our competitors'
            products;

<PAGE>

         o  changes in government regulation of the pharmaceutical or medical
            industry;

         o  changes in the reimbursement policies of third-party insurance
            companies or government agencies;

         o  actual or anticipated fluctuations in our operating results;

         o  changes in financial estimates or recommendations by securities
            analysts;

         o  sales of large blocks of our common stock;

         o  changes in accounting principles; and

         o  the loss of any of our key scientific or management personnel.

         In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of biotechnology companies,
particularly companies like ours without current product revenues and earnings,
have been highly volatile, and may continue to be highly volatile in the future.
This volatility has often been unrelated to the operating performance of
particular companies. In the past, securities class action litigation has often
been brought against companies that experience volatility in the market price of
their securities. Whether or not meritorious, litigation brought against us
could result in substantial costs and a diversion of management's attention and
resources.

WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE.

         Our quarterly operating results have fluctuated in the past and are
likely to do so in the future. These fluctuations could cause our stock price to
decline. Some of the factors that could cause our operating results to fluctuate
include:

         o  the delay or failure of any of our corporate collaborators to meet
            their payment or other obligations, or termination of any of our
            agreements with them;

         o  the timing of development and commercialization of our abarelix
            products leading to performance-based payments and revenues under
            our agreements with our corporate collaborators;

         o  the timing and level of expenses, and of expense reimbursement
            payments, related to the development and commercialization of our
            abarelix products, or to our other research and development
            programs; and

         o  the timing of our commercialization of other products resulting in
            revenues.

         Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.

         If our stockholders sell substantial amounts of our common stock in the
public market, or the perception that such sales may occur exists, the market
price of our common stock could decline. The 9,200,000 shares of common stock

<PAGE>

sold in our initial public offering in May 2000 are all freely tradeable in the
public market. Additionally, all of the 8,337,500 shares sold in our follow-on
public offering in February 2001 to purchasers other than our affiliates are
freely tradeable in the public market. Any shares of common stock held by our
affiliates may generally only be sold in compliance with Rule 144 under the
Securities Act. As of March 31, 2001, approximately 2.2 million outstanding
shares of common stock were held by our affiliates. In addition, in connection
with our follow-on public offering, holders of approximately 2.4 million shares
of common stock outstanding as of March 31, 2001 have agreed not to offer, sell,
contract to sell or otherwise dispose of their shares of common stock through
May 15, 2001 without the prior written consent of the underwriters for the
offering. Substantially all of our remaining outstanding shares of common stock
may be freely sold without volume restrictions pursuant to Rule 144(k) or Rule
701 under the Securities Act.

         One of our stockholders, which until recently was one of our
affiliates, owned approximately 7.3 million shares of common stock immediately
after completion of our initial public offering in May 2000. This stockholder
sold approximately 3.7 million of these shares in market transactions subject to
the volume limitations and other requirements of Rule 144 from late October 2000
through the end of 2000. This stockholder sold an additional 750,000 shares as
part of our follow-on public offering. The remaining approximately 2.9 million
shares held by this stockholder became eligible for resale without volume
restrictions under Rule 144(k) on April 16, 2001, upon the expiration of the
60-day lock-up agreement executed by this stockholder in connection with our
follow-on public offering.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS, OUR RIGHTS AGREEMENT AND
UNDER DELAWARE LAW MAY MAKE AN ACQUISITION OF US MORE DIFFICULT, EVEN IF AN
ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

         Provisions in our certificate of incorporation and by-laws may delay or
prevent an acquisition of us or a change in our management. Also, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law, which may prohibit or delay large
stockholders, in particular those owning 15% or more of our outstanding voting
stock, from merging or combining with us. In addition, the rights issued under
our rights agreement may be a substantial deterrent to a person acquiring 10% or
more of our common stock without the approval of our board of directors. These
provisions in our charter and by-laws, rights agreement and under Delaware law
could reduce the price that investors might be willing to pay for shares of our
common stock in the future and result in the market price being lower that it
would be without these provisions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we invest in may have market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate. To
minimize this risk in the future, we maintain our portfolio of cash equivalents
and short-term investments in a variety of securities, including commercial
paper, money market funds and government and non-government debt securities. Our
investments are also subject to interest rate risk and will decrease in value if
market interest rates increase. A hypothetical 100 basis point increase in
interest rates would result in an approximate $0.4 million decrease in the fair
value of our investments as of March 31, 2001. However, due to the conservative
nature of our investments and relatively short duration, interest rate risk is
mitigated. As of March 31, 2001, approximately 99% of our total portfolio will
mature in one year or less, with the remainder maturing in less than two years.

