<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, 2000

                                       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.)


                 One Hampshire Street, Cambridge, MA 02139-1572
                 ----------------------------------------------
              (Address of principal executive offices and zip code)

                                 (617) 494-8400
                                 --------------
              (Registrant's telephone number, including area code)

         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 [ ]   No [X]

         ALTHOUGH THE REGISTRANT HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
         SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
         PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS, THE
         REGISTRANT DID NOT BECOME SUBJECT TO SUCH FILING REQUIREMENTS UNTIL THE
         REGISTRATION OF CERTAIN SHARES OF ITS COMMON STOCK PURSUANT TO A
         REGISTRATION STATEMENT ON FORM S-1 WAS DECLARED EFFECTIVE BY THE
         SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2000.

         As of May 31, 2000, there were 41,864,570 shares of the registrant's
         common stock, $.01 par value, outstanding.

<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED

                                    FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2000

                                      INDEX


<TABLE>
<CAPTION>

                                                                                          Page
                                                                                         Number
                                                                                         ------
<S>                                                                                      <C>
PART I.  FINANCIAL INFORMATION                                                              3

Item 1.  Financial Statements
              Condensed Balance Sheets at March 31, 2000 and December 31, 1999              3
              Condensed Statements of Operations for the three months ended
              March 31, 2000 and 1999                                                       4
              Condensed Statements of Cash Flows for the three months ended
              March 31, 2000 and 1999                                                       5
              Notes to Condensed 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                        22

PART II. OTHER INFORMATION                                                                 23

Item 2.  Changes in Securities and Use of Proceeds                                         23

Item 4.  Submission of Matters to a Vote of Security Holders                               24

Item 6.  Exhibits and Reports on Form 8-K                                                  24

SIGNATURE                                                                                  26

EXHIBIT INDEX                                                                              27
</TABLE>


                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                      PRAECIS PHARMACEUTICALS INCORPORATED
                            CONDENSED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                    March 31,     December 31,
                                                                                      2000            1999
                                                                                     ------         ---------
                                                                                   (unaudited)
<S>                                                                                <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................................       $  86,296        $  94,525
  Accounts receivable.......................................................           6,344            8,121
  Unbilled revenue..........................................................           2,667            4,259
  Materials inventory.......................................................          26,330           21,100
  Prepaid expenses and other assets.........................................           4,205              708
  Deferred income taxes.....................................................           5,575            5,575
                                                                                   ---------        ---------

        Total current assets................................................         131,417          134,288

Property and equipment, net.................................................           5,903            6,043
                                                                                   ---------        ---------

              Total assets..................................................       $ 137,320        $ 140,331
                                                                                   =========        =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................................       $   8,702        $   9,878
  Accrued expenses..........................................................           6,517            6,859
  Deferred revenue..........................................................           5,803            5,501
  Advance payments..........................................................          26,330           21,100
  Income taxes payable......................................................             100            4,672
  Current portion of capital lease obligations..............................              39               58
                                                                                   ---------        ---------

        Total current liabilities...........................................          47,491           48,068
Deferred revenue............................................................           3,410            4,547

Commitments and contingencies

Stockholders' equity:
Series A, B, C, D, E Convertible Preferred Stock, $0.01 par value; 3,750,000
shares authorized; 3,417,300 shares issued and outstanding at March 31, 2000
and December 31, 1999.......................................................              35               35
Common Stock, $0.01 par value; 60,000,000 shares authorized; 7,031,870
shares in 2000 and 6,358,684 shares in 1999 issued and outstanding..........              70               64
Additional paid-in capital..................................................          89,882           88,710
Accumulated deficit.........................................................          (3,568)          (1,093)
                                                                                   ---------        ---------

        Total stockholders' equity..........................................          86,419           87,716
                                                                                   ---------        ---------

              Total liabilities and stockholders' equity....................       $ 137,320        $ 140,331
                                                                                   =========        =========
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                       3
<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
                       CONDENSED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                 March 31,
                                                     --------------------------------
                                                         2000                1999
                                                     ------------        ------------
<S>                                                  <C>                 <C>
Revenues:
    Corporate collaborations......................   $      9,001        $      1,143
                                                     ------------        ------------
          Total revenues..........................          9,001               1,143

Costs and expenses:
    Research and development......................         11,276              11,131
    General and administrative....................          1,394                 917
                                                     ------------        ------------
        Total costs and expenses..................         12,670              12,048
                                                     ------------        ------------


Operating loss....................................         (3,669)            (10,905)

Interest income, net..............................          1,294                 976
                                                     ------------        ------------

Loss before income taxes..........................         (2,375)             (9,929)
Provision for income taxes........................            100                 100
                                                     ------------        ------------

Net loss..........................................   $     (2,475)       $    (10,029)
                                                     ============        ============


Basic and diluted net loss per share..............   $      (0.36)       $      (1.68)

Weighted average number of basic
  and diluted shares outstanding..................      6,844,407           5,987,174

