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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

75 Sidney Street, Cambridge, Massachusetts 02139
(Address of principal executive offices) (zip code)

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

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

The total number of shares of the registrant's Common Stock, $0.001 par value, outstanding on November 11, 2002, was 287,785,551.

MILLENNIUM PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

The following Millennium trademarks are used in this Quarterly Report on Form 10-Q:  Diagnomics™, Melastatin®, Millennium®, Millennium Pharmaceuticals™, VELCADE™ (bortezomib) for Injection and INTEGRILIN® (eptifibatide) Injection. CAMPATH® is a registered trademark of ILEX Pharmaceuticals, L.P., TNKase™ and Activase® are trademarks of Genentech, Inc., ReoPro® is a trademark of Eli Lilly and Company and Aggrastat® is a trademark of Merck & Co., Inc. Other trademarks used in this Quarterly Report on Form 10-Q are the property of their respective owners.

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PART I     FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

Millennium Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets

See notes to condensed consolidated financial statements.

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Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
(unaudited)

See notes to condensed consolidated financial statements.

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Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

See notes to condensed consolidated financial statements.

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements

1.        Basis of Presentation

        The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the accompanying condensed consolidated financial statements have been included. Interim results for the three and nine month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the financial statements and accompanying footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which was filed with the Securities and Exchange Commission (SEC) on March 7, 2002.

2.        Summary of Significant Accounting Policies

(a)        Cash Equivalents and Marketable Securities

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

        Management determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable securities at September 30, 2002 and December 31, 2001 are classified as "available-for-sale." Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in a separate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in investment income. Realized losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in realized loss on marketable securities. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income.

(b)        Inventory

        Inventory represents bulk materials used in the production of INTEGRILIN® (eptifibatide) Injection and INTEGRILIN finished goods inventory on hand, valued at cost. Inventory consists of the following (in thousands):

(c)        Goodwill and Intangible Assets

        Intangible assets consist of specifically identified intangible assets. Goodwill is the excess of any purchase price over the estimated fair market value of net tangible assets acquired not allocated to specific intangible assets. Amortization of intangibles is computed using the straight-line method over the useful lives of the respective assets. Accumulated amortization on intangible assets was $35.6 million and $12.7 million at September 30, 2002 and December 31, 2001, respectively.

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

        In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company adopted SFAS No. 142 effective January 1, 2002 and reclassified amounts to goodwill which were previously allocated to assembled workforce. Upon adoption, the Company ceased the amortization of goodwill. The Company completed its transitional assessment of goodwill in the first quarter of 2002 and no impairment loss was recognized. The Company will continue to test for goodwill impairment annually, on October 1.

        On October 1, 2002, the Company performed its annual goodwill impairment test and determined that no impairment existed on that date. However, since the date of the Company's acquisition of COR Therapeutics, Inc. ("COR") which generated a significant amount of goodwill (see Note 3), the Company has experienced a significant decline in market capitalization due to a decline in stock price. While a decline in stock price is not specifically cited as an impairment indicator, the Company continually monitors business and market conditions to assess whether an impairment indicator exists. If the Company were to determine that an impairment indicator exists, it would be required to perform an impairment test which might result in a material impairment charge to the statement of operations.

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

(d)        Revenue Recognition

        Copromotion revenue includes the Company's share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotion territories by Schering-Plough Ltd. and Schering Corporation (collectively "Schering"). Also included in copromotion revenue are reimbursements from Schering of the Company's cost of copromotion revenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory. The Company recognizes revenue when Schering ships INTEGRILIN to wholesalers and records it net of allowances, if any. The Company's costs of copromotion revenue consist of certain manufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN within copromotion territories. The Company defers certain manufacturing-related expenses until the time Schering ships related product to its customers inside and outside copromotion territories. Advertising and promotional expenses are expensed as incurred. Deferred revenue includes payments from Schering received prior to the period in which the related contract revenues are earned. Deferred revenue also includes cash

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

advances from Schering to the Company for the Company's prepayments to its manufacturers of INTEGRILIN® (eptifibatide) Injection.

        Effective October 1, 2000, Millennium changed its method of accounting for revenue under strategic alliances in accordance with Staff Accounting Bulletin (SAB) No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. Previously, the Company had recognized revenue relating to non-refundable, up-front, license and milestone payments and certain research funding payments from its strategic partners in accordance with the contract. Under the new accounting method adopted retroactively to January 1, 2000, the Company recognizes revenue from non-refundable, up-front, license and milestone payments, not specifically tied to a separate earnings process, ratably over the term of the research contract.

        When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation associated with the payment is completed. Performance obligations typically consist of significant milestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory agencies. In addition, when appropriate, the Company recognizes revenue from certain research payments based upon the level of research services performed during the period of the research contract.

        The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which was included in the loss for the year ended December 31, 2000. The amount of revenue recognized in the three and nine months ended September 30, 2002 that was included in the cumulative effect of change in accounting principle and was recognized in prior years was $8.4 million and $30.5 million, respectively. The amount of revenue recognized in the three and nine months ended September 30, 2001 that was included in the cumulative effect of change in accounting principle and was recognized in prior years was $10.6 million and $32.8 million, respectively.

(e)        Segment Information

        SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers.

        The Company operates in one business segment, which primarily focuses on the discovery, development and commercialization of proprietary therapeutic and diagnostic human healthcare products and services. All of the Company's copromotion revenue is currently related to sales of INTEGRILIN. Revenues from one strategic partner accounted for approximately 19.6% and 50.4% of total revenues for the quarters ended September 30, 2002 and 2001, respectively and 21.5% and 38.7% of total revenues for the nine months ended September 30, 2002 and 2001, respectively. Revenues from a second strategic partner accounted for approximately 11.3% and 13.2% of total revenues for the quarters ended September 30, 2002 and 2001, respectively and 12.7% and 17.0% of total revenues for the nine months ended September 30, 2002 and 2001, respectively. Revenues from a third strategic partner accounted for approximately 10.4% and 12.2% of total revenues for the quarters ended September 30, 2002 and 2001, respectively and 11.9% and 15.7% of total revenues for the nine months ended September 30, 2002 and 2001, respectively. There were no other significant strategic partners during the three and nine months ended September 30, 2002 and 2001, respectively.

(f)        Information Concerning Market and Source of Supply Concentration

        Millennium and Schering copromote INTEGRILIN in the United States and share any profits and losses. Together with Schering and Genentech, Inc., the Company also copromotes INTEGRILIN for use with Genentech's fibrinolytic, or clot-dissolving, drugs TNKase™ and Activase® across the United States. INTEGRILIN has received regulatory approval in the European Union and a number of other countries for various indications. The Company has exclusively licensed to Schering rights to market INTEGRILIN outside the United States, and Schering pays the Company royalties based on these sales of INTEGRILIN. The

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

Company has long-term supply arrangements with two suppliers for the bulk product and with another two suppliers, one of which is Schering, for the filling and final packaging of INTEGRILIN® (eptifibatide) Injection.

