<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

                         COMMISSION FILE NUMBER 0-21481

                          TRANSKARYOTIC THERAPIES, INC.
             (Exact name of registrant as specified in its charter)

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

               DELAWARE                                         04-3027191
    (State or other jurisdiction of                          (I.R.S. Employer
    incorporation or organization)                          Identification No.)

            195 ALBANY STREET
        CAMBRIDGE, MASSACHUSETTS                                   02139
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (617) 349-0200

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

         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       / /


         At October 31, 2000, there were 22,694,439 shares of Common Stock, $.01
par value, outstanding.

<PAGE>

                          Transkaryotic Therapies, Inc.


                                      INDEX

<TABLE>
<CAPTION>

                                                                                           PAGE NUMBER
                                                                                           -----------
<S>                                                                                        <C>
PART  I.      FINANCIAL INFORMATION

Item  1.      Condensed Consolidated Financial Statements (unaudited)

              Condensed Consolidated Balance Sheets as of
              September 30, 2000 and December 31, 1999                                              3

              Condensed Consolidated Statements of Operations for the Three and Nine
              Months Ended September 30, 2000 and 1999                                              4

              Condensed Consolidated Statements of Cash Flows for the Nine Months
              Ended September 30, 2000 and 1999                                                     5

              Notes to Condensed Consolidated Financial Statements                              6 - 9

Item  2.      Management's Discussion and Analysis of Financial Condition and
              Results of Operations                                                           10 - 16

Item  3.      Quantitative and Qualitative Disclosures about Market
              Risk                                                                                 16

PART  II.     OTHER INFORMATION

Item 1.       Legal Proceedings                                                                    17

Item 6.       Exhibits and Reports on Form 8-K                                                     17

SIGNATURES                                                                                         18

EXHIBIT INDEX                                                                                      19

</TABLE>

                                                                            2
<PAGE>

Part 1- Item 1- Condensed Consolidated Financial Statements

                                     Transkaryotic Therapies, Inc.
                                 Condensed Consolidated Balance Sheets
                                             (unaudited)

<TABLE>
<CAPTION>
(in thousands, except par values)                                       September 30,     December 31,
                                                                            2000              1999
                                                                      -----------------   --------------
<S>                                                                   <C>                 <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                  $ 81,059         $151,202
   Marketable securities                                                       177,584           41,293
   Prepaid expenses and other current assets                                     2,773            2,054
                                                                      -----------------   --------------
      Total current assets                                                     261,416          194,549
Property and equipment, net                                                     22,236           20,384
Other assets                                                                     1,081              358
                                                                      -----------------   --------------
Total assets                                                                  $284,733         $215,291
                                                                      =================   ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                           $  2,251         $  2,000
   Accrued expenses                                                              4,686            4,009
   Current maturities of long-term debt                                          2,500            2,000
                                                                      -----------------   --------------
      Total current liabilities                                                  9,437            8,009
Long-term debt, less current maturities                                         10,000           11,500
                                                                      -----------------   --------------
      Total liabilities                                                         19,437           19,509
                                                                      -----------------   --------------

Stockholders' equity:
   Convertible preferred stock, Series A, $.01 par value,
      10,000 shares authorized; 10 shares issued and outstanding
      at September 30, 2000 and no shares issued and
      outstanding at December 31, 1999                                               1                -
   Common stock, $.01 par value; 100,000 shares authorized;
      22,693 and 22,592 shares issued and outstanding at
      September 30, 2000 and December 31, 1999, respectively                       227              226
   Additional paid-in capital                                                  413,188          311,817
   Accumulated deficit                                                        (147,233)        (114,408)
   Deferred compensation                                                        (1,041)          (1,645)
   Accumulated other comprehensive income (loss)                                   154             (208)
                                                                      -----------------   --------------
      Total stockholders' equity                                               265,296          195,782
                                                                      -----------------   --------------
Total liabilities and stockholders' equity                                    $284,733         $215,291
                                                                      =================   ==============
</TABLE>

   See accompanying Notes to Condensed Consolidated Financial Statements.