Pro forma basic and diluted net loss per share....   $      (0.08)       $      (0.32)

Pro forma weighted average number of basic
    and diluted shares outstanding................     32,452,257          31,595,024
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                       4
<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                          Three months ended
                                                                               March 31,
                                                                       -------------------------
                                                                          2000            1999
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
OPERATING ACTIVITIES:
Net loss...........................................................    $ (2,475)       $(10,029)
Adjustments to reconcile net loss to cash used in
operating activities:
   Depreciation and amortization...................................         633             242
   Deferred income taxes...........................................          --          (1,324)
   Stock compensation..............................................         462              --
   Changes in operating assets and liabilities:
      Accounts receivable..........................................       1,777            (835)
      Unbilled revenue.............................................       1,592             (82)
      Materials inventory..........................................      (5,230)             --
      Prepaid expenses and other assets............................      (3,497)           (690)
      Accounts payable.............................................      (1,176)          2,530
      Accrued expenses.............................................        (342)           (312)
      Deferred revenue.............................................        (835)            154
      Advance payments.............................................       5,230              --
      Income taxes payable.........................................      (4,572)            650
                                                                       --------        --------
Net cash used in operating activities..............................      (8,433)         (9,696)


INVESTING ACTIVITIES:
Purchase of property and equipment.................................        (493)         (1,240)
                                                                       --------        --------
Net cash used in investing activities..............................        (493)         (1,240)


FINANCING ACTIVITIES:
Principal repayments of capital lease obligations..................         (19)           (111)
Proceeds from issuance of common stock, options and warrants.......         716              18
                                                                       --------        --------
Net cash provided by (used in) financing activities................         697             (93)
                                                                       --------        --------


Net decrease in cash and cash equivalents..........................      (8,229)        (11,029)
Cash and cash equivalents, beginning of period.....................      94,525          85,298
                                                                       --------        --------

Cash and cash equivalents, end of period...........................    $ 86,296        $ 74,269
                                                                       ========        ========
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                       5
<PAGE>

                      PRAECIS PHARMACEUTICALS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


1.  BASIS OF PRESENTATION

The accompanying condensed 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 Registration Statement on Form S-1
(File No. 333-96351) (the "Registration Statement"), which was declared
effective by the SEC on April 26, 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 POLICIES

NEW ACCOUNTING PRONOUNCEMENTS

In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION (the
"Interpretation"). This Interpretation clarifies how companies should apply the
Accounting Principles Board's Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES. The Interpretation will be applied prospectively to new awards,
modifications to outstanding awards, and changes in employee status on or after
July 1, 2000, except as follows: the definition of an employee applies to awards
granted after December 15, 1998; the Interpretation applies to modifications
that reduce the exercise price of an award after December 15, 1998; and the
Interpretation applies to modifications that add a reload feature to an award
made after January 12, 2000. The Company believes that there are no awards that
would result in an adjustment at July 1, 2000 as a result of this
Interpretation.

In December 1999, the SEC issued Staff Accounting Bulletin 101 ("SAB 101"),
REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB 101 clarifies the SEC staff's
views on applying generally accepted accounting principles to revenue
recognition in financial statements. In March 2000, the SEC issued an amendment,
SAB 101A, which deferred the effective date of SAB 101. The Company believes its
revenue recognition policies are in compliance with SAB 101.


                                       6
<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 1999, 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 April 2000 (See Note 5), using the
if-converted method.

The calculation of historical basic and diluted net loss per share is as follows
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31,
                                                           ---------------------------------
                                                               2000                 1999
                                                           ------------         -----------
<S>                                                        <C>                 <C>
Historical:
   Net loss...........................................     $     (2,475)       $    (10,029)
                                                           ============        ============
   Weighted average number of common shares
      outstanding used in computing basic and
      diluted net loss per share......................        6,844,407           5,987,174
                                                           ============        ============
Basic and diluted net loss per share..................     $      (0.36)       $      (1.68)
                                                           ============        ============
Pro forma:
   Net loss...........................................     $     (2,475)       $    (10,029)
                                                           ============        ============
   Weighted average number of common shares used in
      computing basic and diluted net loss per share
      (from above)....................................        6,844,407           5,987,174
   Adjustment to reflect the effect of the
      assumed conversion of preferred stock from
      the date of issuance............................       25,607,850          25,607,850
                                                           ------------        ------------
   Weighted average number of common shares outstanding
      used in computing pro forma basic and diluted net
      loss per share..................................       32,452,257          31,595,024
                                                           ============        ============
Pro forma basic and diluted net loss per share........     $      (0.08)        $     (0.32)
                                                           ============        ============
</TABLE>

3. COMMITMENTS

BUILDING

On January 14, 2000, the Company signed a purchase and sale agreement to
purchase, for $41.5 million, land and a building to be used as its principal
headquarters and research facility. In connection with this agreement, the
Company has made deposits of $1.2 million and expects the transaction to close
in the second quarter of 2000. The Company expects to use approximately $30.0
million of the net proceeds of its initial public offering for the purchase of
this facility and related improvements. The Company intends


                                       7
<PAGE>

to obtain first mortgage financing of up to approximately $33.0 million for the
balance of the required amount and expects to close a mortgage financing
transaction in the second quarter of 2000.

