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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-28494

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MILLENNIUM PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE 04-3177038
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

75 SIDNEY STREET 02139
CAMBRIDGE, MASSACHUSETTS (zip code)
(Address of principal executive offices)

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

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

The number of shares outstanding of each of the registrant's classes of
common stock as of:

DATE CLASS OUTSTANDING SHARES
- ------------------------------------ ------------------------------------ ------------------------------------

April 17, 2001 Common stock, $.001 par value 217,657,675

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MILLENNIUM PHARMACEUTICALS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001

TABLE OF CONTENTS

PAGE
----

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000..................................... 3

Condensed Consolidated Statements of Operations for the
three months ended March 31, 2001 and 2000................ 4

Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 and 2000................ 5

Notes to Condensed Consolidated Financial Statements........ 6

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

Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 15

PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K............................ 16

Signatures.................................................. 17

Exhibit Index

PART I FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MILLENNIUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

MARCH 31, DECEMBER 31,
2001 2000
---------- ------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents................................... $ 76,189 $ 166,086
Marketable securities....................................... 1,383,805 1,286,281
Due from strategic alliance partners........................ 41,108 21,901
Prepaid expenses and other current assets................... 14,827 11,312
---------- ----------
Total current assets........................................ 1,515,929 1,485,580
Property and equipment, net................................. 89,472 85,803
Restricted cash and other assets............................ 34,629 34,599
Goodwill, net............................................... 163,332 177,083
Intangible assets, net...................................... 27,369 28,857
---------- ----------
Total assets................................................ $1,830,731 $1,811,922
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable............................................ $ 15,156 $ 20,256
Accrued expenses............................................ 44,657 39,868
Deferred revenue............................................ 71,925 61,842
Current portion of capital lease obligations................ 15,259 14,208
---------- ----------
Total current liabilities................................... 146,997 136,174
Deferred revenue............................................ 75,978 88,169
Capital lease obligations, net of current portion........... 29,325 29,369
Long term debt.............................................. 83,345 95,927

Commitments and contingencies

Stockholders equity:
Preferred Stock, $0.001 par value; 5,000 shares authorized,
none issued............................................... -- --
Common Stock, $0.001 par value; 500,000 shares authorized:
216,009 shares at March 31, 2001 and 213,979 shares at
December 31, 2000 issued and outstanding.................. 216 214
Additional paid-in capital.................................. 2,273,975 2,203,902
Deferred compensation....................................... (1,163) (1,296)
Notes receivable from officers.............................. (356) (385)
Accumulated other comprehensive income...................... 26,089 10,455
Accumulated deficit......................................... (803,675) (750,607)
---------- ----------
Total stockholders equity................................... 1,495,086 1,462,283
---------- ----------
Total liabilities and stockholders equity................... $1,830,731 $1,811,922
========== ==========

See notes to condensed consolidated financial statements.

MILLENNIUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED MARCH 31,
----------------------------------
2001 2000
--------- ----------------------
(RESTATED, SEE NOTE 2)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues:
Revenue under strategic alliances......................... $ 50,364 $ 47,236
Costs and expenses:
Research and development.................................. 92,521 60,100
General and administrative................................ 16,236 10,823
Amortization of intangible assets......................... 16,267 11,970
-------- ---------
Total costs and expenses................................ 125,024 82,893
-------- ---------
Loss from operations........................................ (74,660) (35,657)
Other income (expense):
Equity in operations of joint venture..................... (964) --
Interest income........................................... 27,459 8,480
Interest expense.......................................... (2,336) (5,451)
Debt conversion expense................................... (2,567) --
Minority interest......................................... -- (141)
-------- ---------
Loss before cumulative effect of change in accounting
principle................................................. (53,068) (32,769)
Cumulative effect of change in accounting principle......... -- (107,692)
-------- ---------
Net loss.................................................... $(53,068) $(140,461)
======== =========
AMOUNTS PER COMMON SHARE:

Loss before cumulative effect of change in accounting
principle................................................. $ (0.25) $ (0.18)
Cumulative effect of change in accounting principle......... -- (0.60)
-------- ---------
Net loss per share, basic and diluted....................... $ (0.25) $ (0.78)
======== =========

Weighted average shares, basic and diluted.................. 215,371 180,890
======== =========

See notes to condensed consolidated financial statements.