                                                                            3
<PAGE>

Part 1- Item 1- Condensed Consolidated Financial Statements

                                        Transkaryotic Therapies, Inc.
                               Condensed Consolidated Statements of Operations
                                                (unaudited)

<TABLE>
<CAPTION>                                          Three Months                   Nine Months
(in thousands, except                            Ended September 30,          Ended September 30,
per share amounts)                              2000           1999             2000        1999
                                           --------------  -------------   ------------  ----------
<S>                                        <C>             <C>              <C>           <C>
License and research revenues                   $  5,357       $    649       $  6,871    $  1,370

Operating expenses:
   Research and development                       13,373         11,753         39,700      32,787
   General and administrative                      3,723          2,836          9,772       7,034
                                           --------------  -------------   ------------  ----------
                                                  17,096         14,589         49,472      39,821
                                           --------------  -------------   ------------  ----------
Loss from operations                             (11,739)       (13,940)       (42,601)    (38,451)
Interest income                                    4,233          1,070          9,776       3,606
                                           --------------  -------------   ------------  ----------

Net loss                                        $ (7,506)      $(12,870)      $(32,825)   $(34,845)
                                           ==============  =============   ============  ==========

Basic and diluted net loss per share            $  (0.33)      $  (0.67)      $  (1.45)   $  (1.82)
                                           ==============  =============   ============  ==========

Shares used to compute basic and diluted
   net loss per share                             22,688         19,241         22,668      19,198
                                           ==============  =============   ============  ==========
</TABLE>

   See accompanying Notes to Condensed Consolidated Financial Statements.

                                                                            4
<PAGE>

Part 1- Item 1- Condensed Consolidated Financial Statements

                          Transkaryotic Therapies, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)

<TABLE>
<CAPTION>
(in thousands)                                                      Nine Months Ended
                                                                      September 30,
                                                               2000                1999
                                                          ----------------    ----------------
<S>                                                       <C>                 <C>
OPERATING ACTIVITIES:
Net loss                                                        $ (32,825)           $(34,845)
Adjustments to reconcile net loss to net
   cash used for operating activities:
      Depreciation and amortization                                 1,777               1,468
      Compensation expense related to
         equity issuances                                             561                 747
Changes in operating assets and liabilities                           681               5,675
                                                          ----------------    ----------------
Net cash used for operating activities                            (29,806)            (26,955)
                                                          ----------------    ----------------
INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities                  86,815              82,383
Purchases of marketable securities                               (223,106)            (63,351)
Purchases of property and equipment                                (3,629)            (15,214)
Changes in other assets                                              (723)                (38)
                                                          ----------------    ----------------
Net cash provided by (used for) investing activities             (140,643)              3,780
                                                          ----------------    ----------------
FINANCING ACTIVITIES:
Issuance of convertible preferred stock, net                       99,787                   -
Issuance of common stock                                            1,519                 935
Repayment of long-term debt                                        (1,000)                  -
Proceeds from issuance of long-term debt                                -              12,331
                                                          ----------------    ----------------
Net cash provided by financing activities                         100,306              13,266
                                                          ----------------    ----------------
Net decrease in cash and cash equivalents                         (70,143)             (9,909)

Cash and cash equivalents at January 1                            151,202              31,760
                                                          ----------------    ----------------
Cash and cash equivalents at September 30                       $  81,059            $ 21,851
                                                          ================    ================
</TABLE>

   See accompanying Notes to Condensed Consolidated Financial Statements.

                                                                            5
<PAGE>

PART I - Item 1 - Condensed Consolidated Financial Statements

                          Transkaryotic Therapies, Inc.
        Notes to Condensed Consolidated Financial Statements (unaudited)
                           September 30, 2000 and 1999

1.       NATURE OF BUSINESS AND BASIS OF PRESENTATION

         Transkaryotic Therapies, Inc. ("TKT" or "the Company") is a
biopharmaceutical company engaged in the development and commercialization of
products based on its three proprietary product development platforms:
Gene-Activated-Registered Trademark- proteins, Niche Protein-TM- products and
Gene Therapy.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
condition, results of operations and cash flows for the periods presented. The
results of operations for the interim period ended September 30, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000.

         These financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1999 included in the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.

         Gene-Activated is a registered and Replagal and Niche Protein are
trademarks of the Company. Dynepo is a trademark of Aventis Pharmaceuticals,
Inc.

