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

FORM 10-K

(Mark One)

For the fiscal year ended: December 31, 2004

Or

For the transition period from                               to                              

Commission file number: 0-28494

MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

40 Landsdowne Street, Cambridge, Massachusetts 02139
(Address of principal executive offices) (zip code)

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

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
(Title of class)

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

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

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý    No o

        The aggregate market value of voting Common Stock held by non-affiliates of the registrant as of June 30, 2004 was $4,141,855,120.20 based on the last reported sale price of the Common Stock on the Nasdaq Stock Market on that date.

        Number of shares outstanding of the registrant's class of Common Stock as of March 4, 2005: 306,695,427.

Documents incorporated by reference:

        Portions of the information required by Part III of Form 10-K will appear in the registrant's definitive Proxy Statement on Schedule 14A for the 2005 Annual Meeting of Stockholders and are hereby incorporated by reference into this report.

TABLE OF CONTENTS

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PART I

Item 1. BUSINESS

Overview

        We are a leading biopharmaceutical company focused on developing and commercializing breakthrough products in the areas of cancer, cardiovascular disease and inflammatory disease. We currently market two market-leading products, one for cancer and one for cardiovascular disease. We also have other potential therapeutic products in various stages of clinical and preclinical development in all three of our areas of disease focus.

        Our cancer product, VELCADE® (bortezomib) for Injection, was approved in the United States in May 2003 and in the European Union in April 2004 for marketing as a treatment for patients with multiple myeloma, a type of blood cancer, who have received at least two prior therapies and demonstrated disease progression on their most recent therapy. We began marketing VELCADE in the United States shortly after receiving approval. We sell VELCADE in the United States directly through our own oncology sales force. VELCADE is sold in the European Union and other approved areas outside of the United States by our collaborator Ortho Biotech Products, L.P., or Ortho Biotech, a wholly owned subsidiary of Johnson & Johnson. In 2004, U.S. sales of VELCADE were approximately $143.1 million, which represented approximately 32% of our total revenue for 2004.

        Our cardiovascular product, INTEGRILIN® (eptifibatide) Injection, has been on the market in the United States since 1998 and outside of the United States since 1999. In the United States, we co-promote INTEGRILIN with Schering-Plough Corporation and Schering- Plough Ltd., together referred to as SGP, and share profits and losses. In the European Union, GlaxoSmithKline plc, or GSK, exclusively markets INTEGRILIN under a license from us. SGP sells INTEGRILIN in specified other areas outside of the United States and the European Union. In 2004, worldwide sales of INTEGRILIN were approximately $325.3 million. Approximately 93% of those sales were made in the United States. The co-promotion revenue we received from SGP based in part on worldwide sales of INTEGRILIN was approximately $206.3 million, which represented approximately 46% of our total revenue for 2004.

        Our business strategy is to build a portfolio of innovative, new medicines based on our understanding of particular molecular pathways that affect the establishment and progression of specific diseases. These molecular pathways include the related effects of proteins on cellular performance, reproduction and death. We plan to develop and commercialize many of our products on our own, but will seek development and commercial collaborators when we believe that this will maximize product value. For example, we generally intend to enter into sales and marketing alliances with major pharmaceutical companies for products in disease areas that require large sales forces or for markets outside of the United States.

        In the near term, we expect to focus our commercial activities in the cancer and cardiovascular therapeutic areas where we plan to build on our commercial and regulatory achievements with VELCADE and INTEGRILIN. We also are working to obtain approval to market VELCADE in the United States and elsewhere for earlier use in multiple myeloma and for the treatment of additional cancer types. We believe that these additional uses of VELCADE would lead to a significant expansion of our cancer business. In inflammatory disease, we are advancing novel product candidates in clinical development as potential treatments for serious and widely prevalent conditions.

        In the long term, we expect to bring new products to market on a regular basis from our pipeline of discovery and development-stage programs. If we are successful, we would use the revenues from this expanding portfolio of marketed products to broaden the scope of our operations.

        We were incorporated in Delaware in 1993. Our principal executive offices are located at 40 Landsdowne Street, Cambridge, Massachusetts 02139.

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Our Products

VELCADE® (bortezomib) for Injection

        VELCADE, the first of a new class of medicines called proteasome inhibitors, was the first treatment in more than a decade to be approved in the United States for patients with multiple myeloma. We received accelerated approval from the Food and Drug Administration, or FDA, on May 13, 2003 to market VELCADE for the treatment of multiple myeloma patients who have received at least two prior therapies and have demonstrated disease progression on their most recent therapy, commonly referred to as third line and beyond.

        The European Commission granted Marketing Authorization for VELCADE for this same indication in Europe in April 2004. Under this Authorization, a single license was granted to Millennium for marketing VELCADE in the 15 member states of the European Union, plus Norway and Iceland. VELCADE was also approved for marketing in the ten accession member countries of the European Union when those countries officially joined the European Union on May 1, 2004. VELCADE has also been approved in a number of other countries, including Canada, Switzerland, Argentina, Israel, Bulgaria, Slovenia, South Korea and Mexico, bringing the total number of approved countries to approximately 40. Under our agreement with Ortho Biotech, since securing these non-U.S. approvals, we have transferred the licenses to an affiliate of Ortho Biotech. Ortho Biotech's affiliates now market VELCADE in these countries.

        In September 2004, we submitted a supplemental New Drug Application, or sNDA, to the FDA for VELCADE for the treatment of patients with multiple myeloma who have received at least one prior therapy, commonly referred to as second line, based on our completed phase III APEX clinical trial. Also during October 2004, the European Medicines Evaluation Agency, or EMEA, accepted for review a filing by Ortho Biotech for the same indication in Europe.

        We are also pursuing the development and potential for the commercialization of VELCADE for other types of cancer, such as lymphoma. The FDA granted VELCADE fast track designation for relapsed and refractory mantle cell lymphoma, an aggressive form of non-Hodgkin's lymphoma, in November 2004. This designation allows the FDA to accept on a rolling basis portions of a marketing application for review prior to the submission of a final document. Additionally, in the fourth quarter of 2004, the National Comprehensive Cancer Network, or NCCN, an alliance of 19 of the world's leading cancer centers that develops guidelines for clinical policy in oncology, included VELCADE in its guidelines for the treatment of patients with mantle cell lymphoma who have received at least one prior therapy. Fast track designation and inclusion in the NCCN guidelines are based on preliminary data from on-going clinical trials of VELCADE in relapsed and refractory mantle cell lymphoma.

        Multiple myeloma is a cancer of the bone marrow in which some types of white blood cells are overproduced. As a result, there is decreased production of normal red and normal white blood cells, thereby damaging the body's immune system. The overproduced white blood cells also cause the growth of tumors that spread to multiple sites, causing bone destruction and resulting in pain and bone fractures. Approximately 15,000 new cases of multiple myeloma were diagnosed in the United States in 2004 and approximately 11,000 people in the United States died of this disease in 2004. Multiple myeloma is one of the top ten causes of cancer death among African-Americans.

        Non-Hodgkin's Lymphoma, or NHL, is the fifth most common cancer in the United States. Each year in the United States there are approximately 56,000 new NHL cases diagnosed and 19,000 NHL-related deaths. According to the American Cancer Society, the incidence of NHL has more than doubled since the 1970s. Mantle cell lymphoma, or MCL, is an aggressive form of NHL that accounts for approximately six percent of all lymphomas. MCL is often widespread when diagnosed and typically involves the lymph nodes, bone marrow and spleen. Only one fifth of MCL patients survive more than five years following diagnosis.

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        Proteasome inhibitors act in a different way from other anti-cancer therapies. Proteasomes are enzyme complexes in all cells that break down intracellular proteins in a regulated manner in both healthy and cancerous cells. Intracellular proteins form pathways by which cancer cells multiply, spread, interact with other cells and avoid programmed cell death. Inhibition of the proteasome by VELCADE prevents the regulated breakdown of these intracellular proteins, thereby interfering with many of these varied functions. This disruption of essential pathways in cancer cells can lead to cell death and inhibit tumor growth.

        The most commonly reported side effects of VELCADE are asthenic conditions including fatigue, malaise and weakness, nausea, diarrhea, decreased appetite including anorexia, constipation, thrombocytopenia, peripheral neuropathy, pyrexia, vomiting, anemia, neutropenia and orthostatic hypotension.

INTEGRILIN® (eptifibatide) Injection

        We market INTEGRILIN in the United States in collaboration with SGP. GSK markets INTEGRILIN in the European Union and, subject to approval of the transfer from SGP to GSK of the relevant marketing authorizations, GSK will also market INTEGRILIN in other European countries. SGP markets INTEGRILIN in countries outside of Europe, including Argentina, Australia, Brazil, Canada, Egypt, India, Israel, Japan, Mexico, Singapore, South Africa and Thailand.

        INTEGRILIN is a small synthetic peptide that works by preventing the aggregation of platelets by blocking the platelet receptor GP IIb-IIIa. The effects of INTEGRILIN are specific to platelets, avoiding interference with other normal cardiovascular processes. In addition, these effects can be reversed following INTEGRILIN discontinuation when no longer needed. We believe that more than one million people per year in the United States are candidates for INTEGRILIN therapy. Bleeding is the most common complication encountered during administration of INTEGRILIN therapy. The majority of excess major bleeding events associated with INTEGRILIN are localized at the site of catheter insertion.

        INTEGRILIN is approved for marketing in the United States for the treatment of patients with acute coronary syndromes, or ACS, which include unstable angina and non-ST segment elevation myocardial infarction. This group includes patients who are medically managed and those undergoing percutaneous coronary intervention, or PCI, including angioplasty. INTEGRILIN is also approved for use at the time of a PCI, including for patients undergoing intracoronary stenting. This is a broader set of indications than the other two GP IIb-IIIa inhibitors approved for marketing in the United States.

        In addition to maintaining the role and market share of INTEGRILIN as a treatment in the catheterization lab, our strategy to grow INTEGRILIN sales within its approved indication is to increase early usage in patients with ACS as well as to increase the number of hospitals using INTEGRILIN. We have a specialized United States cardiovascular sales force that focuses on expanding hospital use of INTEGRILIN. We and SGP market INTEGRILIN in the United States to clinical cardiologists, interventional cardiologists and emergency medicine physicians. We and SGP also focus on hospital pharmacy directors, formulary committee members, hospital administrators and nurses, all of whom can affect purchasing decisions. SGP is currently responsible for the sale of INTEGRILIN to wholesalers. During September 2004, we initiated the process, contemplated by our original agreement with SGP, to transition United States distribution responsibilities for INTEGRILIN from SGP to us. We expect this transition to take place during the fourth quarter of 2005, at the earliest. After the transition, we expect we will be responsible for distributing the product to wholesalers.

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Our Development Efforts

VELCADE® (bortezomib) for Injection Development

        We believe that VELCADE may have broad applications in the treatment of cancer. There are a wide range of ongoing company sponsored trials, investigator initiated studies and cooperative group studies on the use of VELCADE alone and in combination with other therapies in patients with cancer, including the following principal trials:

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clinical trials across the multiple myeloma treatment paradigm including a phase III clinical trial with newly diagnosed and untreated patients;



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a phase II clinical trial in patients with mantle cell lymphoma who have received at least one prior therapy;



•

a phase II clinical trial in patients with follicular or marginal zone lymphoma who have received at least one prior therapy;



•

phase II clinical trials in patients with non small cell lung cancer; and



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clinical trials in patients with other solid tumors including: small cell lung, prostate, ovarian colorectal and breast cancers.

INTEGRILIN® (eptifibatide) Injection Development

        We are pursuing opportunities to expand the market potential for INTEGRILIN by increasing the use of the product in its currently approved indications and exploring potential new indications. The following are the principal on-going efforts we are making in this regard:

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The EARLY ACS trial which we and SGP initiated in June 2004 to demonstrate the benefits of earlier use of INTEGRILIN before patients undergo an interventional procedure.



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EVENT, a drug eluting stent registry which is intended to show the incremental benefit of using INTEGRILIN with drug eluting stents, was initiated in June 2004.



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Through the CRUSADE quality improvement initiative conducted by Duke Clinical Research Institute, we are seeking to increase awareness of the 2002 American College of Cardiology and the American Heart Association guidelines for the management of non-ST-Segment Elevation Acute Coronary Syndromes recommending early use of GP IIb-IIIa inhibitors in some high risk patients.



•

We are funding various investigator-initiated clinical trials to evaluate INTEGRILIN in other possible indications including peripheral angioplasty where anti-platelet aggregation biology might play a role in patient care.

Pipeline Development

        In addition to our ongoing clinical trials of INTEGRILIN and VELCADE, we have eight drug candidates in late preclinical and clinical development. The following chart summarizes the applicable disease indication and the clinical trial or preclinical status of these eight drug candidates.

