<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

         FOR THE TRANSITION PERIOD FROM______________ TO ______________

                         COMMISSION FILE NO. 000-28324
                            ------------------------

                           BIOTRANSPLANT INCORPORATED

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                              <C>
                   DELAWARE                                        04-3119555
        (State or other jurisdiction of                         (I.R.S. Employer
        incorporation or organization)                         Identification No.)
</TABLE>

      CHARLESTOWN NAVY YARD, BLDG. 75, THIRD AVENUE, CHARLESTOWN, MA 02129
               (Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (617) 241-5200

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

Securities registered pursuant to Section 12(g) of the Act:COMMON STOCK, $.01
                                                           PAR VALUE

                                            (Title of each class)

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes /X/  No / /

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

    The aggregate market value of voting Common Stock held by non-affiliates of
the registrant was $121,640,000 based on the last reported sale price of the
Common Stock on the Nasdaq consolidated transaction reporting system on
March 15, 2000.

    Number of shares of the registrant's class of Common Stock outstanding as of
March 15, 2000: 11,643,345.

                      DOCUMENTS INCORPORATED BY REFERENCE:

    Proxy Statement for the 2000 Annual Meeting of Stockholders--Part III

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                     PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

    BioTransplant Incorporated is developing pharmaceutical products and systems
to enable the body's immune system to better tolerate the transplantation of
foreign cells, tissues and organs. The Company believes that this technology,
which it refers to as its ImmunoCognance-TM- technology, will have the following
benefits when compared to the technology which is currently used in conjunction
with transplantation of cells, tissues and organs:

    - reduce or eliminate the need for lifelong immunosuppressive therapy, which
      refers to the long-term administration of potentially debilitating drugs
      to a patient after a transplantation procedure in an effort to reduce the
      likelihood that the patient's body will reject the transplanted cells,
      tissue or organ,

    - minimize infections and health complications which may result from the
      transplantation of foreign cells, tissues and organs,

    - improve the treatment of certain cancers,

    - reduce the cost of treating end-stage organ disease, and

    - increase the supply of organs or cells available for transplantation
      procedures.

    The Company's lead product, MEDI-507, which is being developed in
collaboration with MedImmune, Inc., is currently in Phase I/II clinical trials
for the treatment of graft-versus-host disease, or GvHD, a frequent and often
fatal clinical syndrome which is caused when donor cells in a bone marrow
transplant attack the tissues of the transplant recipient. MedImmune has
completed a Phase I/ II clinical trial of MEDI-507 to treat patients with
severe, steroid-resistant GvHD. Additionally, MedImmune has completed enrollment
for a Phase I/II steroid-naive GvHD trial and continues to enroll patients in a
Phase I/II pediatric GvHD trial. MedImmune has also initiated Phase I trials of
MEDI-507 to treat psoriasis as a proof-of-concept for its use in autoimmune
diseases. In 2000, MedImmune plans to begin Phase I/II psoriasis trials using
MEDI-507.

    The Company's AlloMune-TM- Systems are being designed to re-educate a
patient's immune system so that it does not reject transplanted cells, tissues
and organs. The Company is currently evaluating AlloMune Systems for blood cell
cancers and human organ transplants. BioTransplant's AlloMune Cancer System is
initially under development to treat certain blood cancers by utilizing the
Company's core technology to re-educate patients' immune systems to more
aggressively attack cancerous cells. BioTransplant has initiated a Phase I/II
AlloMune System multi-center clinical trial in refractory lymphoma patients.
BioTransplant is also continuing to develop its AlloMune Transplant System to
address the medical issues relating to life-long immunosuppressive therapy.
During 1999, BioTransplant received FDA approval of its Investigational New Drug
application protocol, followed by approval from hospital Institutional Review
Boards to initiate a Phase I/II proof-of-concept trial.

    The Company is designing its XenoMune-TM- System to increase the available
supply of organs for transplantation through the development of methods to
enable the transplantation of organs from miniature swine into humans. The
XenoMune System is being developed by the Company in collaboration with Novartis
Pharma AG.

    In addition to its corporate collaborations with MedImmune and Novartis, the
Company has corporate collaborations with a number of scientific collaborative
partners, including Massachusetts General Hospital. BioTransplant holds United
States and foreign patents covering many of its fundamental technologies.

                                       1
<PAGE>
MARKET OVERVIEW

    ORGAN TRANSPLANTATION

    During the last two decades organ transplantation has become an established
therapy for end-stage organ disease. This is due in part to the significant
progress that has been made since the introduction of cyclosporine by Novartis
in 1983. In 1999, over 30,000 organ transplants were performed in patients
suffering from end-stage kidney, liver, heart and lung disease in the United
States and Western Europe. The Company estimates that over $5.0 billion is spent
annually in the United States on organ transplantation. However, the success of
these procedures is frequently limited by the rejection of the transplanted
organ by the recipient's immune system. To prevent rejection of the transplanted
organ, recipients must maintain a lifelong regimen of immunosuppressive therapy.
Over half of the costs of organ transplantation, on a patient by patient basis,
are attributable to care subsequent to the transplant, including lifelong
immunosuppressive therapy, hospitalizations due to complications resulting from
the chronic use of immunosuppressive drugs, infections and transplant
rejections. Other treatments for end-stage organ disease, such as kidney
dialysis, are even more expensive and many non-kidney transplant patients die
while waiting for organs. Accordingly, the Company expects that improvements in
transplantation technology that reduce the wait for suitable organs and minimize
infections and other complications, including retransplantation and the
toxicities of chronic immunosuppressive drugs, will lower the overall cost of
treating end-stage organ disease.

    There is a critical shortage of organs worldwide and waiting lists have been
established for potential organ transplant recipients. Over 60,000 patients in
the United States suffering from end-stage organ disease were on waiting lists
for a lifesaving organ transplant in 1999, based on data provided by the United
Network for Organ Sharing. This number has more than tripled since 1988, and the
number of deaths of people on the waiting list has increased proportionately. If
an adequate supply of transplant organs were available and the complications of
transplantation minimized, the Company estimates that an additional 100,000
critically ill patients annually could benefit from organ transplantation as a
replacement for disease-damaged organs and as an alternative to artificial
devices.

    Efforts to ease this organ shortage through public campaigns and
advertisements to enlarge the pool of potential organ donors have been only
moderately successful due to several factors. Increased automotive safety has
adversely affected the donation rate. In addition, the quality of organs
available for transplant has been declining, which the Company believes may
impact organ graft half-lives and increase the number of organs needed for
retransplantation. Moreover, the potential for allotransplantation to spread
infectious disease has also limited the potential donor pool.
Allotransplantation refers to the transplantation of organs between different
individuals of the same species. While the number of cadaveric donors has
increased in the last ten years, the demand for organs has increased more
rapidly. Advances have been made in obtaining multiple organs from a single
donor and in organ preservation techniques, but a severe shortage of organs
still exists and the backlog of patients awaiting transplantation continues to
grow. The shortage of donor organs restricts the number of transplant procedures
performed and forces many patients to undergo costly and less effective
alternatives to transplantation for as long as possible. This delay renders
transplant candidates much sicker than they would have been if the organ
transplant had been possible sooner.

    BONE MARROW TRANSPLANTATION

    Bone marrow transplantation has evolved from a treatment of last resort to
the preferred therapy for some cancers and blood disorders. In bone marrow
transplantation, bone marrow from a healthy donor is transplanted into an
unhealthy recipient in order to promote the growth and development of healthy,
non-cancerous blood cells. It is the treatment of choice for leukemia and
lymphoma, and for selected solid tumors in adults and children. It is also used
in conjunction with radioimmunotherapy for patients with certain advanced
cancers that have not responded to conventional treatment. The annual

                                       2
<PAGE>
number of blood and marrow transplants worldwide exceeds 30,000 for autologous
transplants, which refers to the transplantation of the recipient's own bone
marrow which was harvested prior to therapy. In addition, the annual number of
blood and marrow transplants worldwide approaches 16,000 for allogeneic
transplants, which involve the transplantation of bone marrow from another human
donor. The Company believes that the numbers of autologous and allogeneic bone
marow transplants are likely to increase in future years. Due to the lack of a
centralized reporting agency, these data include only about 40% of all
allogeneic transplants worldwide and about half of the autotransplants in North
America. A bone marrow transplant increases the likelihood of a cure or can at
least prolong the period of disease-free survival for many patients with cancer.
Survival rates are now, in some cases, better than 90 percent. New procedures
and better drugs have made the bone marrow transplant process safer, shorter,
less debilitating and thus an option for more of the population worldwide.

    Allogeneic bone marrow transplantation results in high cure rates due to its
inherent antitumor properties that result in low relapse rates. However, the
morbidity related to graft-verses-host disease, or GvHD, and its associated
complications remains a concern. The therapies for GvHD are similar to the
therapies for solid organ rejection. However, a significant number of GvHD
patients that do not respond to steroids will also fail to respond to any other
currently available antilymphocytic agents and will die as result of the GvHD.
The Company believes that methods to control GvHD in allotransplantation will
increase the use of this form of treatment.

    Myeloablative conditioning regimens for autologous transplantation and
allotransplantation, which destroy the recipient's own bone marrow, limit the
number of patients able to benefit from these treatments. Recent advances in
non-myeloablative preparative courses will increase the types of conditions that
can be treated as well as patients' ability to tolerate the protocol.

PRODUCTS UNDER DEVELOPMENT

    BioTransplant is developing a portfolio of products designed to treat a
range of medical conditions for which current therapies are inadequate. These
conditions include organ and tissue transplantation, cancer and autoimmune
disease. BioTransplant's products under development are intended to induce
long-term functional transplantation tolerance in humans, increase the
therapeutic benefit of bone marrow transplants, and reduce or eliminate the need
for lifelong immunosuppressive therapy.

    MEDI-507

    MEDI-507 is a novel and proprietary monoclonal antibody derived from
BTI-322. BTI-322, the rodent precursor of MEDI-507 (originally known as
LO-CD2a), was discovered in the Experimental Immunology Unit of the Catholic
University of Louvain, Belgium, by Drs. Herve Bazin and Dominique Latinne. The
Company obtained exclusive rights to develop and commercialize this antibody in
early 1993. The Company has entered into a collaboration with MedImmune to
develop MEDI-507 as a stand-alone product. MEDI-507 is also being developed
independently by the Company as an important component in the Company's AlloMune
and XenoMune Systems.

    A monoclonal antibody is a single antibody which reacts with a specific
molecule, called an antigen, to trigger a response from the immune system. By
selectively inhibiting T cells in an antigen-specific manner, the Company
believes that BTI-322/MEDI-507 leaves the remainder of the immune system
competent to respond to pathogens subsequent to BTI-322/MEDI-507 administration.
The Company believes that MEDI-507 may offer unique advantages when administered
at the time of transplantation, as an agent for the prevention of acute organ
rejection and in inhibiting GvHD following bone marrow transplantation.

                                       3
<PAGE>
    MEDI-507 binds to CD2, an important therapeutic target on the surface of T
cells. The Company believes that MEDI-507 interferes with signaling through CD2,
thereby preventing T cell activation. Other therapies used for the treatment of
acute rejection only inhibit T cell activation around the time of the treatment
period. However, based on laboratory experiments, the Company expects that
MEDI-507 will have a lasting effect even after administration and will continue
to selectively suppress T cell responsiveness to the donor antigens. The Company
believes that, if the mechanism of action can be substantiated, MEDI-507 may be
effective against T cell mediated diseases such as psoriasis, inflammatory bowel
disease, Crohn's disease and rheumatoid arthritis.

    The Company believes that early clinical results and research data suggest
BTI-322/MEDI-507 has the potential to be a safe and effective agent for the
prevention and treatment of GvHD and allograft and xenograft transplant
rejection. An allograft transplant refers to a transplantation within the same
species, such as primate to primate or human to human. A xenograft transplant
refers to transplantation between different species, such as primate to
miniature swine or primate to human.

    Prior to the Catholic University of Louvain's grant to the Company of an
exclusive license to BTI-322 in 1993, four patients were treated for either
acute kidney rejection or GvHD under a compassionate use protocol approved by
the Catholic University of Louvain hospital ethical committee. Between 1994 and
1998, over 100 patients were treated at several hospitals with BTI-322 for
treatment of renal allograft rejection and steroid resistant GvHD and the
prevention of renal and liver allograft rejection.

    MedImmune began clinical testing of MEDI-507 in 1997 with a Phase I,
open-label, dose-escalating safety trial for prevention of renal allograft
rejection. Thirteen patients were given an initial dose of MEDI-507 within six
hours after kidney transplant surgery and a second dose 60-72 hours later.
Results indicated that MEDI-507 was generally well tolerated and no
anti-MEDI-507 antibodies were detected following administration.

    During 1999, MedImmune concluded the acute study period for a multicenter
Phase I/II trial of MEDI-507 for the treatment of severe steroid-resistant GvHD,
which is classified as Grade II or above. The results were presented in 1999 at
the Annual Meeting of the International Society for Experimental Hematology.
Seven patients with Grade II and 10 patients with Grade III to IV GvHD were
enrolled in the study. Patients received a short regimen of four doses of 0.12
mg/kg intravenous MEDI-507 given every third day and then either placebo or
additional doses of 0.12 mg/kg intravenous MEDI-507 weekly for four weeks.
Patients were followed for 100 days. Of the 17 patients in the trial, 12
improved their grade of GvHD and 10 achieved grade 0, indicating no symptoms of
GvHD, at some point during follow up. Treatment with MEDI-507 was generally well
tolerated and no patients developed antibodies to the antibody.

    In 1999, MedImmune initiated two additional Phase I/II clinical trials to
evaluate MEDI-507. In the first study, adult steroid-naive stem cell transplant
or bone marrow transplant recipients received MEDI-507 or placebo combined with
methylprednisolone, a corticosteroid which is the current standard initial
therapy for acute GvHD. In the second study, MEDI-507 is being assessed in an
open-label trial for its ability to treat GvHD in pediatric stem cell transplant
or bone marrow transplant patients. Currently there are no agents approved for
the treatment of GvHD in children. Up to 20 pediatric patients (age 2 to
17) are expected to be recruited from at least ten centers for this Phase I/II
study. MedImmune also initiated Phase I clinical trials evaluating MEDI-507 for
the treatment of psoriasis as a proof-of-concept for its use in autoimmune
disease. In 2000, MedImmune plans to begin Phase I/II psoriasis trials using
MEDI-507.

    In 1998, MedImmune received orphan drug designation from the Office of
Orphan Products Development of the FDA for MEDI-507 for the treatment of GvHD.
The Orphan Drug Act was established to encourage development of drugs for rare
diseases and conditions affecting a small patient population, generally less
than 200,000 people. Orphan designation of a product can potentially

                                       4
<PAGE>
provide a company with seven years of market exclusivity if the company is the
first to receive FDA product marketing approval for the orphan drug in the
designated indication. Additionally, this designation provides a company with
tax credits of 50 percent for clinical research expenses and the opportunity for
clinical research grants.

    THE ALLOMUNE SYSTEM

    The AlloMune System is a proprietary system which incorporates multiple
components. It is being designed to reduce or eliminate the need for lifelong
immunosuppressive therapy in human-to-human organ transplantation by inducing
functional tolerance to the transplanted organ through the creation of mixed
bone marrow chimerism between the donor and the recipient and by allowing a
milder procedure for therapeutic bone marrow transplantation.

    Chimeric bone marrow contains the cells of both the donor and the recipient.
The creation of the mixed bone marrow chimeric state will cause the recipient's
newly differentiated T cells to become specifically tolerant to the donor
antigens and regard them as self. The advantage of the induction of donor
functional tolerance is that the recipient will retain its ability to respond to
the antigens of foreign pathogens without responding to the donor antigens on
the organ transplant and will allow donor lymphocytes to be used for cancer
immunotherapy with less chance of severe GvHD. This tolerance will reduce or
eliminate the need for lifelong immunosuppressive therapy. The Company has
exclusive rights to patents and patent applications directed towards producing
mixed bone marrow chimerism.

    Prior to transplantation of the donor bone marrow, the recipient is given
injections of an anti-T cell antibody in order to block the recipient's immune
response to the new foreign antigens from the donor and to deplete the
recipient's mature T cells. Concurrent with the administration of the anti-T
cell antibody, the recipient receives doses of radiation or, in the case of
cancer patients, chemotherapy, to make space in the recipient's bone marrow and
allow the transplanted bone marrow to "seed" the newly created space. In some
cases, a splenectomy may be performed at the time of transplantation. Bone
marrow or mobilized stem cells from the donor is then injected into the
recipient. The organ is then transplanted and a short course of cyclosporine,
which is expected to last approximately one month, is administered.

    The Company is continuing to evaluate modifications to the conditioning
regimen in rodent and large animal models. Recent evidence from the Company's
miniature swine models has demonstrated the ability to eliminate the irradiation
needed to establish a state of mixed bone marrow chimerism, and has induced
functional tolerance to mismatched organ transplants.

    ALLOMUNE CANCER SYSTEM.  The Company's AlloMune Cancer System is under
development to treat certain blood cancers by utilizing the Company's core
technology to re-educate patients' immune systems to more aggressively attack
their cancerous cells. In December 1999, BioTransplant's collaborators from the
Massachusetts General Hospital presented additional data at the Annual Meeting
of the American Society of Hematology on continuing studies of a novel approach
to treating blood cell cancers, including lymphomas and leukemias, that are
unresponsive to standard therapies. This new approach re-programs the immune
system, using a combination of chemotherapy and the approach used in
BioTransplant's AlloMune System, to make bone marrow transplant recipients more
successful in eliminating cancerous blood cells. Following the bone marrow
transplant, recipients may receive an infusion of donor white blood cells to
eliminate the remaining cancerous cells.