2.       BASIC AND DILUTED NET LOSS PER SHARE

         Basic and diluted net loss per share is calculated under Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." Basic
earnings per share is calculated by dividing income available to common
stockholders by the weighted average common shares outstanding. Diluted earnings
per share is calculated by dividing net income by the sum of weighted average
common shares outstanding during the period plus common stock equivalents.
Common stock equivalents are shares assumed to be issued if outstanding stock
options and warrants were exercised. Basic and diluted net loss per share are
the same for the three and nine months ended September 30, 2000 and 1999 since
common equivalent shares from stock options have been excluded as their effect
is antidilutive.


                                                                            6
<PAGE>

3.       COMPREHENSIVE INCOME

         The Company had total comprehensive loss of $7,211,000 and $12,968,000
for the three months ended September 30, 2000 and 1999, respectively. For the
nine months ended September 30, 2000 and 1999, total comprehensive loss was
$32,463,000 and $35,196,000, respectively.

4.       LEGAL PROCEEDINGS

         As previously disclosed in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 and the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000, in April
1997, Amgen Inc. ("Amgen") filed a civil action in the U.S. District Court of
Massachusetts against TKT and its collaborative partner, Aventis
Pharmaceuticals, Inc. ("Aventis"), formerly Hoechst Marion Roussel, Inc. The
complaint in the action, as amended, alleges that certain of TKT's activities
relating to Gene-Activated-Registered Trademark- erythropoietin
("Dynepo-TM-") infringe five U.S. patents assigned to Amgen and requests that
TKT and Aventis be enjoined from certain activities related to Dynepo and
that the District Court award Amgen monetary damages.

         In April 2000, the Court granted Amgen's Motion for Summary Judgment
of literal infringement on Claim 1 of U.S. Patent No. 5,955,422 against the
Company and Aventis. The Court left open for trial the question of whether
this claim is invalid or unenforceable. The District Court commenced trial in
May 2000.

         In June 2000, the District Court ruled that Claims 4, 5, 6, 7, 8,
and 9 of U.S. Patent No. 5,618,698 were not infringed and dismissed this
patent from the suit. The District Court also ruled that Claims 2, 3, and 4
of U.S. Patent No. 5,621,080 were not literally infringed, but left open
questions of infringement under the doctrine of equivalents and whether the
patent is invalid or unenforceable.

         In July 2000, the District Court ruled that TKT and Aventis had not
met their burden of proving by clear and convincing evidence that U.S. Patent
Nos. 5,621,080, 5,547,933 and 5,576,349 are invalid on the grounds of
obviousness and anticipation. However, the Court left open questions of
infringement and TKT and Aventis' remaining invalidity and unenforceability
defenses directed to these patents.

         The trial concluded in September 2000, and the parties are awaiting
a final ruling from the District Court on these and other outstanding issues.

         In addition, in July 1999, the Company commenced legal proceedings
in the U.K. against Kirin-Amgen, Inc., seeking a declaration that a U.K.
patent held by Kirin-Amgen will not be infringed by TKT's activities relating
to Dynepo and that numerous claims of Kirin-Amgen's U.K. patent are invalid.
The trial is scheduled to commence in January 2001.

                                                                            7
<PAGE>


         Pursuant to the Amended and Restated License Agreement, dated March
1995, by and between Aventis and the Company, Aventis has assumed the legal
cost of the Amgen and Kirin-Amgen litigations. The Company is required to
reimburse Aventis for the Company's share of litigation expenses, as defined,
from future royalties, if any, received from the sale of Dynepo and in
certain other circumstances.

         As previously disclosed in the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, in July 2000, Genzyme Corporation
("Genzyme") and Mt. Sinai School of Medicine of New York University ("Mt.
Sinai") brought suit against TKT in the U. S. District Court of Delaware
alleging that certain of TKT's activities relating to Replagal-TM-
(agalsidase alfa) infringe or will infringe one or more claims of U.S. Patent
No. 5,356,804. Replagal is TKT's investigational enzyme replacement therapy
for the treatment of Fabry disease. Genzyme and Mt. Sinai's complaint
requested that the District Court award Genzyme and Mt. Sinai monetary
damages and injunctive relief. In September 2000, the Company commenced an
action against Genzyme and Mt. Sinai in the U.S. District Court of
Massachusetts seeking a declaratory judgment that TKT's activities with
respect to Replagal do not and will not infringe U.S. Patent No. 5,356,804
and that this patent is invalid. TKT has filed a motion in the Delaware
action seeking transfer of the Delaware case to Massachusetts. Genzyme and
Mt. Sinai have filed separate motions to dismiss the Massachusetts action.
All of these motions are pending and undecided.