(g)        Net Loss Per Common Share

        Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is typically computed using the weighted average number of common and dilutive common equivalent shares from stock options, warrants and convertible debt using the treasury stock method. However, for all periods presented, diluted net loss per share is the same as basic net loss per share because the Company reported a net loss and therefore the inclusion of weighted average shares of common stock issuable upon the exercise of stock options, warrants and convertible debt would be antidilutive.

(h)        Comprehensive Loss

        Comprehensive loss was $82.2 million and $4.5 million for the three months ended September 30, 2002 and 2001, respectively, and $495.5 million and $91.9 million for the nine months ended September 30, 2002 and 2001, respectively. Comprehensive loss is composed of net loss, unrealized gains and losses on marketable securities and cumulative foreign currency translation adjustments. Unrealized gains and losses on marketable securities include the reclassification to realized losses on marketable securities in the condensed consolidated statement of operations for the nine months ended September 30, 2002 of unrealized losses of $14.6 million due to a decline in the market value of an investment in marketable securities that was deemed to be other than temporary. Accumulated other comprehensive income at September 30, 2002 included $33.8 million of unrealized gains on marketable securities with the balance attributable to cumulative foreign currency translation adjustments.

3.        COR Acquisition

        On February 12, 2002, the Company acquired COR for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares of Millennium common stock pursuant to the merger agreement between the Company and COR. This calculation is based on COR outstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 of a share of Millennium common stock for each share of outstanding COR common stock. In addition, options to purchase approximately 6.2 million shares of COR common stock with a weighted average exercise price of $12.90 were assumed by Millennium pursuant to the merger agreement and converted into options to purchase approximately 6.1 million shares of Millennium common stock.

        The total cost of the merger was determined as follows (in thousands):

        The fair value of options assumed was determined using the Black-Scholes method assuming expected lives ranging from one to five years, a risk-free rate of 4.35%, volatility of 86.88% and no expected dividends. In accordance with FASB Interpretation No. 44, or FIN 44, Accounting for Certain Transactions Involving

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

Stock Compensation--an Interpretation of APB 25, a portion of the intrinsic value of unvested options of COR has been allocated to deferred stock compensation. Deferred stock compensation will be amortized on a straight-line basis over the estimated remaining vesting period of the related options.

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

        The Company recorded a one-time, noncash charge to operations in the quarter ended March 31, 2002 and the nine months ended September 30, 2002 of $242.0 million for acquired in-process research and development. The valuation of acquired in-process research and development represents the estimated fair value related to incomplete projects that, at the time of the acquisition, had no alternative future use and for which technological feasibility had not been established.

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

        The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of COR had occurred as of January 1, 2001:

        The pro forma net loss and net loss per share amounts for each period above exclude the acquired in-process research and development charge. The pro forma consolidated results do not purport to be indicative of results that would have occurred had the acquisition been in effect for the periods presented, nor do they purport to be indicative of the results that will be obtained in the future.

4.        Revenues and Strategic Alliances

        The Company has formed strategic alliances with major participants in marketplaces where its discovery expertise and technology platform are applicable. These agreements include alliances based on the transfer of

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

technology platforms, alliances that combine technology-transfer with a focus on a specific disease or therapeutic approach, and disease-focused programs under which the Company conducts research funded by its partners. The Company's disease-based alliances and alliances that combine technology-transfer with a disease focus are generally structured as research collaborations. Under these arrangements, the Company performs research in a specific disease area aimed at discoveries leading to novel pharmaceutical (small molecule) products. These alliances generally provide research funding over an initial period, with renewal provisions, varying by agreement. Under these agreements, the Company's partners may make up-front payments, additional payments upon the achievement of specific research and product development milestones, ongoing research funding and/or royalty payments or in some cases profit-sharing payments to the Company based upon any product sales resulting from the collaboration.

        In each of March 2002, June 2002 and September 2002, Abbott Laboratories ("Abbott") made a $28.6 million purchase of Millennium common stock pursuant to the March 2001 Investment Agreement between the Company and Abbott.

5.        Convertible Debt

        The Company currently has the following outstanding convertible notes:

        At September 30, 2002, the Company had an aggregate of approximately $600.0 million of principal of the 5.0% and 4.5% notes outstanding after the Company completed a cash repurchase offer to the noteholders in April 2002. In April 2002, the Company amended the terms of these notes to add put options permitting noteholders to require the Company on April 29, 2003, to repurchase the 4.5% notes for cash at a price of $1,095 per $1,000 of principal amount and the 5% notes for cash at a price of $1,085 per $1,000 of principal amount, resulting in a maximum aggregate payment obligation of $654.0 million. These put options on the notes are derivative instruments. Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" requires us to record all derivative instruments in the balance sheet at fair value. The Company determined the fair value of these derivative instruments to be $54.0 million in the aggregate and the Company recorded a liability on the balance sheet and a non-cash charge in the quarter ended June 2002. Changes in the fair value of these derivatives are recognized in income.

        At September 30, 2002, the Company had $83.3 million of principal of 5.5% notes outstanding. During the nine months ended September 30, 2001, the Company paid $2.6 million in cash to certain holders of the 5.5% notes in order to induce the conversion of $12.6 million of their notes into approximately 0.3 million shares of Millennium common stock. These cash payments were expensed during the nine months ended September 30, 2001. Interest accrued through the date of conversion was charged to interest expense and was paid upon conversion.

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

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Millennium Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (continued)

6.        Commitments

Lease Commitments

        The Company has lease obligations relating to two buildings for laboratory and office space in Cambridge, Massachusetts. The rent obligation for the first of these buildings began in July 2002. The rent obligation for the second building is expected to commence on the earlier of (a) October 1, 2003 or (b) the date on which the Company commences occupancy of the building. Rent is calculated on an escalating scale ranging from approximately $7.6 million, per building per year, to approximately $9.7 million, per building per year. Each lease is for a term of seventeen years. The Company is responsible for a portion of the construction costs for both buildings and was deemed to be the owner during the construction period of each building under Emerging Issues Task Force ("EITF") 97-10, "The Effect of Lessee Involvement in Asset Construction."

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

Overview

        We are a leading biopharmaceutical company focused on applying our comprehensive and integrated science and technology platform to discover and accelerate the development of breakthrough drugs and predictive medicine products. We expect that these drugs and products ultimately will enable physicians to more closely customize medical treatment by combining knowledge of the genetic basis for disease and the genetic characteristics of a patient. We primarily focus our research and development and commercialization activities in four key disease areas: cardiovascular, oncology, inflammatory and metabolic. We view the pursuit of mergers, acquisitions and product in-licensing as important in achieving our business goals.

        Our management's discussion and analysis of our financial condition and results of our operations are subject to important factors that could cause our actual results to differ materially from those indicated. See "Risk Factors That May Affect Results."

Revenues

        Historically, we have derived our revenue from payments from our strategic alliances with major pharmaceutical companies. With the acquisition of COR Therapeutics, Inc. ("COR"), we began generating revenue based on sales of INTEGRILIN® (eptifibatide) Injection. We expect that our revenue mix will continue to shift to product based revenue as we develop our product pipeline, bring additional products to commercialization, evolve our partnerships and additional discovery-focused alliances terminate.