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        Completion of clinical trials may take several years or more. The length of time can vary substantially according to the type, complexity, novelty and intended use of a product candidate. The types of costs incurred during a clinical trial vary depending upon the type of product candidate and the nature of the study.

Our Collaborations

        We have entered into commercialization, development and research arrangements with pharmaceutical and biotechnology companies relating to a broad range of products and potential product opportunities. These collaborations provide us with the opportunity to maximize the value of our internal resources while at the same time utilizing the resources of other companies to market and develop our products. In the case of our commercial product collaborations, we receive combinations of royalties, distribution fees, shares of profits and losses and/or milestone and other payments. In our research collaborations, we may receive various combinations of license fees and research funding in

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addition to the potential for future payments based on successful commercialization of products resulting from the collaborations.

Ortho Biotech Collaboration

        In June 2003, we entered into an agreement with Ortho Biotech to collaborate on the commercialization and continued clinical development of VELCADE® (bortezomib) for Injection. Under the terms of the agreement, we retain all commercialization rights to VELCADE in the United States. Ortho Biotech and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside of the United States and Janssen Pharmaceutical K.K. is responsible for Japan. We receive distribution fees from Ortho Biotech and its affiliates from sales of VELCADE outside of the United States. We also retain an option to co-promote VELCADE with Ortho Biotech at a future date in specified European countries.

        We are engaged with Ortho Biotech in an extensive global program for further clinical development of VELCADE with the purpose of maximizing the clinical and commercial potential of VELCADE. This program is investigating the potential of VELCADE to treat multiple forms of solid and hematological tumors, including continued clinical development of VELCADE for multiple myeloma. Ortho Biotech is responsible for 40% of the joint development costs through 2005 and for 45% of those costs after 2005. In addition, we may receive payments from Ortho Biotech for achieving clinical development milestones, regulatory milestones outside of the United States and agreed-upon sales levels of VELCADE.

        Decisions regarding the ongoing development and marketing of VELCADE are generally subject to the oversight of a joint steering committee with equal membership from Ortho Biotech and us. However, in the event of a dispute, specified development, United States commercialization and specified other decisions are allocated specifically to us, and commercialization decisions outside of the United States and some other decisions are allocated specifically to Ortho Biotech.

        Unless our agreement with Ortho Biotech is terminated early due to a material uncured breach by one of the parties or by Ortho Biotech unilaterally subject to notice obligations, the agreement continues on a country by country basis outside of the United States until no earlier than the expiration of the last to expire patent covering the manufacture, use or sale of the product in the country. For the year ended December 31, 2004, revenues from this alliance including license fees, reimbursement of development expenses, milestone payments and distribution fees accounted for approximately 17% of our total revenues.

SGP Collaboration

        In April 1995, COR Therapeutics, Inc., or COR, entered into a collaboration agreement with SGP to jointly develop and commercialize INTEGRILIN® (eptifibatide) Injection on a worldwide basis. We acquired COR in February 2002. Under the collaboration agreement with SGP, decisions regarding the ongoing development and marketing of INTEGRILIN are generally subject to the oversight of a joint steering committee with equal membership from SGP and us. However, some development decisions are allocated specifically to us. In addition, in those markets where SGP has exclusive marketing rights, currently everywhere except the United States and the European Union, SGP has decision-making authority with respect to marketing issues.

        Under our collaboration agreement with SGP, we generally share any profits or losses from the United States with SGP based on the amount of promotional efforts that each party contributes. Since the United States launch of INTEGRILIN in June 1998, we have agreed to share promotional efforts in the United States equally with SGP, except for costs associated with marketing programs specific to us. We have granted SGP an exclusive license to market INTEGRILIN outside the United States and the European Union, and SGP pays royalties to us based on sales outside of the United States and the

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European Union. We have the right, in the future, to co-promote INTEGRILIN® (eptifibatide) Injection in Canada. If we exercise this right, we would share any profits or losses from this additional co-promotion territory with SGP.

        Our agreement with SGP continues on a country by country basis until the later of fifteen years from the first commercial sale of an INTEGRILIN product in that country, or expiration of the last to expire patent covering the manufacture, use or sale of that product in that country. During September 2004, we initiated the process, contemplated by our original agreement with SGP, to transition United States distribution responsibilities for INTEGRILIN from SGP to us. We expect this transition to take place during the fourth quarter of 2005, at the earliest. After the transition, we expect to continue to co-promote the product with SGP, but be responsible for distributing the product. As a result, we expect we will recognize revenue for all sales of INTEGRILIN in the United States and pay SGP co-promotion fees.

GSK License Agreement

        In June 2004, we reacquired the rights to market INTEGRILIN in Europe from SGP and concurrently entered into a license agreement granting GSK exclusive marketing rights to INTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketing authorizations for the European Union from SGP to GSK was completed, and GSK began selling INTEGRILIN in the countries of the European Union. Subject to approval of the transfer from SGP to GSK of the relevant marketing authorizations, GSK will also market INTEGRILIN in other European countries. Our commercialization alliance with GSK is designed to provide significant sales and marketing support from GSK to address market opportunities for INTEGRILIN in Europe. Under the terms of the agreement, we are entitled to license fees and royalties from GSK on INTEGRILIN sales in Europe subject to the achievement of specified objectives.

        Under the license agreement with GSK, decisions regarding the ongoing marketing of INTEGRILIN are generally subject to the oversight of a joint steering committee with equal membership from GSK and us. However, GSK has significant final decision-making authority with respect to European marketing issues. Our agreement with GSK continues until the later of (a) December 31, 2014, or (b) as long as GSK continues to commercialize INTEGRILIN in any European country.

BZL Collaboration

        In April 2001, we entered into an agreement with BZL Biologics, L.L.C., or BZL, for the joint development and commercialization of antibody-based therapeutics targeting prostate specific membrane antigen, or PSMA, including both chemotherapeutic agent conjugated and radio-labeled products. These products include MLN2704. Under this agreement, we currently have exclusive development and worldwide marketing rights to these products. We are required to pay development costs of the products and milestone and royalty payments to BZL based on product sales.

Aventis Inflammatory Disease Discovery Collaboration

        In June 2000, we entered into a broad agreement in the field of inflammatory disease with Aventis that includes joint discovery, development and commercialization of drugs for the treatment of specified inflammatory diseases. This agreement covers a substantial portion of our research and development program in the inflammatory disease area and provides us with potential access to Aventis' large promotional infrastructure in connection with the commercialization of jointly developed products. The research phase of the agreement has a five-year term expiring in June 2005.

        In North America, we have agreed to share the responsibility for and cost of developing, manufacturing and marketing products arising from the alliance. Outside of North America, Aventis is

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responsible for and will bear the cost of developing, manufacturing and marketing products arising from the alliance. Aventis is required to pay us a royalty on product sales outside of North America. Under this agreement, Aventis acquired 4.5 million shares of our common stock over a two-year period through 2001 for $250.0 million.

        To date, we and Aventis have identified a significant number of novel drug targets relevant in inflammatory diseases. During the remaining portion of the research phase of the alliance, we and Aventis have agreed to focus our joint resources on the identification and evaluation of compounds for preclinical and clinical development. As of the end of 2004, the alliance had identified several early development candidates, one of which, MLN3897 is now being tested by us in a phase I clinical trial.

Manufacturing

        Our strategy with regard to manufacturing is to contract with third parties to meet our needs for commercial supply and, as to most of our compounds, for research, development, preclinical and clinical trials. Therefore, we have limited manufacturing capabilities and produce only a small amount of product for research and development and preclinical testing.

        We have established a quality assurance/control program to ensure that our products and product candidates are manufactured in accordance with applicable regulations. We require that our contract manufacturers adhere to current Good Manufacturing Practices, or GMP, except for products and product candidates for toxicology studies and animal studies, which we require to be manufactured in accordance with current Good Laboratory Practices, or GLP. The facilities of our contract manufacturers of marketed products must pass regular post-approval inspections by the FDA and other agencies. The FDA or other regulatory agencies must approve the processes or the facilities that may be used for the manufacture of any of our potential products. The manufacture of our products and product candidates is based in part on technology that we believe to be proprietary to our contract manufacturers. Our manufacturers may not abide by the limitations or confidentiality restrictions in licenses or other agreements with us. In addition, some of our manufacturers may develop process technology related to the manufacture of our compounds that such suppliers own either independently or jointly with us. This could increase our reliance on such manufacturers, require us to obtain a license from such manufacturers in order to have our products manufactured or result in us not benefiting from the potential efficiencies of new process technologies.

        We rely on third-party contract manufacturers for the manufacturing, fill/finish and packaging of VELCADE® (bortezomib) for Injection for both commercial purposes and for ongoing clinical trials. We have established long-term supply relationships for the production of commercial supplies of VELCADE. We believe we currently have a sufficient quantity of bortezomib to meet the anticipated commercial demand for the product for 2005 and to fulfill the needs for our clinical trials. We work with one manufacturer to complete fill/finish for VELCADE.

        We also rely on third-party contract manufacturers for the clinical and commercial production of INTEGRILIN® (eptifibatide) Injection. We have two manufacturers that provide us with eptifibatide, the raw material necessary to make INTEGRILIN for both clinical trials and commercial supply. Solvay, Societe Anonyme, or Solvay, one of the current manufacturers, owns the process technology used by it and the other manufacturer for the production of bulk product. We are planning to submit our own alternative process technology for the production of eptifibatide for approval in the United States, Europe and other countries as required. We entered into an agreement with Solvay in January 2003 for an initial term of four years and one-year renewal periods thereafter. We have one manufacturer that currently performs fill/finish services for INTEGRILIN. We are qualifying a second fill/finish supplier and we have identified an alternative packaging supplier to serve as future sources of supply for the United States. Although we believe our contracted supply of INTEGRILIN is sufficient

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to meet current market demand, our longer-term manufacturing plans call for the addition of additional manufacturing capacity.

Sales and Marketing

        We have built a specified cancer specialized sales force geographically dispersed across the United States. This sales force markets VELCADE® (bortezomib) for Injection in its approved indications to physicians, hospitals and other health care providers. Ortho Biotech or its affiliates market VELCADE outside of the United States and pay us distribution fees on product sales. See "Ortho Biotech Collaboration."

        We also have a specialized cardiovascular sales force geographically dispersed across the United States. This sales force, together with SGP's sales force, markets INTEGRILIN® (eptifibatide) Injection to clinical cardiologists, interventional cardiologists and emergency medicine physicians. One of the primary goals of this sales force is to expand hospital emergency room early use of INTEGRILIN for when a patient first presents with ACS.

        SGP currently sells INTEGRILIN to drug wholesalers. These wholesalers subsequently sell INTEGRILIN to the hospitals where health care providers administer the drug to patients. Wholesaler management decisions to increase or decrease their inventory of INTEGRILIN may result in sales of INTEGRILIN to wholesalers that do not track directly with demand for the product at hospitals. GSK markets and sells INTEGRILIN in the European Union and will sell in other European countries upon regulatory approval of the transfer of the necessary marketing authorizations from SGP, and SGP sells and markets INTEGRILIN elsewhere outside the United States. See "SGP Collaboration" and "GSK License Agreement."

        We have not developed commercialization plans for our product candidates other than VELCADE and INTEGRILIN that may receive marketing approval in the future because the manner in which we will commercialize these product candidates will depend in large part on their market potential and our financial resources. We may establish co-promotion, corporate collaboration, licensing or other arrangements for the marketing and sale of some products in some or all geographic markets.

        Sales of VELCADE, INTEGRILIN, and product candidates that may be approved in the future will depend heavily upon the availability of reimbursement from third party payors, such as government and private insurance plans. We meet with administrators of these plans to discuss the potential medical benefits and cost-effectiveness of our products. We believe this approach may assist in obtaining reimbursement authorization for our products from these third party payors. See "Government Regulation—Third Party Reimbursement."

Competition

        We face competition, and believe significant long-term competition can be expected, from a range of pharmaceutical and biotechnology companies. This competition may become more intense as we develop additional products and commercial applications for biotechnology products increase. Some competitors, primarily large pharmaceutical companies, have greater resources and experience than we have. Many of these companies have commercial arrangements with other companies in the biotechnology industry to supplement their own research capabilities.

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        The introduction of new products or the development of new processes by competitors or new information about existing products may result in price reductions or product replacements, even for products protected by patents. However, we believe our competitive position is enhanced by our commitment to research leading to the discovery and development of new products. Other factors that may help us meet competition include the quality and breadth of our technology platform, the skill of our employees and our ability to recruit and retain skilled employees, our program of seeking patent protection for our discoveries and advances, and our capabilities for early stage research and drug discovery. However, many large pharmaceutical and biotechnology companies have significantly larger intellectual property estates than we do, more substantial capital resources than we have, and greater capabilities and experience than we do in discovery, research, preclinical and clinical development, sales, marketing, manufacturing and regulatory affairs.