<PAGE>

         In connection with the purchase of our new facility in July 2000, our
wholly owned real estate subsidiary executed an acquisition and construction
loan agreement that provides for up to $33.0 million in borrowings at a floating
interest rate indexed to 30-day LIBOR. Concurrent with that transaction, the
subsidiary also entered into an interest rate cap agreement which limits
exposure to interest rate increases above a certain threshold. Due to the
decrease in interest rates since we entered into this interest rate cap, we
believe that there is not material market risk exposure with respect to this
item which would require additional disclosure. With regard to borrowings under
the loan agreement, we believe that we have mitigated our risk to significant
adverse fluctuations in interest rates and we do not believe that a 10% change
in interest rates would have a material impact on our results of operations or
cash flows.

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

         (d) On February 8, 2000, we filed a Registration Statement on Form S-1
(Registration No. 333-96351) with the Securities and Exchange Commission to
register under the Securities Act 8,000,000 shares of our common stock (plus an
additional 1,200,000 shares subject to an over-allotment option granted to the
underwriters). The Registration Statement was declared effective by the
Securities and Exchange Commission on April 26, 2000.

         From April 26, 2000 through March 31, 2001, we used approximately $36.2
million of the net proceeds from our initial public offering for the purchase
and build-out of our new facility. Due to unanticipated construction costs, we
expect that the total amount of net proceeds from our initial public offering
which will be used for the purchase and build-out of our new facility will
exceed our original estimates by approximately $10.0 million. Pending use of the
remaining net proceeds of our initial public offering, we have invested these
funds in short-term, interest-bearing, investment-grade securities. Our
management will continue to have broad discretion over the actual use of these
proceeds.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits

<TABLE>
<CAPTION>
              EXHIBIT NUMBER      EXHIBIT
              <S>                <C>
                   3.1           Amended and Restated Certificate of Incorporation (2)
                   3.2           Amended and Restated By-Laws (2)
                   4.1           Specimen certificate representing shares of common stock (1)
                   4.2           Specimen certificate representing shares of common stock (including Rights
                                 Agreement Legend)(5)
                   4.3           Warrant to purchase Common Stock dated as of May 13, 1997 (1)
                   4.4           Amendment dated as of January 30, 2001 between the Registrant and
                                 Sanofi-Synthelabo Inc. (formerly Sylamerica, Inc.) to the Warrant for the Purchase
                                 of Shares of Common Stock issued by the Registrant to Sylamerica, Inc. (3)
                   4.5           Rights Agreement between the Registrant and American Stock Transfer & Trust
                                 Company, as Rights Agent (4)
                   4.6           Form of Certificate of Designations of Series A Junior Participating Preferred
                                 Stock (attached as Exhibit A to the Rights Agreement filed as Exhibit 4.5 hereto)
                                 (4)
                   4.7           Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as
                                 Exhibit 4.5 hereto) (4)
                   10.1          Executive Management Bonus Plan, as amended and Restated as of January 30, 2001 (5)
                   10.2          Waiver and Amendment dated as of January 26, 2001 between the Registrant and
                                 Sanofi-Synthelabo Inc. (formerly Sylamerica, Inc.) to the Stock and Warrant
                                 Purchase Agreement dated as of May 13, 1997 by and between Sylamerica, Inc. and
                                 the Registrant (3)
</TABLE>

----------------
(1) Incorporated by reference to Registration Statement on Form S-1
    (Registration No. 333-96351) initially filed with the Securities and
    Exchange Commission on February 8, 2000 and declared effective on April 26,
    2000.