In connection with the decision to relocate its principal operations to the
new facility, the Company may incur approximately $1.0 million of incremental
cash and non-cash operating costs during the approximate 12 month transition
period.

4. STOCK SPLIT

On March 8, 2000, the Company effected a two-for-one stock split of its common
stock, par value $.01 per share (the "Common Stock"), in the form of a 100%
stock dividend. All common share and per share data in the accompanying
financial statements have been retroactively adjusted to reflect the stock
split.


5. SUBSEQUENT EVENTS

INITIAL PUBLIC OFFERING

On April 26, 2000, the Company's Registration Statement was declared effective
by the SEC. Pursuant to the Registration Statement, on May 2, 2000, the Company
sold 8,000,000 shares of its Common Stock at $10 per share and on May 8, 2000,
the Company sold an additional 1,200,000 shares of Common Stock at $10 per share
pursuant to the underwriters' exercise in full of their over-allotment option.
The Company received net proceeds of approximately $84,310,000 from its initial
public offering (including the net proceeds from the sale of shares pursuant to
the exercise by the underwriters of the over-allotment option), after payment of
underwriting discounts and commissions and estimated offering expenses.

The accompanying balance sheet is as of March 31, 2000, and does not reflect the
net proceeds of the Company's initial public offering. Upon the closing of the
Company's initial public offering on May 2, 2000, all of the outstanding shares
of the Company's convertible preferred stock, par value $.01 per share (the
"Preferred Stock"), automatically converted into 25,607,850 shares of Common
Stock. Immediately following the automatic conversion of the Preferred Stock,
the Company filed an amended and restated certificate of incorporation. Under
the amended and restated certificate of incorporation, the Company is authorized
to issue 200,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock. There currently are no shares of Preferred Stock issued and outstanding.


                                       8
<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 IN CONJUNCTION WITH THE CONDENSED 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 STATEMENTS AND MAY CONTAIN INFORMATION ABOUT
FINANCIAL RESULTS, ECONOMIC CONDITIONS, TRENDS AND KNOWN UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
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 THE COMPANY'S 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. THE COMPANY 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, 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.

         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. These revenues
enabled us to achieve profitability and positive cash flow before any financing
activity for fiscal 1997, 1998 and 1999. From inception through March 31, 2000,
we recognized approximately $128.7 million in revenues under these collaboration
agreements. 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.

         Our accumulated deficit as of March 31, 2000 was approximately $3.6
million. Substantially all of our expenditures to date have been for drug
development 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 expect to have net operating losses for fiscal
2000 and the following several years. We do not expect to generate operating
income until several years after abarelix-depot-M, our drug for the treatment
of prostate cancer, is approved for marketing by the FDA. We will require
regulatory approval to market all of our future products.

         In August 1996, we entered into a collaboration and license agreement
with Boehringer Ingelheim International GmbH. Under this agreement, Boehringer
paid us approximately $5.4 million over approximately two years. These payments
consisted of an initial signing payment and additional payments for the
screening of Boehringer compounds and reimbursement of personnel and related
materials expenses. We also are entitled to receive royalties on the net sales
of any product containing a Boehringer compound which we screened if Boehringer
develops and commercializes the product.


                                       9
<PAGE>

         In May 1997, we entered into an agreement with Sanofi-Synthelabo for
the development and commercialization of abarelix products in Europe, Latin
America, the Middle East and various countries in Africa. Under our agreement
with Sanofi-Synthelabo, we could receive up to approximately $69.6 million in
non-refundable fees and performance-based payments. For supply of product to
Sanofi-Synthelabo, we receive a transfer price that varies based on sales price
and volume. Additionally, we are entitled to receive reimbursement for ongoing
development costs. To date, we have received a total of approximately $30.9
million in non-refundable fees, performance-based payments and reimbursement for
ongoing development costs under the Sanofi-Synthelabo agreement.

         In 1997 and 1998, we entered into agreements with Roche Products
Inc. for the research, development and commercialization of abarelix products
in all countries outside of the Sanofi-Synthelabo territory. In December
1998, we and Roche mutually terminated the agreement. During the term of the
agreement, Roche paid to us approximately $28.2 million in performance-based
and cost-sharing payments. Roche retains no rights to the abarelix program
and has no equity interest in us.

         Effective March 1999, we entered into an agreement with Amgen for the
development and commercialization of abarelix products in the countries not
covered by the Sanofi-Synthelabo agreement. Under the 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. The remaining $15.0 million is payable upon FDA
approval of an NDA relating to abarelix. Amgen will pay 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. Following these
expenditures, in general we will share with Amgen all subsequent United States
research and development costs for abarelix products through the launch period
and we will reimburse Amgen for a share of costs associated with establishing a
sales and marketing infrastructure in the United States. In general, we will
receive a transfer price and royalty based on a 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.