         The Company can provide no assurance as to the outcome of these
proceedings. Court decisions adverse to the Company could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

5.       RECENT ACCOUNTING PRONOUNCEMENTS

         In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in
Financial Statements," which provides guidance related to revenue recognition
based on interpretations and practices followed by the SEC. The effective
date of SAB 101 was deferred to no later than the fourth quarter of 2000. SAB
101 requires companies to report any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board Opinion No. 20, "Accounting
Changes." The Company has concluded that SAB 101, including the frequently
asked questions and answers document issued by the SEC in October 2000, will
not have a material impact on the historical financial position or results of
operations of the Company.

         In April 2000, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation, an Interpretation of APB No. 25." The Interpretation has
been applied prospectively to new awards, modifications to outstanding
awards, and changes in employee status on or after July 1, 2000, except in
certain circumstances. This interpretation has not had a material impact on
the

                                                                            8
<PAGE>

Company's financial position and results of operations.

         In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities- Deferral of
the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities." These
statements establish accounting and reporting standards for derivative
instruments and for hedging activities. It requires that derivatives be
recognized in the balance sheet at fair value and specifies the accounting
for changes in fair value. The Company has adopted these statements as of
July 1, 2000. Currently, the Company does not hold derivative instruments and
has not entered into any hedging arrangements.

6.       CONVERTIBLE PREFERRED STOCK

         In June 2000, the Company sold 10,000 shares of Series A Convertible
Preferred Stock for an aggregate price of $100,000,000 to investment funds
affiliated with E.M. Warburg, Pincus & Co., L.L.C. pursuant to a Stock
Purchase Agreement dated as of May 18, 2000, resulting in net proceeds of
$99,787,000. The Convertible Preferred Stock converts, at the option of the
holder, into approximately 3,571,000 shares of the Company's common stock
based on a conversion price of $28.00 per share, subject to adjustment under
specified terms and conditions. The Company, at its option, may redeem all,
but not less than all, of the shares of the Convertible Preferred Stock, at
any time after December 15, 2000 at a price of $10,000 per share, plus
dividends thereon declared but unpaid, provided certain specified criteria
are met. In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Convertible Preferred Stock are entitled to
receive, prior to and in preference to the holders of common stock, $10,000
per share (subject to adjustments) plus any dividends thereon declared but
unpaid. Each issued and outstanding share of Convertible Preferred Stock is
entitled to the number of votes equal to the number of shares of common stock
into which each share of Convertible Preferred Stock is then convertible.

7.        LETTER OF CREDIT

         In August 2000, the Company obtained a $7,000,000 letter of credit
from a bank as part of the security deposit for a leasehold obligation. The
letter of credit is secured by an investment in the amount of $7,815,000.

                                                                            9
<PAGE>

PART I - Financial Information

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

OVERVIEW

         Transkaryotic Therapies, Inc. is engaged in the development and
commercialization of products based on the Company's three proprietary
development platforms: Gene-Activated proteins, Niche Protein products and
Gene Therapy. No revenues have been derived from the sale of any products,
and the Company does not expect to receive revenues from product sales until
late 2000, at the earliest. The Company expects that its research and
development expenditures will increase substantially in future years as
product development efforts accelerate. With the exception of 1995, the
Company has incurred substantial annual operating losses since inception and
expects to incur substantial operating losses in the future. At September 30,
2000, the Company's accumulated deficit was $147,233,000. As a result, the
Company is dependent upon existing cash resources, interest income, external
financing from equity offerings, debt financings or collaborative research
and development arrangements with corporate sponsors to finance its
operations.

         Results of operations may vary significantly from period to period
depending on, among other factors, the progress of the Company's research and
development efforts, the receipt, if any, of additional license fees and
milestone payments, the timing of certain expenses, and the establishment of
additional collaborative research agreements.