        INTEGRILIN

        Beginning in the first quarter of 2002 in connection with our acquisition of COR, we began recognizing copromotion revenue that principally relates to our share of the profits from the sale of INTEGRILIN by Schering in copromotion territories. Additionally, copromotion revenues include recognition of reimbursement from Schering of our cost of copromotion revenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory. Our major product alliances include:

        Alliances

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

        Additional product alliances include:

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        Our major discovery alliances include:

        These alliances are usually established for a fixed term, typically five years. Upon expiration of the initial term, unless renewed, revenue funding under these agreements will cease. We expect revenues from our discovery-focused alliances to decline as existing alliances expire and the current business environment may make it difficult to enter into new alliances.

Ongoing Expansion of Operations

        During 2002 and 2001, we have expanded and expect to continue to expand our operations through internal growth, additional strategic alliances and the COR acquisition. To build development and commercialization capabilities, in 2002 and 2001, we hired staff in critical functions, including global commercial operations, clinical research and operations, strategic product development, government relations and regulatory affairs, as well as in other support areas.

        We expect to incur increasing expenses and may incur increasing operating losses for at least the next several years, primarily due to expansion of facilities and research and development programs and as a result of our efforts to advance acquired products or our own development programs to commercialization. In particular, we anticipate significant expenditures related to the following ongoing initiatives:

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

Financial Resources

        As of September 30, 2002 we had approximately $1.8 billion in cash, cash equivalents and marketable securities. We primarily invest in high-grade corporate bonds, asset-backed and U.S. government agency securities. Our objectives are to preserve principal, maintain a high degree of liquidity to meet operating needs and deliver competitive returns subject to prevailing market conditions and, consistent with these primary objectives, to realize gains through periodic sales of marketable securities in order to meet our earnings objectives. Income may decline as cash and marketable securities balances may decline and will fluctuate based upon market conditions.

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        As of September 30, 2002 we had approximately $683.3 million in convertible notes outstanding. All three issues of notes require semi-annual interest payments through maturity. Certain notes have been amended to include put options resulting in an additional payment obligation of $54.0 million. See Contractual Obligations for further discussion of these convertible notes.

Critical Accounting Policies

        In December 2001, the SEC requested that all registrants discuss their most "critical accounting policies" in management's discussion and analysis of financial condition and results of operations. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of the company's financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in our Form 10-K, we believe the following accounting policies to be critical:

        Revenue—We have formed strategic alliances with major pharmaceutical companies. These agreements include alliances based on the transfer of technology, alliances which combine technology-transfer with a focus on a specific disease or therapeutic approach, and disease-focused programs under which we conduct research funded by our partners. Our disease-based alliances and alliances which combine technology-transfer with a disease focus are generally structured as research collaborations. Under these arrangements, we perform research in a specific disease area aimed at discoveries leading to novel pharmaceutical (small molecule) products. These alliances generally provide research funding over an initial period, with renewal provisions, varying by agreement. Under these agreements, our partners may make up-front payments, additional payments upon the achievement of specific research and product development milestones, ongoing research funding and/or royalty payments or in some cases make profit-sharing payments to us based upon any product sales resulting from the collaboration.

        Copromotion revenue includes our share of profits from the sale of INTEGRILIN® (eptifibatide) Injection in copromotion territories by Schering. Also included in copromotion revenue are reimbursements to us by Schering of our cost of copromotion revenue and royalties from Schering on sales of INTEGRILIN outside the copromotion territory. We recognize revenue when Schering ships related product to wholesalers and record it net of allowances, if any. Our costs of copromotion revenue consist of certain manufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN within copromotion territories. We defer certain manufacturing-related expenses until the time Schering ships related product to its customers inside and outside copromotion territories. Advertising and promotional expenses are expensed as incurred. Deferred revenue includes payments from Schering received prior to the period in which the related contract revenues are earned. Deferred revenue also includes cash advances from Schering to us for our prepayments to our manufacturers of INTEGRILIN.

        Effective October 1, 2000, we changed our method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. Previously, we had recognized revenue relating to non-refundable, up-front, license and milestone payments and certain research funding payments from our strategic partners in accordance with the contract. Under the new accounting method adopted retroactively to January 1, 2000, we recognize revenue from non-refundable, up-front, license and milestone payments, not specifically tied to a separate earnings process, ratably over the term of the research contract. When the period of deferral cannot be specifically identified from the contract, management estimates the period based upon other critical factors contained within the contract. We continually review these estimates which could result in a change in the deferral period. When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation associated with the payment is completed. Performance obligations typically consist of significant milestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory agencies. In addition, when appropriate, we recognize revenue from certain research payments based upon the level of research services performed during the period of the research contract. The cumulative effect of the change on prior years resulted in a charge to income of $107.7 million, which was included in the loss for the year ended December 31, 2000.

        In connection with our adoption of SAB 101, we began recognizing the research funding portion of our Bayer alliance on a percentage-of-completion basis. The percentage-of-completion is determined based upon

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the actual level of work performed during the period as compared to management's estimate of the total work to be performed under the alliance. The estimates are continually reviewed and adjusted as necessary, as experience develops or new information becomes known.

        Inventory—Inventory represents bulk materials used in the production of INTEGRILIN® (eptifibatide) Injection and INTEGRILIN finished goods inventory on hand, valued at cost. Inventories are reviewed periodically for slow-moving or obsolete status based on sales activity, both projected and historical. If product sales differ from projections, inventory may not be fully utilized and could be subject to impairment.

        Goodwill—In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. We adopted SFAS No. 142 effective January 1, 2002 and reclassified amounts to goodwill which were previously allocated to assembled workforce. Upon adoption, we ceased the amortization of goodwill. We completed our transitional assessment of goodwill in the first quarter of 2002 and no impairment loss was recognized. We will continue to test for goodwill impairment annually, on October 1. We continually monitor business and market conditions to assess whether an impairment indicator exists. If we were to determine that an impairment indicator exists, we would be required to perform an impairment test which might result in a material impairment charge to the statement of operations.

Results of Operations

Quarters Ended September 30, 2002 and September 30, 2001

        For the three months ended September 30, 2002 (the "2002 Quarterly Period"), we reported a net loss of $98.9 million or $0.35 per basic and diluted share as compared to a net loss of $25.2 million or $0.11 per basic and diluted share for the three months ended September 30, 2001 (the "2001 Quarterly Period").

        Revenues increased to $95.8 million for the 2002 Quarterly Period from $82.2 million for the 2001 Quarterly Period, and include $45.0 million of copromotion revenue based upon worldwide sales of INTEGRILIN and $50.7 million of strategic alliance revenue. The increase is primarily attributable to our share of profits from INTEGRILIN copromoted by us and Schering. As reported by Schering, sales of INTEGRILIN for the 2002 Quarterly Period were $76.9 million worldwide and U.S. sales were $72.2 million, an increase of 31 percent of worldwide sales and 36 percent of U.S. sales from the same period last year. Included in revenue for the quarterly periods presented in 2002 and 2001 is $8.4 million and $10.6 million, respectively, of revenue that was recognized in prior years relating to the adoption of SAB 101. Revenue under strategic alliances decreased due to the termination of certain of our early strategic alliances. We expect that our revenue mix will continue to shift to product-based revenue as we develop our product pipeline, evolve our partnerships and additional discovery-focused alliances terminate.