         We have granted Amgen exclusive manufacturing and commercialization
rights for abarelix products for all indications in the licensed territories.
Initially, we are responsible for supplying Amgen with its requirements for
abarelix products in the licensed territory. Amgen has provided us with written
notice of its intent to assume manufacturing responsibility for abarelix
products pursuant to the terms of our agreement. Under the agreement, we will
retain manufacturing responsibility for the depot formulation of abarelix
following the transfer, subject to the terms of the agreement.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999

         Revenues for the three months ended March 31, 2000 increased 687% to
approximately $9.0 million, from approximately $1.1 million for the
corresponding period in 1999. The increase in revenues was due to significantly
increased cost-sharing payments under our collaboration agreements, principally
our agreement with Amgen.

         Research and development expenses for the three months ended March
31, 2000 increased approximately 1% to approximately $11.3 million, from
approximately $11.1 million for the corresponding period in 1999. During the
current period, expenses related to phase I and II/III clinical trials of
abarelix-depot-F, our drug for the treatment of endometriosis, as well as
spending related to our Apan and Latranal drug development programs were
higher than those experienced in the corresponding period in 1999. These
spending increases were offset in part by decreases in expenses related to
two pivotal phase III clinical trials of abarelix-depot-M, and expenses
related to both abarelix research and development materials and related drug
formulation. We expect to continue to expand our research and development
efforts and, accordingly, expect research and development costs to increase
in the future.

                                       10
<PAGE>

         General and administrative expenses for the three months ended March
31, 2000 increased 52% to approximately $1.4 million, from approximately $1.0
million for the corresponding period in 1999. The increase in expenses
reflects higher personnel costs as well as expenses associated with an
increased use of consultants and external contractors. We expect that general
and administrative expenses will continue to increase as we hire additional
administrative personnel to support continued growth of our research and
development efforts and incur additional costs related to being a public
company, including directors' and officers insurance, investor relations
programs and printing and legal costs.

         Net interest income for the three months ended March 31, 2000
increased 33% to approximately $1.3 million, from approximately $1.0 million
for the corresponding period in 1999. This increase was attributable to a
higher average cash balance as well as a higher average interest rate during
the first quarter of 2000 as compared to the corresponding period in 1999. We
anticipate that interest income will substantially increase as a result of
our increased cash and investment balances from our initial public offering
in the second quarter of 2000.

         The provision for income taxes for the three months ended March 31,
2000 and 1999 was $0.1 million. The provision for income taxes consists
primarily of state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations since inception principally through
private placements of equity securities and our initial public offering.
Prior to our initial public offering, we had received net proceeds of
approximately $10.5 million from the private placement of our common stock,
$0.5 million from the private placement of warrants to purchase common stock
and $78.5 million from the private placement of convertible preferred stock.
Additionally, we have received a total of approximately $155.2 million for
one-time signing payments and performance-based payments, cost reimbursements
and contract service payments under our collaboration agreements. We also
have received $12.1 million from interest on invested cash balances and paid
$0.4 million in interest expense associated with equipment leasing. As of
March 31, 2000, we had cash and cash equivalents of $86.3 million and working
capital of $83.9 million.

         On May 2, 2000, we completed our initial public offering, selling
8,000,000 shares of common stock at a price of $10 per share, raising a total of
approximately $73.2 million in net proceeds after payment of underwriting
discounts and commissions and estimated offering expenses. On May 3, 2000, the
underwriters of our initial public offering exercised their right to purchase
additional shares of common stock to cover over-allotments. Accordingly, on May
8, 2000, we sold an additional 1,200,000 shares of common stock at a price of
$10 per share, resulting in an additional $11.2 million in net proceeds after
payment of underwriting discounts and commissions. We sold a total of 9,200,000
shares (including the over-allotment shares) of common stock in our initial
public offering for a total of approximately $84.3 million, net of underwriting
discounts and commissions and estimated offering expenses. Based upon our
existing capital resources, together with the net proceeds of the initial public
offering, interest income and payments under our collaboration agreements, 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, 2000, net cash of $8.4 million
was used in operating activities compared to $9.7 for the corresponding
period in 1999. During the three months ended March 31, 2000, our use of cash
in operations was principally due to our net loss coupled with our payment of
1999 income taxes, as well as an increase in our prepaid expenses and other
assets and a decrease in accounts payable, partially offset by decreases in
accounts receivable and unbilled revenues. Our investing activities for the
three months ended March 31, 2000 were limited to the purchase of property
and equipment in the amount of approximately $0.5 million. Our financing
activities for the three months ended March 31, 2000 consisted principally of
proceeds received from the exercise of common stock options.