        Over the longer term, our and our collaborators' abilities to successfully market products, expand their usage and bring new products to the marketplace will depend on many factors, including:

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the effectiveness and safety of the products;



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FDA and foreign regulatory agencies' approvals of new products and indications;



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the degree of patent protection afforded to particular products; and



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the effects of price control mechanisms.

        Although the mechanism of action utilized by VELCADE® (bortezomib) for Injection is unique, we expect traditional chemotherapy treatments and other therapies in development to compete with VELCADE. In particular, Thalomid® (thalidomide) is marketed by Celgene Corporation and approved as a treatment for patients with leprosy, but has an increasing and significant off-label use in multiple myeloma based on data published in peer-reviewed publications. Celgene Corporation recently filed an sNDA for thalidomide for the treatment of multiple myeloma that was accepted by the FDA for review. There are also other potentially competitive therapies that are in late-stage clinical development for multiple myeloma including Celgene's Revlimid®. We believe that VELCADE generally competes with other therapies on the basis of safety, efficacy, convenience and price.

        Due to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address such diseases is large, and we expect the already intense competition in this field to increase. INTEGRILIN® (eptifibatide) Injection generally competes with other therapies on the basis of safety, efficacy, convenience and price. Two GP IIb-IIIa inhibitors which compete with INTEGRILIN have received regulatory approval in the United States and Europe:

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ReoPro® (abciximab), which is produced by Johnson & Johnson and sold by Johnson & Johnson and Eli Lilly & Co.; and



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Aggrastat® (tirofiban), which is produced and sold by Merck & Co., Inc. outside of the United States and by Guilford Pharmaceuticals, Inc. in the United States.

        Other competitive factors that could negatively impact the future growth and development of the GP IIb-IIIa inhibitors market segment include:

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expanded use of heparin replacement therapies, such as Angiomax® (bivalirudin) produced and sold by The Medicines Company for patients undergoing PCI;



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changing treatment practices for PCI and ACS based on new technologies, including the use of drug-coated stents;



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increased use of another class of anti-platelet drugs known as ADP inhibitors in patients whose symptoms make them potential candidates for treatment with INTEGRILIN; and

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•

our inability to complete clinical trials and develop data to promote increased use of INTEGRILIN® (eptifibatide) Injection in its current indications as well as in new indications.

Drug Research, Discovery and Development

        A key element of our overall strategy is to build a sustainable pipeline of innovative new treatments in several disease areas. In these disease areas, our goal is to generate a sufficiently large and diverse portfolio of discovery and development programs at various stages of maturity so that we can move new drugs through clinical development and onto the market on a regular basis.

        To achieve this goal, we have focused on developing a comprehensive understanding of the mechanisms and pathways that underlie important diseases and on building an organization capable of converting this understanding into innovative treatments for patients. We deploy a full range of genomics capabilities to decipher the workings of the human genome and identify genes the regulation of which may play an important role in disease. From among these genes, we select those whose properties appear most suitable as targets for new drugs. Then we seek to identify and optimize small molecule compounds or antibodies that interact with targets in an appropriate manner. We test these drug candidates extensively in animal models to assess their likely suitability as therapeutic products. We then move into clinical testing in humans, to establish the safety and efficacy of these experimental products and to understand therapeutically important differences among people. At any stage of this process, we may need to go back to repeat several steps with slight variations, in an effort to ensure that we bring the most suitable new drug candidate through clinical testing. If we believe we have established safety and efficacy for a new drug candidate, we submit applications for marketing approval to the appropriate regulatory authorities.

        During this process, we are informed by the expertise of our scientists and clinicians in disease biology, chemistry and preclinical and clinical development, and our efforts are enabled by the comprehensive range of capabilities we have assembled into our technology platform. To augment our internal discovery and development capabilities, we may also license or acquire rights to drugs or drug candidates that have been developed outside of our company and which address pathways we have identified as important for particular diseases.

        As we continue to shift our focus to clinical development and product commercialization, and as we conclude our discovery-based alliances, we expect to devote fewer personnel and resources to research and discovery activities. As a result of this shift, we recorded a restructuring charges in 2004 of approximately $38.0 million and in 2003 of approximately $191.0 million and expect to record additional restructuring charges during 2005 of between $5.0 million and $20.0 million related to adjustments to the estimates of the remaining rental obligations, net of estimated sublease income, for facilities we vacated.

        Company-sponsored research and development expenses totaled $266.4 million in 2004, $316.8 million in 2003 and $337.5 million in 2002. Our strategic collaborator-sponsored research and development expenditures totaled $136.2 million in 2004, $171.7 million in 2003 and $173.7 million in 2002. In calculating strategic collaborator-sponsored research and development expenditures, we have included expenditures in programs for which we receive current funding as well as programs for which we may receive future compensation as milestone payments, royalties or otherwise, even though we provide the current funding.

Patents and Proprietary Rights; Licenses

Patents

        We generally seek United States and foreign patent protection for the genes, proteins, antibodies and small-molecule drug leads that we discover as well as possible therapeutic, diagnostic and

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pharmacogenomic products and processes, drug screening methodologies and other inventions based on such genes, proteins, antibodies and small molecules. We also seek patent protection or rely upon trade secret rights to protect other technologies which may be used to discover and characterize genes, proteins, antibodies and small-molecules and which may be used to develop and manufacture novel therapeutic, diagnostic and pharmacogenomic products and processes.

        We own issued United States patents, granted foreign patents and pending United States and foreign applications for VELCADE® (bortezomib) for Injection. The issued U.S. patents related to VELCADE expire in 2014.

        We own issued United States patents, granted foreign patents and pending United States and foreign applications for INTEGRILIN® (eptifibatide) Injection. The issued United States patents that cover INTEGRILIN expire in 2014 and 2015 and the issued foreign patents expire between 2010 and 2012 and could be extended to 2014 in Europe depending on the outcome of a case pending in front of the European Court of Justice.

        We also own issued and pending United States and foreign patent applications related to MLN02 and MLN1202. The issued United States patents for MLN02 expire in 2015 and 2016 and the issued United States patents for MLN1202 expire in 2018.

Licenses

        We have obtained licenses from various parties for rights to use proprietary technologies and compounds. These licenses generally are for a fixed duration, typically the life of the licensed patents, and require us to use reasonable or diligent efforts to develop and commercialize and to pay ongoing royalties on product sales. We are the exclusive licensee of issued United States and foreign patents and/or pending United States and foreign applications relating to our products on the market and in clinical development as follows:

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VELCADE. We are a party to an exclusive worldwide Patent License Agreement with the U.S. Public Health Service, or PHS, dated December 12, 2002. This agreement provides us with the right to use the patents belonging to PHS relating to the formulation of VELCADE. Under this agreement we have obligations to pay PHS up-front royalty payments, royalty milestones, royalties on net sales of VELCADE and sublicensing royalties. The license extends through the expiration of any licensed patents that may result from PHS' pending applications unless terminated earlier by PHS to meet requirements for public use specified by law or for a default by us or a failure to meet our obligations under the agreement, in either case, following a cure period.



•

MLN2704. The issued United States patents that cover MLN2704 expire in 2017 and 2022.



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MLN518. The issued United States patents relating to MLN518 expire in 2018. The MLN518 license extends through the expiration of the issued patents or any licensed patents that may result from pending applications.

Trademarks

        We currently own a number of trademarks and servicemarks including: Millennium®, the Millennium "M" logo and design (registered), Millennium Pharmaceuticals™, "Transcending the Limits of Medicine"™, VELCADE®, INTEGRILIN® and "Breakthrough Science. Breakthrough Medicine." All are covered by registrations or pending applications for registration in the United States Patent and Trademark Office and many other countries.

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Government Regulation

Regulatory Compliance

        Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of our products and in ongoing research and product development activities. All of our products require regulatory approval by governmental agencies prior to commercialization. In particular, our products are subject to rigorous preclinical and clinical testing and other premarket approval requirements by the FDA and regulatory authorities in other countries. Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, any delay in obtaining or any failure to maintain, regulatory approvals could materially adversely affect our business.

        The activities required before a pharmaceutical product may be marketed in the United States begin with preclinical testing. Preclinical tests include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies must be submitted to the FDA as part of an Investigational New Drug application, or IND, which must be reviewed by the FDA before proposed clinical testing can begin.

        Typically, clinical testing involves a three-phase process.

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In phase I, clinical trials are conducted with a small number of subjects to determine the early safety profile and the pattern of drug distribution and metabolism.



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In phase II, clinical trials are conducted with groups of patients afflicted with a specified disease in order to provide enough data to statistically evaluate the preliminary efficacy, optimal dosages and expanded evidence of safety.



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In phase III, large scale, multicenter, comparative clinical trials are conducted with patients afflicted with a target disease in order to provide enough data to statistically evaluate the efficacy and safety of the product, as required by the FDA.

        The results of the preclinical and clinical testing of a pharmaceutical product are then submitted to the FDA for approval to commence commercial sales. For a chemical pharmaceutical product, the submission is in the form of an NDA and for a biological pharmaceutical product the submission is in the form of a biologic license application, or BLA. In responding to an NDA or a BLA, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. We can not assure that any approval required by the FDA will be obtained on a timely basis, if at all.

        Among the conditions for an NDA or a BLA approval is the requirement that the applicable manufacturing, clinical, pharmacovigilance, quality control and manufacturing procedures conform on an ongoing basis with current Good Clinical Practices, or GCP, GLP, for specific non-clinical toxicology studies, current GMP and computer information system validation standards. Before approval of a BLA, the FDA will perform a prelicensing inspection of clinical sites, manufacturing facilities and the related quality control records to determine its compliance with these requirements. To assure compliance, applicants must continue to expend time, money and effort in the area of training, production and quality control. After the applicant is licensed for the manufacture of any product, manufacturers are subject to periodic inspections by the FDA. We also face similar inspections coordinated by the EMEA by inspectors from particular European Union member states that conduct inspections on behalf of the Europe Union.

        In European Union countries, Canada, and Australia, regulatory requirements and approval processes are similar in principle to those in the United States and can be at least as rigorous, costly

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and uncertain. Additionally, depending on the type of drug for which an applicant is requesting approval, there are currently two potential tracks for marketing approval in European Union countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval in all European Union countries, but each method grants all participating countries some decision making authority in product approval.

        We are also subject to various federal and state laws pertaining to health care "fraud and abuse," including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors, including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.

        As a result of gaining approval of and launching VELCADE® (bortezomib) for Injection, the first product we have sold directly, we became a participant in the Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, and under amendments of that law that became effective in 1993. Participation in this program includes requirements such as extending comparable discounts under the Public Health Service, or PHS, pharmaceutical pricing program. Under the Medicaid rebate program, we pay a rebate for each unit of our product reimbursed by Medicaid. The amount of the rebate for each product is set by law as a minimum of 15.1% of the average manufacturer price, or AMP, of that product, or if it is greater, the difference between AMP and the best price available from us to any customer. The rebate amount also includes an inflation adjustment if AMP increases faster than inflation. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The rebate amount is recomputed each quarter based on our reports of our current average manufacturer price and best price for each of our products to the Centers for Medicare & Medicaid Services. Additionally, under the Medicare Prescription Drug and Modernization Act of 2003 we must report our average sales price.

        We make VELCADE and SGP makes INTEGRILIN® (eptifibatide) Injection available to authorized users of the Federal Supply Schedule of the General Services Administration. Since 1993, as a result of the Veterans Health Care Act of 1992, or VHC Act, federal law has required that product prices for purchases by the Veterans Administration, the Department of Defense, Coast Guard, and the PHS, including the Indian Health Service, be discounted by a minimum of 24% off the AMP to non-federal customers, the non-federal average manufacturer price, or non-FAMP. Our computation and report of non-FAMP is used in establishing the price, and the accuracy of the reported non-FAMP may be audited by the government under applicable federal procurement laws. We will become responsible for FAMP and non-FAMP reporting at the time we assume distribution responsibility for INTEGRILIN.

        Under the laws of the United States, the countries of the European Union and other nations, we and the institutions where we sponsor research are subject to obligations to ensure the protection of personal information of human subjects participating in our clinical trials. We have instituted procedures that we believe will enable us to comply with these requirements and the contractual requirements of our data sources. The laws and regulations in this area are evolving and further regulation, if adopted, could affect the timing and the cost of future clinical development activities.

        We are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current and potential future federal, state, or local regulations. Our research and development activities involve the

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controlled use of hazardous materials, chemicals, biological materials, and various radioactive compounds. We believe that our procedures comply with the standards prescribed by local, state and federal regulations; however, the risk of injury or accidental contamination cannot be completely eliminated. We conduct our research and manufacturing activities in voluntary compliance with the National Institutes of Health Guidelines for Recombinant DNA Research.