    In studies presented by Drs. Megan Sykes and Thomas Spitzer of Massachusetts
General Hospital, or MGH, 21 patients with refractory hematologic malignancies,
including lymphoma and leukemia, received a prototype AlloMune-TM--System-based
bone marrow transplant therapy, being transplanted with HLA-identical donors. Of
these patients, 18 developed a stable chimeric immune system containing both
donor and recipient elements. In addition, a shift towards the production of
more

                                       5
<PAGE>
donor cells was induced in some of the 10 transplant recipients who received a
subsequent infusion of donor-derived white blood cells. Fourteen of twenty (70%)
evaluable patients have shown a complete (8/20) or partial (6/20) response to
treatment, despite having advanced cancers that did not respond to other
therapies. Three of four patients who received multiple infusions of
donor-derived white blood cells developed GvHD.

    In addition, the Company has launched a companion Phase I/II multi-center
clinical trial in refractory lymphoma patients. This clinical trial contains an
improved conditioning regimen using MEDI-507. Enrollment in this study, expected
to accrue up to 40 patients, has begun and is expected to be completed within
12 months.

    ALLOMUNE TRANSPLANT SYSTEM.  The Company is developing the AlloMune
Transplant System to address the medical issues relating to life-long
immunosuppressive therapy. Currently, transplant recipients face a life-long
treatment regimen of immunosuppressive therapy to protect the transplanted organ
from their own immune systems. As a result of this immunosuppressive therapy,
patients are vulnerable to further medical complications and other diseases.
During 1999, the Company received clearance of an Initial New Drug application
with the FDA to begin Phase I clinical trials of the AlloMune System in
living-donor kidney transplantation. Recent evidence from the Company's
preclinical animal studies have led the Company to make changes to the protocol
for the Phase I clinical trials. The Company intends to discuss these protocol
changes with the FDA and to amend the Initial New Drug Application in order to
initiate a proof-of-concept trial. The Company's academic collaborators have
initiated a hospital Internal Review Board approved Phase I/II
proof-of-principle evaluation of the AlloMune System in humans. The initial
patient treated under the IND was treated for myeloma, a blood cell cancer, and
end-stage renal disease, using the AlloMune approach. The patient is currently
over seventeen months post-transplant. The patient is now over fifteen months
post-removal of immunosuppressive drugs and has normal kidney function and
controlled myeloma protein production. The clinical report for this initial
patient was published in the journal TRANSPLANTATION (August 27, 1999).

    In 1999, MGH received two issued U.S. patents, which are exclusively
licensed to BioTransplant, that cover fundamental claims in methods for
establishing mixed bone marrow chimerism for use in allograft and xenograft
transplants.

    THE XENOMUNE SYSTEM

    Xenotransplantation is being designed to address the issue of limited human
organ availability. With the XenoMune System, BioTransplant intends to build
upon the Company's proprietary knowledge and technology being developed with the
AlloMune System to achieve transplantation of organs from animals into humans,
using organs derived from miniature swine. Many of the components of the
proposed AlloMune System are also part of the proposed XenoMune System. However,
there are additional unique components in the XenoMune System.

    The proposed XenoMune System is expected to include miniature swine kidneys,
hearts, lungs and other organs for transplantation. Pursuant to a Miniature
Swine Transfer and Maintenance Agreement with Charles River Laboratories, the
Company has obtained exclusive rights to miniature swine which are being
specifically developed by Charles River Laboratories for use in
xenotransplantation. These miniature swine are an appropriate donor choice for
xenotransplantation because of their size, physiology, inbreeding at swine
histocompatibility genes, long-term documented medical history and breeding
capacity. However, although the Company intends to use these miniature swine as
a potential donor of xenogeneic organs because of these advantages, recent
scientific publications by others have demonstrated, under laboratory
conditions, that certain porcine viruses, called porcine endogenous
retroviruses, or PERV, have the potential to infect human cells. The Company has
an active program addressing the characterization of the PERV from our herd of
miniature swine relative to its infectivity

                                       6
<PAGE>
of human cells and has presented preliminary evidence suggesting that its
miniature swine may have an advantage for clinical use in that its blood cells
do not appear to produce PERV in a form that is capable of infecting human
cells.

    Untreated swine-to-primate organ transplants normally result in hyperacute
organ rejection within hours of the transplant. One of the significant
challenges in xenotransplantation is overcoming hyperacute rejection, which is
mediated by pre-existing antibodies in the recipient, called natural antibodies,
which react with the donor tissue. To avoid the hyperacute rejection of a
miniature swine organ, BioTransplant is using a proprietary absorption
technique, licensed from a third party, to absorb natural antibodies from the
recipient's blood prior to the transplant. BioTransplant is also examining the
effect on hyperacute rejection of transgenic porcine cells provided by its
collaborator Novartis which contain human complement inhibitory proteins.

    To prevent acute rejection of the transplanted miniature swine organ, which
typically occurs over a period of days or weeks, the Company is working to
achieve mixed bone marrow chimerism between cross-species donors and recipients.
As alternative methods of inducing specific tolerance, the Company is also
actively pursuing gene transduction and thymic transplantation approaches.

    The Company has achieved mixed bone marrow chimerism and long-term xenograft
tolerance between rat and mouse. The Company has also demonstrated chimerism and
long-term acceptance of miniature swine skin grafts on immunocompetent rodents.
In addition, the Company has established mixed bone marrow chimerism in the
miniature swine-to-primate model. The Company has developed a proprietary method
to promote the engraftment of swine bone marrow in primates. The use of this
technique in a protocol similar to the AlloMune System has produced
xeno-chimerism in primates and has resulted in a diminished miniature
swine-specific T cell response from the chimeric primates. Lack of priming and
diversification of the humoral response was also demonstrated. These results
represent progress towards the generation of functional tolerance to miniature
swine antigens.

    The Company's collaborators at MGH have published the first successful
demonstration in a pig-to-mouse model of tolerance to permanently re-educate the
immune system to accept transplanted tissue from a different species in the
absence of chronic immunosuppressive drugs. Collaborators have demonstrated that
transplantation of tissue derived from donor thymus tissue can induce tolerance
in an allogeneic large animal model and in xenogeneic combinations in small
animal studies. This patented technology is currently being tested in porcine to
primate experiments with encouraging results. This technology may have direct
application to tolerance for porcine organ transplantation and for treatment of
the immune defects that result from HIV infections in AIDS patients.

COLLABORATIONS AND AGREEMENTS

    As part of its strategy, the Company has established alliances with
pharmaceutical and other biotechnology companies, academic institutions and
scientists and government laboratories. Currently, its principal strategic
alliances are the following:

    DR. DAVID H. SACHS/THE MASSACHUSETTS GENERAL HOSPITAL

    In January 1991, the Company entered into a ten-year agreement with MGH
under which BioTransplant funds a portion of the research of Dr. Sachs and other
MGH personnel, including Drs. Megan Sykes, A. Benedict Cosimi, Christian LeGuern
and Jay Fishman, in the area of transplantation of organs and tissues and, in
particular, xenograft transplantation involving primates, mice and miniature
swine. In exchange for such research funding, MGH has granted the Company
exclusive worldwide royalty-bearing rights to technology and inventions
developed in the course of the Company funded research, subject to a royalty to
be paid to MGH and subject to the usual retention rights of the United States
Government. BioTransplant also has a right of first refusal in connection with
any

                                       7
<PAGE>
additional research proposals in the field of tissue and organ transplantation
to be submitted by Dr. Sachs and his colleagues (who are funded by
BioTransplant) to other commercial sponsors.

    NOVARTIS PHARMA

    In April 1993, the Company entered into a five-year collaboration agreement
with Novartis, the world's leading supplier of transplantation therapeutics,
which was amended and restated in September 1995, to develop and commercialize
xenotransplantation products utilizing gene transduction (the "Novartis Gene
Transduction Agreement"). Pursuant to the Novartis Gene Transduction Agreement,
the Company received research funding of $20.0 million and license fees of
$10.0 million in connection with the research by the Company of certain
xenotransplantation products.

    In October 1997, the Company entered into a collaboration and license
agreement with Novartis to develop and commercialize transplantation products
utilizing the Company's proprietary mixed bone marrow chimerism technology (the
"Novartis Bone Marrow Agreement"). The research program under the Novartis Bone
Marrow Agreement is for a period of three years. Pursuant to the Novartis Bone
Marrow Agreement, the Company may receive research funding, license fees and
milestone payments of up to $36 million, assuming the agreement continues for
its full term. As of December 31, 1999, research funding of $13.5 million,
license fees of $4.0 million and milestone payments of $2.5 million had been
received. The Novartis Bone Marrow Agreement was amended in October 1998 to
include support for certain costs of developing and maintaining the miniature
swine. In 1999, revenues from the Novartis Bone Marrow Agreement accounted for
92% of the Company's total revenues.

    Pursuant to the terms of both Novartis Agreements, Novartis is obligated to
fund the development costs associated with certain xenotransplantation products
which may be developed by the Company, subject to reimbursement of a portion of
such costs by the Company, if the Company elects to co-promote any such
products. Under certain conditions, the Company has the right to co-promote any
such products solely in North America and to receive an agreed upon share of
profits, if any, derived from North American sales. The Company is entitled to
receive royalties on the sale of any such licensed products by Novartis outside
of North America and, to the extent that the Company elects not to co-promote in
North America, on sales in North America as well. Royalties and profits from any
licensed products developed will depend, in part, upon the efforts of Novartis
to perform clinical testing, obtain regulatory approvals and market and sell
such products both within and outside of the United States. The amount and
timing of the resources devoted to these activities by Novartis will be
controlled by Novartis. Under certain circumstances, Novartis may develop or
market products competitive with the Company's xenotransplantation products
utilizing the gene transduction or mixed bone marrow chimerism approaches.
Pursuant to the Novartis Agreements, Novartis has an option under certain
circumstances to obtain an exclusive license to inventions developed in the
course of BioTransplant research funded by Novartis for use outside the field of
xenotransplantation.

    MEDIMMUNE

    In October 1995, the Company and MedImmune formed a collaborative agreement
for the development and commercialization of products to treat and prevent organ
transplant rejection. The collaboration is based upon the development of
products derived from BTI-322, MEDI-507 and future generations of products
derived from these molecules. Pursuant to the collaboration, the Company granted
MedImmune an exclusive worldwide license to develop and commercialize BTI-322
and MEDI-507 and any products based on BTI-322 or MEDI-507, other than the use
of BTI-322 or MEDI-507 in kits or systems for xenotransplantation or
allotransplantation (such as the Company's AlloMune and XenoMune Systems).
MedImmune paid BioTransplant a $2.0 million license fee at the time of formation
of the collaboration, and agreed to fund and assume responsibility for clinical
testing and commercialization of any resulting products. As of December 31,
1999, MedImmune has provided $2.0 million in non-refundable research support and
has agreed to make milestone payments which

                                       8
<PAGE>
could total up to an additional $11.0 million, all of which is repayable from
royalties on BTI-322 or MEDI-507, as well as to pay royalties on any sales of
BTI-322 or MEDI-507 and future generations of products, if any. Royalties will
depend, in part, upon the efforts of MedImmune to perform clinical testing,
obtain regulatory approvals and market and sell BTI-322 and MEDI-507. The amount
and timing of the resources devoted to these activities by MedImmune will be
controlled by MedImmune.

    CHARLES RIVER LABORATORIES

    In March 1991, BioTransplant entered into an exclusive research and supply
agreement with Charles River Laboratories, a wholly-owned subsidiary of
Bausch & Lomb, Inc., which assigned its rights in the agreement to an affiliate,
Wilmington Partners L.P., in 1993. CRL is a leading company in providing
genetically-defined and "pathogen-free" animals to the biomedical community.
Pursuant to the agreement, CRL is the exclusive supplier of miniature swine
and/or miniature swine organs to be delivered by the Company as part of the
XenoMune System. Prior to 1998, CRL assumed all of the costs of maintaining,
expanding and improving the miniature swine herd, including extensive research
and development costs associated with achieving "specific pathogen-free" status
for the herd in support of the delivery of transplantable organs. Pursuant to an
amendment to the Agreement entered into by the parties in 1998, the Company will
assume the costs of maintaining the miniature swine herd and, upon commencement
of commercial sales of miniature swine organs, the Company and CRL will seek to
enter into a definitive supply agreement for the ongoing supply of miniature
swine. The agreement, as amended, is for a term of five years and may be renewed
for an additional five-year period by mutual agreement of the parties. The
Novartis Bone Marrow agreement was also amended in 1998 to provide for Novartis
to share certain of these miniature swine maintenance costs with the Company.

    STEM CELL SCIENCES

    The Company has entered into a strategic alliance with Stem Cell Sciences
Pty Ltd. ("Stem Cell Sciences") for the purpose of developing genetically
engineered miniature swine. BioTransplant has been granted worldwide, exclusive
rights, subject to the payment of a royalty, to technology, products and
processes for the derivation and manipulation of porcine embryonic stem cells
and nuclear transfer technology developed during the research term and useful in
xenotransplantation in humans. In addition, Stem Cell Sciences will be creating
relevant transgenic miniature swine for the Company. BioTransplant has made
equity investments in Stem Cell Sciences, which represent 30% of the outstanding
shares of that company. Substantially all of the consideration received by Stem
Cell Sciences from the Company's equity investment has been used to fund the
research and development of nuclear transfer technology and, in particular, the
development of technology, products and processes useful for xenotransplantation
in humans. BioTransplant made additional investments in Stem Cell Sciences in
1996, 1997 and 1998 to maintain its 30% ownership position and to support
additional research through December 31, 1999.

    In 1998, the Novartis Bone Marrow Agreement was amended to include support
for certain research by Stem Cell Sciences into the development of transgenic
miniature swine which incorporate technology owned by Novartis.

    OTHER ARRANGEMENTS

    CATHOLIC UNIVERSITY OF LOUVAIN (BELGIUM).  BioTransplant is funding research
by Drs. Herve Bazin and Dominique Latinne at the Experimental Immunology Unit of
the Catholic University of Louvain, Belgium, for the development of monoclonal
antibodies. The Company has exclusive worldwide royalty-bearing
commercialization rights to discoveries, including BTI-322, made in laboratories
under the Company's sponsorship, subject to a royalty.

                                       9
<PAGE>
    ALBERTA RESEARCH COUNCIL (CANADA).  BioTransplant has been granted a
worldwide royalty-bearing, license from the Alberta Research Council for
specified patents and patent applications covering technology potentially useful
for removal of natural antibodies against xenografts. The license is exclusive,
except for one patent application directed to the removal of natural antibodies
against xenografts which is co-owned by one of the inventors and was assigned to
a competitor. The Alberta Research Council has also granted to BioTransplant a
non-exclusive, worldwide royalty-bearing, license to use any of its information,
data, formulas or processing information which pertain to the manufacture,
development or use of any products resulting from the licensed patents in the
field of xenotransplantation.

MANUFACTURING AND SUPPLY

    The Company currently has no manufacturing facilities or staff for clinical
or commercial production of any products or systems under development. The
Company plans to rely initially on third parties to manufacture certain of its
product candidates for research, preclinical testing, clinical trials and
commercialization, if any, with a long-term objective to develop internal
manufacturing capability where appropriate. There is no assurance that the
Company will be able to develop or contract for manufacturing capabilities of
any of its products or systems on acceptable terms.

    Materials for preclinical studies and ongoing clinical trials with the
rodent BTI-322 were manufactured by a contractor in Europe. Supplies of MEDI-507
required for preclinical studies, clinical trials and commercial products are
being manufactured by MedImmune using its own manufacturing facilities. The
Company has the option to continue to use MedImmune as a supplier or to use an
alternative manufacturer or supplier.

    The manufacture of the Company's AlloMune and XenoMune Systems may require
the production of cytokines, monoclonal antibodies and gene transfer vectors.
The Company has the capacity to produce these materials in sufficient quantity
and of sufficient quality to support preclinical studies. However, materials of
the quality suitable for clinical trials will have to be produced by third party
manufacturers. In addition, the Company has entered into an agreement with
Dendreon Corporation to provide a system for handling, transferring and
purifying donor bone marrow. CRL has agreed to supply miniature swine and
miniature swine organs exclusively for BioTransplant in connection with
xenotransplantation.

SALES AND MARKETING

    MedImmune has exclusive worldwide marketing rights to BTI-322, MEDI-507 and
future generations of these products, if any, other than the use of BTI-322 and
MEDI-507 for kits or systems for xenotransplantation and allotransplantation.

    BioTransplant currently holds all marketing rights to the AlloMune System,
although the Company may seek a corporate partner to support the development and
commercialization of the AlloMune System. In the United States, the Company
currently intends to market the AlloMune System for solid organ transplantation
and related products and systems to the approximately 275 organ transplant
centers, which the Company believes will allow significant market coverage with
relatively few sales personnel. To implement this marketing strategy, the
Company intends to hire a limited number of sales and marketing personnel. In
foreign markets, the Company expects to use local pharmaceutical companies to
market its products and systems due to the complexities of foreign regulations
and medical practices.

    Pursuant to the collaboration agreement between BioTransplant and Novartis,
Novartis has been granted exclusive worldwide rights to market
xenotransplantation products based on gene transduction or mixed bone marrow
chimerism, subject to the Company's right to co-promote in North America under
specified conditions. To the extent the Company develops a xenotransplantation
product that

                                       10
<PAGE>
does not utilize technology which has already been licensed, the Company may
seek to collaborate with a third party or may seek to market such product on its
own.