         In January 2000, we signed an agreement to purchase, for $41.5 million,
land and a building of approximately 175,000 square feet located in the western
suburbs of Boston, Massachusetts, which we will use as our principal
headquarters and research facility. In connection with our signing this
agreement, we made deposits of $1.2 million. We currently expect to use
approximately $30.0 million of the net proceeds


                                       11
<PAGE>

of our initial public offering for the purchase of this facility and related
improvements, and to obtain first mortgage financing for the balance of the
required amount. In connection with proposed first mortgage financing of up to
approximately $33.0 million, we have agreed to pay the potential lender a
$330,000 arrangement fee, of which $165,000 was paid in April 2000 and the
remainder will be paid at the closing of the proposed loan transaction, and
various additional costs and expenses incurred in connection with the proposed
loan. We expect to close the transaction in the second quarter of 2000.

         Under our agreement with Amgen, Amgen will provide us with a line of
credit not to exceed $150.0 million through 2002. Under the line of credit,
subject to various conditions each year, we are permitted to draw down a maximum
of $25.0 million in 2000, $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.
In addition, 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 continue with current clinical trials for abarelix, initiate
clinical trials for additional products, prepare for a potential commercial
launch of abarelix products, purchase, improve and move into our new facility
and continue to expand our research and development efforts. Our expenditure
requirements will depend on numerous factors, including:

     -   the progress of our research and development activities;

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

     -   the cost, timing and outcomes of regulatory reviews;

     -   the rate of technological advances;

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

     -   the status of competitive products;

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

     -   the continued viability and duration of our corporate collaboration
         agreements or other licensing agreements;

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

     -   the development of sales and marketing resources;

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

     -   the availability of financing for the purchase of our new facility;

     -   our ability to sublease our current facility and part of our new
         facility; and

     -   the availability of other financing.

         At December 31, 1999, we had provided a valuation allowance of $3.6
million for our deferred tax assets. The valuation allowance represents the
excess of the deferred tax asset over the benefit from future


                                       12
<PAGE>

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.

YEAR 2000 CONSIDERATIONS

         We, our corporate collaborators, suppliers and other third parties we
rely upon use a wide variety of information technologies, computer systems and
scientific equipment containing computer chips dedicated to a specific task. As
of May 31, 2000, neither we, nor to our knowledge, any of the third parties we
depend upon, have experienced any material problems associated with the year
2000 issue. If we or these third parties experience problems in the future as a
result of any year 2000-related issues, we could experience an interruption of
our research programs. We currently are unable to estimate the duration and
extent of any potential interruption, or estimate the effect that any
interruption may have on our future revenue. However, we believe that the impact
of any residual year 2000-related issues on our research operations will be
limited to the ongoing execution of new experiments, and we do not expect that
any historical data would be affected. Costs to ensure that our systems and
networks are year 2000 compliant have not been, nor do we expect them to be,
material.

ADDITIONAL RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

         THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THAT
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 OF OUR 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 of our potential products
are in the research or development stage. We have not yet marketed or sold
any of our products, and we may not succeed in developing and marketing any
product in the future. To date, we have derived 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 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, 2000, we had an accumulated deficit
of approximately $3.6 million. We expect that our operating expenses will
increase significantly in the near term, resulting in significant operating
losses for fiscal 2000 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
PRODUCTS, WE WOULD INCUR INCREASING OPERATING LOSSES.

         The development and sale of our products is subject to extensive
regulation by governmental authorities. Obtaining and maintaining regulatory
approval typically is costly and takes many years. Regulatory authorities have
substantial discretion to terminate clinical trials, delay or withhold
registration and marketing approval, 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 action against our potential products
or 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 we describe above.

         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


                                       13
<PAGE>

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 effect the statistical analysis of
the safety and efficacy of our products.

         In addition, many factors could delay or terminate 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. Accordingly, we
may not be able to obtain product registration or marketing approval for
abarelix-depot-M, abarelix-depot-F, or for any of our other products, based on
the results of our clinical trials.

         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 products 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 proceeds from our initial public offering,
significantly sooner than we had planned. If this happened, 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 PRODUCTS, 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:

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

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

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

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

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

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

     -   the extent and success of our marketing efforts and those of our
         collaborators; and

     -   unfavorable publicity concerning our products or any similar products.

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


                                       14
<PAGE>

IF OUR STRATEGIC PARTNERS REDUCE, DELAY OR TERMINATE THEIR FINANCIAL SUPPORT, WE
MAY BE UNABLE TO SUCCESSFULLY DEVELOP, MARKET, DISTRIBUTE AND SELL OUR PRODUCTS.

         We depend upon our corporate collaborators, in particular Amgen and
Sanofi-Synthelabo, to provide substantial financial support for developing our
products. 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 dependence, we have limited control over the
amount and timing of resources that our corporate collaborators devote to our
programs or potential products. Also, 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:

     -   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;

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

     -   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 its
obligations, it may delay the development or commercialization of the potential
product or research program. As a result, we could have 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 a collaboration agreement, we could
have to seek funds in addition to the net proceeds of our initial public
offering 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 we may 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 to 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.