        Included in the 2001 Quarterly Period was $18.4 million of additional revenue from our Bayer alliance resulting from a change of estimate to reflect our continued research productivity improvements. Excluding the impact of this change in estimate, net loss attributable to common stockholders and the related earnings per share amounts for the three months ended September 30, 2001 was $43.7 million and $0.20 per share.

        Research and development expenses increased to $140.5 million in the 2002 Quarterly Period from $98.8 million for the 2001 Quarterly Period. The increase was primarily attributable to our continued investment in building a sustainable product pipeline, with increases in expenses relating to clinical trials, principally for VELCADE™ (bortezomib) for Injection (formerly MLN341, LDP 341 and PS-341), and preclinical product candidates, personnel and facilities and consulting.

        In 2001, we initiated a Phase II trial of our lead oncology candidate, VELCADE, in patients with hematologic cancers and Phase I trials for potential treatment of patients with solid tumors. In June 2002, we received fast track designation from the Food and Drug Administration for VELCADE and we initiated a pivotal Phase III clinical trial of VELCADE in patients with multiple myeloma.

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        Also in 2001, we initiated Phase II trials of MLN977 in patients with asthma and MLN02 in patients with ulcerative colitis and Crohn's Disease. During July 2002, we discontinued the development of our oral MLN977 program based upon the findings of a multi-center Phase II trial initiated in 2001 that showed the drug was clinically active in study patients, but that three patients experienced elevations in liver enzymes that were likely drug-related. During September 2002, the analysis of a Phase II trial of MLN02 in patients with Crohn's Disease showed the study did not meet its primary endpoint, but did reach the secondary endpoint which was remission.

        The radio-labeled version of our anti-PSMA (prostate specific membrane antigen) antibody, MLN591 is in Phase I trials in patients with hormone-refractory prostate cancer. In November 2001, we initiated a Phase I trial of our first genomically-derived molecule, MLN4760, for the potential treatment of obesity. Completion of clinical trials may take several years or more, but the length of time can vary substantially according to the type, complexity, novelty and intended use of a product candidate.

        CMR International estimates that clinical trials in our areas of focus are typically completed over the following timelines:

        If we successfully complete Phase III trials, we intend to submit the results to the FDA to support regulatory approval of the product. However, we cannot be certain that any of our products will prove to be safe or effective, will receive regulatory approvals, or will be successfully commercialized.

        The duration and the cost relating to preclinical testing and clinical trials may vary significantly over the life of a project. Our joint development arrangements with our strategic partners also result in variability in our development costs. Our primary mechanism for budgeting and tracking these costs is by type of cost incurred. The types of costs include the following categories: personnel costs, clinical costs, laboratory costs, technology license fees, research costs and facilities costs.

        Selling, general and administrative expenses increased to $37.4 million for the 2002 Quarterly Period from $18.3 million for the 2001 Quarterly Period. This increase represents a full quarter of expenses from our commercial organization acquired in large part through the acquisition of COR as well as increased expenses due to the expansion of our business groups, facilities and infrastructure necessary to support the development of our pipeline and growth in all areas of our business. Significant increases were primarily in personnel expenses, facility expenses and consulting.

        Cost of copromotion revenue consists of certain manufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN® (eptifibatide) Injection within copromotion territories. Cost of copromotion revenue fluctuates in relation to the domestic sales of INTEGRILIN and as we incur more or less of the joint activities that we undertake in our collaboration with Schering.

        Amortization of intangible assets in the 2002 Quarterly Period relates to specifically identified intangible assets from the COR, LeukoSite, Inc. ("LeukoSite") and Cambridge Discovery Chemistry Limited ("CDC") acquisitions. Amortization of intangible assets in the 2001 Quarterly Period relates to existing technology, assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense decreased to $9.8 million in the 2002 Quarterly Period from $15.7 million in the 2001 Quarterly Period due to the adoption of SFAS No. 142. Following our adoption of SFAS 142 effective as of January 1, 2002, we continue to amortize specifically identifiable intangible assets and ceased amortizing goodwill and assembled workforce which was reclassified to goodwill.

        Investment income decreased to $21.7 million for the 2002 Quarterly Period from $24.0 million for the 2001 Quarterly Period. We recorded realized gains of $3.8 million and $1.4 million and realized losses of $3.3 million and $0.2 million for the 2002 Quarterly Period and 2001 Quarterly Period, respectively. We expect to

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continue to realize gains and losses as we manage our portfolio. Interest expense increased to $10.4 million for the 2002 Quarterly Period from $2.4 million for the 2001 Quarterly Period primarily due to our assumption of COR's convertible notes consisting of 5.0% convertible subordinated notes due March 1, 2007, that are convertible into our common stock at any time prior to maturity at a price equal to $34.21 per share (the "5.0% notes") and 4.5% convertible senior notes due June 15, 2006, that are convertible into our common stock at any time prior to maturity at a price equal to $40.61 per share (the "4.5% notes").

Nine Months Ended September 30, 2002 and September 30, 2001

        For the nine months ended September 30, 2002 (the "2002 Nine Month Period"), we reported a net loss of $510.5 million or $1.86 per basic and diluted share as compared to a net loss of $125.0 million or $0.57 per basic and diluted share for the nine months ended September 30, 2001 (the "2001 Nine Month Period").

        Revenues increased to $256.2 million for the 2002 Nine Month Period from $191.6 million for the 2001 Nine Month Period. The increase is primarily attributable to our share of profits from INTEGRILIN® (eptifibatide) Injection copromoted by us and Schering. Included in revenue for the nine month periods presented in 2002 and 2001 is $30.5 million and $32.8 million, respectively, of revenue that was recognized in prior years relating to the adoption of SAB 101. Revenue under strategic alliances decreased due to the termination of certain of our early strategic alliances. We expect that our revenue mix will continue to shift to product-based revenue as we develop our pipeline, evolve our partnerships and additional discovery-focused alliance terminate.

        Included in the 2001 Nine Month Period was $18.4 million of additional revenue from our Bayer alliance resulting from a change of estimate to reflect our continued research productivity improvements. Excluding the impact of this change in estimate, net loss attributable to common stockholders and the related earnings per share amounts for the nine months ended September 30, 2001 was $143.5 million and $0.66 per share.

        Research and development expenses increased to $364.3 million in the 2002 Nine Month Period from $285.9 million for the 2001 Nine Month Period. The increase was primarily attributable to our continued investment in building a sustainable product pipeline, with increases in expenses relating to clinical trials and preclinical product candidates, personnel and facilities.

        Selling, general and administrative expenses increased to $114.7 million for the 2002 Nine Month Period from $53.9 million for the 2001 Nine Month Period. The increase represents expenses from our commercial organization that were not present last year as well as increased expenses due to the expansion of our business groups, facilities and infrastructure necessary to support the development of our pipeline and growth in all areas of our business. Significant increases were primarily in personnel expenses, consulting and facility expenses.