<PAGE>

(2) Incorporated by reference to Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2000 filed with the Securities and Exchange Commission on
    June 7, 2000.

(3) Incorporated by reference to Registration Statement on Form S-1
    (Registration No. 333-54342) initially filed with the Securities and
    Exchange Commission on January 26, 2001 and declared effective on February
    14, 2001.

(4) Incorporated by reference to Registration Statement on Form 8-A filed with
    the Securities and Exchange Commission on January 26, 2001.

(5) Incorporated by reference to Annual Report on Form 10-K for the year ended
    December 31, 2000 filed with the Securities and Exchange Commission on March
    29, 2001.

    (b) Reports Submitted on Form 8-K

         On January 11, 2001, we filed a Current Report on Form 8-K to file
under Item 5 (Other Events) a copy of our Press Release dated January 11, 2001.

         On January 26, 2001, we filed a Current Report on Form 8-K announcing
under Item 5 (Other Events) the adoption of a shareholder rights plan and the
filing of a Registration Statement on Form S-1.

         On February 22, 2001, we filed an Amended Current Report on Form 8-K/A
amending, under Item 5 (Other Events), certain information appearing in our
Current Report on Form 8-K filed on January 26, 2001 relating to our shareholder
rights plan.

<PAGE>

                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

                                    PRAECIS PHARMACEUTICALS INCORPORATED

Date:  May 9, 2001                  By /s/ Kevin F. McLaughlin
                                       -------------------------------------
                                       Kevin F. McLaughlin
                                       Chief Financial Officer, Senior Vice
                                       President, Treasurer and Secretary
                                       (Duly Authorized Officer and Principal
                                        Financial and Accounting Officer)

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
              EXHIBIT NUMBER
                                                                       EXHIBIT
              <S>                <C>
                   3.1           Amended and Restated Certificate of Incorporation (2)
                   3.2           Amended and Restated By-Laws (2)
                   4.1           Specimen certificate representing shares of common   stock (1)
                   4.2           Specimen certificate representing shares of common   stock (including Rights
                                 Agreement Legend)(5)
                   4.3           Warrant to purchase Common Stock dated as of May 13, 1997 (1)
                   4.4           Amendment dated as of January 30, 2001 between the Registrant and
                                 Sanofi-Synthelabo Inc. (formerly Sylamerica, Inc.) to the Warrant for the Purchase
                                 of Shares of Common Stock issued by the Registrant to Sylamerica, Inc. (3)
                   4.5           Rights Agreement between the Registrant and American Stock Transfer & Trust
                                 Company, as Rights Agent (4)
                   4.6           Form of Certificate of Designations of Series A Junior Participating Preferred
                                 Stock (attached as Exhibit A to the Rights Agreement filed as Exhibit 4.5 hereto)
                                 (4)
                   4.7           Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as
                                 Exhibit 4.5 hereto) (4)
                   10.1          Executive Management Bonus Plan, as amended and Restated as of January 30, 2001 (5)
                   10.2          Waiver and Amendment dated as of January 26, 2001 between the Registrant and
                                 Sanofi-Synthelabo Inc. (formerly Sylamerica, Inc.) to the Stock and Warrant
                                 Purchase Agreement dated as of May 13, 1997 by and between Sylamerica, Inc. and
                                 the Registrant (3)
</TABLE>

----------------

(1) Incorporated by reference to Registration Statement on Form S-1
    (Registration No. 333-96351) initially filed with the Securities and
    Exchange Commission on February 8, 2000 and declared effective on April 26,
    2000.

(2) Incorporated by reference to Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2000 filed with the Securities and Exchange Commission on
    June 7, 2000.

(3) Incorporated by reference to Registration Statement on Form S-1
    (Registration No. 333-54342) initially filed with the Securities and
    Exchange Commission on January 26, 2001 and declared effective on February
    14, 2001.

(4) Incorporated by reference to Registration Statement on Form 8-A filed with
    the Securities and Exchange Commission on January 26, 2001.

(5) Incorporated by reference to Annual Report on Form 10-K for the year ended
    December 31, 2000 filed with the Securities and Exchange Commission on March
    29, 2001.