WE COULD EXPERIENCE DELAYS IN THE RESEARCH, DEVELOPMENT OR COMMERCIALIZATION OF
OUR PRODUCTS 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 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 products. Conflicts or disputes
with our collaborators, and competition from them, could harm our relationships
with our other collaborators, restrict our ability to enter future collaboration
agreements and delay the research, development or commercialization of our
products.

ALTERNATIVE TREATMENTS ARE AVAILABLE WHICH MAY IMPAIR OUR ABILITY TO CAPTURE
MARKET SHARE FOR OUR 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 responds to changes in
hormone levels. Even if the FDA approves abarelix-depot-M, our product for


                                       15
<PAGE>

the treatment of prostate cancer, for commercialization, it may not compete
favorably with existing treatments that already have an established market
share. If abarelix-depot-M does not achieve broad market acceptance, we may not
become profitable.

MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY
BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR PRODUCTS AND
TECHNOLOGIES OBSOLETE AND 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 competitive 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:

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

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

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

     -   successfully market products that compete with our products.

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

         Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our technologies and products. If we do not
adequately protect our intellectual property, competitors may be able to use our
technologies and erode our competitive advantage. For example, if we lost 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 these 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. To date, we hold seven 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,
circumvent or narrow our 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 OUR COMPETITIVE ADVANTAGE IN THE MARKET.

         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 they 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


                                       16
<PAGE>

techniques or otherwise gain access to our trade secrets, which could impair any
competitive advantage we may have.

IF OUR 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 potential products may give rise to claims that they infringe other
patents. A third party could force us to pay damages or to stop our
manufacturing and marketing of the affected products by bringing a legal action
against us for any infringement. In addition, a third party could require us to
obtain a license to continue to 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 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 necessary to
develop and commercialize our potential 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
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
products.

IF WE 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 PRODUCTS.

         Our capacity to conduct clinical trials and commercialize our products
will depend in part on our ability to manufacture our products on a large scale,
at a competitive cost and in accordance with regulatory requirements. We must
establish and maintain a commercial scale formulation and manufacturing process
for all of our potential products to complete clinical trials. We, our
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 to produce abarelix and
other compounds for preclinical, clinical and commercial purposes for a
significant period of time. If our supply 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 need


                                       17
<PAGE>

to replace our current third-party manufacturers, or contract with additional
manufacturers, we must conduct 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.

         For example, Oread Pharmaceutical Manufacturing, Inc., our supplier of
abarelix-depot powder in finished vials, has advised us that its lease for
possession and use of the facility where it has conducted its manufacturing
operations pursuant to its agreement with us has been terminated, effective June
30, 2000, that it will be unable to continue operations in the leased premises
and that it must terminate its agreement with us. Accordingly, we are in the
process of making alternative arrangements for this step in the manufacture of
abarelix-depot-M. We cannot assure you that we will be able to make these
arrangements and transition this manufacturing step in a timely manner or on
favorable terms. If we are unable to do so, regulatory approval and
commercialization of abarelix-depot-M could be delayed, possibly materially.
Moreover, the use of a different manufacturer for this step may require us to
undergo additional regulatory review and compliance procedures which could
result in additional expenses and delay the commercialization of
abarelix-depot-M.

         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. 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 third parties to market and sell our products. We
have granted Amgen and Sanofi-Synthelabo exclusive commercialization rights for
abarelix products in defined geographic locations. Our marketing and
distribution arrangements with Amgen and Sanofi-Synthelabo may not be successful
and we may not receive any revenues from these arrangements. 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.

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. For example,
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 our collaborators' ability 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:

     -   government and health administration authorities;

     -   private health insurers; and


                                       18
<PAGE>

     -   other third-party payors, including Medicare.

         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 refusing, in some cases, 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.

WE MAY BE UNABLE TO SECURE ADEQUATE DEBT FINANCING FOR THE PURCHASE OF OUR NEW
FACILITY.

         We have exceeded the capacity of our current facilities, and recently
agreed to purchase a new facility in the western suburbs of Boston. We will
spend substantial funds to purchase this facility and make necessary
improvements. We may be unable to borrow sufficient funds to do so on a timely
basis, or at all. If we cannot borrow money, we will be required to use more
proceeds from our initial public offering than we originally intended. In
addition, we intend to lease part of our new facility and sub-lease our current
facility. We may not be able to find a suitable tenant or sub-tenant to occupy
these spaces in a timely manner, if at all.

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 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 acquire these services or to develop this expertise could result in
delays in the research, development and commercialization of our 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 clinical trials. We intend to obtain
product liability insurance to cover our products approved for marketing and
sale. This insurance may be prohibitively expensive or may not fully cover our
potential liabilities. Our inability to obtain adequate insurance coverage and
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 POTENTIAL CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL
OF THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY.


                                       19
<PAGE>

         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 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 may be expensive. Current or
future environmental regulations may impair our research, development or
production efforts. We might have to pay civil damages in the event of an
improper or unauthorized release of, or 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.