    Due to the early stage of the Company's development efforts, the Company has
no marketing or sales personnel. There can be no assurance that the Company will
be able to successfully develop an effective marketing and sales organization or
enter into acceptable collaborative agreements with third parties for the
marketing of those products for which the Company has retained marketing rights.

RESEARCH AND DEVELOPMENT

    The Company's total research and development expenses were $14.0 million,
$14.7 million and $15.7 million for 1997, 1998 and 1999, respectively.
Collaborative research and development revenues totaled $12.1 million,
$6.7 million and $9.0 million in 1997, 1998 and 1999, respectively.

PATENTS AND PROPRIETARY RIGHTS

    As of March 15, 2000, there were 33 patents issued and 43 patent
applications pending in the United States Patent and Trademark Office which are
owned by or licensed to BioTransplant. The Company's issued patents have terms
expiring between 2005 and 2017. The Company has also filed corresponding patent
applications in selected foreign countries for certain of these U.S. patent
applications. BioTransplant believes that its proprietary rights in its
technology are important to its ability to develop and commercialize products.

    The Company's strategy is to pursue aggressively a strong patent portfolio.
There can be no assurance that patent applications owned by or licensed to the
Company will issue or that, if issued, will provide the Company with significant
protection against competitors. BioTransplant may need to acquire licenses under
patents belonging to others for technology potentially useful or necessary to
it, and the cost and availability of such licenses are currently unknown.
Moreover, patents issued to or licensed by the Company may be challenged,
invalidated, infringed upon or designed around by others and others may hold
patent rights that prevent the Company from commercializing the patented
invention.

    The Company is aware of granted patents which claim monoclonal antibodies
which bind to T cells and the therapeutic use thereof. These patents are owned
by Johnson & Johnson, which manufactures and sells OKT3, a T cell binding
monoclonal antibody. Although BTI-322 is also a monoclonal antibody which binds
to T cells, the Company believes that BTI-322 is distinguishable from the
monoclonal antibodies claimed in such patents, and does not infringe such
patents either literally or under the doctrine of equivalents. Notwithstanding
such belief, there is a risk that the patent owner could initiate patent
infringement litigation to prevent the manufacture, sale and use of BTI-322. If
the patentee should prevail in such litigation, the Company could be required to
pay damages and reimburse the patentee for the cost of such litigation. In
addition, if the patentee was not prepared to grant a license to the Company, an
injunction could issue which would prevent the manufacture, sale and use of
BTI-322.

    The Company has reviewed issued patents which include claims relating to
humanized monoclonal antibodies. These patents are held by biotechnology
companies and an academic institution. While BTI-322 is a rodent antibody, the
Company and MedImmune intend to commercialize MEDI-507, a humanized version of
BTI-322. The Company and MedImmune have obtained a license from Protein Design
Laboratories Inc. under their patents. However, there can be no assurance that,
if required, the Company will be able to obtain additional such licenses on
acceptable terms, if at all. Failure to obtain such licenses could require the
Company to suspend or modify MEDI-507 and would limit the use of BTI-322 to
indications not requiring repeated multiple administrations.

                                       11
<PAGE>
    The Company is also aware of a granted United States patent directed to the
production of transgenic animals by the use of a microinjection technique which
is licensed to a competitor. Such patent could have an adverse impact on the
Company's ability to produce transgenic animals by microinjection. In addition,
the Company is aware of a United States patent which is directed to embryonic
stem cells. Such patent may have an adverse impact on the Company's program for
producing transgenic swine by the use of embryonic stem cells.

    Some of the Company's know-how and technology is not patentable. To protect
its rights, the Company requires all employees, consultants, advisors and
collaborators to enter into confidentiality agreements with BioTransplant. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure. Further, in the
absence of patent protection, the Company's business may be adversely affected
by competitors who independently develop substantially equivalent technology.

COMPETITION

    The products being developed by the Company compete with existing and new
products being created by pharmaceutical, biopharmaceutical and biotechnology
companies, as well as universities. Many of these entities have significantly
greater research and development capabilities, as well as substantial marketing,
manufacturing, financial and managerial resources and represent significant
competition for the Company. There can be no assurance that developments by
others will not render the Company's products or technologies obsolete or
noncompetitive or that the Company will be able to keep pace with technological
developments. Many of the Company's competitors have developed or are in the
process of developing technologies that are, or in the future may be, the basis
for competitive products. Some of these products may have an entirely different
approach than products being developed by the Company and may be more effective
and less costly. In addition, many of these competitors have significantly
greater experience than the Company in undertaking preclinical testing and human
clinical trials of products and obtaining FDA and other regulatory approvals of
such products. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly than the Company. In addition, colleges,
universities, government agencies and other public and private research
organizations conduct research and may market commercial products on their own
or through joint ventures. These institutions are becoming more active in
seeking patent protection and licensing arrangements to collect royalties for
use of technology that they have developed. These institutions also compete with
the Company in recruiting and retaining highly qualified scientific personnel.

    In particular, there are several commercially available anti-rejection drugs
that will compete with BTI-322/MEDI-507 products, including OKT3 (marketed by
Ortho Biotech, Inc., a subsidiary of Johnson & Johnson), ATGAM (marketed by
Pharmacia Upjohn), ThymoGlobulin-Registered Trademark- (marketed by SangStat
Medical Corporation), Zenapax-Registered Trademark- (marketed by Roche
Laboratories) and Simulect-Registered Trademark- (marketed by Novartis). To the
extent that these therapeutics address the problems associated with
transplantation on which the Company has focused, they may represent significant
competition.

    In addition, the Company is aware of other biotechnology companies
attempting xenotransplants, including Imutran Ltd., a wholly-owned subsidiary of
Novartis, Nextran Inc., a wholly owned subsidiary of Baxter HealthCare and
Alexion Pharmaceuticals, Inc. Some of the Company's competitors are using organs
derived from genetically modified transgenic donors which are designed to
eliminate hyperacute rejection in humans. Despite the Company's progress in
creating tolerance for transplantation, there can be no assurance that others
will not be successful in inducing tolerance. In addition, the development of
superior immunosuppressant therapeutics, mechanical organ systems and other
improvements in therapies for end stage organ disease could adversely affect the
size of the Company's available markets. The Company is aware that Chimeric
Therapies, Inc. plans to develop mixed bone

                                       12
<PAGE>
marrow chimerism to include tolerance for allogeneic solid organ and bone marrow
transplants. These approaches may be competitive.

GOVERNMENT REGULATION

    The development and commercialization of the Company's products will be
subject to regulation in the United States by numerous regulatory authorities
including the Federal Food and Drug Administration (FDA) and Federal Trade
Commission (FTC) and by comparable regulatory authorities in foreign countries.
These regulatory authorities and other federal, state, and local entities will
regulate, among other things, the preclinical and clinical testing, safety,
effectiveness, approval, clearance, manufacturing, labeling, packaging, export,
storage, recordkeeping, adverse event reporting, and promotion and advertising
of the Company's products.

    FDA approval or clearance of the Company's products, including a review of
the manufacturing processes and facilities used to produce such products will be
required before the products may be marketed in the United States. Based upon
initial discussions with the FDA, the Company believes that BTI-322 will be
classified as a biological product by FDA. Biological products are subject to
dual regulation. Their approval for marketing, among other things, is regulated
under the Public Health Service Act through a Biologics License Application
(BLA). However, biological products are also drugs and must meet drug standards
under the Federal Food, Drug and Cosmetic Act such as good manufacturing
practices regulations and regulations governing clinical trials. The Company
expects the AlloMune and XenoMune Systems to be classified as a Combination
Product, with the Center for Biologics Evaluation and Research ("CBER") assuming
principal responsibilities for the review, assisted by the Center for Devices
and Radiologic Health.

    The manufacture of xenograft products for human transplantation can be
expected to present novel questions concerning both the safety and effectiveness
of the products and compliance with and further development of standards for
good manufacturing practices of such products. The Public Health Service (PHS)
published draft guidance in 1996 on infectious disease issues related to
xenotransplantation and in 1999 on the infectious disease implication of blood
donation from recipients of xenotransplants. In January 1998, PHS held a public
meeting on emerging policy issues, but final guidance and/or regulations do not
yet exist. The Company cannot predict the content of future policy or
regulations relating to such products, or the effect such policy or regulation
may have on its ability to research, develop, manufacture, and market its
products.

    Development of a therapeutic product for human use under applicable laws and
regulations is a multi-step process. First, in vitro and/or animal testing must
be conducted in accordance with good laboratory practices to establish the
potential safety and effectiveness of the experimental product in a given
disease. If a product is found to be reasonably safe and potentially effective
in preclinical trials, the next step in the process is human clinical trials. An
Investigative New Drug application, or IND, containing, among other things, the
preclinical data, chemistry, manufacturing, and control information, and an
investigative plan, must be submitted to the FDA and allowed to become effective
by the agency before such trials may begin. There can be no assurance that
submission of an IND will result in the ability to commence clinical trials. In
addition, the FDA may place a clinical trial on hold or terminate it if, among
other reasons, it concludes that clinical subjects are being exposed to an
unacceptable health risk.

    Clinical trials typically involve three phases, although those phases can
overlap. Phase I is conducted to evaluate the safety and pharmacokinetics of the
experimental product in humans, and if possible, to gain early indications of
effectiveness. Phase I studies may also evaluate various routes, dosages and
schedules of product administration. If acceptable product safety is
demonstrated, Phase II studies are initiated. In Phase II, clinical trials are
conducted in groups of patients afflicted with a specific disease or condition
for which the product is intended for use in order to further test safety,

                                       13
<PAGE>
begin evaluating effectiveness, optimize dosage amounts, and determine dose
schedules and routes of administration. If Phase II studies yield satisfactory
results and no hold is placed on further studies by the FDA, Phase III studies
are commenced. Phase III studies are usually randomized, double blind studies
testing for product safety and effectiveness in an expanded patient population
in order to evaluate the overall risk/benefit relationship of the product and to
provide an adequate basis for product labeling. These studies also may compare
the safety and effectiveness of the product with currently available products.
It is not possible to estimate the time in which Phase I, II, and III studies
will be completed with respect to a given product, if at all, and the time
period may last as long as several years.

    Following completion of clinical investigations, the preclinical and
clinical data that has been accumulated, together with chemistry, manufacturing,
and controls specifications and information are submitted to the FDA in a BLA.
To approve a product regulated under a BLA, the agency must determine, among
other things, that the product is safe, pure, and potent, and that any facility
in which it is manufactured, processed, packed, or held, meets standards
designed to assure the product's continued safety, purity, and potency. There
can be no assurance that a product will be approved in a timely manner, if at
all. The approval process can be very lengthy and depends, among other things,
upon the time it takes to review the submitted data, the FDA's comments on the
application, and the time required for the Company to provide satisfactory
answers or additional clinical data if requested.

    If a BLA is approved, continued compliance with strict FDA requirements
concerning good manufacturing practices, enforced by periodic inspections, and
adverse event reporting, as well as any special requirements imposed as a part
of the BLA approval will be required to continue marketing the approved product.
Changes to approved biological products that affect safety or effectiveness
require approved supplemental applications, as do changes in manufacturing that
have a substantial potential to adversely affect product safety or
effectiveness. Such supplemental applications may require the submission of
clinical or comparability data and must be approved before the product may be
marketed as modified.

    In addition, the nature of marketing claims that the Company will be
permitted to make in the labeling and advertising of its products will be
limited to those specified in an FDA clearance or approval, and claims exceeding
those that are cleared or approved will constitute violation of the Act.
Violations of the Act or regulatory requirements at any time during the product
development process, approval process, or after approval may result in agency
enforcement actions, including recall, license suspension or revocation, seizure
of products, fines, injunctions and/or civil or criminal penalties. Any such
agency action could have a material adverse effect on the Company.

    The Company's advertising of its products will also be subject to regulation
by the Federal Trade Commission (FTC) under the FTC Act. The FTC Act prohibits
unfair methods of competition and unfair or deceptive acts in or affecting
commerce. Violations of the FTC Act, such as failure to have substantiation for
product claims, would subject the Company to a variety of enforcement actions,
including compulsory process, cease and desist orders, and injunctions. FTC
enforcement can result in orders requiring, among other things, limits on
advertising, corrective advertising, consumer redress, and recision of
contracts. Violations of FTC enforcement orders can result in substantial fines
or other penalties.

    The Orphan Drug Act of 1983 generally provides incentives to manufacturers
to undertake development and marketing of products to treat relatively rare
diseases, those where fewer than 200,000 persons in the United States at the
time of application for orphan drug designation would be likely to receive the
treatment. A product that receives orphan drug designation by the FDA and is the
first product to receive FDA marketing approval for its indication is entitled
to a seven-year exclusive marketing period in the United States for that
indication. BioTransplant intends to pursue this designation with respect to any
of its products intended for patient populations in the United States of

                                       14
<PAGE>
less than 200,000. MEDI-507 has received Orphan Drug designation, both as a
stand-alone product, and as a component of the Company's AlloMune System,
however, there can be no assurance that such status will be attained for other
such products. In addition, Orphan drug exclusivity can be terminated for a
number of reasons, including that the manufacturer cannot provide an adequate
supply of the drug.

    In the European Union, although there are some minor orphan drug provisions
in some countries, there is, as yet, no equivalent overall process to that
followed in the United States. The results of all preclinical,
development/manufacturing and Phase I, II, and III clinical study data generated
in Europe or the United States may also be submitted to the European Medicines
Evaluation Agency ("EMEA"), the counterpart of the FDA, for approval as a
Marketing Approval Application, or MAA, which is the equivalent of a BLA. The
application procedure is known as the "Centralized" procedure. The MAA is
assigned to a rapporteur, who coordinates the assessment of the application by a
team of experts in the preclinical, product manufacturing and clinical areas. An
overview of the results of the assessment are then presented to the Committee on
Proprietary Medicinal Products, or CPMP. The CPMP, which is comprised of two
members from each Member State of the European Union, evaluates both the MAA and
the rapporteur's recommendations and forms an opinion on the approval or
rejection of the MAA. This opinion is then referred to the European Commission,
and the European Council if appropriate, for a final decision. Approval of the
MAA permits product marketing within all countries of the European Union. This
MAA procedure takes a minimum of 300 days, excluding the time taken by the
applicant to respond to questions raised by the CPMP. Approval procedures for
marketing of products in countries that are not European Union Member States
vary from country to country and the time required for approval may be longer or
shorter than that required for FDA approval. In addition, for products exported
from the United States to any foreign country or territory, applicable FDA
export requirements must be met.

REIMBURSEMENT

    Major health insurance programs in the United States, including Blue Cross
and Blue Shield and other managed care plans which provide health insurance
coverage to more than 125 million Americans, pay for most non-kidney
transplantation costs for their members. Kidney transplants and kidney dialysis
are funded by Medicare, a federally supported program which pays for over 65% of
the costs associated with end-stage renal disease. The Company expects that
private health insurance and the Medicare program will continue to reimburse
transplant expenses at current levels in the majority of cases. The Company
plans to design its clinical trials to demonstrate lower overall treatment costs
for end-stage organ disease compared to alternative therapies. Since some of the
Company's organ, tissue or cell transplantation systems are designed to allow
rescue from life-threatening disease for which there are no alternative
treatments, the Company believes that those products will receive reimbursement
commensurate with current practices. However, pending or future health care
reform proposals could result in significant changes in the United States
reimbursement climate.

RISK FACTORS THAT MAY AFFECT RESULTS

    This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained in this Report that are not statements of
historical fact may be deemed to be forward-looking statements. Words such as
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth below and elsewhere in this
Annual Report on Form 10-K.

                                       15
<PAGE>
    WE HAVE NOT SUCCESSFULLY DEVELOPED ANY PRODUCTS TO DATE AND IF WE DO NOT
    SUCCESSFULLY COMMERCIALIZE ANY PRODUCTS WE WILL NOT BE PROFITABLE

    To date, we have engaged primarily in research and development activities.
We have not yet completed the development of, conducted significant clinical
trials with respect to, or marketed any of our potential products. If we are not
successful in developing and commercializing any products then we will never
become profitable.

    Neither we, nor any other company, has successfully developed and sold the
types of products we plan to develop using our technologies. The products that
we are developing will require additional research and development, extensive
preclinical studies and clinical trials and regulatory approval prior to any
commercial sales. In particular, we may need to successfully develop multiple
novel technologies in order to complete development of our AlloMune and XenoMune
Systems. Moreover, these products may not be effective in solving any of our
targeted disorders or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may prevent or limit commercial use.

    OUR IMMUNOCOGNANCE TECHNOLOGY IS COMPLEX AND NOVEL AND THERE ARE
    UNCERTAINTIES AS TO THE EFFECTIVENESS OF THIS TECHNOLOGICAL APPROACH

    Our ImmunoCognance technology is complex and novel. MEDI-507 and the
AlloMune System have been tested in relatively few patients and we may not be
able to demonstrate the clinical benefits of these products. Furthermore, our
XenoMune System is based upon technologies which, to our knowledge, have never
been implanted in humans, including by us. Our technological approaches may not
enable us to successfully develop and commercialize any products. Even if our
technological approaches are successful, we will need to undertake substantial
additional work to translate our discoveries into products.