MILLENNIUM PHARMACEUTICALS, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
---------------------
2001 2000
--------- ---------

(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (53,068) $(140,461)
Adjustments to reconcile net loss to cash used in operating
activities:
Cumulative effect of change in accounting principle......... -- 107,692
Depreciation and amortization............................... 24,269 17,785
Gain on available-for-sale securities....................... (2,196) --
Stock compensation expense.................................. 887 1,633
Equity in operations of joint venture....................... 964 --
Minority interest........................................... -- 141
Changes in operating assets and liabilities:
Prepaid expenses and other current assets................. (486) 6,549
Due from strategic alliance partners...................... (19,052) 2,254
Restricted cash and other assets.......................... (140) 339
Accounts payable and accrued expenses..................... (3,217) 5,020
Deferred revenue.......................................... (2,108) (4,124)
--------- ---------
Net cash used in operating activities....................... (54,147) (3,172)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in marketable securities........................ (213,723) (245,056)
Proceeds from sales and maturities of marketable
securities................................................ 134,004 61,222
Investment in joint venture................................. (656) --
Purchase of property and equipment and other long term
assets.................................................... (8,951) (7,143)
--------- ---------
Net cash used in investing activities....................... (89,326) (190,977)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of convertible subordinated notes, net of issuance
costs..................................................... -- 388,695
Proceeds from sales of common stock......................... 50,000 --
Net proceeds from employee stock purchases.................. 6,850 17,572
Principal payments on capital leases........................ (3,299) (2,834)
--------- ---------
Net cash provided by financing activities................... 53,551 403,433
--------- ---------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (89,922) 209,284
Equity adjustment from foreign currency translation......... 25 --
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 166,086 56,775
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 76,189 $ 266,059
========= =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 866 $ 746

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Equipment acquired under capital leases..................... $ 4,306 $ 3,984
Deferred compensation relating to issuance of stock
options................................................... -- 345
Write off of capital assets................................. 558 --
Issuance of common stock to Abgenix, Inc.................... -- 10,000
Conversion of subordinated debt to common stock............. 12,582 --
Reclassification of debt issuance costs to additional
paid-in capital........................................... 110 --

See notes to condensed consolidated financial statements.

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation of
the accompanying condensed consolidated financial statements have been included.
Interim results for the three month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, which was filed with the Securities and
Exchange Commission on March 15, 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) CASH EQUIVALENTS AND MARKETABLE SECURITIES

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

Management determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation at each
balance sheet date. Marketable securities at March 31, 2001 and December 31,
2000 are classified as "available-for-sale." Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of stockholders' equity. The cost of debt
securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion is included
in interest income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in interest
income. The cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available-for-sale
are included in interest income.

(B) GOODWILL AND INTANGIBLE ASSETS

Intangible assets consist of specifically identified intangible assets.
Goodwill is the excess of any purchase price over the estimated fair market
value of net tangible assets acquired not allocated to specific intangible
assets. Amortization is computed using the straight-line method over the
estimated useful lives of the respective assets, generally four years.
Accumulated amortization was $80.3 million and $64.0 million at March 31, 2001
and December 31, 2000, respectively. On a periodic basis, the Company estimates
the future undiscounted cash flows of the businesses to which the intangible
assets relate in order to ensure that the carrying value of such intangible
assets has not been impaired.

Effective October 1, 2000, Millennium changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101
("SAB 101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS. Previously, the
Company had recognized revenue relating to non-refundable, up-front, license and
milestone payments and certain research funding payments from its strategic
partners in accordance with the contract. Under the new accounting method
adopted retroactively to January 1, 2000, the Company recognizes revenue from
non-refundable, up-front, license and milestone payments, not specifically tied
to a separate earnings process, ratably over the term of the research contract.
When payments are specifically tied to a separate earnings process, revenue is
recognized when earned.

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In addition, when appropriate, the Company recognizes revenue from certain
research payments based upon the level of research services performed during the
period of the research contract. The cumulative effect of the change on prior
years resulted in a charge to income of $107.7 million, which is included in the
loss for the three months ended March 31, 2000. Included in revenue for the
three months ended March 31, 2000 is $5.0 million of revenue that was recognized
in prior years relating to the adoption of SAB 101. The amount of revenue
recognized in the three months ended March 31, 2001 that was included in the
cumulative effect of change in accounting principle is $10.1 million. Prior year
financial results have been restated for the retroactive adoption of SAB 101 to
January 1, 2000.

(D) SEGMENT INFORMATION

The Company has identified three operating segments which, under the
applicable provision of Statement of Financial Accounting Standards ("SFAS") No.
131, have been aggregated into one reportable segment. Substantially all of the
Company's revenues have been derived from its strategic alliances. Revenues from
Aventis accounted for approximately 20% of consolidated revenues for the three
months ended March 31, 2001. Revenues from Bayer accounted for approximately 30%
and 23% of consolidated revenues in the three months ended March 31, 2001 and
2000, respectively. Revenues from Monsanto accounted for approximately 22% and
23% of consolidated revenues in the three months ended March 31, 2001 and 2000,
respectively. There were no other significant customers in the three months
ended March 31, 2001 and 2000.