FLUCTUATIONS IN CURRENCY EXCHANGE RATES COULD INCREASE THE PAYMENTS WE MUST MAKE
UNDER SOME OF OUR SUPPLY AGREEMENTS.

         We currently conduct all our business transactions in United States
dollars. However, under two of our supply agreements relating to our abarelix
products, the amount we are required to pay our supplier may be adjusted from
time to time if the applicable currency exchange rate varies by more than 10%
from the agreed exchange rate. Accordingly, significant exchange rate
fluctuations could materially increase the required payments under these
agreements.

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. 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 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 the common stock may fluctuate substantially due to
a variety of factors, including:

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

     -   announcement of FDA approval or disapproval of our products;

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

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

     -   the willingness of collaborators to commercialize our products and the
         timing of commercialization;


                                       20
<PAGE>

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

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

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

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

     -   actual or anticipated fluctuations in our operating results;

     -   changes in financial estimates or recommendations by securities
         analysts;

     -   loss of corporate collaborators;

     -   changes in accounting principles; and

     -   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 consistent 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:

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

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

     -   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.

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW STOCKHOLDERS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

         After giving effect to our initial public offering, our officers,
directors and stockholders affiliated with them control, based on their
beneficial ownership as of March 31, 2000, approximately 43.7% of our
outstanding common stock, and will until at least 180 days after our initial
public offering. As a result, these stockholders, acting together, will be
able to significantly influence all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers
or other business

                                       21
<PAGE>

combination transactions. The interests of this group of stockholders may not
always coincide with our interests or the interests of other stockholders.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER, BY-LAWS 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. In addition, because
we are incorporated in Delaware, we are governed by the provisions of Section
203 of the Delaware General Corporate Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of our outstanding voting
stock, from merging or combining with us. These provisions in our charter,
by-laws 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.
For example, if we hold a security that was issued with an interest rate fixed
at the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. We believe that a 10%
decline in the average yield of our investments would adversely impact our net
interest income. We do not believe, however, that such a 10% decline would have
a material adverse effect on our overall results of operations or cash flows. To
minimize this risk in the future, we intend to 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. The average duration of all of our investments in 1999 and during
the three months ended March 31, 2000 was less than one year. Due to the
short-term nature of these investments, we believe we have no material exposure
to interest rate risk arising from our investments. Therefore, no quantitative
tabular disclosure has been provided.

         We have two supply agreements with vendors located outside the United
States. We currently conduct all transactions under these agreements in United
States dollars, but these transactions are subject to adjustment based upon
significant fluctuations in currency exchange rates. If the exchange rate
undergoes a change of 10%, we do not believe that it would have a material
impact on our results of operations or cash flows.


                                       22
<PAGE>

                        PART II.     OTHER INFORMATION

ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS.

                  On March 8, 2000, we filed an amendment to our amended and
restated certificate of incorporation, as amended, effecting a two-for-one split
of our common stock, par value $.01 per share. The common stock share amounts
and the option exercise prices set forth below give effect to the 2-for-1 stock
split of the common stock.

         (c)      During the period covered by this report on Form 10-Q, we
issued the securities set forth below that were not registered under the
Securities Act of 1933, as amended.

                  From December 31, 2000 through March 31, 2000: (i) we granted
options to employees and consultants under our Amended and Restated 1995 Stock
Plan, as amended, to purchase a total of 604,930 shares of common stock at an
exercise price of $14.50 per share; and (ii) we issued 671,686 shares of common
stock upon the exercise of options for aggregate consideration of $695,395.

                  In March 2000, we issued a stock award under our Amended and
Restated 1995 Stock Plan, as amended, of 1,500 shares of common stock, with an
estimated fair market value of $21,750, to one of our consultants for services
rendered.

                  The issuance of options and common stock awards, and the
issuance of common stock upon the exercise of options, were exempt from
registration under the Securities Act either pursuant to Rule 701 under the
Securities Act, as a transaction pursuant to a compensatory benefit plan, or
pursuant to Section 4(2) of the Securities Act, as a transaction not involving a
public offering. All of the foregoing securities are deemed restricted
securities for the purposes of the Securities Act.

         (c)      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.

                  The managing underwriters for the offering were Salomon Smith
Barney Inc., CIBC World Markets Corp. and Credit Suisse First Boston
Corporation.

                  The offering was terminated on May 8, 2000, after we had sold
all of the 9,200,000 shares of common stock registered under the Registration
Statement, including 1,200,000 shares sold pursuant to the exercise of the
underwriters' over-allotment option. The initial public offering price was
$10.00 per share. The aggregate proceeds of the offering (including the
over-allotment option) were $92,000,000. We received net proceeds of
approximately $84,310,000, after deducting underwriting discounts and
commissions of $6,440,000 and estimated offering expenses.

                  On May 2, 2000, upon the closing of the sale of 8,000,000
shares of common stock to the underwriters in our initial public offering, all
of the outstanding shares of our convertible preferred stock automatically
converted into 25,607,850 shares of common stock.