        Cost of copromotion revenue consists of certain manufacturing-related and advertising and promotional expenses associated with the sale of INTEGRILIN within copromotion territories. Cost of copromotion revenue fluctuates in relation to the domestic sales of INTEGRILIN and as we incur more or less of the joint activities that we undertake in our collaboration with Schering.

        On February 12, 2002, we acquired COR for an aggregate purchase price of $1.8 billion primarily consisting of 55.1 million shares of Millennium common stock pursuant to the merger agreement between Millennium and COR. This calculation is based on COR outstanding common stock at February 12, 2002 using the conversion ratio of 0.9873 of a share of Millennium common stock for each share of outstanding COR common stock. In addition, options to purchase approximately 6.2 million shares of COR common stock with a weighted average exercise price of $12.90 were assumed by us pursuant to the merger agreement and converted into options to purchase approximately 6.1 million shares of Millennium common stock with a weighted average exercise price of $13.07.

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

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        We also recorded a one-time, non-cash charge to operations in the 2002 Nine Month Period of $242.0 million for acquired in-process research and development. The valuation of acquired in-process research and development represents the estimated fair value related to incomplete projects that, at the time of the COR acquisition, had no alternative future use and for which technological feasibility had not been established.

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

        The in-process technology we acquired from COR consisted of five significant research and development projects with values assigned of $4.0 million to $149.0 million for each project. These projects include the development of pipeline products for the treatment of cardiovascular diseases, including acute myocardial infarction, restenosis, cirrhosis, pulmonary fibrosis, venous thrombosis, and stroke prevention, as well as in the area of oncology. Through the acquisition date, COR had spent approximately $80.0 million to $140.0 million on each of these five in-process research and development projects. We expect to incur an additional $86.0 million to $146.0 million of development expenses for each of these five significant projects. The five projects acquired, which are in various stages of preclinical and Phase II clinical trials, are expected to reach completion in 2003 through 2009.

        A major risk associated with the timely completion and commercialization of these products is the ability to confirm the safety and efficacy of the technology based on the data of long-term clinical trials. If these projects are not successfully developed, future results of operations may be adversely affected. Additionally, the value of the other intangible assets acquired may become impaired.

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

        Amortization of intangible assets in the 2002 Nine Month Period relates to specifically identified intangible assets from the COR, LeukoSite and CDC acquisitions. Amortization of intangible assets in the 2001 Nine Month Period relates to existing technology, assembled workforce and goodwill acquired through the acquisitions of LeukoSite and CDC. Amortization expense decreased to $25.1 million in the 2002 Nine Month Period from $48.0 million in the 2001 Nine Month Period due to the adoption of SFAS No. 142. Following our adoption of SFAS 142 effective as of January 1, 2002, we continue to amortize specifically identifiable intangible assets and ceased amortizing goodwill and assembled workforce which was reclassified to goodwill.

        Investment income decreased to $69.8 million for the 2002 Nine Month Period from $73.4 million for the 2001 Nine Month Period. We recorded realized gains of $15.8 million and $6.5 million for the 2002 Nine Month Period and 2001 Nine Month Period, respectively. We recorded realized losses of $20.4 million during the 2002 Nine Month Period, including a $14.6 million write-down relating to certain bond investments. Our investments are made primarily in government and corporate bonds of high quality and a small portion of our holdings have been affected by the sudden and dramatic changes in the fundamentals of some of our bond issuers. We expect to continue to realize gains and losses as we manage our portfolio. Interest expense increased to $27.6 million for the 2002 Nine Month Period from $7.0 million for the 2001 Nine Month Period primarily due to our assumption of COR's convertible notes.

        We sold our equity interest in Millennium & ILEX Partners, L.P. ("M&I") and in consideration for the sale, we received an initial payment of $20.0 million in December 2001. During the 2002 Nine Month Period, we recorded an additional gain of $40.0 million payable in December 2002 on our sale of this equity interest based

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upon the achievement of a predetermined sales target of CAMPATH® (alemtuzumab) humanized monoclonal antibody for 2002 that entitles us to receive this additional payment under the terms of our agreement with ILEX.

        During the 2002 Nine Month Period, we recorded a non-cash charge of $54.0 million relating to the fair value of the premium put placed on COR's convertible notes that were assumed in the merger. See Contractual Obligations for further discussion of the put options.

        During the 2001 Nine Month Period, we paid an aggregate of $2.6 million in cash to certain holders of our 5.5% convertible subordinated notes due January 15, 2007, that are convertible into our common stock at any time prior to maturity at a price equal to $42.07 per share (the "5.5% notes") in order to induce the conversion of their notes into our common stock.

Liquidity and Capital Resources

        We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to pay debt service, including principal and interest and capital lease payments. As described above under Overview—Ongoing Expansion of Operations, we expect that our cash requirements for all of these uses will increase as the scale of our operations grows.

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

        In the future, we expect to continue to fund our cash requirements from some of these external sources as well as the sales of INTEGRILIN® (eptifibatide) Injection and other products. In particular, we are entitled to additional committed research and development funding under a number of our strategic alliances, Abbott has agreed to purchase an additional $57.0 million of our common stock in two quarterly installments through 2003 and we may receive additional substantial payments from ILEX as a result of our sale of our joint venture interest in M&I. We believe that the key factors that could affect our internal and external sources of cash are:

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        As of September 30, 2002 and December 31, 2001, we had approximately $1.8 billion and $1.5 billion, respectively in cash, cash equivalents and marketable securities. This excludes $38.9 million of interest-bearing marketable securities classified as restricted cash on our balance sheet as of September 30, 2002, which serve as collateral for letters of credit securing leased facilities.

         During the nine months ended September 30, 2001, we paid $2.6 million in cash to certain holders of the 5.5% notes in order to induce the conversion of $12.6 million of these notes into approximately 0.3 million shares of Millennium common stock. These cash payments were expensed during the nine months ended September 30, 2001. Interest accrued through the date of conversion was charged to interest expense and was paid upon conversion. At September 30, 2002, we had $83.3 million of outstanding 5.5% notes.

        During the nine months ended September 30, 2002, we received $85.8 million from Abbott for a purchase of approximately 5.1 million shares of our common stock under an equity investment agreement. During the nine months ended September 30, 2001, we received $100.0 million from Aventis and $78.6 million from Abbott for purchases of approximately 2.0 million and 2.5 million shares, respectively of our common stock under equity investment agreements.

Cash Flows

        We used $305.3 million of cash in operating activities in the 2002 Nine Month Period and $109.4 million in the 2001 Nine Month Period. The principal use of cash in operating activities in both 2002 and 2001 was to fund our net loss.

        In addition to operating expenses we incur as a result of our alliances with our strategic partners, we have also made commitments to purchase debt and/or equity securities from certain of these partners.

        Investing activities provided net cash of $248.2 million in the 2002 Nine Month Period. We used cash of $179.0 million in investing activities in the 2001 Nine Month Period. The principal source of funds in the 2002 Nine Month Period is from the net cash acquired in the COR acquisition. The principal uses in the 2002 and 2001 Nine Month Periods were purchases of marketable securities, property and equipment and other long term assets.