         The following discussion of the financial condition and results of
operation of the Company should be read in conjunction with the accompanying
condensed consolidated financial statements and the related footnotes thereto.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

         License and research revenues totaled $5,357,000 and $649,000 for
the three months ended September 30, 2000 and 1999, respectively. Revenues
for the third quarter of 2000 included a $3,500,000 milestone payment from
Aventis relating to the submission of a Biologics License Application ("BLA")
to the U.S. Food and Drug Administration (the "FDA") for Dynepo
(Gene-Activated erythropoietin) for the treatment of anemia, as well as
payments earned from collaborative agreements with Sumitomo Pharmaceutical
Co., Ltd. ("Sumitomo") and Genetics Institute, Inc. Revenues in the third
quarter of 1999 were earned from collaborative agreements with Sumitomo and
Aventis.

                                                                            10
<PAGE>


         Research and development expenses totaled $13,373,000 in the third
quarter of 2000, as compared to $11,753,000 during the same period in 1999.
The increase in 2000 of $1,620,000, or 14%, was principally due to increases
in personnel, as well as increased funding for clinical trials and
preclinical product activities. Currently, four products emerging from TKT's
pipeline are undergoing clinical testing, two of which are funded by the
Company. Over the next several months, three late-stage preclinical programs
are expected to enter clinical testing. As a result, the Company expects that
during the remainder of 2000 and for 2001 research and development expenses
will increase significantly.

         General and administrative expenses were $3,723,000 in the quarter
ended September 30, 2000, compared with $2,836,000 during the same period in
1999. The increase in 2000 of $887,000, or 31%, was principally due to costs
incurred in building a commercialization infrastructure, including both U.S.
and European sales and marketing capabilities related to the
commercialization of products in the Company's Niche Protein product
platform. During the remainder of 2000 and for 2001, general and
administrative costs are expected to increase significantly as product launch
activities related to the Company's Fabry disease program accelerate.

         Interest income was $4,233,000 and $1,070,000 for the three months
ended September 30, 2000 and 1999, respectively. The average cash and
marketable securities balances were $263,297,000 and $84,966,000 in 2000 and
1999, respectively. The increase in interest income of $3,163,000 resulted
from higher average cash and marketable securities balances, as well as
higher interest rates in 2000. Higher average cash and marketable securities
balances in 2000 are a result of financings completed in November 1999 and
June 2000, which totaled $224,363,000, net of expenses.

         The Company had a net loss of $7,506,000 and $12,870,000 for the
three months ended September 30, 2000 and 1999, respectively. Basic and
diluted net loss per share was $0.33 for the three months ended September 30,
2000, as compared to a basic and diluted net loss per share of $0.67 for the
corresponding period in 1999.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

         License and research revenues totaled $6,871,000 and $1,370,000 for
the nine months ended September 30, 2000 and 1999, respectively. Revenues for
2000 included a $3,500,000 milestone payment from Aventis relating to the
submission of a BLA to the FDA for Dynepo for the treatment of anemia, as
well as payments earned from collaborative agreements with Sumitomo and
Genetics Institute. Revenues in 1999 were earned from collaborative
agreements with Sumitomo and Aventis.

         Research and development expenses totaled $39,700,000 in the first
nine months of 2000, as compared to $32,787,000 during the same period in
1999. The increase in 2000 of $6,913,000, or 21%, was principally due to
increases in personnel, as well as increased funding for clinical trials and
preclinical product activities.

                                                                            11
<PAGE>


         General and administrative expenses were $9,772,000 in the nine
months ended September 30, 2000, compared with $7,034,000 during the same
period in 1999. The increase in 2000 of $2,738,000, or 39%, was principally
due to costs in building a commercialization infrastructure, including both
U.S. and European sales and marketing capabilities related to the
commercialization of products in the Company's Niche Protein product platform.

         Interest income was $9,776,000 and $3,606,000 for the nine months
ended September 30, 2000 and 1999, respectively. The average cash and
marketable securities balances were $214,669,000 and $95,404,000 in 2000 and
1999, respectively. The increase in interest income of $6,170,000 resulted
from higher average cash and marketable securities balances, as well as
higher interest rates in 2000. Higher average cash and marketable securities
balances in 2000 are a result of financings completed in November 1999 and
June 2000, which totaled $224,363,000, net of expenses.

         The Company had a net loss of $32,825,000 and $34,845,000 for the
nine months ended September 30, 2000 and 1999, respectively. Basic and
diluted net loss per share was $1.45 for the nine months ended September 30,
2000, as compared to a basic and diluted net loss per share of $1.82 for the
corresponding period in 1999.