        We are subject to the United States Foreign Corrupt Practices Act which prohibits corporations and individuals from engaging in specified activities to obtain or retain business or to influence a person working in an official capacity. Under this act, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. Our present and future business has been and will continue to be subject to various other laws and regulations.

Pricing Controls

        The levels of revenues and profitability of biopharmaceutical companies may be affected by the continuing efforts of government and third party payors to contain or reduce the costs of health care through various means. For example, in some foreign markets, pricing reimbursement or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In Canada this practice has led to lower priced products than in the United States. As a result, importation of products from Canada into the United States may result in reduced product revenues. In the United States there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing reimbursement controls. For example, the passage of the Medicare Prescription Drug and Modernization Act of 2003 imposes new requirements for the distribution and pricing of prescription drugs which may affect the marketing of our products. While we cannot predict whether any future legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability.

        In many foreign markets, including the countries in the European Union, pricing of pharmaceutical products is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and results.

Third Party Reimbursement

        In the United States and elsewhere, sales of therapeutic and other pharmaceutical products are dependent in part on the availability of reimbursement to the consumer from third party payors, such as government and private insurance plans. Third party payors are increasingly challenging the prices charged for medical products and services. As a result, in the future, our products could be considered not cost effective or reimbursement to the consumer could become unavailable or could be insufficient to allow us to sell our products on a competitive and profitable basis.

Employees

        As of February 28, 2005, we had approximately 1,477 full-time employees. We believe that relations with our employees are good.

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Available Information

        Our Internet website is http://www.millennium.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. We have made these reports available through our website during the period covered by this report and, since November 15, 2002, at the same time that they become available on the Securities and Exchange Commission's website.

        Our code of conduct, the Core Values Handbook, our Board Policies, and the charters of the Audit Committee, Compensation and Talent Committee and Board Governance Committee are all available on the corporate governance section of our website at http://www.millennium.com/investors. Stockholders may request a free copy of any of these documents by writing to Investor Relations, Millennium Pharmaceuticals, Inc., 40 Landsdowne Street, Cambridge, Massachusetts, U.S.A. 02139.

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RISK FACTORS THAT MAY AFFECT RESULTS

        This Annual Report on Form 10-K 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, 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," "may," "will" and similar expressions to help identify forward-looking statements.

        We cannot assure investors that our assumptions and expectations will prove to have been correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Such factors that could cause or contribute to such differences include those factors discussed below. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Regulatory Risks

Our business may be harmed if we do not fulfill specified post-approval requirements of the FDA and EMEA relating to VELCADE® (bortezomib) for Injection or obtain approval to market VELCADE for additional therapeutic uses.

        The FDA granted accelerated approval, and the EMEA granted approval under exceptional circumstances, for VELCADE for specific therapeutic uses. These approvals require the fulfillment of specific post-approval clinical trial requirements. Our business would be seriously harmed if we do not fulfill these requirements and the FDA or the EMEA revokes its marketing approval for VELCADE. In addition, an important part of our strategy to grow our business is to market VELCADE for additional indications. To do so, we will need to successfully conduct clinical trials and then apply for and obtain the appropriate regulatory approvals. If we are unsuccessful in our clinical trials, or we experience a delay in obtaining or are unable to obtain authorizations for expanded uses of VELCADE, our revenues may not grow as expected and our business and operating results will be harmed.

We may not be able to obtain approval in additional countries to market VELCADE.

        VELCADE is currently approved for marketing in the United States, the countries of the European Union and other countries. If we are not able to obtain approval to market VELCADE in additional countries, we will lose the opportunity to sell in those countries and will not be able to earn potential milestone payments under our agreement with Ortho Biotech or collect potential distribution fees on sales of VELCADE by Ortho Biotech in those countries.

We may not be able to obtain marketing approval for products resulting from our development efforts and we may face challenges to the exclusivity of our marketing approvals.

        The products that we are developing require research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. This process is expensive and lengthy, and can often take 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.

        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.

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        In some cases, we may experience challenges to the extension of exclusivity of our marketing approval. For example, with respect to INTEGRILIN, regulatory authorities in Luxembourg instituted a claim to reduce the effective term of supplemental protection certificates for INTEGRILIN in the European Community from 2014 to 2012. That claim was denied by the court of first instance in Europe. That denial has been appealed to the European Court of Justice, which held a hearing on the appeal in July 2004. If that court decides against us, the term of the supplemental protection certificates covering INTEGRILIN could be shortened in any particular European Community Member State in which a subsequent action requesting enforcement of the appellate decision was filed and decided against us. Shortening of such term could allow earlier generic competition in any such Member State.

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, is subject to continual review and periodic inspections by the FDA, and other regulatory bodies. Later discovery of previously unknown problems or safety issues 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, the imposition of civil or criminal penalties or a refusal by the FDA and other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved applications. As with any recently approved therapeutic product, we expect that our knowledge of the safety profile for VELCADE will expand after wider usage and the possibility exists of patients receiving VELCADE treatment experiencing unexpected serious adverse events, which could have a material adverse effect on our business.

        We are a party to collaborations that transfer responsibility for specified regulatory requirements, such as filing and maintenance of marketing authorizations and safety reporting to our collaborators. If our collaborators do not fulfill these regulatory obligations, products, including VELCADE or INTEGRILIN, could be withdrawn from the market, which would have a material adverse effect on our business.

Some of our products may be based on new technologies which may affect our ability or the time we require to obtain necessary regulatory approvals.

        Products that 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.

Risks Relating to Our Business, Strategy and Industry

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

        Our revenues over the next several years will be materially dependent on the commercial success of our two currently marketed products: VELCADE and INTEGRILIN. VELCADE was approved by the FDA in May 2003 and commercially launched in the United States shortly after that date. Marketing of VELCADE outside the United States commenced in April 2004. INTEGRILIN has been on the market in the United States since June 1998. Marketing of INTEGRILIN outside the United States commenced in mid-1999.

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        Because of the recent introduction of VELCADE® (bortezomib) for Injection, we have limited experience as to the sales levels of this product. Our business plan contemplates obtaining marketing authorization to sell VELCADE in many countries for the treatment of all patients with multiple myeloma and both in the United States and abroad for other indications. We will be adversely affected if VELCADE does not receive such approvals.

        We will not achieve our business plan, and we may be forced to scale back our operations and research and development programs, if:

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we do not obtain regulatory approval to sell VELCADE in additional countries or for additional therapeutic uses;



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physicians reduce prescribing INTEGRILIN® (eptifibatide) Injection for its current indications or fail to use INTEGRILIN earlier in treatment and in the PCI setting;



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we are not able to successfully implement distribution logistics for INTEGRILIN; or



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the sales of VELCADE or INTEGRILIN do not meet our expectations.

We face substantial competition, and others may discover, develop or commercialize products before or more successfully than we do.

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

        With respect to VELCADE, we face competition from Celgene Corporation's Thalomid® (thalidomide) and its derivatives, a treatment approved for complications associated with leprosy which is increasingly used for multiple myeloma based on data published in peer-reviewed publications. Celgene has filed an sNDA for Thalomid for the treatment of multiple myeloma that was accepted by the FDA for review. We also face competition for VELCADE from traditional chemotherapy treatments, and there are other potentially competitive therapies for VELCADE that are in late-stage clinical development for the treatment of multiple myeloma including Celgene's Revlimid. In addition, multiple myeloma therapies in development may reduce the number of patients available for VELCADE treatment through enrollment of these patients in clinical trials of these potentially competing products.

        Due to the incidence and severity of cardiovascular diseases, the market for therapeutic products that address these diseases is large, and we expect the already intense competition in this field to increase. Our most significant competitors are major pharmaceutical companies and biotechnology companies. The two products that compete directly with INTEGRILIN in the GP IIb-IIIa inhibitor market segment are ReoPro® (abciximab), which is produced by Johnson & Johnson and sold by Johnson & Johnson and Eli Lilly and Company, and Aggrastat® (tirofiban HCl), which is produced and sold by Merck & Co., Inc. outside of the United States and by Guilford Pharmaceuticals, Inc. in the United States.

        Other competitive factors that could negatively affect INTEGRILIN include:

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expanded use of heparin replacement therapies, such as Angiomax® (bivalirudin), which is produced and sold by The Medicines Company;

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changing treatment practices for PCI and ACS based on new technologies, including the use of drug-coated stents;



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increased use of another class of anti-platelet drugs known as ADP inhibitors in patients whose symptoms make them potential candidates for treatment with INTEGRILIN; and



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our inability to complete clinical trials and develop data to promote increased use of INTEGRILIN in its current indications as well as in new indications.

Sales of INTEGRILIN® (eptifibatide) Injection and possibly VELCADE® (bortezomib) for Injection in particular reporting periods may be affected by fluctuations in inventory, allowances and buying patterns.

        A significant portion of INTEGRILIN domestic pharmaceutical sales is made by SGP 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. Inventory levels held by these wholesalers may fluctuate significantly from quarter to quarter. If these wholesalers build inventory levels excessively in any quarter, sales to the wholesalers in future quarters may unexpectedly decrease notwithstanding steady prescriber demand. Because SGP currently manages product distribution, we have limited insight into or control over forces affecting changes in distributor inventory levels. If SGP does not appropriately manage this distribution, we and SGP may not realize our sales goals for the product and increased returns could reduce the co-promotion revenue we recognize and adversely affect our business.

        We recently began distributing VELCADE in the U.S. through a sole-source distribution model, where we sell directly to a third party who in turn distributes to the wholesaler base. Our product inventory levels may fluctuate in the short-term as our current wholesalers familiarize themselves with these new distribution logistics.

        Additionally, we and our commercial collaborators make provisions at the time of sale of both VELCADE and INTEGRILIN for all discounts, rebates and estimated sales allowances based on historical experience updated for changes in facts and circumstances, as appropriate. To the extent these allowances are incorrect, we may need to adjust our estimates, which could have a material impact on the timing and actual revenue we are able to recognize from these sales.

        Because fewer medical procedures are typically performed in the summer months, demand for INTEGRILIN could generally be lower during these months. These fluctuations in sales of INTEGRILIN could have a material adverse effect on our results of operations for particular reporting periods. It is possible that sales of VELCADE could be similarly affected by fluctuations in buying patterns.

Because our research and development projects are based on new technologies and new therapeutic approaches that have not been extensively tested in humans, it is possible that our discovery process will not result in commercial products.

        The process of discovering drugs based upon genomics and other new technologies is new and evolving rapidly. We focus a portion of our research on diseases that may be linked to several or many genes working in combination or to unprecedented targets. Both we and the general scientific and medical communities have only a limited understanding of the role that 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

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development expenses. Further, manufacturing costs or products based on these new technologies may make products uneconomical to commercialize.

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, adverse medical events during a clinical trial or safety issues resulting from products of the same class of drug 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. For example, in December 2003 we decided to stop further accrual to a phase II trial examining VELCADE® (bortezomib) for Injection in colorectal cancer because interim findings produced results that did not meet the pre-specified efficacy criteria for continuation of study accrual.

        We may not complete our planned preclinical or clinical trials on schedule or at all. We may not be able to confirm the safety and efficacy of our potential drugs in long-term clinical trials, which may result in a delay or failure to commercialize our products. 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. A number of additional events could delay the completion of our clinical trials, including conditions imposed on us by the FDA or foreign regulatory authorities regarding the scope or design of our clinical trials, lower than anticipated retention rates for patients in our clinical trials, insufficient supply or deficient quality of our product candidates or other materials necessary to conduct our clinical trials or the failure of our third-party contractors to comply with regulatory requirements or otherwise meet their contractual obligations to us in a timely manner. As a result, 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.

If third parties on which we rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates.

        We depend on independent clinical investigators and, in some cases, contract research organizations and other third-party service providers to conduct the clinical trials of our product candidates and expect to continue to do so. We rely heavily on these parties for successful execution of our clinical trials, but we do not control many aspects of their activities. Nonetheless, we are responsible for confirming that each of our clinical trials is conducted in accordance with the general investigational plan and protocol. Our reliance on these third parties that we do not control does not relieve us of our responsibility to comply with the regulations and standards of the FDA relating to good clinical practices. Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or the applicable trials plans and protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates or result in enforcement action against us.

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

        The commercial success of any of our products 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 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, particularly the first products 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 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.

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 net losses of $252.3 million for the year ended December 31, 2004 and net losses of $483.7 million for the year ended December 31, 2003 and $590.2 million for the year ended December 31, 2002. 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 continue to incur significant expenses in connection with our research and development programs and commercialization activities. As a result, we will need to generate significant revenues to help fund these costs and achieve profitability. Our ability to achieve profitability would be adversely impacted if our acquired intangible assets and goodwill, primarily resulting from our acquisition of COR, became impaired as a result of reduced market capitalization or product failures or withdrawals. 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 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 business and 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, manufacture and market products that are approved for commercial sale, including INTEGRILIN® (eptifibatide) Injection and VELCADE® (bortezomib) for 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 have to delay or curtail our research and development programs or our product commercialization activities. We could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to specified technologies, product candidates or products which we would otherwise pursue on our own.