(E) NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed using the weighted
average number of common shares outstanding during the period. Diluted net
income (loss) per common share is computed using the weighted average number of
common and dilutive common equivalent shares from stock options, warrants and
convertible debt using the treasury stock method. For the three months ended
March 31, 2001 and 2000, diluted net loss per share is the same as basic net
loss per share, as the inclusion of outstanding Common Stock options, warrants
and convertible debt would be antidilutive.

(F) STOCK DIVIDENDS

Stockholders' equity has been restated to give retroactive application to
each of the two-for-one stock splits on April 18, 2000 and October 4, 2000 by
reclassifying from additional paid-in capital to Common Stock the par value of
the additional shares arising from the stock splits. In addition, all references
in the condensed consolidated financial statements to the number of shares and
per share amounts have been restated.

(G) COMPREHENSIVE INCOME (LOSS)

Comprehensive loss was $37.4 million and $140.5 million for the three months
ended March 31, 2001 and 2000, respectively. Comprehensive income (loss) is
comprised of net income (loss), unrealized gains and losses on marketable
securities and cumulative foreign currency translation adjustments. Accumulated
other comprehensive income at March 31, 2001 included $26.4 million of
unrealized gains on marketable securities and $0.3 million of cumulative foreign
currency translation adjustments.

(H) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The effective
date of this statement was deferred to fiscal years beginning after June 15,
2000 by SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of Effective Date of SFAS No. 133." SFAS No. 133 was
amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." The

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company has adopted this new accounting standard effective January 1, 2001 and
it did not have a significant effect on the financial statements.

3. STRATEGIC ALLIANCES

On January 4, 2001, Aventis made a $50 million purchase of Millennium Common
Stock pursuant to the Investment Agreement between the Company and Aventis.

On March 12, 2001, the Company entered into a strategic alliance with Abbott
Laboratories. This alliance is for a five-year term, and is primarily for
collaborative research and development in the area of metabolic diseases. The
Company and Abbott have agreed to share the cost of developing, manufacturing
and marketing products on a worldwide basis. This arrangement with Abbott also
includes a technology exchange and development agreement and an equity
investment by Abbott, under which the Company is eligible to receive up to $250
million. As part of this $250 million equity investment, Abbott made an initial
investment of $50 million on April 11, 2001 and has agreed to make additional
investments totaling $200 million in seven equal quarterly installments from
later in 2001 through 2003.

4. MILLENNIUM & ILEX PARTNERS, L.P.

Through its merger with LeukoSite, Inc. ("LeukoSite") the Company became a
party to a joint venture agreement with ILEX Products, Inc. ("ILEX") to form
Millennium and ILEX Partners, L.P. ("M&I") for the purpose of developing and
commercializing the CAMPATH-Registered Trademark- product, a monoclonal antibody
for use in the treatment of chronic lymphocytic leukemia. In August 1999, M&I
and Schering AG entered into a distribution and development agreement which
grants Schering AG exclusive marketing and distribution rights to the
CAMPATH-Registered Trademark- product in the U.S., Europe and the rest of the
world except Japan and East Asia, where M&I has retained rights. In the United
States, Berlex Laboratories, Inc., Schering's U.S. affiliate, and M&I will share
in the profits from the sale of the CAMPATH-Registered Trademark- product. On
sales made in the rest of the territory, Schering AG has agreed to pay royalties
equivalent to the rate of profit sharing expected in the U.S. Under the terms of
the agreement, Schering has agreed to make payments of up to $30 million, of
which $20 million has been paid as of March 31, 2001, for rights to the
CAMPATH-Registered Trademark- product upon the achievement of certain regulatory
milestones. The joint venture currently intends to use these funds to pay for
ongoing development activities.

The Company accounts for its investment in the joint venture under the
equity method of accounting and records its share of the income or loss in other
income (expense). For the three months ended March 31, 2001 the Company's share
of the joint venture's recorded loss was $1.0 million and the Company's
obligation to fund the joint venture at March 31, 2001 was $9.1 million. During
the three months ended March 31, 2001, the Company recognized $1.2 million of
revenue from research and development activities performed on behalf of and to
be reimbursed by M&I. At March 31, 2001 and December 31, 2000, the Company had
amounts receivable of $5.1 million and $3.8 million, respectively, included in
Due from strategic alliance partners, for amounts due from M&I, for such work.