LIQUIDITY AND SOURCES OF CAPITAL

         Since its inception, the Company has financed its operations through
the sale of common and preferred stock, borrowings under debt agreements,
revenues from collaborative agreements, and interest income.

         The Company had cash, cash equivalents and marketable securities
totaling $258,643,000 at September 30, 2000 including marketable securities
collateralizing letters of credit totaling $8,378,000. Cash equivalents and
marketable securities are invested in U.S. Treasury notes, agencies of the
U.S. government, and money market funds.

         In November 1999, the Company completed a private placement of
3,300,000 shares of Common Stock, resulting in net proceeds to the Company of
approximately $124,576,000.

         In June 2000, the Company sold 10,000 shares of Series A Convertible
Preferred Stock to investment funds affiliated with E. M. Warburg, Pincus &
Co., L.L.C., resulting in net proceeds to the Company of $99,787,000.

         The Company leased additional facilities in the fourth quarter of
1998, which are used for research and development. In December 1998, the
Company obtained an unsecured term loan facility for up to $14,000,000 to
finance the capital costs related to the leased space. The loan is payable,
beginning in December 1999, on the basis of a seven year amortization
schedule over a five year period, with a final payment for any remaining
amount in September 2004. The loan

                                                                            12
<PAGE>


bears interest at either the prime rate or LIBOR plus 1.50% at the Company's
election. The weighted average interest rate of the loan was 8.4% as of
September 30, 2000. The note contains certain restrictive covenants,
including, among other things, minimum cash and tangible net asset
requirements and limitations on the payment of dividends. At September 30,
2000, $12,500,000 was outstanding under the loan.

         In August 2000, the Company entered into a ten year lease for a new
corporate headquarters and research and development facility in Cambridge,
Massachusetts. The lease agreement calls for minimum annual rent of
$6,700,000 for the first five years and $7,600,000 for years six through ten.
Lease payments are expected to commence in late 2001, at the earliest. The
lease requires a security deposit of $7,680,000, of which $680,000 was paid
in cash and the balance provided in the form of a letter of credit. An
investment of $7,815,000 collateralizes the letter of credit. The Company
expects to spend up to an additional $25,000,000 for leasehold improvements.
The Company may seek financing for all or a significant portion of the cost
of the leasehold improvements. There can be no guarantee that financing will
be available on favorable terms, if at all.

         At December 31, 1999, the Company had net operating loss
carryforwards of approximately $100,287,000, which expire at various times
through 2019. Due to the degree of uncertainty related to the ultimate use of
loss carryforwards and tax credits, the Company has fully reserved against
any potential tax benefit. The future utilization of net operating loss
carryforwards and tax credits may be subject to limitation under the changes
in stock ownership rules of the Internal Revenue Code. Because of this
limitation, it is possible that taxable income in future years, which would
otherwise be offset by net operating losses, will not be offset and,
therefore, will be subject to tax.

         Substantial additional funds will be required to support the
Company's research and development programs, for acquisition of technologies,
for preclinical and clinical testing of its products, pursuit of regulatory
approvals, acquisition of capital equipment, expansion of laboratory and
office facilities, establishment of production capabilities, establishment of
sales and marketing capabilities, and for general and administrative
expenses. Until such time, if any, as the Company's operations generate
significant revenues from product sales, cash resources and proceeds from
equity offerings, debt financings and funding from collaborative arrangements
will be required to fund operations.

         The Company expects to pursue opportunities to obtain additional
financing in the future through equity offerings, debt financings, lease
arrangements related to facilities and capital equipment and collaborative
research agreements. The source, timing and availability of any future
financing will depend principally upon equity and debt market conditions,
interest rates and, more specifically, on the Company's continued progress in
its exploratory, preclinical and clinical development programs. There can be
no assurance that such funds will be available on favorable terms, if at all.

         The Company expects that its existing capital resources, together
with revenues from

                                                                            13
<PAGE>


collaborative agreements and interest income, will be sufficient to fund its
operations into 2003. The Company's cash requirements may vary, however,
depending on numerous factors. Lack of necessary funds may require the
Company to delay, scale back or eliminate some or all of its research and
product development programs or to license its potential products or
technologies to third parties or to seek financing earlier than expected.