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

        At December 31, 2004, we had approximately $105.5 million of outstanding convertible debt and $90.9 million of capital lease obligations. During each of the last five years, our earnings were insufficient to cover our fixed charges. We will be required to make interest payments on our outstanding convertible notes totaling approximately $13.9 million over the next three years. We will be required to make interest payments totaling approximately $8.3 million over the next three years on our capital leases.

        We may in the future incur additional indebtedness, including long-term debt, credit lines and property and equipment financings to finance capital expenditures. We intend to satisfy our current and future debt service obligations from cash generated by our operations, our existing cash and investments and, in the case of principal payments at maturity, funds from external sources. We may not have sufficient funds and we may be unable to arrange for additional financing to satisfy our principal or interest payment obligations when those obligations become due. Funds from external sources may not be available on acceptable terms, or at all.

        Our indebtedness could have significant additional negative consequences, including:

•

increasing our vulnerability to general adverse economic and industry conditions;



•

limiting our ability to obtain additional financing;



•

requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including capital expenditures and research and development;



•

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and



•

placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.

If we do not achieve the anticipated benefits of our restructuring, or if the costs of this restructuring exceed anticipated levels, our business could be harmed.

        In December 2002 and June 2003, we announced a restructuring designed to focus our resources on development and commercialization of product opportunities and achieving our goal of becoming profitable in the future. We may not achieve the cost savings anticipated from the restructuring because such savings are difficult to predict and speculative in nature. In 2003, we recorded approximately $191.0 million related to this restructuring and in 2004, we recorded approximately $38.0 million related to this restructuring. We expect to record additional restructuring charges during 2005 of between $5.0 million and $20.0 million. While we believe this estimate to be reasonable, it is possible that the actual charges will exceed this range. For example, we may not be able to lease facilities that we have closed or plan to close in connection with the restructuring as quickly or on as favorable terms as we anticipated.

Risks Relating to Collaborators

We depend significantly on our collaborators to work with us to develop and commercialize products.

        We market and sell INTEGRILIN® (eptifibatide) Injection through alliances with SGP and GSK. Outside of the United States, we commercialize VELCADE® (bortezomib) for Injection through an alliance with Ortho Biotech. We conduct substantial discovery and development activities through strategic alliances, including with Ortho Biotech for the ongoing development of VELCADE, and with

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SGP for the ongoing development of INTEGRILIN® (eptifibatide) Injection. We expect to enter into additional alliances in the future, especially in connection with product commercialization. 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 it will apply to the alliance and the degree to which it shares financial and product sales and inventory information. Our existing and any future alliances may not be scientifically or commercially successful.

        The risks that we face in connection with these existing and any future alliances include the following:

•

All of our strategic alliance agreements are for fixed terms and are subject to termination under various circumstances, including, in many cases, such as in our collaboration with Ortho Biotech, without cause.



•

Our collaborators may change the focus of their development and commercialization efforts. Pharmaceutical and biotechnology companies historically have re-evaluated their development and commercialization priorities following mergers and consolidations, which have been common in recent years in these industries. The ability of some of our products to reach their potential could be limited if our collaborators decrease or fail to increase marketing or spending efforts related to such products.



•

We expect to rely on our collaborators to manufacture many products covered by our alliances.



•

In our strategic alliance agreements, we generally agree not to conduct specified types of research and development in the field that is the subject of the alliance. These agreements may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with third parties.



•

Our collaborators may develop and commercialize, either alone or with others, products that are similar to or competitive with the products that are the subject of the alliance with us.



•

Our collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to expose us to potential litigation.

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

        An important element of our business strategy is entering into strategic alliances for the development and commercialization of selected products. In some instances, if we are unsuccessful in reaching an agreement with a suitable collaborator, we may fail to meet all of our business objectives for the applicable product or program. 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.

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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 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 depends in significant part on our ability to:

•

obtain patents;



•

obtain licenses to the proprietary rights of others on commercially reasonable terms;



•

operate without infringing upon the proprietary rights of others;



•

prevent others from infringing on our proprietary rights; and



•

protect trade secrets.

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.

        We may not have rights under some patents or patent applications related to some of our existing and proposed products or processes. 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, in order to develop, manufacture, sell or import some of our existing and proposed products or processes, 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 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 or processes.

        Our MLN02 and MLN1202 product candidates are humanized monoclonal antibodies. Our product candidate MLN2704 also includes a recombinant antibody. We are aware of third-party patents and patent applications that relate to humanized or modified antibodies, products useful for making humanized or modified antibodies and processes for making and using recombinant antibodies. With

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respect to MLN2704, we are also aware of third-party patent applications relating to anti-PSMA antibodies.

        With respect to VELCADE® (bortezomib) for Injection and other proteasome inhibitors in the treatment of myocardial infarctions, we are aware of the existence of a potentially interfering patent application filed by a third party. In addition, on June 26, 2002, Ariad Pharmaceuticals, Inc. sent to us and approximately 50 other parties a letter offering a sublicense for the use of United States Patent No. 6,410,516, which is exclusively licensed to Ariad. If this patent is valid and Ariad successfully sues us for infringement, we would require a license from Ariad in order to manufacture and market VELCADE.

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 or processes 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.

Our patent protection for any compounds that we seek to develop may be limited to a particular method of use or indication such that, if a third party were to obtain approval of the compound for use in another indication, we could be subject to competition arising from off-label use.

        Although we generally seek the broadest patent protection available for our proprietary compounds, we may not be able to obtain patent protection for the actual composition of any particular compound and may be limited to protecting a new method of use for the compound or otherwise restricted in our ability to prevent others from exploiting the compound. If we are unable to obtain patent protection for the actual composition of any compound that we seek to develop and commercialize and must rely on method of use patent coverage, we would likely be unable to prevent others from manufacturing or marketing that compound for any use that is not protected by our patent rights. If a third party were to receive marketing approval for the compound for another use, physicians could nevertheless prescribe it for indications that are not described in the product's labeling or approved by the FDA or other regulatory authorities. Even if we have patent protection of the prescribed indication, as a practical matter, we would have little recourse as a result of this off-label use. In that event, our revenues from the commercialization of the compound would likely be adversely affected.

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If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.

        We are a party to various license agreements. In particular, we license rights to patents for the formulation of VELCADE® (bortezomib) for Injection, issued U.S. patents covering MLN2704 and issued patents relating to MLN518. We may enter into additional licenses in the future. Our existing licenses impose, and we expect future licenses will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.

Risks Relating to Product Manufacturing, Marketing and Sales

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

        We are marketing and selling VELCADE in the United States solely through our cancer-specific sales force and without a collaborator. Our success in selling VELCADE will depend heavily on the performance of this sales force. In areas outside the United States where VELCADE has received approval, Ortho Biotech or its affiliates market VELCADE. As a result, our ability to earn revenue related to VELCADE outside of the United States will depend heavily on Ortho Biotech.

        We have a specialty cardiovascular sales force that markets INTEGRILIN® (eptifibatide) Injection with SGP in the United States. GSK exclusively markets INTEGRILIN in Europe and SGP markets INTEGRILIN in areas outside of the United States and Europe. Our success in receiving co-promotion revenue royalties and milestone payments from sales of INTEGRILIN will depend heavily on the marketing efforts of these sales forces.

        During September 2004, we initiated the process, contemplated by the original agreement with SGP, to transition United States distribution responsibilities for INTEGRILIN from SGP to us. If we are not able to successfully distribute the product after this transition, INTEGRILIN sales could decline and our business could be substantially harmed.

        Depending on the nature of the products for which we obtain marketing 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 these 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 no commercial manufacturing capabilities, we will continue to be dependent on third-party manufacturers to manufacture products for us, or we will be required to incur significant costs and devote significant efforts to establish our own manufacturing facilities and capabilities.

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

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

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        There are a limited number of contract manufacturers that operate under the FDA's good manufacturing practices regulations capable of manufacturing our products. 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 commercialize 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, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or non-renewal 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 some 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.

Because we have no commercial manufacturing capability for VELCADE® (bortezomib) for Injection, we are dependent on third parties to produce product sufficient to meet market demand.

        We rely on third-party contract manufacturers to manufacture, fill/finish and package VELCADE for both commercial purposes and for all clinical trials. We have established long-term supply relationships for the production of commercial supplies of VELCADE. We work with one manufacturer, with whom we have a long-term supply agreement, to complete fill/finish for VELCADE. If any of our current third party manufacturers performing production and fill/finish for VELCADE are unable or unwilling to continue performing these services for us and we are unable to find a replacement manufacturer or in the future we are otherwise unable to contract with manufacturers to produce commercial supplies of VELCADE in a cost-effective manner, we could run out of VELCADE for commercial sale and clinical trials and our business could be substantially harmed.

We face 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.

        We have no manufacturing facilities for INTEGRILIN and, accordingly, rely on third-party contract manufacturers for the clinical and commercial production of INTEGRILIN. We have two manufacturers that currently provide us with eptifibatide, the active ingredient necessary to make INTEGRILIN. Solvay, one of the current manufacturers, owns the process technology used by it and the other manufacturer for the production of bulk product. As a result, until we have an approved alternative process technology, we will be reliant on these manufacturers. We have one manufacturer that currently performs fill/finish services for INTEGRILIN. We are qualifying a second fill/finish supplier and we have identified an alternative packaging supplier to serve as future sources of supply for the United States. The inability of our current manufacturer to continue its fill/finish services or our inability to secure alternative manufacturers could adversely affect the supply of INTEGRILIN and, thereby, harm our business.

        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 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 manufacturing plans and commercialization strategy for INTEGRILIN include the addition of extra capacity for the manufacture of INTEGRILIN as described above. We are currently engaged in finalizing third-party manufacturing arrangements on commercially reasonable terms. We may not be able to do so, and, even if such arrangements are established, if demand for INTEGRILIN does not meet our forecasts, the manufacturing cost could become more expensive on a per unit basis.

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

        The availability and levels of reimbursement by governmental and other third-party payors affect the market for any pharmaceutical product or health care service. These third-party payors continually attempt to contain or reduce the costs of health care by challenging the prices charged for medical products and services. In some 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 as profitably as we expect if we are required to sell our products at lower than anticipated prices or reimbursement is unavailable or limited in scope or amount.

        In particular, third-party payors could lower the amount that they will reimburse hospitals or doctors to treat the conditions for which the FDA has approved INTEGRILIN® (eptifibatide) Injection or VELCADE® (bortezomib) for Injection. If they do, pricing levels or sales volumes of INTEGRILIN or VELCADE may decrease. In addition, if we fail to comply with the rules applicable to the Medicaid and Medicare programs, we could be subject to the imposition of civil or criminal penalties or exclusion from these programs.

        In foreign markets, a number of different governmental and private entities determine the level at which hospitals will be reimbursed for administering INTEGRILIN and VELCADE to insured patients. If these levels are set, or reset, too low, it may not be possible to sell INTEGRILIN or VELCADE at a profit in these markets.

        In both the United States and other foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system. For example, the Medicare Prescription Drug and Modernization Act of 2003 and its implementing regulations impose new requirements for the distribution and pricing of prescription drugs which may affect the marketing of our products. These new requirements have created uncertainty among oncologists and could impact sales levels of VELCADE as oncologists adapt to the new reimbursement model. Further proposals are also likely. The current uncertainty and the potential for adoption of additional proposals could affect the timing of product revenue, our ability to raise capital, obtain additional collaborators and market our products.

        In addition, we believe that the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of our present and future products, which may adversely affect product sales. Further, when a new therapeutic product is approved, the availability of governmental or private reimbursement for that product is uncertain, as is the amount for which that product will be reimbursed. We cannot predict the availability or amount of reimbursement for our product candidates, and current reimbursement policies for INTEGRILIN or VELCADE could change at any time.

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 and VELCADE are administered to patients with serious diseases who have a high incidence of mortality. Although we have product liability insurance that we believe is appropriate, this insurance is subject to deductibles, co-insurance requirements and coverage limitations and the market for such insurance is becoming more restrictive. 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 suggesting the reduced use of our products or the use of competitive or alternative products that are followed by patients and health care providers could result in decreased use of our products.

Risks Relating to an Investment in Our Common Stock

The trading price of our securities could be subject to significant fluctuations.

        The trading price of our common stock has been quite volatile, and may be volatile in the future. Between January 1, 2004 and December 31, 2004, our common stock traded as high as $19.87 per share and as low as $9.88 per share. Factors such as announcements of our or our competitors' operating results, data from our competitors' clinical trial results, changes in our prospects, market conditions for biopharmaceutical stocks in general and analyst recommendations could have a significant impact on the future trading prices of our common stock.