5. CONVERTIBLE DEBT

In January 2000, the Company completed a sale, pursuant to Rule 144A of the
Securities Act of 1933, of $400.0 million of 5.5% convertible subordinated notes
due January 15, 2007. The notes are convertible into Millennium Common Stock at
any time prior to maturity at a price equal to $42.07 per share, subject to
adjustment, unless previously repurchased or redeemed by the Company under
certain

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

circumstances. Under the terms of the notes, the Company is required to make
semi-annual interest payments on the outstanding principal balance of the notes
on January 15 and July 15 of each year.

During the first quarter of 2001, the Company paid an aggregate of $2.6
million in cash to certain holders of Millennium's convertible notes in order to
induce the conversion of their notes into Millennium Common Stock. These cash
payments were expensed during the first quarter of 2001. Interest accrued
through the date of conversion was charged to interest expense and was paid upon
conversion. These conversions resulted in the retirement of $12.6 million of
outstanding principal of Millennium convertible notes, the issuance of
approximately 0.3 million shares of Millennium Common Stock, and the
reclassification of deferred debt issuance costs of $0.1 million to additional
paid-in capital.

6. COMMITMENTS

On August 4, 2000, the Company entered into lease agreements, relating to
two buildings to be constructed for laboratory and office space in Cambridge,
Massachusetts. The rent obligation for each building is expected to commence on
the earlier of (a) September 1, 2002 or October 1, 2003, respectively or (b) the
date on which the Company commences occupancy of the respective building. Both
leases are for a term of seventeen years. The Company is responsible for a
portion of the construction costs for both buildings. The Company's cost to
complete one of the buildings is expected to be approximately $31.0 million. The
other building is currently in the design phase and construction costs are
currently being estimated. Rent is calculated on an escalating scale ranging
from approximately $7.6 million, per building per year, to approximately $9.7
million, per building per year.

In February 2001, the Company entered into an Agreement for Lease, relating
to a building to be constructed for laboratory and office space in Cambridge,
England. The lease is expected to have a 20-year term and to commence in 2003.
The Company is responsible for a portion of the construction costs, which it
estimates to be approximately $21.0 million. Rent is expected to be
approximately $2.4 million per year and is subject to market adjustments at the
end of the 5th, 10th and 15th years.

7. SUBSEQUENT EVENTS

On April 5, 2001, the Company adopted a shareholder rights plan designed to
ensure that all Millennium shareholders will receive fair and equal treatment in
the event of any unsolicited attempt to acquire the Company. The plan was not
adopted in response to any unsolicited offer or takeover attempt. A complete
copy of the shareholder rights plan is attached as an exhibit to a Current
Report on Form 8-K which was filed with the SEC on April 5, 2001.

On April 11, 2001, the Company entered into an agreement with BZL Biologics,
L.L.C., a privately-held company, to develop and commercialize antibody-based
therapeutics targeting Prostate Specific Membrane Antigen (PSMA). The
development plan includes programs for both immunotoxin and radiolabeled
products. The primary indication expected for products targeting PSMA is
prostate cancer, although PSMA may also be a relevant therapeutic target in
other solid tumors. The terms of the agreement call for Millennium and BZL to
jointly develop the immunotoxin and radiolabeled products for the prostate
cancer indication until a predetermined clinical decision point. Thereafter,
Millennium will have full responsibility for development, manufacturing and
commercialization of all antibody-based therapies for all indications, as well
as all diagnostic products. Millennium will be responsible for all development
costs of the products. In addition, BZL will be entitled to receive milestone
payments and royalties based on net sales of any marketed products.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This quarterly report on Form 10-Q contains forward-looking statements,
including our expectations of future industry conditions, strategic plans and
forecasts of operational results. Various risks may cause our actual results to
differ materially. A list and description of some of the risks and uncertainties
is contained below and in Exhibit 99.1 to this quarterly report, which
discussion is expressly incorporated by reference herein.

OVERVIEW

Millennium Pharmaceuticals, Inc. was founded in 1993. We incorporate
large-scale genetics, genomics, high throughput screening, and informatics in an
integrated science and technology platform, which we apply primarily in
discovering and developing proprietary therapeutic and diagnostic human
healthcare products and services.