         The Company is engaged in litigation with Amgen and Kirin-Amgen with
respect to the development of Dynepo. Pursuant to TKT's agreements with
Aventis, Aventis has assumed the cost of the litigation. The Company is
required to reimburse Aventis for the Company's share of litigation expenses
from future royalties, if any, otherwise payable by Aventis as to the sale of
Dynepo and in certain other circumstances. In addition, Genzyme and Mt. Sinai
have brought suit against TKT with respect to the development and
commercialization of Replagal, TKT's investigational enzyme replacement
therapy for the treatment of Fabry disease. See Note 4 to Notes to Condensed
Consolidated Financial Statements for more information on these litigations.

FORWARD-LOOKING STATEMENTS

          Statements that are not historical facts, including statements
about the Company's confidence and strategies and its expectations about
future products, technologies and opportunities, market demand or acceptance
of future products are forward-looking statements. Without limiting the
foregoing, the words "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, including, without limitation, whether any of the Company's
Gene-Activated protein, Niche Protein product, or Gene Therapy product
candidates will advance in the clinical trial process, the timing of such
clinical trials, whether the clinical trial results will warrant continued
product development, the timing of making required regulatory filings such as
Investigational New Drug applications and BLAs, whether the Company's
products will receive approval from the FDA or equivalent foreign regulatory
agencies, and, if such products receive approval, whether they will be
successfully distributed and marketed; the results of litigation in which the
Company is involved or may become involved, as described below; competition;
the Company's dependence on collaborators, manufacturers and distributors;
and other risks set forth under the caption "Certain Factors That May Affect
Future Results" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, which are incorporated by reference herein and
attached hereto as Exhibit 99.1, except for the risks set forth under the
caption "We are party to litigation with Amgen and Kirin-Amgen involving
GA-EPO", which is superceded by the description below.

WE ARE PARTY TO LITIGATION WITH AMGEN AND KIRIN-AMGEN INVOLVING DYNEPO

          Amgen filed a civil action in the U.S. District Court of Massachusetts
against us and our collaborative partner, Aventis. The complaint in the action,
as amended, alleges that certain of our activities relating to Dynepo infringe
five U.S. patents assigned to Amgen and requests that we and Aventis be enjoined
from certain activities relating to Dynepo and that the District Court

                                                                            14
<PAGE>

award Amgen monetary damages.

         In April 2000, the Court granted Amgen's Motion for Summary Judgment
of literal infringement on Claim 1 of U.S. Patent No. 5,955,422 against us
and Aventis. The Court left open for trial the question of whether this claim
is invalid or unenforceable. The District Court commenced trial in May 2000.

         In June 2000, the District Court ruled that Claims 4, 5, 6, 7, 8,
and 9 of U.S. Patent No. 5,618,698 were not infringed and dismissed this
patent from the suit. The District Court also ruled that Claims 2, 3, and 4
of U.S. Patent No. 5,621,080 were not literally infringed, but left open
questions of whether we and Aventis had infringed the patent under the
doctrine of equivalents and whether the patent is invalid or unenforceable.

         In July 2000, the District Court ruled that we and Aventis had not
met our burden of proving by clear and convincing evidence that U.S. Patent
Nos. 5,621,080, 5,547,933 and 5,576,349 are invalid on the grounds of
obviousness and anticipation. However, the Court left open questions of
infringement and our remaining invalidity and unenforceability defenses
directed to these patents.

         The trial concluded in September 2000, and we are awaiting a final
ruling from the District Court on these and other outstanding issues.

         In addition, in July 1999, we commenced legal proceedings in the
U.K. against Kirin-Amgen seeking a declaration that a U.K. patent held by
Kirin-Amgen will not be infringed by our activities relating to Dynepo and
that numerous claims of Kirin-Amgen's U.K. patent are invalid. The trial is
scheduled to commence in January 2001.

         We can provide no assurance as to the outcome of either the U.S. or
U.K. proceedings. Court decisions adverse to us could have a material adverse
effect on our business, financial condition, and results of operations.

         Pursuant to an agreement with Aventis, Aventis has assumed the legal
cost of the Amgen and Kirin-Amgen litigations. We are required to reimburse
Aventis for our share of litigation expenses from future royalties, if any,
received from the sale of Dynepo and in certain other circumstances.