        In particular, the trading price of the common stock of many biopharmaceutical companies, including ours, has experienced extreme price and volume fluctuations, which have at times been unrelated to the operating performance of such companies whose stocks were affected. Some of the factors that may cause volatility in the price of our securities include:

•

product revenues and the rate of revenue growth;



•

introduction or success of competitive products;



•

clinical trial results and regulatory developments;



•

quarterly variations in financial results and guidance to the investment community with respect to future financial results;



•

business and product market cycles;



•

fluctuations in customer requirements;



•

availability and utilization of manufacturing capacity;



•

timing of new product introductions; and



•

our ability to develop and implement new technologies.

        The price of our securities may also be affected by the estimates and projections of the investment community and our ability to meet or exceed the financial projections we provide to the public. The price may also be affected by general economic and market conditions, and the cost of operations in our product markets. While we cannot predict the individual effect that these factors may have on the price of our securities, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time. We can not assure you that these factors will not have an adverse effect on the trading price of our common stock.

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We have anti-takeover defenses that could delay or prevent an acquisition and could adversely affect the price of our common stock.

        Provisions of our certificate of incorporation and bylaws and of Delaware law could have the effect of delaying, deferring or preventing an acquisition of our company. For example, we have divided our board of directors into three classes that serve staggered three-year terms, we may issue shares of our authorized "blank check" preferred stock and our stockholders are limited in their ability to call special stockholder meetings. In addition, we have issued preferred stock purchase rights that would adversely affect the economic and voting interests of a person or group that seeks to acquire us or a 15% or greater interest in our common stock without negotiations with our board of directors.

Item 2. PROPERTIES

        We lease a total of approximately 1,340,000 square feet of office and laboratory space. This table contains information about our current materially important leased properties:

        In connection with our 2003 restructuring initiatives, we have sublet 203,000 square feet of space in various facilities, as shown in the table above. We are seeking to sublease an additional 208,000 square feet of our Cambridge, Massachusetts facilities. We have consolidated our Cambridge operations into our remaining facilities in that location. We have closed our facilities in Cambridge, England and South San Francisco, California and plan to sublease these facilities through the end of our lease terms.

        We believe that our leased and occupied facilities will be adequate to meet our requirements for the near term.

Item 3. LEGAL PROCEEDINGS

        We are not a party to any material legal proceedings.

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

        No matters were submitted to a vote of our security holders, through solicitation of proxies or otherwise, during the last quarter of the year ended December 31, 2004.

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OUR EXECUTIVE OFFICERS

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PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price of and Dividends on Millennium's Common Stock and Related Stockholder Matters

        Our common stock is traded on the NASDAQ National Market under the symbol "MLNM." The following table reflects the range of the reported high and low last sale prices on the NASDAQ National Market for the periods indicated.

        On March 4, 2005, the closing price per share of our common stock was $8.38, as reported on the NASDAQ National Market and we had approximately 1,020 stockholders of record.

        We have never declared or paid any cash dividends on our common stock. We anticipate that, in the foreseeable future, we will retain any earnings for use in the operation of our business and will not pay any cash dividends.

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities

        None.

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Item 6. SELECTED FINANCIAL DATA

Millennium Pharmaceuticals, Inc.
Selected Financial Data

Note 1: On February 12, 2002 Millennium acquired COR Therapeutics, Inc. The transaction was recorded as a purchase for accounting purposes and the consolidated statements of operations data include COR's operating results from the date of acquisition.

Note 2: The cumulative effect of change in accounting principle is a one-time, noncash charge relating to Millennium's adoption of Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 was issued by the Securities and Exchange Commission ("SEC") in December 1999. SAB 101 provides guidance related to revenue recognition policies based on interpretations and practices followed by the SEC. The impact of Millennium's adoption of SAB 101 was to defer revenue recognition for certain portions of the revenue previously recognized by Millennium under its strategic alliances into future accounting periods.

Note 3: The Company's 2002 results from operations reflect the adoption of Financial Accounting Standards Board ("FASB") No. 142, "Goodwill and Other Intangible Asset" (SFAS No. 142). Upon adoption, the Company ceased the amortization of goodwill.

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Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Our management's discussion and analysis of our financial condition and results of our operations contains forward-looking statements, including statements about our growth and future operating results, discovery and development of products, 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," "may," "will" and similar expressions to help identify forward-looking statements.

        Actual results may differ from those indicated by such forward-looking statements as a result of various important factors, including, without limitation, those factors discussed in this annual report under the heading "Risk Factors That May Affect Results."

Overview

        We are a leading biopharmaceutical company focused on developing and commercializing breakthrough products in the areas of cancer, cardiovascular disease and inflammatory disease. We currently market two leading products, one for cancer and one for cardiovascular disease. We also have other potential therapeutic products in various stages of clinical and preclinical development in all three of our therapeutic areas of disease focus.

        We achieved a number of our corporate goals in 2004, including product-related revenue growth of 43% over 2003 and reduced costs and expenses driven primarily by decreased restructuring charges and decreased research and development expenses. Our financial position remains strong, with $700.4 million in cash, cash equivalents and marketable securities as of December 31, 2004.

        In December 2002 and June 2003, we took steps to realign our resources to become a commercially-focused biopharmaceutical company. We discontinued specified discovery research efforts, reduced overall headcount, primarily in our discovery group, streamlined our discovery and development projects and consolidated our research and development facilities.

        In addition to our two marketed products, VELCADE and INTEGRILIN® (eptifibatide) Injection, we have eight drug candidates in development. Our business strategy is to develop and commercialize important new medicines through clinical trials and regulatory approvals and to play a significant role in the marketing and sale of many of these products. We plan to develop and commercialize many of our products on our own, but will also seek development and commercial collaborators on favorable terms or when we otherwise believe that doing so would be advantageous to us.

Our Products

VELCADE® (bortezomib) for Injection

        VELCADE, the first of a new class of medicines called proteasome inhibitors, is the first treatment in more than a decade to be approved in the United States for patients with multiple myeloma. We received accelerated approval from the Food and Drug Administration, or FDA, on May 13, 2003 to market VELCADE for the treatment of multiple myeloma patients who have received at least two prior therapies and have demonstrated disease progression on their most recent therapy, commonly referred to as third line and beyond.

        The European Commission granted Marketing Authorization for VELCADE for this same indication in Europe in April 2004. Under this Authorization, a single license was granted to Millennium for marketing VELCADE in the 15 member states of the European Union, plus Norway and Iceland. VELCADE was also approved for marketing in the ten accession member countries when those countries officially joined the European Union on May 1, 2004. VELCADE has also been

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approved in a number of other countries, including Canada, Switzerland, Argentina, Israel, Bulgaria, Slovenia, South Korea and Mexico, bringing the total number of approved countries to approximately 40.

        In September 2004, we submitted a supplemental New Drug Application, or sNDA, to the FDA for VELCADE® (bortezomib) for Injection for the treatment of patients with multiple myeloma who have received at least one prior therapy, commonly referred to as second line, based on our completed phase III APEX clinical trial. Also during September 2004, the European Medicines Evaluation Agency, or EMEA, accepted for review a filing by our collaborator, Ortho Biotech Products, L.P., or Ortho Biotech, for the same second line indication in Europe.

        The FDA granted VELCADE fast track designation for relapsed and refractory mantle cell lymphoma, an aggressive form of non-Hodgkin's lymphoma, in November 2004. This designation allows the FDA to accept on a rolling basis portions of a marketing application for review prior to the submission of a final document.

Ortho Biotech Collaboration

        In June 2003, we entered into an agreement with Ortho Biotech to collaborate on the commercialization and continued clinical development of VELCADE. Under the terms of the agreement, we retain all commercialization rights to VELCADE in the United States. Ortho Biotech and its affiliate, Janssen-Cilag, have agreed to commercialize VELCADE outside of the United States and Janssen Pharmaceutical K.K. is responsible for Japan. We receive distribution fees from Ortho Biotech and its affiliates from sales of VELCADE outside of the United States. We also retain an option to co-promote VELCADE with Ortho Biotech at a future date in specified European countries.

        We are engaged with Ortho Biotech in an extensive global program for further clinical development of VELCADE with the purpose of maximizing the clinical and commercial potential of VELCADE. This program is investigating the potential of VELCADE to treat multiple forms of solid and hematological tumors, including continued clinical development of VELCADE for multiple myeloma. Ortho Biotech is responsible for 40% of the joint development costs through 2005 and for 45% of those costs after 2005. In addition, we may receive payments from Ortho Biotech for achieving clinical development milestones, regulatory milestones outside of the United States or agreed-upon sales levels of VELCADE.

INTEGRILIN® (eptifibatide) Injection

        We co-promote INTEGRILIN in the United States in collaboration with Schering-Plough Corporation and Schering-Plough Ltd., together referred to as SGP, and share profits and losses. GlaxoSmithKline plc, or GSK, markets INTEGRILIN in the European Union under a license from us. Pending approval of the transfer from SGP to GSK of the relevant marketing authorizations, GSK will also market INTEGRILIN in other European countries. SGP markets INTEGRILIN in specified other areas outside of the United States and the European Union.

SGP Collaboration

        In April 1995, COR Therapeutics, Inc., or COR, entered into a collaboration agreement with SGP to jointly develop and commercialize INTEGRILIN on a worldwide basis. We acquired COR in February 2002.

        Under our collaboration agreement with SGP, we generally share any profits or losses from the United States with SGP based on the amount of promotional efforts that each party contributes. Since the United States launch of INTEGRILIN in June 1998, we have agreed to share promotional efforts in the United States equally with SGP, except for costs associated with marketing programs specific to

36

us. We have granted SGP an exclusive license to market INTEGRILIN outside of the United States and the European Union, and SGP pays royalties to us based on sales outside of the United States and the European Union.

        During September 2004, we initiated the process, contemplated by our original agreement with SGP, to transition United States distribution responsibilities for INTEGRILIN® (eptifibatide) Injection from SGP to us. We expect this transition to take place during the fourth quarter of 2005, at the earliest. After the transition, we expect we will continue to co-promote the product with SGP, but we will be responsible for distributing the product. As a result, we will recognize revenue for all sales of INTEGRILIN in the United States and pay SGP co-promotion fees.

GSK License Agreement

        In June 2004, we reacquired the rights to market INTEGRILIN in Europe from SGP and concurrently entered into a license agreement granting GSK exclusive marketing rights to INTEGRILIN in Europe. In January 2005, the transition of the INTEGRILIN marketing authorizations for the European Union from SGP to GSK was completed, and GSK began selling INTEGRILIN in the countries of the European Union. Subject to approval of the transfer from SGP to GSK of the relevant marketing authorizations, GSK will also market INTEGRILIN in other European countries. Our commercialization alliance with GSK is designed to provide significant sales and marketing support from GSK to address market opportunities for INTEGRILIN in Europe. Under the terms of the agreement, we are entitled to license fees and royalties from GSK on INTEGRILIN sales in Europe subject to the achievement of specified objectives.

        Under the license agreement with GSK, decisions regarding the ongoing marketing of INTEGRILIN are generally subject to the oversight of a joint steering committee with equal membership from GSK and us. However, GSK has significant final decision-making authority with respect to European marketing issues. Our agreement with GSK continues until the later of December 31, 2014, or as long as GSK continues to commercialize INTEGRILIN in any European country.

Research and Discovery 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 products. These alliances provide us with the opportunity to receive various combinations of equity investments, license fees and research funding, and may provide additional payments contingent upon our achievement of research and regulatory milestones and royalties and/or share profits if our collaborations are successful in developing and commercializing products.

        In addition to our collaboration agreements with Ortho Biotech, SGP and GSK, our major recent alliances from which we have recognized or may recognize revenues include:

•

A June 2000 joint development and commercialization agreement with Aventis Pharmaceuticals, Inc., or Aventis, in inflammatory diseases. In April 2003, Aventis exercised its option effective July 21, 2003 to terminate a technology transfer agreement with us. Upon exercising this option, Aventis paid us $40.0 million in consideration of future use of technology transferred to Aventis prior to the termination date. Termination of the technology transfer agreement has no effect on the existing five-year joint development and commercialization agreement in inflammation. We expect the joint development and commercialization agreement with Aventis in the field of inflammatory disease to continue through its scheduled expiration in June 2005.

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•

A September 1998 research agreement with Bayer AG, or Bayer, in cardiovascular diseases, and specified areas of oncology, pain, hematology, atherosclerosis, thrombosis, urology and viral infections. In October 2003, the research phase of our five-year alliance with Bayer concluded. Bayer and we amended the agreement to provide both parties access to specified identified targets for a period of seven years. If Bayer successfully develops and commercializes any of these targets discovered in the alliance, Bayer will owe us success and royalty payments on the sale of products generated from the alliance.