We currently derive our revenue primarily from payments from strategic
alliances with major pharmaceutical companies. We have not received any revenue
from the sale of products. Significant strategic alliances include the
following: two agreements with the Wyeth-Ayerst Division of American Home
Products ("AHP") in certain disorders of the central nervous system and in
bacterial diseases, respectively; an agreement with Bayer, AG ("Bayer") in
cardiovascular disease, and certain areas of oncology, osteoporosis, pain, liver
fibrosis, hematology and viral infections; a research alliance and technology
transfer agreement with Monsanto Company ("Monsanto") in plant agriculture; a
technology transfer agreement and joint development and commercialization
agreement with Aventis Pharmaceuticals, Inc. ("Aventis") in inflammatory
disease; Millennium and ILEX Partners, L.P. ("M&I"), a joint venture partnership
with ILEX Products, Inc. ("ILEX") for development of the
CAMPATH-Registered Trademark- (alemtuzumab) product candidate, a monoclonal
antibody for use in the treatment of chronic lymphocytic leukemia, for which the
partnership is currently seeking approval from the Food and Drug Administration
("FDA"); and an agreement, through our joint venture partnership with ILEX, with
Schering AG for distribution of the CAMPATH-Registered Trademark- (alemtuzumab)
product candidate. In addition, we have a number of other strategic alliances.
Our strategic alliance agreements have provided us with various combinations of
equity investments, license fees and research funding, and may provide certain
additional payments contingent upon our attainment of research and regulatory
milestones and royalty and/or profit sharing payments based on sales of any
products resulting from the collaborations.

In February 2001, M&I received a Class I complete response letter from the
FDA. The FDA has indicated that the timeframe for accelerated approval has been
extended for a 60-day period following their acceptance of M&I's response. M&I's
response to the letter was accepted by the FDA on March 19, 2001. M&I expects to
complete ongoing discussions with the FDA on final package labeling and design
of a post-marketing confirmatory study for the CAMPATH-Registered Trademark-
(alemtuzumab) product candidate during this time.

In March 2001, the European Medicines Evaluation Agency's Committee on
Proprietary Medicinal Products issued a positive opinion to recommend approval
under exceptional circumstances of the MabCampath-TM- (alemtuzumab) product
candidate for patients with chronic lymphocytic leukemia (CLL) who have been
treated with alkylating agents and have failed fludarabine therapy.
MabCampath-TM- is the name that will be used for the
CAMPATH-Registered Trademark- product in Europe. It is anticipated that the
European Commission will ratify the opinion and will issue a Marketing
Authorization during July 2001. Under this authorization, M&I Partners would be
granted a single license for marketing MabCampath-TM- in the 15 member states of
the European Union and would receive national licenses in two additional
countries, Iceland and Norway. Approval under exceptional circumstances requires
that M&I Partners conduct a Phase III confirmatory study of MabCampath-TM-
versus chlorambucil, the

standard frontline treatment, to examine further MabCampath's safety and
efficacy in CLL patients. This post-approval trial is planned to begin later
this year.

On March 12, 2001, we entered into a strategic alliance with Abbott
Laboratories. This alliance is for a five-year term, and is primarily for
collaborative research and development in the area of metabolic diseases. Abbott
and we have agreed to share the cost of developing, manufacturing and marketing
products on a worldwide basis. This arrangement with Abbott also includes a
technology exchange and development agreement and an equity investment by
Abbott, under which we are eligible to receive up to $250 million. As part of
this $250 million equity investment, Abbott made an initial investment of
$50 million on April 11, 2001 and has agreed to make additional investments
totaling $200 million in seven equal quarterly installments from later in 2001
through 2003.

Our goal is to become an integrated biopharmaceutical company. As a result,
we expect to continue to pursue additional alliances and to consider joint
development, merger, or acquisition opportunities that may provide us with
access to products on the market or in later stages of commercial development
than those represented within our current programs. We expect that we will incur
increasing expenses and may incur increasing operating losses for at least the
next several years, primarily due to expansion of facilities and research and
development programs and as a result of our efforts to advance acquired products
or our own development programs to commercialization. Our results of operations
for any period may not be indicative of future results as our revenues under
strategic alliance and licensing arrangements and from product sales, to the
extent that we receive product sales in future periods, may fluctuate from
period to period or year to year.

RESULTS OF OPERATIONS

Quarters Ended March 31, 2001 and March 31, 2000

For the three months ended March 31, 2001 (the "2001 Quarterly Period") we
reported a net loss of $53.1 million or $0.25 per basic and diluted share as
compared to a net loss of $140.5 million or $0.78 per basic and diluted share
for the three months ended March 31, 2000 (the "2000 Quarterly Period").

Revenue under strategic alliances increased to $50.4 million for the 2001
Quarterly Period from $47.2 million for the 2000 Quarterly Period. The increase
in revenue is primarily due to milestone and license payments from Aventis and
increased revenue from Bayer. This increase is offset in part by the AstraZeneca
concluding payment made in the 2000 Quarterly Period. We expect revenue under
existing and new strategic alliances to continue; however, revenues may
fluctuate from period to period and there can be no assurance that strategic
alliance agreements will continue for their full initial terms or beyond.