    Our XenoMune System is based upon the transplantation of organs from
miniature swine into humans. We have little precedent for this procedure and
previous attempts by others in the xenotransplantation, or inter-species
transplantation, field have not been successful. No xenotransplantation
approaches have been approved by the United States Food and Drug Administration,
or FDA, for humans.

    WE ARE DEPENDENT ON MEDIMMUNE AND NOVARTIS AND OTHER COLLABORATIVE PARTNERS
    TO DEVELOP, CONDUCT CLINICAL TRIALS ON, OBTAIN REGULATORY APPROVALS FOR, AND
    MANUFACTURE, MARKET, AND SELL OUR PRINCIPAL PRODUCTS

    We conduct most of our development activities, and plan to conduct most of
our commercialization activities, through collaborations. The success of these
collaborations is heavily dependent on the efforts and activities of our
collaborative partners. Our agreements with our collaborative partners allow
them significant discretion in determining the efforts and resources that they
will apply to the collaboration. Our existing and any future collaborations may
not be scientifically or commercially successful.

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

    - Novartis is independently developing, and our other current and any future
      partners may independently develop, products that may be competitive with
      the products they are developing in collaboration with us, which could
      affect their commitment to the collaboration with us.

    - Our existing collaborations are subject to termination without cause and
      on short notice under certain circumstances. If our collaborative partners
      terminate their collaborations with us, it could make it difficult for us
      to attract new collaborative partners or adversely affect the perception
      of us in the business and financial communities.

                                       16
<PAGE>
    - If MedImmune, Novartis or any of our other collaborative partners were to
      breach or terminate an agreement with us, reduce its funding or otherwise
      fail to conduct the collaboration successfully, we could be required to
      devote additional internal resources to the program that is the subject of
      the collaboration, scale back or terminate the program or seek an
      alternative partner.

    - Our collaborative partners may pursue higher priority programs or change
      the focus of their development programs, which could affect the
      collaborative partners' commitment to us. Pharmaceutical companies have
      historically re-evaluated their development priorities following mergers
      and consolidations, which have been common in recent years in these
      industries.

    - After a product has been approved for marketing, any reductions in
      marketing or sales efforts or a discontinuation of marketing or sales of
      such product by our collaborative partners would reduce our revenues,
      which will be based on a percentage of net sales by the collaborative
      partner. For example, we are entitled to receive royalties on MEDI-507, a
      product proprietary to MedImmune for stand-alone indications. The amount
      of any royalties earned under this arrangement is entirely dependent on
      the efforts of MedImmune to develop and market MEDI-507.

    THE PROGRESS OF OUR XENOMUNE SYSTEM DEVELOPMENT COULD BE DELAYED BY
    DISRUPTIONS IN OUR SUPPLY OF MINIATURE SWINE

    Our XenoMune System is based upon a herd of genetically engineered,
miniature swine. Although our miniature swine are located at several different
facilities, a disease epidemic or other catastrophe could destroy all or a
portion of the miniature swine herd, which would interrupt or significantly
delay the research, development and commercialization of any XenoMune System
product under development. In addition, Charles River Laboratories is currently
the only supplier of miniature swine and miniature swine organs used in our
XenoMune System research. In the event that Charles River terminates or breaches
its agreement with us, we may not have the resources or capabilities to maintain
the miniature swine herds ourselves.

    WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
    DEVELOPING OR COMMERCIALIZING PRODUCTS BEFORE OR MORE SUCCESSFULLY THAN WE
    DO

    The products being developed by us compete with existing and new products
being created by pharmaceutical, biopharmaceutical and biotechnology companies,
as well as universities and other research institutions. Many of our competitors
are substantially larger than we are and have substantially greater capital
resources, research and development staffs and facilities than we have.
Furthermore, many of our competitors are more experienced in product development
and commercialization, obtaining regulatory approvals and product manufacturing.
As a result, they may develop competing products more rapidly and at less cost.
In addition, our competitors may discover, develop and commercialize products
which render non-competitive or obsolete the products that we or our
collaborative partners are seeking to develop and commercialize.

    THE MARKET MAY NOT BE RECEPTIVE TO OUR PRODUCTS UPON THEIR INTRODUCTION

    The commercial success of our products that are approved for marketing will
depend upon their acceptance by the medical community and third party payors as
clinically useful, cost effective and safe. All of the products that we are
developing are based upon new technologies or therapeutic approaches. As a
result, it may be more difficult for us to achieve market acceptance of our
products.

                                       17
<PAGE>
    Other factors that we believe will materially affect market acceptance of
our products and services include:

    - The timing of receipt of marketing approvals and the countries in which
      such approvals are obtained,

    - the safety, efficacy and ease of administration of the product,

    - the success of physician education programs, and

    - the availability of government and third party payor reimbursement of our
      products.

    WE HAVE INCURRED SUBSTANTIAL LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES
    AND WE WILL NOT BE SUCCESSFUL UNTIL WE REVERSE THIS TREND

    We have incurred losses in each year since our founding in 1990. We expect
to continue to incur operating losses for the foreseeable future.

    To date, substantially all of our revenues have been generated from payments
from our collaborative partners such as Novartis and MedImmune. In 1999, all of
our revenues other than interest income were from our collaboration with
Novartis. We have not received any revenues from the sale of products. We
anticipate that it will be a number of years, if ever, before we will receive
revenues from product sales or royalties.

    We expect to increase our spending significantly as we continue to expand
our research and development programs and commercialization activities. As a
result, we will need to generate significant revenues in order to achieve
profitability. We cannot be certain whether or when this will occur because of
the significant uncertainties that affect our business.

    WE MAY REQUIRE ADDITIONAL FINANCING, WHICH MAY BE DIFFICULT TO OBTAIN AND
    MAY DILUTE YOUR OWNERSHIP INTEREST IN US

    We will require substantial funds to conduct research and development,
including preclinical testing and clinical trials of our AlloMune and XenoMune
Systems, and to manufacture and market any products that are approved for
commercial sale. Our future capital requirements will depend on many factors,
including the following:

    - continued progress in our research and development programs, as well as
      the magnitude of these programs,

    - the resources required to successfully complete our clinical trials,

    - the time and costs involved in obtaining regulatory approvals,

    - the cost of manufacturing and commercialization activities,

    - the cost of any additional facilities requirements,

    - the timing, receipt, and amount of milestone and other payments from
      collaborative partners,

    - the timing, receipt, and amount of sales and royalties from our potential
      products in the market, and

    - the costs involved in preparing, filing, prosecuting, maintaining, and
      enforcing patent claims and other patent-related costs, including
      litigation costs and the costs of obtaining any required licenses to
      technologies.

    We may seek additional funding through collaborative arrangements and public
or private financings. Additional financing may not be available to us on
acceptable terms or at all.

                                       18
<PAGE>
    If we raise additional funds by issuing equity securities, further dilution
to our then existing stockholders will result. In addition, the terms of the
financing may adversely affect the holdings or the rights of such stockholders.
If we are unable to obtain funding on a timely basis, we may be required to
significantly curtail one or more of our research or development programs. We
also could be required to seek funds through arrangements with collaborative
partners or others that may require us to relinquish rights to certain of our
technologies, product candidates, or products which we would otherwise pursue on
our own.

    IF OUR CLINICAL TRIALS ARE NOT SUCCESSFUL, WE WILL NOT BE ABLE TO DEVELOP
    AND COMMERCIALIZE ANY RELATED PRODUCTS

    In order to obtain regulatory approvals for the commercial sale of our
future products, we and our collaborative partners will be required to complete
extensive clinical trials in humans to demonstrate the safety and efficacy of
the products. We have limited experience in conducting clinical trials.

    The submission of an Investigational New Drug Application may not result in
FDA authorization to commence clinical trials. If clinical trials begin, we or
our collaborative partners may not complete testing successfully within any
specific time period, if at all, with respect to any of our products.
Furthermore, we, our collaborative partners, or the FDA, may suspend clinical
trials at any time on various grounds, including a finding that the subjects or
patients are being exposed to unacceptable health risks. Clinical trials, if
completed, may not show any potential product to be safe or effective. Thus, the
FDA and other regulatory authorities may not approve any of our potential
products for any indication.

    The rate of completion of clinical trials is dependent in part upon the rate
of enrollment of patients. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the study, and the existence of
competitive clinical trials. In particular, the patient population for some of
our potential products is small. Delays in planned patient enrollment may result
in increased costs and program delays.

    We are dependent upon MedImmune to conduct clinical trials with respect to
MEDI-507, Novartis to conduct clinical trials for the development of
xenotransplantation products, and we may become dependent upon other third
parties to conduct future clinical trials of our AlloMune and XenoMune Systems
and any other products. We will have less control over such clinical trials than
if we were conducting the trials directly. As a result, these trials may not
begin or be completed as we would have planned them.

    WE MAY NOT OBTAIN REGULATORY APPROVALS; THE APPROVAL PROCESS IS COSTLY AND
    LENGTHY

    We must obtain regulatory approval for our ongoing development activities
and before marketing or selling any of our future products. We may not receive
regulatory approvals to conduct clinical trials of our products or to
manufacture or market our products. In addition, regulatory agencies may not
grant such approvals on a timely basis or may revoke previously granted
approvals.

    The process of obtaining FDA and other required regulatory approvals is
lengthy and expensive. The time required for FDA and other clearances or
approvals is uncertain and typically takes a number of years, depending on the
complexity and novelty of the product. Our analysis of data obtained from
preclinical and clinical activities is subject to confirmation and
interpretation by regulatory authorities, which could delay, limit or prevent
regulatory approval. Any delay in obtaining or failure to obtain required
clearance or approvals could materially adversely affect our ability to generate
revenues from the affected product. We have only limited experience in filing
and prosecuting applications necessary to gain regulatory approvals.

                                       19
<PAGE>
    There is limited regulatory precedent for the approval of products based
upon the technologies that we are employing to develop products. For example,
the FDA has not yet established definitive and comprehensive regulatory
guidelines for xenotransplantation. Because the AlloMune and XenoMune Systems
are based on new technologies and new therapeutic approaches that have not been
extensively tested in humans, the regulatory requirements governing these types
of products may be more rigorous than for conventional products. As a result, we
may experience a longer regulatory process in connection with any products that
we develop based on these new technologies or new therapeutic approaches. For
example, the FDA has not yet established final or comprehensive guidelines for
xenotransplantation.

    We also are subject to numerous foreign regulatory requirements governing
the design and conduct of the clinical trials and the manufacturing and
marketing of our future products. The approval procedure varies among countries.
The time required to obtain foreign approvals often differs from that required
to obtain FDA approvals. Moreover, approval by the FDA does not ensure approval
by regulatory authorities in other countries.

    All of the foregoing regulatory risks also are applicable to development,
manufacturing and marketing undertaken by our collaborative partners or other
third parties.

    EVEN IF WE OBTAIN MARKETING APPROVAL, OUR PRODUCTS WILL BE SUBJECT TO
    ONGOING REGULATORY REVIEW WHICH WILL BE EXPENSIVE AND MAY EFFECT OUR ABILITY
    TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS

    Even if we receive regulatory approval of a product, such approval may be
subject to limitations on the indicated uses for which the product may be
marketed, which may limit the size of the market for the product or contain
requirements for costly post-marketing follow-up studies. With respect to
products for which we have obtained marketing approval, we, the manufacturer of
the product if other than us, and the manufacturing facilities will be subject
to continual review and periodic inspections by the FDA and other regulatory
authorities. The subsequent discovery of previously unknown problems with the
product, such as the presence of porcine endogenous retrovirus, also known as
PERV, in porcine (swine) cells or clinical trial subjects, or with the
manufacturer or facility, may result in restrictions on the product or
manufacturer, including withdrawal of the product from the market.

    If we fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions, and criminal prosecution.

    WE MAY NOT BE ABLE TO OBTAIN PATENT PROTECTION FOR OUR DISCOVERIES AND WE
    MAY INFRINGE PATENT RIGHTS OF THIRD PARTIES

    The patent positions of pharmaceutical and biotechnology companies,
including us, are generally uncertain and involve complex legal, scientific and
factual questions.

    Our success depends in significant part on our ability to:

    - obtain patents,

    - protect trade secrets,

    - operate without infringing upon the proprietary rights of others, and

    - prevent others from infringing on our proprietary rights.

    Patents may not issue from any patent applications that we own or license.
If patents do issue, the claims allowed may not be sufficiently broad to protect
our technology. In addition, issued patents that we own or license may be
challenged, invalidated or circumvented. Our patents also may not afford us
protection against competitors with similar technology. Because patent
applications in the United States

                                       20
<PAGE>
are maintained in secrecy until patents issue, third parties may have filed or
maintained patent applications for technology used by us or covered by our
pending patent applications without our being aware of these applications.

    We may not hold proprietary rights to certain patents related to our
proposed products. In some cases, these patents may be owned or controlled by
third parties. As a result, we or our collaborative partners may be required to
obtain licenses under third party patents to market certain of our proposed
products or services. If licenses are not available to us on acceptable terms,
we or our collaborative partners will not be able to market these products or
services.

    WE MAY NOT BE ABLE TO KEEP OUR TRADE SECRETS CONFIDENTIAL

    We also rely significantly upon unpatented proprietary technology,
information, processes and know how. For example, there are no patents and only
patent applications covering the miniature swine which are supplied to us for
use in our XenoMune System research. We seek to protect this information by
confidentiality agreements with our employees, consultants and other third party
contractors as well as through other security measures. These confidentiality
agreements may be breached, and we may not have adequate remedies for any such
breach. In addition, our trade secrets may otherwise become known or be
independently developed by competitors.

    WE MAY BECOME INVOLVED IN EXPENSIVE PATENT LITIGATION OR OTHER INTELLECTUAL
    PROPERTY PROCEEDINGS WHICH COULD RESULT IN LIABILITY FOR DAMAGES OR STOP OUR
    DEVELOPMENT AND COMMERCIALIZATION EFFORTS

    There has been substantial litigation and other proceedings regarding the
complex patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. We may become a party to patent litigation or other
proceedings regarding intellectual property rights.

    Other types of situations in which we may become involved in patent
litigation or other intellectual property proceedings include:

    - We may initiate litigation or other proceedings against third parties to
      enforce our patent rights.

    - We may initiate litigation or other proceedings against third parties to
      seek to invalidate the patents held by such third parties or to obtain a
      judgment that our products or services do not infringe such third parties'
      patents.

    - If our competitors file patent applications that claim technology also
      claimed by us, we may participate in interference or opposition
      proceedings to determine the priority of invention.

    - If third parties initiate litigation claiming that our processes or
      products infringe their patent or other intellectual property rights, we
      will need to defend against such claims.

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

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

                                       21
<PAGE>
    WE COULD LOSE IMPORTANT LICENSE RIGHTS IN CERTAIN CIRCUMSTANCES

    We are a party to technology in-licenses that are important to our business
and expect to enter into additional licenses in the future. These licenses
impose various commercialization, sublicensing, royalty, insurance and other
obligations on us. If we fail to comply with these requirements, the licensors
will have the right to terminate these licenses.

    We have no sales, marketing and distribution experience and capabilities. We
plan to rely significantly on sales, marketing and distribution arrangements
with our collaborative partners and other third parties for the products that we
are developing. For example, we have granted to MedImmune exclusive marketing
rights to MEDI-507 and have granted to Novartis exclusive worldwide marketing
rights for our XenoMune System for certain technologies. The terms of any future
arrangements may not be favorable to us. In addition, we may have limited or no
control over the sales, marketing and distribution activities of these third
parties. Our future revenues will be materially dependent upon the success of
the efforts of these third parties.

    WE HAVE NO SALES AND MARKETING EXPERIENCE AND CAPABILITIES

    If in the future we determine to perform sales, marketing and distribution
functions ourselves, we would face a number of additional risks, including:

    - we may not be able to attract and build a significant marketing staff or
      sales force,

    - the cost of establishing a marketing staff or sales force may not be
      justifiable in light of any product revenues, and

    - our direct sales and marketing efforts may not be successful.

    WE HAVE LIMITED MANUFACTURING CAPABILITIES AND WILL BE DEPENDENT ON THIRD
    PARTY MANUFACTURERS

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

    We currently rely upon third parties to produce material for preclinical and
clinical testing purposes and expect to continue to do so in the future. We also
expect to rely upon third parties, including our collaborative partners, to
produce materials required for the commercial production of certain of our
products if we succeed in obtaining necessary regulatory approvals. There are a
limited number of manufacturers that operate under the FDA's regulations for
good manufacturing practices which are capable of manufacturing for us. If we
are unable to arrange for third party manufacturing of our products, or to do so
on commercially reasonable terms, we may not be able to complete development of
our products or market them.

    To the extent that we enter into manufacturing arrangements with third
parties, we are dependent upon these third parties to perform their obligations
in a timely manner. If such third party suppliers fail to perform their
obligations, we may be adversely affected in a number of ways, including:

    - we may not be able to meet commercial demands for our products,

    - we may not be able to initiate or continue clinical trials of products
      that are under development, and

    - we may be delayed in submitting applications for regulatory approvals for
      our products.

    We may in the future determine to manufacture certain of our products in our
own manufacturing facilities. We will require substantial additional funds and
need to recruit qualified personnel in order

                                       22
<PAGE>
to build or lease and operate any manufacturing facilities. We may not be able
to successfully develop our own manufacturing capabilities. Moreover, it may be
very costly and time consuming for us to develop such capabilities.

    The manufacture of products by us and our collaborative partners and
suppliers is subject to regulation by the FDA and comparable agencies in foreign
countries. Delay in complying or failure to comply with such manufacturing
requirements could materially adversely affect the marketing of our products.

    IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR FUTURE
    PRODUCTS OR SERVICES BY THIRD PARTY PAYORS, THERE MAY BE NO COMMERCIALLY
    VIABLE MARKETS FOR OUR PRODUCTS

    The availability of reimbursement by governmental and other third party
payors affects the market for any pharmaceutical product. These third party
payors continually attempt to contain or reduce the costs of healthcare by
challenging the prices charged for medical products. In certain foreign
countries, particularly the countries of the European Union, the pricing of
prescription pharmaceuticals is subject to governmental control. We may not be
able to sell our products profitably if reimbursement is unavailable or limited
in scope or amount. Currently, no reimbursement plan exists for the costs
associated with our AlloMune and XenoMune Systems.

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

    If we or our collaborative partners obtain marketing approval for our
products, we expect to experience pricing pressure due to the trend toward
managed health care, the increasing influence of health maintenance
organizations and additional legislative proposals.

    WE COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF WE ARE UNABLE TO
    OBTAIN INSURANCE AT ACCEPTABLE COSTS OR OTHERWISE TO PROTECT US AGAINST
    POTENTIAL PRODUCT LIABILITY CLAIMS

    We may be subjected to product liability claims that are inherent in the
testing, manufacturing, marketing and sale of human health care products. These
claims could expose us to significant liabilities that could prevent or
interfere with the development or commercialization of our products. Product
liability claims could require us to spend significant time and money in
litigation or to pay significant damages. Product liability insurance is
generally expensive for biopharmaceutical companies such as ours. Although we
maintain limited product liability insurance coverage for the clinical trials of
our products, it is possible that we will not be able to obtain further product
liability insurance on acceptable terms, if at all, and that insurance
subsequently obtained will not provide adequate coverage against all potential
claims.

    OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY
    PERSONNEL AND CONSULTANTS

    Our success is substantially dependent on the ability, experience and
performance of our senior management and other key personnel and consultants. If
we lose one or more of the members of our senior management or other key
employees or consultants, our business and operating results could be seriously
harmed. None of the members of our senior management or other key employees are
bound by a long-term employment agreement with us. With respect to the
development of our XenoMune System, we depend in large part on the efforts of
Dr. David H. Sachs, chairman of our scientific advisory board. We currently have
a consulting contract with Dr. Sachs which may be terminated by him at any time
upon 30 days' written notice.

                                       23
<PAGE>
    In addition, our future success will depend heavily on our ability to
continue to hire, train, retain and motivate additional skilled managerial and
scientific personnel. The pool of personnel with the skills that we require is
limited. Competition to hire from this limited pool is intense.

EMPLOYEES

    As of March 15, 2000, the Company had 70 full time employees.

ITEM 2. PROPERTIES

    Since October 1994, the Company has occupied a 34,000 square-foot facility
containing office and laboratory space located in the Charlestown Navy Yard in
Charlestown, Massachusetts, pursuant to a 15-year lease which expires in 2009.
The Company has the option to extend the lease for an additional five-year term.
The Company believes that this leased facility is adequate to meet the Company's
purposes for at least the next three years.

ITEM 3. LEGAL PROCEEDINGS

    The Company is not a party to any material legal proceeding.

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

    No matters were submitted to a vote of security holders of the Company,
through solicitation of proxies or otherwise, during the last quarter of the
year ended December 31, 1999.

EXECUTIVE OFFICERS OF THE REGISTRANT

    The following table sets forth the names, ages and positions of the
executive officers of the Company.

<TABLE>
<CAPTION>
NAME                                       AGE                          POSITION
----                                     --------                       --------
<S>                                      <C>        <C>
Elliot Lebowitz, Ph.D..................     58      President and Chief Executive Officer, Director
James Hope, Ph.D.......................     48      Senior Vice President of Development
Julia L. Greenstein, Ph.D..............     43      Senior Vice President of Research and Chief
                                                    Scientific Officer
Mary White-Scharf, Ph.D................     49      Vice President of Research
Richard V. Capasso, C.P.A..............     38      Vice President, Finance and Treasurer
Howard Grossberg, M.D..................     46      Vice President of Medical Affairs
</TABLE>

    DR. LEBOWITZ has served as President and Chief Executive Officer and as a
member of the Board of Directors of the Company since April 1991. From 1985 to
1991, he served as Vice President for Research and Development at C.R.
Bard, Inc., directing internal and collaborative research and development
programs for Bard's Vascular Systems, Cardiosurgery and Cardiopulmonary
Divisions. From 1981 until 1985, Dr. Lebowitz served as Director of Long Range
Research and Development at DuPont Corporation, developing
immunopharmaceuticals. From 1977 until 1981, he served as Division Manager of
the Medical Products Division of New England Nuclear Corporation which
developed, manufactured and sold radiopharmaceuticals for in vivo diagnosis.
Earlier in his career, Dr. Lebowitz served at Brookhaven National Laboratories,
where he developed Thallium-201, a radiopharmaceutical for the diagnosis of
coronary artery disease. Dr. Lebowitz was a founder of Diagnostic
Isotopes, Inc., a radiopharmaceutical company which was subsequently acquired by
Hoffmann-La Roche Inc., a pharmaceutical company. He was also a founder of
Procept, Inc., a biopharmaceutical company which focused on rational drug
design. He holds a B.A. from Columbia College and a Ph.D. from Columbia
University.

                                       24
<PAGE>
    DR. HOPE has served as Senior Vice President of Development of the Company
since December 1995. From August 1992 until December 1995, he served as Vice
President of Development of the Company. From 1990 until 1992, he served as
Executive Director of Operations Technical Support of Serono Laboratories, Inc.
where he directed the transfer, scale-up and validation of biopharmaceutical
manufacturing processes. From 1986 until 1990, he served as the Director of
Bioprocess Development and Production at Invitron Corp., a contract manufacturer
for the development and scale-up of mammalian, cell-based biopharmaceutical
manufacturing processes. Dr. Hope received a B.S. in microbiology and chemistry
from the University of Reading (U.K.) and a Ph.D. in biochemistry from the
University of London (U.K.).

    DR. GREENSTEIN has served as Senior Vice President of Research and Chief
Scientific Officer of the Company since December 1995. From February 1994 until
December 1995, she served as Vice President of Research of the Company. From
1992 until 1994, she served as Vice President, Discovery Research, and from 1991
until 1992, as Director of Immunology, at ImmuLogic Pharmaceutical Corporation,
a biotechnology company which she joined in 1987 and worked on a T cell mediated
approach to allergy desensitization. From 1986 until 1987, Dr. Greenstein was an
Assistant Professor of Pathology at Harvard Medical School and the Dana Farber
Cancer Institute. She received her B.A. from Russell Sage College and her Ph.D.
in microbiology from the University of Rochester Medical School.

    DR. WHITE-SCHARF has served as Vice President of Research of the Company
since December 1995. From September 1991 until December 1995 she served as
Director of Monoclonal Antibody Development of the Company where she directed
the BTI-322 program and the Company's hybridoma discovery, scale-up, antibody
purification and antibody engineering. From 1989 to 1991, she served as a
Research Scientist at Repligen Corporation, a biotechnology company, where she
directed its efforts to generate a broadly neutralizing monoclonal antibody to
HIV-1. Dr. White-Scharf received her B.S. in biology from Southern Methodist
University, her M.A. in physiology from the University of Texas Medical Branch
and her Ph.D. in medical microbiology from Stanford University School of
Medicine.

    MR. CAPASSO has served as Vice President, Finance and Treasurer of the
Company since May 1997. From December 1994 until May 1997 he served as Director
of Finance of the Company and from December 1991 until December 1994 he served
as Controller of the Company. From 1988 to 1991, Mr. Capasso served as Manager
of Financial Reporting and Controller at Softbridge, Inc., a computer software
development company. From 1984 to 1988, he served as a member of the
professional staff of the Enterprise Group of Arthur Andersen LLP, an
international public accounting firm. Mr. Capasso received his B.S. from
Northeastern University with a major in accounting and received his C.P.A. in
1987.

    DR. GROSSBERG has served as Vice President of Medical Affairs of the Company
since December 1999. From 1996 to 1999, he served as Vice President for Medical
and Clinical Affairs for V.I. Technologies, Inc., a biopharmaceutical company
involved in producing virally safe blood products and other antiviral
technologies. From 1995 to 1996, he was Chief Medical Officer at Forest
Laboratories, and from 1991 to 1995 he served as Executive Director of General
Drug Development at Ciba Geigy, where he directed the International Project Team
efforts in signal transduction, aromatase inhibition and lung cancer
chemotherapy. Prior to his promotion to Executive Director, he served as
Director of Oncology at Ciba Geigy from 1990 to 1991. From 1986 to 1990, he was
Associate Director of Oncology at Schering Plough, where he was part of the
clinical development team responsible for the U.S. registration of
alpha-interferon and other biologic response modifiers. Dr. Grossberg received
his B.S. in chemistry from Union College (N.Y.) and received his M.D. from
S.U.N.Y. Downstate. He served as a medical intern at the University of Michigan
Medical Center, performed a medical residency at Montefiore Hospital (N.Y.), and
was a fellow in hematology and oncology at N.Y.U. Dr. Grossberg is
board-certified in internal medicine, hematology and oncology.

                                       25
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    (A) MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON STOCK AND
       RELATED STOCKHOLDER MATTERS.

    The Common Stock of BioTransplant Incorporated has been traded on the Nasdaq
National Market under the symbol BTRN since May 8, 1996. Prior to May 8, 1996,
the Company's Common Stock was not publicly traded. The following table sets
forth for the periods indicated the high and low sales prices per share of the
Common Stock as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                                     1998
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................   $6.13      $3.75
Second Quarter..............................................   $4.25      $3.13
Third Quarter...............................................   $3.75      $1.50
Fourth Quarter..............................................   $3.00      $1.00
</TABLE>

<TABLE>
<CAPTION>
                                                                     1999
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................   $2.69      $1.88
Second Quarter..............................................   $4.94      $1.94
Third Quarter...............................................   $7.50      $4.50
Fourth Quarter..............................................   $9.28      $4.88
</TABLE>

    On March 15, 2000, the Company had approximately 1,000 stockholders of
record and the closing price of the Company's Common Stock on the Nasdaq
National Market was $13.44. The Company has never declared or paid any dividends
on its Common Stock. The Company does not expect to pay cash dividends in the
foreseeable future.

    (B) REPORT OF OFFERING OF SECURITIES AND USE OF PROCEEDS THEREFROM

    On December 29, 1999, the Company issued and sold to a group of investors an
aggregate of 1,706,287 shares of its common stock, $.01 par value per share, at
a purchase price of $4.50 per share for net proceeds to the Company of
approximately $7.4 million.

    On February 11, 2000, the Company issued and sold to a group of investors an
aggregate of 1,215,000 shares of its common stock, $.01 par value per share, at
a purchase price of $8.00 per share, for net proceeds to the Company of
approximately $9.0 million.

    No person acted as an underwriter with respect to the above transactions.
BioTransplant relied on Regulation D of the Securities Act of 1933, as amended
(the "Securities Act"), for the exemption from the registration requirements of
the Securities Act, since no public offering was involved.

                                       26
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                                PERIOD FROM
                                                                                                 INCEPTION
                                                                                              (MARCH 20, 1990)
                                                   YEARS ENDED DECEMBER 31,                   TO DECEMBER 31,
                                   --------------------------------------------------------   ----------------
                                     1995       1996        1997        1998        1999            1999
                                   --------   ---------   ---------   ---------   ---------   ----------------
                                                      (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                <C>        <C>         <C>         <C>         <C>         <C>
Revenues:
  License fees...................  $ 4,000      $ 2,000     $ 5,000     $ 1,000     $ 3,500       $18,500
  Research and development.......    5,875        5,750       7,125       5,688       5,189        32,252
  Interest income................      168        1,296       1,731       1,318         782         5,653
Total Revenue....................   10,043        9,046      13,856       8,006       9,471        56,405
Expenses:
  Research and development.......    9,460       12,268      13,988      14,730      15,680        92,942
  General and administrative.....    1,939        2,680       2,963       2,477       2,446        18,832
  Interest.......................      731          135          58          10          18         1,777
Total expense....................    2,130       15,083      17,009      17,217      18,144       113,551
Net loss per common share:
  Basic and diluted..............  $(16.78)     $ (1.08)    $ (0.37)    $ (1.07)    $ (1.01)
Weighted average common shares
  outstanding (1):
  Basic and diluted..............  124,373    5,582,055   8,568,709   8,578,941   8,598,085
</TABLE>

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                   ----------------------------------------------------
                                                     1995       1996       1997       1998       1999
                                                   --------   --------   --------   --------   --------
<S>                                                <C>        <C>        <C>        <C>        <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........................  $ 2,849     $6,564     $9,784    $13,168    $17,649
Marketable securities............................       --     13,001     19,863      6,843      3,718
Working capital..................................       86     17,788     24,111     15,499     14,629
Long-term investments............................       --     10,311      1,015         --         --
Total assets.....................................    5,732     32,316     32,939     22,683     23,419
Long-term obligation under capital leases, net of
  current portion................................      615        189         10         --         --
Redeemable convertible preferred stock...........   29,241         --         --         --         --
Stockholders' equity (deficit)...................  (28,840)    29,262     26,154     16,958     15,645
</TABLE>

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

(1) Computed on the basis described in Note 2(f) of Notes to Consolidated
    Financial Statements, Item 8, "Financial Statements and Supplementary Data"

                                       27
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

    Since commencement of operations in 1990, the Company has been engaged
primarily in the research and development of pharmaceutical products and systems
to enable the body's immune system to better tolerate the transplantation of
foreign cells, tissues and organs. The major sources of the Company's working
capital have been the proceeds from sales of equity securities, sponsored
research funding and license fees and capital lease financings. The Company has
not generated any revenues from the sale of products to date, and does not
expect to receive any product revenues for several years, if ever. The Company
will be required to conduct significant additional research, development,
testing and regulatory compliance activities that, together with general and
administrative expenses, are expected to result in significant and increasing
operating losses for at least the next several years.

    In 1993, and as amended and restated in September 1995, the Company and
Novartis entered into a collaboration agreement for the development and
commercialization of xenotransplantation products utilizing gene transduction.
Under the agreement, Novartis committed research funding and license fees
through March 1998 of $30.0 million, all of which had been received as of
December 31, 1997. Novartis has also agreed to fund certain development and
premarketing costs and products which may be developed as a result of the
collaboration, portions of which, under certain circumstances, may be repayable
from the Company's operating profits from sales of any such products.

    In October 1997, the Company and Novartis expanded their relationship by
entering into a collaboration and license agreement to develop and commercialize
xenotransplantation products utilizing the Company's proprietary mixed bone
marrow chimerism technology. Under the agreement, the Company may receive from
Novartis research funding, license fees, and milestone payments of up to
$36.0 million assuming the agreement continues for its full term and certain
research objectives are met. As of December 31, 1999, research funding of
$13.5 million, license fees of $4.0 million and milestone payments of
$2.5 million had been received. In addition to research funding, Novartis will
also fund certain development and premarketing costs of such products, portions
of which may be repayable under certain circumstances.

    In October 1995, the Company and MedImmune entered into a collaborative
research agreement for the development of products to treat and prevent organ
rejection. MedImmune paid the Company a $2.0 million license fee at the time of
execution of the agreement, and agreed to fund and assume responsibility for
clinical testing and commercialization of BTI-322 and other related products.
MedImmune has provided $2.0 million of non-refundable research support and has
agreed to make milestone payments which could total up to an additional
$11.0 million. Any milestone payments which are received are repayable from
royalties on such products.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

    Revenues increased to $9.5 million in 1999 from $8.0 million in 1998. The
increase in revenues was primarily due to $8.7 million in sponsored research,
milestone payments and license revenue from the Novartis agreements in 1999,
compared to $6.7 million in sponsored research and license revenue from Novartis
during 1998. Interest income decreased to $0.8 million in 1999 compared to
$1.3 million in 1998. The decrease was due to lower average cash balances
available for investment during 1999.

    Research and development expenses increased to $15.7 million in 1999 from
$14.7 million in 1998. This increase was primarily due to additional external
research support combined with increases in research and development staff and
associated increases in supplies and support services.

                                       28
<PAGE>
    General and administrative expenses decreased slightly to $2.4 million in
1999 from $2.5 million in 1998. This decrease was primarily due to decreased
outside professional services rendered in connection with market research and
business development.

    Interest expense increased to $18,000 in 1999 from $10,000 in 1998. This
increase was primarily due to borrowings under a term note in 1999.

    As a result of the above factors, the Company incurred a net loss for 1999
of $8.7 million compared to a net loss of $9.2 million for 1998.

YEARS ENDED DECEMBER 31, 1998 AND 1997

    Revenues decreased to $8.0 million in 1998 from $13.9 million in 1997. The
decrease in revenues was primarily due to $6.7 million in sponsored research and
license revenue from the Novartis agreements in 1998, compared to $11.4 million
in sponsored research and license revenue from Novartis during 1997.
Additionally, interest income decreased to $1.3 million in 1998 compared to
$1.7 million in 1997. The increase in interest income was due to lower average
cash balances available for investment during 1998.

    Research and development expenses increased to $14.7 million in 1998 from
$14.0 million in 1997. This increase was primarily due to additional external
research support combined with increases in research and development staff and
associated increases in supplies and support services.

    General and administrative expenses decreased to $2.5 million in 1998 from
$3.0 million in 1997. This decrease was primarily due to decreased outside
professional services rendered in connection with market research and
development.