        We have also entered into a number of arrangements for the commercialization of products under which we share the costs for the development and eventual commercialization of specified compounds and may receive or be obligated to make product revenue, royalty, milestone or other payments. For example, in April 2001, we entered into an agreement with BZL Biologics, L.L.C., or BZL, for the joint development and commercialization of antibody-based therapeutics targeting prostate specific membrane antigen, or PSMA, including both chemotherapeutic agent conjugated and radio-labeled products. These products include MLN2704. Under this agreement, we currently have exclusive development and worldwide marketing rights to these products. We are required to pay development costs of the products and milestone and royalty payments to BZL based on product sales.

Critical Accounting Policies and Significant Judgments and Estimates

        Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory, intangible assets and goodwill. We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in this report, we believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial results.

Revenue

        We recognize revenue from the sale of our products, our co-promotion collaboration and strategic alliances. We divide our revenue arrangements with multiple elements into separate units of accounting if specified criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. We allocate the consideration we receive among the separate units based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. We classify advance payments received in excess of amounts earned as deferred revenue until earned.

        We recognize revenue from the sales of VELCADE® (bortezomib) for Injection in the United States when delivery has occurred and title has transferred to the wholesalers. We record allowances as a reduction to product sales for product returns and discounts at the time of sale. As VELCADE is a fairly new product, we estimate product returns based on an on-going analysis of industry trends for similar products and historical return patterns as they become available. VELCADE returns are expected to be generally low because the shelf life for the product is 18 months in the United States

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and we expect wholesalers not to significantly stock inventory due to the expensive nature of the product. Additionally, we consider several factors in our estimation process including our internal sales forecasts, inventory levels as provided by wholesalers and third-party market research data. During the fourth quarter of 2004, we began distributing VELCADE® (bortezomib) for Injection through a sole-source distribution model. As we continually monitor actual product returns and inventory levels in the domestic distribution channel, if circumstances change or conditions become more competitive in the market for therapeutic products that address multiple myeloma, we may take actions to increase our product return estimates. Doing so would result in an incremental reduction of product sales at the time the return estimate is changed. During the fourth quarter of 2004, we reduced our reserve for product returns by approximately $1.5 million based upon actual returns to date and inventory levels at the wholesalers. Since product launch, we have made no material revisions to our estimates of other dilution reserves. Accruals for rebates, chargebacks, and other discounts are immaterial as a result of the recent introduction of VELCADE and the current lack of competitive product available.

        We recognize co-promotion revenue based on SGP's reported shipments of INTEGRILIN® (eptifibatide) Injection to wholesalers. Co-promotion revenue includes our share of the profits from the sales of INTEGRILIN, reimbursements of our manufacturing-related costs, development costs, advertising and promotional expenses and royalties from SGP on sales of INTEGRILIN outside of the co-promotion territory. We communicate with SGP to calculate our share of the profits from the sales of INTEGRILIN on a monthly basis. The calculation includes estimates of the amount of advertising and promotional expenses and other costs incurred on a monthly basis. We also communicate with SGP to estimate royalties earned on sales outside of the co-promotion territory. Adjustments to our estimates are based upon actual information that we receive subsequent to our reporting deadlines. Our estimates are adjusted on a monthly basis and historically have not been significant due to periodic communication with SGP. Significant adjustments in future reporting periods could impact the timing and the amount of revenue to be recognized.

        We recognize nonrefundable upfront licensing fees and guaranteed, time-based payments that require continuing involvement in the form of research and development, manufacturing or other commercialization efforts by us as strategic alliance revenue:

•

ratably over the development period if development risk is significant,



•

ratably over the manufacturing period or estimated product useful life if development risk has been substantially eliminated, or



•

based upon the level of research services performed during the period 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 and might impact the timing and the amount of revenue recognized.

        Milestone payments are recognized as strategic alliance revenue when the performance obligations, as defined in the contract, are achieved. 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.

        Royalties are recognized as revenue when earned.

        Reimbursements of research and development costs are recognized as strategic alliance revenue as the related costs are incurred.

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Inventory

        Inventory consists of currently marketed products and from time to time product candidates awaiting regulatory approval which were capitalized based upon management's judgment of probable near-term commercialization. We assess the probability of commercialization based upon several factors including estimated launch date, time to manufacture and shelf life. At December 31, 2004 and 2003, inventory does not include amounts for products that have not been approved for sale. Inventory primarily represents raw materials used in production, work in process and 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. Our current sales projections provide for full utilization of the inventory balance. If product sales levels differ from projections or a launch of a new product is delayed, inventory may not be fully utilized and could be subject to impairment, at which point we would record a reserve to adjust inventory to its net realizable value.

Intangible Assets

        We have acquired significant intangible assets that we value and record. Those assets which do not yet have regulatory approval and for which there are no alternative uses are expensed as acquired in-process research and development, and those that are specifically identified and have alternative future uses are capitalized. We use a discounted cash flow model to value intangible assets. The discounted cash flow model requires assumptions about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect the value of the intangible asset. We engage independent valuation experts who review our critical assumptions for significant acquisitions of intangibles. We review intangible assets for impairment on a periodic basis using an undiscounted net cash flows approach. If the undiscounted cash flows of an intangible asset are less than the carrying value of an intangible asset, the intangible asset is written down to the discounted cash flow value. Where cash flows cannot be identified for an individual asset, the review is applied at the lowest group level for which cash flows are identifiable.

Goodwill

        On October 1, 2004, we performed our annual goodwill impairment test and determined that no impairment existed on that date. However, since the date of acquisition of COR, which generated a significant amount of goodwill, we have experienced a significant decline in market capitalization due to a decline in stock price. 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 could result in a material impairment charge to our statement of operations.

Accounting Pronouncements

        In January 2003, the Financial Accounting Standards Board, or FASB, issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51", or FIN 46, and in December 2003 issued a revised FIN 46, or FIN 46R, which addressed the period of adoption of FIN 46 for entities created before January 31, 2003. FIN 46 provides a new consolidation model which determines control and consolidation based on potential variability in gains and losses. The provisions of FIN 46 are effective for enterprises with variable interests in variable interest entities created after January 31, 2003. We adopted the provisions of FIN 46 in the first quarter of fiscal 2004 and the adoption did not have a material impact on our financial position or results of operations for our interests in variable interest entities created before February 1, 2003.

        In May 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity"

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("SFAS No. 150"). SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position or results of operations.

        In December 2004, the FASB issued SFAS No. 123R (revised 2004), "Share-Based Payment—An Amendment of FASB Statements No. 123 and 95" ("SFAS No. 123R"). SFAS No. 123R requires companies to calculate and record in the income statement the cost of equity instruments, such as stock options or restricted stock, awarded to employees for services received. The cost of the equity instrument is to be measured based on the fair value of the instruments on the date they are granted and is required to be recognized over the period during which the employees are required to provide services in exchange for the equity instruments. SFAS No. 123R is effective at the beginning of the first interim period beginning after June 15, 2005.

        SFAS No. 123R provides two alternatives for adoption:

•

a "modified prospective" method in which compensation cost is recognized for all awards granted subsequent to the effective date of the statement as well as for the unvested portion of awards outstanding as of the effective date; or



•

a "modified retrospective" method which follows the approach in the "modified prospective" method, but also permits entities to restate prior periods to record compensation cost calculated under SFAS No. 123 for pro forma disclosure.

        We plan to adopt SFAS No. 123R using the modified prospective method. As permitted by SFAS No. 123, we currently account for share-based payments to employees using APB 25 intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123R's fair value method will have a significant impact on our result of operations, although it will have no impact on our overall financial position. We cannot accurately estimate at this time the impact of adopting SFAS No. 123R as it will depend on our market price, our assumptions used and levels of share-based payments granted in future periods. However, had we adopted SFAS No. 123R in a prior period, the impact would approximate the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 2 to our consolidated financial statements.

Reclassifications

        In connection with the launch of VELCADE® (bortezomib) for Injection in May 2003 and the recognition of the related costs of sales, we reclassified some INTEGRILIN® (eptifibatide) Injection related manufacturing expenses to cost of goods sold so that cost of goods sold now includes manufacturing-related expenses associated with the sales of INTEGRILIN and VELCADE. These reclassified manufacturing-related expenses were previously included in cost of co-promotion revenue and some INTEGRILIN related advertising and promotional expenses that were previously included in cost of co-promotion revenue have been reclassified to selling, general and administrative expenses.

        Prior period amounts have been adjusted to conform to the current year presentation. There was no impact on net loss in any period.

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Results of Operations

Revenues

        Total revenues increased 3% to $448.2 million in 2004 and 23% to $433.7 million in 2003. Increases in both years were driven by product-related revenue.

        In May 2003 we received FDA approval to market VELCADE® (bortezomib) for Injection and began shipping to wholesalers. Net product sales of VELCADE were $143.1 million in 2004 and $59.6 million in 2003, reflecting increased patient penetration and use of the product. Reserves for product returns, chargebacks and discounts represent approximately 5.0% to 5.5% of gross product sales in 2004 and 2003. Product sales from VELCADE represent approximately 32% of our 2004 total revenues and 14% of our 2003 total revenues.

        Co-promotion revenue, based upon worldwide sales of INTEGRILIN® (eptifibatide) Injection, increased 12% to $206.3 million in 2004 and 15% to $184.3 million in 2003. These increases are due to higher net reimbursement from SGP under our collaboration agreement and increased product sales in the United States. U.S. product sales, as provided to us by SGP, were $301.3 million, a 6% increase

42

over sales in 2003. Co-promotion revenue represents approximately 46% of our 2004 total revenues and 43% of our 2003 total revenues.

        Revenue under strategic alliances decreased 48% to $98.9 million in 2004 and 2% to $189.7 million in 2003. The decrease in 2004 is primarily due to the April 2003 termination of the Aventis technology transfer agreement and reduced revenue recognized under the research phase of the Bayer agreement, offset by increased revenue under our Ortho Biotech alliance from milestone payments earned relating to VELCADE® (bortezomib) for Injection approval in the European Union and the achievement of specified sales levels of VELCADE. The decrease in 2003 primarily relates to less revenue recognized under our research alliance with Monsanto Company, which expired in 2002 at the end of its original five year term and the conclusion of the research phase of our Bayer alliance in the fourth quarter of 2003, partially offset by clinical milestones earned under our Ortho Biotech alliance and $40.0 million of revenue recognized in connection with the termination of the Aventis technology transfer agreement

        There were no amounts of revenue recognized in 2004 that were included in the cumulative effect of change in accounting principle relating to the adoption of SAB 101 in 2000. Included in strategic alliance revenue in 2003 is $8.6 million that was recognized in prior years relating to the adoption of SAB 101. Included in strategic alliance revenue in 2002 is $36.1 million that was recognized in prior years relating to the adoption of SAB 101.

        We expect revenue under strategic alliances to fluctuate depending on the level of revenues earned for ongoing development efforts, the level of milestones achieved and the number of sales and marketing alliances we may enter into in the future with major pharmaceutical companies.

Cost of Sales

        Cost of sales increased 15% to $70.3 million in 2004 and 29% to $61.2 million in 2003. Cost of sales includes manufacturing-related expenses associated with the sales of VELCADE and INTEGRILIN® (eptifibatide) Injection. The increases were primarily driven by increased sales of VELCADE and INTEGRILIN.

Research and Development

        Research and development expenses decreased 18% to $402.6 million in 2004 and 4% to $488.5 million in 2003. The decreases reflect the financial benefits of our June 2003 restructuring efforts, including reductions in discovery personnel and personnel-related costs, including facilities expenses and lower development costs for VELCADE in 2004. The decreases are partially offset by increases in clinical trial costs for MLN2704 and INTEGRILIN in 2004 and VELCADE in 2003.

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        In addition to our ongoing clinical trials of INTEGRILIN® (eptifibatide) Injection and VELCADE® (bortezomib) for Injection, we have eight drug candidates in late preclinical and clinical development. The following chart summarizes the applicable disease indication and the clinical or preclinical trial status of these eight drug candidates.

        Completion of clinical trials may take several years or more and the length of time can vary substantially according to the type, complexity, novelty and intended use of a product candidate. The types of costs incurred during a clinical trial vary depending upon the type of product candidate and the nature of the study.

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        We estimate that clinical trials in our areas of focus are typically completed over the following timelines:

        Upon successful completion of phase III clinical trials of a product candidate, we intend to submit the results to the FDA to support regulatory approval. However, we cannot be certain that any of our product candidates will prove to be safe or effective, will receive regulatory approvals, or will be successfully commercialized. Our clinical trials might prove that our product candidates may not be effective in treating the disease or have undesirable or unintended side effects, toxicities or other characteristics that require us to cease further development of the product candidate. The cost to take a product candidate through clinical trials is dependent upon, among other things, the disease indications, the timing, the size and dosing schedule of each clinical trial, the number of patients enrolled in each trial and the speed at which patients are enrolled and treated. We could incur increased product development costs if we experience delays in clinical trial enrollment, delays in the evaluation of clinical trial results or delays in regulatory approvals.