Effective October 1, 2000, we changed our method of accounting for revenue
recognition in accordance with Staff Accounting Bulletin (SAB) No. 101
("SAB 101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS. Previously, we had
recognized revenue relating to non-refundable, up-front, license and milestone
payments and certain research funding payments from our strategic partners in
accordance with the contract. Under the new accounting method adopted
retroactively to January 1, 2000, we now recognize revenue from non-refundable,
up-front, license and milestone payments, not specifically tied to a separate
earnings process, ratably over the term of the research contract. When payments
are specifically tied to a separate earnings process, revenue is recognized when
earned. In addition, when appropriate, we recognize revenue from certain
research payments based upon the level of research services performed during the
research contract. The cumulative effect of the change resulted in a charge to
income of $107.7 million in the 2000 Quarterly Period and relates to revenue
previously recognized by us that was deferred into future periods. Included in
the 2000 quarterly revenue is $5.0 million of revenue that was recognized in
prior years relating to the adoption of

SAB 101. The amount of revenue recognized in the 2001 Quarterly Period that was
included in the cumulative effect of change in accounting principle is
$10.1 million.

Research and development expenses increased to $92.5 million for the 2001
Quarterly Period from $60.1 million for the 2000 Quarterly Period. The increase
was primarily attributable to increased personnel and facilities expenses,
increased purchases of laboratory supplies and our continued investment in
clinical trials and preclinical product candidates. We expect research and
development expenses to continue to increase as personnel are added and research
and development activities are expanded to accommodate our existing and
additional strategic alliances as well as our investment in development efforts
to move our product candidates to commercialization.

General and administrative expenses increased to $16.2 million for the 2001
Quarterly Period from $10.8 million for the 2000 Quarterly Period. The increase
was primarily attributable to increased expenses for additional management and
administrative personnel, as well as an increase in facilities expenses and
other professional fees associated with the expansion and increased complexity
of our operations and increased business development activity. We expect that
general and administrative expenses will continue to increase as we add
capabilities to support the further advancement of our development efforts.

On December 22, 1999 and July 27, 2000, we acquired LeukoSite, Inc.
("LeukoSite") and Cambridge Discovery Chemistry Limited, respectively. The
transactions were recorded as purchases for accounting purposes and accordingly,
the purchase price was allocated to the assets purchased and liabilities assumed
based upon their respective fair values. The excess of the purchase price over
the estimated fair market value of net tangible assets was allocated to specific
intangible assets and goodwill. Intangible assets and goodwill are being
amortized on a straight-line basis over four years. Amortization expense for the
2001 Quarterly Period of $16.3 million is primarily related to the LeukoSite
acquisition.

In connection with the LeukoSite acquisition, we also incurred a
nonrecurring charge to operations in 1999 for acquired in-process research and
development. Our research and development projects acquired in connection with
our acquisition of LeukoSite are expected to continue in line with the estimates
set forth in our 2000 Annual Report on Form 10-K.

Through our 1999 acquisition of LeukoSite we became a party to a joint
venture partnership with ILEX, M & I, for development of the
CAMPATH-Registered Trademark- product. We account for our investment in the
joint venture under the equity method of accounting and record our share of the
income or loss in other income (expense). Equity in operations of the joint
venture was a loss of $1.0 million for the 2001 Quarterly Period. The loss is
primarily attributable to pre-product launch marketing and sales activities.

Interest income increased to $27.5 million for the 2001 Quarterly Period
from $8.5 million for the 2000 Quarterly Period. The increase resulted primarily
from a higher level of invested funds due to net proceeds from our public stock
offering in October 2000 of $767.4 million (including the underwriters' exercise
of their over-allotment option) and Common Stock purchases made by Aventis in
the third quarter of 2000 and January 2001 of $150 million and $50 million,
respectively. Interest expense decreased to $2.3 million for the 2001 Quarterly
Period from $5.5 million for the 2000 Quarterly Period due to reduced
obligations from the early conversion of our January 2000 convertible debt.

During the 2001 Quarterly Period, we paid an aggregate of $2.6 million in
cash to certain holders of our convertible notes in order to induce the
conversion of their notes into our Common Stock. These cash payments were
expensed during the 2001 Quarterly Period.