        Financing activities provided net cash of $82.5 million in the 2002 Nine Month Period and $183.9 million in the 2001 Nine Month Period. The principal sources of net cash from financing activities were the sales of common stock to Abbott in the 2002 and 2001 periods and the sale of common stock to Aventis in the 2001 Period.

        On October 1, 2002, we performed our annual goodwill impairment test and determined that no impairment existed on that date. However, we have experienced a significant decline in market capitalization due to a decline in stock price. While, a decline in stock price is not specifically cited as an impairment indicator, we continually monitor business and market conditions to assess whether an impairment indicators exists. If we were to determine that an impairment indicator exists, we would be required to perform an impairment test which might result in a material impairment charge to our statement of operations.

        We believe that existing cash and cash equivalents, internally generated funds and the anticipated cash payments from our current strategic alliances will be sufficient to support our operations and fund our capital commitments for the near term. Our actual future cash requirements, however, will depend on many factors, including:

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Contractual Obligations

        Our major outstanding contractual obligations relate to our convertible notes, our capital leases from equipment financings and our facilities leases. Our facilities lease expense in future years will increase significantly over past years as a result of new lease arrangements entered into in 2000 and 2001 described below and the facilities leases assumed by us in the COR acquisition.

        Our convertible notes aggregate $683.3 million in principal amount outstanding. All three issues of notes require semi-annual interest payments through maturity. These notes consist of:

        In April 2002, we amended the terms of the 4.5% notes and the 5.0% notes to add put options permitting noteholders to require us on April 29, 2003, to repurchase the 4.5% notes for cash at a price of $1,095 per $1,000 of principal amount and the 5% notes for cash at a price of $1,085 per $1,000 of principal amount, resulting in a maximum aggregate payment obligation of $654.0 million. These put options on the notes are derivative instruments. Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" requires us to record all derivative instruments in the balance sheet at fair value. We determined the fair value of these derivative instruments to be $54.0 million in the aggregate and we recorded a liability on the balance sheet and a non-cash charge in the quarter ended June 2002. Changes in the fair value of these derivatives are recognized in income.

        In February 2001, we entered into a lease agreement relating to a building for laboratory and office space in Cambridge, England. The lease has a term of 20 years and is expected to commence in 2003 upon completion of construction. We are responsible for a portion of the construction costs, which we estimate to be approximately $21.0 million. Rent is expected to be approximately $2.6 million per year based upon foreign currency exchange rates at September 30, 2002 and is subject to market adjustments at the end of the 5th, 10th and 15th years.

        We also have lease obligations relating to two buildings for laboratory and office space in Cambridge, Massachusetts. The rent obligation for the first of these buildings began in July 2002. The rent obligation for the second building is expected to commence on the earlier of (a) October 1, 2003 or (b) the date on which we commence occupancy of the building. Rent is calculated on an escalating scale ranging from approximately $7.6 million, per building per year, to approximately $9.7 million, per building per year. Each lease is for a term of seventeen years. The Company is responsible for a portion of the construction costs for both buildings and was deemed to be the owner during the construction period of each building under Emerging Issues Task Force ("EITF") 97-10, "The Effect of Lessee Involvement in Asset Construction."

        There have been no other significant changes to our contractual obligations and commercial commitments since we presented those amounts in our Form 10-K as of December 31, 2001, except for Amendment No. 6 dated as of March 22, 2002 to Agreement dated as of September 22, 1998 by and between Bayer AG and us filed as an exhibit to our Form 10-Q for the period ended March 31, 2002.

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RISK FACTORS THAT MAY AFFECT RESULTS

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

        There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Form 10-Q. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Regulatory Risks

We may not be able to obtain marketing approval for products or services resulting from our development efforts or to market INTEGRILIN® (eptifibatide) Injection for additional therapeutic uses.

        All of 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. This process is expensive and lengthy, often taking a number of years. In some cases, the length of time that it takes for us to achieve various regulatory approval milestones affects the payments that we are eligible to receive under our strategic alliance agreements. For example, a payment is due to us from Schering if INTEGRILIN receives an expanded marketing authorization for the European Union.

        We may need to successfully address a number of technological challenges in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.

        INTEGRILIN has been approved for a specific set of therapeutic uses. To grow our business, we may need to obtain regulatory approval to be able to promote INTEGRILIN for additional therapeutic uses.

If we fail to comply with regulatory requirements, or if we experience unanticipated problems with our approved products, our products could be subject to restrictions or withdrawal from the market.

        Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data and promotional activities for such product, will be subject to continual review and periodic inspections by the FDA and other regulatory bodies. Later discovery of previously unknown problems with our products or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such products or manufacturing processes, withdrawal of the products from the market or the imposition of civil or criminal penalties.

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

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

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Risks Relating to Our Business, Strategy and Industry

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

        Our revenues over the next several years will be materially dependent on the commercial success of INTEGRILIN, which has been on the market in the United States since June 1998. Marketing outside the United States commenced in mid-1999. Although sales of INTEGRILIN have increased since its launch, if sales do not continue to increase over current levels, we will not achieve our business plan and may be forced to scale back our operations and research and development programs.

Sales of INTEGRILIN in particular reporting periods may be affected by fluctuations in buying patterns.

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

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

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

We face substantial competition, particularly in the cardiovascular disease market, which may result in others discovering, developing or commercializing products and services before or more successfully than us.

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

        In particular due to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address these diseases is large, and competition is intense and expected to increase. Our most significant competitors are major pharmaceutical companies and more established biotechnology companies. The two products that compete with INTEGRILIN are ReoPro®, which is produced by Johnson & Johnson and sold by Johnson & Johnson and Eli Lilly and Company, and Aggrastat®, which is produced and sold by Merck & Co., Inc. These competitors operate large, well-funded cardiovascular research and development programs and have significant expertise in manufacturing, testing, regulatory matters and marketing.

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

        We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage of testing. Interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be seen in later studies. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial or adverse medical events during a clinical trial could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.

        We may not complete our planned preclinical or clinical trials on schedule or at all. In addition, due to the substantial demand for clinical trial sites in the cardiovascular area, we may have difficulty obtaining a sufficient number of appropriate patients or clinician support to conduct our clinical trials as planned. If so, we may have to expend substantial additional funds to obtain access to resources or delay or modify our plans significantly. Our product development costs will increase if we experience delays in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential products.

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

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

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

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

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Risks Relating to Our Financial Results and Need for Financing

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

        We have incurred losses in all but two of the years since our inception. We expect to continue to incur substantial operating losses in future periods. Prior to our acquisition of COR, substantially all of our revenues resulted from payments from collaborators, and not from the sale of products.

        We expect to increase our spending significantly as we continue to expand our infrastructure, research and development programs and commercialization activities. As a result, we will need to generate significant revenues to pay these costs and achieve profitability. We cannot be certain whether or when we will become profitable because of the significant uncertainties with respect to our ability to generate revenues from the sale of products and services and from existing and potential future strategic alliances.