    Interest expense decreased to $10,000 in 1998 from $59,000 in 1997. This
decrease was primarily due to decreasing balances on existing obligations under
capital leases.

    As a result of the above factors, the Company incurred a net loss for 1998
of $9.2 million compared to a net loss of $3.2 million for 1997.

LIQUIDITY AND CAPITAL RESOURCES

    Since its inception, the Company's operations have been funded principally
through the net proceeds of an aggregate of $71.6 million from sales of equity
securities. The Company has also received $49.7 million from research and
development and collaboration agreements with Novartis, $4.0 million from an
alliance agreement with MedImmune and $2.9 million in equipment financing. The
proceeds of the sales of equity securities, notes payable and capital leases and
cash generated from the corporate collaborations with Novartis and MedImmune
have been used to fund operating losses of approximately $57.1 million and the
investment of approximately $5.3 million in equipment and leasehold improvements
through December 31, 1999. The Company extended and increased its term note with
a bank from $500,000 to $1.0 million for certain equipment and fixtures
borrowing. There were $700,000 in borrowings outstanding under this term note at
December 31, 1999. The Company had no significant commitments as of
December 31, 1999 for capital expenditures.

    On December 29, 1999, the Company issued and sold to a group of investors an
aggregate of 1,706,287 shares of its common sock, $.01 par value per share, at a
purchase price of $4.50 per share for net proceeds to the Company of
approximately $7.4 million.

    On February 11, 2000, the Company issued and sold to a group of investors an
aggregate of 1,215,000 shares of its common stock, $.01 par value per share, at
a purchase price of $8.00 per share, for net proceeds to the Company of
approximately $9.0 million.

    The Company has entered into sponsored research and consulting agreements
with certain hospitals, academic institutions and consultants, requiring
periodic payments by the Company. Aggregate minimum funding obligations under
these agreements, which include certain cancellation provisions, total
approximately $4.4 million, which includes approximately $4.1 million in 2000.

                                       29
<PAGE>
    The Company had cash and cash equivalents and investments of $21.4 million
as of December 31, 1999.

    The Company anticipates that its existing funds should be sufficient to fund
its operating and capital requirements as currently planned through 2001.
However, the Company's cash requirements may vary materially from those now
planned due to many factors, including, but not limited to, the progress of the
Company's research and development programs, the scope and results of
preclinical and clinical testing, changes in existing and potential
relationships with corporate collaborators, the time and cost in obtaining
regulatory approvals, the costs involved in obtaining and enforcing patents,
proprietary rights and any necessary licenses, the ability of the Company to
establish development and commercialization capacities or relationships, the
costs of manufacturing and other factors.

    The Company expects to incur substantial additional costs, including costs
related to research and development activities, preclinical studies, clinical
trials, obtaining regulatory approvals, manufacturing and the expansion of its
facilities. The Company will need to raise substantial additional funds, through
additional financings including public or private equity offerings and
collaborative arrangements with corporate partners. There can be no assurance
that funds will be available on terms acceptable to the Company, if at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate certain of its product development programs or to license to
others the right to commercialize products or technologies that the Company
would otherwise seek to develop and commercialize itself, any of which would
have a material and adverse effect on the Company.

YEAR 2000 READINESS

    Historically, certain computer programs have been written using two digits
rather than four digits, to define the applicable year. This could lead, in many
cases, to a computer's recognition of a date using "00" as 1900 rather than the
year 2000. This phenomenon could result in significant computer system failures
or miscalculations, and is generally referred to as the "Year 2000" problem or
issue.

    At December 31, 1999, the Company had completed an inventory of its
financial and management operating systems and updated or replaced any programs
that were not Year 2000 compliant.

    The Company estimates that the cost to remediate its financial and
management operating systems and embedded chips in its facilities or equipment
was less than $25,000, including capital costs for new computers and related
equipment. This amount does not include costs for computer software developed in
order to provide or improve functionality.

    The Company has also interviewed third parties, vendors and suppliers of the
Company to determine their exposure to Year 2000 issues, their anticipated risks
and responses to those risks. The Company completed this process and no material
risks were identified.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

    The Company owns financial instruments that are sensitive to market risks as
part of its investment portfolio. The investment portfolio is used to preserve
the Company's capital until it is required to fund operations, including the
Company's research and development activities. All of these market-risk
sensitive instruments are classified as held-to-maturity and are not held for
trading purposes. The Company does not own derivative financial instruments in
its investment portfolio. The investment portfolio contains instruments that are
subject to the risk of a decline in interest rates.

    INTEREST RATE RISK:  The Company's investment portfolio includes investment
grade debt instruments. These bonds are subject to interest rate risk, and could
decline in value if interest rates fluctuate. Due to the short duration and
conservative nature of these instruments, the Company does not believe that it
has a material exposure to interest rate risk.

                                       30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To BioTransplant Incorporated:

    We have audited the accompanying consolidated balance sheets of
BioTransplant Incorporated (a Delaware corporation in the development stage) and
subsidiary as of December 31, 1998 and 1999 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1999 and for the period from
inception (March 20, 1990) to December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
BioTransplant Incorporated and subsidiary as of December 31, 1998 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 and for the period from inception
(March 20, 1990) to December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

                                          Arthur Andersen LLP

Boston, Massachusetts
February 11, 2000

                                       31
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                              -------------------------
                                                                 1998          1999
                                                              -----------   -----------
<S>                                                           <C>           <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................  $13,168,496   $17,648,789
  Short-term investments....................................    6,842,963     3,718,033
  Other receivables.........................................           --       400,500
  Prepaid expenses and other current assets.................    1,212,294       169,733
                                                              -----------   -----------
      Total current assets..................................   21,223,753    21,937,055
                                                              -----------   -----------
Property and equipment, at cost:
  Equipment under capital leases............................       45,000            --
  Laboratory equipment......................................    3,521,985     3,707,833
  Leasehold improvements....................................      696,016       795,017
  Office equipment..........................................      615,616       792,605
                                                              -----------   -----------
                                                                4,878,617     5,295,455
  Less--Accumulated depreciation............................    3,420,592     3,813,455
                                                              -----------   -----------
                                                                1,458,025     1,482,000
                                                              -----------   -----------
Other assets................................................        1,541
                                                              -----------   -----------
                                                              $22,683,319   $23,419,055
                                                              ===========   ===========
                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long term debt.........................  $        --   $   233,333
  Current obligation under capital leases...................       10,042            --
  Accounts payable..........................................      227,356       433,067
  Accrued expenses..........................................    2,112,658     2,516,173
  Deferred revenue..........................................    3,375,000     4,125,000
                                                              -----------   -----------
    Total current liabilities...............................    5,725,056     7,307,573
                                                              -----------   -----------
Long-term debt, net of current portion......................           --       466,667
                                                              -----------   -----------
Commitments (Notes 9 and 10)
Stockholders' equity:
  Preferred stock, $.01 par value--Authorized--2,000,000
    shares; Issued and outstanding--no shares...............           --            --
  Common stock, $.01 par value--Authorized--25,000,000
    shares; Issued and outstanding--8,581,463 shares in 1998
    and 10,300,890 shares in 1999...........................       85,815       103,010
Additional paid-in capital..................................   65,345,228    72,688,035
Deficit accumulated during the development stage............  (48,472,780)  (57,146,230)
                                                              -----------   -----------
      Total stockholders' equity............................   16,958,263    15,644,815
                                                              -----------   -----------
                                                              $22,683,319   $23,419,055
                                                              ===========   ===========
</TABLE>

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

                                       32
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                               FOR THE YEARS ENDED DECEMBER 31,        CUMULATIVE
                                            ---------------------------------------      SINCE
                                               1997          1998          1999        INCEPTION
                                            -----------   -----------   -----------   ------------
<S>                                         <C>           <C>           <C>           <C>
Revenues:
  License fees............................  $ 5,000,000   $ 1,000,000   $ 3,500,000   $ 18,500,000
  Research and development................    7,125,000     5,688,500     5,188,475     32,251,975
  Interest income.........................    1,731,258     1,317,780       782,182      5,652,839
                                            -----------   -----------   -----------   ------------
    Total revenues........................   13,856,258     8,006,280     9,470,657     56,404,814
                                            -----------   -----------   -----------   ------------
Expenses:
  Research and development................   13,987,982    14,729,825    15,680,281     92,941,557
  General and administrative..............    2,962,644     2,477,460     2,445,912     18,831,995
  Interest................................       58,886         9,602        17,914      1,777,492
                                            -----------   -----------   -----------   ------------
    Total expenses........................   17,009,512    17,216,887    18,144,107    113,551,044
                                            -----------   -----------   -----------   ------------
    Net loss..............................  $(3,153,254)  $(9,210,607)  $(8,673,450)  $(57,146,230)
                                            ===========   ===========   ===========   ============
Net loss per common share:
  Basic and diluted.......................  $      (.37)  $     (1.07)  $     (1.01)
                                            ===========   ===========   ===========
Weighted average common shares
  outstanding:
  Basic and diluted.......................    8,568,709     8,578,941     8,598,085
                                            ===========   ===========   ===========
</TABLE>

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

                                       33
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                                    DEFICIT
                                                                COMMON STOCK                      ACCUMULATED        TOTAL
                                                           ----------------------   ADDITIONAL     DURING THE    STOCKHOLDERS'
                                                             NUMBER       $.01        PAID-IN     DEVELOPMENT       EQUITY
                                                           OF SHARES    PAR VALUE     CAPITAL        STAGE         (DEFICIT)
                                                           ----------   ---------   -----------   ------------   -------------
<S>                                                        <C>          <C>         <C>           <C>            <C>
Inception, March 20, 1990................................          --   $     --    $        --   $        --     $        --
  Net loss...............................................          --         --             --      (142,353)       (142,353)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1990...............................          --         --             --      (142,353)       (142,353)
  Sale of common stock...................................     102,572      1,026          3,077            --           4,103
  Issuance of warrants...................................          --         --         22,000            --          22,000
  Net loss...............................................          --         --             --    (2,637,206)     (2,637,206)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1991...............................     102,572      1,026         25,077    (2,779,559)     (2,753,456)
  Net loss...............................................          --         --             --    (6,188,344)     (6,188,344)
Balance, December 31, 1992...............................     102,572      1,026         25,077    (8,967,903)     (8,941,800)
  Issuance of warrants...................................          --         --        476,800            --         476,800
  Exercise of stock options..............................          63          1             46            --              47
  Deferred compensation on stock options.................          --         --        105,546            --         105,546
  Net loss...............................................          --         --             --    (7,748,627)     (7,748,627)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1993...............................     102,635      1,027        607,469   (16,716,530)    (16,108,034)
  Exercise of stock options..............................      17,406        174          1,448            --           1,622
  Restricted stock sold to directors.....................       1,250         12          8,738            --           8,750
  Issuance of warrants...................................          --         --        165,937            --         165,937
  Deferred compensation on stock options.................          --         --        170,225            --         170,225
  Net loss...............................................          --         --             --   (11,268,042)    (11,268,042)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1994...............................     121,291      1,213        953,817   (27,984,572)    (27,029,542)
  Issuance of warrants...................................          --         --         99,000            --          99,000
  Exercise of stock options..............................       5,303         53          7,301            --           7,354
  Deferred compensation on stock options.................          --         --        170,225            --         170,225
  Net loss...............................................          --         --             --    (2,087,239)     (2,087,239)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1995...............................     126,594      1,266      1,230,343   (30,071,811)    (28,840,202)
  Conversion of preferred stock into common stock........   4,770,430     47,704     36,154,586            --      36,202,290
  Issuance of common stock in initial public offering,
    net of issuance costs of $2,681,920..................   3,220,000     32,200     27,875,880            --      27,908,080
  Issuance of common stock pursuant to antidilution
    rights...............................................     431,724      4,317         (4,317)           --              --
  Exercise of stock options..............................      10,154        102         28,546            --          28,648
  Net loss...............................................          --         --             --    (6,037,108)     (6,037,108)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1996...............................   8,558,902     85,589     65,285,038   (36,108,919)     29,261,708
  Exercise of stock options..............................      15,238        153         45,407            --          45,560
  Restricted stock sold to directors.....................       1,250         12             38            --              50
  Net loss...............................................          --         --             --    (3,153,254)     (3,153,254)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1997...............................   8,575,390     85,754     65,330,483   (39,262,173)     26,154,064
  Exercise of stock options..............................       6,073         61         14,745            --          14,806
  Net loss...............................................          --         --             --    (9,210,607)     (9,210,607)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1998...............................   8,581,463   $ 85,815    $65,345,228   $(48,472,780)   $16,958,263
  Exercise of stock options..............................      11,265        113         24,803            --          24,916
  Restricted stock sold to directors.....................       1,875         19          4,433            --           4,452
  Issuance of common stock in private placement, net of
    issuance costs of $517,215...........................   1,706,287     17,063      7,313,571            --       7,330,634
  Net loss...............................................          --         --             --    (8,673,450)     (8,673,450)
                                                           ----------   --------    -----------   ------------    -----------
Balance, December 31, 1999...............................  10,300,890   $103,010    $72,688,035   $(57,146,230)   $15,644,815
                                                           ==========   ========    ===========   ============    ===========
</TABLE>

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

                                       34
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                              ---------------------------------------     CUMULATIVE
                                                                 1997          1998          1999       SINCE INCEPTION
                                                              -----------   -----------   -----------   ---------------
<S>                                                           <C>           <C>           <C>           <C>
Cash flows from operating activities:
  Net loss..................................................  $(3,153,254)  $(9,210,607)  $(8,673,450)   $(57,146,230)
  Adjustments to reconcile net loss to net cash (used in)
    provided by operating activities-
    Depreciation and amortization...........................      581,641       358,052       392,865       3,877,145
    Noncash interest expense on convertible notes payable to
      stockholders..........................................           --            --            --         465,477
    Noncash expenses related to options and warrants........       33,188        33,186         1,541       1,186,785
    Changes in current assets and liabilities-
      Accounts receivable...................................           --            --      (400,500)       (400,500)
      Prepaid expenses and other current assets.............     (150,984)       26,206     1,042,561        (169,733)
      Accounts payable......................................      163,532       (62,179)      205,711         433,067
      Accrued expenses......................................      869,252       (69,558)      403,514       2,516,172
      Deferred revenue......................................    3,125,000      (750,000)      750,000       4,125,000
                                                              -----------   -----------   -----------    ------------
        Net cash (used in) provided by operating
          activities........................................    1,468,375    (9,674,900)   (6,277,758)    (45,112,817)
                                                              -----------   -----------   -----------    ------------
Cash flows from investing activities:
  Purchases of property and equipment.......................     (300,893)     (812,828)     (416,839)     (4,735,948)
  Disposal of property and equipment, net...................           --            --            --          28,040
  Purchases of investments..................................  (19,050,026)   (8,887,022)   (4,086,657)    (70,224,397)
  Proceeds from investments.................................   21,484,458    22,921,877     7,211,587      66,506,363
                                                              -----------   -----------   -----------    ------------
        Net cash (used in) provided by investing
          activities........................................    2,133,539    13,222,027     2,708,091      (8,425,942)
                                                              -----------   -----------   -----------    ------------
Cash flows from financing activities:
  Proceeds from convertible notes payable to stockholders...           --            --            --       9,400,000
  Payments of obligations under capital leases..............     (427,252)     (177,666)      (10,042)     (2,194,210)
  Proceeds from sale/leaseback of equipment.................           --            --            --         771,968
  Proceeds from equipment leases............................           --            --            --       1,422,240
  Proceeds from long-term debt..............................           --            --       700,000         700,000
  Net proceeds from sale of redeemable convertible preferred
    stock...................................................           --            --            --      25,661,526
  Net proceeds from sale of common stock....................       45,610        14,806     7,360,002      35,426,024
                                                              -----------   -----------   -----------    ------------
        Net cash (used in) provided by financing
          activities........................................     (381,642)     (162,860)    8,049,960      71,187,548
                                                              -----------   -----------   -----------    ------------
Net increase in cash and cash equivalents...................    3,220,272     3,384,267     4,480,293      17,648,789
Cash and cash equivalents, beginning of period..............    6,563,957     9,784,229    13,168,496              --
                                                              -----------   -----------   -----------    ------------
Cash and cash equivalents, end of period....................  $ 9,784,229   $13,168,496   $17,648,789    $ 17,648,789
                                                              ===========   ===========   ===========    ============
Supplemental disclosure of noncash transactions:
  Equipment acquired under capital leases...................  $        --   $        --   $        --    $ (2,210,170)
                                                              ===========   ===========   ===========    ============
  Conversion of convertible notes payable to stockholders
    and accrued interest into redeemable convertible
    preferred stock.........................................  $        --   $        --   $        --    $  9,905,710
                                                              ===========   ===========   ===========    ============
  Conversion of preferred stock into common stock...........  $        --   $        --   $        --    $ 36,202,290
                                                              ===========   ===========   ===========    ============
  Issuance of warrants......................................  $        --   $        --   $        --    $    741,737
                                                              ===========   ===========   ===========    ============
  Leasehold improvements acquired through issuance of
    redeemable convertible preferred stock..................  $        --   $        --   $        --    $    619,584
                                                              ===========   ===========   ===========    ============
Supplemental disclosure of cash flow information:
  Interest paid during the period...........................  $    53,542   $     6,975   $    16,159    $  1,410,505
                                                              ===========   ===========   ===========    ============
</TABLE>

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

                                       35
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

[1] OPERATIONS

    BioTransplant Incorporated (the "Company") was incorporated on March 20,
1990. The Company utilizes its proprietary technologies in re-educating the
body's immune responses to allow tolerance of foreign cells, tissues and organs.
Based on this ImmunoCognance-TM- technology, the Company is developing a
portfolio of products designed to treat a range of medical conditions for which
current therapies are inadequate, including organ and tissue transplantation,
cancer and autoimmune disease. BioTransplant's products under development are
intended to induce long-term functional transplantation tolerance in humans,
increase the therapeutic benefit of bone marrow transplants, and reduce or
eliminate the need for lifelong immunosuppressive therapy.