WE ARE A PARTY TO LITIGATION WITH GENZYME AND MT. SINAI INVOLVING REPLAGAL

         In July 2000, Genzyme and Mt. Sinai brought suit against us in the
U.S. District Court of Delaware alleging that some of our activities relating
to Replagal infringe or will infringe one or more claims of U.S. Patent No.
5,356,804. Replagal is our investigational enzyme replacement therapy for the
treatment of Fabry disease. Genzyme and Mt. Sinai's complaint requested that
the District Court award Genzyme and Mt. Sinai monetary damages and
injunctive relief.

                                                                            15
<PAGE>


         In September 2000, we filed a complaint against Genzyme and Mt.
Sinai in the U.S. District Court of Massachusetts seeking a declaratory
judgment that our activities with respect to Replagal do not and will not
infringe U.S. Patent No. 5,356,804 and that this patent is invalid. We also
filed a motion in the Delaware action seeking transfer of the Delaware case
to Massachusetts. Genzyme and Mt. Sinai have filed separate motions to
dismiss the Massachusetts action. All of these motions are pending and
undecided.

         We can provide no assurance as to the outcome these proceedings.
Court decisions adverse to us could have a material adverse effect on our
business, financial condition, and results of operations.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

         The Company is exposed to certain market risks from changes in
interest rates. The Company has a $12,500,000 term loan outstanding at
September 30, 2000. The loan bears interest at LIBOR plus 1.5%.

                                                                            16
<PAGE>

PART II - Other Information

Item 1.  Legal Proceedings

                  As previously disclosed in the Company's Annual Report on Form
         10-K for the year ended December 31, 1999 and the Company's Quarterly
         Reports on Form 10-Q for the quarters ended March 31, 2000 and June 30,
         2000, the Company is engaged in litigation with Amgen and Kirin-Amgen
         with respect to the development and commercialization of Dynepo. See
         Note 4 to Notes to Condensed Consolidated Financial Statements, which
         is incorporated by reference herein.

                  As previously disclosed in the Company's Quarterly Report on
         Form 10-Q for the quarter ended June 30, 2000, in July 2000, Genzyme
         brought suit against TKT in the U.S. District Court of Delaware
         alleging that some of TKT's activities relating to Replagal infringe or
         will infringe one or more claims of U.S. Patent No. 5,356,804. In
         September 2000, the Company filed a complaint against Genzyme and Mt.
         Sinai in the U.S. District Court of Massachusetts seeking a declaratory
         judgment that TKT's activities with respect to Replagal do not and will
         not infringe U.S. Patent No. 5,356,804 and that this patent is invalid.
         TKT also filed a motion in the Delaware action seeking transfer of the
         Delaware case to Massachusetts. Genzyme and Mt. Sinai have filed
         separate motions to dismiss the Massachusetts action. All of these
         motions are pending and undecided. See Note 4 to Notes to Condensed
         Consolidated Financial Statements, which is incorporated by reference
         herein.


Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  The Exhibits filed as part of this Form 10-Q are listed on the
         Exhibit Index immediately preceding such Exhibits, which Exhibit Index
         is incorporated herein by reference.

         (b)      Reports on Form 8-K

                  Current Report on Form 8-K dated July 25, 2000 regarding the
         TKT's announcement that Genzyme brought suit against the Company in
         the U. S. District Court of Delaware claiming that TKT's activities
         relating to Replagal infringe one or more claims of U.S. Patent
         No. 5,356,804.

                                                                           17
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements 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.

                                         TRANSKARYOTIC THERAPIES, INC.



Date:      November 14, 2000             By: /S/ DANIEL E. GEFFKEN
                                             -----------------------------------
                                                 Daniel E. Geffken
                                                 Vice President, Finance and
                                                 Chief Financial Officer
                                                 (Principal Financial and
                                                 Accounting Officer)

                                                                            18
<PAGE>


                          Transkaryotic Therapies, Inc.




                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
       EXHIBIT NO.     DESCRIPTION
       -----------     -----------
<S>                    <C>
           10.38       Lease agreement, dated August 4, 2000, by and
                       between Massachusetts Institute of Technology and
                       the Registrant for a new corporate headquarters
                       and research and development space at 28 Osborn
                       Street, Cambridge, Massachusetts.

              27       Financial Data Schedule (for EDGAR filing purposes only)

            99.1       Certain Factors That May Affect Future Results
</TABLE>