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

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

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

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

        At September 30, 2002 we had approximately $683.3 million of outstanding debt. During each of the last five years, our earnings were insufficient to cover our fixed charges. During each of the next three years, we will be required to make interest payments on our outstanding convertible notes totaling approximately $33.1 million. In addition, we amended the convertible notes assumed upon our acquisition of COR to provide noteholders the right to put these notes to us on April 29, 2003 for cash at a premium to face value. The aggregate amount of this premium on the $600.0 million principal amount of these notes is approximately $54.0 million. In the event that the holders of large numbers of these notes put these notes to us, the amount of our cash would be substantially diminished. If we are unable to generate sufficient cash to meet these obligations and have to use existing cash or investments, we may have to delay or curtail our research and development programs.

        We intend to fulfill our debt service obligations both from cash generated by our operations and from our existing cash and investments. We may add additional lease lines to finance capital expenditures and may obtain additional long-term debt and lines of credit.

        Our indebtedness could have significant additional negative consequences, including:

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We have sold our interest in CAMPATH® (alemtuzumab) humanized monoclonal antibody; as a result, we will no longer have control over the financial success of that product.

        On December 31, 2001, ILEX Oncology, Inc. acquired our equity interest in Millennium & ILEX Partners, L.P., which owns the CAMPATH product. In exchange for our equity interest in Millennium & ILEX Partners, ILEX paid us $20 million on December 31, 2001 and is obligated to pay us up to an additional $120.0 million over the next three years if sales of CAMPATH in the U.S. meet specified sales thresholds. During the nine month period ended September 30, 2002, we recorded an additional gain of $40.0 million payable in December 2002. In addition, we will be entitled to additional payments from ILEX based on U.S. sales of CAMPATH after 2004. There can be no assurance that we will receive any of the payments that are dependent on sales of CAMPATH. In addition, we will have no ability to influence the actions of the entity that owns CAMPATH and, therefore, will have no control over the financial success of CAMPATH.

Risks Relating to Collaborators

We depend significantly on our collaborators to develop and commercialize products and services based on our work. Our business may suffer if any of our collaborators breaches its agreement or fails to support or terminates its alliance with us.

        We conduct most of our discovery and development activities through strategic alliances and market and sell INTEGRILIN® (eptifibatide) Injection through an alliance with Schering. The success of our alliances depends heavily on the efforts and activities of our collaborators. Each of our collaborators has significant discretion in determining the efforts and resources that they will apply to the alliance. Our existing and any future alliances may not be scientifically or commercially successful.

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

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

        An important element of our business strategy is entering into strategic alliances for the development and commercialization of products and services based on our discoveries. We face significant competition in seeking appropriate collaborators. Moreover, these alliance arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to establish additional strategic alliances or other alternative arrangements. The terms of any additional strategic alliances or other arrangements that we establish may not be favorable to us. Moreover, such strategic alliances or other arrangements may not be successful.

Risks Relating to Intellectual Property

If we are unable to obtain patent protection for our discoveries, the value of our technology and products will be adversely affected. If we infringe patent or other intellectual property rights of third parties, we may not be able to develop and commercialize our products and services or the cost of doing so may increase.

        Our patent positions, and those of other pharmaceutical and biotechnology companies, are generally uncertain and involve complex legal, scientific and factual questions.

        Our ability to develop and commercialize products and services depends in significant part on our ability to:

There is significant uncertainty about the validity and permissible scope of patents in our industry, which may make it difficult for us to obtain patent protection for our discoveries.

        The validity and permissible scope of patent claims in the pharmaceutical and biotechnology fields, including the genomics field, involve important unresolved legal principles and are the subject of public policy debate in the United States and abroad. For example, there is significant uncertainty both in the United States and abroad regarding the patentability of gene sequences in the absence of functional data and the scope of patent protection available for full-length genes and partial gene sequences. Moreover, some groups have made particular gene sequences available in publicly accessible databases. These and other disclosures may adversely affect our ability to obtain patent protection for gene sequences claimed by us in patent applications that we file subsequent to such disclosures. There is also some uncertainty as to whether human clinical data will be required for issuance of patents for human therapeutics. If such data are required, our ability to obtain patent protection could be delayed or otherwise adversely affected.

Third parties may own or control patents or patent applications and require us to seek licenses, which could increase our development and commercialization costs, or prevent us from developing or marketing our products or services.

        We may not have rights under some patents or patent applications related to our proposed products, processes or services. Third parties may own or control these patents and patent applications in the United States and abroad. Therefore, in some cases, such as those described below, to develop, manufacture, sell or import certain of our proposed products, processes or services, we or our collaborators may choose to seek, or be required to seek, licenses under third party patents issued in the United States and abroad or those that might issue from United States and foreign patent applications. In such event, we would be required to pay license

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fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products, processes or services.

        With respect to our product candidate MLN01, we are aware of third party patents and patent applications which relate to certain anti-CD18 antibodies and their use in various methods of treatment including methods of reperfusion therapy and methods of treating focal ischemic stroke. In addition, our MLN01 and MLN02 product candidates are humanized monoclonal antibodies. We are aware of third party patents and patent applications that relate to certain humanized or modified antibodies, products useful for making humanized or modified antibodies and processes for making and using humanized or modified antibodies. We are also aware of third party patents and patent applications relating to certain manufacturing processes, products thereof and materials useful in such processes. We are also aware of third party patent applications and a potentially interfering patent application relating to anti-PSMA antibodies.

        Our product candidates VELCADE™ (bortezomib) for Injection (formerly known as MLN341, LDP-341 and PS-341) and MLN519 are small molecule drug candidates. For the use of VELCADE and MLN519 in the treatment of infarctions, we are aware of the existence of a potentially interfering patent application filed by one of our former consultants. We are also aware of third party patents relating to assays relating to the NFkB pathway.

        On June 26, 2002, Ariad Pharmaceuticals, Inc. sent us and approximately 50 other parties a letter offering a sublicense for the use of U.S. Patent No. 6,410,516 (which was issued and which is exclusively licensed to Ariad). We have serious questions concerning the validity of this patent. However, if Ariad sued us for infringement of this patent, and the patent was found to be valid and we were found to be infringing, we could be required to pay royalties based on the U.S. sales of VELCADE, which would reduce our profits on these sales and which could have a material adverse effect on our business.

We may become involved in expensive patent litigation or other proceedings, which could result in our incurring substantial costs and expenses or substantial liability for damages or require us to stop our development and commercialization efforts.

        There has been substantial litigation and other proceedings regarding the patent and other intellectual property rights in the pharmaceutical and biotechnology industries. We may become a party to patent litigation or other proceedings regarding intellectual property rights. For example, we believe that we hold patent applications that cover genes that are also claimed in patent applications filed by others. Interference proceedings before the United States Patent and Trademark Office may be necessary to establish which party was the first to invent these genes.

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

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

Risks Relating to Product Manufacturing, Marketing and Sales

Because we have limited sales, marketing and distribution experience and capabilities, we may be dependent on third parties to successfully perform these functions on our behalf or may be required to incur significant costs and devote significant efforts to augment our existing capabilities.