    The Company is in the development stage and is devoting substantially all of
its efforts toward product research and development and raising capital. The
Company is subject to a number of risks similar to those of other development
stage companies, including its dependence on key individuals and collaborative
research partners, competition from substitute products and larger companies, no
assurance that the Company will be able to develop and market commercially
usable products or obtain regulatory approval for its products under
development, and the need to obtain adequate additional financing necessary to
adequately fund the development of its products.

[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The accompanying consolidated financial statements reflect the application
of certain accounting policies described below and elsewhere in the notes to
consolidated financial statements.

    (a) Principles of Consolidation

    The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation.

    (b) Use of Estimates in the Preparation of Financial Statements

    The preparation of 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
disclosure 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.

    (c) Cash and Cash Equivalents and Investments

    Cash and cash equivalents include short-term, highly liquid investments with
original maturities of less than three months from the date of purchase.
Short-term investments consist primarily of corporate notes with maturities of
less than one year. In accordance with Financial Accounting Standards Board
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", the Company's investments are classified as held-to-maturity and
are stated at amortized cost, which approximates market value. At December 31,
1999 the weighted average maturity of all investments was two months.

                                       36
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The Company held the following cash equivalents and investments at
December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                        1998          1999
                                                     -----------   -----------
<S>                                                  <C>           <C>
Cash and cash equivalents:.........................  $13,168,496   $17,648,789
                                                     -----------   -----------
Short-term investments:
  Corporate Bonds (average maturity of 2 months)...    6,842,963            --
  Commercial Paper (average maturity of 2
    months)........................................           --     3,718,033
                                                     -----------   -----------
                                                       6,842,963     3,718,033
                                                     -----------   -----------
  Total Cash, Cash equivalents and Investments.....  $20,011,459   $21,366,822
                                                     ===========   ===========
</TABLE>

    There were no realized gains or losses in the years ended December 31, 1997,
1998 and 1999.

    (d) Depreciation and Amortization

    The Company provides for depreciation using the straight-line method by
charges to operations in amounts estimated to allocate the cost of these assets
over a five-year life. Amortization of equipment under capital lease and
leasehold improvements is computed using the straight-line method over the
shorter of the estimated useful life of the asset or the lease term.

    (e) Revenue Recognition

    Substantially all of the Company's license and research and development
revenues are derived from three collaborative research arrangements (see
Note 7). Annual research and development payments are recognized on a
straight-line basis over the period of the contract, which approximates when
work is performed and costs are incurred. License fee revenue represents
technology transfer fees received for rights to certain technology of the
Company. License fees are recognized as revenue when all obligations as defined
in the individual arrangements are fulfilled by the Company and there is no risk
of refund. Deferred revenue represents amounts received in advance for research
and development. Research and development expenses in the accompanying
consolidated statements of operations include funded and unfunded expenses.

    (f) Net Loss per Common Share

    The Company applies Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share" ("FAS 128"), which establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. Diluted weighted average shares is the same as
basic weighted average shares since the inclusion of shares issuable pursuant to
the exercise of stock options and warrants would have been antidilutive.

                                       37
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    Calculations of basic and diluted net loss per common share are as follows:

<TABLE>
<CAPTION>
                                            1997          1998          1999
                                         -----------   -----------   -----------
<S>                                      <C>           <C>           <C>
Net loss...............................  $(3,153,254)  $(9,210,607)  $(8,673,450)
                                         ===========   ===========   ===========
Weighted average common shares
  outstanding--basic and diluted.......    8,568,709     8,578,941     8,598,085
                                         ===========   ===========   ===========
Basic and diluted net loss per common
  share................................  $      (.37)  $     (1.07)  $     (1.01)
                                         ===========   ===========   ===========
Antidilutive securities not included--
  Common stock options.................      164,270        48,266       296,396
                                         ===========   ===========   ===========
  Common stock warrants................      216,338       133,007       151,998
                                         ===========   ===========   ===========
</TABLE>

[3] TERM NOTE

    In September 1997, the Company entered into a term note with a bank, whereby
the Company may borrow up to $500,000 for certain equipment and fixtures during
a specified drawdown period, after which time the outstanding balance will
become payable in 36 equal monthly principal installments plus interest. During
1999, the Company extended the drawdown period to December 31, 2002 and
increased its availability to $1.0 million under the same conditions of this
term note. Borrowings under the term note bear annual floating interest at the
bank's Prime Rate (8.5% at December 31, 1999) during the drawdown period with an
option to convert during the repayment period to an annual fixed rate at the
three-month London Interbank Offered Rate ("LIBOR") (6.12% at December 31, 1999)
plus 2.25%. Borrowings under the term note are secured by equipment and fixtures
purchased using the proceeds of the note. There were $700,000 in borrowings
outstanding under this term note at December 31, 1999.

[4] ACCRUED EXPENSES

    Accrued expenses consist of the following at December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                          1998         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>
Consulting and contract research.....................  $  947,331   $1,067,988
Payroll and payroll related..........................      52,284      309,209
Professional fees....................................     484,078      538,646
Other................................................     628,965      600,330
                                                       ----------   ----------
                                                       $2,112,658   $2,516,173
                                                       ==========   ==========
</TABLE>

[5] COMMON STOCK

    In December 1999, the Company completed a private placement of 1,706,287
shares of its common stock at $4.50 per share for net proceeds of approximately
$7.4 million.

                                       38
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    As of December 31, 1998 and 1999, the Company has reserved the following
shares of common stock for issuance:

<TABLE>
<CAPTION>
                                                               1998        1999
                                                             ---------   ---------
<S>                                                          <C>         <C>
1991 Stock Option Plan....................................     696,386     688,364
1994 Directors' Equity Plan...............................      49,375      99,375
1997 Stock Option Plan....................................     750,000   1,496,757
Outstanding warrants......................................     367,191     425,147
                                                             ---------   ---------
                                                             1,862,952   2,709,643
                                                             =========   =========
</TABLE>

[6] OPTIONS AND WARRANTS

    (a) Common Stock Plans

    In May 1997, the stockholders approved the 1997 Stock Incentive Plan (the
"1997 Plan") which was intended to replace the Company's Amended 1991 Stock
Incentive Plan (the "1991 Plan"), under which it may grant incentive stock
options, nonqualified stock options and stock appreciation rights. In May 1999,
the stockholders approved an amendment to increase the number of shares of
common stock reserved for issuance under the 1997 Plan from 750,000 to
1,500,000. These options generally vest ratably over a four-to-five-year period.

    In May 1999, the stockholders approved an amendment to the Company's 1994
Directors' Equity Plan (the "Directors' Plan"). The amendment increased from
50,000 to 100,000 the number of shares of common stock reserved for issuance
under the Directors' Plan. The Directors' Plan automatically grants an option to
each eligible outside director of the Company for the purchase of 3,125 shares
of common stock at the then fair market value upon such eligible outside
directors' election to the Board of Directors. In addition, each eligible
outside director concurrently receives an award to purchase 625 shares of
restricted common stock at $.04 per share. In 1999, the Company recorded
compensation expense of $4,378 related to the issuance of 1,875 shares of
restricted common stock under the Directors Plan. Under the Director's Plan,
common stock options and restricted common stock awards vest ratably over
five-and four-year periods, respectively. At December 31, 1999, 1,125 restricted
common shares were unvested.

                                       39
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The following table summarizes the employee and director stock option
activity under the plans discussed above:

<TABLE>
<CAPTION>
                                                       NUMBER     WEIGHTED AVERAGE
                                                     OF OPTIONS    EXERCISE PRICE
                                                     ----------   ----------------
<S>                                                  <C>          <C>
Outstanding, December 31, 1996.....................    668,302         $5.02
  Granted..........................................    404,964          6.63
  Exercised........................................    (15,238)         2.46
  Canceled.........................................    (43,603)         6.36
                                                     ---------         -----
Outstanding, December 31, 1997.....................  1,014,425         $5.65
  Granted..........................................    493,290          2.79
  Exercised........................................     (6,073)         2.43
  Canceled.........................................   (129,188)         6.98
                                                     ---------         -----
Outstanding, December 31, 1998.....................  1,372,454         $4.51
  Granted..........................................    329,745          4.46
  Exercised........................................    (11,265)         2.21
  Canceled.........................................    (69,326)         4.61
                                                     ---------         -----
Outstanding, December 31, 1999.....................  1,621,608         $4.53
                                                     =========         =====
Exercisable, December 31, 1997.....................    311,338         $4.06
                                                     =========         =====
Exercisable, December 31, 1998.....................    472,608         $4.70
                                                     =========         =====
Exercisable, December 31, 1999.....................    747,266         $4.70
                                                     =========         =====
</TABLE>

    The following tables summarize certain information about options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>
                                           WEIGHTED AVERAGE      WEIGHTED AVERAGE
                             OPTIONS     REMAINING CONTRACTUAL       EXERCISE
RANGE OF EXERCISE PRICES   OUTSTANDING       LIFE IN YEARS            PRICE
------------------------   -----------   ---------------------   ----------------
<S>                        <C>           <C>                     <C>
          $0.04-- 3.13        622,794             7.62                $2.37
           3.19-- 6.50        675,137             7.23                 5.44
           6.63--10.50        323,677             7.89                 6.79
                            ---------             ----                -----
          $0.04--10.50      1,621,608             7.51                $4.53
                            =========             ====                =====
</TABLE>

    The following tables summarize certain information about options exercisable
at December 31, 1999:

<TABLE>
<CAPTION>
                             OPTIONS     WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES   EXERCISABLE    EXERCISE PRICE
------------------------   -----------   ----------------
<S>                        <C>           <C>
          $0.04-- 3.13       236,554          $2.53
           3.19-- 6.50       369,869           5.28
           6.63--10.50       140,843           6.84
                             -------          -----
          $0.04--10.50       747,266          $4.70
                             =======          =====
</TABLE>

                                       40
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") requires that the measurement of the fair
value of stock options or warrants granted to employees be included in the
statement of operations or disclosed in the notes to financial statements. The
Company has determined that it will account for stock-based compensation for
employees under Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under FAS 123. The Company has computed the pro
forma disclosures required under FAS 123 for options granted in 1997, 1998 and
1999 using the Black-Scholes option pricing model prescribed by FAS 123. The
assumptions used for the years ended December 31, 1997, 1998 and 1999 are as
follows: risk-free interest rates of 5.53%, 4.73% and 6.72%; expected common
stock volatility factors of 68%, 85% and 87%; and a weighted-average expected
life of the stock options of seven years. The Company does not currently pay any
dividends, and it does not expect to pay cash dividends in the foreseeable
future; therefore; dividend yields for 1997, 1998 and 1999 are assumed to be 0%.
The weighted average fair value of options granted in 1997, 1998 and 1999 was
$4.61, $2.18, and $3.57, respectively.

    The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

    The total fair value of the options granted during the years ended
December 31, 1997, 1998 and 1999 was computed as approximately $1,867,000,
$1,074,000, and $1,177,000 respectively. Of these amounts, approximately
$642,000, $913,000, and $1,096,000 would be charged to operations for the years
ended December 31, 1997, 1998 and 1999, respectively. The remaining amount would
be amortized over the related vesting periods. The resulting pro forma
compensation expense may not be representative of the amount to be expected in
future years, as pro forma compensation expense may vary, based upon the number
of options granted and the assumptions used in valuing these options.

    The pro forma net loss and pro forma net loss per common share presented
below have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options granted
are incentive stock options and the Company does not anticipate a future
deduction associated with the exercise of these stock options. The pro forma
effect of FAS 123 for the years ended December 31, 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
                                              1997           1998          1999
                                           -----------   ------------   -----------
<S>                    <C>                 <C>           <C>            <C>
Net loss.............  As reported.......  $(3,153,254)  $ (9,210,607)  $(8,673,450)
                       Pro forma.........   (3,795,662)   (10,123,353)   (9,769,704)
Basic and diluted net
  loss per common
  share..............  As reported.......  $      (.37)  $      (1.07)  $     (1.01)
                       Pro forma.........         (.44)         (1.18)        (1.14)
</TABLE>

                                       41
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    (b) Warrants

    In connection with certain financing and facility leasing transactions that
occurred in 1993, 1994, and 1995, the Company issued warrants to purchase
369,944 shares of common stock at prices ranging from $.04 to $49.80. In
December 1999, the Company issued warrants to purchase 71,391 shares of common
stock at a price of $5.63 per share in connection with a private placement of
the Company's common stock. The following table summarizes certain information
about warrants outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                           WEIGHTED AVERAGE
                            WARRANTS     REMAINING CONTRACTUAL   WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES   OUTSTANDING       LIFE IN YEARS        EXERCISE PRICE
------------------------   -----------   ---------------------   ----------------
<S>                        <C>           <C>                     <C>
      $0.04--5.63            412,866              4.45                $2.93
      10.80--49.80            12,281              1.85                16.17
                             -------              ----                -----
      $0.04--49.80           425,147              4.37                $3.32
                             =======              ====                =====
</TABLE>

[7] COLLABORATIVE RESEARCH AGREEMENTS

    (a) Novartis

    In April 1993, as amended and restated in September 1995, the Company
entered into a five-year collaboration agreement with Novartis to develop and
commercialize xenotransplantation technology utilizing gene transduction.
Pursuant to this agreement, all committed research funding of $20.0 million and
all committed license fees of $10.0 million had been received as of
December 31, 1997. In October 1997, the Company and Novartis expanded their
relationship in xenotransplantation by entering into a collaboration and license
agreement for the development and commercialization of xenotransplantation
products utilizing the Company's proprietary mixed bone marrow chimerism
technology. Under this agreement, Novartis has committed up to $36.0 million in
research funding, license fees and milestone payments, assuming the agreement
continues for its full term. As of December 31, 1999, $13.5 million of research
funding, $4.0 million of license fees and $2.5 million of milestone payments had
been received. Pursuant to the terms of these agreements, Novartis is obligated
to fund the development costs associated with certain xenotransplantation
products developed by the Company, subject to reimbursement of a portion thereof
by the Company, if the Company elects, under certain circumstances, to
co-promote such products. The Company has the right to co-promote solely in
North America and to receive an agreed upon share of profits, if any, derived
from North American sales. The Company is entitled to receive royalties on the
sale of xenotransplantation products by Novartis outside of North America and,
to the extent that the Company elects not to co-promote in North America, on
sales in North America, as well.

    As of December 31, 1999, the Company had deferred revenue of $4,125,000
pursuant to the Novartis agreements, which represents annual research and
development payments received prior to recognition of revenue.

    In addition to these agreements, Novartis purchased $5.0 million of the
Company's Series B convertible preferred stock in 1992, which converted into
532,125 shares of common stock upon the Company's initial public offering.

    (b) MedImmune, Inc.

    In October 1995, the Company and MedImmune, Inc. ("MedImmune") formed a
collaborative agreement for the development and commercialization of products to
treat and prevent organ

                                       42
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

transplant rejection. The collaboration is based upon the development of
products derived from BTI-322, MEDI-500 and future generations of products
derived from these two molecules (including MEDI-507, the humanized version of
BTI-322). Pursuant to the collaboration, the Company granted MedImmune an
exclusive worldwide license to develop and commercialize BTI-322 and any
products based on BTI-322, other than the use of BTI-322 in kits or systems for
xenotransplantation or allotransplantation. MedImmune paid the Company a
$2.0 million license fee at the time of formation of the collaboration, and
agreed to fund and assume responsibility for clinical testing and
commercialization of any resulting products. As of December 31, 1999, MedImmune
has provided $2.0 million in non-refundable research support and has agreed to
make milestone payments that could total up to an additional $11.0 million, all
of which is repayable from royalties on BTI-322/MEDI-507 or MEDI-500, as well as
pay royalties on any sales of BTI-322/MEDI-507, MEDI-500 and future generations
of products, if any. The Company has not received any milestone payments to
date. MedImmune is entitled to a credit against royalty payments for certain
milestone payments that it makes.

[8] INCOME TAXES

    The Company accounts for income taxes in accordance with Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes". At
December 31, 1999 the Company had net operating loss carryforwards for income
tax purposes of approximately $51,959,000. The Company also has available tax
credit carryforwards of $2,000,000 at December 31, 1999 to reduce future federal
income taxes, if any. The net operating loss carryforwards and tax credit
carryforwards expire commencing in the year 2006, and are subject to review and
possible adjustment by the Internal Revenue Service. Net operating loss
carryforwards and tax credit carryforwards may be limited in the event of
certain changes in the ownership interests of significant stockholders.