Minority interest in the 2000 Quarterly Period represents the minority
shareholder interest of Becton, Dickinson and Company ("Becton Dickinson") in
the net income for the 2000 Quarterly Period of our then majority-owned
subsidiary, Millennium Predictive Medicine, Inc. ("MPMx"). On

June 2, 2000, we acquired the outstanding Preferred and Common Stock of our MPMx
subsidiary that we did not already own, making MPMx a wholly-owned subsidiary of
the Company.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2001, we had approximately $1.5 billion in cash, cash
equivalents and marketable securities, an increase of $7.6 million from December
31, 2000. This excludes $28.9 million of interest-bearing marketable securities
classified as restricted cash and other assets on our balance sheet, which serve
as security deposits for certain of our facilities leases.

The increase in cash, cash equivalents and marketable securities is
primarily due to $50.0 million of proceeds from the sale of Common Stock to
Aventis and $6.9 million of proceeds from employee stock purchases, offset by
cash outflows of $54.2 million for operating activities, purchases of
$9.0 million of property and equipment and other long term assets, and $3.3
million to pay capital lease obligations.

In January 2000, we completed a sale, pursuant to Rule 144A of the
Securities Act of 1933, of $400.0 million of 5.5% convertible subordinated notes
due January 15, 2007. The notes are convertible into shares of our Common Stock
at any time prior to maturity at a price equal to $42.07 per share, subject to
adjustment, unless previously repurchased or redeemed by us under certain
circumstances. Under the terms of the notes, we are required to make semi-annual
interest payments on the outstanding principal balance of the notes on January
15 and July 15 of each year.

On June 23, 2000, we entered into an alliance with Aventis covering the
joint development and commercialization of drugs for the treatment of
inflammatory diseases; joint development of new drug discovery technologies;
transfer of key elements of our technology platform to Aventis to enhance its
existing capabilities; and purchase of an equity interest in us by Aventis. In
North America, we have agreed to share the responsibility for and cost of
developing, marketing and manufacturing products arising from the alliance, as
well as profits. Outside of North America, Aventis is responsible for developing
and marketing products arising from the alliance, with a royalty obligation to
us. Under a Technology Transfer Agreement, we agreed to provide Aventis with
rights to our drug discovery technologies in exchange for payments of up to $200
million over a five-year period. Under an Investment Agreement, Aventis agreed
to invest $250 million in our Common Stock. As part of this $250 million equity
investment, Aventis made a $150 million stock purchase in the third quarter of
2000 and made a $50 million stock purchase in January 2001. Aventis is required
to make an additional $50 million stock purchase in July 2001.

On August 4, 2000, we entered into lease agreements, relating to two
buildings to be constructed for laboratory and office space in Cambridge,
Massachusetts. The rent obligation for each building is expected to commence on
the earlier of (a) September 1, 2002 or October 1, 2003, respectively or
(b) the date on which we commence occupancy of the respective building. Both
leases are for a term of seventeen years. We are responsible for a portion of
the construction costs for both buildings. Our cost to complete one of the
buildings is expected to be approximately $31.0 million. The other building is
currently in the design phase and construction costs are currently being
estimated. Rent is calculated on

an escalating scale ranging from approximately $7.6 million, per building per
year, to approximately $9.7 million, per building per year.

On October 11, 2000, we completed a public offering of 11,000,000 shares of
our Common Stock resulting in net proceeds to us of $677.1 million. On October
17, 2000 the underwriters exercised their over-allotment option with respect to
an additional 1,465,500 shares of Common Stock, resulting in net proceeds to us
of an additional $90.3 million. We plan to use the net proceeds of this offering
for working capital and other corporate purposes including financing our growth,
accelerating the expansion of our technology platform, developing products,
including conducting preclinical testing and clinical trials, and acquisitions
of businesses, products and technologies that complement or expand our business.

In February 2001, we entered into an Agreement for Lease, relating to a
building to be constructed for laboratory and office space in Cambridge,
England. The lease is expected to have a 20 year term and to commence in 2003.
We are responsible for a portion of the construction costs, which we estimate to
be approximately $21.0 million. Rent is expected to be approximately
$2.4 million per year and is subject to market adjustments at the end of the
5th, 10th and 15th years.

In March 2001, we entered into a strategic alliance with Abbott
Laboratories. This alliance is for a five-year term, and is primarily for
collaborative research and development in the area of metabolic diseases. Abbott
and we have agreed to share the cost of developing, manufacturing and marketing
products on a worldwide basis. Our arrangement with Abbott also includes a
technology exchange and development agreement and an equity investment by
Abbott, under which we are eligible to receive up to $250 million. As part of
this $250 million equity investment, Abbott made an initial investment of
$50 million on April 11, 2001 and has agreed to make additional investments
totaling $200 million in seven equal quarterly installments from later in 2001
through 2003.