        We have limited sales, marketing and distribution experience and capabilities, primarily the specialty sales force that we acquired in the COR merger that markets INTEGRILIN® (eptifibatide) Injection. Depending on

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

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

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

        We currently rely upon third parties to produce material for preclinical testing purposes and expect to continue to do so in the future. We also expect to rely upon other third parties, including our collaborators, to produce materials required for clinical trials and for the commercial production of certain of our products.

        There are a limited number of manufacturers that operate under the FDA's good manufacturing practices regulations capable of manufacturing our products. As a result, we have experienced some difficulty finding manufacturers for our products with adequate capacity for our anticipated future needs. If we are unable to arrange for third party manufacturing of our products, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.

        Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

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

We face particular challenges in connection with the manufacture of INTEGRILIN® (eptifibatide) Injection; if we do not meet these challenges our revenues and income will be adversely affected.

        With respect to INTEGRILIN, we have two manufacturers that produce bulk product and two manufacturers, one of which is Schering at its Manati facility in Puerto Rico, that perform fill/finish and packaging. If we do not have adequate supplies of INTEGRILIN to meet market demand, we may lose potential revenues, and the healthcare community may turn to competing products. Pending resolution of issues to be addressed by us and Schering relating to production processes and procedures, international supply of INTEGRILIN from Schering's Manati facility has been temporarily halted and fill/finish and packaging of INTEGRILIN at that facility for sale in the United States is in abeyance. We are actively working with Schering to identify alternative fill/finish and packaging suppliers, including other Schering facilities, to serve as future sources of supply. We believe that the fill/finish and packaging performed by our primary manufacturer is sufficient to meet our requirements for INTEGRILIN supply in the United States for the foreseeable future.

        Our manufacturing plans call for the addition of extra capacity for the manufacture of INTEGRILIN. If we are not able to secure additional manufacturing capacity on favorable terms, we may not be able to expand capacity sufficiently to meet future market demand.

        We expect to improve or modify our existing process technologies and manufacturing capabilities for INTEGRILIN. We cannot quantify the time or expense that may ultimately be required to improve or modify

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our existing process technologies, but it is possible that such time or expense could be substantial. Moreover, we may not be able to implement any of these improvements or modifications successfully.

        Our commercialization strategy for INTEGRILIN® (eptifibatide) Injection includes establishment of multiple third-party manufacturing sources on commercially reasonable terms. We may not be able to do so, and, even if such sources are established, they may not continue to be available to us on commercially reasonable terms. In the event that we are unable to obtain contract manufacturing on commercially acceptable terms, our ability to produce INTEGRILIN and to conduct preclinical testing and clinical trials of product candidates would be impaired.

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

        The availability and levels of reimbursement by governmental and other third party payors affect the market for any pharmaceutical product or healthcare service. These third party payors continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for medical products and services. In certain foreign countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. We may not be able to sell our products and services profitably if reimbursement is unavailable or limited in scope or amount.

        In particular, third party payors could lower the amount that they will reimburse hospitals to treat the conditions for which the FDA has approved INTEGRILIN. If they do, pricing levels or sales volumes of INTEGRILIN may decrease. In foreign markets, a number of different governmental and private entities determine the level at which hospitals will be reimbursed for administering INTEGRILIN to insured patients. If these levels are set, or reset, too low, it may not be possible to sell INTEGRILIN at a profit in these markets.

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

        We expect to experience pricing pressures in connection with the sale of our future products and services due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative proposals.

        Ethical, legal and social issues related to genetic testing may cause our diagnostic products to be rejected by customers or prohibited or curtailed by governmental authorities.

        Diagnostic tests that evaluate genetic predisposition to disease raise issues regarding the use and confidentiality of the information provided by such tests. Insurance carriers and employers might discriminate on the basis of such information, resulting in a significant barrier to the acceptance of such tests by customers. This type of discrimination could cause governmental authorities to prohibit or limit the use of such tests.

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

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

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Guidelines and recommendations can affect the use of our products.

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

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        We manage our investment portfolio in accordance with our Investment Policy. The primary account objectives of our Investment Policy are to preserve principal, maintain a high degree of liquidity to meet operating needs and deliver competitive returns subject to prevailing market conditions. Investments are made primarily in high-grade corporate bonds with effective maturities of three years or less, asset-backed and U.S. government agency securities. These investments are subject to risk of default, changes in credit rating and changes in market value. These investments are also subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 100 basis point increase in interest rates would result in an approximate $27.4 million decrease in the fair value of our investments as of September 30, 2002. However, due to the conservative nature of our investments and relatively short effective maturities of debt instruments, interest rate risk is mitigated. Our Investment Policy specifies credit quality standards for our investments and limits the amount of exposure from any single issue, issuer or type of investment. We do not own derivative financial instruments in our investment portfolio.

        The interest rates on our convertible subordinated notes and capital lease obligations are fixed and therefore not subject to interest rate risk.

        Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial instruments which would require disclosure under this item.

        As of September 30, 2002 we did not have any financing arrangements that were not reflected in our balance sheet.

Item 4.    Controls and Procedures

(a)    Evaluation of disclosure controls and procedures.

        We have established and maintain disclosure controls and procedures to ensure that we record, process, summarize, and report information we are required to disclose in our periodic reports filed with the Securities and Exchange Commission in the manner and within the time periods specified in the SEC's rules and forms. Our chief executive officer and chief financial officer evaluated these controls and procedures--within 90 days of the filing date of this quarterly report--and concluded based upon that evaluation, that they are effective in achieving this purpose.

(b)    Changes in internal controls.

        We maintain internal financial controls and procedures to ensure that we comply with applicable laws and our established financial policies. There were no significant changes, including any corrective actions with regard to significant deficiencies and material weaknesses, in our internal controls or in other factors that could significantly affect internal controls since the date of the most recent evaluation of these controls by our chief executive officer and chief financial officer.

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PART II OTHER INFORMATION

Item 2.    Changes in Securities and Use of Proceeds

        On September 4, 2002, we issued and sold to Abbott Laboratories 2,269,375 shares of our common stock for aggregate proceeds of approximately $28.6 million. These shares were issued pursuant to an investment agreement dated March 9, 2001 between us and Abbott and no person served as an underwriter with respect to this transaction. We relied on Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") for exemption from the registration requirements of the Securities Act.

Item 6.    Exhibits and Reports on Form 8-K

         The following Current Reports on Form 8-K were filed by us during the three months ended September 30, 2002.

         1.         A Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2002 pursuant to Items 5 and 7 to report that we issued a press release on July 15, 2002 to announce that we will discontinue the development of our oral MLN977 program for the treatment of chronic asthma.

         2.         A Current Report on Form 8-K was filed with the Securities and Exchange Commission on August 13, 2002 pursuant to Items 5 and 7 to report that, although we were not included on the list of companies required to comply with SEC Order 4-460, our principal executive officer and principal financial officer voluntarily signed statements under oath in the form required by the order.

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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.

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CERTIFICATIONS

I, Mark J. Levin, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Millennium Pharmaceuticals, Inc.;

2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.        The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.        The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.        The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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I, Kevin P. Starr, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Millennium Pharmaceuticals, Inc.;

2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.        The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.        The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.        The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

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