    The components of the deferred tax asset as of December 31, 1998 and 1999
are approximately as follows:

<TABLE>
<CAPTION>
                                                       1998           1999
                                                   ------------   ------------
<S>                                                <C>            <C>
Operating loss carryforwards.....................  $ 17,592,000   $ 19,350,000
Tax credit carryforwards.........................     2,000,000      2,000,000
Start-up costs...................................        50,000             --
Other temporary differences......................     1,681,000      1,550,000
                                                   ------------   ------------
                                                     21,323,000     22,900,000
Less--Valuation allowance........................   (21,323,000)   (22,900,000)
                                                   ------------   ------------
                                                   $         --   $         --
                                                   ============   ============
</TABLE>

    Because of the history of operating losses, a valuation allowance has been
provided for the entire deferred tax asset since it is uncertain if the Company
will realize the benefit of the deferred tax asset.

[9] COMMITMENTS

    (a) Research and License Agreements

    The Company has entered into several research and license agreements with a
hospital whereby the Company obtained the rights to the hospital's research
pertaining to the transplantation of organs and tissues and other related
technologies. The Company also obtained an exclusive license to commercially
develop, manufacture, use and distribute worldwide any products developed
pursuant to

                                       43
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the agreements, in exchange for research funding and royalties on any future
sales. These agreements have initial terms of one to ten years; however, either
party may terminate the agreements at various times, as defined, with written
notice.

    The Company has entered into research and license agreements with
universities whereby the Company funds research and development. The Company
also obtained exclusive worldwide licenses for certain patents, patent rights
and research information and rights to develop, manufacture, use and sell any
product developed pursuant to the licensed technology in exchange for royalties
on any future sales, as defined.

    The Company has entered into a miniature swine transfer and maintenance
agreement with a breeding laboratory and was granted exclusive, worldwide rights
to the miniature swine. Pursuant to this agreement, the Company has agreed to
pay specified maintenance costs, as defined in the agreement.

    Commitments as of December 31, 1999, pursuant to these research and license
agreements are as follows:

<TABLE>
<CAPTION>
                                                                TOTAL
                                                              ----------
<S>                                                           <C>
Year Ending December 31,
2000........................................................  $4,112,000
2001........................................................     150,000
2002........................................................     150,000
                                                              ----------
                                                              $4,412,000
                                                              ==========
</TABLE>

    (b) Operating Lease Commitments

    The Company leases its facility under an operating lease that expires in
2009. In addition, the Company is responsible for the real estate taxes and
operating expenses related to this facility. Minimum annual rental payments,
excluding taxes and operating costs, under this lease agreement are as follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $ 1,025,000
2001........................................................    1,025,000
2002........................................................    1,025,000
2003........................................................    1,025,000
2004........................................................    1,025,000
Thereafter..................................................    5,125,000
                                                              -----------
                                                              $10,250,000
                                                              ===========
</TABLE>

    Rental expense, which includes facility lease, ground lease and real estate
tax costs, for the years ended December 31, 1997, 1998 and 1999 was
approximately $1,196,000, $1,219,000 and $1,192,000, respectively.

[10] INVESTMENT IN STEM CELL SCIENCES PTY. LTD.

    In April 1994, the Company entered into a shareholders' agreement and a
research and license agreement (the "Agreements") with Stem Cell Sciences
Pty. Ltd. ("Stem Cell"). Under the Agreements, the Company paid $1,000,000 for
30% of the outstanding shares of Stem Cell, an exclusive license to

                                       44
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

certain technology and other intellectual property and support of certain
research in the field of animal genetic engineering. The Company recorded the
$1,000,000 payment as research and development expense during the year ended
December 31, 1994.

    The Company recorded $676,000 as research and development expense during the
year ended December 31, 1997, to maintain its pro rata ownership in Stem Cell.

    In December 1997, the Company paid $700,000 in research support to maintain
its pro rata ownership of Stem Cell for 1998, which was recorded as research and
development expense on a straight-line basis over the year ended December 31,
1998. During 1998, the Company exercised its final option to maintain its pro
rata ownership in Stem Cell for an additional commitment of $825,000 in research
support which was recognized as research and development expense on a
straight-line basis over the year ending December 31, 1999. The Company paid
$175,000 of this amount in December 1998 and paid the remaining amount during
1999.

[11] EMPLOYMENT RETIREMENT/SAVINGS PLAN

    The Company maintains an employee retirement/savings plan (the "Plan") which
permits participants to make tax deferred contributions by salary reduction
pursuant to section 401(k) of the Internal Revenue Code. All active employees,
21 years of age or older, who have completed a calendar quarter of service are
eligible to participate in the Plan. The Company pays all administrative costs
of the Plan and currently makes no matching contributions to the Plan.

[12] RECENT ACCOUNTING PRONOUNCEMENTS

    (a) Comprehensive Income

    In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. This statement is effective for fiscal years beginning
after December 15, 1997. The Company adopted this statement for the year ended
December 31, 1998 with no material impact on the Company's financial statements
as there are no material differences between the Company's reported income and
comprehensive income for all periods presented.

    (b) Segment Reporting

    In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131"). FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that enterprises report selected information about
operating segments in interim financial reports issued to stockholders. The
Company adopted this statement for the year ended December 31, 1998. In
accordance with FAS 131, the Company believes that it operates in one operating
segment.

    (c) Pensions and Other Postretirement Benefits

    The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." Statement No. 132 is effective for years
beginning after December 15, 1998. The Company adopted this statement for the
year ended December 31, 1999. Adoption of this statement did not have a material
impact on the Company's financial statements.

                                       45
<PAGE>
                   BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    (d) Derivative Instruments and Hedging Activities

    In June 1999, FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE DATE OF FASB
STATEMENT NO. 133, which defers the effective date of SFAS No. 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, issued in June
1998, establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Company does not expect adoption of this
statement to have a significant impact on its consolidated financial position or
results of operations.

    (e) Staff Accounting Bulletin No. 101

    Staff Accounting Bulletin No. 101 (SAB 101), REVENUE RECOGNITION, was issued
in December 1999. SAB 101 will require companies to recognize certain upfront
non-refundable fees and milestone payments over the life of the related alliance
when such fees are received in conjunction with alliances which have multiple
elements. The Company is required to adopt this new accounting principle through
a cumulative charge to the statement of operations, in accordance with
Accounting Principles Board Opinion (APB) No. 20, ACCOUNTING CHANGES, no later
than the second quarter of fiscal 2000. The Company believes that the adoption
of SAB 101 will have an impact on its future operating results as it relates to
the upfront non-refundable payments and milestone payments received in
connection with alliances (see Note 7). The historical financial statements
reflect payments of approximately $18.5 million received through December 31,
1999. Based on guidance currently available, upon adoption of SAB 101, the
Company will be required to record these fees as revenue over the life of the
related agreement, as defined.

[13] RELATED PARTY TRANSACTIONS

    In March 1991, the Company entered into a supply agreement with Charles
River Laboratories (CRL), which was amended in 1998. Under the terms of the
amended agreement, CRL provides the Company with miniature swine and miniature
swine organs for research and development purposes in exchange for payments of
the costs of maintaining the miniature swine herd. Upon commencement of
commercial sales of miniature swine organs, the Company and CRL will look to
enter into a definitive supply agreement for the ongoing supply of miniature
swine. In the years ended December 31, 1998 and 1999, the Company paid CRL
approximately $878,000 and $940,000, respectively, under this agreement. James
C. Foster, President and Chief Executive Officer of CRL, is a director of the
Company.

[14] SUBSEQUENT EVENTS

    On February 11, 2000, the Company issued and sold to a group of investors an
aggregate of 1,215,000 shares of its common stock, $.01 par value per share, at
a purchase price of $8.00 per share, for net proceeds to the Company of
approximately $9,000,000.

                                       46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    During the Company's two most recent fiscal years, there have been no
disagreements with the Company's independent accountants on accounting and
financial disclosure matters.

                                    PART III

ITEMS 10. DIRECTORS AND EXECUTIVE OFFICERS

    Except as set forth below, the information required by this item is
incorporated by reference from the information under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in the Company's Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Meeting of Stockholders to be
held on June 7, 2000 (the "Proxy Statement").

    Certain required information about Executive Officers of the Company is
contained in Part I of this Annual Report on Form 10-K under the heading
"Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

    The information required regarding executive compensation is incorporated by
reference from the information under the captions "Compensation for Directors,"
"Compensation of Executive Officers," "Report of the Compensation Committee" and
Compensation Committee Interlocks and Insider Participation" contained in the
Proxy Statement.

ITEM 12. STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGMENT

    The information required by this item is incorporated by reference from the
information under the caption "Stock Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item is incorporated by reference from the
information contained under the caption "Certain Relationships and Related
Transactions" contained in the Proxy Statement.

                                    PART IV

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

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

                                       47
<PAGE>
    1.  Financial Statements:

<TABLE>
<CAPTION>
                                                              PAGE NUMBER IN
                                                               THIS REPORT
                                                              --------------
<S>                                                           <C>
Report of Independent Public Accountants on Financial
  Statements................................................        31
Consolidated Balance Sheets at December 31, 1999 and 1998...        32
Consolidated Statements of Operations for the years ended
  December 31, 1999, 1998, and 1997 and cumulative since
  inception (March 20, 1990)................................        33
Statements of Stockholders' Equity for the years ended
  December 31, 1999, 1998 and 1997 and cumulative since
  inception (March 20, 1990)................................        34
Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997 and cumulative since
  inception (March 20, 1990)................................        35
Notes to Financial Statements...............................        36
</TABLE>

    2.  The Exhibits listed in the Exhibit Index immediately preceding the
       Exhibits are filed as part of this Annual Report on Form 10-K.

(b) No Current Reports on Form 8-K were filed by the Company during the last
    quarter covered by this report:

    The following trademarks are mentioned in this Annual Report on Form 10-K:

       BioTransplant-TM-
       AlloMune-TM-
       BTI-322-TM- antibody
       XenoMune-TM-
       ImmunoCognance-TM-

                                       48
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 28(th) day of
March, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       BIOTRANSPLANT INCORPORATED

                                                       By:             /s/ ELLIOT LEBOWITZ
                                                            -----------------------------------------
                                                                      Elliot Lebowitz, Ph.D.
</TABLE>

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

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                      DATE
                      ---------                                    -----                      ----
<C>                                                    <S>                             <C>
                                                       President, Chief Executive
                 /s/ ELLIOT LEBOWITZ                     Officer and Director
     -------------------------------------------         (Principal Executive            March 28, 2000
               Elliot Lebowitz, Ph.D.                    Officer)

                                                       Vice President, Finance and
               /s/ RICHARD V. CAPASSO                    Treasurer (Principal
     -------------------------------------------         Financial and Accounting        March 28, 2000
                 Richard V. Capasso                      Officer)

                /s/ DONALD R. CONKLIN                  Director
     -------------------------------------------                                         March 28, 2000
                  Donald R. Conklin

                                                       Director
     -------------------------------------------                                         March   , 2000
                  William W. Crouse

                 /s/ JAMES C. FOSTER                   Director
     -------------------------------------------                                         March 28, 2000
                   James C. Foster

                /s/ DANIEL O. HAUSER                   Director
     -------------------------------------------                                         March 28, 2000
               Daniel O. Hauser, Ph.D

                                                       Director
     -------------------------------------------                                         March   , 2000
           Michael S. Perry, D.V.M., Ph.D.
</TABLE>

                                       49
<PAGE>
                                 EXHIBIT INDEX

    The following exhibits are filed as part of this Annual Report on
Form 10-K.

<TABLE>
<CAPTION>
EXHIBIT NO.                                        DESCRIPTION
-----------                ------------------------------------------------------------
<C>                        <S>
         3.1 (2)           Restated Certificate of Incorporation.

         3.2 (2)           By-laws, as amended to date.

         4.1 (1)           Specimen certificate for shares of Common Stock.

       +10.1 (1)           Research and License Agreement between the Company and The
                           General Hospital Corporation, dated January 1, 1991 as
                           amended by Agreements dated November 10, 1993, June 28,
                           1995, November 1, 1995, December 19, 1995, December 22, 1995
                           and January 31, 1996 (the "1991 MGH Agreement").

       +10.2 (1)           Research and License Agreement between the Company and The
                           General Hospital Corporation dated December 8, 1992.

       +10.3 (1)           Research and License Agreement between the Company and The
                           General Hospital Corporation dated August 1, 1994.

       +10.4 (1)           Alliance Agreement between the Company and MedImmune, Inc.,
                           dated October 2, 1995.

       +10.5 (1)           Research and Supply Agreement between the Company and
                           Charles River Laboratories, Inc. dated March 1, 1991, as
                           supplemented by letter dated April 10, 1992.

       +10.6 (1)           Amended and Restated Collaboration Agreement between the
                           Company and Novartis Pharma, Inc. dated September 7, 1995.

       +10.7 (1)           Shareholders' Agreement by and among the Company, Castella
                           Research, Secure Sciences and Stem Cell Sciences Pty. Ltd.
                           dated April 5, 1994, as amended.

       +10.8 (1)           Research and License Agreement between the Company and Stem
                           Cell Sciences Pty Ltd. dated April 5, 1994 as amended.

        10.9 (1)           Form of Common Stock Warrant issued to affiliates of
                           BioLease, Inc in June 1994 and Schedule of Warrantholders.

        10.10(1)           Common Stock Warrant issued to Aberlyn Holding Company dated
                           June 16, 1993.

        10.11(1)           Common Stock Warrant issued to Aberlyn Capital Management
                           dated June 16, 1993.

        10.12(1)           Common Stock Warrant issued to Aberlyn Capital Management
                           Limited Partnership dated November 18, 1994.

        10.13(1)           Form of Common Stock Warrant issued to certain investors in
                           August 1994 and Schedule of Warrantholders.

        10.14(1)           Form of Common Stock Warrant issued to certain investors in
                           October 1994 and Schedule of Warrantholders.

        10.15(1)           Form of Common Stock Warrant issued to certain investors in
                           August 1995 and Schedule of Warrantholders.

        10.16(1)           Convertible Promissory Note and Warrant Purchase Agreement
                           by and among the Company, HealthCare Ventures II, L.P and
                           Everest Trust dated December 20, 1991.
</TABLE>

                                       50
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                        DESCRIPTION
-----------                ------------------------------------------------------------
<C>                        <S>
        10.17(1)           Preferred Stock Warrant Agreement between the Company and
                           Comdisco, Inc., dated December 12, 1991, as clarified by a
                           Letter Agreement dated May 15, 1992.

        10.18(1)           Convertible Promissory Note and Warrant Purchase Agreement
                           by and among the Company and the parties signatory thereto
                           dated October 31, 1994.

        10.19(1)           Third Amended and Restated Stockholders Agreement by and
                           among the Company and the parties signatory thereto; as
                           amended by a Consent, Waiver and Amendment dated January 23,
                           1996.

        10.20(1)           Form of Consent, Waiver and Amendment Agreement to Third
                           Amended and Restated Stockholders' Agreement by and among
                           the Company and the parties signatory thereto.

       *10.21(1)           Amended 1991 Stock Option Plan.

       *10.22(1)           1994 Directors' Equity Plan.

        10.23(1)           Consulting Agreement between the Company and Dr. David H.
                           Sachs dated January 1, 1991.

        10.24              Amendments to Consulting Agreement between the Company and
                           Dr. David H. Sachs dated December 1, 1998 and January 5,
                           2000.

        10.25(1)           Master Lease Agreement between the Company and Aberlyn
                           Capital Management Limited Partnership dated May 12, 1993.

        10.26(1)           Master Lease Agreement between the Company and Comdisco,
                           Inc., dated December 12, 1991.

        10.27(1)           Lease between the Company and BioLease, Inc. dated March 17,
                           1994.

        10.28              Amendment to Lease between the Company and BioLease, Inc.
                           dated November 17, 1998.

       +10.29(2)           Development and Supply Agreement between BioTransplant
                           Incorporated and Dendreon Corporation (formerly, Activated
                           Cell Therapy), dated August 22, 1996.

       +10.30(3)           Agreement to further vary Shareholder's Agreement between
                           BioTransplant Incorporated and C.R., S.S. and Stem Cell
                           Sciences Pty., Ltd., dated December 20, 1996.

       +10.31(3)           Agreement to further vary Shareholder's Agreement between
                           BioTransplant Incorporated and C.R., S.S. and Stem Cell
                           Sciences Pty., Ltd., dated March 16, 1997, as amended.

       +10.32(4)           Collaboration and License Agreement between the Company and
                           Novartis Pharma AG, dated October 6, 1997.

        10.33(6)           Letter Agreement, Security Agreement and Promissory Note
                           between the Company and Fleet National Bank, dated August
                           10, 1999.

       +10.34(5)           Miniature swine Transfer and Maintenance Agreement dated
                           January 1, 1998 by and between Charles River Laboratories,
                           Inc., Wilmington Partners, L.P. and the Company.

        23.1               Consent of Arthur Andersen LLP.

        27.1               Financial Data Schedule--Year Ended December 31, 1999.
</TABLE>

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

*   Management contract or compensatory plan or arrangement filed as an exhibit
    to this Form pursuant to Items 14(a) and 14(c) of Form 10-K.

                                       51
<PAGE>
+  Confidential treatment requested as to certain portions.

(1) Incorporated herein by reference to the Company's Registration Statement on
    Form S-1, as amended (File No. 333-2144).

(2) Incorporated herein by reference to the Company's Form 10-Q for the quarter
    ended September 30, 1996.

(3) Incorporated herein by reference to the Company's Form 10-Q for the quarter
    ended March 31, 1997.

(4) Incorporated herein by reference to the Company's Form 10-Q for the quarter
    ended September 30, 1997.

(5) Incorporated herein by reference to the Company's Form 10-Q for the quarter
    ended June 30, 1998.

(6) Incorporated herein by reference to the Company's Form 10-Q for the quarter
    ended September 30, 1999.

                                       52