We believe that existing cash, our investment securities and the anticipated
cash payments from our current strategic alliances will be sufficient to support
our operations and fund our capital commitments for the near term. Our actual
future cash requirements, however, will depend on many factors, including the
progress of our disease research programs, the number and breadth of these
programs, achievement of milestones under strategic alliance arrangements,
acquisitions, our ability to establish and maintain additional strategic
alliance and licensing arrangements, the progress of our development efforts and
the development efforts of our strategic partners, and our ability to repay our
long-term debt at maturity.

We may require additional financing in the future, which we may seek to
raise through public or private security offerings, debt financings, additional
strategic alliances or other financing sources. However, additional financing,
strategic alliances or licensing arrangements may not be available when needed
or, if available, such financing may not be obtained on terms favorable to our
stockholders or us.

SUBSEQUENT EVENTS

On April 5, 2001, we adopted a shareholder rights plan designed to ensure
that all Millennium shareholders will receive fair and equal treatment in the
event of any unsolicited attempt to acquire us. The plan was not adopted in
response to any unsolicited offer or takeover attempt. A complete copy of the
shareholder rights plan is attached as an exhibit to a Current Report on
Form 8-K which was filed with the SEC on April 5, 2001.

On April 11, 2001, we entered into an agreement with BZL Biologics, L.L.C.,
a privately-held company, to develop and commercialize antibody-based
therapeutics targeting Prostate Specific Membrane Antigen (PSMA). The
development plan includes programs for both immunotoxin and radiolabeled
products. The primary indication expected for products targeting PSMA is
prostate cancer,

although PSMA may also be a relevant therapeutic target in other solid tumors.
The terms of the agreement call for Millennium and BZL to jointly develop the
immunotoxin and radiolabeled products for the prostate cancer indication until a
predetermined clinical decision point. Thereafter, we will have full
responsibility for development, manufacturing and commercialization of all
antibody-based therapies for all indications, as well as all diagnostic
products. We will be responsible for all development costs of the products. In
addition, BZL will be entitled to receive milestone payments and royalties based
on net sales of any marketed products.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain an investment portfolio in accordance with our Investment
Policy. The primary objectives of our Investment Policy are to preserve
principal, maintain proper liquidity to meet operating needs and maximize
yields. Although our investments are subject to credit risk, our Investment
Policy specifies credit quality standards for our investments and limits the
amount of credit exposure from any single issue, issuer or type of investment.
Our 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 $21.6 million decrease in the
fair value of our investments as of March 31, 2001. However, due to the
conservative nature of our investments and relatively short duration, interest
rate risk is mitigated. We do not own derivative financial instruments in our
investment portfolio.

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

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

PART II OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits listed in the Exhibit Index are included in this
report.

(b) Reports on Forms 8-K.

1. A Current Report on Form 8-K was filed on January 24, 2001 to
report, pursuant to Item 5, that the Company adopted Staff
Accounting Bulletin 101 "Revenue Recognition in Financial
Statements" in the fourth quarter of 2000 and recorded a
cumulative effect of change in accounting principle related to
contract revenues recognized in prior periods resulting in a
one-time, non-cash charge of $107.7 million for the year ended
December 31, 2000.

2. A Current Report on Form 8-K was filed on March 12, 2001 to
report, pursuant to Item 5, that the Company had issued a press
release announcing that the Company and Abbott Laboratories had
entered into a strategic alliance for collaborative research and
development in the area of metabolic diseases, including an
equity investment by Abbott of up to $250 million over the first
two years of the collaboration.

3. A Current Report on Form 8-K was filed on April 5, 2001 to
report, pursuant to Item 5, that the Board of Directors of the
Company had adopted a shareholder rights plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

MILLENNIUM PHARMACEUTICALS, INC.
(Registrant)

Dated: April 19, 2001

---------------------------------------------
Kevin P. Starr
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND CHIEF ACCOUNTING
OFFICER)

EXHIBIT INDEX

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

EXHIBIT NO. DESCRIPTION
- ----------- -----------

3.1 Certificate of Designations dated April 5, 2001 amending the
Amended and Restated Certificate of Incorporation of the
Company.

+ 10.1 Collaboration and License Agreement dated March 9, 2001 by
and between the Company and Abbott Laboratories.

+ 10.2 Technology Exchange and Development Agreement dated
March 9, 2001 by and between the Company and Abbott
Laboratories.

10.3 Investment Agreement dated March 9, 2001 by and between the
Company and Abbott Laboratories.

99.1 Risk Factors.

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

+ Confidential treatment requested as to certain portions.