                  Because the effective date of the Registration Statement was
after March 31, 2000, we had not used any of the net proceeds from the offering
through the end of the period covered by this report on Form 10-Q. We expect
that our use of the proceeds from the offering will be consistent with the
intended use of proceeds set forth in the Registration Statement. Pending such
use, we have invested the net proceeds of the offering in short-term,
interest-bearing, investment-grade securities.


                                       23
<PAGE>

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

                  In connection with our initial public offering, after giving
effect to the two-for-one stock split, the holders of 6,597,930 shares of common
stock, 7,777,882 shares of Series A convertible preferred stock, 7,806,300
shares of Series C convertible preferred stock and 6,753,579 shares of Series E
convertible preferred stock, representing a majority of the then-outstanding
capital stock entitled to vote on an as-converted basis, acting by written
consent dated as of February 28, 2000, approved and adopted the following
documents:

          -    An amendment to our amended and restated certificate of
               incorporation, as amended, as was in effect prior to the
               completion of our initial public offering, providing for a
               two-for-one split of our common stock. The amendment effecting
               the stock split was filed with the Secretary of State of the
               State of Delaware and became effective on March 8, 2000.
          -    Our amended and restated certificate of incorporation, which was
               filed with the Secretary of State of the State of Delaware and
               became effective on May 2, 2000, following the completion of our
               initial public offering.
          -    Our amended and restated by-laws, which were effective May 2,
               2000 upon the filing of the amended and restated certificate of
               incorporation with the Secretary of State of the State of
               Delaware.
          -    Our Second Amended and Restated 1995 Stock Plan, which was
               effective as of May 2, 2000.
          -    Our Employee Stock Purchase Plan, which will be effective as of
               July 3, 2000.

                  No outstanding shares of common stock were voted against the
approval and adoption of the documents referred to above.

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
                  3.2      Amended and Restated By-Laws
                  *4.1     Specimen certificate representing shares of common
                           stock
                  *4.2     Warrant to purchase Series A Convertible Preferred
                           Stock dated as of August 12, 1998 held by Comdisco,
                           Inc.
                  *4.3     Warrant to purchase Series A Convertible Preferred
                           Stock dated as of August 12, 1998 held by Gregory
                           Stento
                  *4.4     Warrant to purchase Common Stock dated as of May 13,
                           1997
                  *10.1    Amended and Restated Stockholders Agreement dated as
                           of April 30, 1998 by and among the Registrant and
                           certain stockholders referred to therein, as amended
                           by Amendment No. 1 dated as of May 14, 1998,
                           Amendment No. 2 dated as of July 21, 1998 and
                           Amendment No 3 dated as of January 31, 2000
                  *+10.2   Collaboration Agreement dated as of January 31, 2000
                           by and between Human Genome Sciences, Inc. and the
                           Registrant
                  *10.3    Contract of Sale dated as of January 14, 2000 by and
                           between Best Property Fund, L.P. and the Registrant,
                           as amended as of February 7, 2000
                  27       Financial Data Schedule
</TABLE>

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

         *        Incorporated by reference to PRAECIS' 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.


                                       24
<PAGE>

         +        Portions of this exhibit have been omitted pursuant to a
request for confidential treatment. Omitted portions have been filed separately
with the Securities and Exchange Commission.

         (b)      REPORTS SUBMITTED ON FORM 8-K

                  The Registrant did not file any reports on Form 8-K during the
         quarter ended March 31, 2000.




















                                       25
<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:    June 7, 2000               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)




                                       26
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                                     EXHIBIT
     ------
     <S>          <C>
         3.1      Amended and Restated Certificate of Incorporation

         3.2      Amended and Restated By-Laws

         *4.1     Specimen certificate representing shares of common stock

         *4.2     Warrant to purchase Series A Convertible Preferred Stock dated
                  as of August 12, 1998 held by Comdisco, Inc.

         *4.3     Warrant to purchase Series A Convertible Preferred Stock dated
                  as of August 12, 1998 held by Gregory Stento

         *4.4     Warrant to purchase Common Stock dated as of May 13, 1997

         *10.1    Amended and Restated Stockholders Agreement dated as of April
                  30, 1998 by and among the Registrant and certain stockholders
                  referred to therein, as amended by Amendment No. 1 dated as of
                  May 14, 1998, Amendment No. 2 dated as of July 21, 1998 and
                  Amendment No 3 dated as of January 31, 2000

         *+10.2   Collaboration Agreement dated as of January 31, 2000 by and
                  between Human Genome Sciences, Inc. and the Registrant

         *10.3    Contract of Sale dated as of January 14, 2000 by and between
                  Best Property Fund, L.P. and the Registrant, as amended as of
                  February 7, 2000

         27       Financial Data Schedule
</TABLE>

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

         *        Incorporated by reference to PRAECIS' 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.

         +        Portions of this exhibit have been omitted pursuant to a
request for confidential treatment. Omitted portions have been filed separately
with the Securities and Exchange Commission.


                                       27