        Some products that are likely to result from our research and development projects are based on new technologies and new therapeutic approaches that have not been extensively tested in humans. The regulatory requirements governing these types of products may be more rigorous than for conventional products. As a result, it is difficult to estimate the nature and length of the efforts to complete such products as we may experience a longer regulatory process in connection with any products that we develop based upon these new technologies or therapeutic approaches. In addition, ultimate approval for commercial manufacturing and marketing of our products is dependent on the FDA or applicable approval body in the country for which approval is being sought, adding further uncertainty to estimated costs and completion dates. Significant delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidates.

        Due to the variability in the length of time necessary to develop a product, the uncertainties related to the estimated cost of the projects and ultimate ability to obtain governmental approval for commercialization, accurate and meaningful estimates of the ultimate cost to bring our product candidates to market are not available.

        We budget and monitor our research and development costs by type or category, rather than by project on a comprehensive or fully allocated basis. Significant categories of costs include personnel, clinical, third party research and development services and laboratory supplies. In addition, a significant portion of our research and development expenses is not tracked by project as it benefits multiple projects or our technology platform. Consequently, fully loaded research and development cost summaries by project are not available.

        Given the uncertainties related to development, we are currently unable to reliably estimate when, if ever, our product candidates will generate revenue and cash flows. We do not expect to receive net

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cash inflows from any of our major research and development projects until a product candidate becomes a profitable commercial product.

Selling, General and Administrative

        Selling, general and administrative expenses increased 10% to $196.6 million in 2004 and 6% to $178.8 million in 2003. The increase in 2004 is due to increased commercial spend to support VELCADE® (bortezomib) for Injection and INTEGRILIN® (eptifibatide) Injection reflecting a full year of increased headcount and activities by the VELCADE and expanded INTEGRILIN sales forces partially offset by decreased expenses in corporate general and administrative functions attributable to our restructuring and cost containment efforts. The increase in 2003 reflects the net impact of increased selling and marketing expenses related to the launch of VELCADE and the expansion of the Millennium—SGP sales force for INTEGRILIN offset by decreased consulting and legal expenses.

Restructuring

        In December 2002 and June 2003, we took steps to focus our resources on drug development and commercialization. Our restructuring plan included consolidation of research and development facilities, overall headcount reduction and streamlining of discovery and development projects. We recorded restructuring charges of $38.0 million in 2004 primarily related to the recognition of the estimated remaining rental obligations, net of estimated sublease income, for facilities we vacated during 2004. We recorded restructuring charges of $191.0 million in 2003 related to asset impairments, remaining rental obligations on facilities we have vacated, personnel costs and contract termination.

        Our decisions to vacate specified facilities and abandon the related leasehold improvements as well as terminate specified research programs were deemed to be impairment indicators under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," or SFAS No. 144. As a result of performing the impairment evaluations, we recorded asset impairment charges to adjust the carrying value of the related long lived assets to fair value. Fair value of the assets was estimated based upon anticipated future cash flows, discounted at a rate commensurate with the risk involved.

        We anticipate additional restructuring charges during 2005 of between approximately $5.0 million and $20.0 million relating to adjustments to the estimates of the remaining rental obligations, net of estimated sublease income, for facilities we vacated.

Acquired In-Process Research and Development

        We recorded a one-time, non-cash charge to operations in 2002 of $242.0 million for acquired in-process research and development from the COR acquisition. 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 in-process technology we acquired from COR consisted of five significant research and development projects for the treatment of cardiovascular diseases, as well as in the area of oncology. During 2003, we discontinued four of the five programs as part of our streamlining of discovery and development projects. We have advanced the remaining program into phase I clinical testing.

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Amortization of Intangibles

        Amortization of intangible assets decreased 14% to $33.5 million in 2004 and increased 11% to $38.9 million in 2003. Amortization decreased in 2004 as the specifically identified intangible assets from our LeukoSite, Inc., or LeukoSite, acquisition were fully amortized as of December 2003. Amortization in 2003 relates to specifically identified intangible assets from the COR acquisition, as well as our acquisitions of LeukoSite in 1999 and Cambridge Discovery Chemistry Ltd., or CDC, in 2000. We will continue to amortize the specifically identified intangible assets from our COR acquisition through 2015. We expect to incur amortization expense of approximately $33.9 million for each of the next five years.

Investment Income

        Investment income decreased 66% to $11.2 million in 2004 and 72% to $32.6 million in 2003. The decrease in 2004 is a result of a lower average balance of invested funds, as well as increased realized losses on marketable securities and other investments. The decrease in 2003 is primarily attributable to a lower average balance of invested funds and less favorable market conditions resulting in lower yields, coupled with a decrease in realized gains, as significant realized gains were recognized from our investment portfolio in 2002.

Interest Expense

        Interest expense decreased 49% to $10.7 million in 2004 and 45% to $21.0 million in 2003. The decreases are attributable to the April 2003 repurchase of $577.8 million aggregate principal amount of our 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 our 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").

Gain on Sale of Equity Interest in Joint Venture

        Through our acquisition of LeukoSite, we became a party to a joint venture partnership, Millennium and ILEX Partners, L.P., or M&I, for development of Campath® (alemtuzumab) humanized monoclonal antibody. We sold our equity interest in M&I and in consideration for the sale, we received an initial payment of $20.0 million in December 2001. During each of the second quarters of 2003 and 2002, we recorded additional gains of $40.0 million on our sale of this equity interest based upon the achievement of predetermined sales targets of Campath. During the first quarter of 2004, we recorded the final $40.0 million gain related to our sale of this equity interest based upon the achievement of predetermined 2004 sales targets of Campath. In addition, we will be entitled to additional payments from ILEX if sales of Campath in the United States after 2004 exceed specified annual thresholds. We do not expect that these thresholds will be achieved and therefore, we are unlikely to receive any future additional payments related to Campath.

Debt Financing Charge

        During 2003, we recorded a non-cash charge of $10.5 million which represents the write-off of approximately $12.4 million of unamortized original debt issuance costs associated with the 5.0% notes and 4.5% notes assumed in the COR acquisition, offset by $1.9 million relating to the expired put premium on the untendered notes on April 29, 2003.

        During 2002, we recorded a non-cash charge of $54.0 million relating to the fair value of the put premium placed on the 5.0% notes and 4.5% notes.

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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. We have also made strategic commitments to purchase debt and equity securities from some of our alliance collaborators in accordance with our Board of Directors' approved policies and our business needs. These investment commitments are generally in smaller companies. We have and may in the future lose money in these investments and our ability to liquidate these investments is in some cases very limited. We may also owe our partners milestone payments and royalties. We also have committed to fund development costs incurred by some of our collaborators.

        We have funded our cash requirements primarily through the following:

•

our co-promotion relationship with SGP for the sale of INTEGRILIN® (eptifibatide) Injection;



•

sales of VELCADE® (bortezomib) for Injection;



•

payments from our strategic collaborators, including equity investments, license fees, milestone payments and research funding; and



•

equity and debt financings in the public markets.

        In the future, we expect to continue to fund our cash requirements from some of these sources as well as from sales of other products, subject to receiving regulatory approval. We are entitled to additional committed research and development funding under some of our strategic alliances. We believe the key factors that could affect our internal and external sources of cash are:

•

revenues and margins from sales of VELCADE, INTEGRILIN and other products and services for which we may obtain marketing approval in the future or which are sold by companies that may owe us royalty, milestone, distribution or other payments on account of such products;



•

the success of our clinical and preclinical development programs;



•

our ability to enter into additional strategic collaborations and to maintain existing and new collaborations as well as the success of such collaborations; and



•

the receptivity of the capital markets to financings by biopharmaceutical companies generally and to financings by our company specifically.

        As of December 31, 2004 we had $700.4 million in cash, cash equivalents and marketable securities. This excludes $10.3 million of interest-bearing marketable securities classified as restricted cash on our balance sheet as of December 31, 2004, which primarily serve as collateral for letters of credit securing leased facilities.

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Cash Flows

        The principal use of cash in operating activities in both 2004 and 2003 was to fund our net loss. Cash flows from operations can vary significantly due to various factors including changes in accounts receivable, as well as changes in accounts payable and accrued expenses. The average collection period of our accounts receivable can vary and is dependent on various factors, including the type of revenue and the payment terms related to those revenues.

        Investing activities provided cash of $117.9 million in 2004. The principal source of funds during 2004 was from the sale of marketable securities. We used $480.3 million of cash in investing activities in 2003 as we reinvested our cash into our securities portfolio.

        Financing activities provided cash of $14.4 million in 2004. The principal source was from the sales of common stock to our employees. We used $574.9 million of cash in financing activities in 2003. The primary use of cash in 2003 was the repurchase of $577.8 million in principal of convertible notes and the related put premium of $52.1 million, offset by sales of common stock.

        We believe that our existing cash and cash equivalents and the anticipated cash payments from our product sales, co-promotion revenue and current strategic alliances will be sufficient to support our expected operations, fund our debt service and capital lease obligations and fund our capital commitments for at least the next several years.

Contractual Obligations

        Our major outstanding contractual obligations relate to our facilities leases, convertible notes, capital lease financings and commitments to purchase debt and equity securities from collaborators.

        As of December 31, 2004, our convertible notes aggregated $105.5 million in principal amount outstanding. All three issues of notes require semi-annual interest payments through maturity. All required interest payments have been made to date. As of December 31, 2004, these notes consisted of:

•

$83.3 million of principal of 5.5% convertible subordinated notes due January 15, 2007, that are convertible into Millennium common stock at any time prior to maturity at a price equal to $42.07 per share (the "5.5% notes");



•

$16.3 million of our 5.0% notes; and



•

$5.9 million of our 4.5% notes.

        In January 2005, we repaid SGP approximately $49.3 million for advances SGP had made for inventory purchases in prior years. This amount is included in current liabilities at December 31, 2004.

        Below is a table which presents our contractual obligations and commercial commitments as of December 31, 2004:

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        In addition, in the future we may owe royalties and other contingent payments to our collaborators, licensees and other parties to whom we bear commitments based on the achievement of product sales and specified other objectives and milestones.

        As of December 31, 2004, we had net operating loss carryforwards of approximately $1.3 billion to offset future federal taxable income expiring in 2005 through 2024 and $1.0 billion to offset future state taxable income expiring in 2005 through 2009. Due to the degree of uncertainty related to the ultimate realization of tax benefits created from such prior losses, no benefit has been recognized in the financial statements as of December 31, 2004. We would allocate any subsequently recognized tax benefits to operations, goodwill and additional paid-in capital. Moreover, our ability to utilize these losses in future years may be limited under the change of stock ownership rules of the Internal Revenue Service.

Subsequent Events

        In February 2005, we achieved specified objectives under our collaborations with GSK and Ortho Biotech. We will recognize approximately $19.9 million throughout the remainder of 2005 as a result of the successful transfer of the central marketing authorization of INTEGRILIN® (eptifibatide) Injection in Europe to GSK and related activities.

        We will recognize milestone payments of approximately $20.0 million in the first quarter of 2005 as a result of the achievement of specified sales levels of VELCADE® (bortezomib) for Injection outside of the United States and worldwide.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We manage our fixed income investment portfolio in accordance with our Policy for Securities Investments, or Investment Policy, that has been approved by our Board of Directors. The primary objectives of our Investment Policy are to preserve principal, maintain a high degree of liquidity to meet operating needs, and obtain competitive returns subject to prevailing market conditions. Investments are made primarily in investment-grade corporate bonds with effective maturities of three years or less, asset-backed debt securities and U.S. government agency debt 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 $11.5 million decrease in the fair value of our investments as of December 31, 2004. 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.

        As of December 31, 2004, the fair value of our 4.5% notes, 5.0% notes and 5.5% notes approximates their carrying value. The interest rates on our convertible notes and capital lease obligations are fixed and therefore not subject to interest rate risk.

        We have no derivative instruments outstanding as of December 31, 2004.

        As of December 31, 2004 we did not have any financing arrangements that were not reflected in our balance sheet.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Millennium Pharmaceuticals, Inc.
Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Millennium Pharmaceuticals, Inc.

        We have audited the accompanying consolidated balance sheets of Millennium Pharmaceuticals, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Millennium Pharmaceuticals, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Millennium Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 18, 2005 expressed an unqualified opinion thereon.

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Millennium Pharmaceuticals, Inc.

Consolidated Balance Sheets

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

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Millennium Pharmaceuticals, Inc.

Consolidated Statements of Operations